Quarterly Report (10-q)

RAND

Rand Capital Corporation

Boards:

Quotes:

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from to

Commission File Number: 814-00235

Rand Capital Corporation

(Exact Name of Registrant as specified in its Charter)


New York		16-0961359
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

1405 Rand Building, Buffalo, NY		14203
(Address of Principal executive offices)		(Zip Code)

(716) 853-0802

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Common Stock, $0.10 par value

RAND

Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that

the registrant was required to submit such files). Yes ☐ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of August 8, 2022, there were 2,581,021 shares of the registrant’s common stock outstanding.

RAND CAPITAL CORPORATION

TABLE OF CONTENTS FOR FORM 10-Q


PART I. – FINANCIAL INFORMATION

Item 1.	Financial Statements and Supplementary Data	1

	Consolidated Statements of Financial Position as of June 30, 2022 (Unaudited) and December 31, 2021	1

	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2022 and 2021 (Unaudited)	2

	Consolidated Statements of Changes in Net Assets for the Three and Six Months Ended June 30, 2022 and 2021 (Unaudited)	4

	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021 (Unaudited)	5

	Consolidated Schedule of Portfolio Investments as of June 30, 2022 (Unaudited)	6

	Consolidated Schedule of Portfolio Investments as of December 31, 2021	14

	Notes to the Consolidated Financial Statements (Unaudited)	22

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	52

Item 4.	Controls and Procedures	52

PART II. – OTHER INFORMATION

Item 1.	Legal Proceedings	53

Item 1A.	Risk Factors	53

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53

Item 3.	Defaults upon Senior Securities	53

Item 4.	Mine Safety Disclosures	53

Item 5.	Other Information	53

Item 6.	Exhibits	54

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements and Supplementary Data

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION


	June 30, 2022			December 31,
	(Unaudited)			2021
ASSETS
Investments at fair value:
Affiliate investments (cost of $30,195,392 and $27,357,797, respectively)	$	33,165,309		$	30,279,873
Non-Control/Non-Affiliate investments (cost of $22,291,325 and $25,012,871, respectively)		25,833,464			33,788,589

Total investments, at fair value (cost of $52,486,717 and $52,370,668, respectively)		58,998,773			64,068,462
Cash		1,189,146			833,875
Interest receivable		193,807			128,047
Prepaid income taxes		6,360			252,010
Deferred tax asset		239,158			181,003
Other assets		360,091			181,457

Total assets	$	60,987,335		$	65,644,854

LIABILITIES AND STOCKHOLDERS’ EQUITY (NET ASSETS)
Liabilities:
Due to investment adviser	$	230,781		$	891,102
Accounts payable and accrued expenses		55,933			51,689
Capital gains incentive fees		2,645,000			3,547,760
Deferred revenue		391,437			408,887

Total liabilities		3,323,151			4,899,438
Commitments and contingencies (See Note 5)
Stockholders’ equity (net assets):
Common stock, $0.10 par; shares authorized 100,000,000; shares issued: 2,648,916; shares outstanding: 2,581,021 at 6/30/22 and 12/31/21		264,892			264,892
Capital in excess of par value		51,679,809			51,679,809
Treasury stock, at cost: 67,895 shares at 6/30/22 and 12/31/21		(1,566,605	)		(1,566,605	)
Total distributable earnings		7,286,088			10,367,320

Total stockholders’ equity (net assets) (per share – 6/30/22: $22.34; 12/31/21: $23.54)		57,664,184			60,745,416

Total liabilities and stockholders’ equity (net assets)	$	60,987,335		$	65,644,854

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three months ended June 30, 2022			Three months ended June 30, 2021			Six months ended June 30, 2022			Six months ended June 30, 2021
Investment income:
Interest from portfolio companies:
Control investment	$	—		$	2,867		$	—		$	2,867
Affiliate investments		614,997			295,085			1,185,113			614,501
Non-Control/Non-Affiliate investments		389,835			344,254			731,858			735,600

Total interest from portfolio companies		1,004,832			642,206			1,916,971			1,352,968

Interest from other investments:
Non-Control/Non-Affiliate investments		1			243			1			12,870

Total interest from other investments		1			243			1			12,870

Dividend and other investment income:
Affiliate investments		202,785			13,125			246,510			108,051
Non-Control/Non-Affiliate investments		113,735			123,922			243,000			275,665

Total dividend and other investment income		316,520			137,047			489,510			383,716

Fee income:
Affiliate investments		22,515			24,562			52,820			63,918
Non-Control/Non-Affiliate investments		9,314			6,979			18,628			13,957

Total fee income		31,829			31,541			71,448			77,875

Total investment income		1,353,182			811,037			2,477,930			1,827,429

Expenses:
Base management fee (see Note 8)		230,767			212,907			471,042			388,516
Capital gains incentive fees (see Note 8)		(663,000	)		1,060,000			(902,760	)		3,660,000
Interest on SBA obligations		—			104,190			—			208,380
Professional fees		212,138			123,991			443,221			284,124
Stockholders and office operating		64,890			69,661			121,588			141,083
Directors’ fees		44,883			38,900			89,983			75,400
Insurance		13,353			9,380			22,263			19,707
Corporate development		726			821			3,753			8,303
Other operating		45			108			90			108

Total expenses		(96,198	)		1,619,958			249,180			4,785,621

Net investment income (loss) before income taxes		1,449,380			(808,921	)		2,228,750			(2,958,192	)
Income tax expense		31,243			1,966			38,610			19,723

Net investment income (loss)		1,418,137			(810,887	)		2,190,140			(2,977,915	)

Net realized gain on sales and dispositions of investments:
Affiliate investments		167,159			—			167,159			135,430
Non-Control/Non-Affiliate investments		1,372,984			1,817,350			521,513			1,992,675

Net realized gain on sales and dispositions of investments		1,540,143			1,817,350			688,672			2,128,105


Net change in unrealized appreciation/ depreciation on investments:
Affiliate investments		47,841			—		47,841			—
Non-Control/Non-Affiliate investments		(4,902,510	)		3,495,322		(5,233,579	)		13,382,354

Change in unrealized appreciation/ depreciation before income taxes		(4,854,669	)		3,495,322		(5,185,738	)		13,382,354
Deferred income tax expense		—			951		—			951

Net change in unrealized appreciation/ depreciation on investments		(4,854,669	)		3,494,371		(5,185,738	)		13,381,403

Net realized and unrealized (loss) gain on investments		(3,314,526	)		5,311,721		(4,497,066	)		15,509,508

Net (decrease) increase in net assets from operations	($	1,896,389	)	$	4,500,834	($	2,306,926	)	$	12,531,593

Weighted average shares outstanding		2,581,021			2,582,169		2,581,021			2,582,169
Basic and diluted net (decrease) increase in net assets from operations per share	($	0.73	)	$	1.74	($	0.89	)	$	4.85

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(Unaudited)


	Three months ended June 30, 2022			Three months ended June 30, 2021			Six months ended June 30, 2022			Six months ended June 30, 2021
Net assets at beginning of period	$	59,947,726		$	53,877,204		$	60,745,416		$	46,104,830
Net investment income (loss)		1,418,137			(810,887	)		2,190,140			(2,977,915	)
Net realized gain on sales and dispositions of investments		1,540,143			1,817,350			688,672			2,128,105
Net change in unrealized appreciation/ depreciation on investments		(4,854,669	)		3,494,371			(5,185,738	)		13,381,403

Net (decrease) increase in net assets from operations		(1,896,389	)		4,500,834			(2,306,926	)		12,531,593
Declaration of dividend		(387,153	)		(258,217	)		(774,306	)		(516,602	)

Net assets at end of period	$	57,664,184		$	58,119,821		$	57,664,184		$	58,119,821

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six months ended June 30, 2022			Six months ended June 30, 2021
Cash flows from operating activities:
Net (decrease) increase in net assets from operations	($	2,306,926	)	$	12,531,593
Adjustments to reconcile net (decrease) increase in net assets to net cash provided by (used in) operating activities:
Investments in portfolio companies		(2,742,086	)		(11,273,836	)
Proceeds from sale of portfolio investments		3,527,630			3,491,060
Proceeds from loan repayments		90,175			3,750,430
Net realized gain on sales and dispositions of portfolio investments		(688,672	)		(2,128,105	)
Change in unrealized (appreciation) depreciation on investments before income taxes		5,185,738			(13,382,354	)
Deferred income tax benefit		(58,155	)		(12,085	)
Depreciation and amortization		—			18,838
Original issue discount amortization		(12,504	)		(99,671	)
Non-cash conversion of debenture interest		(290,591	)		(116,418	)
Changes in operating assets and liabilities:
Increase in interest receivable		(65,760	)		(29,516	)
Increase in other assets		(178,635	)		(108,463	)
Decrease in prepaid income taxes		245,650			4,857
Increase (decrease) in accounts payable and accrued expenses		4,244			(10,280	)
(Decrease) increase in due to investment adviser		(660,321	)		55,908
(Decrease) increase in capital gains incentive fees payable		(902,760	)		3,660,000
(Decrease) increase in deferred revenue		(17,450	)		178,230

Total adjustments		3,436,503			(16,001,405	)

Net cash provided by (used in) operating activities		1,129,577			(3,469,812	)

Cash flows from financing activities:
Payment of cash dividend		(774,306	)		(3,950,718	)

Net cash used in financing activities		(774,306	)		(3,950,718	)

Net increase (decrease) in cash and cash equivalents		355,271			(7,420,530	)
Cash and cash equivalents:
Beginning of period		833,875			20,365,415

End of period	$	1,189,146		$	12,944,885

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

June 30, 2022

(Unaudited)


Company, Geographic Location, Business Description, (Industry) and Website	(a) Type of Investment	(b) Date Acquired		(c) Equity			Cost		(d)(f) Fair Value		Percent of Net Assets
Non-Control/Non-Affiliate Investments – 44.8% of net assets: (g) (j)

ACV Auctions, Inc. (e)(n)(p) NASDAQ: ACVA Buffalo, NY. Live mobile wholesale auctions for new and used car dealers. (Software) www.acvauctions.com	319,934 Class A Common stock valued at $6.54 per share.		8/12/16		<1	%	$	87,219	$	2,092,368		3.6	%

Ares Capital Corporation (n) NASDAQ: ARCC New York, NY. (BDC Investment Fund)	21,000 shares.		3/16/20		<1	%		267,140		377,090		0.7	%

Barings BDC, Inc. (n) NYSE: BBDC New York, NY. (BDC Investment Fund)	40,000 shares.		8/13/20		<1	%		333,352		375,467		0.7	%

Caitec, Inc. (l) Halethorpe, MD. Pet product manufacturer and distributor. (Consumer Goods) www.caitec.com	$1,750,000 Subordinated Secured Promissory Note at 12% (+2% PIK) due June 1, 2026.		11/6/20		2	%		1,809,367		1,809,367		6.8	%
	150 Class A Units.		11/6/20					150,000		150,000
	$1,750,000 Subordinated Secured Promissory Note at 12% (+2% PIK) due June 1, 2026.		11/6/20		2	%		1,809,367		1,809,367
	150 Class A Units.		11/6/20					150,000		150,000

