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RAND CAPITAL CORP - Quarter Report: 2022 March (Form 10-Q)

10-Q
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 March 31, 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.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

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 May 9, 2022, there were 2,581,021 shares of the registrant’s common stock outstanding.

 

 

 


Table of Contents

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 March  31, 2022 (Unaudited) and December 31, 2021

     1  
 

Consolidated Statements of Operations for the Three Months Ended March  31, 2022 and 2021 (Unaudited)

     2  
 

Consolidated Statements of Changes in Net Assets for the Three Months Ended March 31, 2022 and 2021 (Unaudited)

     4  
 

Consolidated Statements of Cash Flows for the Three Months Ended March  31, 2022 and 2021 (Unaudited)

     5  
 

Consolidated Schedule of Portfolio Investments as of March  31, 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

     37  
Item 3.  

Quantitative and Qualitative Disclosures about Market Risk

     45  
Item 4.  

Controls and Procedures

     45  

PART II. – OTHER INFORMATION

 

Item 1.  

Legal Proceedings

     46  
Item 1A.  

Risk Factors

     46  
Item 2.  

Unregistered Sales of Equity Securities and Use of Proceeds

     46  
Item 3.  

Defaults upon Senior Securities

     46  
Item 4.  

Mine Safety Disclosures

     46  
Item 5.  

Other Information

     46  
Item 6.  

Exhibits

     47  


Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements and Supplementary Data

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

     March 31,
2022

(Unaudited)
    December 31,
2021
 

ASSETS

    

Investments at fair value:

    

Affiliate investments (cost of $28,016,127 and $27,357,797, respectively)

   $ 30,938,203     $ 30,279,873  

Non-Control/Non-Affiliate investments (cost of $23,028,790 and $25,012,871, respectively)

     31,473,439       33,788,589  
  

 

 

   

 

 

 

Total investments, at fair value (cost of $51,044,917 and $52,370,668, respectively)

     62,411,642       64,068,462  

Cash

     596,793       833,875  

Interest receivable

     195,797       128,047  

Prepaid income taxes

     234,567       252,010  

Deferred tax asset

     191,319       181,003  

Other assets

     295,103       181,457  
  

 

 

   

 

 

 

Total assets

   $ 63,925,221     $ 65,644,854  
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (NET ASSETS)

 

Liabilities:

    

Due to investment adviser

   $ 240,275     $ 891,102  

Accounts payable and accrued expenses

     49,952       51,689  

Capital gains incentive fees

     3,308,000       3,547,760  

Deferred revenue

     379,268       408,887  
  

 

 

   

 

 

 

Total liabilities

     3,977,495       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 3/31/22 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 3/31/22 and 12/31/21

     (1,566,605     (1,566,605

Total distributable earnings

     9,569,630       10,367,320  
  

 

 

   

 

 

 

Total stockholders’ equity (net assets) (per share – 3/31/22: $23.23; 12/31/21: $23.54)

     59,947,726       60,745,416  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity (net assets)

   $ 63,925,221     $ 65,644,854  
  

 

 

   

 

 

 

See accompanying notes

 

1


Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

     Three months
ended

March 31, 2022
    Three months
ended

March 31, 2021
 

Investment income:

    

Interest from portfolio companies:

    

Affiliate investments

   $ 570,116     $ 319,416  

Non-Control/Non-Affiliate investments

     342,023       391,346  
  

 

 

   

 

 

 

Total interest from portfolio companies

     912,139       710,762  
  

 

 

   

 

 

 

Interest from other investments:

    

Non-Control/Non-Affiliate investments

     —         12,627  
  

 

 

   

 

 

 

Total interest from other investments

     —         12,627  
  

 

 

   

 

 

 

Dividend and other investment income:

    

Affiliate investments

     43,725       94,926  

Non-Control/Non-Affiliate investments

     129,265       151,743  
  

 

 

   

 

 

 

Total dividend and other investment income

     172,990       246,669  
  

 

 

   

 

 

 

Fee income:

    

Affiliate investments

     30,305       39,356  

Non-Control/Non-Affiliate investments

     9,314       6,978  
  

 

 

   

 

 

 

Total fee income

     39,619       46,334  
  

 

 

   

 

 

 

Total investment income

     1,124,748       1,016,392  
  

 

 

   

 

 

 

Expenses:

 

Base management fee (see Note 7)

     240,275       175,609  

Capital gains incentive fees (see Note 7)

     (239,760     2,600,000  

Interest on SBA obligations

     —         104,190  

Professional fees

     231,083       160,133  

Stockholders and office operating

     56,698       71,422  

Directors’ fees

     45,100       36,500  

Insurance

     8,910       10,327  

Corporate development

     3,027       7,482  

Other operating

     45       —    
  

 

 

   

 

 

 

Total expenses

     345,378       3,165,663  
  

 

 

   

 

 

 

Net investment income (loss) before income taxes

     779,370       (2,149,271

Income tax expense

     7,367       17,757  
  

 

 

   

 

 

 

Net investment income (loss)

     772,003       (2,167,028
  

 

 

   

 

 

 

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

 

Affiliate investments

     —         135,430  

Non-Control/Non-Affiliate investments

     (851,471     175,325  
  

 

 

   

 

 

 

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

     (851,471     310,755  

 

2


Table of Contents

Net change in unrealized appreciation (depreciation) on investments:

    

Non-Control/Non-Affiliate investments

     (331,069     9,887,032  
  

 

 

   

 

 

 

Net change in unrealized appreciation (depreciation) on investments

     (331,069     9,887,032  
  

 

 

   

 

 

 

Net realized and unrealized (loss) gain on investments

     (1,182,540     10,197,787  
  

 

 

   

 

 

 

Net (decrease) increase in net assets from operations

   ($ 410,537   $ 8,030,759  
  

 

 

   

 

 

 

Weighted average shares outstanding

     2,581,021       2,582,169  

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

   ($ 0.16   $ 3.11  

See accompanying notes

 

3


Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(Unaudited)

 

     Three months
ended

March 31, 2022
    Three months
ended

March 31, 2021
 

Net assets at beginning of period

   $ 60,745,416     $ 46,104,830  

Net investment income (loss)

     772,003       (2,167,028

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

     (851,471     310,755  

Net change in unrealized appreciation (depreciation) on investments

     (331,069     9,887,032  
  

 

 

   

 

 

 

Net (decrease) increase in net assets from operations

     (410,537     8,030,759  

Declaration of dividends

     (387,153     (258,385
  

 

 

   

 

 

 

Net assets at end of period

   $ 59,947,726     $ 53,877,204  
  

 

 

   

 

 

 

See accompanying notes

 

4


Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     Three months
ended

March 31, 2022
    Three months
ended
March 31, 2021
 

Cash flows from operating activities:

    

Net (decrease) increase in net assets from operations

   ($ 410,537   $ 8,030,759  

Adjustments to reconcile net (decrease) increase in net assets to net cash provided by (used in) operating activities:

    

Investments in portfolio companies

     (542,086     (6,706,706

Proceeds from sale of portfolio investments

     1,079,589       1,057,489  

Proceeds from loan repayments

     90,175       3,735,430  

Net realized loss (gain) on portfolio investments

     851,471       (310,755

Change in unrealized appreciation (depreciation) on investments before income taxes

     331,069       (9,887,032

Deferred income tax (benefit) expense

     (10,316     3,492  

Depreciation and amortization

     —         9,419  

Original issue discount amortization

     (6,252     (91,753

Non-cash conversion of debenture interest

     (147,146     (56,157

Changes in operating assets and liabilities:

    

Increase in interest receivable

     (67,750     (55,850

Increase in other assets

     (113,646     (135,571

Decrease (increase) in prepaid income taxes

     17,443       (4,361

Decrease in accounts payable and accrued expenses

     (1,737     (71,897

(Decrease) increase in due to investment adviser

     (650,827     18,610  

(Decrease) increase in capital gains incentive fees payable

     (239,760     2,600,000  

(Decrease) increase in deferred revenue

     (29,619     104,331  
  

 

 

   

 

 

 

Total adjustments

     560,608       (9,791,311
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     150,071       (1,760,552
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Payment of cash dividend

     (387,153     (3,692,501
  

 

 

   

 

 

 

Net cash used in financing activities

     (387,153     (3,692,501
  

 

 

   

 

 

 

Net decrease in cash

     (237,082     (5,453,053

Cash:

    

Beginning of period

     833,875       20,365,415  
  

 

 

   

 

 

 

End of period

   $ 596,793     $ 14,912,362  
  

 

 

   

 

 

 

See accompanying notes

 

5


Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

March 31, 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 – 52.5% of net assets: (j)                 

ACV Auctions, Inc. (e)(g)(n)(p)
NASDAQ: ACVA

Buffalo, NY. Live mobile wholesale auctions for new and used car dealers. (Software)

www.acvauctions.com

   405,934 Class A Common stock valued at $15.09.      8/12/16        <1   $ 111,299      $ 6,124,191        10.2

Ares Capital Corporation (n)
NASDAQ: ARCC

New York, NY.

