RAND CAPITAL CORP - Quarter Report: 2023 September (Form 10-Q)

10-Q

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 September 30, 2023

☐ 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 November 6, 2023, there were 2,581,021 shares of the registrant’s common stock outstanding.

RAND CAPITAL CORPORATION

TABLE OF CONTENTS FOR FORM 10-Q


PART I. – FINANCIAL INFORMATION
Item 1.	Financial Statements and Supplementary Data	1
	Consolidated Statements of Financial Position as of September 30, 2023 (Unaudited) and December 31, 2022	1
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022 (Unaudited)	2
	Consolidated Statements of Changes in Net Assets for the Three and Nine Months Ended September 30, 2023 and 2022 (Unaudited)	3
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022 (Unaudited)	4
	Consolidated Schedule of Portfolio Investments as of September 30, 2023 (Unaudited)	5
	Consolidated Schedule of Portfolio Investments as of December 31, 2022	13
	Notes to the Consolidated Financial Statements (Unaudited)	21
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	47
Item 4.	Controls and Procedures	48
PART II. – OTHER INFORMATION
Item 1.	Legal Proceedings	49
Item 1A.	Risk Factors	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 3.	Defaults upon Senior Securities	49
Item 4.	Mine Safety Disclosures	49
Item 5.	Other Information	49
Item 6.	Exhibits	50

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements and Supplementary Data

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION


	September 30, 2023 (Unaudited)			December 31, 2022
ASSETS
Investments at fair value:
Control investments (cost of $5,207,299 and $4,660,017, respectively)	$	4,083,489		$	3,536,207
Affiliate investments (cost of $43,946,584 and $30,204,160, respectively)		51,097,315			38,241,589
Non-Control/Non-Affiliate investments (cost of $17,108,025 and $20,852,060, respectively)		19,503,481			19,726,463
Total investments, at fair value (cost of $66,261,908 and $55,716,237, respectively)		74,684,285			61,504,259
Cash		3,479,772			1,368,996
Interest receivable		237,193			208,338
Prepaid income taxes		—			76,396
Deferred tax asset, net		134,087			28,160
Other assets		504,345			295,043
Total assets	$	79,039,682		$	63,481,192
LIABILITIES AND STOCKHOLDERS’ EQUITY (NET ASSETS)
Liabilities:
Due to investment adviser	$	268,609		$	562,221
Accounts payable and accrued expenses		169,995			66,680
Income taxes payable		29,577			—
Line of credit (see Note 6)		13,750,000			2,550,000
Capital gains incentive fees		2,907,700			2,167,000
Deferred revenue		561,524			413,971
Total liabilities		17,687,405			5,759,872
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 9/30/23 and 12/31/22		264,892			264,892
Capital in excess of par value		51,464,267			51,464,267
Treasury stock, at cost: 67,895 shares at 9/30/23 and 12/31/22		(1,566,605	)		(1,566,605	)
Total distributable earnings		11,189,723			7,558,766
Total stockholders’ equity (net assets) (per share –9/30/23: $23.77; 12/31/22: $22.36)		61,352,277			57,721,320
Total liabilities and stockholders’ equity (net assets)	$	79,039,682		$	63,481,192

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three months ended September 30, 2023			Three months ended September 30, 2022		Nine months ended September 30, 2023			Nine months ended September 30, 2022
Investment income:
Interest from portfolio companies:
Control investments	$	175,962		$	124,408	$	506,800		$	124,408
Affiliate investments		1,002,553			581,911		2,731,575			1,767,024
Non-Control/Non-Affiliate investments		357,162			393,686		1,067,745			1,125,544
Total interest from portfolio companies		1,535,677			1,100,005		4,306,120			3,016,976
Interest from other investments:
Non-Control/Non-Affiliate investments		456			48		692			49
Total interest from other investments		456			48		692			49
Dividend and other investment income:
Affiliate investments		13,126			305,959		419,951			552,469
Non-Control/Non-Affiliate investments		141,290			115,700		401,805			358,700
Total dividend and other investment income		154,416			421,659		821,756			911,169
Fee income:
Control investments		4,515			3,900		12,726			3,900
Affiliate investments		40,072			19,340		246,816			72,160
Non-Control/Non-Affiliate investments		5,978			9,313		19,934			27,941
Total fee income		50,565			32,553		279,476			104,001
Total investment income		1,741,114			1,554,265		5,408,044			4,032,195
Expenses:
Base management fee (see Note 8)		268,609			225,730		769,869			696,772
Capital gains incentive fees (see Note 8)		(41,300	)		22,000		740,700			(880,760	)
Interest expense		290,522			26,042		707,834			26,042
Professional fees		120,828			126,089		392,110			569,310
Stockholders and office operating		57,097			41,739		206,481			163,327
Directors' fees		66,550			47,800		197,791			137,783
Administrative fees		37,250			—		111,750			—
Insurance		10,380			9,525		33,720			31,788
Corporate development		—			—		4,267			3,753
Other operating		—			34		—			124
Total expenses		809,936			498,959		3,164,522			748,139
Net investment income before income taxes:		931,178			1,055,306		2,243,522			3,284,056
Income taxes, including excise tax expense		132,595			45,140		237,393			83,750
Net investment income		798,583			1,010,166		2,006,129			3,200,306
Net realized (loss) gain on sales and dispositions of investments:
Affiliate investments		—			—		2,596,094			167,159
Non-Control/Non-Affiliate investments		(2,802,731	)		1,919		(1,527,190	)		523,432
Net realized (loss) gain on sales and dispositions of investments, before income taxes		(2,802,731	)		1,919		1,068,904			690,591
Income tax expense		—			—		338,158			—
Net realized (loss) gain on sales and dispositions of investments		(2,802,731	)		1,919		730,746			690,591
Net change in unrealized appreciation/depreciation on investments:
Affiliate investments		—			—		(886,698	)		47,841
Non-Control/Non-Affiliate investments		2,599,652			92,817		3,521,053			(5,140,762	)
Change in unrealized appreciation/depreciation before income taxes		2,599,652			92,817		2,634,355			(5,092,921	)
Deferred income tax benefit		—			—		(66,441	)		—
Net change in unrealized appreciation/depreciation on investments		2,599,652			92,817		2,700,796			(5,092,921	)
Net realized and unrealized (loss) gain on investments		(203,079	)		94,736		3,431,542			(4,402,330	)
Net increase (decrease) in net assets from operations	$	595,504		$	1,104,902	$	5,437,671		$	(1,202,024	)
Weighted average shares outstanding		2,581,021			2,581,021		2,581,021			2,581,021
Basic and diluted net increase (decrease) in net assets from operations per share	$	0.23		$	0.43	$	2.11		$	(0.47	)

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(Unaudited)


	Three months ended September 30, 2023			Three months ended September 30, 2022			Nine months ended September 30, 2023			Nine months ended September 30, 2022
Net assets at beginning of period	$	61,402,028		$	57,664,184		$	57,721,320		$	60,745,416
Net investment income		798,583			1,010,166			2,006,129			3,200,306
Net realized (loss) gain on sales and dispositions of investments		(2,802,731	)		1,919			730,746			690,591
Net change in unrealized appreciation/depreciation on investments		2,599,652			92,817			2,700,796			(5,092,921	)
Net increase (decrease) in net assets from operations		595,504			1,104,902			5,437,671			(1,202,024	)
Declaration of dividend		(645,255	)		(387,153	)		(1,806,714	)		(1,161,459	)
Net assets at end of period	$	61,352,277		$	58,381,933		$	61,352,277		$	58,381,933

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine months ended September 30, 2023			Nine months ended September 30, 2022
Cash flows from operating activities:
Net increase (decrease) in net assets from operations	$	5,437,671		$	(1,202,024	)
Adjustments to reconcile net increase (decrease) in net assets to net cash (used in) provided by operating activities:
Investments in portfolio companies		(18,060,000	)		(3,142,086	)
Proceeds from sale of portfolio investments		5,907,298			3,529,549
Proceeds from loan repayments		3,511,481			90,175
Net realized gain on sales and dispositions of portfolio investments		(1,068,904	)		(690,591	)
Change in unrealized (appreciation) depreciation on investments		(2,634,355	)		5,092,921
Deferred income tax benefit		(105,927	)		(48,395	)
Amortization		18,750			6,250
Original issue discount amortization		(17,006	)		(18,754	)
Non-cash conversion of debenture interest		(813,599	)		(516,391	)
Changes in operating assets and liabilities:
Increase in interest receivable		(28,855	)		(92,617	)
Increase in other assets		(232,993	)		(147,111	)
Decrease in prepaid income taxes		76,396			200,874
Increase in income taxes payable		29,577			—
Increase in accounts payable and accrued expenses		103,315			22,453
Decrease in due to investment adviser		(293,612	)		(665,453	)
Increase (decrease) in capital gains incentive fees payable		740,700			(880,760	)
Increase (decrease) in deferred revenue		147,553			(50,001	)
Total adjustments		(12,720,181	)		2,690,063
Net cash (used in) provided by operating activities		(7,282,510	)		1,488,039
Cash flows from financing activities:
Proceeds from line of credit		11,200,000			—
Payment of cash dividend		(1,806,714	)		(1,161,459	)
Payment of closing fee		—			(125,000	)
Net cash provided by (used in) financing activities		9,393,286			(1,286,459	)
Net increase in cash		2,110,776			201,580
Cash:
Beginning of period		1,368,996			833,875
End of period	$	3,479,772		$	1,035,455

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

September 30, 2023

(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 – 31.8% of net assets: (g) (j)
ACV Auctions, Inc. (e)(n) NASDAQ: ACVA	194,934 shares of Class A Common Stock valued at $15.18 per share.	8/12/16	<1%	$	53,094	$	2,959,098	4.8%
Buffalo, NY. Live mobile wholesale auctions for new and used car dealers. (Software)
www.acvauctions.com
Ares Capital Corporation (n) NASDAQ: ARCC New York, NY. (BDC Investment Fund)	21,000 shares valued at $19.47 per share.	3/16/20	<1%		267,140		408,870	0.7%
Barings BDC, Inc. (n) NYSE: BBDC New York, NY. (BDC Investment Fund)	40,000 shares valued at $8.91 per share.	8/13/20	<1%		333,352		356,400	0.6%
Caitec, Inc. (l) Halethorpe, MD. Pet product manufacturer and distributor. (Consumer Goods)	$1,750,000 Subordinated Secured Promissory Note at 12% (+2% PIK) due June 1, 2026.	11/6/20	4%		1,855,852		1,855,852	6.5%
www.caitec.com	150 Class A Units.	11/6/20			150,000		150,000
	$1,750,000 Subordinated Secured Promissory Note at 12% (+2% PIK) due June 1, 2026.	11/6/20			1,855,852		1,855,852
	150 Class A Units.	11/6/20			150,000		150,000
	Total Caitec				4,011,704		4,011,704
Carlyle Secured Lending Inc. (n) NASDAQ: CGBD New York, NY. (BDC Investment Fund)	86,000 shares valued at $14.50 per share.	8/13/20	<1%		899,749		1,247,000	2.0%
FS KKR Capital Corp. (n) NYSE: FSK Philadelphia, PA. (BDC Investment Fund)	48,000 shares valued at $19.69 per share.	3/16/20	<1%		755,058		945,120	1.6%
GoNoodle, Inc. (l) Nashville, TN. Student engagement education	$1,500,000 Secured Note at 12% (1% PIK) due September 30, 2024.	11/1/19	<1%		1,422,382		1,422,382	2.3%
software providing core aligned physical	Warrant for 47,324 Series C Preferred.	3/1/15			25		25
activity breaks. (Software)	Warrant for 21,948 Series D Preferred.	11/1/19			38		38
www.gonoodle.com	Total GoNoodle				1,422,445		1,422,445
HDI Acquisition LLC (Hilton Displays) (h) (l) Greenville, NC. Manufacturing, installation	$1,245,119 Term Loan at 12% (+2% PIK) due June 30, 2025.	11/8/19	0%		1,044,964		1,044,964	1.7%
and maintenance of signage and brands. (Manufacturing)
www.hiltondisplays.com
Lumious (Tech 2000, Inc.) Herndon, VA. Develops and delivers IT	$850,000 Replacement Term Note at 14% due December 1, 2024.	11/16/18	0%		789,944		789,944	1.3%
training. (Software)
www.t2000inc.com
Mattison Avenue Holdings LLC (l) Dallas, TX. Provider of upscale salon spaces for lease. (Professional and Business Services)	$1,794,944 Third Amended, Restated and Consolidated Promissory Note at 12% (+2% PIK) due December 9, 2023.	6/23/21	0%		1,884,836		1,884,836	3.1%
www.mattisonsalonsuites.com