	Total Caitec							3,918,734		3,918,734


Carlyle Secured Lending Inc. (formerly TCG BDC, Inc.) (n) NASDAQ: CGBD New York, NY. (BDC Investment Fund)	86,000 shares.		8/13/20		<1	%		899,749		1,104,814		1.9	%

Empire Genomics, Corp. Buffalo, NY. Molecular diagnostics company that offers a comprehensive menu of assay services for diagnosing and guiding patient therapeutic treatments. (Health Care) www.empiregenomics.com	$444,915 + $1,000,000 Secured Promissory Notes at 8% due December 31, 2026.		5/3/21		0	%		1, 444,915		1,444,915		2.5	%

FS KKR Capital Corp. (n) NYSE: FSK Philadelphia, PA. (BDC Investment Fund)	48,000 shares.		3/16/20		<1	%		755,058		926,560		1.6	%

GoNoodle, Inc. (h)(l) Nashville, TN. Student engagement education software providing core aligned physical activity breaks. (Software) www.gonoodle.com	$1,500,000 Secured Note at 12% (1% PIK) due September 30, 2024.		11/1/19		<1	%		1,404,736		1,404,736		2.4	%
	Warrant for 47,324 Series C Preferred.		3/1/15					25		25
	Warrant for 21,948 Series D Preferred.		11/1/19					38		38

	Total GoNoodle							1,404,799		1,404,799


HDI Acquisition LLC (Hilton Displays) (l) Greenville, NC. HDI is engaged in manufacturing, installation and maintenance of signage and brands. (Manufacturing) www.hiltondisplays.com	$1,245,119 Term Loan at 12% (+2% PIK) due June 20, 2023.		11/8/19		0	%		1,314,312		1,314,312		2.3	%

Lumious (Tech 2000, Inc.) Herndon, VA. Develops and delivers IT training. (Software) www.t2000inc.com	$850,000 Replacement Term Note at 14% due November 15, 2023.		11/16/18		0	%		860,777		860,777		1.5	%

RAND CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

June 30, 2022 (Continued)

(Unaudited)


Company, Geographic Location, Business Description, (Industry) and Website	(a) Type of Investment	(b) Date Acquired		(c) Equity			Cost		(d)(f) Fair Value		Percent of Net Assets
Mattison Avenue Holdings LLC (l) Dallas, TX. Provider of upscale salon spaces for lease. (Professional Services) www.mattisonsalonsuites.com	$1,794,944 Third Amended, Restated and Consolidated Promissory Note at 14% (2% PIK) due December 9, 2023		6/23/21		0	%		1,837,703		1,837,703		3.2	%

Nailbiter, Inc. Reston, VA. Video-metrics data analytics supporting name brand Consumer Products Groups (CPG) shopping behavioral insight. (Professional Services) www.nailbiter.com	$2,250,000 Membership Interest of USB Focus Fund Nailbiter I, LLC with economic interest of $2,250,000 Subordinated Secured Promissory Note at net 9% due November 23, 2024.		11/22/21		<1	%		2,250,000		2,250,000		3.9	%
	Warrants for Preferred stock							—		—

	Total Nailbiter, Inc.							2,250,000		2,250,000


OnCore Golf Technology, Inc. (e) Buffalo, NY. Patented and proprietary golf balls utilizing technology and innovation. (Consumer Product) www.oncoregolf.com	300,483 Preferred AA.		11/30/18		3	%		752,712		300,000		0.5	%

Open Exchange, Inc. (e) Lincoln, MA. Online presentation and training software. (Software) www.openexc.com	397,899 Series C Preferred.		11/13/13		3	%		1,193,697		2,785,000		9.7	%
	397,899 Common.		10/22/19					208,243		2,785,000

	Total Open Exchange							1,401,940		5,570,000


PennantPark Investment Corporation (n) NASDAQ: PNNT New York, NY. (BDC Investment Fund)	195,000 shares.		8/13/20		<1	%		892,212		1,207,050		2.1	%

PostProcess Technologies, Inc. (e) Buffalo, NY. Provides innovative solutions for the post-processing of additive manufactured 3D parts. (Manufacturing) www.postprocess.com	360,002 Series A1 Preferred.		11/1/19		<1	%		348,875		348,875		0.6	%

Rheonix, Inc. (e) Ithaca, NY. Developer of fully automated microfluidic based molecular assay and diagnostic testing devices. (Health Care) www.rheonix.com	9,676 Common.		10/29/09		4	%		—		—		0.0	%
	1,839,422 Series A Preferred.		12/12/13					2,099,999		—
	50,593 Common.		10/24/09					—		—
	589,420 Series B Preferred.		9/29/15					702,732		—

	Total Rheonix							2,802,731		—


Somerset Gas Transmission Company, LLC (e)(m) Columbus, OH. Natural gas transportation. (Oil and Gas) www.somersetgas.com	26.5337 Units.		4/1/05		3	%		719,097		500,000		0.8	%


Subtotal Non-Control/Non-Affiliate Investments							$	22,291,325	$	25,833,464

Affiliate Investments – 57.5% of net assets (g)(k)

Applied Image, Inc. Rochester NY. Global supplier of precision imaged optical components and calibration standards for a wide range of industries and applications. (Manufacturing) www.appliedimage.com	$1,750,000 Term Note at 10% due February 1, 2029. Warrant for 1,167 shares.		12/31/21 12/31/21		12	%	$	1,750,000 —	$	1,750,000 —		3.0	%

	Total Applied Imaging							1,750,000		1,750,000


BMP Swanson Holdco, LLC (m) Plano, TX. Designs, installs, and maintains a variety of fire protection systems. (Professional Services)	$1,600,000 Term Note at 12% due September 4, 2026.		3/4/21		9	%		1,600,000	$	1,600,000		3.2	%
	Preferred Membership Interest for 9.29%.		3/4/21					233,333		233,333

	Total BMP Swanson							1,833,333		1,833,333

RAND CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

June 30, 2022 (Continued)

(Unaudited)


Company, Geographic Location, Business Description, (Industry) and Website	(a) Type of Investment	(b) Date Acquired		(c) Equity			Cost		(d)(f) Fair Value		Percent of Net Assets
Carolina Skiff LLC (m) Waycross, GA. Manufacturer of ocean fishing and pleasure boats. (Manufacturing) www.carolinaskiff.com	6.0825% Class A Common Membership Interest.		1/30/04		7	%		15,000		1,300,000		2.3	%

DSD Operating, LLC (l)(m) Duluth, GA. Design and renovate auto dealerships. (Automotive) www.dsdteam.com	$3,063,276 Term Note at 12% (+2% PIK) due September 30, 2026.		9/30/21		11	%		3,107,931		3,107,931		7.2	%
	1,067 Class A Preferred shares.							1,067,500		1,067,500
	1,067 Class B Common shares.							—		—

	Total DSD							4,175,431		4,175,431


Filterworks Acquisition USA, LLC DBA Autotality (l)(m) Deerfield Beach, FL. Provides spray booth equipment, frame repair machines and paint booth filter services for collision shops. (Automotive) www.autotality.com	$2,283,702 Term Note at 12% (+2% PIK) (modified to 8% payable in A-0 shares and 6% PIK from May 1, 2022 to December 31, 2022) due December 4, 2023. 626.2 shares Class A-1 units		11/18/19		8	%		2,554,176		2,554,176		4.9	%
			12/28/21					626,243		256,994

	Total Filterworks							3,180,419		2,811,170


ITA Acquisition, LLC (l)(m) Ormond Beach, FL. Blind and shade manufacturing. (Manufacturing) www.itainc.com	$1,900,000 Term Note at 12% (+2% PIK) due June 21, 2026.		6/22/21		25	%		1,939,851		1,939,851		6.6	%
	$1,500,000 Term Note at 12% (+2% PIK) due June 21, 2026.		6/22/21					1,531,461		1,531,461
	724 Class A Preferred Units and 724 Class B Common Units.		6/22/21					723,810		348,810

	Total ITA							4,195,122		3,820,122


Knoa Software, Inc. (e) New York, NY. End user experience management and performance (EMP) solutions utilizing enterprise applications. (Software) www.knoa.com	973,533 Series A-1 Convertible Preferred.		11/20/12		7	%		750,000		—		0.8	%
	1,876,922 Series B Preferred.		6/9/14					479,155		479,155

	Total Knoa							1,229,155		479,155



Mezmeriz, Inc. (e) Ithaca, NY. Technology company developing novel reality capture tools for 3D mapping, reality modeling, object tracking and classification. (Electronics Developer) www.mezmeriz.com	1,554,565 Series Seed Preferred.		5/14/15		12	%		742,850		—		0.0	%

SciAps, Inc. (e) Woburn, MA. Instrumentation company producing portable analytical devices using XRF, LIBS and RAMAN spectroscopy to identify compounds, minerals, and elements. (Manufacturing) www.sciaps.com	187,500 Series A Preferred.		7/12/13		6	%		1,500,000		210,000		4.3	%
	274,299 Series A1 Convertible Preferred.		4/4/14					504,710		96,000
	117,371 Series B Convertible Preferred.		8/31/15					250,000		124,000
	113,636 Series C Convertible Preferred.		4/7/16					175,000		84,000
	369,698 Series C1 Convertible Preferred.		4/7/16					399,274		207,000
	147,059 Series D Convertible Preferred.		5/9/17					250,000		250,000
	Warrant to purchase Series D-1 Preferred.		5/9/17					45,000		—
	$1,500,000 Second Amended and Restated Secured Subordinated Promissory Note at 12% due August 20, 2024.		8/20/21					1,487,500		1,487,500

	Total SciAps							4,611,484		2,458,500


Seybert’s Billiards Corporation (l) Coldwater, MI. Billiard supplies. (Consumer Product) www.seyberts.com	$4,139,444 Term Note at 12% (+2% PIK) due January 19, 2026.		11/22/21		8	%		4,139,003		4,139,003		9.7	%
	Warrant for 4%.		1/19/21					25,000		25,000
	$1,435,435 Term Note at 12% (+2% PIK) due January 19, 2026.		1/19/21					1,423,580		1,423,580
	Warrant for 4%.		1/19/21					25,000		25,000

	Total Seybert’s							5,612,583		5,612,583

RAND CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

June 30, 2022 (Continued)

(Unaudited)


Company, Geographic Location, Business Description, (Industry) and Website	(a) Type of Investment	(b) Date Acquired		(c) Equity			Cost		(d)(f) Fair Value			Percent of Net Assets
Tilson Technology Management, Inc. Portland, ME. Provides network deployment construction and information system services management for cellular, fiber optic and wireless systems providers. Its affiliated entity, SQF, LLC is a CLEC supporting small cell 5G deployment. (Professional Services) www.tilsontech.com	*120,000 Series B Preferred.		1/20/15		9	%		600,000		3,900,000			15.5	%
	*21,391 Series C Preferred.		9/28/16					200,000		695,000
	*70,176 Series D Preferred.		9/29/17					800,000		2,280,000
	*15,385 Series E Preferred.		3/15/19					500,012		500,012
	211,567 SQF Hold Co. Common.		3/15/19					—		800,000
	23,077 Series F Preferred.		6/15/20					750,003		750,003

	Total Tilson							2,850,015		8,925,015

	*2.5% dividend payable quarterly.