(BDC Investment Fund)

   21,000 shares.      3/16/20        <1     267,140        439,740        0.7

Barings BDC, Inc. (n)
NYSE: BBDC

New York, NY.

(BDC Investment Fund)

   40,000 shares.      8/13/20        <1     333,352        414,667        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    
    
1,800,250

 
    
    
1,800,250

 
     6.5
   150 Class A Units.      11/6/20          150,000        150,000     
   (g) $1,750,000 Subordinated Secured Promissory Note at 12% (+2% PIK) due June 1, 2026.      11/6/20        2    
    
1,800,250

 
    
    
1,800,250

 
  
   (g) 150 Class A Units.      11/6/20          150,000        150,000     
          

 

 

    

 

 

    
   Total Caitec           3,900,500        3,900,500     
          

 

 

    

 

 

    

Empire Genomics Corp. (g)

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

 
     2.4

FS KKR Capital Corp. (n)
NYSE: FSK

Philadelphia, PA.

(BDC Investment Fund)

   48,000 shares.      3/16/20        <1     755,058        1,095,520        1.8

Golub Capital BDC, Inc. (n)
NASDAQ: GBDC

New York, NY.

(BDC Investment Fund)

   31,250 shares.      3/16/20        <1     403,910        475,417        0.8

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% (1% PIK) due September 30, 2024.      11/1/19        <1    
    
1,401,233

 
    
    
1,401,233

 
     2.3
   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           1,401,296        1,401,296     
          

 

 

    

 

 

    

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    
    
1,307,701

 
    
    
1,307,701

 
     2.2

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)

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    

    
    
1,828,459


 
    

    
    
1,828,459


 
     3.1

 

6


Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

March 31, 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
 

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



 
     3.8
   Warrants for Preferred stock of Nailbiter, Inc.           —          —       

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)

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        9.3
   397,899 Common.      10/22/19          208,243        2,785,000     
          

 

 

    

 

 

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

 

 

    

 

 

    

Owl Rock Capital Corporation (n)
NYSE:ORCC

New York, NY.

(BDC Investment Fund)

   30,000 shares.      3/16/20        <1     347,067        446,000        0.7

PennantPark Investment Corporation (n)
NASDAQ: PNNT

New York, NY.

(BDC Investment Fund)

   195,000 shares.      8/13/20        <1     892,212        1,515,800        2.6

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)(g)

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
   (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        —       
          

 

 

    

 

 

    
   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

TCG BDC, Inc. (n)
NASDAQ: CGBD

New York, NY.

(BDC Investment Fund)

   86,000 shares.      8/13/20        <1     899,749        1,249,581        2.1
          

 

 

    

 

 

    
Subtotal Non-Control/Non-Affiliate Investments            $ 23,028,790      $ 31,473,439     
          

 

 

    

 

 

    

 

7


Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

March 31, 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
 
Affiliate Investments – 51.6% 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        3.1
   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)

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        2.2

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    
    
3,092,298

 
    
    
3,092,298

 
     6.9
   1,067 Class A Preferred shares.           1,067,500        1,067,500     
   1,067 Class B Common shares.           —          —       
          

 

 

    

 

 

    
   Total DSD           4,159,798        4,159,798     
          

 

 

    

 

 

    

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 June 30, 2022, due December 4, 2023.      11/8/19        9    

    
    
2,507,782


 
    

    
    
2,507,782


 
     4.6
   562.5 + 63.27 Class A Units.      12/28/21          626,243        256,994     
          

 

 

    

 

 

    
   Total Filterworks           3,134,025        2,764,776     
          

 

 

    

 

 

    
                

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    
    
1,930,077

 
    
    
1,930,077

 
     6.4
   (g) $1,500,000 Term Note at 12% (+2% PIK) due June 21, 2026.      6/22/21         
    
1,523,745

 
    
    
1,523,745

 
  
   (g) 724 Class A Preferred Units and 724 Class B Common Units.      6/22/21         
    
723,810

 
    
    
348,810

 
  
          

 

 

    

 

 

    
   Total ITA           4,177,632        3,802,632     
          

 

 

    

 

 

    

Knoa Software, Inc. (e)(g)

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)(g)

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

Microcision LLC (e)(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

 

8


Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

March 31, 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
 

SciAps, Inc. (e)(g)

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       4.1
   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          1,483,750        1,483,750    
          

 

 

    

 

 

   
   Total SciAps           4,607,734        2,454,750    
          

 

 

    

 

 

   

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     1,918,666        1,918,666       5.6
   Warrant for 4%.      1/19/21          25,000        25,000    
   (g) $1,400,000 Term Note at 12% (+2% PIK) due January 19, 2026.      1/19/21          1,415,078        1,415,078    
   Warrant for 4%.      1/19/21          25,000        25,000    
          

 

 

    

 

 

   
   Total Seybert’s           3,383,744        3,383,744    
          

 

 

    

 

 

   

Tilson Technology Management, Inc. (g)

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       14.9
   *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            $ 28,016,127      $ 30,938,203    
          

 

 

    

 

 

   
TOTAL INVESTMENTS – 104.1%            $ 51,044,917      $ 62,411,642    
          

 

 

    

 

 

   
LIABILITIES IN EXCESS OF OTHER ASSETS - (4.1%)                 (2,463,916  
             

 

 

   
NET ASSETS – 100%               $ 59,947,726    
             

 

 

   

 

9


Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

March 31, 2022 (Continued)

(Unaudited)

 

Notes to the Consolidated Schedule of Portfolio Investments

(a)

At March 31, 2022, restricted securities represented 81% 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 March 31, 2022, ASC 820 designates 81% 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 March 31, 2022, the total cost of investment securities was approximately $51.0 million. Net unrealized appreciation was approximately $11.4 million, which was comprised of $19.3 million of unrealized appreciation of investment securities and ($7.9) million of unrealized depreciation of investment securities. At March 31, 2022, the aggregate gross unrealized gain for federal income tax purposes was $18.6 million and the aggregate gross unrealized loss for federal income tax purposes was ($7.8) million. The net unrealized gain for federal income tax purposes was $10.8 million based on a tax cost of $51.4 million.

(g)

Rand Capital investment held in 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. (None at March 31, 2022).

(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 March 31, 2022).

(p)

Subsequent to March 31, 2022, ACV Auctions’ (ACVA) public market share price had a trading range on NASDAQ of $13.35 to $15.56 for the period of April 1, 2022, to April 29, 2022. The Corporation’s value per share at March 31, 2022 was $15.09.

 

10


Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

March 31, 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)
     March 31,
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      $ —        $ 45,762  
   Warrant for 1,167 shares.      —          —          —          —          —          —          —    
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   Total Applied Image    $ 1,750,000      $ —        $ —        $ —        $ 1,750,000      $ —        $ 45,762  
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
BMP Swanson Holdco, LLC    $1,600,000 Term Note at 12% due September 4, 2026.      1,600,000        —          —          —          1,600,000        —          49,667  
   Preferred Membership Interest for 9.29%      233,333        —          —          —          233,333        —          —    
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   Total BMP Swanson      1,833,333        —          —          —          1,833,333        —          49,667  
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
Carolina Skiff LLC    6.0825% Class A Common Membership interest.      1,300,000        —          —          —          1,300,000        —          30,600  
DSD Operating, LLC    $2,745,000 Term Note at 12% (+2% PIK) due September 30, 2026.      2,759,183        —          333,115        —          3,092,298        —          107,686  
   1,067 Class A Preferred shares.      1,067,500        —          —          —          1,067,500        —          —    
   1,067 Class B Common shares.      —          —          —          —          —          —          —    
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   Total DSD      3,826,683        —          333,115        —          4,159,798        —          107,686  
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
Filterworks Acquisition USA, LLC    $2,283,702 Term Note at 12%.      2,446,617        —          61,165        —          2,507,782        —          85,631  
   562.5 Class A Units.      256,994        —          —          —          256,994        —          —    
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   Total Filterworks      2,703,611        —          61,165        —          2,764,776        —          85,631  
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
ITA Acquisition    $1,900,000 Term Note at 12% (+2% PIK) due June 22, 2026.      1,920,459        —          9,618        —          1,930,077        —          69,228  
   $1,500,000 Term Note at 12% (+2% PIK) due June 22, 2026.      1,516,152        —          7,593        —          1,523,745        —          54,358  
   724 Class A Preferred Units and 724 Class B Common Units.      125,000        —          223,810        —          348,810        —          —    
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   Total ITA      3,561,611        —          241,021        —          3,802,632        —          123,586  
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
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        —          —    
New Monarch Machine Tool, Inc.    22.84 Common.      —          —          —          —          —          —          —    
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        —          3,750        —          1,483,750        —          53,750  
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   Total SciAps      2,451,000        —          3,750        —          2,454,750        —          53,750  
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