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

September 30, 2023 (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 and Business Services)	$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	3.7%
www.nailbiter.com	Warrants for Preferred Stock.	11/22/21			—		—
	Total Nailbiter				2,250,000		2,250,000
	(i) Interest Receivable $58,319
OnCore Golf Technology, Inc. (e) Buffalo, NY. Patented and proprietary golf balls utilizing technology and innovation. (Consumer Product) www.oncoregolf.com	300,483 Preferred AA.	11/30/18	3%		752,712		100,000	0.2%
Open Exchange, Inc. (e)	397,899 Series C Preferred.	11/13/13	3%		1,193,697		700,000	1.1%
Lincoln, MA. Online presentation and training	397,899 Common.	10/22/19			208,243		—
software. (Software)	Total Open Exchange				1,401,940		700,000
www.openexc.com
PennantPark Investment Corporation (n) NASDAQ: PNNT New York, NY. (BDC Investment Fund)	195,000 shares valued at $6.58 per share.	8/13/20	<1%		892,212		1,283,100	2.0%
PostProcess Technologies, Inc. (e) Buffalo, NY. Provides innovative solutions for the post-processing of additive manufactured 3D parts. (Manufacturing) www.postprocess.com	360,002 Series A1 Preferred.	11/1/19	<1%		348,875		100,000	0.2%
Subtotal Non-Control/Non-Affiliate Investments				$	17,108,025	$	19,503,481
Affiliate Investments – 83.3% of net assets (g) (k)
Applied Image, Inc. Rochester, NY. Global supplier of precision	$1,750,000 Term Note at 10% due February 1, 2029.	12/31/21	12%		1,750,000		1,750,000	2.9%
imaged optical components and calibration	Warrant for 1,167 shares.	12/31/21			—		—
standards for a wide range of industries and	Total Applied Image				1,750,000		1,750,000
applications. (Manufacturing) www.appliedimage.com
BMP Food Service Supply Holdco, LLC (h)(m)	$4,820,000 Term Note at 12% due November 22, 2027.	11/22/22	17%		4,779,953		4,779,953	8.4%
Salt Lake City, UT. Provides design,	16.7% Preferred Interest.	11/22/22			390,000		390,000
distribution, and installation services for	Total BMP Food Service Supply				5,169,953		5,169,953
commercial kitchen renovations and new builds. (Professional and Business Services) www.foodservicesupply.com
BMP Swanson Holdco, LLC (l) (m) Plano, TX. Designs, installs, and maintains a	$1,600,000 Term Note at 12% due September 4, 2026.	3/4/21	9%		1,700,115		1,700,115	3.2%
variety of fire protection systems.	Preferred Membership Interest for 9.29%.	3/4/21			233,333		233,333
(Professional and Business Services)	Total BMP Swanson				1,933,448		1,933,448
www.swansonfire.com

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

September 30, 2023 (Continued)

(Unaudited)


Company, Geographic Location, Business Description, (Industry) and Website	(a) Type of Investment	(b) Date Acquired	(c) Equity	Cost		(d)(f) Fair Value		Percent of Net Assets
Carolina Skiff LLC (m) Waycross, GA. Manufacturer of ocean fishing	6.0825% Class A Common Membership Interest.	1/30/04	7%		15,000		1,957,000	3.2%
and pleasure boats. (Manufacturing) www.carolinaskiff.com
FCM Industries Holdco LLC (l) Jacksonville, FL. Commercial mulch	$3,380,000 Term Note at 13% due July 31, 2028.	7/31/23	12%		3,380,000		3,380,000	6.2%
installation company that serves a range of end markets.	$420,000 Convertible Note at 10% PIK, due July 31, 2033.	7/31/23			427,147		427,147
(Professional and Business Services)	Total FCM				3,807,147		3,807,147
www.firstcoastmulch.com
Filterworks Acquisition USA, LLC d/b/a Autotality (l)(m) Deerfield Beach, FL. Provides spray booth equipment, frame repair machines and paint	$2,283,702 Term Note modified to 6% (+8% PIK) through November 30, 2023, thereafter 12% (+2% PIK), due August 30, 2024.	11/18/19	8%		2,837,594		2,837,594	5.3%
booth filter services for collision shops.	626.2 shares Class A-1 Units.	6/3/22			626,243		256,994
(Automotive)	417.7 shares Class A-0 Units.	9/30/22			139,232		139,232
www.autotality.com	Total Filterworks				3,603,069		3,233,820
Highland All About People Holdings, Inc. (l) Phoenix, AZ. Full-service staffing and	$3,000,000 Term Note at 12% (+4% PIK) due August 7, 2028.	8/7/23	12%		3,018,000		3,018,000	6.5%
executive search firm with a focus on the	1,000,000 Class A Units.	8/7/23			1,000,000		1,000,000
healthcare industry.	Total All About People				4,018,000		4,018,000
(Professional and Business Services) www.allaboutpeople.net
Inter-National Electronic Alloys LLC d/b/a EFINEA (l)(m)	$3,288,235 Term Note at 12% (+2% PIK) due April 4, 2028.	4/4/23	6%		3,321,071		3,321,071	7.0%
Oakland, NJ. Stocking distributor of controlled	75.3 Class B Preferred Units.	4/4/23			1,011,765		1,011,765
expansion alloys, electronic grade nickels,	Total EFINEA				4,332,836		4,332,836
refractory grade metals and alloys, and soft magnetic alloys. (Distribution) www.nealloys.com
Knoa Software, Inc. New York, NY. End user experience	973,533 Series A-1 Convertible Preferred.	11/20/12	7%		750,000		—	0.2%
management and performance (EMP) solutions	1,876,922 Series B Preferred.	6/9/14			479,155		100,000
utilizing enterprise applications. (Software)	Total Knoa				1,229,155		100,000
www.knoa.com
Mezmeriz, Inc. (e)	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
Pressure Pro, Inc. (l) Harrisonville, MO. A provider of branded tire	$3,000,000 Term Note at 12% (+3% PIK) due January 19, 2028.	1/19/23	10%		3,038,446		3,038,446	5.0%
pressure monitoring systems consisting	Warrant for 10% Membership Interest.	1/19/23			30,000		30,000
of a suite of proprietary hardware	Total Pressure Pro				3,068,446		3,068,446
and software. (Manufacturing)
www.pressurepro.us
SciAps, Inc.	187,500 Series A Preferred.	7/12/13	6%		1,500,000		1,500,000	8.5%
Woburn, MA. Instrumentation company	274,299 Series A1 Convertible Preferred.	4/4/14			504,710		504,710
producing portable analytical devices using	117,371 Series B Convertible Preferred.	8/31/15			250,000		250,000
XRF, LIBS and RAMAN spectroscopy to	113,636 Series C Convertible Preferred.	4/7/16			175,000		175,000
identify compounds, minerals, and elements.	369,698 Series C1 Convertible Preferred.	4/7/16			399,274		399,274
(Manufacturing)	147,059 Series D Convertible Preferred.	5/9/17			250,000		250,000
www.sciaps.com	Warrant to purchase Series D-1 Preferred.	5/9/17			45,000		45,000
	$2,090,000 Second Amended and Restated Secured Subordinated Promissory Note at 12% due August 20, 2024.	8/20/21			2,090,000		2,090,000
	Total SciAps				5,213,984		5,213,984

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

September 30, 2023 (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
Seybert’s Billiards Corporation d/b/a The Rack Group (l)	$4,139,444 Term Note at 12% (+2% PIK) due January 19, 2026.	11/22/21	8%		4,251,875		4,251,875		9.7%
Coldwater, MI. Billiard supplies.	Warrant for 4% Membership Interest.	1/19/21			25,000		25,000
(Consumer Product) www.seyberts.com	$1,435,435 Term Note at 12% (+2% PIK) due January 19, 2026.	1/19/21			1,466,806		1,466,806
	Warrant for 4% Membership Interest.	1/19/21			25,000		25,000
	5.82 Common shares.	10/24/22			194,000		194,000
	Total Seybert’s				5,962,681		5,962,681
Tilson Technology Management, Inc.	*120,000 Series B Preferred.	1/20/15	9%		600,000		4,559,500		17.2%
Portland, ME. Provides network deployment	*21,391 Series C Preferred.	9/28/16			200,000		812,800
construction and information system services	*70,176 Series D Preferred.	9/29/17			800,000		2,666,400
management for cellular, fiber optic and	*15,385 Series E Preferred.	3/15/19			500,012		584,500
wireless systems providers. Its affiliated	23,077 Series F Preferred.	6/15/20			750,003		876,800
entity, SQF, LLC is a CLEC supporting	211,567 A-1 Units of SQF Holdco LLC.	3/15/19			—		800,000
small cell 5G deployment. (Professional and Business Services)	250 Class D-1 Units of SQF Holdco LLC.	2/16/23			250,000		250,000
www.tilsontech.com	Total Tilson				3,100,015		10,550,000
	*2.5% dividend payable quarterly.
Subtotal Affiliate Investments				$	43,946,584	$	51,097,315
Control Investments - 6.7% of net assets (o)
ITA Acquisition, LLC (l)(m) Ormond Beach, FL. Blind and shade manufacturing. (Manufacturing)	$2,297,808 Amended and Restated Term Note at 12% (+5% PIK) due June 21, 2026.	6/22/21	37%		2,457,832		2,457,832		6.7%
www.itawindowfashions.com	$1,500,000 Term Note at 12% (+5% PIK) due June 21, 2026.	6/22/21			1,625,657		1,625,657
	1,124 Class A Preferred Units and 1,924 Class B Common Units.	6/22/21			1,123,810		—
	Total ITA				5,207,299		4,083,489
Subtotal Control Investments				$	5,207,299	$	4,083,489
TOTAL INVESTMENTS – 121.7%				$	66,261,908	$	74,684,285
LIABILITIES IN EXCESS OF OTHER ASSETS - (21.7%)							(13,332,008	)
NET ASSETS – 100%						$	61,352,277

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

September 30, 2023 (Continued)

(Unaudited)

Notes to the Consolidated Schedule of Portfolio Investments

(a)

At September 30, 2023, restricted securities represented 90% of the fair value of the investment portfolio. Restricted securities are subject to one or more restrictions on resale and are not freely marketable. Type of investment for equity position is in the form of shares unless otherwise noted as units or interests, i.e., preferred shares, common shares.

(b)

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

(c)

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

(d)

The Corporation’s investments are carried at fair value in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820 “Fair Value Measurements and Disclosures,” which defines fair value and establishes guidelines for measuring fair value. At September 30, 2023, ASC 820 designates 90% of the Corporation’s investments as “Level 3” assets. Under the valuation policy of the Corporation, unrestricted publicly traded securities are valued at the closing price for these securities on the last trading day of the reporting period. Restricted securities are subject to restrictions on resale and are valued at fair value as determined in good faith 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 September 30, 2023, the total cost of investment securities was approximately $66.3 million. Net unrealized appreciation was approximately $8.4 million, which was comprised of $13.4 million of unrealized appreciation of investment securities and ($5.0) million of unrealized depreciation of investment securities. At September 30, 2023, the aggregate gross unrealized gain for federal income tax purposes was $13.8 million and the aggregate gross unrealized loss for federal income tax purposes was ($4.7) million. The net unrealized gain for federal income tax purposes was $9.1 million based on a tax cost of $65.5 million.

(g)

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

(h)

Reduction in cost and fair 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” subsidiary of Rand Capital Corporation or Rand Capital Sub LLC for federal income tax and Regulated Investment Company (RIC) compliance purposes.

(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.

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

September 30, 2023 (Continued)

(Unaudited)

Investments in and Advances to Affiliates


Company	Type of Investment	January 1, 2023, Fair Value		Net Change in Unrealized Appreciation (Depreciation)			Gross Additions (1)		Gross Reductions (2)			September 30, 2023, Fair Value		Net Realized Gains (Losses)		Amount of Interest/ Dividend/ Fee Income (3)
Control Investments:
ITA Acquisition, LLC	$2,297,808 Amended and Restated Term Note at 12% (+5% PIK) due June 21, 2026.	$	1,976,116	$	—		$	481,716	$	—		$	2,457,832	$	—	$	302,940
	$1,500,000 Term Note at 12% (+5% PIK) due June 21, 2026.		1,560,091		—			65,566		—			1,625,657		—		216,586
	1,124 Class A Preferred Units and 1,924 Class B Common Units.		—		—			—		—			—		—		—
	Total ITA		3,536,207		—			547,282		—			4,083,489		—		519,526
	Total Control Investments	$	3,536,207	$	—		$	547,282	$	—		$	4,083,489	$	—	$	519,526
Affiliate Investments:
Applied Image, Inc.	$1,750,000 Term Note at 10% due February 1, 2029.	$	1,750,000	$	—		$	—	$	—		$	1,750,000	$	—	$	137,287
	Warrant for 1,167 shares.		—		—			—		—			—		—		—
	Total Applied Image		1,750,000		—			—		—			1,750,000		—		137,287
BMP Food Service Supply Holdco, LLC	$4,820,000 Term Note at 12% due November 22, 2027.		2,500,000		—			2,320,000		(40,047	)		4,779,953		—		464,575
	16.7% Preferred Interest.		600,000		—			—		(210,000	)		390,000		—		—
	Total FSS		3,100,000		—			2,320,000		(250,047	)		5,169,953		—		464,575
BMP Swanson Holdco, LLC	$1,600,000 Term Note at 12% due September 4, 2026.		1,600,000		—			100,115		—			1,700,115		—		153,114
	Preferred Membership Interest for 9.29%.		233,333		—			—		—			233,333		—		—
	Total BMP Swanson		1,833,333		—			100,115		—			1,933,448		—		153,114
Carolina Skiff LLC	6.0825% Class A Common Membership Interest.		1,957,000		—			—		—			1,957,000		—		299,173
DSD Operating, LLC	$3,063,276 Term Note at 12% (+2% PIK) due September 30, 2026.		3,139,782		—			31,652		(3,171,434	)		—		—		324,000
	1,067 Class A Preferred shares.		1,954,198		(886,698	)		—		(1,067,500	)		—		2,537,765		62,565
	1,067 Class B Common shares.		—		—			—		—			—		—		—
	Total DSD		5,093,980		(886,698	)		31,652		(4,238,934	)		—		2,537,765		386,565
FCM Industries Holdco LLC	$3,380,000 Term Note at 13% due July 31, 2028.		—		—			3,380,000		—			3,380,000		—		88,987
	$420,000 Convertible Note at 10% PIK, due July 31, 2033.		—		—			427,147		—			427,147		—		7,147
	Total FCM		—		—			3,807,147		—			3,807,147		—		96,134
Filterworks Acquisition USA, LLC	$2,283,702 Term Note modified to 6% (+8% PIK) through November 30, 2023, thereafter 12% (+2% PIK), due August 30, 2024.		2,633,105		—			204,489		—			2,837,594		—		287,392
	626.2 shares Class A-1 Units.		256,994		—			—		—			256,994		—		—
	417.7 shares Class A-0 Units.		139,232		—			—		—			139,232		—		—
	Total Filterworks		3,029,331		—			204,489		—			3,233,820		—		287,392
Highland All About People Holdings, Inc.	$3,000,000 Term Note at 12% (+4% PIK) due August 7, 2028.		—		—			3,018,000		—			3,018,000		—		74,774
	1,000,000 Class A Units.		—		—			1,000,000		—			1,000,000		—		—
	Total All About People		—		—			4,018,000		—			4,018,000		—		74,774
Inter-National Electronic Alloys LLC	$3,288,235 Term Note at 12% (+2% PIK) due April 4, 2028.		—		—			3,321,071		—			3,321,071		—		236,424
	75.3 Class B Preferred Units.		—		—			1,011,765		—			1,011,765		—		—
	Total INEA		—		—			4,332,836		—			4,332,836		—		236,424