Subtotal Affiliate Investments							$	30,195,392	$	33,165,309

TOTAL INVESTMENTS – 102.3%							$	52,486,717	$	58,998,773

LIABILITIES IN EXCESS OF OTHER ASSETS - (2.3%)										(1,334,589	)

NET ASSETS – 100%									$	57,664,184

RAND CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

June 30, 2022 (Continued)

(Unaudited)

Notes to the Consolidated Schedule of Portfolio Investments

(a)

At June 30, 2022, restricted securities represented 90% of the fair value of the investment portfolio. Restricted securities are subject to one or more restrictions on resale and are not freely marketable. Type of investment for equity position is in the form of shares unless otherwise noted as units or interests, i.e., preferred shares, common shares.

(b)	The Date Acquired column indicates the date on which the Corporation first acquired an investment.

(c)

Each equity percentage estimates the Corporation’s ownership interest in the applicable portfolio investment. The estimated ownership is calculated based on the percent of outstanding voting securities held by the Corporation or the potential percentage of voting securities held by the Corporation upon exercise of warrants or conversion of debentures, or other available data. If applicable, the symbol “<1%” indicates that the Corporation holds an equity interest of less than one percent.

(d)

The Corporation’s investments are carried at fair value in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820 “Fair Value Measurements and Disclosures,” which defines fair value and establishes guidelines for measuring fair value. At June 30, 2022, ASC 820 designates 90% of the Corporation’s investments as “Level 3” assets. Under the valuation policy of the Corporation, unrestricted publicly traded securities are valued at the average closing price for these securities for the last three trading days of the reporting period. Restricted securities are subject to restrictions on resale and are valued at fair value as determined by our external investment advisor Rand Capital Management, LLC (“RCM”) and submitted to the Board of Directors for approval. Fair value is considered to be the amount that the Corporation may reasonably expect to receive for portfolio securities when sold on the valuation date. Valuations as of any particular date, however, are not necessarily indicative of amounts which may ultimately be realized as a result of future sales or other dispositions of securities and these favorable or unfavorable differences could be material. Among the factors considered in determining the fair value of restricted securities are the financial condition and operating results, projected operations, and other analytical data relating to the investment. Also considered are the market prices for unrestricted securities of the same class (if applicable) and other matters which may have an impact on the value of the portfolio company (see Note 3. “Investments” to the Consolidated Financial Statements).

(e)

These investments are non-income producing. All other investments are income producing. Non-income producing investments have not generated cash payments of interest or dividends including LLC tax-related distributions within the last twelve months or are not expected to do so going forward. If a debt or a preferred equity investment fails to make its most recent payment, then the investment will also be classified as non-income producing.

(f)

As of June 30, 2022, the total cost of investment securities was approximately $ 52.5 million. Net unrealized appreciation was approximately $ 6.5 million, which was comprised of $14.4 million of unrealized appreciation of investment securities and ($7.9) million of unrealized depreciation of investment securities. At June 30, 2022, the aggregate gross unrealized gain for federal income tax purposes was $13.7 million and the aggregate gross unrealized loss for federal income tax purposes was ($7.7) million. The net unrealized gain for federal income tax purposes was $6.0 million based on a tax cost of $52.8 million.

(g)

All of the Corporation’s portfolio assets are pledged as collateral for purposes of securing the Corporation’s senior secured revolving credit facility pursuant to a general security agreement, dated June 27, 2022, between the Corporation, the subsidiaries listed therein, and the Lender (as defined herein).

(h)	Reduction in cost and value from previously reported balances reflects current principal repayment.

(i)	Represents interest due (amounts over $50,000) from investments included as interest receivable on the Corporation’s Consolidated Statements of Financial Position.

(j)	Non-Control/Non-Affiliate Investments are investments that are neither Control Investments nor Affiliate Investments.

(k)	Affiliate Investments are defined by the Investment Company Act of 1940, as amended (“1940 Act”), as those Non-Control investments in companies in which between 5% and 25% of the voting securities are owned by the Corporation.

(l)

Payment in kind (PIK) represents earned interest that is added to the cost basis of the investment and due at maturity. The amount of PIK earned is included in the interest rate detailed in the “Type of Investment” column, unless it has been noted with a (+), in which case the PIK is in addition to the face amount of interest due on the security.

(m)	Equity holdings are held in a wholly owned (100%) “blocker corporation” of Rand Capital Corporation or Rand Capital Sub LLC, Inc. for federal income tax and Regulated Investment Company (RIC) compliance.

(n)	Publicly traded company.

(o)	Control Investments are defined by the 1940 Act as investments in companies in which more than 25% of the voting securities are owned by the Corporation or where greater than 50% of the board representation is maintained. None at June 30, 2022.

(p)	Subsequent to June 30, 2022, ACV Auction’s (ACVA) public market share price had a trading range on Nasdaq of $6.35 to $7.64 for the period of July 1, 2022 to August 1, 2022. The Corporation’s value per share on June 30, 2022 of $6.54 per share.

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

June 30, 2022 (Continued)

(Unaudited)


Investments in and Advances to Affiliates
Company	Type of Investment	January 1, 2022, Fair Value		Net Change in Unrealized Appreciation (Depreciation)		Gross Additions (1)		Gross Reductions (2)			June 30, 2022, Fair Value		Net Realized (Losses) Gains			Amount of Interest/ Dividend/ Fee Income (3)
Affiliate Investments:

Applied Image Inc.	$1,750,000 Term Note at 10% due December 28, 2028.	$	1,750,000	$	—	$	—	$	—		$	1,750,000	$	—		$	91,524
Applied Image Inc.	Warrant for 1,167 shares.		—		—		—		—			—		—			—

	Total Applied Image		1,750,000		—		—		—			1,750,000		—			91,524


BMP Swanson Holdco, LLC	$1,600,000 Term Note at 12% due September 4, 2026.		1,600,000		—		—		—			1,600,000		—			99,866
BMP Swanson Holdco, LLC	Preferred Membership Interest for 9.29%		233,333		—		—		—			233,333		—			—

	Total BMP Swanson		1,833,333		—		—		—			1,833,333		—			99,866


Carolina Skiff LLC	6.0825% Class A Common Membership interest.		1,300,000		—		—		—			1,300,000		—			220,260

DSD Operating, LLC	$2,745,000 Term Note at 12% (+2% PIK) due September 30, 2026.		2,759,183		—		348,748		—			3,107,931		—			220,932
	1,067 Class A Preferred shares.		1,067,500		—		—		—			1,067,500		—			—
	1,067 Class B Common shares.		—		—		—		—			—		—			—

	Total DSD		3,826,683		—		348,748		—			4,175,431		—			220,932


Filterworks Acquisition USA, LLC	$2,283,702 Term Note at 12%.		2,446,617		—		107,559		—			2,554,176		—			140,384
Filterworks Acquisition USA, LLC	562.5 Class A Units.		256,994		—		—		—			256,994		—			—

	Total Filterworks		2,703,611		—		107,559		—			2,811,170		—			140,384


ITA Acquisition	$1,900,000 Term Note at 12% (+2% PIK) due June 22, 2026.		1,920,459		—		19,392		—			1,939,851		—			139,547
	$1,500,000 Term Note at 12% (+2% PIK) due June 22, 2026.		1,516,152		—		15,310		—			1,531,462		—			110,373
	500 Class A Preferred Units		125,000		—		223,810		—			348,810		—			—
	500 Class B Common Units.		—		—		—		—			—		—			—

	Total ITA		3,561,611		—		258,512		—			3,820,123		—			249,920


Knoa Software, Inc.	973,533 Series A-1 Convertible Preferred.		—		—		—		—			—		—			—
	1,876,922 Series B Preferred.		479,155		—		—		—			479,155		—			—

	Total Knoa		479,155		—		—		—			479,155		—			—


Mezmeriz, Inc.	1,554,565 Series Seed Preferred.		—		—		—		—			—		—			—

Microcision	Membership Interest Purchase Warrant for 5%.		85,000		—		—		(85,000	)		—		190,000			—

New Monarch Machine Tool, Inc.	22.84 Common.		—		—		—		—			—		(22,841	)		—

SciAps, Inc.	187,500 Series A Preferred.		210,000		—		—		—			210,000		—			—
	274,299 Series A-1 Convertible Preferred.		96,000		—		—		—			96,000		—			—
	117,371 Series B Convertible Preferred.		124,000		—		—		—			124,000		—			—
	113,636 Series C Convertible Preferred.		84,000		—		—		—			84,000		—			—
	369,698 Series C-1 Convertible Preferred.		207,000		—		—		—			207,000		—			—
	147,059 Series D Convertible Preferred.		250,000		—		—		—			250,000		—			—
	Warrant to Purchase Series D-1 Preferred.		—		—		—		—			—		—			—
	$1,500,000 Subordinated Promissory Note at 12%.		1,480,000		—		7,500		—			1,487,500		—			107,500

	Total SciAps		2,451,000		—		7,500		—			2,458,500		—			107,500


Seybert’s Billiards Corporation	$1,400,000 Term Note at 12% (+2% PIK) due January 19, 2026.		1,907,774		—		2,231,230		—			4,139,004		—			220,799
	Warrant for 4%.		25,000		—		—		—			25,000		—			—
	$1,400,000 Term Note at 12% (+2% PIK) due January 19, 2026.		1,406,690		—		16,888		—			1,423,578		—			107,008
	Warrant for 4%.		25,000		—		—		—			25,000		—			—

	Total Seybert’s		3,364,464		—		2,248,118		—			5,612,582		—			327,807

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

June 30, 2022 (Continued)

(Unaudited)


Company	Type of Investment	January 1, 2022, Fair Value		Net Change in Unrealized Appreciation (Depreciation)		Gross Additions (1)		Gross Reductions (2)			June 30, 2022, Fair Value		Net Realized (Losses) Gains		Amount of Interest/ Dividend/ Fee Income (3)
Tilson Technology	120,000 Series B Preferred.		3,900,000		—		—		—			3,900,000		—		26,250
Management, Inc.	21,391 Series C Preferred.		695,000		—		—		—			695,000		—		—
	70,176 Series D Preferred.		2,280,000		—		—		—			2,280,000		—		—
	15,385 Series E Preferred.		500,012		—		—		—			500,012		—		—
	23,077 Series F Preferred.		800,000		—		—		—			800,000		—		—
	211,567 SQF Hold Co. Common.		750,003		—		—		—			750,003		—		—

	Total Tilson		8,925,015		—		—		—			8,925,015		—		26,250


	Total Affiliate Investments	$	30,279,872	$	—	$	2,970,437	$	(85,000	)	$	33,165,309	$	167,159	$	1,484,443


	Total Control and Affiliate Investments	$	30,279,872	$	—	$	2,970,437	$	(85,000	)	$	33,165,309	$	167,159	$	1,484,443

This schedule should be read in conjunction with the Corporation’s Consolidated Financial Statements, including the Notes to the Consolidated Financial Statements and the Consolidated Schedule of Portfolio Investments.

