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Rand Capital Announces Second Quarter 2017 Results

/EINPresswire.com/ -- BUFFALO, NY--(Marketwired - August 07, 2017) -

  • Portfolio company Athenex completes initial public offering
  • Invested $3.35 million in four follow-on transactions
  • Net Asset Value per share was $5.00 at June 30

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 year-to-date periods ended June 30, 2017.

Allen F. ("Pete") Grum, President and Chief Executive Officer of Rand Capital, commented, "Our application for our second SBIC fund is under review by the SBA. In support of the proposed SBIC, we contributed $7.5 million of cash to this subsidiary. We anticipate receiving approval for $15 million of new leverage. We invested $3.35 million in four portfolio companies during the second quarter, the majority of which was from the new fund under the SBA's pre-licensing approval protocols. Consistent with our current plan to increase interest income, $3 million of these investments was in the form of debt instruments."

Second Quarter 2017 Financial Highlights

  • Reported $5.00 net asset value (NAV) per share at June 30, 2017, compared with $5.10 at March 31, 2017. Lower NAV is primarily due to net unrealized losses on certain investments, reflecting current operating conditions within those companies.
  • Supported four current portfolio companies with $3 million of debt investments and $350,000 of equity investments during the quarter:
    • eHealth Global Technologies, Inc. $2,000,000
    • GENICON, Inc. $1,000,000
    • SciAps, Inc. $250,000
    • BeetNPath, LLC $100,000
  • Investment income increased 58% over the prior-year second quarter.
  • At June 30, 2017, portfolio fair value was $30.3 million and cash was $6.6 million.

Mr. Grum added, "We are assisting several of the companies in our portfolio with their eventual exit. While we can't predict the timing, such transactions should generate further investment capital to support our growth strategy."

Total investment income in the second quarter and first half of 2017 were approximately $349,000 and $678,000, respectively, up from approximately $221,000 and $415,000 in the comparable prior-year periods, demonstrating the Company's progress with its plan to increase interest income. Total expenses in the 2017 second quarter were approximately $607,000, up from approximately $490,000 in the prior-year second quarter, primarily due to higher professional fees associated with the formation of the new SBIC. On a year-to-date basis, total expenses were approximately $1.1 million, down from approximately $2.4 million in the 2016 first half, which included higher bonus and profit sharing expenses resulting from the Company's Gemcor exit.

Selected Portfolio Highlights

  • Athenex, Inc. is a global biopharmaceutical company dedicated to the discovery, development and commercialization of novel therapies for the treatment of cancer, aiming to develop safer and more efficacious cancer medication. In June 2017, the company went public (NASDAQ: ATNX) through an initial public offering at $11 per share. Athenex has been a Rand portfolio company since 2014. At June 30, 2017, Rand held approximately 46,000 restricted common shares, valued at $614,000. The shares were valued at a discount due to restrictions on the sale of the shares.
  • eHealth Global Technologies, Inc. is the industry-leading provider of clinically-informed referral services. The company serves more than half of the top 100 hospitals in the U.S. as well as the leading health information exchanges. During the second quarter, Rand funded a
    $2 million loan to eHealth in support of its ongoing growth. The company plans to add 84 new jobs over the next three years, in accordance with its plans to digitally organize the growing volume of electronic medical records. At June 30, 2017, Rand's investment in eHealth was $3.5 million, making it the second largest investment in Rand's portfolio on a cost basis.
  • GENICON, Inc. is recognized as an emerging leader in the design, production, and distribution of patented surgical instrumentation focused exclusively on laparoscopic, or minimally invasive, surgery. During the second quarter, Rand replaced $2 million of previously outstanding promissory notes and adding $1 million of new debt capital, resulting in a $3 million investment during the quarter. GENICON plans to invest in tooling for new product lines and expand its production capacity. At June 30, 2017, GENICON represents the largest investment in the Rand portfolio, at $4 million on a cost basis.

As of June 30, 2017, Rand's portfolio consisted of 29 active companies. At that date, the portfolio was comprised of approximately 59% in equity investments and 41% in debt investments, compared with 68% in equity investments and 32% in debt investments at the same time last year. The change in investment mix reflects Rand's current strategy to increase investment income to cover operating expenses.

Webcast and Conference Call

Rand will host a conference call and live webcast today, August 7, 2017, at 1:30 p.m. Eastern Time to review its financial condition and results for the 2017 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 heading "Investor Relations." 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 heading "Investor Relations."

A telephonic replay will be available from approximately 4:30 p.m. Eastern Time today through Monday, August 14, 2017. To listen to the archived call, dial (412) 317-6671, and enter conference ID number 13666555. 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), and its first wholly-owned subsidiary is licensed by the U.S. Small Business Administration (SBA) as a Small Business Investment Company (SBIC). Its second SBIC is undergoing the approval process with the SBA. Rand focuses its equity investments in early or expansion stage companies and generally lends to more mature companies. Rand looks for strong leadership who is 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,     December 31,  
    2017     2016  
    (Unaudited)        
ASSETS            
  Investments at fair value:                
    Control investments (cost of $99,500 and $99,500, respectively)   $ 99,500     $ 99,500  
    Affiliate investments (cost of $19,341,212 and $17,589,623, respectively)     14,691,888       13,605,974  
    Non-Control/Non-Affiliate investments (cost of $16,052,007 and $13,941,907, respectively)     15,471,799       13,795,007  
  Total investments, at fair value (cost of $35,492,719 and $31,631,030, respectively)     30,263,187       27,500,481  
  Cash     6,590,994       12,280,140  
  Interest receivable (net of allowance: $161,000)     373,835       324,237  
  Deferred tax asset     1,684,327       1,165,164  
  Prepaid income taxes     298,630       -  
  Other assets     608,514       1,148,508  
      Total assets   $ 39,819,487     $ 42,418,530  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (NET ASSETS)  
  Liabilities:                
  Debentures guaranteed by the SBA, net   $ 7,841,473     $ 7,827,773  
  Profit sharing and bonus payable     132,000       1,270,052  
  Income tax payable     -       320,008  
  Accounts payable and accrued expenses     164,294       324,537  
  Deferred revenue     47,175       46,797  
      Total liabilities     8,184,942       9,789,167  
                   