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

September 30, 2023 (Continued)

(Unaudited)


Company	Type of Investment	January 1, 2023, Fair Value		Net Change in Unrealized Appreciation (Depreciation)			Gross Additions (1)		Gross Reductions (2)			September 30, 2023, Fair Value		Net Realized Gains (Losses)		Amount of Interest/ Dividend/ Fee Income (3)
Knoa Software, Inc.	973,533 Series A-1 Convertible Preferred.		—		—			—		—			—		—		34,850
	1,876,922 Series B Preferred.		100,000		—			—		—			100,000		—		—
	Total Knoa		100,000		—			—		—			100,000		—		34,850
Mezmeriz, Inc.	1,554,565 Series Seed Preferred.		—		—			—		—			—		—		—
Microcision LLC	Membership Interest Purchase Warrant for 5%.		—		—			—		—			—		58,329		—
Pressure Pro, Inc.	$3,000,000 Term Note at 12% (+3% PIK) due January 19, 2028.		—		—			3,038,446		—			3,038,446		—		352,631
	Warrant for 10% Membership Interest.		—		—			30,000		—			30,000		—		—
	Total Pressure Pro		—		—			3,068,446		—			3,068,446		—		352,631
SciAps, Inc.	187,500 Series A Preferred.		1,500,000		—			—		—			1,500,000		—		—
	274,299 Series A1 Convertible Preferred.		504,710		—			—		—			504,710		—		—
	117,371 Series B Convertible Preferred.		250,000		—			—		—			250,000		—		—
	113,636 Series C Convertible Preferred.		175,000		—			—		—			175,000		—		—
	369,698 Series C1 Convertible Preferred.		399,274		—			—		—			399,274		—		—
	147,059 Series D Convertible Preferred.		250,000		—			—		—			250,000		—		—
	Warrant to purchase Series D-1 Preferred.		45,000		—			—		—			45,000		—		—
	$2,090,000 Second Amended and Restated Secured Subordinated Promissory Note at 12% due August 20, 2024.		2,085,000		—			5,000		—			2,090,000		—		198,600
	Total SciAps		5,208,984		—			5,000		—			5,213,984		—		198,600
Seybert’s Billiards Corporation	$4,139,444 Term Note at 12% (+2% PIK) due January 19, 2026.		4,184,106		—			67,769		—			4,251,875		—		472,604
	Warrant for 4% Membership Interest.		25,000		—			—		—			25,000		—		—
	$1,435,435 Term Note at 12% (+2% PIK) due January 19, 2026.		1,440,855		—			25,951		—			1,466,806		—		164,843
	Warrant for 4% Membership Interest.		25,000		—			—		—			25,000		—		—
	5.82 Common shares.		194,000		—			—		—			194,000		—		—
	Total Seybert’s		5,868,961		—			93,720		—			5,962,681		—		637,447
Tilson Technology	120,000 Series B Preferred.		4,559,500		—			—		—			4,559,500		—		39,376
Management, Inc.	21,391 Series C Preferred.		812,800		—			—		—			812,800		—		—
	70,176 Series D Preferred.		2,666,400		—			—		—			2,666,400		—		—
	15,385 Series E Preferred.		584,500		—			—		—			584,500		—		—
	23,077 Series F Preferred.		876,800		—			—		—			876,800		—		—
	211,567 A-1 Units of SQF Holdco LLC.		800,000		—			—		—			800,000		—		—
	250 Class D-1 Units of SQF Holdco LLC.		—		—			250,000		—			250,000		—		—
	Total Tilson		10,300,000		—			250,000		—			10,550,000		—		39,376
	Total Affiliate Investments	$	38,241,589	$	(886,698	)	$	18,231,405	$	(4,488,981	)	$	51,097,315	$	2,596,094	$	3,398,342
	Total Control and Affiliate Investments	$	41,777,796	$	(886,698	)	$	18,778,687	$	(4,488,981	)	$	55,180,804	$	2,596,094	$	3,917,868

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.

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

September 30, 2023 (Continued)

(Unaudited)


Industry Classification	Percentage of Total Investments (at fair value) as of September 30, 2023
Professional and Business Services		39.6	%
Manufacturing		23.1
Consumer Product		13.5
Software		8.0
Distribution		5.8
BDC Investment Funds		5.7
Automotive		4.3
Total Investments		100	%

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2022


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 – 34.2% of net assets: (g) (j)
ACV Auctions, Inc. (e)(n) NASDAQ: ACVA	319,934 shares of Class A Common Stock valued at $7.87 per share.	8/12/16	<1%	$	87,219	$	2,517,881	4.4%
Buffalo, NY. Live mobile wholesale auctions for new and used car dealers. (Software)
www.acvauctions.com
Ares Capital Corporation (n) NASDAQ: ARCC New York, NY. (BDC Investment Fund)	21,000 shares valued at $18.53 per share.	3/16/20	<1%		267,140		389,130	0.7%
Barings BDC, Inc. (n) NYSE: BBDC New York, NY. (BDC Investment Fund)	40,000 shares valued at $8.16 per share.	8/13/20	<1%		333,352		326,400	0.6%
Caitec, Inc. (l) Halethorpe, MD. Pet product manufacturer and distributor. (Consumer Goods)	$1,750,000 Subordinated Secured Promissory Note at 12% (+2% PIK) due June 1, 2026.	11/6/20	4%		1,827,941		1,827,941	6.9%
www.caitec.com	150 Class A Units.	11/6/20			150,000		150,000
	$1,750,000 Subordinated Secured Promissory Note at 12% (+2% PIK) due June 1, 2026.	11/6/20			1,827,941		1,827,941
	150 Class A Units.	11/6/20			150,000		150,000
	Total Caitec				3,955,882		3,955,882
Carlyle Secured Lending Inc. (formerly TCG BDC, Inc.) (n) NASDAQ: CGBD New York, NY. (BDC Investment Fund)	86,000 shares valued at $14.29 per share.	8/13/20	<1%		899,749		1,229,227	2.1%
FS KKR Capital Corp. (n) NYSE: FSK Philadelphia, PA. (BDC Investment Fund)	48,000 shares valued at $17.40 per share.	3/16/20	<1%		755,058		835,360	1.4%
GoNoodle, Inc. (h) (l) Nashville, TN. Student engagement education	$1,500,000 Secured Note at 12% (1% PIK) due September 30, 2024.	11/1/19	<1%		1,411,768		1,411,768	2.4%
software providing core aligned physical	Warrant for 47,324 Series C Preferred.	3/1/15			25		25
activity breaks. (Software)	Warrant for 21,948 Series D Preferred.	11/1/19			38		38
www.gonoodle.com	Total GoNoodle				1,411,831		1,411,831
HDI Acquisition LLC (Hilton Displays) (l) Greenville, NC. Manufacturing, installation	$1,245,119 Term Loan at 12% (+2% PIK) due June 20, 2023.	11/8/19	0%		1,327,782		1,327,782	2.3%
and maintenance of signage and brands. (Manufacturing)
www.hiltondisplays.com
Lumious (Tech 2000, Inc.) (h) Herndon, VA. Develops and delivers IT	$850,000 Replacement Term Note at 14% due November 15, 2023.	11/16/18	0%		789,944		789,944	1.4%
training. (Software)
www.t2000inc.com
Mattison Avenue Holdings LLC (l) Dallas, TX. Provider of upscale salon spaces for lease. (Professional Services)	$1,794,944 Third Amended, Restated and Consolidated Promissory Note at 12% (2% PIK) due December 9, 2023.	6/23/21	0%		1,856,536		1,856,536	3.2%
www.mattisonsalonsuites.com

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2022 (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)	$2,250,000 Membership Interest of USB Focus Fund Nailbiter I, LLC with economic interest of $2,250,000 Subordinated Secured Promissory Note at net 9% due November 23, 2024.	11/22/21	<1%		2,250,000		2,250,000	3.9%
www.nailbiter.com	Warrants for Preferred Stock.				—		—
	Total Nailbiter, Inc.				2,250,000		2,250,000
OnCore Golf Technology, Inc. (e) Buffalo, NY. Patented and proprietary golf balls utilizing technology and innovation. (Consumer Product) www.oncoregolf.com	300,483 Preferred AA.	11/30/18	3%		752,712		100,000	0.2%
Open Exchange, Inc. (e)	397,899 Series C Preferred.	11/13/13	3%		1,193,697		1,193,697	2.4%
Lincoln, MA. Online presentation and training	397,899 Common.	10/22/19			208,243		208,243
software. (Software)	Total Open Exchange				1,401,940		1,401,940
www.openexc.com
PennantPark Investment Corporation (n) NASDAQ: PNNT New York, NY. (BDC Investment Fund)	195,000 shares valued at $5.69 per share.	8/13/20	<1%		892,212		1,109,550	1.9%
PostProcess Technologies, Inc. (e) Buffalo, NY. Provides innovative solutions for the post-processing of additive manufactured 3D parts. (Manufacturing) www.postprocess.com	360,002 Series A1 Preferred.	11/1/19	<1%		348,875		100,000	0.2%
Rheonix, Inc. (e)	9,676 Common.	10/29/09	4%		—		—	0.0%
Ithaca, NY. Developer of fully automated	1,839,422 Series A Preferred.	12/12/13			2,099,999		—
microfluidic based molecular assay and	50,593 Common.	10/24/09			—		—
diagnostic testing devices. (Health Care)	589,420 Series B Preferred.	9/29/15			702,732		—
www.rheonix.com	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		125,000	0.2%
Subtotal Non-Control/Non-Affiliate Investments				$	20,852,060	$	19,726,463
Affiliate Investments – 66.3% of net assets (g) (k)
Applied Image, Inc. Rochester, NY. Global supplier of precision	$1,750,000 Term Note at 10% due February 1, 2029.	12/31/21	12%		1,750,000		1,750,000	3.0%
imaged optical components and calibration	Warrant for 1,167 shares.	12/31/21			—		—
standards for a wide range of industries and	Total Applied Image				1,750,000		1,750,000
applications. (Manufacturing) www.appliedimage.com
BMP Food Service Supply Holdco, LLC (m) Salt Lake City, UT. Provides design,	$2,500,000 Term Note at 12% due November 22, 2027.	11/22/22	24%		2,500,000		2,500,000	5.4%
distribution, and installation services for	24.83% Preferred Interest				600,000		600,000
commercial kitchen renovations and new builds.	Total BMP Food Service Supply				3,100,000		3,100,000
(Professional Services) www.foodservicesupply.com
BMP Swanson Holdco, LLC (m) Plano, TX. Designs, installs, and maintains a	$1,600,000 Term Note at 12% due September 4, 2026.	3/4/21	9%		1,600,000		1,600,000	3.2%
variety of fire protection systems.	Preferred Membership Interest for 9.29%.	3/4/21			233,333		233,333
(Professional Services)	Total BMP Swanson				1,833,333		1,833,333
www.swansonfire.com

