RAND - Rand Capital Announces Second Quarter 2018 Results

August, 07 2018 08:30 AM Rand Capital Corporation

Invested $775,000 during the second quarter
Net Asset Value per share was $4.87 at June 30
Progressing with Small Business Administration (SBA) new financing process

Rand Capital Corporation (Nasdaq:RAND) (“Rand”), a venture capital company which invests in growth businesses with unique product, service or technology concepts, announced its results for the quarter and six months ended June 30, 2018.

Allen F. (“Pete”) Grum, President and Chief Executive Officer of Rand Capital, commented, “During the quarter we invested $775,000 in debt instruments supporting KnowledgeVision’s progression of its smart media technology. Since we first began investing in them in 2013, the company has increased its registered user base tenfold.”

Mr. Grum added, “We continue to work with the SBA to secure an additional $6 million of debentures. With a full pipeline of investment opportunities, we look forward to completing this transaction and putting the funds to work in support of exciting growth businesses.”

Second Quarter 2018 Financial Highlights

Reported $4.87 net asset value (NAV) per share at June 30, 2018, compared with $4.97 at March 31, 2018. The decrease was primarily due to write-downs of investments in certain portfolio companies based on their recent operating performance.
Supported an existing portfolio company, KnowledgeVision^Â® Systems, Inc., with $775,000 of investments during the quarter.
Investment income increased 18% and 15% over the prior-year second quarter and first six months, respectively.
At June 30, 2018, portfolio fair value was $32.3 million and consolidated cash was $4.7 million.

Total investment income in the second quarter of 2018 grew to $413,000, up from $349,000 in the second quarter of 2017. The $64,000 increase was driven by the Company’s success with focusing on investments in income producing instruments. Total expenses in the 2018 and 2017 second quarters were $474,000 and $607,000, respectively, reflecting a reduction of 22%. The decrease is primarily due to lower professional fees, partially offset by higher bad debt expense.

Total investment income was $776,000 and $678,000 for the first six months ended June 30, 2018 and 2017, respectively. Similar to the second quarter, the growth was driven by the Company’s investment focus on income-generating instruments. Total expenses for the first six months of 2018 and 2017 were $1.1 million in each period.

Selected Portfolio Highlights

KnowledgeVision Systems, Inc. is a leader in smart media creation and hosting technology. Its Knovio^Â® video platform is used by more than 300,000 people worldwide in more than 2,000 companies and campuses to create, host, share, organize, collaborate around, and measure online media content. The company recently further strengthened its leadership position by winning its second U.S. patent for its video presentation technology, launching a groundbreaking live multimedia webcasting product, Knovio Live. Including its second quarter investments, at June 30, 2018, Rand’s investment in KnowledgeVision was valued at approximately $1.3 million.
Centivo Corporation is a new high-value healthcare solution built specifically for employers and their employees and families. Centivo^SM targets lowering healthcare costs and improved healthcare outcomes by rewarding members and providers for smart choices and actions while delivering an exceptional member experience. Centivo recently raised $34 million in Series A funding, in which Rand invested $200,000 and converted a $100,000 convertible note during the first quarter of 2018. The capital will be deployed to build the company’s technology and infrastructure, develop local partnerships, and support market launch. At June 30, 2018, Rand’s investment in Centivo was valued at approximately $301,000.
Rheonix, Inc. is a developer of fully automated, sample-to-answer molecular testing solutions for use in multiple applications. Rheonix recently announced two new innovative products for use on the Encompass Optimumâ„¢ workstation. First, they expanded their Beer SpoilerAlertâ„¢ assay to detect more organisms that may cause spoilage in beer, resulting in the simplest and most comprehensive beer spoilage test in the market. Second, Rheonix launched the Listeria PatternAlertâ„¢ assay, a breakthrough method for rapidly identifying molecular patterns from Listeria strains. Its quick results enable food producers to take rapid action to reduce the risk of contamination and recall. In addition, the company has initiated clinical studies to gain FDA clearance for its Encompass MDxâ„¢ Workstation and the Rheonix STI Tri-Plex assay for the simultaneous detection of three sexually transmitted infections. At June 30, 2018, Rand’s investment in Rheonix was valued at approximately $2.9 million.