(1)

Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow on investments, capitalized interest and the accretion of discounts. Gross additions also include the movement of an existing portfolio company into this category and out of another category.

(2)	Gross reductions include decreases in the cost basis of investments resulting from principal repayments, sales, note conversions, the exchange of existing securities for new securities and the movement of an existing portfolio company out of this category and into another category.

(3)	Represents the total amount of interest, fees or dividends credited to income for the portion of the period an investment was included in “Control or Affiliate” categories, respectively.

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

June 30, 2022 (Continued)

(Unaudited)


Industry Classification		Percentage of Total Investments (at fair value) as of June 30, 2022
Professional Services		25.2%
Manufacturing		18.6
Software		17.7
Consumer Product		16.7
Automotive		11.9
BDC Investment Fund		6.7
Healthcare		2.4
Oil and Gas		0.8

Total Investments		100%

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2021


Company, Geographic Location, Business Description, (Industry) and Website	(a) Type of Investment	(b) Date Acquired		(c) Equity			Cost		(d)(f) Fair Value		Percent of Net Assets
Non-Control/Non-Affiliate Investments – 55.6% of net assets: (j)

ACV Auctions, Inc. NASDAQ: ACVA (e)(g)(n)(p) Buffalo, NY. Live mobile wholesale auctions for new and used car dealers. (Software) www.acvauctions.com	442,934 Class A Common stock valued at $18.81 per share.		8/12/16		<1	%	$	121,659	$	8,333,065		13.7	%

Ares Capital Corporation (n) NASDAQ: ARCC	27,000 shares.		3/16/20		<1	%		343,460		567,090		0.9	%
New York, NY. (BDC Investment Fund)

Barings BDC, Inc. (n) NYSE: BBDC	40,000 shares.		8/13/20		<1	%		333,352		438,000		0.7	%
New York, NY. (BDC Investment Fund)

Caitec, Inc. (l) Halethorpe, MD. Pet product manufacturer and	$1,750,000 Subordinated Secured Promissory Note at 12% (+2% PIK) due June 1, 2026.		11/6/20		4	%		1,791,278		1,791,278		6.4	%
distributor. (Consumer Goods)	150 Class A Units.		11/6/20					150,000		150,000
www.caitec.com	(g) $1,750,000 Subordinated Secured Promissory Note at 12% (+2% PIK) due June 1, 2026.		11/6/20
								1,791,278		1,791,278
	(g) 150 Class A Units.		11/6/20					150,000		150,000

	Total Caitec							3,882,556		3,882,556


Empire Genomics Corp. (g)	$444,915 + $1,000,000 Secured		5/3/21		0	%						2.4	%
Buffalo, NY. Molecular diagnostics company that offers a comprehensive menu of assay services for diagnosing and guiding patient therapeutic treatments. (Health Care) www.empiregenomics.com	Promissory Notes at 8% due December 31, 2026.							1,444,915		1,444,915

FS KKR Capital Corp. (n) NYSE: FSK	54,000 shares.		3/16/20		<1	%		849,438		1,127,160		1.9	%
Philadelphia, PA. (BDC Investment Fund)

Golub Capital BDC, Inc. (n) NASDAQ: GBDC	31,250 shares.		3/16/20		<1	%		403,910		481,563		0.8	%
New York, NY. (BDC Investment Fund)

GoNoodle, Inc. (g)(h)(l) Nashville, TN. Student engagement education software providing core aligned physical activity breaks. (Software) www.gonoodle.com	$1,500,000 Secured Note at 12%		11/1/19		<1	%						2.5	%
	(1% PIK) due September 30, 2024.							1,487,801		1,487,801
	Warrant for 47,324 Series C Preferred.		3/1/15					25		25
	Warrant for 21,948 Series D Preferred.		11/1/19					38		38

	Total GoNoodle							1,487,864		1,487,864


HDI Acquisition LLC (Hilton Displays) (l) Greenville, NC. HDI is engaged in manufacturing, installation and maintenance of signage and brands. (Manufacturing) www.hiltondisplays.com	$1,245,119 Term Loan at 12% (+2% PIK) due June 20, 2023.		11/8/19		0	%		1,301,195		1,301,195		2.1	%

Lumious (Tech 2000, Inc.) (g) Herndon, VA. Develops and delivers IT training. (Software) www.t2000inc.com	$850,000 Replacement Term Note at 14% due November 15, 2023.		11/16/18		0	%		860,777		860,777		1.4	%

Mattison Avenue Holdings LLC (l)	$1,794,944 Third Amended, Restated and		6/23/21		0	%						3.0	%
Dallas, TX. Provider of upscale salon spaces for lease. (Professional Services) www.mattisonsalonsuites.com	Consolidated Promissory Note at 14% (2% PIK) due December 9, 2023.							1,819,362		1,819,362

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2021 (Continued)


Company, Geographic Location, Business Description, (Industry) and Website	(a) Type of Investment	(b) Date Acquired		(c) Equity			Cost		(d)(f) Fair Value		Percent of Net Assets
Nailbiter, Inc. Reston, VA. Video-metrics data analytics supporting name brand consumer products groups (CPG) shopping behavioral insight. (Professional Services) www.nailbiter.com	$2,250,000 Membership Interest of USB Focus Fund Nailbiter I, LLC with economic interest of $2,250,000 Subordinated Secured Promissory Note at 10% due November 23, 2024. Warrants for Preferred stock of Nailbiter, Inc.		11/22/21		<1	%		2,250,000		2,250,000		3.7	%

OnCore Golf Technology, Inc. (e)(g) Buffalo, NY. Patented and proprietary golf balls utilizing technology and innovation. (Consumer Product) www.oncoregolf.com	300,483 Preferred AA.		11/30/18		3	%		752,712		300,000		0.5	%

Open Exchange, Inc. (e)(g)	397,899 Series C Preferred.		11/13/13		3	%		1,193,697		2,785,000		9.2	%
(Formerly KnowledgeVision Systems, Inc.)	397,899 Common.		10/22/19					208,243		2,785,000

Lincoln, MA. Online presentation and training	Total Open Exchange							1,401,940		5,570,000

software. (Software)
www.openexc.com

Owl Rock Capital Corporation (n) NYSE: ORCC (n) New York, NY. (BDC Investment Fund)	30,000 shares.		3/16/20		<1	%		347,067		427,600		0.7	%

PennantPark Investment Corporation (n) NASDAQ: PNNT New York, NY. (BDC Investment Fund)	195,000 shares.		8/13/20		<1	%		892,212		1,345,500		2.2	%

PostProcess Technologies, Inc. (e)(g) Buffalo, NY. Provides innovative solutions for the post-processing of additive manufactured 3D parts. (Manufacturing) www.postprocess.com	360,002 Series A1 Preferred.		11/1/19		<1	%		348,875		348,875		0.6	%

Rheonix, Inc. (e)	9,676 Common.		10/29/09		4	%		—		—		0.0	%
Ithaca, NY. Developer of fully automated microfluidic based molecular assay and diagnostic testing devices. (Health Care)	(g) 1,839,422 Series A Preferred.		12/12/13					2,099,999		—
	(g) 50,593 Common.		10/24/09					—		—
	(g) 589,420 Series B Preferred.		9/29/15					702,732		—

www.rheonix.com	Total Rheonix							2,802,731		—


SocialFlow, Inc. (e)(g)	1,049,538 Series B Preferred.		4/5/13		4	%		500,000		35,000		0.2	%
New York, NY. Provides instant analysis of social	1,204,819 Series B-1 Preferred.		4/8/14					750,000		52,000
networks using a proprietary, predictive analytic	717,772 Series C Preferred.		6/26/15					500,000		35,000

algorithm to optimize advertising and publishing.	Total Social Flow							1,750,000		122,000

(Software) www.socialflow.com

Somerset Gas Transmission Company, LLC (e)(m) Columbus, OH. Natural gas transportation. (Oil and Gas) www.somersetgas.com	26.5337 Units.		4/1/05		3%			719,097		500,000		0.8%

TCG BDC, Inc. (n) NASDAQ: CGBD New York, NY. (BDC Investment Fund)	86,000 shares.		8/13/20		<1%			899,749		1,181,067		1.9%

Subtotal Non-Control/Non-Affiliate Investments							$	25,012,871	$	33,788,589

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2021 (Continued)


Company, Geographic Location, Business Description, (Industry) and Website	(a) Type of Investment	(b) Date Acquired		(c) Equity			Cost		(d)(f) Fair Value		Percent of Net Assets
Affiliate Investments – 49.9% of net assets (k)

Applied Image, Inc. Rochester, NY. Global supplier of precision imaged optical components and calibration standards for a wide range of industries and applications. (Manufacturing) www.appliedimage.com	$1,750,000 Term Note at 10% due February 1, 2029.		12/31/21		12	%	$	1,750,000	$	1,750,000		2.9	%
	Warrant for 1,167 shares.		12/31/21					—		—

	Total Applied Image							1,750,000		1,750,000


BMP Swanson Holdco, LLC (g)(m) Plano, TX. Designs, installs and maintains a variety of fire protection systems. (Professional Services) www.swansonfire.com	$1,600,000 Term Note at 12% due September 4, 2026.		3/4/21		9	%		1,600,000		1,600,000		3.0	%
	Preferred Membership Interest for 9.29%.		3/4/21					233,333		233,333

	Total BMP Swanson							1,833,333		1,833,333


Carolina Skiff LLC (g)(m)	6.0825% Class A Common Membership Interest.		1/30/04		7	%		15,000		1,300,000		2.2	%
Waycross, GA. Manufacturer of ocean fishing	6.0825% Class A Common Membership Interest.
and pleasure boats. (Manufacturing)
www.carolinaskiff.com

DSD Operating, LLC (l)(m) Duluth, GA. Design and renovate auto dealerships. (Automotive) www.dsdteam.com	$2,745,000 Term Note at 12% (+2% PIK) due September 30, 2026. 1,067 Class A Preferred shares. 1,067 Class B Common shares.		9/30/21		11	%		2,759,183 1,067,500 —		2,759,183 1,067,500 —		6.3	%

	Total DSD							3,826,683		3,826,683


Filterworks Acquisition USA, LLC DBA Autotality (l)(m) Deerfield Beach, FL. Provides spray booth equipment, frame repair machines and paint booth filter services for collision shops. (Automotive) www.autotality.com	$2,283,702 Term Note at 12% (+2% PIK), modified to 4% (+10% PIK) through March 31, 2022, due December 4, 2023.		11/8/19		9	%		2,446,617		2,446,617		4.5	%
	626 Class A Units.		12/28/21					626,243		256,994