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2022 (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
Carolina Skiff LLC (m) Waycross, GA. Manufacturer of ocean fishing	6.0825% Class A Common Membership Interest.	1/30/04	7%		15,000		1,957,000	3.4%
and pleasure boats. (Manufacturing) www.carolinaskiff.com
DSD Operating, LLC (l)(m) Duluth, GA. Design and renovate auto	$3,063,276 Term Note at 12% (+2% PIK) due September 30, 2026.	9/30/21	11%		3,139,782		3,139,782	8.8%
dealerships. (Automotive)	1,067 Class A Preferred shares.				1,067,500		1,954,198
www.dsdteam.com	1,067 Class B Common shares.				—		—
	Total DSD				4,207,282		5,093,980
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.	$2,283,702 Term Note at 12% (+2% PIK) modified to 8% PIK and 6% payable in A-0 shares for the period May 1, through December 31, 2022, due December 4, 2023.	11/18/19	8%		2,633,105		2,633,105	5.3%
(Automotive)	626.2 shares Class A-1 Units.	6/3/22			626,243		256,994
www.autotality.com	417.7 shares Class A-0 Units.	9/30/22			139,232		139,232
	Total Filterworks				3,398,580		3,029,331
Knoa Software, Inc.	973,533 Series A-1 Convertible Preferred.	11/20/12	7%		750,000		—	0.2%
New York, NY. End user experience	1,876,922 Series B Preferred.	6/9/14			479,155		100,000
management and performance (EMP) solutions	Total Knoa				1,229,155		100,000
utilizing enterprise applications. (Software)
www.knoa.com
Mezmeriz, Inc. (e)	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
SciAps, Inc.	187,500 Series A Preferred.	7/12/13	6%		1,500,000		1,500,000	9.0%
Woburn, MA. Instrumentation company	274,299 Series A1 Convertible Preferred.	4/4/14			504,710		504,710
producing portable analytical devices using	117,371 Series B Convertible Preferred.	8/31/15			250,000		250,000
XRF, LIBS and RAMAN spectroscopy to	113,636 Series C Convertible Preferred.	4/7/16			175,000		175,000
identify compounds, minerals, and elements.	369,698 Series C1 Convertible Preferred.	4/7/16			399,274		399,274
(Manufacturing)	147,059 Series D Convertible Preferred.	5/9/17			250,000		250,000
www.sciaps.com	Warrant to purchase Series D-1 Preferred.	5/9/17			45,000		45,000
	$2,090,000 Second Amended and Restated Secured Subordinated Promissory Note at 12% due August 20, 2024.	8/20/21			2,085,000		2,085,000
	Total SciAps				5,208,984		5,208,984
Seybert’s Billiards Corporation (l) Coldwater, MI. Billiard supplies.	$4,139,444 Term Note at 12% (+2% PIK) due January 19, 2026.	11/22/21	8%		4,184,106		4,184,106	10.2%
(Consumer Product)	Warrant for 4% Membership Interest.	1/19/21			25,000		25,000
www.seyberts.com	$1,435,435 Term Note at 12% (+2% PIK) due January 19, 2026.	1/19/21			1,440,855		1,440,855
	Warrant for 4% Membership Interest.	1/19/21			25,000		25,000
	5.82 Common shares	10/24/22			194,000		194,000
	Total Seybert’s				5,868,961		5,868,961

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2022 (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
Tilson Technology Management, Inc.	*120,000 Series B Preferred.	1/20/15	9%		600,000		4,559,500		17.8%
Portland, ME. Provides network deployment	*21,391 Series C Preferred.	9/28/16			200,000		812,800
construction and information system services	*70,176 Series D Preferred.	9/29/17			800,000		2,666,400
management for cellular, fiber optic and	*15,385 Series E Preferred.	3/15/19			500,012		584,500
wireless systems providers. Its affiliated entity, SQF, LLC is a CLEC supporting	211,567 Class A-1 Units of SQF Holdco LLC.	3/15/19			—		800,000
small cell 5G deployment.	23,077 Series F Preferred.	6/15/20			750,003		876,800
(Professional Services)	Total Tilson				2,850,015		10,300,000
www.tilsontech.com	*2.5% dividend payable quarterly.
Subtotal Affiliate Investments				$	30,204,160	$	38,241,589
Control Investments - 6.1% of net assets (o)
ITA Acquisition, LLC (l)(m) Ormond Beach, FL. Blind and shade	$1,900,000 Term Note at 12% (+2% PIK) due June 21, 2026.	6/22/21	37%		1,976,116		1,976,116		6.1%
manufacturing. (Manufacturing) www.itainc.com	$1,500,000 Term Note at 12% (+2% PIK) due June 21, 2026.	6/22/21			1,560,091		1,560,091
	1,124 Class A Preferred Units and 1,924 Class B Common Units.	6/22/21			1,123,810		—
	Total ITA				4,660,017		3,536,207
Subtotal Control Investments				$	4,660,017	$	3,536,207
TOTAL INVESTMENTS – 106.6%				$	55,716,237	$	61,504,259
LIABILITIES IN EXCESS OF OTHER ASSETS - (6.6%)							(3,782,939	)
NET ASSETS – 100%						$	57,721,320

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2022 (Continued)

Notes to the Consolidated Schedule of Portfolio Investments

(a)

At December 31, 2022, restricted securities represented 90% of the fair value of the investment portfolio. Restricted securities are subject to one or more restrictions on resale and are not freely marketable. Type of investment for equity position is in the form of shares unless otherwise noted as units or interests, i.e., preferred shares, common shares.

(b)

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

(c)

(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, 2022, ASC 820 designates 90% of the Corporation’s investments as “Level 3” assets. Under the valuation policy of the Corporation, unrestricted publicly traded securities are valued at the average closing price for these securities for the last three trading days of the reporting period. Restricted securities are subject to restrictions on resale and are valued at fair value as determined in good faith by our external investment advisor 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)

(f)

As of December 31, 2022, the total cost of investment securities was approximately $55.7 million. Net unrealized appreciation was approximately $5.8 million, which was comprised of $13.5 million of unrealized appreciation of investment securities and ($7.7) million of unrealized depreciation of investment securities. At December 31, 2022, the aggregate gross unrealized gain for federal income tax purposes was $13.2 million and the aggregate gross unrealized loss for federal income tax purposes was ($6.7) million. The net unrealized gain for federal income tax purposes was $6.5 million based on a tax cost of $55.0 million.

(g)

(h)

Reduction in cost and fair 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 December 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 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)

(m)

(n)

Publicly traded company.

(o)

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2022 (Continued)

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)			December 31, 2022, Fair Value		Net Realized Gains (Losses)			Amount of Interest/ Dividend/ Fee Income (3)
Control Investments:
ITA Acquisition, LLC	$1,900,000 Term Note at 12% (+2% PIK) due June 21, 2026.	$	—	$	—		$	1,976,116	$	—		$	1,976,116	$	—		$	159,738
	$1,500,000 Term Note at 12% (+2% PIK) due June 21, 2026.		—		—			1,560,091		—			1,560,091		—			127,117
	1,124 Class A Preferred Units and 1,924 Class B Common Units.		—		(748,810	)		748,810		—			—		—			—
	Total ITA		—		(748,810	)		4,285,017		—			3,536,207		—			286,855
	Total Control Investments	$	—	$	(748,810	)	$	4,285,017	$	—		$	3,536,207	$	—		$	286,855
Affiliate Investments:
Applied Image, Inc.	$1,750,000 Term Note at 10% due February 1, 2029.	$	1,750,000	$	—		$	—	$	—		$	1,750,000	$	—		$	184,022
	Warrant for 1,167 shares.		—		—			—		—			—		—			—
	Total Applied Image		1,750,000		—			—		—			1,750,000		—			184,022
BMP Food Service Supply Holdco, LLC	$2,500,000 Term Note at 12% due November 22, 2027.		—		—			2,500,000		—			2,500,000		—			33,533
	24.83% Preferred Interest		—		—			600,000		—			600,000		—			—
	Total FSS		—		—			3,100,000		—			3,100,000		—			33,533
BMP Swanson Holdco, LLC	$1,600,000 Term Note at 12% due September 4, 2026.		1,600,000		—			—		—			1,600,000		—			201,334
	Preferred Membership Interest for 9.29%.		233,333		—			—		—			233,333		—			—
	Total BMP Swanson		1,833,333		—			—		—			1,833,333		—			201,334
Carolina Skiff LLC	6.0825% Class A Common Membership Interest.		1,300,000		657,000			—		—			1,957,000		—			653,437
DSD Operating, LLC	$3,063,276 Term Note at 12% (+2% PIK) due September 30, 2026.		2,759,183		—			380,599		—			3,139,782		—			720,247
	1,067 Class A Preferred shares.		1,067,500		886,698			—		—			1,954,198		—			—
	1,067 Class B Common shares.		—		—			—		—			—		—			—
	Total DSD		3,826,683		886,698			380,599		—			5,093,980		—			720,247
Filterworks Acquisition USA, LLC	$2,283,702 Term Note at 12% (+2% PIK) modified to 8% PIK and 6% payable in A-0 shares for the period May 1, through December 31, 2022, due December 4, 2023.		2,446,617		—			186,488		—			2,633,105		—			358,545
	626.2 shares Class A-1 Units.		256,994		—			—		—			256,994		—			—
	417.7 shares Class A-0 Units.		—		—			139,232		—			139,232		—			—
	Total Filterworks		2,703,611		—			325,720		—			3,029,331		—			358,545
ITA Acquisition, LLC	$1,900,000 Term Note at 12% (+2% PIK) due June 21, 2026.		1,920,459		—			29,324		(1,949,783	)		—		—			139,547
	$1,500,000 Term Note at 12% (+2% PIK) due June 21, 2026.		1,516,152		—			23,151		(1,539,303	)		—		—			110,373
	1,124 Class A Preferred Units and 1,924 Class B Common Units.		125,000		—			623,810		(748,810	)		—		—			—
	Total ITA		3,561,611		—			676,285		(4,237,896	)		—		—			249,920
Knoa Software, Inc.	973,533 Series A-1 Convertible Preferred.		—		—			—		—			—		—			—
	1,876,922 Series B Preferred.		479,155		(379,155	)		—		—			100,000		—			—
	Total Knoa		479,155		(379,155	)		—		—			100,000		—			—
Mezmeriz, Inc.	1,554,565 Series Seed Preferred.		—		—			—		—			—		—			—
Microcision	Membership Interest Purchase Warrant for 5%.		85,000		—			—		(85,000	)		—		190,000			—
New Monarch Machine Tool, Inc.	22.84 Common.		—		—			—		—			—		(22,841	)		—

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2022 (Continued)


Company	Type of Investment	January 1, 2022, Fair Value		Net Change in Unrealized Appreciation (Depreciation)		Gross Additions (1)		Gross Reductions (2)			December 31, 2022, Fair Value		Net Realized Gains (Losses)		Amount of Interest/ Dividend/ Fee Income (3)
SciAps, Inc.	187,500 Series A Preferred.		210,000		1,290,000		—		—			1,500,000		—		—
	274,299 Series A1 Convertible Preferred.		96,000		408,710		—		—			504,710		—		—
	117,371 Series B Convertible Preferred.		124,000		126,000		—		—			250,000		—		—
	113,636 Series C Convertible Preferred.		84,000		91,000		—		—			175,000		—		—
	369,698 Series C1 Convertible Preferred.		207,000		192,274		—		—			399,274		—		—
	147,059 Series D Convertible Preferred.		250,000		—		—		—			250,000		—		—
	Warrant to purchase Series D-1 Preferred.		—		45,000		—		—			45,000		—		—
	$2,090,000 Second Amended and Restated Secured Subordinated Promissory Note at 12% due August 20, 2024.		1,480,000		—		605,000		—			2,085,000		—		231,520
	Total SciAps		2,451,000		2,152,984		605,000		—			5,208,984		—		231,520
Seybert’s Billiards Corporation	$4,139,444 Term Note at 12% (+2% PIK) due January 19, 2026.		1,907,775		—		2,276,331		—			4,184,106		—		532,377
	Warrant for 4% Membership Interest.		25,000		—		—		—			25,000		—		—
	$1,435,435 Term Note at 12% (+2% PIK) due January 19, 2026.		1,406,690		—		34,165		—			1,440,855		—		216,720
	Warrant for 4% Membership Interest.		25,000		—		—		—			25,000		—		—
	5.82 Common shares		—		—		194,000		—			194,000		—		—
	Total Seybert’s		3,364,465		—		2,504,496		—			5,868,961		—		749,097
Tilson Technology	120,000 Series B Preferred.		3,900,000		659,500		—		—			4,559,500		—		52,500
Management, Inc.	21,391 Series C Preferred.		695,000		117,800		—		—			812,800		—		—
	70,176 Series D Preferred.		2,280,000		386,400		—		—			2,666,400		—		—
	15,385 Series E Preferred.		500,012		84,488		—		—			584,500		—		—
	211,567 Class A-1 Units of SQF Holdco LLC.		800,000		—		—		—			800,000		—		—
	23,077 Series F Preferred.		750,003		126,797		—		—			876,800		—		—
	Total Tilson		8,925,015		1,374,985		—		—			10,300,000		—		52,500
	Total Affiliate Investments	$	30,279,873	$	4,692,512	$	7,592,100	$	(4,322,896	)	$	38,241,589	$	167,159	$	3,434,155
	Total Control and Affiliate Investments	$	30,279,873	$	3,943,702	$	11,877,117	$	(4,322,896	)	$	41,777,796	$	167,159	$	3,721,010

(1)

(2)

(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.

See accompanying notes

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2022 (Continued)


Industry Classification	Percentage of Total Investments (at fair value) as of December 31, 2022
Professional Services		31.4	%
Manufacturing		22.6
Consumer Product		16.2
Automotive		13.2
Software		10.1
BDC Investment Funds		6.3
Oil and Gas		0.2
Total Investments		100	%

See accompanying notes

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, 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 September 30, 2023. Concurrent with the Closing, Rand Capital Management, LLC (“RCM”), a registered investment adviser, was 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”). The term of the new investment advisory and management agreement (the “Investment Management Agreement”) with RCM was extended after its renewal was approved by our Board of Directors (the “Board”) in October 2023 and is now set to expire December 31, 2024. In addition, the term of the administration agreement (the “Administration Agreement”) with RCM was extended after its renewal was approved by the Board in October 2023 and is now set to expire December 31, 2024. After December 31, 2024, the Investment Management Agreement and Administration Agreement will continue for successive annual periods provided that such continuance is specifically approved at least annually by (i)(A) the affirmative vote of a majority of the Board or (B) the affirmative vote of a majority of our outstanding voting securities, and (ii) the affirmative vote of a majority of our directors who are not “interested persons,” as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended (the "1940 Act"), of us, RCM or our respective affiliates. 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, 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.

We are an externally managed, closed-end, non-diversified investment company. We have elected to be regulated as a business development company (“BDC”) under 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, 2022.

Since 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.