 

11


Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

March 31, 2022 (Continued)

(Unaudited)

 

Company

  

Type of Investment

  January 1,
2022, Fair
Value
    Net Change in
Unrealized
Appreciation
(Depreciation)
    Gross
Additions
(1)
    Gross
Reductions
(2)
    March 31,
2022 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       —         10,892       —         1,918,666       —         81,238  
   Warrant for 4%.     25,000       —         —         —         25,000       —         —    
   (g) $1,400,000 Term Note at 12% (+2% PIK) due January 19, 2026.     1,406,690       —         8,388       —         1,415,078       —         53,101  
   Warrant for 4%.     25,000       —         —         —         25,000       —         —    
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   Total Seybert’s     3,364,464       —         19,280       —         3,383,744       —         134,339  
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tilson Technology

Management, Inc.

   120,000 Series B Preferred.     3,900,000       —         —         —         3,900,000       —         13,125  
   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       —         13,125  
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   Total Affiliate Investments   $ 30,279,872     $ —       $ 658,331     $ —       $ 30,938,203     $ —       $ 644,146  
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   Total Control and Affiliate Investments   $ 30,279,872     $ —       $ 658,331     $ —       $ 30,938,203     $ —       $ 644,146  
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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.

 

12


Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

March 31, 2022 (Continued)

(Unaudited)

 

Industry Classification

   Percentage of Total
Investments (at fair value)
as of March 31, 2022

Professional Services

      23.8%

Software

   23.1

Manufacturing

   17.7

Consumer Product

   12.2

Automotive

   11.1

BDC Investment Fund

     9.0

Healthcare

     2.3

Oil and Gas

     0.8
  

 

Total Investments

       100%
  

 

 

13


Table of Contents

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.     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    

 

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Table of Contents

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     
          

 

 

    

 

 

    

 

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Table of Contents

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

             

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

 

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Table of Contents

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%      1/19/21            
   PIK) 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    
             

 

 

   

 

17


Table of Contents

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 1st to February 28th, 2022. The Corporation’s value per share at December 31, 2021 was $18.81.

 

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Table of Contents

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  
  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  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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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  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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.

 

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Table of Contents

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
  

 

 

 

 

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Table of Contents

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 March 31, 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 make up the board of directors of Rand, a majority of whom are not “interested persons” as defined by the 1940 Act.

 

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Table of Contents

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 quarter ended March 31, 2022:

 

Quarter

   Dividend/Share
Amount
   Record Date      Payment Date  

1st

   $0.15      March 15, 2022        March 29, 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 March 31, 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., LLC (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.”

 

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Table of Contents

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 three months ended March 31, 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.

 

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Table of Contents

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 paid during the three months ended March 31, 2022 and 2021 were $240 and $18,627, respectively. Interest paid during the three months ended March 31, 2022 and 2021 was $0 and $187,985, respectively. The Corporation converted $147,146 and $56,157 of interest receivable into investments during the three months ended March 31, 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 March 31, 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 of Directors 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 of Directors in April 2021. No shares of common stock were repurchased by the Corporation during the three months ended March 31, 2022 or March 31, 2021.

 

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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 quarter ended March 31 2022.

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 March 31, 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 three months ended March 31, 2022 or 2021, respectively.

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:

 

     March 31, 2022  

Tilson Technology Management, Inc. (Tilson)

     14

ACV Auctions, Inc. (ACV)

     10

Open Exchange, Inc. (Open Exchange)

     9

DSD Operating, LLC (DSD)

     7

Caitec, Inc. (Caitec)

     6
     December 31, 2021  

Tilson Technology Management, Inc. (Tilson)

     14

ACV Auctions, Inc. (ACV)

     13

Open Exchange, Inc. (Open Exchange)

     9

Caitec, Inc. (Caitec)

     6

DSD Operating, LLC (DSD)

     6

 

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Table of Contents

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 March 31, 2022, 19% of the Corporation’s investments were Level 1 investments and 81% 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 March 31, 2022 or December 31, 2021.

 

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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.

 

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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 March 31, 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

     3,136,160        2,262,010        1,444,915        5,850,500        12,693,585  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Non-Control/Non-Affiliate

   $ 3,136,160      $ 2,762,010      $ 1,444,915      $ 12,369,438      $ 19,712,523  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Affiliate Equity

   $ 1,905,804      $ —        $ 1,450,155      $ 10,360,848      $ 13,716,807  

Affiliate Loan and Debt

     2,507,782        —          —          14,713,614        17,221,396  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Affiliate

   $ 4,413,586      $ —        $ 1,450,155      $ 25,074,462      $ 30,938,203  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Level 3 Investments

   $ 7,549,746      $ 2,762,010      $ 2,895,070      $ 37,443,900      $ 50,650,726  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
                


                    

 

 

Range

     5-6X        1X        2X-4X        Not Applicable  

Unobservable Input

     EBITDA Multiple        Asset Value        Revenue Multiple        Transaction Price  

Weighted Average

     5.8X        1X        2.7X        Not Applicable  

The following table provides a summary of the components of Level 1, 2 and 3 Assets Measured at Fair Value at March 31, 2022:

 

            Fair Value Measurements at Reported Date Using  

Description

   March 31,
2022
     Quoted Prices in
Active Markets for
Identical Assets

(Level 1)
     Significant
Observable Inputs
(Level 2)
     Other Significant
Unobservable
Inputs
(Level 3)
 

Loan investments

   $ 15,880,771      $ —        $ —        $ 15,880,771  

Debt investments

     14,034,210        —          —          14,034,210  

Equity investments

     32,496,661        11,760,916        —          20,735,745  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 62,411,642      $ 11,760,916      $ —        $ 50,650,726  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

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 three months ended March 31, 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  

SocialFlow, Inc. (Social Flow)

     —          —         (1,482,498     (1,482,498
  

 

 

    

 

 

   

 

 

   

 

 

 

Total realized (losses), net

     —          —         (1,443,617     (1,443,617

Unrealized gains, net included in net change in net assets from operations:

         

Social Flow

     —          —         1,628,000       1,628,000  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total unrealized gains

     —          —         1,628,000       1,628,000  

Purchases of securities/changes to securities/non-cash conversions:

         

Caitec, Inc. (Caitec)

     17,944        —         —         17,944  

DSD Operating, LLC (DSD)

     333,115        —         —         333,115  

Filterworks Acquisition USA, LLC (Filterworks)

     —          61,165       —         61,165  

GoNoodle, Inc. (GoNoodle)

     —          3,607       —         3,607  

HDI Acquisition LLC (Hilton Displays)

     —          6,506       —         6,506  

ITA Acquisition, LLC (ITA)

     17,211        —         223,810       241,021  

Mattison Avenue Holdings LLC (Mattison)

     9,097        —         —         9,097  

Seybert’s Billiards Corporation (Seybert’s)

     —          19,279       —         19,279  

SciAps, Inc. (Sciaps)

     —          3,750       —         3,750  
  

 

 

    

 

 

   

 

 

   

 

 

 

Total purchases of securities/changes to securities/non-cash conversions

     377,367        94,307       223,810       695,484  

Repayments and sales of securities:

         

Clearview Social

     —          —         (38,881     (38,881

GoNoodle

     —          (90,175     —         (90,175

Social Flow

     —          —         (267,502     (267,502
  

 

 

    

 

 

   

 

 

   

 

 

 

Total repayments and sales of securities

     —          (90,175     (306,383     (396,558
  

 

 

    

 

 

   

 

 

   

 

 

 

Ending balance March 31, 2022, of Level 3 Assets

   $ 15,880,771      $ 14,034,210     $ 20,735,745     $ 50,650,726  
  

 

 

    

 

 

   

 

 

   

 

 

 

 

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Change in unrealized appreciation on investments for the period included in changes in net assets

 

   ($ 331,069
           

 

 

 

Net realized loss on investments for the period included in changes in net assets

      ($ 851,471
           

 

 

 

The following table provides a summary of changes in Assets Measured at Fair Value Using Significant Unobservable Inputs (Level 3) for the three months ended March 31, 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  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total realized gains