	Total Filterworks							3,072,860		2,703,611



ITA Acquisition, LLC (l) (m) Ormond Beach, FL. Blind and shade manufacturing. (Manufacturing)	$1,900,000 Term Note at 12% (+2% PIK) due June 21, 2026.		6/22/21		24	%		1,920,459		1,920,459		5.9	%
	(g) $1,500,000 Term Note at 12% (+2% PIK) due June 21, 2026.		6/22/21					1,516,152		1,516,152
	(g) 500 Class A Preferred Units and 500 Class B Common Units.		6/22/21					500,000		125,000

www.itainc.com	Total ITA							3,936,611		3,561,611


Knoa Software, Inc. (e)(g)	973,533 Series A-1 Convertible Preferred.		11/20/12		7	%		750,000		—		0.8	%
New York, NY. End user experience	1,876,922 Series B Preferred.		6/9/14					479,155		479,155

management and performance (EMP) solutions	Total Knoa							1,229,155		479,155

utilizing enterprise applications. (Software)
www.knoa.com

Mezmeriz, Inc. (e)(g)	1,554,565 Series Seed Preferred.		5/14/15		12	%		742,850		—		0.0	%
Ithaca, NY. Technology company developing novel reality capture tools for 3D mapping, reality modeling, object tracking and classification. (Electronics Developer) www.mezmeriz.com

Microcision LLC (g) Pennsauken Township, NJ. Manufacturer of precision machined medical implants, components and assemblies. (Manufacturing) www.microcision.com	Membership Interest Purchase Warrant for 5%.		1/10/20		5	%		110,000		85,000		0.1	%

New Monarch Machine Tool, Inc. (e)(g) Cortland, NY. Manufactures and services vertical/horizontal machining centers. (Manufacturing) www.monarchmt.com	22.84 Common.		1/17/08		15	%		22,841		—		0.0	%

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2021 (Continued)


Company, Geographic Location, Business Description, (Industry) and Website	(a) Type of Investment	(b) Date Acquired		(c) Equity			Cost		(d)(f) Fair Value			Percent of Net Assets
SciAps, Inc. (e)(g)	187,500 Series A Preferred.		7/12/13		6	%		1,500,000		210,000			4.0	%
Woburn, MA. Instrumentation company producing portable analytical devices using XRF, LIBS and RAMAN spectroscopy to identify compounds, minerals, and elements. (Manufacturing) www.sciaps.com	274,299 Series A1 Convertible Preferred.		4/4/14					504,710		96,000
	117,371 Series B Convertible Preferred.		8/31/15					250,000		124,000
	113,636 Series C Convertible Preferred.		4/7/16					175,000		84,000
	369,698 Series C1 Convertible Preferred.		4/7/16					399,274		207,000
	147,059 Series D Convertible Preferred.		5/9/17					250,000		250,000
	Warrant to purchase Series D-1 Preferred.		5/9/17					45,000		—
	$1,500,000 Second Amended and Restated Secured Subordinated Promissory Note at 12% due August 20, 2024.		8/20/21					1,480,000		1,480,000

	Total SciAps							4,603,984		2,451,000


Seybert’s Billiards Corporation (l) Coldwater, MI. Billiard supplies. (Consumer Product) www.seyberts.com	$1,900,000 Term Note at 12% (+2% PIK) due January 19, 2026.		11/22/21		8	%		1,907,775		1,907,775			5.5	%
	Warrant for 4%.		1/19/21					25,000		25,000
	(g) $1,400,000 Term Note at 12% (+2% PIK)		1/19/21
	due January 19, 2026.							1,406,690		1,406,690
	Warrant for 4%.		1/19/21					25,000		25,000

	Total Seybert’s							3,364,465		3,364,465


Tilson Technology Management, Inc. (g)	*120,000 Series B Preferred.		1/20/15		9	%		600,000		3,900,000			14.7	%
Portland, ME. Provides network deployment construction and information system services management for cellular, fiber optic and wireless systems providers. Its affiliated entity, SQF, LLC is a CLEC supporting small cell 5G deployment.	*21,391 Series C Preferred.		9/28/16					200,000		695,000
	*70,176 Series D Preferred.		9/29/17					800,000		2,280,000
	*15,385 Series E Preferred.		3/15/19					500,012		500,012
	211,567 SQF Hold Co. Common.		3/15/19					—		800,000
	23,077 Series F Preferred.		6/15/20					750,003		750,003

(Professional Services)	Total Tilson							2,850,015		8,925,015

www.tilsontech.com	*2.5% dividend payable quarterly.

Subtotal Affiliate Investments							$	27,357,797	$	30,279,873

TOTAL INVESTMENTS – 105.5%							$	52,370,668	$	64,068,462
LIABILITIES IN EXCESS OF OTHER ASSETS – (5.5%)										(3,323,046	)

NET ASSETS – 100%									$	60,745,416

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2021 (Continued)

Notes to the Consolidated Schedule of Portfolio Investments

(a) At December 31, 2021, restricted securities represented 78% of the fair value of the investment portfolio. Restricted securities are subject to one or more restrictions on resale and are not freely marketable. Type of investment for equity position is in the form of shares unless otherwise noted as units or interests, i.e., preferred shares, common shares.

(b) The Date Acquired column indicates the date on which the Corporation first acquired an investment.

(c) Each equity percentage estimates the Corporation’s ownership interest in the applicable portfolio investment. The estimated ownership is calculated based on the percent of outstanding voting securities held by the Corporation or the potential percentage of voting securities held by the Corporation upon exercise of warrants or conversion of debentures, or other available data. If applicable, the symbol “<1%” indicates that the Corporation holds an equity interest of less than one percent.

(d) The Corporation’s investments are carried at fair value in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820 “Fair Value Measurements and Disclosures,” which defines fair value and establishes guidelines for measuring fair value. At December 31, 2021, ASC 820 designates 78% of the Corporation’s investments as “Level 3” assets. Under the valuation policy of the Corporation, unrestricted publicly traded securities are valued at the average closing price for these securities for the last three trading days of the reporting period. Restricted securities are subject to restrictions on resale and are valued at fair value as determined by our external investment advisor Rand Capital Management, LLC (“RCM”) and approved by the Board of Directors. Fair value is considered to be the amount that the Corporation may reasonably expect to receive for portfolio securities when sold on the valuation date. Valuations as of any particular date, however, are not necessarily indicative of amounts which may ultimately be realized as a result of future sales or other dispositions of securities and these favorable or unfavorable differences could be material. Among the factors considered in determining the fair value of restricted securities are the financial condition and operating results, projected operations, and other analytical data relating to the investment. Also considered are the market prices for unrestricted securities of the same class (if applicable) and other matters which may have an impact on the value of the portfolio company (see Note 3. “Investments” to the Consolidated Financial Statements).

(e) These investments are non-income producing. All other investments are income producing. Non-income producing investments have not generated cash payments of interest or dividends including LLC tax-related distributions within the last twelve months or are not expected to do so going forward. If a debt or a preferred equity investment fails to make its most recent payment, then the investment will also be classified as non-income producing.

(f) As of December 31, 2021, the total cost of investment securities was approximately $52.4 million. Net unrealized appreciation was approximately $11.7 million, which was comprised of $21.2 million of unrealized appreciation of investment securities and ($9.5) million of unrealized depreciation of investment securities. At December 31, 2021, the aggregate gross unrealized gain for federal income tax purposes was $20.6 million and the aggregate gross unrealized loss for federal income tax purposes was ($9.6) million. The net unrealized gain for federal income tax purposes was $11.0 million based on a tax cost of $53.0 million.

(g) Rand Capital investment held by Rand Capital Sub LLC.

(h) Reduction in cost and value from previously reported balances reflects current principal repayment.

(i) Represents interest due (amounts over $50,000) from investments included as interest receivable on the Corporation’s Consolidated Statements of Financial Position.

(j) Non-Control/Non-Affiliate Investments are investments that are neither Control Investments nor Affiliate Investments.

(k) Affiliate Investments are defined by the Investment Company Act of 1940, as amended (“1940 Act”), as those Non-Control investments in companies in which between 5% and 25% of the voting securities are owned by the Corporation.

(l) Payment in kind (PIK) represents earned interest that is added to the cost basis of the investment and due at maturity. The amount of PIK earned is included in the interest rate detailed in the “Type of Investment” column, unless it has been noted with a (+), in which case the PIK is in addition to the face amount of interest due on the security.

(m) Equity holdings are held in a wholly owned (100%) “blocker corporation” of Rand Capital Corporation or Rand Capital Sub LLC for federal income tax and Regulated Investment Company (RIC) compliance.

(n) Publicly traded company.

(o) Control Investments are defined by the 1940 Act as investments in companies in which more than 25% of the voting securities are owned by the Corporation or where greater than 50% of the board representation is maintained (None at December 31, 2021).

(p) Subsequent to December 31, 2021, ACV Auctions’ (ACVA) public market share price had a trading range on NASDAQ of $10.30 to $19.73 for the period of January 1^st to February 28th, 2022. The Corporation’s value per share at December 31, 2021 was $18.81.

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2021 (Continued)

Investments in and Advances to Affiliates


Company	Type of Investment	January 1, 2021, Fair Value		Net Change in Unrealized Appreciation (Depreciation)			Gross Additions (1)		Gross Reductions (2)			December 31, 2021 Fair Value		Net Realized (Losses) Gains			Amount of Interest/ Dividend/ Fee Income (3)
Control Investments:
Empire Genomics Corp.	$444,915 Secured Promissory Note at 8% due December 31, 2026.	$	—	$	—		$	444,915	($	444,915	)	$	—	($	308,676	)	$	23,068
Empire Genomics Corp.	1,576,499 common shares.		—		—			157,655		(157,655	)		—		—			—

	Total Empire		—		—			602,570		(602,570	)		—		(308,676	)		23,068

	Total Control Investments	$	—	$	—		$	602,570	($	602,570	)	$	—	($	308,676	)	$	23,068


Affiliate Investments:
Applied Image Inc.	$1,750,000 Term Note at 10% due December 28, 2028.	$	—	$	—		$	1,750,000	$	—		$	1,750,000	$	—		$	17,500
	Warrant for 1,167 shares.		—		—			—		—			—		—			—

	Total Applied Image		—		—			1,750,000		—			1,750,000		—			17,500


BMP Swanson Holdco, LLC	$1,600,000 Term Note at 12% due September 4, 2026.		—		—			1,600,000		—			1,600,000		—			166,623
	Preferred Membership Interest for 9.29%.		—		—			233,333		—			233,333		—			—

	Total BMP Swanson		—		—			1,833,333		—			1,833,333		—			166,623


Carolina Skiff LLC	6.0825% Class A Common Membership interest.		1,500,000		(200,000	)		—		—			1,300,000		—			214,265

ClearView Social, Inc.	312,500 Series Seed Plus Preferred.		200,000		—			—		(200,000	)		—		135,430			—

DSD Operating, LLC	$2,745,000 Term Note at 12% (+2% PIK) due September 30, 2026.		—		—			2,759,183		—			2,759,183		—			103,089
	1,067 Class A Preferred shares.		—		—			1,067,500		—			1,067,500		—			—
	1,067 Class B Common shares.		—		—			—		—			—		—			—

	Total DSD		—		—			3,826,683		—			3,826,683		—			103,089


Filterworks Acquisition USA, LLC	$2,283,702 Term Note at 12%.		2,349,831		—			96,786		—			2,446,617		—			336,090
	562.5 Class A Units.		562,500		(369,249	)		63,743		—			256,994		—			—