The Board declared the following quarterly cash dividends during the nine months ended September 30, 2023:


Quarter	Dividend/Share Amount		Record Date	Payment Date
1st	$	0.20	March 13, 2023	March 27, 2023
2nd	$	0.25	May 31, 2023	June 14, 2023
3rd	$	0.25	August 31, 2023	September 14, 2023

In order to continue to qualify as a RIC, Rand holds several of its equity investments in holding companies that facilitate a tax structure that is advantageous to the RIC election. Rand has the following wholly owned blocker subsidiaries in place at September 30, 2023: Rand BMP Swanson Holdings Corp., Rand Carolina Skiff Holdings Corp., Rand DSD Holdings Corp., Rand Filterworks Holdings Corp., Rand FSS Holdings Corp., Rand INEA Holdings Corp., Rand ITA Holdings Corp., and Rand Somerset Holdings Corp. (the “Blocker Corps”). These subsidiaries are consolidated using United States generally accepted accounting principles (“GAAP”) for financial reporting purposes.

On October 7, 2020, Rand, RCM and certain of their affiliates received an exemptive order for relief from the Securities and Exchange Commission (“SEC”) to permit Rand to co-invest in portfolio companies with certain affiliates, including other BDCs and registered investment companies, managed by RCM and certain of its affiliates in a manner consistent with Rand’s investment objective, policies, strategies and restrictions as well as regulatory requirements, subject to compliance with certain conditions (the “Order”). On March 29, 2021, the SEC granted Rand, Callodine Group, LLC (“Callodine”), which holds a controlling interest in RCM, and certain of their affiliates a new exemptive order (the “New Order”) that superseded the Order and permits Rand to co-invest with affiliates managed by RCM and Callodine. Callodine is a yield focused asset management platform. Pursuant to the New Order, Rand is generally permitted to co-invest with affiliates covered by the New Order 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 of Rand or its shareholders on the part of any person concerned, (2) the transaction is consistent with the interests of Rand’s shareholders and is consistent with Rand’s investment objective and strategies and (3) the investment by Rand’s affiliates would not disadvantage Rand, and Rand’s participation would not be on a basis different from or less advantageous than that on which Rand’s affiliates are investing. In addition, on September 6, 2022, the SEC granted an amendment to the New Order to permit Rand to participate in follow-on investments in our existing portfolio companies with certain Affiliated Funds (as defined in the amended New Order) that do not hold any investments in such existing portfolio companies.

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

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

Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation – It is our opinion that the accompanying consolidated financial statements include all adjustments of a normal recurring nature necessary for a fair presentation in accordance with GAAP of the consolidated financial position, results of operations, cash flows and statement of changes in net assets for the interim periods presented. The Corporation is an investment company following accounting and reporting guidance in Accounting Standards Codification (“ASC”) 946, Financial Services—Investment Companies. 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 nine months ended September 30, 2023 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, 2022. 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 the Board. The Corporation generally invests in loan, debt, and equity instruments and there is no single standard for determining fair value of these investments. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio company while employing a consistent valuation process. Due to the inherent uncertainty of determining the fair value of portfolio investments, there may be material risks associated with this determination including that estimated fair values may differ

from the values that would have been used had a readily available market value for the investments existed and these differences could be material if our assumptions and judgments differ from results of actual liquidation events. 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 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, the Corporation's equity securities in the underlying portfolio company has also appreciated in value. Additionally, the Corporation continues to assess any material risks associated with this fair value determination, including risks associated with material conflicts of interest. Under the valuation policy of the Corporation, unrestricted publicly traded securities are valued at the closing price for these securities on the last trading day of the reporting period.

Qualifying Assets - The Corporation’s portfolio of investments includes both qualifying and non-qualifying assets. A majority of the Corporation’s investments represent qualifying investments in privately held businesses, principally based in the United States, and represent qualifying assets as defined by Section 55(a) of the 1940 Act. The non-qualifying assets generally include investments in other publicly traded BDC investment companies and other publicly traded securities.

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. There was no reserve for possible losses as of September 30, 2023 or December 31, 2022.

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 for private portfolio companies or on the record date for publicly traded portfolio companies.

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 meeting 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 (refunded) during the nine months ended September 30, 2023 and 2022 were $509,063 and ($69,028), respectively. Interest paid during the nine months ended September 30, 2023 and 2022 was $614,640 and $19,792, respectively. The Corporation converted $813,599 and $516,391 of interest receivable into investments during the nine months ended September 30, 2023 and 2022, 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 September 30, 2023 and December 31, 2022, there were 500,000 shares of $10.00 par value preferred stock authorized and unissued.

On April 19, 2023, the Board approved a share repurchase plan which authorizes the Corporation to repurchase shares of Rand’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 19, 2024, and replaces the share repurchase authorization that was previously approved by the Board in April 2022. No shares of Rand's common stock were repurchased by the Corporation during the nine months ended September 30, 2023 or the nine months ended September 30, 2022.

Income Taxes – The Corporation elected to be treated, for U.S. federal income tax purposes, as a RIC for the 2022 and 2021 tax years under Subchapter M of the Code. 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. If the Corporation continues to qualify as a RIC and continues to satisfy the annual distribution requirement, the Corporation will not have to pay corporate level U.S. federal income taxes on any income that the Corporation distributes to its stockholders.

The Blocker Corps, which are consolidated under U.S. GAAP for financial reporting purposes, are subject to U.S. federal and state income taxes. Therefore, the Corporation accounts for income taxes pursuant to FASB ASC Topic 740, Income Taxes. Under FASB ASC Topic 740, deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The Corporation records a valuation allowance against the deferred tax assets if and to the extent it is more likely than not that the Corporation will not recover the deferred tax assets. In evaluating the need for a valuation allowance, the Corporation weights all relevant positive and negative evidence, and considers among other factors, historical financial performance, projected future taxable income, scheduled reversals of deferred tax liabilities, the overall business environment, and tax planning strategies. Changes in circumstances, including the Blocker Corps generating significant taxable income and tax planning strategies, could cause a change in judgment about the need for a valuation allowance of the related deferred tax assets. Any change in the valuation allowance will be included in income in the period of the change in estimate.

Accordingly, during the three and nine months ended September 30, 2023, the Corporation estimated that a portion of its Blocker Corps’ deferred tax assets are not expected to be fully recoverable in the future. As a result, the Corporation recorded a partial valuation allowance of approximately $129,000 during the three and nine months ended September 30, 2023 against its U.S. Federal deferred tax assets. There was no valuation allowance prior to this date.

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 September 30, 2023 or December 31, 2022.

Depending on the level of taxable income earned in a tax year, the Corporation may choose to carry forward taxable income in excess of current year dividend distributions from such current year taxable income into the next tax year and pay a 4% excise tax on such income, as required. To the extent that the Corporation determines that its estimated current year taxable income will be in excess of estimated dividend distributions for the current year from such income, the Corporation accrues excise tax, if any, on estimated excess taxable income as such taxable income is earned. The Corporation incurred $24,543 and $0 in federal excise tax expense during the nine months ended September 30, 2023 and 2022, respectively.

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

The Corporation is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended December 31, 2019 through 2022. In general, the Corporation’s state income tax returns are open to audit under the statute of limitations for the years ended December 31, 2019 through 2022.

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 nine months ended September 30, 2023 or 2022.

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 insured 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:


	September 30, 2023
Tilson Technology Management, Inc. (Tilson)		14	%
Seybert’s Billiards Corporation (Seybert’s)		8	%
SciAps, Inc. (Sciaps)		7	%
BMP Food Service Supply Holdco, LLC (FSS)		7	%
Inter-National Electronic Alloys LLC (INEA)		6	%


	December 31, 2022
Tilson		17	%
Seybert's		10	%
Sciaps		8	%
DSD Operating, LLC (DSD)		8	%
Caitec, Inc. (Caitec)		6	%

Recent Accounting Pronouncements – In March 2022, the FASB issued ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326)”, which is intended to address issues identified during the post-implementation review of ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The amendment, among other things, eliminates the accounting guidance for troubled debt restructurings by creditors in Subtopic 310-40, “Receivables - Troubled Debt Restructurings by Creditors”, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. The new guidance is effective for interim and annual periods beginning after December 15, 2022. The Corporation evaluated the impact of the adoption of ASU 2022-02 on its consolidated financial statements and disclosures and determined that this guidance does not have a material impact on its consolidated financial statements.

Note 3. INVESTMENTS

The Corporation’s investments are carried at fair value, as determined in good faith by the Board, 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 typically with no equity features or required equity co-investment. 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. Equity investments will be direct investments into a portfolio company and may include preferred stock, common stock, warrants and limited liability company membership interests.

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

•

Loan and debt securities are generally valued using an asset approach and will be valued at cost when 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. The valuation may also consider 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 uses estimates of the liquidation value of the portfolio companies’ assets in relation to the cost of the respective security. This approach values the equity at the value remaining after the portfolio company pays off its debt and loan balances and its outstanding liabilities. The market approach uses observable prices and other relevant information generated by similar market transactions. It may include both private and public M&A transactions where the traded price is a multiple of EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) or another relevant operating metric. It may also include the market value of comparable public companies that are trading in an active market, or 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 valuation techniques to convert future benefits or costs, usually in the form of cash flows, into a present value amount. The measurement is based on value indicated by current market expectations about those future amounts.

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 closing price on the last trading day 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 September 30, 2023, 10% of the Corporation’s investments were Level 1 investments and 90% were Level 3 investments. At December 31, 2022, 10% of the Corporation’s investments were Level 1 investments and 90% were Level 3 investments. There were no Level 2 investments at September 30, 2023 or December 31, 2022.

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 (positive or 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 privately-held,

lower middle market companies and these industry standards may be adjusted to more closely match the specific financial and operational performance of the portfolio company. Due to the nature of certain investments, fair value measurements may be based on other criteria, which may include third party appraisals. Significant changes in any of these unobservable inputs may result in a significantly higher or lower fair value estimate.

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

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

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

Loan and Debt Securities

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

The following table provides a summary of the significant unobservable inputs used to determine the fair value of the Corporation’s Level 3 portfolio investments as of September 30, 2023:


Investment Type	Market Approach EBITDA Multiple		Market Approach Liquidation Seniority		Market Approach Revenue Multiple		Market Approach Transaction Pricing		Totals
Non-Control/Non-Affiliate Equity	$	300,000	$	—	$	700,000	$	200,063	$	1,200,063
Non-Control/Non-Affiliate Loan and Debt		6,641,504		2,212,326		—		2,250,000		11,103,830
Total Non-Control/Non-Affiliate	$	6,941,504	$	2,212,326	$	700,000	$	2,450,063	$	12,303,893
Affiliate Equity	$	4,262,324	$	—	$	3,223,984	$	11,550,000	$	19,036,308
Affiliate Loan and Debt		18,357,414		—		2,090,000		11,613,593		32,061,007
Total Affiliate	$	22,619,738	$	—	$	5,313,984	$	23,163,593	$	51,097,315
Control Equity	$	—	$	—	$	—	$	—	$	—
Control Loan and Debt		—		4,083,489		—		—		4,083,489
Total Control	$	—	$	4,083,489	$	—	$	—	$	4,083,489
Total Level 3 Investments	$	29,561,242	$	6,295,815	$	6,013,984	$	25,613,656	$	67,484,697

Range	4X - 7X		1X		1X - 3X		Not Applicable
Unobservable Input	EBITDA Multiple		Asset Value		Revenue Multiple		Transaction Price
Weighted Average	5.4X		1X		1.7X		Not Applicable

The following table provides a summary of the components of Level 1, 2 and 3 Assets Measured at Fair Value at September 30, 2023:


			Fair Value Measurements at Reported Date Using
Description	September 30, 2023		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Other Significant Unobservable Inputs (Level 3)
Loan investments	$	12,170,088	$	—	$	—	$	12,170,088
Debt investments		35,078,238		—		—		35,078,238
Equity investments		27,435,959		7,199,588		—		20,236,371
Total	$	74,684,285	$	7,199,588	$	—	$	67,484,697

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


			Fair Value Measurements at Reported Date Using
Description	December 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	$	14,578,351	$	—	$	—	$	14,578,351
Debt investments		19,582,616		—		—		19,582,616
Equity investments		27,343,292		6,407,548		—		20,935,744
Total	$	61,504,259	$	6,407,548	$	—	$	55,096,711

The following table provides a summary of changes in Assets Measured at Fair Value Using Significant Unobservable Inputs (Level 3) for the nine months ended September 30, 2023:


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Description	Loan Investments			Debt Investments			Equity Investments			Total
Ending balance December 31, 2022, of Level 3 Assets	$	14,578,351		$	19,582,616		$	20,935,744		$	55,096,711
Realized gains (losses) included in net change in net assets from operations:
ClearView Social, Inc. (Clearview Social)		—			—			10,432			10,432
DSD Operating, LLC (DSD)		—			—			2,537,765			2,537,765
Microcision, LLC (Microcision)		—			—			58,329			58,329
Rheonix, Inc. (Rheonix)		—			—			(2,802,731	)		(2,802,731	)
SocialFlow, Inc. (Social Flow)		—			—			(4,941	)		(4,941	)
Somerset Gas Transmission Company, LLC (Somerset)		—			—			(448,717	)		(448,717	)
Total realized losses, net		—			—			(649,863	)		(649,863	)
Unrealized gains (losses) included in net change in net assets from operations:
DSD		—			—			(886,698	)		(886,698	)
Open Exchange, Inc. (Open Exchange)		—			—			(701,940	)		(701,940	)
Rheonix		—			—			2,802,731			2,802,731
Somerset		—			—			594,097			594,097
Total unrealized gains (losses)		—			—			1,808,190			1,808,190
Purchases of securities/changes to securities/non-cash conversions:
BMP Food Service Supply Holdco, LLC (FSS)		—			2,320,000			—			2,320,000
BMP Swanson Holdco, LLC (Swanson)		100,115			—			—			100,115
Caitec, Inc. (Caitec)		55,822			—			—			55,822
DSD		31,652			—			—			31,652
FCM Industries Holdco LLC (First Coast Mulch)		—			3,807,147			—			3,807,147
Filterworks Acquisition USA, LLC (Filterworks)		—			204,489			—			204,489
GoNoodle, Inc. (GoNoodle)		—			10,614			—			10,614
HDI Acquisition LLC (Hilton Displays)		—			17,182			—			17,182
Highland All About People Holdings, Inc. (All About People)		—			3,018,000			1,000,000			4,018,000
Inter-National Electronic Alloys LLC (INEA)		—			3,321,071			1,011,765			4,332,836
ITA Acquisition, LLC (ITA)		547,282			—			—			547,282
Mattison Avenue Holdings LLC (Mattison)		28,300			—			—			28,300
Pressure Pro, Inc. (Pressure Pro)		—			3,038,446			30,000			3,068,446
Seybert’s Billiards Corporation (Seybert’s)		—			93,720			—			93,720
SciAps, Inc. (Sciaps)		—			5,000			—			5,000
Social Flow		—			—			4,941			4,941
Tilson Technology Management, Inc. (Tilson)		—			—			250,000			250,000
Total purchases of securities/changes to securities/non-cash conversions		763,171			15,835,669			2,296,706			18,895,546
Repayments and sales of securities:
Clearview Social		—			—			(10,432	)		(10,432	)
DSD		(3,171,434	)		—			(3,605,265	)		(6,776,699	)
FSS		—			(40,047	)		(210,000	)		(250,047	)
Hilton Displays		—			(300,000	)		—			(300,000	)
Microcision		—			—			(58,329	)		(58,329	)
Somerset		—			—			(270,380	)		(270,380	)
Total repayments and sales of securities		(3,171,434	)		(340,047	)		(4,154,406	)		(7,665,887	)
Ending balance September 30, 2023, of Level 3 Assets	$	12,170,088		$	35,078,238		$	20,236,371		$	67,484,697

Change in unrealized appreciation/depreciation included in earnings related to Level 3 investments still held at reporting date										$	(701,940	)

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


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Description	Loan Investments		Debt Investments			Equity Investments			Total
Ending Balance December 31, 2021, of Level 3 Assets	$	15,503,404	$	14,030,078		$	20,633,935		$	50,167,417
Realized gains (losses) included in net change in net assets from operations:
ClearView Social, Inc. (Clearview Social)		—		—			38,881			38,881
GiveGab, Inc. (Givegab)		—		—			1,919			1,919
Microcision, LLC (Microcision)		—		—			190,000			190,000
New Monarch Machine Tool, Inc. (New Monarch)		—		—			(22,841	)		(22,841	)
SocialFlow, Inc. (Social Flow)		—		—			(1,481,498	)		(1,481,498	)
Total realized (losses), net		—		—			(1,273,539	)		(1,273,539	)
Unrealized gains included in net change in net assets from operations:
Microcision		—		—			25,000			25,000
New Monarch		—		—			22,841			22,841
Social Flow		—		—			1,628,000			1,628,000
Total unrealized gains		—		—			1,675,841			1,675,841
Purchases of securities/changes to securities/non-cash conversions:
Caitec, Inc. (Caitec)		54,704		—			—			54,704
DSD Operating, LLC (DSD)		364,633		—			—			364,633
Filterworks Acquisition USA, LLC (Filterworks)		—		146,723			86,213			232,936
GoNoodle, Inc. (GoNoodle)		—		10,622			—			10,622
HDI Acquisition LLC (Hilton Displays)		—		19,835			—			19,835
ITA Acquisition, LLC (ITA)		52,475		—			623,810			676,285
Mattison Avenue Holdings LLC (Mattison)		27,734		—			—			27,734
Seybert’s Billiards Corporation (Seybert’s)		—		2,279,234			—			2,279,234
SciAps, Inc. (Sciaps)		—		11,250			—			11,250
Total purchases of securities/changes to securities/non-cash conversions		499,546		2,467,664			710,023			3,677,233
Repayments and sale of securities:
Clearview Social		—		—			(38,881	)		(38,881	)
Givegab		—		—			(1,919	)		(1,919	)
GoNoodle		—		(90,175	)		—			(90,175	)
Microcision		—		—			(300,000	)		(300,000	)
Social Flow		—		—			(268,502	)		(268,502	)
Total repayments and sale of securities		—		(90,175	)		(609,302	)		(699,477	)
Ending Balance September 30, 2022, of Level 3 Assets	$	16,002,950	$	16,407,567		$	21,136,958		$	53,547,475

Change in unrealized appreciation/depreciation included in earnings related to Level 3 investments still held at reporting date									$	—

Note 4. OTHER ASSETS

At September 30, 2023 and December 31, 2022, other assets was comprised of the following:


	September 30, 2023		December 31, 2022
Escrow receivables	$	243,719	$	68,983
Dividend receivables		118,410		102,655
Deferred financing fees, net		93,750		112,500
Prepaid expenses		48,466		10,905
Total other assets	$	504,345	$	295,043

Amortization expense related to the deferred financing fees during the nine months ended September 30, 2023 and 2022 was $18,750 and $6,250, respectively.

Note 5. COMMITMENTS AND CONTINGENCIES

The Corporation had no commitments at September 30, 2023 or December 31, 2022.

Note 6. SENIOR SECURED REVOLVING CREDIT FACILITY

On June 27, 2022, the Corporation entered into a credit agreement (the “Credit Agreement”) with M&T Bank, as lender (the “Lender”), which provides the Corporation with a senior secured revolving credit facility in a principal amount not to exceed $25.0 million (the “Credit Facility”). The amount the Corporation can borrow, at any given time, under the Credit Facility is tied to a borrowing base, which is measured as (i) 75% of the aggregate sum of the fair market values of the publicly traded equity securities held (other than shares of ACV Auctions) plus (ii) the least of (a) 75% of the fair market value of the shares of ACV Auctions held, (b) $6.25 million and (c) 25% of the aggregate borrowing base availability for the Credit Facility at any date of determination plus (iii) 50% of the aggregate sum of the fair market values of eligible private loans held that meet specified criteria plus (iv) the lesser of (a) 50% of the aggregate sum of the fair market values of unsecured private loans held that meet specified criteria and (b) $1.25 million minus (v) such reserves as the Lender may establish from time to time in its sole discretion. The Credit Facility has a maturity date of June 27, 2027. Under the borrowing base formula described above, the unused line of credit balance for the Credit Facility was $11,250,000 at September 30, 2023

The Corporation’s borrowings under the Credit Facility bear interest at a variable rate determined as a rate per annum equal to 3.50 percentage points above the greater of (i) the applicable daily simple secured overnight financing rate (SOFR) and (ii) 0.25%. At September 30, 2023, the Corporation's applicable interest rate was 8.81%. In addition, under the terms of the Credit Facility, the Corporation has also agreed to pay the Lender an unused commitment fee on a quarterly basis, computed as 0.30% multiplied by the average daily Unused Commitment Fee Base (which is defined as the difference between (i) $25.0 million and (ii) the sum of the aggregate principal amount of the Corporation’s outstanding borrowings under the Credit Facility) for the preceding quarter.

The Credit Agreement contains representations and warranties and affirmative, negative and financial covenants usual and customary for agreements of this type, including among others, covenants that prohibit, subject to certain specified exceptions, the Corporation’s ability to merge or consolidate with other companies, sell any material part of the Corporation’s assets, incur other indebtedness, incur liens on the Corporation’s assets, make investments or loans to third parties other than permitted investments and permitted loans, and declare any distribution or dividend other than certain permitted distributions. The Credit Agreement includes the following financial covenants: (i) a tangible net worth covenant that requires the Corporation to maintain a Tangible Net Worth (defined in the Credit Agreement as the Corporation’s aggregate assets, excluding intangible assets, less all liabilities) of not less than $50.0 million, which is measured quarterly at the end of each fiscal quarter, (ii) an asset coverage ratio covenant that requires the Corporation to maintain an Asset Coverage Ratio (defined in the Credit Agreement as the ratio of the fair market value of all of the Corporation’s assets to the sum of all of the Corporation’s obligations for borrowed money plus all capital lease obligations) of not less than 3:1, which is measured quarterly at the end of each fiscal quarter and (iii) an interest coverage ratio covenant that requires the Corporation to maintain an Interest Coverage Ratio (defined in the Credit Agreement as the ratio of Cash Flow (as defined in the Credit Agreement) to Interest Expense (as defined in the Credit Agreement)) of not less than 2.5:1, which is measured quarterly on a trailing twelve-months basis. As of September 30, 2023, the Corporation is in compliance with all covenants.

Events of default under the Credit Agreement which permit the Lender to exercise its remedies, including acceleration of the principal and interest on the Credit Facility, include, among others: (i) default in the payment of principal or interest on the Credit Facility, (ii) default by the Corporation on any other obligation, condition, covenant or other provision under the Credit Agreement and related documents, (iii) failure by the Corporation to pay any material indebtedness or obligation owing to any third party or affiliate, or the failure by the Corporation to perform any agreement with any third party or affiliate that would have a material adverse effect on the Corporation and its subsidiaries taken as a whole, (iv) the sale of all or substantially all of the Corporation’s assets to a third party, (v) various bankruptcy and insolvency events, and (vi) any material adverse change in the Corporation and its subsidiaries, taken as a whole, or their business, assets, operations, management, ownership, affairs, condition (financial or otherwise) or the Lender’s collateral that the Lender reasonably determines will have a material adverse effect on the Lender’s collateral, the Corporation and its subsidiaries, taken as a whole, or their business, assets, operation or condition (financial or otherwise) or on the Corporation’s ability to repay its debts.

In connection with entry into the Credit Facility, the Corporation and each of its subsidiaries that guaranty the Credit Facility entered into a general security agreement, dated June 27, 2022, with the Lender (the “Security Agreement”). The Security Agreement secures all of the Corporation’s obligations to the Lender, including, without limitation, principal and interest on the Credit Facility

and any fees and charges. The security interest granted under the Security Agreement covers all of the Corporation’s personal property including, among other things, all accounts, chattel paper, investment property, deposit accounts, general intangibles, inventory, and all of the fixtures. The Security Agreement contains various representations, warranties, covenants and agreements customary in security agreements and various events of default with remedies under the New York Uniform Commercial Code and the Security Agreement. Events of default under the Security Agreement, which permit the Lender to exercise its various remedies, are similar to those contained in the Credit Agreement.

The outstanding balance drawn on the Credit Facility at September 30, 2023 and December 31, 2022 was $13,750,000 and $2,550,000, respectively. The unamortized closing fee was $93,750 and $112,500 as of September 30, 2023 and December 31, 2022, respectively, and it is recorded in Other Assets on the Consolidated Statement of Financial Position. Amortization expense related to the Credit Facility during the three and nine months ended September 30, 2023 was $6,250 and $18,750, respectively. Amortization expense related to the Credit Facility during both the three and nine months ended September 30, 2022 was $6,250.

For the three and nine months ended September 30, 2023 and 2022, the average debt outstanding under the Credit Facility and weighted average interest rate were as follows:


	Three months ended September 30, 2023			Three months ended September 30, 2022			Nine months ended September 30, 2023			Nine months ended September 30, 2022
Average debt outstanding	$	12,161,957		$	—		$	10,086,630		$	—
Weighted average interest rate		8.95	%		0.00	%		8.68	%		0.00	%

Note 7. CHANGES IN STOCKHOLDERS’ EQUITY (NET ASSETS)

The following schedule analyzes the changes in stockholders’ equity (net assets) section of the Consolidated Statements of Financial Position for the three and nine months ended September 30, 2023 and 2022, respectively:


	Common Stock		Capital in excess of par value		Treasury Stock, at cost			Total distributable earnings (losses)			Total Stockholders’ Equity (Net Assets)
July 1, 2023	$	264,892	$	51,464,267	$	(1,566,605	)	$	11,239,474		$	61,402,028
Payment of dividend		—		—		—			(645,255	)		(645,255	)
Net increase in net assets from operations		—		—		—			595,504			595,504
September 30, 2023	$	264,892	$	51,464,267	$	(1,566,605	)	$	11,189,723		$	61,352,277


	Common Stock		Capital in excess of par value		Treasury Stock, at cost			Total distributable earnings (losses)			Total Stockholders’ Equity (Net Assets)
July 1, 2022	$	264,892	$	51,679,809	$	(1,566,605	)	$	7,286,088		$	57,664,184
Payment of dividend		—		—		—			(387,153	)		(387,153	)
Net increase in net assets from operations		—		—		—			1,104,902			1,104,902
September 30, 2022	$	264,892	$	51,679,809	$	(1,566,605	)	$	8,003,837		$	58,381,933


	Common Stock		Capital in excess of par value		Treasury Stock, at cost			Total distributable earnings (losses)			Total Stockholders’ Equity (Net Assets)
January 1, 2023	$	264,892	$	51,464,267	$	(1,566,605	)	$	7,558,766		$	57,721,320
Payment of dividend		—		—		—			(1,806,714	)		(1,806,714	)
Net increase in net assets from operations		—		—		—			5,437,671			5,437,671
September 30, 2023	$	264,892	$	51,464,267	$	(1,566,605	)	$	11,189,723		$	61,352,277


	Common Stock		Capital in excess of par value		Treasury Stock, at cost			Total distributable earnings (losses)			Total Stockholders’ Equity (Net Assets)
January 1, 2022	$	264,892	$	51,679,809	$	(1,566,605	)	$	10,367,320		$	60,745,416
Payment of dividend		—		—		—			(1,161,459	)		(1,161,459	)
Net decrease in net assets from operations		—		—		—			(1,202,024	)		(1,202,024	)
September 30, 2022	$	264,892	$	51,679,809	$	(1,566,605	)	$	8,003,837		$	58,381,933

Note 8. 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 and nine months ended September 30, 2023, the Base Management Fee was $268,609 and $769,869, respectively. For the three and nine months ended September 30, 2022, the Base Management Fee was $225,730 and $696,772, respectively. At September 30, 2023 and December 31, 2022, the Corporation had $268,609 and $230,221 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 Investment Management 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

(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 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 nine months ended September 30, 2023 and 2022, 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 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.