     —         —         135,430       135,430  

Purchases of securities/changes to securities/non-cash conversions:

        

Caitec Acquisition, Inc. (Caitec)

     17,583       —         —         17,583  

Filterworks Acquisition USA, LLC

     —         11,749       —         11,749  

GoNoodle, Inc. (GoNoodle)

     —         3,794       —         3,794  

HDI Acquisition LLC (Hilton Displays)

     —         6,376       —         6,376  

Mattison Avenue Holdings LLC (Mattison)

     —         5,611       —         5,611  

Microcision, LLC (Microcision)

     —         88,003       —         88,003  

Seybert’s Billiards Corporation (Seyberts)

     —         2,811,044       —         2,811,044  

SciAps, Inc. (Sciaps)

     —         3,750       —         3,750  

BMP Swanson Holdco, LLC (Swanson)

     1,600,000       —         233,333       1,833,333  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total purchases of securities/changes to securities/non-cash conversions

     1,617,583       2,930,327       233,333       4,781,243  

Repayments and sales of securities:

        

Clearview Social

     —         —         (335,430     (335,430

Microcision

     —         (1,500,000     —         (1,500,000

Science and Medicine Group, Inc. (SMG)

     (1,900,000     —         —         (1,900,000
  

 

 

   

 

 

   

 

 

   

 

 

 

Total repayments and sales of securities

     (1,900,000     (1,500,000     (335,430     (3,735,430

Transfers out of Level 3

     —         —         (6,531,815     (6,531,815
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending Balance March 31, 2021, of Level 3 Assets

   $ 6,488,977     $ 11,229,692     $ 13,682,923     $ 31,401,592  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Change in unrealized appreciation on investments for the period included in changes in net assets

   $ 9,887,032  
           

 

 

 

Net realized gain on investments for the period included in changes in net assets

   $ 310,755  
           

 

 

 

Note 4. OTHER ASSETS

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

 

     March 31,
2022
     December 31,
2021
 

Escrow receivables

   $ 127,593      $ 71,765  

Dividend receivables

     101,240        99,720  

Prepaid expenses

     43,145        9,972  

Other receivables

     23,125        —    
  

 

 

    

 

 

 

Total other assets

   $ 295,103      $ 181,457  
  

 

 

    

 

 

 

Note 5. COMMITMENTS AND CONTINGENCIES

The Corporation had no commitments at March 31, 2022 or December 31, 2021.

 

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Note 6. CHANGES IN STOCKHOLDERS’ EQUITY (NET ASSETS)

The following schedule analyzes the changes in stockholders’ equity (net assets) section of the Consolidated Statement of Financial Position for the three months ended March 31, 2022 and 2021, respectively:

 

     Common
Stock
     Capital in
excess of par
value
     Treasury
Stock, at cost
    Total distributable
earnings (losses)
    Total Stockholders’
Equity (Net Assets)
 

December 31, 2021

   $ 264,892      $ 51,679,809      ($ 1,566,605   $ 10,367,320     $ 60,745,416  

Payment of dividend

     —          —          —         (387,153     (387,153

Net decrease in net assets from operations

     —          —          —         (410,537     (410,537
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

March 31, 2022

   $ 264,892      $ 51,679,809      ($ 1,566,605   $ 9,569,630     $ 59,947,726  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
     Common
Stock
     Capital in
excess of par
value
     Treasury
Stock, at cost
    Total distributable
(losses) earnings
    Total Stockholders’
Equity (Net Assets)
 

December 31, 2020

   $ 264,892      $ 52,003,545      ($ 1,545,834   ($ 4,617,773   $ 46,104,830  

Payment of dividend

     —          —          —         (258,385     (258,385

Net increase in net assets from operations

     —          —          —         8,030,759       8,030,759  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

March 31, 2021

   $ 264,892      $ 52,003,545      ($ 1,545,834   $ 3,154,601     $ 53,877,204  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Note 7. RELATED PARTY TRANSACTIONS

Investment Management Agreement

Effective with the Closing, RCM, a registered investment adviser, was retained by the Corporation as its external investment adviser and administrator. Under the Investment Management Agreement, the Corporation pays RCM, as compensation for the investment advisory and management services, fees consisting of two components: (i) the Base Management Fee and (ii) the Incentive Fee.

The “Base Management Fee” is calculated at an annual rate of 1.50% of the Corporation’s total assets (other than cash but including assets purchased with borrowed funds). For the three months ended March 31, 2022 and 2021, the Base Management Fee was $240,275 and $175,609, respectively. At March 31, 2022 and December 31, 2021, the Corporation had $240,275 and $238,862 payable, respectively, for the Base Management Fees on its Consolidated Statement of Financial Position.

The “Incentive Fee” is comprised of two parts: (1) the “Income Based Fee” and (2) the “Capital Gains Fee”. The Income Based Fee is calculated and payable quarterly in arrears based on the “Pre-Incentive Fee Net Investment Income” (as defined in the agreement) for the immediately preceding calendar quarter, subject to a hurdle rate of 1.75% per quarter (7% annualized) and is payable promptly following the filing of the Corporation’s financial statements for such quarter.

The Corporation pays RCM an Incentive Fee with respect to its Pre-Incentive Fee Net Investment Income in each calendar quarter as follows:

 

  (i)

no Income Based Fee in any quarter in which the Pre-Incentive Fee Net Investment Income for such quarter does not exceed the hurdle rate of 1.75% (7.00% annualized);

 

  (ii)

100% of the Pre-Incentive Fee Net Investment Income for any calendar quarter with respect to that portion of the Pre-Incentive Fee Net Investment Income for such calendar quarter, if any, that exceeds the hurdle rate of 1.75% (7.00% annualized) but is less than 2.1875% (8.75% annualized); and

 

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  (iii)

20% of the amount of the Pre-Incentive Fee Net Investment Income for any calendar quarter with respect to that portion of the Pre-Incentive Fee Net Investment Income for such calendar quarter, if any, that exceeds 2.1875% (8.75% annualized).

The Income Based Fee paid to RCM for any calendar quarter that begins more than two years and three months after the effective date of the Prior Investment Management Agreement shall not be in excess of the Incentive Fee Cap. The “Incentive Fee Cap” for any quarter is an amount equal to (1) 20.0% of the Cumulative Net Return (as defined below) during the relevant Income Based Fee Calculation Period (as defined below) minus (2) the aggregate Income Based Fee that was paid in respect of the calendar quarters included in the relevant Income Based Fee Calculation Period.

For purposes of the calculation of the Income Based Fee, “Income Based Fee Calculation Period” is defined as, with reference to a calendar quarter, the period of time consisting of such calendar quarter and the additional quarters that comprise the lesser of (1) the number of quarters immediately preceding such calendar quarter that began more than two years after November 8, 2019 or (2) the eleven calendar quarters immediately preceding such calendar quarter.

For purposes of the calculation of the Income Based Fee, “Cumulative Net Return” is defined as (1) the aggregate net investment income in respect of the relevant Income Based Fee Calculation Period minus (2) any Net Capital Loss, if any, in respect of the relevant Income Based Fee Calculation Period. If, in any quarter, the Incentive Fee Cap is zero or a negative value, the Corporation pays no Income Based Fee to RCM for such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is a positive value but is less than the Income Based Fee that is payable to RCM for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, the Corporation pays an Income Based Fee to RCM equal to the Incentive Fee Cap for such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is equal to or greater than the Income Based Fee that is payable to RCM for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, we pay an Income Based Fee to the Adviser equal to the Income Based Fee calculated as described above for such quarter without regard to the Incentive Fee Cap.

For purposes of the calculation of the Income Based Fee, “Net Capital Loss,” in respect of a particular period, means the difference, if positive, between (1) aggregate capital losses, whether realized or unrealized, in such period and (2) aggregate capital gains, whether realized or unrealized, in such period.

Any Income Based Fee otherwise payable under the Investment Management Agreement with respect to Accrued Unpaid Income (such fees being the “Accrued Unpaid Income Based Fees”) shall be deferred, on a security by security basis, and shall become payable to RCM only if, as, when and to the extent cash is received by us in respect of any Accrued Unpaid Income. Any Accrued Unpaid Income that is subsequently reversed by us in connection with a write-down, write-off, impairment or similar treatment of the investment giving rise to such Accrued Unpaid Income will, in the applicable period of reversal, (1) reduce Pre-Incentive Fee Net Investment Income and (2) reduce the amount of Accrued Unpaid Income Based Fees. Subsequent payments of Accrued Unpaid Income Based Fees deferred pursuant to this paragraph shall not reduce the amounts otherwise payable for any quarter as an Income Based Fee.