	Total Filterworks		2,912,331		(369,249	)		160,529		—			2,703,611		—			336,090


ITA Acquisition LLC	$1,900,000 Term Note at 12% (+2% PIK) due June 22, 2026.		—		—			1,920,459		—			1,920,459		—			147,049
	(g) $1,500,000 Term Note at 12% (+2% PIK) due June 22, 2026.		—		—			1,516,152		—			1,516,152		—			118,220
	(g) 500 Class A Preferred Units and 500 Class B Common Units.		—		(375,000	)		500,000		—			125,000		—			14,096

	Total ITA		—		(375,000	)		3,936,611		—			3,561,611		—			279,365


Knoa Software, Inc.	973,533 Series A-1 Convertible Preferred.		544,860		(544,860	)		—		—			—		—			87,771
	1,876,922 Series B Preferred.		479,155		—			—		—			479,155		—			—

	Total Knoa		1,024,015		(544,860	)		—		—			479,155		—			87,771


Mezmeriz, Inc.	1,554,565 Series Seed Preferred.		—		—			—		—			—		—			—

Microcision LLC	$1,500,000 Subordinated Promissory Note at 10%.		1,411,997		—			88,003		(1,500,000	)		—		57,215			126,711
	Membership Interest Purchase Warrant for 5%.		95,000		(10,000	)		—		—			85,000		—			—

	Total Microcision		1,506,997		(10,000	)		88,003		(1,500,000	)		85,000		57,215			126,711


New Monarch Machine Tool, Inc.	22.84 Common.		22,841		(22,841	)		—		—			—		—			—

OnCore Golf Technology, Inc.	300,483 Series AA Preferred.		300,000		—			—		(300,000	)		—		—			—

SciAps, Inc.	187,500 Series A Preferred.		—		210,000			—		—			210,000		—			—
	274,299 Series A-1 Convertible Preferred.		—		96,000			—		—			96,000		—			—
	117,371 Series B Convertible Preferred.		—		124,000			—		—			124,000		—			—
	113,636 Series C Convertible Preferred.		—		84,000			—		—			84,000		—			—
	369,698 Series C-1 Convertible Preferred.		—		207,000			—		—			207,000		—			—
	147,059 Series D Convertible Preferred.		250,000		—			—		—			250,000		—			—
	Warrant to Purchase Series D-1 Preferred.		—		—			—		—			—		—			—
	$1,500,000 Subordinated Promissory Note at 12%.		1,465,000		—			15,000		—			1,480,000		—			215,000

	Total SciAps		1,715,000		721,000			15,000		—			2,451,000		—			215,000

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2021 (Continued)


Company	Type of Investment	January 1, 2021, Fair Value		Net Change in Unrealized Appreciation (Depreciation)		Gross Additions (1)		Gross Reductions (2)			December 31, 2021 Fair Value		Net Realized (Losses) Gains			Amount of Interest/ Dividend/ Fee Income (3)
Seybert’s Billiards Corporation	$1,400,000 Term Note at 12% (+2% PIK) due January 19, 2026.		—		—		1,907,774		—			1,907,774		—			209,904
	Warrant for 4%.		—		—		25,000		—			25,000		—			—
	(g) $1,400,000 Term Note at 12% (+2% PIK) due January 19, 2026.		—		—		1,406,690		—			1,406,690		—			201,922
	Warrant for 4%.		—		—		25,000		—			25,000		—			—

	Total Seybert’s		—		—		3,364,464		—			3,364,464		—			411,826


Tilson Technology Management, Inc.	120,000 Series B Preferred.		1,950,000		1,950,000		—		—			3,900,000		—			52,500
	21,391 Series C Preferred.		347,604		347,396		—		—			695,000		—			—
	70,176 Series D Preferred.		1,140,360		1,139,640		—		—			2,280,000		—			—
	15,385 Series E Preferred.		500,012		—		—		—			500,012		—			—
	23,077 Series F Preferred.		750,003		—		—		—			750,003		—			—
	211,567 SQF Hold Co. Common.		22,036		777,964		—		—			800,000		—			—

	Total Tilson		4,710,015		4,215,000		—		—			8,925,015		—			52,500


	Total Affiliate Investments	$	13,891,199	$	3,414,050	$	14,974,623	($	2,000,000	)	$	30,279,872	$	192,645		$	2,010,740


	Total Control and Affiliate Investments	$	13,891,199	$	3,414,050	$	15,577,193	($	2,602,570	)	$	30,279,872	($	116,031	)	$	2,033,808

(1)

(2)	Gross reductions include decreases in the cost basis of investments resulting from principal repayments, sales, note conversions, the exchange of existing securities for new securities and the movement of an existing portfolio company out of this category and into another category.

(3)	Represents the total amount of interest, fees or dividends credited to income for the portion of the period an investment was included in “Control or Affiliate” categories, respectively.

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2021 (Continued)


Industry Classification	Percentage of Total Investments (at fair value) as of December 31, 2021
Software		26.3	%
Professional Services		23.1
Manufacturing		16.8
Consumer Product		11.8
Automotive		10.2
BDC Investment Funds		8.7
Healthcare		2.3
Oil and Gas		0.8

Total Investments		100	%

Rand Capital Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

(Unaudited)

Note 1. ORGANIZATION

Rand Capital Corporation (“Rand”, “we”, “us” and “our”) was incorporated under the laws of New York in February 1969. We completed our initial public offering in 1971 and operated as an internally managed, closed end, diversified, management investment company from that time until November 2019.

In November 2019, Rand completed a stock sale transaction (the “Closing”) with East Asset Management (“East”). The transaction consisted of a $25 million investment in Rand by East, in the form of cash and contributed portfolio assets, in exchange for approximately 8.3 million shares of Rand common stock. East owns approximately 64% of Rand Capital’s outstanding common stock at June 30, 2022. Concurrent with the Closing, Rand’s management and staff became employees of Rand Capital Management, LLC (“RCM”), a registered investment adviser that has been retained by Rand as its external investment adviser and administrator (the Closing and the retention of RCM as our investment adviser and administrator are collectively referred to herein as the “Transaction”). In connection with a change of control of RCM (the “Adviser Change of Control”), Rand’s shareholders approved a new investment advisory and management agreement (the “Investment Management Agreement”) with RCM at a special meeting of shareholders held on December 16, 2020 (the “Special Meeting”). The terms of the Investment Management Agreement are identical to those contained in the prior investment management agreement that was in effect prior to the Adviser Change of Control (the “Prior Investment Management Agreement”) with RCM continuing to provide investment advisory and management services to Rand. Following approval by Rand’s shareholders at the Special Meeting, Rand, on December 31, 2020, entered into the Investment Management Agreement and a new administration agreement (the “Administration Agreement”) with RCM and terminated the prior administration agreement (the “Prior Administration Agreement”). The terms of the Administration Agreement are identical to those contained in the Prior Administration Agreement. Pursuant to the terms of the Investment Management Agreement, Rand pays RCM a base management fee and may pay an incentive fee, if specified benchmarks are met.

In connection with the Closing, we also entered into a shareholder agreement by and between Rand and East (the “Shareholder Agreement”). Pursuant to the terms of the Shareholder Agreement, East has the right to designate two or three persons, depending upon the size of the Board of Directors of Rand (the “Board”), for nomination for election to the Board. East has the right to designate (i) up to two persons if the size of the Board is composed of fewer than seven directors or (ii) up to three persons if the size of the Board is composed of seven or more directors. East’s right to designate persons for nomination for election to the Board under the Shareholder Agreement is the exclusive means by which East may designate or nominate persons for election to the Board. The Board currently consists of five directors, and East’s designees are Adam S. Gusky and Benjamin E. Godley.

After the completion of the Transaction, we are an externally managed, closed-end, diversified management investment company. We have elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). As a BDC, we are required to comply with certain regulatory requirements specified in the 1940 Act. For instance, we generally have to invest at least 70% of our total assets in “qualifying assets” and provide managerial assistance to the portfolio companies in which we invest. See “Item 1. Business—Regulations, Business Development Company Regulations” in our Annual Report on Form 10-K for the year ended December 31, 2021.

Prior to 2021, we made the majority of our investments through our wholly owned subsidiary, Rand Capital SBIC, Inc. (“Rand SBIC”), which operated as a small business investment company (“SBIC”) and was licensed by the U.S. Small Business Administration (“SBA”) from 2002 until December 2021. Until December 2021, Rand SBIC also operated as a BDC. Rand SBIC’s board of directors was comprised of the same directors that made up the Board of Rand, a majority of whom are not “interested persons” as defined by the 1940 Act.

In November 2021, Rand SBIC repaid, in full, all of its outstanding SBA-guaranteed debentures and surrendered its SBIC license. In connection with the surrender of its SBIC license, Rand SBIC changed its name to Rand Capital Sub, Inc. (“Rand Sub”), withdrew its election to be regulated as a BDC, and merged with and into Rand Capital Sub LLC, a Delaware limited liability company, a wholly owned subsidiary of Rand.

In connection with the completion of the Transaction, we adopted an investment strategy focused on higher yielding debt investments and elected to be treated as a regulated investment company (“RIC”) for U.S. Federal income tax purposes as of January 1, 2020 on our U.S. Federal tax return for the 2020 tax year. As required for the RIC election, we paid a special dividend to shareholders to distribute all of our accumulated earnings and profits since inception to 2019.

The Board declared the following quarterly cash dividend during the six months ended June 30, 2022:


Quarter	Dividend/Share Amount	Record Date		Payment Date

1^st	$0.15		March 14, 2022		March 28, 2022
2^nd	$0.15		June 1, 2022		June 15, 2022

In order to qualify to make the RIC election, Rand placed several of its equity investments in newly formed holding companies that facilitate a tax structure that is advantageous to the RIC election. Rand has the following wholly owned blocker companies in place at June 30, 2022: Rand Somerset Holdings Corp., Rand Carolina Skiff Holdings Corp., Rand DSD Holdings Corp., Rand Filterworks Holdings Corp., Rand ITA Holdings Corp., and Rand BMP Swanson Holdings Corp. (the “Blocker Corps”). These subsidiaries are consolidated using United States generally accepted accounting principles (“GAAP”) for financial reporting purposes.

On October 7, 2020, Rand, RCM and certain of their affiliates received exemptive relief from the Securities and Exchange Commission (“SEC”) to permit Rand to co-invest in portfolio companies with certain other funds, including other BDCs and registered investment companies, managed by RCM and certain of its affiliates in a manner consistent with Rand’s investment objective, positions, policies, strategies and restrictions as well as regulatory requirements, subject to compliance with certain conditions (the “Order”). Pursuant to the Order, Rand is generally permitted to co-invest with affiliated funds if a “required majority” (as defined in Section 57(o) of the 1940 Act) of Rand’s independent directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transaction, including the consideration to be paid, are reasonable and fair to Rand and its shareholders and do not involve overreaching in respect to Rand or its shareholders on the part of any person concerned and (2) the transaction is consistent with the interests of Rand’s shareholders and is consistent with Rand’s investment objective and strategies. On March 29, 2021, the SEC granted approval for a new exemptive relief order (the “New Order”) that supersedes the Order and permits the Corporation to co-invest with affiliates of RCM and Callodine Group, LLC (“Callodine”) in connection with the completion of the Adviser Change of Control. Callodine holds a controlling interest in RCM.