As of June 30, 2018, Rand’s portfolio consisted of 30 active companies. At that date, the portfolio was comprised of approximately 58% in equity investments and 42% in debt investments, compared with 59% in equity investments and 41% in debt investments at June 30, 2017.

Webcast and Conference Call

Rand will host a conference call and live webcast today, August 7, 2018, at 1:30 p.m. Eastern Time to review its financial condition and results for the 2018 second quarter, as well as its strategy and outlook. The review will be accompanied by a slide presentation, which will be available on Rand’s website at www.randcapital.com under the “Investor Relations” heading. A question-and-answer session will follow the formal presentation.

Rand’s conference call can be accessed by calling (201) 689-8263. Alternatively, the webcast can be monitored on Rand’s website at www.randcapital.com under the “Investor Relations” heading.

A telephonic replay will be available from approximately 4:30 p.m. Eastern Time today through Tuesday, August 14, 2018. To listen to the archived call, dial (412) 317-6671, and enter conference ID number 13681337. A transcript of the call will be placed on Rand’s website, once available.

ABOUT RAND CAPITAL

Rand Capital (Nasdaq: RAND) provides investors the ability to participate in venture capital opportunities through an investment in the Company’s stock. Rand is a Business Development Company (BDC) with a wholly owned subsidiary licensed by the U.S. Small Business Administration (SBA) as a Small Business Investment Company (SBIC). Rand focuses its equity investments in early or expansion stage companies and generally lends to more mature companies. The Company seeks investment opportunities in businesses with strong leaders who are bringing to market new or unique products, technologies or services that have a high potential for growth. Additional information can be found at the Company’s website where it regularly posts information: http://www.randcapital.com/.

Safe Harbor Statement

This news release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements concerning future net asset value growth, investment returns and opportunities as well as Rand’s plans for utilizing proceeds from sales of portfolio companies when and if received. These statements involve known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from the results expressed or implied by such statements, including general economic and business conditions, conditions affecting the portfolio companies’ markets, competitor responses, and market acceptance of their products and services and other factors disclosed in the Corporation’s periodic reports filed with the Securities and Exchange Commission. Consequently, such forward-looking statements should be regarded as the Corporation’s current plans, estimates and beliefs. The Corporation assumes no obligation to update the forward-looking information contained in this release.

FINANCIAL TABLES FOLLOW.

Rand Capital Corporation and Subsidiaries

Consolidated Statements of Financial Position

June 30,

2018

December 31,

(Unaudited)

2017

ASSETS

Investments at fair value:

Control investments (cost of $99,500)

99,500

99,500

Affiliate investments (cost of $21,937,593 and $20,871,129, respectively)

17,526,818

17,016,795

Non-Control/Non-Affiliate investments (cost of $15,903,520 and $15,718,690, respectively)

14,701,108

15,167,767

Total investments, at fair value (cost of $37,940,613 and $36,689,319, respectively)

32,327,426

32,284,062

Cash

4,720,381

6,262,039

Interest receivable (net of allowance: $237,641 at 6/30/18; $161,000 at 12/31/17)

127,897

231,048

Deferred tax asset

898,903

551,863

Prepaid income taxes

740,086

762,047

Other assets

55,956

42,854

Total assets

38,870,649

40,133,913

LIABILITIES AND STOCKHOLDERS’ EQUITY (NET ASSETS)

Liabilities:

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

7,868,873

7,855,173

Profit sharing and bonus payable

144,000

Accounts payable and accrued expenses

168,918

178,348

Deferred revenue

65,880

37,707

Total liabilities

8,103,671

8,215,228

Stockholders’ equity (net assets):

Common stock, $.10 par; shares authorized 10,000,000; shares issued 6,863,034;

shares outstanding of 6,321,988

686,304

686,304

Capital in excess of par value

10,581,789

10,581,789

Accumulated net investment loss

(1,808,243

)

(1,597,146

)

Undistributed net realized gain on investments

27,215,738

27,215,738

Net unrealized depreciation on investments

(4,439,505

)