For purposes of calculating the amount of the capital gains incentive fee accrual to be included as part of a company’s financial statements, U.S. generally accepted accounting principles (GAAP) requires a company to consider, as part of such calculation, the amount of cumulative aggregate unrealized capital appreciation that such company has with respect to its investments. As a result, the capital gains incentive fee accrual under GAAP is calculated using the both 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. However, unrealized capital appreciation is not used by the Corporation as part of the calculation to determine the amount of the Capital Gains Fee actually payable to RCM under the terms of the Investment Management Agreement. There can be no

assurances that the Corporation will realize the unrealized capital appreciation, upon which the Corporation’s capital gains incentive fee accrual has been calculated under GAAP, in the future.

As of September 30, 2023, there was no Capital Gains Fee currently payable under the terms of the Investment Management Agreement, and the final calculations are determined annually, and subject to change based on subsequent realized gains, losses or unrealized losses during the remainder of 2023.

In accordance with GAAP, the Corporation is required to accrue a capital gains incentive fee on all realized and unrealized gains and losses, resulting in an accrual of $2,907,700 at September 30, 2023, which represents the fee that would be due based on net portfolio appreciation. The $2,907,700 accrued capital gains incentive fee is recorded in the line item “Capital gains incentive fees” on the Consolidated Statements of Financial Position at September 30, 2023. At December 31, 2022, there was an accrual of $2,499,000 for the capital gains incentive fee, which represented both the capital gains fee payable to RCM of $332,000 and $2,167,000 that would be due based on net portfolio appreciation at December 31, 2022. The $332,000 capital gains fee payable is recorded in the line item "Due to investment adviser" on the Consolidated Statement of Financial Position at December 31, 2022, and was paid to RCM during the nine months ended September 30, 2023.

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 the Corporation’s 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 the Corporation in determining and publishing the Corporation’s net asset value (NAV), overseeing the preparation and filing of the tax returns, and the printing and dissemination of reports to shareholders, and generally overseeing the payment of 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 9. FINANCIAL HIGHLIGHTS

The following schedule provides the financial highlights, calculated based on shares outstanding, for the periods indicated:


	Nine months ended September 30, 2023 (Unaudited) *			Nine months ended September 30, 2022 (Unaudited) *
Net asset value, beginning of period	22.36			23.54
Income (loss) from operations (1):
Net investment income		0.78			1.24
Net realized gains		0.28			0.27
Net unrealized appreciation (depreciation)		1.05			(1.98	)
Increase (decrease) in net assets from operations		2.11			(0.47	)
Payment of cash dividend		(0.70	)		(0.45	)
Increase (decrease) in net assets		1.41			(0.92	)
Net asset value, end of period	$	23.77		$	22.62
Per share market price, end of period	$	13.17		$	14.65
Total return based on market value (2)		4.13	%		(13.80	)%
Total return based on net asset value (3)		9.42	%		(3.90	)%
Supplemental data:
Ratio of expenses before income taxes to average net assets (4)		7.09	%		1.68	%
Ratio of expenses including income taxes to average net assets (4)		8.23	%		1.87	%
Ratio of net investment income to average net assets (4)		4.49	%		9.03	%
Portfolio turnover		26.52	%		5.08	%
Debt/equity ratio		22.41	%		—	%
Net assets, end of period	$	61,352,277		$	57,664,184

(1)

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

(2)

Total return based on market value is calculated as the change in market value per share during the period plus declared dividends per share, assuming reinvestment of dividends, divided by the beginning market value per share.

(3)

Total return based on net asset value is calculated as the change in net asset value per share during the period plus declared dividends per share, divided by the beginning net asset value per share.

(4)

Percentage is presented on an annualized basis.

* Amounts are rounded.

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.

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 our election as a RIC for U.S. federal tax purposes on the 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 2023; and statements regarding our compliance with the RIC requirements as of September 30, 2023, statements regarding 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 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, 2022.

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 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.

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”). Callodine is a yield focused asset management platform. 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, comprised of two parts: (1) the "Income Based Fee" and (2) the "Capital Gains Fee", if specified benchmarks are met.

We elected U.S federal tax treatment as a regulated investment company (“RIC”) under subchapter M of the Internal Revenue Code of 1986, as amended. To maintain our qualification as a RIC, we must, among other things, meet certain source of income and asset diversification requirements. As of September 30, 2023, we believe we were 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. We must 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 quarterly cash dividend.

Our Board of Directors declared the following quarterly cash dividends during the nine months ended September 30, 2023:


Quarter	Dividend/Share Amount		Record Date	Payment Date
1st	$	0.20	March 13, 2023	March 27, 2023
2nd	$	0.25	May 31, 2023	June 14, 2023
3rd	$	0.25	August 31, 2023	September 14, 2023

We may 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.

SEC Exemptive Order

On October 7, 2020, Rand, RCM and certain of their affiliates received an exemptive order from the SEC to permit the Corporation to co-invest in portfolio companies with certain affiliates, 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”). On March 29, 2021, the SEC granted Rand, RCM, Callodine, which holds a controlling interest in RCM, and certain of their affiliates a new exemptive order (the “New Order”) that superseded the Order and permits Rand to co-invest with affiliates managed by RCM and Callodine. Pursuant to the New Order, the Corporation is generally permitted to co-invest with affiliates covered by the New Order if a “required majority” (as defined in Section 57(o) of the 1940 Act) of Rand’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 Rand and its shareholders and do not involve overreaching in respect of Rand or its shareholders on the part of any person concerned, (2) the transaction is consistent with the interests of the Rand’s shareholders and is consistent with Rand’s investment objective and strategies and (3) the investment by Rand’s affiliates would not disadvantage Rand, and Rand’s participation would not be on a basis different from or less advantageous than that on which Rand’s affiliates are investing. In addition, on September 6, 2022, the SEC granted an amendment to the New Order to permit us to participate in follow-on investments in our existing portfolio companies with certain Affiliated Funds (as defined in the amended New Order) that do not hold any investments in such existing portfolio companies.

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, 2022 under Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Financial Condition

Overview:


	September 30, 2023		December 31, 2022		Increase		% Increase
Total assets	$	79,039,682	$	63,481,192	$	15,558,490		24.5	%
Total liabilities		17,687,405		5,759,872		11,927,533		207.1	%
Net assets	$	61,352,277	$	57,721,320	$	3,630,957		6.3	%

Net asset value per share (NAV) was $23.77 at September 30, 2023 and $22.36 at December 31, 2022.

Cash approximated 5.7% of net assets at September 30, 2023, as compared to 2.4% of net assets at December 31, 2022.

During 2022, we entered into a $25 million senior secured revolving credit facility (the “Credit Facility”) with M&T Bank, as lender (the “Lender”), with the amount that we can borrow thereunder, at any given time, determined based upon a borrowing base formula. The Credit Facility has a 5-year term with a maturity date of June 27, 2027. Our borrowings under the Credit Facility bear interest at a variable rate per annum equal to 3.50 percentage points above the greater of (i) the applicable daily simple secured overnight financing rate (SOFR) and (ii) 0.25%. At September 30, 2023, there was $13,750,000 drawn on the Credit Facility and the applicable interest rate was 8.81%. See “Note 6. Senior Secured Revolving Credit Facility” in the Notes to the Consolidated Financial Statements for additional information regarding the terms of our Credit Facility.

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.


	September 30, 2023		December 31, 2022		Increase		% Increase
Investments, at cost	$	66,261,908	$	55,716,237	$	10,545,671		18.9	%
Unrealized appreciation, net		8,422,377		5,788,022		2,634,355		45.5	%
Investments, at fair value	$	74,684,285	$	61,504,259	$	13,180,026		21.4	%

Our total investments at fair value, as determined by RCM and approved by our Board of Directors, approximated 122% of net assets at September 30, 2023 as compared to approximately 107% of net assets at December 31, 2022.

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 also invest in publicly traded shares of other business development companies that provide income through dividends and have more liquidity than our private company equity investments.

The change in investments during the nine months ended September 30, 2023, at cost, is comprised of the following:


	Cost Increase (Decrease)
New investments:
Inter-National Electronic Alloys LLC (INEA)	$	4,300,000
Highland All About People Holdings, Inc. (All About People)		4,000,000
FCM Industries Holdco LLC (First Coast Mulch)		3,800,000
Pressure Pro, Inc. (Pressure Pro)		3,000,000
BMP Food Service Supply Holdco, LLC (FSS)		2,320,000
ITA Acquisition, LLC (ITA)		390,000
Tilson Technology Management, Inc. (Tilson)		250,000
Total of new investments		18,060,000
Other changes to investments:
Filterworks Acquisition USA, LLC (Filterworks) interest conversion		204,489
ITA interest conversion		157,282
BMP Swanson Holdco, LLC (Swanson) interest conversion		100,115
Seybert’s Billiards Corporation (Seybert's) OID amortization and interest conversion		93,720
Pressure Pro OID amortization and interest conversion		68,446
Caitec, Inc. (Caitec) interest conversion		55,822
INEA interest conversion		32,836
DSD Operating, LLC (DSD) interest conversion		31,652
Mattison Avenue Holdings, LLC (Mattison) interest conversion		28,300
All About People interest conversion		18,000
HDI Acquisition LLC (Hilton Displays) interest conversion		17,182
GoNoodle, Inc. (GoNoodle) interest conversion		10,614
First Coast Mulch interest conversion		7,147
SciAps, Inc. (Sciaps) OID amortization		5,000
Total of other changes to investments		830,605
Investments repaid, sold, liquidated or converted:
ACV Auctions, Inc. (ACV) sale		(34,125	)
FSS debt repayment and equity sale		(250,047	)
Hilton Displays debt repayment		(300,000	)
Somerset Gas Transmission Company, LLC (Somerset) equity sale		(719,097	)
Rheonix, Inc. (Rheonix) equity liquidation		(2,802,731	)
DSD debt repayment and equity sale		(4,238,934	)
Total of investments repaid, sold, liquidated or converted		(8,344,934	)
Net change in investments, at cost	$	10,545,671

Results of Operations

Comparison of the three months ended September 30, 2023 to the three months ended September 30, 2022

Investment Income


	Three months ended September 30, 2023		Three months ended September 30, 2022		Increase (Decrease)			% Increase (Decrease)
Interest from portfolio companies	$	1,535,677	$	1,100,005	$	435,672			39.6	%
Interest from other investments		456		48		408		NM
Dividend and other investment income		154,416		421,659		(267,243	)		(63.4	)%
Fee income		50,565		32,553		18,012			55.3	%
Total investment income	$	1,741,114	$	1,554,265	$	186,849			12.0	%

NM - Not meaningful

The total investment income during the three months ended September 30, 2023 was received from 23 portfolio companies. For the three months ended September 30, 2022, total investment income was received from 21 portfolio companies.

Interest from portfolio companies – Interest from portfolio companies was approximately 40% higher during the three months ended September 30, 2023 versus the same period in 2022 due to the fact that we originated more interest yielding investments during the last year. The new debt instruments were originated from BMP Food Service Supply Holdco, LLC (FSS), FCM Industries Holdco LLC (First Coast Mulch), Highland All About People Holdings, Inc. (All About People), Inter-National Electronic Alloys LLC (INEA), ITA Acquisition, LLC (ITA), Pressure Pro, Inc. (Pressure Pro), and SciAps, Inc. (Sciaps).

Interest from other investments - The increase in interest from other investments is due to higher cash balances and interest rates during the three months ended September 30, 2023 versus the same period in 2022.

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 September 30, 2023		Three months ended September 30, 2022
Carlyle Secured Lending Inc. (Carlyle)	$	43,860	$	34,400
PennantPark Investment Corporation (Pennantpark)		40,950		29,250
FS KKR Capital Corp. (FS KKR)		36,000		32,160
Tilson Technology Management Inc. (Tilson)		13,126		13,125
Barings BDC, Inc. (Barings)		10,400		9,600
Ares Capital Corporation (Ares)		10,080		10,290
DSD Operating, LLC (DSD)		—		114,264
Carolina Skiff LLC (Carolina Skiff)		—		178,570
Total dividend and other investment income	$	154,416	$	421,659

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 $38,565 and $32,553 for the three months ended September 30, 2023 and 2022, respectively. During the three months ended September 30, 2023, we recognized a monitoring fee of $12,000 from our investment in FCM Industries Holdco LLC (First Coast Mulch).

Expenses


	Three months ended September 30, 2023		Three months ended September 30, 2022		Increase		% Increase
Total expenses	$	809,936	$	498,959	$	310,977		62.3	%

The increase in total expenses during the three months ended September 30, 2023 versus the same period in 2022 was primarily due to a $264,480 increase in interest expense, a $42,879 increase in the base management fee payable to RCM, and a $37,250 increase in administrative fees. In June 2022, we entered into a credit agreement with the Lender, which provides us with a Credit Facility in a principal amount not to exceed $25 million. Interest expense under the Credit Facility for the three months ended September 30, 2023 and 2022 was $290,522 and $26,042, respectively.