For the three months ended March 31, 2022 and 2021, there were no Income Based Fees earned under the Investment Management Agreement.

The second part of the Incentive Fee is the “Capital Gains Fee”. This fee is determined and payable in arrears as of the end of each calendar year. Under the terms of the Investment Management Agreement, the Capital Gains Fee is calculated at the end of each applicable year by subtracting (1) the sum of the cumulative aggregate realized capital losses and aggregate unrealized capital depreciation from (2) the cumulative aggregate realized capital gains, in each case calculated from November 8, 2019. If this amount is positive at the end of any calendar year, then the Capital Gains Fee for such year is equal to 20.0% of such amount, less the cumulative aggregate amount of Capital Gains Fees paid in all prior years. If such amount is negative, then

 

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there is no Capital Gains Fee payable for that calendar year. If the Investment Management Agreement is terminated as of a date that is not a calendar year end, the termination date shall be treated as though it were a calendar year end for purposes of calculating and paying the Capital Gains Fee.

For purposes of the Capital Gains Fee:

 

   

The cumulative aggregate realized capital gains are calculated as the sum of the differences, if positive, between (a) the net sales price of each investment in the Corporations portfolio when sold minus (b) the accreted or amortized cost basis of such investment.

 

   

The cumulative aggregate realized capital losses are calculated as the sum of the amounts by which (a) the net sales price of each investment in the portfolio when sold is less than (b) the accreted or amortized cost basis of such investment.

 

   

The aggregate unrealized capital depreciation is calculated as the sum of the amount, if negative, between (a) the valuation of each investment in the portfolio as of the applicable Capital Gains Fee calculation date minus (b) the accreted or amortized cost basis of such investment.

In determining whether a capital gains incentive fee accrual is necessary, U.S. generally accepted accounting principles (GAAP) requires a company to consider the amount of cumulative aggregate unrealized capital appreciation that such company has with respect to its investments, as a capital gains incentive fee would be payable if such unrealized capital appreciation were realized, despite the fact that such unrealized capital appreciation is not used by the Corporation in determining the amount of Capital Gains Fee actually payable under the terms of the RCM Investment Management Agreement. A capital gains incentive fee accrual under GAAP is calculated using the cumulative aggregate realized capital gains and losses and the aggregate net change in unrealized capital appreciation/depreciation at the close of the period. If the calculated amount is positive, GAAP requires the Corporation to record a capital gains incentive fee accrual equal to 20% of this cumulative amount, less the aggregate amount of actual capital gains incentive fees paid, or capital gains incentive fees accrued under GAAP, for all prior periods. There can be no guarantee that the Corporation will realize the unrealized capital appreciation, upon which this accrual has been calculated, in the future.

As of March 31, 2022, there was no Capital Gains Fee currently payable under the terms of the RCM Investment Management Agreement, as such amounts remain unaudited at March 31, 2022, and the final calculations are determined annually, and subject to change based on subsequent realized gains, losses or unrealized losses during the remainder of 2022. At December 31, 2021, there was $652,240 of Capital Gains Fee payable. The Capital Gains Fee earned of $652,240 was included in the “Due to investment adviser” line on the Consolidated Statements of Financial Position and the $3,547,760 cumulative accrued capital gains incentive fee was recorded in the line item “Capital gains incentive fees” on the Consolidated Statements of Financial Position at December 31, 2021.

Accrued capital gains incentive fees as of March 31, 2022, were $3,308,000. In accordance with GAAP, the Corporation is required to cumulatively accrue a capital gains incentive fee on all realized and unrealized gains and losses, resulting in an accrual of $3,308,000 at March 31, 2022, which represents both the interim earned fee, under the terms of the Investment Management Agreement, and the fee that would be due based on net portfolio appreciation. The $3,308,000 accrued capital gains incentive fee is recorded in the line item “Capital gains incentive fees” on the Consolidated Statements of Financial Position at March 31, 2022. Realized gains during the year ended December 31, 2021, resulted in approximately $4,200,000 of net eligible capital gains, of which $652,240 is payable to RCM as a Capital Gains Fee under the formula for the year ended December 31, 2021. In accordance with GAAP, the Corporation is required to cumulatively accrue a capital gains incentive fee on all realized and unrealized gains and losses, which resulted in an accrual in the amount of $4,200,000 as of December 31, 2021, which represents both the Capital Gains Fee payable of $652,240 and $3,547,760 that would be due based on net portfolio appreciation.

 

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Administration Agreement

Under the terms of the Administration Agreement, RCM agreed to perform (or oversee, or arrange for, the performance of) the administrative services necessary for the Corporation’s operations, including, but not limited to, office facilities, equipment, clerical, bookkeeping, finance, accounting, compliance and record keeping services at such office facilities and such other services as RCM, subject to review by the Board, will from time to time determine to be necessary or useful to perform its obligations under the Administration Agreement. RCM shall also, arrange for the services of, and oversee, custodians, depositories, transfer agents, dividend disbursing agents, other shareholder servicing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed to be necessary or desirable.

RCM is responsible for our financial and other records that are required to be maintained and prepares all reports and other materials required to be filed with the SEC or any other regulatory authority, including reports to shareholders. In addition, RCM assists us in determining and publishing the Corporation’s net asset value (NAV), overseeing the preparation and filing of our tax returns, and the printing and dissemination of reports to shareholders, and generally overseeing the payment of our expenses and the performance of administrative and professional services rendered by others. RCM provides, on the Corporation’s behalf, managerial assistance to those portfolio companies that have accepted its offer to provide such assistance.

Note 8. FINANCIAL HIGHLIGHTS

The following schedule provides the financial highlights, calculated based on shares outstanding, for the three months ended March 31, 2022 and 2021.

 

     Three months
ended

March 31,
2022
(Unaudited)
    Three months
ended

March 31,
2021
(Unaudited)
 

Income (loss) from investment operations (1):

    

Investment income

   $ 0.44     $ 0.39  

Expenses

     0.14       1.22  
  

 

 

   

 

 

 

Investment income (loss) before income taxes

     0.30       (0.83

Income tax expense

     0.00       0.01  
  

 

 

   

 

 

 

Net investment income (loss)

     0.30       (0.84

Net realized and unrealized (loss) gain on investments

     (0.46     3.95  
  

 

 

   

 

 

 

(Decrease) increase in net assets from operations

     (0.16     3.11  

Payment of cash dividend

     (0.15     (0.10
  

 

 

   

 

 

 

(Decrease) increase in net assets

     (0.31     3.01  
  

 

 

   

 

 

 

Net asset value, beginning of period

     23.54       17.86  
  

 

 

   

 

 

 

Net asset value, end of period

   $ 23.23     $ 20.87  
  

 

 

   

 

 

 

Per share market price, end of period

   $ 15.15     $ 18.01  
  

 

 

   

 

 

 

Total return based on market price

     (10.83 %)      2.33

Total shareholder return (includes dividends paid)

     (9.95 %)      10.45

Total return based on net asset value

     (1.31 %)      16.86

Supplemental data:

    

Ratio of expenses before income taxes to average net assets

     0.57     6.33

Ratio of expenses including income taxes to average net assets

     0.58     6.37

Ratio of net investment income (loss) to average net assets

     1.28     (4.33 %) 

Debt/Equity ratio

     0     20.1

Portfolio turnover

     0.86     14.5

Net assets, end of period

   $ 59,947,726     $ 53.877,204  

Weighted shares outstanding, end of period

     2,581,021       2,582,169  

 

(1)

Per share data is based on shares outstanding and the results are rounded to the nearest cent.

 

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The Corporation’s interim period results could fluctuate as a result of a number of factors; therefore results for any interim period should not be relied upon as being indicative of performance for the full year or in future periods.

Note 9. SUBSEQUENT EVENT

Subsequent to the quarter end, on April 28, 2022, Rand’s Board of Directors declared a quarterly cash dividend of $0.15 per share. The cash dividend will be paid on or about June 15, 2022 to shareholders of record as of June 1, 2022.

 

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

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated financial statements and related notes included elsewhere in this report. Historical results and percentage relationships among any amounts in the consolidated financial statements are not necessarily indicative of trends in operating results for any future periods.