The accompanying financial statements describe the operations of Rand and its wholly-owned subsidiaries Rand Sub and the Blocker Corps, (collectively, the “Corporation”).

Our corporate office is located in Buffalo, NY and our website address is www.randcapital.com. We make available on our website our annual and quarterly reports, proxy statements and other information as soon as reasonably practicable after such material is filed with the Securities and Exchange Commission (“SEC”). Our shares are traded on the Nasdaq Capital Market under the ticker symbol “RAND.”

Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation – It is our opinion that the accompanying consolidated financial statements include all adjustments of a normal recurring nature necessary for a fair presentation in accordance with GAAP of the consolidated financial position, results of operations, cash flows and statement of changes in net assets for the interim periods presented. Certain information and note disclosures normally included in audited annual consolidated financial statements prepared in accordance with GAAP have been omitted; however, we believe that the disclosures made are adequate to make the information presented herein not misleading. The interim results for the six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the full year.

These statements should be read in conjunction with the consolidated financial statements and the notes included in our Annual Report on Form 10-K for the year ended December 31, 2021. Information contained in this filing should also be reviewed in conjunction with our related filings with the SEC prior to the date of this report.

Principles of Consolidation - The consolidated financial statements include the accounts of Rand and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Fair Value of Financial Instruments – The carrying amounts reported in the consolidated statement of financial position of cash, interest receivable, accounts payable and accrued expenses approximate fair value because of the immediate or short-term nature of these financial instruments.

Investment Classification – In accordance with the provisions of the 1940 Act, the Corporation classifies its investments by level of control. Under the 1940 Act, “Control Investments” are investments in companies that the Corporation is deemed to “Control” because it owns more than 25% of the voting securities of the company or has greater than 50% representation on the company’s board. “Affiliate Investments” are companies in which the Corporation owns between 5% and 25% of the voting securities. “Non-Control/Non-Affiliate Investments” are those companies that are neither Control Investments nor Affiliate Investments.

Investments - Investments are valued at fair value as determined in good faith by RCM and approved by our Board. The Corporation invests in loan instruments, debt instruments, and equity instruments. There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistent valuation process. The Corporation analyzes and values each investment quarterly, and records unrealized depreciation for an investment that it believes has become impaired, including where collection of a loan or debt security or realization of the recorded value of an equity security is doubtful. Conversely, the Corporation will record unrealized appreciation if it believes that an underlying portfolio company has appreciated in value and, therefore, its equity securities have also appreciated in value. These estimated fair values may differ from the values that would have been used had a ready market for the investments existed and these differences could be material if RCM’s assumptions and judgments differ from results of actual liquidation events. Under the valuation policy of the Corporation, unrestricted publicly traded securities are valued at the average closing price for these securities for the last three trading days of the reporting period.

Qualifying Assets - More than 70% of the Corporation’s investments were made in qualifying privately held small business enterprises, that were not investment companies, are principally based in the United States, and represent qualifying assets as defined by Section 55(a) of the 1940 Act.

Revenue Recognition - Interest Income - Interest income is recognized on the accrual basis except where the investment is in default or otherwise presumed to be in doubt. In such cases, interest is recognized at the time of receipt. A reserve for possible losses on interest receivable is maintained when appropriate.

The Corporation holds debt securities in its investment portfolio that contain payment-in-kind (“PIK”) interest provisions. PIK interest, computed at the contractual rate specified in each debt agreement, is added to the principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment.

Revenue Recognition - Dividend Income – The Corporation may receive cash distributions from portfolio companies that are limited liability companies or corporations, and these distributions are classified as dividend income on the consolidated statement of operations. Dividend income is recognized on an accrual basis when it can be reasonably estimated.

The Corporation may hold preferred equity securities that contain cumulative dividend provisions. Cumulative dividends are recorded as dividend income, if declared and deemed collectible, 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 - Consists of the revenue associated with the amortization of financing fees charged to the portfolio companies upon successful closing of financings and income associated with portfolio company board attendance fees.

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. The cost of securities that have, in management’s judgment, become worthless are written off and reported as realized losses when appropriate. Unrealized appreciation or depreciation reflects the difference between the fair value of the investments and the cost basis of the investments.

Original Issue Discount – Investments may include “original issue discount” or OID income. This occurs 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 note or debt instrument by an equal amount in the form of a note discount or OID.

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 six months ended June 30, 2022 and 2021 were ($149,185) and $27,902, respectively, including $10,116 of interest income received from the Internal Revenue Service refund related to the 2018 net operating loss carryback. Interest paid during the six months ended June 30, 2022 and 2021 was $0 and $187,985, respectively. The Corporation converted $290,591 and $116,418 of interest receivable into investments during the six months ended June 30, 2022 and 2021, respectively.

Accounting Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Stockholders’ Equity (Net Assets) - At June 30, 2022 and December 31, 2021, there were 500,000 shares of $10.00 par value preferred stock authorized and unissued.

On April 21, 2022, the Board approved a share repurchase plan which authorizes the Corporation to repurchase shares of the Corporation’s outstanding common stock with an aggregate cost of up to $1,500,000 at prices per share of common stock no greater than the then current net asset value. This share repurchase authorization is in effect through April 21, 2023. This share repurchase plan replaces the share repurchase authorization that was previously approved by the Board in April 2021. No shares of common stock were repurchased by the Corporation during the six months ended June 30, 2022 or June 30, 2021.

Income Taxes – The Corporation elected to be treated, for income tax purposes, as a RIC for the 2022 and 2021 tax years under Subchapter M of the Code. As a result, the Corporation did not pay corporate-level federal income taxes on any net ordinary income or capital gains that the Corporation distributed to its shareholders as dividends. The Corporation must distribute substantially all of its investment company taxable income each tax year as dividends to its shareholders to maintain its RIC status. Accordingly, no provision for federal income tax has been made in the financial statements for the six months ended June 30, 2022 and 2021, respectively.

Distributions from net investment income and distributions from net realized capital gains are determined in accordance with U.S. federal tax regulations, which may differ from amounts determined in accordance with GAAP and those differences could be material. These book-to-tax differences are either temporary or permanent in nature. Reclassifications due to permanent book-tax differences, including the offset of net operating losses against short-term gains and nondeductible meals and entertainment, have no impact on net assets.

The Corporation reviews the tax positions it has taken to determine if they meet a “more likely than not threshold” for the benefit of the tax position to be recognized in the consolidated financial statements. A tax position that fails to meet the more likely than not recognition threshold will result in either a reduction of a current or deferred tax asset or receivable, or the recording of a current or deferred tax liability. There were no uncertain tax positions recorded at June 30, 2022 or December 31, 2021.

The Corporation is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended December 31, 2018 through 2021. In general, the Corporation’s state income tax returns are open to audit under the statute of limitations for the years ended December 31, 2018 through 2021.

It is the Corporation’s policy to include interest and penalties related to income tax liabilities in income tax expense on the Consolidated Statement of Operations. There were no amounts recognized for the six months ended June 30, 2022 and there was $2,627 recognized for the six months ended June 30, 2021.

Concentration of Credit and Market Risk – The Corporation’s financial instruments potentially subject it to concentrations of credit risk. Cash is invested with banks in amounts which, at times, exceed insurable limits. The Corporation does not anticipate non-performance by such banks.

The following are the concentrations of the top five portfolio company values compared to the fair value of the Corporation’s total investment portfolio:


	June 30, 2022
Tilson Technology Management, Inc. (Tilson)		15	%
Seybert’s Billiards Corporation (Seybert’s)		10	%
Open Exchange, Inc. (Open Exchange)		9	%
DSD Operating, LLC (DSD)		7	%
Caitec, Inc. (Caitec)		7	%


	December 31, 2021
Tilson		14	%
ACV Auctions, Inc. (ACV)		13	%
Open Exchange		9	%
Caitec		6	%
DSD		6	%

Note 3. INVESTMENTS

The Corporation’s investments are carried at fair value in accordance with FASB Accounting Standards Codification (ASC) 820, “Fair Value Measurements and Disclosures”, which defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements.

Loan investments are defined as traditional loan financings with no equity features. Debt investments are defined as debt financings that include one or more equity features such as conversion rights, stock purchase warrants, and/or stock purchase options. A financing may also be categorized as a debt financing if it is accompanied by the direct purchase of an equity interest in the portfolio company.

The Corporation uses several approaches to determine the fair value of an investment. The main approaches are:

•

Loan and debt securities are valued at cost when it is representative of the fair value of the investment or sufficient assets or liquidation proceeds are expected to exist from a sale of a portfolio company at its estimated fair value. However, they may be valued at an amount other than cost given the carrying interest rate versus the related inherent portfolio risk of the investment. A loan or debt instrument may be reduced in value if it is judged to be of poor quality, collection is in doubt or insufficient liquidation proceeds exist.

•

Equity securities may be valued using the “asset approach”, “market approach” or “income approach.” The asset approach involves estimating the liquidation value of the portfolio company’s assets. To the extent the value exceeds the remaining principal amount of the debt or loan securities of the portfolio company, the fair value of such securities is generally estimated to be their cost. However, where value is less than the remaining principal amount of the loan and debt securities, the Corporation may discount the value of an equity security. The market approach uses observable prices and other relevant information generated by similar market transactions. It may include the use of market multiples derived from a set of comparables to assist in pricing the investment. Additionally, the Corporation adjusts valuations if a subsequent significant equity financing has occurred that includes a meaningful portion of the financing by a sophisticated, unrelated new investor. The income approach employs a cash flow and discounting methodology to value an investment.

ASC 820 classifies the inputs used to measure fair value into the following hierarchy:

Level 1: Quoted prices in active markets for identical assets or liabilities, used in the Corporation’s valuation at the measurement date. Under the valuation policy, the Corporation values unrestricted publicly traded companies, categorized as Level 1 investments, at the average closing price for the last three trading days of the reporting period.

Level 2: Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices.

Level 3: Unobservable and significant inputs to determining the fair value.

Financial assets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Any changes in estimated fair value are recorded in the statement of operations.

At June 30, 2022, 10% of the Corporation’s investments were Level 1 investments and 90% were Level 3 investments. At December 31, 2021, 22% of the Corporation’s investments were Level 1 investments and 78% were Level 3 investments. There were no Level 2 investments at June 30, 2022 or December 31, 2021.