(3,498,895

)

Treasury stock, at cost; 541,046 shares

(1,469,105

)

(1,469,105

)

Total stockholders’ equity (net assets) (per share $4.87 at 6/30/18; $5.05 at 12/31/17)

30,766,978

31,918,685

Total liabilities and stockholders’ equity (net assets)

38,870,649

40,133,913


Rand Capital Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited)







For the Quarter Ended

For the Six Months Ended


June 30,

June 30,



2018



2017



2018



2017

Investment income:








Interest from portfolio companies:








Affiliate investments

$
175,990


$
137,243


$
323,026


$
274,000

Non-Control/Non-Affiliate investments


139,710



140,397



290,022



249,731

Total interest from portfolio companies


315,700



277,640



613,048



523,731










Interest from other investments:








Non-Control/Non-Affiliate investments


7,735



6,859



12,845



17,834

Total interest from other investments


7,735



6,859



12,845



17,834










Dividend and other investment income:








Affiliate investments


76,266



53,024



127,049



115,397

Non-Control/Non-Affiliate investments


2,676



2,681



6,058



5,193

Total dividend and other investment income


78,942



55,705



133,107



120,590










Fee income:








Affiliate investments


4,416



3,167



7,583



4,084

Non-Control/Non-Affiliate investments


6,725



5,768



9,744



11,537

Total fee income


11,141



8,935



17,327



15,621

Total investment income


413,518



349,139



776,327



677,776










Expenses:








Salaries


169,875



165,413



339,749



330,826

Employee benefits


45,251



47,699



108,996



100,069

Directors' fees


28,624



36,374



63,499



71,249

Professional fees


37,341



178,193



139,028



262,195

Stockholders and office operating


64,599



80,725



129,038



147,935

Insurance


6,900



6,258



18,888



17,560

Corporate development


10,646



11,609



26,442



33,317

Other operating


2,424



3,323



5,115



5,283




365,660



529,594



830,755



968,434

Interest on SBA obligations


77,269



77,569



154,838



155,138

Bad debt expense


30,741



-



76,641



-

Total expenses


473,670



607,163



1,062,234



1,123,572

Net investment loss before income taxes


(60,152
)


(258,024
)


(285,907
)


(445,796
)
Income tax benefit


(22,384
)


(99,403
)


(74,810
)


(171,911
)
Net investment loss


(37,768
)


(158,621
)


(211,097
)


(273,885
)









Net increase in unrealized depreciation on investments:








Affiliate investments


(306,441
)


(665,675
)


(556,441
)


(665,675
)
Non-Control/Non-Affiliate investments


(450,000
)


(52,664
)


(651,489
)


(433,308
)
Increase in unrealized depreciation before income tax benefit


(756,441
)


(718,339
)


(1,207,930
)


(1,098,983
)
Deferred income tax benefit


(162,915
)


(241,623
)


(267,320
)


(378,050
)
Net increase in unrealized depreciation on investments


(593,526
)


(476,716
)


(940,610
)


(720,933
)
Net unrealized loss on investments


(593,526
)


(476,716
)


(940,610
)


(720,933
)
Net decrease in net assets from operations

$
(631,294
)

$
(635,337
)

$
(1,151,707
)

$
(994,818
)
Weighted average shares outstanding


6,321,988



6,321,988



6,321,988



6,321,988

Basic and diluted net decrease in net assets from operations per share

$
(0.10
)

$
(0.10
)

$
(0.18
)

$
(0.16
)

View source version on businesswire.com: https://www.businesswire.com/news/home/20180807005255/en/

Rand Capital Corporation
Company:
Allen F. ("Pete") Grum, 716-853-0802
President and CEO
pgrum@randcapital.com
or
Investors:
Kei Advisors LLC
Deborah K. Pawlowski / Karen L. Howard
716-843-3908 / 716-843-3942
dpawlowski@keiadvisors.com / khoward@keiadvisors.com

Company Name:	Rand Capital Corporation
Stock Symbol:	RAND
Market:	NASDAQ
Website:	randcapital.com

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