FORWARD LOOKING STATEMENTS

Statements included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report that do not relate to present or historical conditions are “forward-looking statements” within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and in Section 21E of the Securities Exchange Act of 1934, as amended. Additional oral or written forward-looking statements may be made by us from time to time, and forward-looking statements may be included in documents that are filed with the SEC. Forward-looking statements involve risks and uncertainties that could cause our results or outcomes to differ materially from those expressed in the forward-looking statements. Forward-looking statements may include, without limitation, statements relating to our plans, strategies, objectives, expectations and intentions, including statements related to our investment strategies and our intention to co-invest with certain of our affiliates, the impact of COVID-19 on our portfolio companies; the impact of our election as a RIC for U.S. federal tax purposes on payment of corporate level U.S. federal income taxes by Rand; statements regarding our liquidity and financial resources; statements regarding any Capital Gains Fee that may be due to RCM upon a hypothetical liquidation of our portfolio and the amount of the Capital Gains Fee that may be payable for 2022; and statements regarding our compliance with the requirements to elect to be taxed as a RIC as of March 31, 2022, future dividend payments, and are intended to be made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as “believes,” “forecasts,” “intends,” “possible,” “expects,” “estimates,” “anticipates,” or “plans” and similar expressions are intended to identify forward-looking statements. Among the important factors on which such statements are based are assumptions concerning the scope of the impact of the COVID-19 pandemic and its specific impact on our portfolio companies, the state of the United States economy and the local markets in which our portfolio companies operate, the state of the securities markets in which the securities of our portfolio companies could be traded, liquidity within the United States financial markets, and inflation. Forward-looking statements are also subject to the risks and uncertainties described under the caption “Risk Factors” contained in Part II, Item 1A of this report and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021.

There may be other factors not identified that affect the accuracy of our forward-looking statements. Further, any forward-looking statement speaks only as of the date when it is made and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time that may cause our business not to develop as we expect, and we cannot predict all of them.

Overview

We are an externally managed investment company that lends to and invests in lower middle market companies. Our investment objective is to generate current income and when also possible, capital appreciation, by targeting investment opportunities with favorable risk-adjusted returns. Our investment activities are managed by our investment adviser, Rand Capital Management, LLC (“RCM”).

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.

 

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In November 2019, Rand completed a stock sale transaction (the “Transaction”) with East. The Transaction consisted of a $25 million investment in Rand by East, in exchange for approximately 8.3 million shares of Rand common stock. Concurrent with the closing of the Transaction, on November 8, 2019, Rand entered into an investment advisory and management agreement (the “Prior Investment Management Agreement”) and an administration agreement (the “Prior Administration Agreement”) with RCM. In connection with retaining RCM as our investment adviser and administrator, Rand’s management and staff became employees of RCM.

In December 2020, Rand’s shareholders approved a new investment advisory and management agreement (the “Investment Management Agreement”) with RCM at a special meeting of shareholders (the “Special Meeting”). The approval was required because Callodine Group, LLC (“Callodine”) planned to acquire a controlling interest in RCM, which was, at that time, majority owned by East (the “Adviser Change in Control”). The terms of the Investment Management Agreement are identical to those contained in the Prior Investment Management Agreement, with RCM continuing to provide investment advisory and management services to Rand following the Adviser Change in Control. 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 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.

We elected U.S federal tax treatment as a regulated investment company (“RIC”) as of January 1, 2020, under subchapter M of the Internal Revenue Code of 1986, as amended, on our timely filed U.S. Federal tax return for the 2020 tax year. To maintain our qualification as a RIC, we must, among other things, meet certain source of income and asset diversification requirements. As of March 31, 2022, we are in compliance with the RIC requirements. As a RIC, we generally will not be subject to corporate-level U.S. federal income taxes on any net ordinary income or capital gains that we timely distribute to our shareholders as dividends.

In connection with our RIC election, we paid a special dividend of $23.7 million, or approximately $1.62 per share, on the Corporation’s common stock, par value $0.10 per shares (the “Common Stock”), in cash and stock to our shareholders on May 11, 2020, which distributed all of our accumulated earnings and profits since our inception through 2019. The total amount of cash distributed to all shareholders, as part of the special dividend, was limited to $4.8 million, or 20% of the total special dividend that was paid. The remaining 80% of the special dividend was paid using approximately 8.6 million shares of the Corporation’s common stock.

To maintain our RIC status, we are required to meet specified source-of-income and asset diversification requirements and distribute annually to our shareholders at least 90% of our ordinary net income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. Accordingly, our Board of Directors has initiated a regular quarterly cash dividend.

The Board of Directors declared the following quarterly cash dividend during the three months ended March 31, 2022:

 

Quarter

           Amount            Record Date    Payment Date

1st

   $0.15    March 14, 2022    March 28, 2022

We intend to co-invest, subject to the conditions included in the exemptive relief order we received from the SEC, with certain of our affiliates. See “SEC Exemptive Order” below. We believe these types of co-investments are likely to afford us additional investment opportunities and provide an ability to achieve greater diversification in our investment portfolio.

 

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SEC Exemptive Order

On October 7, 2020, the Corporation, RCM and certain of their affiliates received exemptive relief from the SEC to permit the Corporation 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 the Corporation’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, the Corporation is generally permitted to co-invest with affiliated funds if a “required majority” (as defined in Section 57(o) of the 1940 Act) of the Corporation’s independent directors makes 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 the Corporation and its shareholders and do not involve overreaching in respect of the Corporation or its shareholders on the part of any person concerned; and (2) the transaction is consistent with the interests of the Corporation’s shareholders and is consistent with the Corporation’s investment objective and strategies.

On March 29, 2021, the SEC approved a new exemptive relief order (the “New Order”) reflecting the new organizational structure of RCM and its affiliates after the Adviser Change of Control. This New Order supersedes the Order and permits, subject to compliance with specified conditions, the Corporation to co-invest with funds managed by RCM and its affiliates under RCM’s current ownership structure after the completion of the Adviser Change in Control.

COVID-19 Update

Since the outbreak of the COVID-19 pandemic, our investment adviser, RCM, has continued to engage in active discussions with the management teams of the companies within our portfolio regarding actions taken by those portfolio companies with respect to the safety and welfare of their employees and their processes for adapting to a new work environments post-COVID-19. RCM has informed us about the impact of COVID-19 on the businesses of our portfolio companies, and the potential impact of disruptions in the supply chain, and the actions these portfolio companies have taken, and are taking, to adapt to changes in demand, both increased and decreased, depending upon the portfolio company. While we do not know what the ultimate long-term impact of the COVID -19 pandemic will be on our portfolio companies, RCM is actively monitoring our portfolio companies, their liquidity and operational status.

Critical Accounting Policies

We prepare our consolidated financial statements in accordance with United States generally accepted accounting principles (GAAP), which require the use of estimates and assumptions that affect the reported amounts of assets and liabilities. A summary of our critical accounting policies can be found in our Annual Report on Form 10-K for the year ended December 31, 2021 under Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

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Financial Condition

Overview:

 

     March 31, 2022      December 31, 2021      Decrease      % Decrease  

Total assets

   $ 63,925,221      $ 65,644,854      ($ 1,719,633      (2.6 %) 

Total liabilities

     3,977,495        4,899,438        (921,943      (18.8 %) 
  

 

 

    

 

 

    

 

 

    

Net assets

   $ 59,947,726      $ 60,745,416      ($ 797,690      (1.3 %) 
  

 

 

    

 

 

    

 

 

    

Net asset value per share (NAV) was $23.23 at March 31, 2022 and $23.54 at December 31, 2021.

Cash approximated 1.0% of net assets at March 31, 2022, as compared to 1.4% of net assets at December 31, 2021.

Composition of Our Investment Portfolio

Our financial condition is dependent on the success of our portfolio holdings. The following summarizes our investment portfolio at the dates indicated.

 

     March 31, 2022      December 31, 2021      Decrease      % Decrease  

Investments, at cost

   $ 51,044,917      $ 52,370,668      ($ 1,325,751      (2.5 %) 

Unrealized appreciation, net

     11,366,725        11,697,794        (331,069      (2.8 %) 
  

 

 

    

 

 

    

 

 

    

Investments, at fair value

   $ 62,411,642      $ 64,068,462      ($ 1,656,820      (2.6 %) 
  

 

 

    

 

 

    

 

 

    

Our total investments at fair value, as determined by RCM and approved by our Board of Directors, approximated 104% of net assets at March 31, 2022 versus 106% of net assets at December 31, 2021.

Our investment objective is to generate current income and when possible, capital appreciation, by targeting investment opportunities with favorable risk-adjusted returns. As a result, we are focused on investing in higher yielding debt instruments and related equity investments in privately held, lower middle market companies with a committed and experienced management team in a broad variety of industries. We may invest in publicly traded shares of other business development companies that provide income through dividends and have more liquidity that our private company equity investments.