In the valuation process, the Corporation values restricted securities categorized as Level 3 investments, using information from these portfolio companies, which may include:

•

Audited and unaudited statements of operations, balance sheets and operating budgets;

•

Current and projected financial, operational and technological developments of the portfolio company;

•

Current and projected ability of the portfolio company to service its debt obligations;

•

The current capital structure of the business and the seniority of the various classes of equity if a deemed liquidation event were to occur;

•

Pending debt or capital restructuring of the portfolio company;

•

Current information regarding any offers to purchase the investment, or recent fundraising transactions;

•

Current ability of the portfolio company to raise additional financing if needed;

•

Changes in the economic environment which may have a material impact on the operating results of the portfolio company;

•

Internal circumstances and events that may have an impact (both positive and negative) on the operating performance of the portfolio company;

•

Qualitative assessment of key management;

•

Contractual rights, obligations or restrictions associated with the investment; and

•

Other factors deemed relevant to assess valuation.

The valuation may be reduced if a portfolio company’s performance and potential have deteriorated significantly. If the factors that led to a reduction in valuation are overcome, the valuation may be readjusted.

Equity Securities

Equity securities may include preferred stock, common stock, warrants and limited liability company membership interests.

The significant unobservable inputs used in the fair value measurement of the Corporation’s equity investments are earnings before interest, tax and depreciation and amortization (EBITDA) and revenue multiples, where applicable, the financial and operational performance of the business, and the debt and senior equity preferences that may exist in a deemed liquidation event. Standard industry multiples may be used when available; however, the Corporation’s portfolio companies are typically small and in early stages of development and these industry standards may be adjusted to more closely match the specific financial and operational performance of the portfolio company. Due to the nature of certain investments, fair value measurements may be based on other criteria, which may include third party appraisals. Significant changes in any of these unobservable inputs may result in a significantly higher or lower fair value estimate.

Another key factor used in valuing equity investments is a significant recent arms-length equity transaction entered into by the portfolio company with a sophisticated, non-strategic, unrelated, new investor. The terms of these equity transactions may not be identical to the equity transactions between the portfolio company and the Corporation, and the impact of the difference in transaction terms on the market value of the portfolio company may be difficult or impossible to quantify.

When appropriate the Black-Scholes pricing model is used to estimate the fair value of warrants for accounting purposes. This model requires the use of highly subjective inputs including expected volatility and expected life, in addition to variables for the valuation of minority equity positions in small private and early stage companies. Significant changes in any of these unobservable inputs may result in a significantly higher or lower fair value estimate.

For investments made within the last year, the Corporation generally relies on the cost basis, which is deemed to represent the fair value, unless other fair value inputs are identified causing the Corporation to depart from this basis.

Loan and Debt Securities

The significant unobservable inputs used in the fair value measurement of the Corporation’s loan and debt securities are the financial and operational performance of the portfolio company, similar debt with similar terms with other portfolio companies, as well as the market acceptance for the portfolio company’s products or services. These inputs will likely provide an indicator as to the probability of principal recovery of the investment. The Corporation’s loan and debt investments are often junior secured or unsecured securities. Fair value may also be determined based on other criteria where appropriate. Significant changes to the unobservable inputs may result in a change in fair value. For recent investments, the Corporation generally relies on the cost basis, which is deemed to represent the fair value, unless other fair value inputs are identified causing the Corporation to depart from this basis.

The following table provides a summary of the significant unobservable inputs used to determine the fair value of the Corporation’s Level 3 portfolio investments as of June 30, 2022:


Investment Type	Market Approach EBITDA Multiple		Market Approach Liquidation Seniority		Market Approach Revenue Multiple		Market Approach Transaction Pricing		Totals
Non-Control/Non-Affiliate Equity	$	—	$	500,000	$	—	$	6,518,938	$	7,018,938
Non-Control/Non-Affiliate Loan and Debt		3,152,015		2,265,513		1,444,915		5,868,734		12,731,177

Total Non-Control/Non-Affiliate	$	3,152,015	$	2,765,513	$	1,444,915	$	12,387,672	$	19,750,115

Affiliate Equity	$	1,905,804	$	—	$	1,450,155	$	10,275,848	$	13,631,807
Affiliate Loan and Debt		2,554,176		—		1,487,500		15,491,826		19,533,502

Total Affiliate	$	4,459,980	$	—	$	2,937,655	$	25,767,674	$	33,165,309

Total Level 3 Investments	$	7,611,995	$	2,765,513	$	4,382,570	$	38,155,346	$	52,915,424


Range		5X - 6X		1X		1X - 4X		Not Applicable
Unobservable Input		EBITDA Multiple		Asset Value		Revenue Multiple		Transaction Price
Weighted Average		5.8X		1X		1.9X		Not Applicable

The following table provides a summary of the components of Level 1, 2 and 3 Assets Measured at Fair Value at June 30, 2022:


			Fair Value Measurements at Reported Date Using
Description	June 30, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Other Significant Unobservable Inputs (Level 3)
Loan investments	$	15,941,372	$	—	$	—	$	15,941,372
Debt investments		16,323,307		—		—		16,323,307
Equity investments		26,734,094		6,083,349		—		20,650,745

Total	$	58,998,773	$	6,083,349	$	—	$	52,915,424

The following table provides a summary of the components of Level 1, 2 and 3 Assets Measured at Fair Value at December 31, 2021:


			Fair Value Measurements at Reported Date Using
Description	December 31, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Other Significant Unobservable Inputs (Level 3)
Loan investments	$	15,503,404	$	—	$	—	$	15,503,404
Debt investments		14,030,078		—		—		14,030,078
Equity investments		34,534,980		13,901,045		—		20,633,935

Total	$	64,068,462	$	13,901,045	$	—	$	50,167,417

The following table provides a summary of changes in Assets Measured at Fair Value Using Significant Unobservable Inputs (Level 3) for the six months ended June 30, 2022:


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Description	Loan Investments		Debt Investments		Equity Investments			Total
Ending balance December 31, 2021, of Level 3 Assets	$	15,503,404	$	14,030,078	$	20,633,935		$	50,167,417
Realized gains (losses) included in net change in net assets from operations:
ClearView Social, Inc. (Clearview Social)		—		—		38,881			38,881
Microcision, LLC (Microcision)		—		—		190,000			190,000
New Monarch Machine Tool, Inc. (New Monarch)		—		—		(22,841	)		(22,841	)
SocialFlow, Inc. (Social Flow)		—		—		(1,481,498	)		(1,481,498	)

*Total realized (losses), net*		—		—		(1,275,458	)		(1,275,458	)
Unrealized gains, net included in net change in net assets from operations:
Microcision		—		—		25,000			25,000
New Monarch		—		—		22,841			22,841
Social Flow		—		—		1,628,000			1,628,000

*Total unrealized gains*		—		—		1,675,841			1,675,841
Purchases of securities/changes to securities/non-cash conversions:
Caitec, Inc. (Caitec)		36,178		—		—			36,178
DSD Operating, LLC (DSD)		348,748		—		—			348,748
Filterworks Acquisition USA, LLC (Filterworks)		—		107,559		—			107,559
GoNoodle, Inc. (GoNoodle)		—		7,110		—			7,110
HDI Acquisition LLC (Hilton Displays)		—		13,117		—			13,117
ITA Acquisition, LLC (ITA)		34,701		—		223,810			258,511
Mattison Avenue Holdings LLC (Mattison)		18,341		—		—			18,341
Seybert’s Billiards Corporation (Seybert’s)		—		2,248,118		—			2,248,118
SciAps, Inc. (Sciaps)		—		7,500		—			7,500

*Total purchases of securities/changes to securities/non-cash conversions*		437,968		2,383,404		223,810			3,045,182


Repayments and sales of securities:
Clearview Social		—		—			(38,881	)		(38,881	)
GoNoodle		—		(90,175	)		—			(90,175	)
Microcision		—		—			(300,000	)		(300,000	)
Social Flow		—		—			(268,502	)		(268,502	)

*Total repayments and sales of securities*		—		(90,175	)		(607,383	)		(697,558	)

Ending balance June 30, 2022, of Level 3 Assets	$	15,941,372	$	16,323,307		$	20,650,745		$	52,915,424


Change in unrealized appreciation on investments for the period included in changes in net assets	($	5,185,738	)

Net realized gain on investments for the period included in changes in net assets	$	688,672

The following table provides a summary of changes in Assets Measured at Fair Value Using Significant Unobservable Inputs (Level 3) for the six months ended June 30, 2021:


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Description	Loan Investments			Debt Investments			Equity Investments			Total
Ending Balance December 31, 2020, of Level 3 Assets	$	6,771,394		$	9,799,365		$	20,181,405		$	36,752,164
Realized gain included in net change in net assets from operations:
ClearView Social, Inc. (Clearview Social)		—			—			135,430			135,430
GiveGab, Inc. (Givegab)		—			—			1,817,350			1,817,350

*Total realized gains*		—			—			1,952,780			1,952,780
Unrealized gains/(losses) included in net change in net assets from operations:
Open Exchange, Inc. (Open Exchange)		—			—			4,918,061			4,918,061
Post Process technologies, Inc. (Post Process)		—			—			(122,728	)		(122,728	)

*Total unrealized gains (losses)*		—			—			4,795,333			4,795,333
Purchases of securities/changes to securities/non-cash conversions:
Caitec, Inc. (Caitec)		35,450			—			—			35,450
Filterworks Acquisition USA, LLC (Filterworks)		—			23,688			—			23,688
GoNoodle, Inc. (GoNoodle)		—			7,597			—			7,597
HDI Acquisition LLC (Hilton Displays)		—			12,855			—			12,855
ITA Acquisition, LLC (ITA)		3,400,000			—			500,000			3,900,000
Mattison Avenue Holdings LLC (Mattison)		673,091			5,611			—			678,702
Microcision, LLC (Microcision)		—			88,003			—			88,003
Seybert’s Billiards Corporation (Seybert’s)		—			2,779,424			50,000			2,829,424
SciAps, Inc. (Sciaps)		—			7,500			—			7,500
BMP Swanson Holdco, LLC (Swanson)		1,600,000			—			233,333			1,833,333

*Total purchases of securities/changes to securities/non-cash conversions*		5,708,541			2,924,678			783,333			9,416,552
Repayments and sale of securities:
Advantage 24/7, LLC (Advantage 24/7)		(15,000	)		—			—			(15,000	)
Clearview Social		—			—			(335,430	)		(335,430	)
Givegab		—			—			(2,433,571	)		(2,433,571	)
Microcision		—			(1,500,000	)		—			(1,500,000	)
Science and Medicine Group, Inc. (SMG)		(1,900,000	)		—			—			(1,900,000	)

*Total repayments and sale of securities*		(1,915,000	)		(1,500,000	)		(2,769,001	)		(6,184,001	)
Transfers within Level 3		1,127,815			(1,285,469	)		157,654			—
Transfers out of Level 3		—			—			(6,531,815	)		(6,531,815	)

Ending Balance June 30, 2021, of Level 3 Assets	$	11,692,750		$	9,938,574		$	18,569,689		$	40,201,013


Change in unrealized appreciation/depreciation on investments for the period included in changes in net assets	$	13,382,354

Net realized gain on investments for the period included in changes in net assets	$	2,128,105

Note 4. OTHER ASSETS

At June 30, 2022 and December 31, 2021, other assets was comprised of the following:


	June 30, 2022		December 31, 2021
Deferred financing fees	$	125,000	$	—
Dividend receivables

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company