  Stockholders' equity (net assets):                
  Common stock, $.10 par; shares authorized 10,000,000; shares issued 6,863,034; shares outstanding of 6,321,988 as of 6/30/17 and 12/31/16     686,304       686,304  
  Capital in excess of par value     10,581,789       10,581,789  
  Accumulated net investment loss     (1,851,733 )     (1,577,848 )
  Undistributed net realized gain on investments     27,127,054       27,127,054  
  Net unrealized depreciation on investments     (3,439,764 )     (2,718,831 )
  Treasury stock, at cost; 541,046 shares     (1,469,105 )     (1,469,105 )
      Total stockholders' equity (net assets) (per share $5.00 at 6/30/17; $5.16 at 12/31/16)     31,634,545       32,629,363  
      Total liabilities and stockholders' equity (net assets)   $ 39,819,487     $ 42,418,530  
                       
                       
Rand Capital Corporation and Subsidiaries  
Consolidated Statements of Operations  
(Unaudited)  
                         
    For the Quarter Ended June 30,     For the Six Months Ended June 30,  
    2017     2016     2017     2016  
Investment income:                                
  Interest from portfolio companies:                                
    Control investments   $ -     $ -     $ -     $ 11,828  
    Affiliate investments     137,243       94,614       274,000       159,575  
    Non-Control/Non-Affiliate investments     140,397       68,527       249,731       129,632  
      Total interest from portfolio companies     277,640       163,141       523,731       301,035  
                                   
  Interest from other investments:                                
    Non-Control/Non-Affiliate investments     6,859       18,648       17,834       21,709  
      Total interest from other investments     6,859       18,648       17,834       21,709  
                                   
  Dividend and other investment income:                                
    Affiliate investments     53,024       33,232       115,397       80,797  
    Non-Control/Non-Affiliate investments     2,681       -       5,193       -  
      Total dividend and other investment income     55,705       33,232       120,590       80,797  
                                   
  Fee income:                                
    Control investments     -       -       -       2,000  
    Affiliate investments     3,167       1,167       4,084       1,862  
    Non-Control/Non-Affiliate investments     5,768       4,318       11,537       7,234  
      Total fee income     8,935       5,485       15,621       11,096  
Total investment income     349,139       220,506       677,776       414,637  
Expenses:                                
  Salaries     165,413       155,437       330,826       310,875  
  Bonus and profit sharing     -       -       -       1,411,659  
  Employee benefits     47,699       36,711       100,069       126,222  
  Directors' fees     36,374       47,380       71,249       94,755  
  Professional fees     178,193       86,288       262,195       151,048  
  Stockholders and office operating     80,725       61,542       147,935       124,036  
  Insurance     6,258       6,258       17,560       17,518  
  Corporate development     11,609       16,055       33,317       31,525  
  Other operating     3,323       2,375       5,283       5,975  
        529,594       412,046       968,434       2,273,613  
  Interest on SBA obligations     77,569       77,570       155,138       155,139  
  Total expenses     607,163       489,616       1,123,572       2,428,752  
Net investment loss before income taxes     (258,024 )     (269,110 )     (445,796 )     (2,014,115 )
  Income tax benefit     (99,403 )     (114,564 )     (171,911 )     (777,591 )
Net investment loss     (158,621 )     (154,546 )     (273,885 )     (1,236,524 )
                                 
Net realized gain on sales and dispositions of investments:                                
  Control investments     -       -       -       13,176,313  
  Non-Control/Non-Affiliate investments             168,140       -       168,140  
  Net realized gain before income tax expense     -       168,140       -       13,344,453  
  Income tax expense     -       34,520       -       4,977,481  
  Net realized gain on investments     -       133,620       -       8,366,972  
                                 
Net change in unrealized deprciation or appreciation on investments:                                
  Control investments     -       -       -       (11,362,500 )
  Affiliate investments     (665,675 )     (325,000 )     (665,675 )     (747,800 )
  Non-Control/Non-Affiliate investments     (52,664 )     69,444       (433,308 )     69,444  
  Change in unrealized depreciation or appreciation before income tax benefit     (718,339 )     (255,556 )     (1,098,983 )     (12,040,856 )
  Deferred income tax benefit     (241,623 )     (78,390 )     (378,050 )     (4,494,796 )
  Net change in unrealized depreciation or appreciation on investments     (476,716 )     (177,166 )     (720,933 )     (7,546,060 )
Net realized and unrealized (loss) gain on investments     (476,716 )     (43,546 )     (720,933 )     820,912  
Net decrease in net assets from operations   $ (635,337 )   $ (198,092 )   $ (994,818 )   $ (415,612 )
Weighted average shares outstanding     6,321,988       6,328,538       6,321,988       6,328,538  
Basic and diluted net decrease in net assets from operations per share   $ (0.10 )   $ (0.03 )   $ (0.16 )   $ (0.07 )
                                 
                                 

Contacts:

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

Investors:
Deborah K. Pawlowski / Karen L. Howard
Kei Advisors LLC
Phone: 716.843.3908 / 716.843.3942
Email: dpawlowski@keiadvisors.com / khoward@keiadvisors.co

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