The change in investments during the three months ended March 31, 2022, at cost, is comprised of the following:

 

     Cost
Increase (Decrease)
 

New investments:

  

DSD Operating, LLC (DSD)

   $ 318,276  

ITA Acquisition, LLC (ITA)

     223,810  
  

 

 

 

Total of new investments

     542,086  

Other changes to investments:

  

Filterworks Acquisition USA, LLC (Filterworks) interest conversion

     61,165  

Seybert’s Billiards Corporation (Seybert’s) OID amortization and interest conversion

     19,279  

Caitec, Inc. (Caitec) interest conversion

     17,944  

ITA interest conversion

     17,211  

DSD interest conversion

     14,839  

Mattison Avenue Holdings, LLC (Mattison) interest conversion

     9,097  

HDI Acquisition LLC (Hilton Displays) interest conversion

     6,506  

SciAps, Inc. (Sciaps) OID amortization

     3,750  

GoNoodle, Inc. (GoNoodle) interest conversion

     3,607  
  

 

 

 

Total of other changes to investments

     153,398  

Investments repaid, sold, liquidated or converted:

  

ACV Auctions, Inc. (ACV) sale

     (10,360

Ares Capital Corporation (Ares) sale

     (76,320

GoNoodle debt repayment

     (90,175

FS KKR Capital Corp. (FS KKR) sale

     (94,380

SocialFlow, Inc. (Social Flow) exit

     (1,750,000
  

 

 

 

Total of investments repaid, sold, liquidated or converted

     (2,021,235
  

 

 

 

Net change in investments, at cost

   ($ 1,325,751
  

 

 

 

 

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Results of Operations

Comparison of the three months ended March 31, 2022 to the three months ended March 31, 2021

Investment Income

 

     Three months
ended

March 31, 2022
     Three months
ended

March 31, 2021
     Increase
(Decrease)
     %
Increase
(Decrease)
 

Interest from portfolio companies

   $ 912,139      $ 710,762      $ 201,377        28.3

Interest from other investments

     —          12,627        (12,627      (100.0 %) 

Dividend and other investment income

     172,990        246,669        (73,679      (29.9 %) 

Fee income

     39,619        46,334        (6,715      (14.5 %) 
  

 

 

    

 

 

    

 

 

    

Total investment income

   $ 1,124,748      $ 1,016,392      $ 108,356        10.7
  

 

 

    

 

 

    

 

 

    

The total investment income that was received on a current basis during the three months ended March 31, 2022 and 2021 was received from 24 portfolio companies during each period. The number of interest yielding companies contributing to current investment income has continued to increase over the last 12 to 18 months due to a focus on investments in interest yielding instruments in alignment with our investment objectives and strategy.

Interest from portfolio companies – Interest from portfolio companies was approximately 28% higher during the three months ended March 31, 2022 versus the same period in 2021 due to the fact that we originated more interest yielding investments during the last 12 to 18 months. The new debt instruments were originated from Applied Image, Inc. (Applied Image), BMP Swanson Holdco, LLC (Swanson), Caitec, Inc. (Caitec), DSD Operating, LLC (DSD), ITA Acquisition, LLC (ITA), Nailbiter Inc. (Nailbiter) and Seybert’s Billiards Corporation (Seybert’s).

Interest from other investments - The decrease in interest from other investments is due to lower cash balances during the three months ended March 31, 2022 versus the same period in 2021.

Dividend and other investment income - Dividend income is comprised of cash distributions from limited liability companies (LLCs) and corporations in which we have invested, including our investment in the shares of publicly traded business development companies (BDC). Our investment agreements with certain LLCs require those LLCs to distribute funds to us for payment of income taxes on our allocable share of the LLC’s profits. These portfolio companies may also elect to make additional discretionary distributions. Dividend income will fluctuate based upon the profitability of these LLCs and corporations and the timing of the distributions. The dividend distributions for the respective periods were:

 

     Three months ended
March 31, 2022
     Three months ended
March 31, 2021
 

TCG BDC, Inc. (TCG)

   $ 34,400      $ 31,820  

Carolina Skiff LLC (Carolina Skiff)

     30,600        81,801  

FS KKR

     30,240        32,400  

PennantPark Investment Corporations (PennantPark)

     27,300        23,400  

Tilson Technology Management Inc. (Tilson)

     13,125        13,125  

Ares

     9,450        10,800  

Golub Capital BDC, Inc. (Golub)

     9,375        9,063  

Owl Rock Capital Corporation (Owl Rock)

     9,300        9,300  

Barings BDC, Inc. (Barings)

     9,200        7,600  

Apollo

     —          27,360  
  

 

 

    

 

 

 

Total dividend and other investment income

   $ 172,990      $ 246,669  
  

 

 

    

 

 

 

 

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Fee income - Fee income generally consists of the revenue associated with the amortization of financing fees charged to the portfolio companies upon successful closing of financings, income from portfolio company board attendance fees and other miscellaneous fees. The financing fees are amortized ratably over the life of the instrument associated with the fees. The unamortized fees are carried on the balance sheet under the line item “Deferred revenue.”

The income associated with the amortization of financing fees was $29,619 and $16,334 for the three months ended March 31, 2022 and 2021, respectively. During the three months ended March 31, 2022, we recognized a one-time loan monitoring fee of $10,000 from our investment in Seybert’s. During the three months ended March 31, 2021, we recognized a one-time fee of $30,000 in conjunction with the repayment of the Microcision loan instrument.

Expenses

 

     Three months
ended

March 31, 2022
     Three months
ended

March 31, 2021
     Decrease      % Decrease  

Total expenses

   $ 345,378      $ 3,165,663      ($ 2,820,285      (89.1 %) 

The decrease in total expenses during the three months ended March 31, 2022 versus the same period in 2021 was primarily due to a $2,839,760 decrease in the capital gains incentive fees and a $104,190 decrease in interest expense. The decrease in capital gains incentive fees is due to an adjustment of the capital gains incentive fees payable accrual during the three months ended March 31, 2022. The Investment Management Agreement with RCM does not consider unrealized gains in calculating the amount of the capital gains incentive fee payable under that agreement. However, as required by GAAP, we must accrue capital gains incentive fees including unrealized gains. Our capital gains incentive fee accrual reflects the capital gains incentive fees that would be payable to RCM if our entire investment portfolio was liquidated at its fair value as of the balance sheet date even though RCM is not entitled to be paid a capital gains incentive fee with respect to unrealized gains unless and until such gains are actually realized.

During the fourth quarter of 2021, we repaid, in full, our $11,000,000 of outstanding SBA debentures, using cash on hand. Therefore, we did not incur any interest expense during the three months ended March 31, 2022, while we incurred $104,190 during the same period in 2021.

The base management fee, payable to RCM, increased 37%, or $64,666, during the three months ended March 31, 2022 versus the same period in 2021 because, as we deploy more cash into investments, the base management fee payable to RCM increases accordingly.

 

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Net Investment Income (Loss)

The net investment income (loss) for the three months ended March 31, 2022 and 2021 was $772,003 and ($2,167,028), respectively.

Realized (Loss) Gain on Investments

 

     Three months ended
March 31, 2022
     Three months ended
March 31, 2021
     Change  

Realized (loss) gain on investments before income taxes

   ($ 851,471    $ 310,755      ($ 1,162,226

During the three months ended March 31, 2022, we sold our investment in Social Flow and recognized a realized loss of ($1,482,498). In addition, during the three months ended March 31, 2022, we recognized a net realized gain of $500,495 on the sale of 37,000 shares of Class A common stock of ACV Auctions, Inc. (ACV). ACV trades on the NASDAQ Global Select Market under the symbol “ACVA”. As of March 31, 2022, we owned 405,934 shares of Class A common stock of ACV.

In addition, during the three months ended March 31, 2022, we recognized a $50,238 realized gain on the sale of 6,000 shares of Ares, and a $41,413 realized gain on the sale of 6,000 shares of FS KKR. We recognized a realized gain on the receipt of $38,881 from ClearView Social, Inc. (Clearview Social), an investment we exited during 2021.

During the three months ended March 31, 2021, we sold our shares in Apollo Investment Corporation and recognized a gain of approximately $175,000. In addition, we sold our investment in Clearview Social and realized an approximately $135,000 gain.

Change in Unrealized Appreciation (Depreciation) of Investments

 

     Three months ended
March 31, 2022
     Three months ended
March 31, 2021
     Change  

Change in unrealized appreciation (depreciation) of investments before income taxes

   ($ 331,069    $ 9,887,032      ($ 10,218,101

The change in net unrealized appreciation, before income taxes, for the three months ended March 31, 2022, was comprised of the following:

 

     Three months ended
March 31, 2022
 

SocialFlow, Inc. (Social Flow)

   $ 1,628,000  

PennantPark Investment Corporation (Pennantpark)

     170,300  

TCG BDC, Inc. (TCG)

     68,514  

FS KKR Capital Corp. (FS KKR)

     62,740  

Owl Rock Capital Corporation (Owl Rock)

     18,400  

Golub Capital BDC, Inc. (Golub)

     (6,146

Barings BDC, Inc. (Barings)

     (23,333

Ares Capital Corporation (Ares)

     (51,030

ACV Auctions, Inc. (ACV)

     (2,198,514
  

 

 

 

Total change in net unrealized appreciation of investments before income taxes

   ($ 331,069
  

 

 

 

 

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ACV, Ares, Barings, FS KKR, Golub, Owl Rock, Pennantpark and TCG are all publicly traded stocks, and as such, are marked to market at the end of each quarter, using the three-day average closing price.

We sold our investment in Social Flow during the three months ended March 31, 2022.

The change in net unrealized appreciation, before income taxes, for the three months ended March 31, 2021, was comprised of the following:

 

     Three months ended
March 31, 2021
 

ACV Auctions, Inc. (ACV)

   $ 9,287,855  

TCG BDC, Inc. (TCG)

     209,240  

FS KKR Capital Corp. (FS KKR)

     142,005  

PennantPark Investment Corporation (Pennantpark)

     103,451  

Ares Capital Corporation (Ares)

     54,900  

Owl Rock Capital Corporation (Owl Rock)

     38,100  

Barings BDC, Inc. (Barings)

     32,534  

Golub Capital BDC, Inc. (Golub)

     26,563  

Apollo Investment Corporation (Apollo)

     (7,616
  

 

 

 

Total change in net unrealized appreciation of investments before income taxes

   $ 9,887,032  
  

 

 

 

Ares, Barings, FS KKR, Golub, Owl Rock, Pennantpark and TCG are all publicly traded stocks, and as such, are marked to market at the end of each quarter. We sold our Apollo shares during the three months ended March 31, 2021.

ACV completed an Initial Public Offering (IPO) at $25.00 per share on March 23, 2021, trading on the NASDAQ Global Select market under the symbol “ACVA”. We owned 590,580 shares of common stock of ACV prior to the IPO. ACV, as a publicly traded stock, was marked to market at the end of the first quarter of 2021. The stock was valued at a three-day average bid price and was discounted due to trading restrictions on the stock, which subsequently expired on September 20, 2021. The Corporation valued its 590,580 shares of ACV at $26.79 as of March 31, 2021.

All of these valuation adjustments resulted from a review by RCM management using the guidance set forth by ASC 820 and our established valuation policy.

Net (Decrease) Increase in Net Assets from Operations

The net (decrease) increase in net assets from operations on our consolidated statements of operations for the three months ended March 31, 2022 and 2021 was ($410,537) and $8,030,759, respectively.

Liquidity and Capital Resources

Liquidity is a measure of our ability to meet anticipated cash requirements, fund new and follow-on portfolio investments, pay distributions to our shareholders and respond to other general business demands. As of March 31, 2022, our total liquidity consisted of approximately $597,000 in cash. In addition, we hold publicly traded equity securities of several BDCs and ACV Auctions, which are available for future liquidity requirements.

For the three months ended March 31, 2022, we experienced a net decrease in cash of approximately $237,000, which is a net effect of approximately $150,000 of cash provided in our operating activities and approximately $387,000 used in our financing activities.

 

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We anticipate that we will continue to fund our investment activities through cash and cash flows generated through our ongoing operating activities and the sale of our publicly traded liquid investments. We anticipate that we will continue to exit investments. However, the timing of liquidation events with respect to our privately held investments is difficult to project.

Our ongoing liquidity is tied to the performance of our portfolio companies and, as such, it may be affected going forward based on the impact of the COVID-19 pandemic and its lasting impact on the capital markets, our portfolio companies, and the U.S. economy in general.

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Our investment activities contain elements of risk. Our investment portfolio primarily consists of equity and debt securities in private companies and is subject to valuation risk. Because there is typically no public market for the equity and debt securities in which we invest, the valuation of the equity interests in the portfolio is stated at “fair value” as determined in good faith by RCM and approved by our Board of Directors. This is in accordance with our investment valuation policy (see the discussion of valuation policy contained in “Note 3. Investments” in the consolidated financial statements contained in Item 1 of this report, which is hereby incorporated herein by reference.) In the absence of readily ascertainable market values, the estimated value of investments in our portfolio may differ significantly from the values that would be placed on such investments in our portfolio if a ready market for the investments existed. Any changes in valuation are recorded on the consolidated statement of operations as “Net change in unrealized depreciation on investments.”

At times, our portfolio may include, and does currently include, marketable securities traded in the over-the-counter market or on other stock markets. In addition, there may be a portion of the portfolio for which no regular trading market exists. In order to realize the full value of a security, the market must trade in an orderly fashion, or a willing purchaser must be available when a sale is to be made. Should an economic or other event occur that would not allow markets to trade in an orderly fashion, we may not be able to realize the fair value of our marketable investments or other investments in a timely manner.

At March 31, 2022, we did not have any off-balance sheet arrangements or hedging or similar derivative financial instrument investments.

 

Item 4.

Controls and Procedures

Disclosure Controls and Procedures. The Corporation maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that this information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The Chief Executive Officer and the Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures as of March 31, 2022. Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s controls and procedures were effective as of March 31, 2022.

Changes in Internal Control over Financial Reporting. There have been no changes in our internal control over financial reporting during the Corporation’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

 

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PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

None.

 

Item 1A.

Risk Factors

See the information provided under the heading “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2021.

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

 

Period

   Total number of
shares purchased (1)
     Average price paid
per share (2)
     Total number of shares
purchased as part of
publicly
announced plan (3)
     Maximum dollar amount
of shares that may yet be
purchased under the share
repurchase program (3)
 

1/1/2022 – 1/31/2022

     —          —          —        $ 1,479,230  

2/1/2022 – 2/28/2022

     —          —          —        $ 1,479,230  

3/1/2022 – 3/31/2022

     —          —          —        $ 1,479,230  
  

 

 

    

 

 

    

 

 

    

Total

     —          —          —       
  

 

 

    

 

 

    

 

 

    

 

(1)

There were 1,148 shares repurchased, in open market transactions, during the third quarter of 2021.

(2)

The average price paid per share is calculated on a settlement basis and includes commission.

(3)

On April 21, 2022, the Board of Directors approved a new 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 of no greater than the then current net asset value. This share repurchase authorization lasts for a period of 12 months from the authorization date, until April 21, 2023.

 

Item 3.

Defaults upon Senior Securities

None.

 

Item 4.

Mine Safety Disclosures

Not Applicable.

 

Item 5.

Other Information

None.

 

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Item 6.

Exhibits

 

  (a)

Exhibits

The following exhibits are filed with this report or are incorporated herein by reference to a prior filing, in accordance with Rule 12b-32 under the Securities Exchange Act of 1934.

 

(3.1)(i)   Certificate of Incorporation of the Corporation, incorporated by reference to Exhibit (a)(1) of Form N-2 filed with the SEC on April 22, 1997. (File No. 333-25617).
(3.1)(ii)   Certificate of Amendment to the Certificate of Incorporation, as amended, incorporated by reference to Exhibit 3.1 to the Corporation’s Current Report on Form 8-K filed with the SEC on November 12, 2019.
(3.1)(iii)   Certificate of Amendment to the Certificate of Incorporation, as amended, incorporated by reference to Exhibit 3.1 to the Corporation’s Current Report on Form 8-K filed with the SEC on May 21, 2020.
(3.1)(iv)   By-laws of the Corporation, incorporated by reference to Exhibit 3(ii) to the Corporation’s Quarterly Report on Form 10-Q for the period ended September 30, 2016 filed with the SEC on November 2, 2016. (File No. 814-00235).
(4.1)   Specimen certificate of common stock certificate, incorporated by reference to Exhibit (b) of Form N-2 filed with the SEC on April 22, 1997. (File No. 333-25617).
(31.1)   Certification of Principal Executive Officer Pursuant to Rules 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended – filed herewith.
(31.2)   Certification of Principal Financial Officer Pursuant to Rules 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended – filed herewith.
(32.1)   Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Rand Capital Corporation – filed herewith.

 

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

    RAND CAPITAL CORPORATION

Dated: May 9, 2022

   

/s/ Daniel P. Penberthy

    Daniel P. Penberthy, Chief Executive Officer and President
    (Chief Executive Officer)

Dated: May 9, 2022

   

/s/ Margaret W. Brechtel

    Margaret W. Brechtel, Executive Vice President, Chief Financial Officer and Treasurer
    (Chief Financial Officer)

 

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