The base management fee, payable to RCM, is calculated based upon total assets less cash, and, as we deploy more capital into investments, the base management fee, payable to RCM, will increase accordingly. The base management fee for the three months ended September 30, 2023 and 2022 was $268,609 and $225,730, respectively.

Administrative fees consists of certain costs incurred by RCM that are reimbursable under the Investment Management Agreement and Administration Agreement. We incurred $37,250 in administrative fees during the three months ended September 30, 2023. There was no corresponding expense during the three months ended September 30, 2022.

Net Investment Income

The excess of investment income over total expenses, including income taxes, represents net investment income. The net investment income for the three months ended September 30, 2023 and 2022 was $798,583 and $1,010,166, respectively.

Realized (Loss) Gain on Investments


	Three months ended September 30, 2023			Three months ended September 30, 2022		Change
Realized (loss) gain on investments before income taxes	$	(2,802,731	)	$	1,919	$	(2,804,650	)

During the three months ended September 30, 2023, we liquidated our investment in Rheonix, Inc. (Rheonix), which was previously valued at $0, and recognized a realized loss of ($2,802,731).

During the three months ended September 30, 2022, we recognized a gain of $1,919 on GiveGab, Inc. (Givegab), an investment we exited in 2021.

Change in Unrealized Appreciation (Depreciation) of Investments


	Three months ended September 30, 2023		Three months ended September 30, 2022		Change
Change in unrealized appreciation (depreciation) of investments before income taxes	$	2,599,652	$	92,817	$	2,506,835

The change in net unrealized appreciation (depreciation), before income taxes, for the three months ended September 30, 2023, was comprised of the following:


	Three months ended September 30, 2023
Rheonix, Inc. (Rheonix)	$	2,802,731
PennantPark Investment Corporation (Pennantpark)		144,950
Barings BDC, Inc. (Barings)		42,400
FS KKR Capital Corp. (FS KKR)		28,320
Ares Capital Corporation (Ares)		15,400
Carlyle Secured Lending Inc. (Carlyle)		(16,340	)
ACV Auctions, Inc. (ACV)		(417,809	)
Total change in net unrealized appreciation (depreciation) of investments before income taxes	$	2,599,652

ACV, Ares, Barings, Carlyle, FS KKR, and Pennantpark are all publicly traded stocks, and as such, are marked to market at the end of each quarter, using the closing price on the last trading day of the quarter.

We liquidated our investment in Rheonix during the three months ended September 30, 2023.

The change in net unrealized appreciation (depreciation), before income taxes, for the three months ended September 30, 2022, was comprised of the following:


	Three months ended September 30, 2022
ACV	$	456,441
Ares		(18,550	)
Barings		(38,667	)
Carlyle		(86,287	)
FS KKR		(97,920	)
Pennantpark		(122,200	)
Total change in net unrealized appreciation (depreciation) of investments before income taxes	$	92,817

All of these valuation adjustments resulted from a review by RCM management, which was subsequently approved by our Board of Directors, using the guidance set forth by ASC 820 and our established valuation policy.

Net Increase in Net Assets from Operations

We account for our operations under GAAP for investment companies. The principal measure of our financial performance is "Net increase (decrease) in net assets from operations" on our consolidated statements of operations. The net increase in net assets from operations for the three months ended September 30, 2023 and 2022 was $595,504 and $1,104,902, respectively.

Comparison of the nine months ended September 30, 2023 to the nine months ended September 30, 2022

Investment Income


	Nine months ended September 30, 2023		Nine months ended September 30, 2022		Increase (Decrease)			% Increase (Decrease)
Interest from portfolio companies	$	4,306,120	$	3,016,976	$	1,289,144			42.7	%
Interest from other investments		692		49		643		NM
Dividend and other investment income		821,756		911,169		(89,413	)		(9.8	)%
Fee income		279,476		104,001		175,475			168.7	%
Total investment income	$	5,408,044	$	4,032,195	$	1,375,849			34.1	%

NM - Not meaningful

The total investment income during the nine months ended September 30, 2023 was received from 26 portfolio companies. For the nine months ended September 30, 2022, total investment income was received from 23 portfolio companies.

Interest from portfolio companies – Interest from portfolio companies was approximately 43% higher during the nine months ended September 30, 2023 versus the same period in 2022 due to the fact that we originated more interest yielding investments during the last year. The new debt instruments were originated from BMP Food Service Supply Holdco, LLC (FSS), FCM Industries Holdco LLC (First Coast Mulch), Highland All About People Holdings, Inc. (All About People), Inter-National Electronic Alloys LLC (INEA), ITA Acquisition, LLC (ITA), Pressure Pro, Inc. (Pressure Pro), and SciAps, Inc. (Sciaps).

Interest from other investments - The increase in interest from other investments is due to higher cash balances and interest rates during the nine months ended September 30, 2023 versus the same period in 2022.


	Nine months ended September 30, 2023		Nine months ended September 30, 2022
Carolina Skiff LLC (Carolina Skiff)	$	299,173	$	398,830
Carlyle Secured Lending Inc. (Carlyle)		119,540		103,200
PennantPark Investment Corporation (Pennantpark)		116,025		84,825
FS KKR Capital Corp. (FS KKR)		105,600		95,040
DSD Operating, LLC (DSD)		46,552		114,264
Tilson Technology Management, Inc. (Tilson)		39,376		39,375
Knoa Software, Inc. (Knoa)		34,850		—
Barings BDC, Inc. (Barings)		30,400		28,400
Ares Capital Corporation (Ares)		30,240		28,560
Golub Capital BDC, Inc. (Golub)		—		9,375
Owl Rock Capital Corporation (Owl Rock)		—		9,300
Total dividend and other investment income	$	821,756	$	911,169

The income associated with the amortization of financing fees was $164,212 and $94,001 for the nine months ended September 30, 2023 and 2022, respectively. During the nine months ended September 30, 2023, we recognized an early repayment fee of $61,264 from our investment in DSD, a loan monitoring fee of $20,000 from our investment in FSS, a loan monitoring fee of $20,000 from our investment in Pressure Pro, a loan monitoring fee of $12,000 from our investment in First Coast Mulch, and a loan modification fee of $2,000 from our investment in Lumious.

During the nine months ended September 30, 2022, we recognized a loan monitoring fee of $10,000 from our investment in Seybert's.

Expenses


	Nine months ended September 30, 2023		Nine months ended September 30, 2022		Increase		% Increase
Total expenses	$	3,164,522	$	748,139	$	2,416,383		323.0	%

The increase in total expenses during the nine months ended September 30, 2023 versus the same period in 2022 was primarily due to a $1,621,460 increase in the capital gains incentive fee expense, a $681,792 increase in interest expense, a $111,750 increase in administrative fees, and a $73,097 increase in the base management fee payable to RCM. These increases were offset by a $177,200 decrease in professional fees.

The increase in the capital gains incentive fee accrual during the nine months ended September 30, 2023 is due to the calculation of the capital gains fee as required by GAAP. We are required to accrue capital gains incentive fees on the basis of net realized capital gains and losses and net unrealized gains and losses. 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 this capital gains incentive fee under the Investment Management Agreement with respect to unrealized gains unless and until such gains are actually realized.

On June 27, 2022, we entered into a credit agreement with the Lender, which provides us with a senior secured revolving credit facility in a principal amount not to exceed $25 million. Interest expense under the Credit Facility for the nine months ended September 30, 2023 and 2022 was $707,834 and $26,042, respectively.

Administrative fees consists of certain costs incurred by RCM that are reimbursable under the Investment Management Agreement and Administration Agreement. We incurred $111,750 in administrative fees during the nine months ended September 30, 2023. There was no corresponding expense during the nine months ended September 30, 2022.

The base management fee, payable to RCM, is calculated based upon total assets less cash, and, as we deploy more capital into investments, the base management fee, payable to RCM, will increase accordingly. The base management fee for the nine months ended September 30, 2023 and 2022 was $769,869 and $696,772, respectively.

Net Investment Income

The excess of investment income over total expenses, including income taxes, represents net investment income. The net investment income for the nine months ended September 30, 2023 and 2022 was $2,006,129 and $3,200,306, respectively.

Realized Gain on Investments


	Nine months ended September 30, 2023		Nine months ended September 30, 2022		Change
Realized gain on investments before income taxes	$	1,068,904	$	690,591	$	378,313

During the nine months ended September 30, 2023, we sold our investment in DSD Operating, LLC (DSD) and recognized a realized gain of $2,537,765. In addition, during the during the nine months ended September 30, 2023, we sold our investment in Somerset Gas Transmission Company, LLC (Somerset) and recognized a realized loss of ($448,717). We also liquidated our investment in Rheonix, Inc. (Rheonix), which was previously valued at $0, and recognized a realized loss of ($2,802,731).

During the nine months ended September 30, 2023, we recognized a gain of $58,329 from additional proceeds received from Microcision LLC (Microcision), an investment we exited in 2022. We also recognized a realized gain of $10,432 from additional proceeds received from ClearView Social, Inc. (Clearview Social), an investment we exited during 2021. In addition, we recognized a realized loss of ($4,941) on our escrow receivable from SocialFlow, Inc. (Social Flow), an investment we exited in 2022.

We recognized a net realized gain of $1,718,767 on the sale of 125,000 shares of Class A common stock of ACV Auctions, Inc. (ACV), during the nine months ended September 30, 2023. At September 30, 2023, we owned 194,934 shares of Class A common stock of ACV.

During the nine months ended September 30, 2022, we sold our investment in Social Flow and recognized a realized loss of ($1,481,498). Additionally, during the nine months ended September 30, 2022, we sold our investment in Microcision and recognized a realized gain of $190,000 and recognized a realized loss of ($22,841) on our investment in New Monarch Machine Tool, Inc. (New Monarch), when the company commenced bankruptcy proceedings. We recognized a realized gain on the receipt of $38,881 from Clearview Social, an investment we exited during 2021.We also recognized a realized gain of $1,919 from additional proceeds received from GiveGab, Inc. (Givegab), an investment we exited during 2021.

We recognized a net realized gain of $1,701,446 on the sale of 123,000 shares of ACV Auctions, Inc. (ACV), during the nine months ended September 30, 2022. At September 30, 2022, we owned 319,934 shares of Class A common stock of ACV.

In addition, during the nine months ended September 30, 2022, we recognized a $73,101 realized gain on the sale of 31,250 shares of Golub Capital BDC, Inc (Golub), a $97,932 realized gain on the sale of 30,000 shares of Owl Rock Capital Corporation (Owl Rock), a $50,238 realized gain on the sale of 6,000 shares of Ares Capital Corporation (Ares), and a $41,413 realized gain on the sale of 6,000 shares of FS KKR Capital Corp. (FS KKR).

Change in Unrealized Appreciation (Depreciation) of Investments


	Nine months ended September 30, 2023		Nine months ended September 30, 2022			Change
Change in unrealized appreciation (depreciation) of investments before income taxes	$	2,634,355	$	(5,092,921	)	$	7,727,276

The change in net unrealized appreciation (depreciation), before income taxes, for the nine months ended September 30, 2023, was comprised of the following:


	Nine months ended September 30, 2023
Rheonix, Inc. (Rheonix)	$	2,802,731
Somerset Gas Transmission Company, LLC (Somerset)		594,097
ACV Auctions, Inc. (ACV)		475,342
PennantPark Investment Corporation (Pennantpark)		173,550
FS KKR Capital Corp. (FS KKR)		109,760
Barings BDC, Inc. (Barings)		30,000
Ares Capital Corporation (Ares)		19,740
Carlyle Secured Lending Inc. (Carlyle)		17,773
Open Exchange Inc. (Open Exchange)		(701,940	)
DSD Operating, LLC (DSD)		(886,698	)
Total change in net unrealized appreciation (depreciation) of investments before income taxes	$	2,634,355

ACV, Ares, Barings, Carlyle, FS KKR and Pennantpark are all publicly traded stocks, and as such, are marked to market at the end of each quarter, using the closing price on the last trading day of the quarter.

We sold our investments in Rheonix, Somerset, and DSD during the nine months ended September 30, 2023.

The valuation of our investment in Open Exchange, during the nine months ended September 30, 2023, was decreased after a review of their operations and financial condition.

The change in net unrealized appreciation (depreciation), before income taxes, for the nine months ended September 30, 2022, was comprised of the following:


	Nine months ended September 30, 2022
SocialFlow, Inc. (Social Flow)	$	1,628,000
Microcision LLC (Microcision)		25,000
New Monarch Machine Tool, Inc. (New Monarch)		22,841
Golub Capital BDC, Inc. (Golub)		(77,653	)
Owl Rock Capital Corporation (Owl Rock)		(80,533	)
Barings		(101,200	)
Ares		(132,230	)
Carlyle		(162,540	)
FS KKR		(204,140	)
Pennantpark		(260,650	)
ACV		(5,749,816	)
Total change in net unrealized appreciation (depreciation) of investments before income taxes	$	(5,092,921	)

ACV, Ares, Barings, Carlyle, FS KKR and Pennantpark 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 prior to the end of the quarter.

We sold our investments in Microcision, Social Flow, Golub and Owl Rock during the nine months ended September 30, 2022.

Net Increase (Decrease) in Net Assets from Operations

We account for our operations under GAAP for investment companies. The principal measure of our financial performance is "Net increase (decrease) in net assets from operations" on our consolidated statements of operations. The net increase (decrease) in net assets from operations for the nine months ended September 30, 2023 and 2022 was $5,437,671 and $(1,202,024), 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 September 30, 2023, our total liquidity consisted of approximately $3,480,000 in cash. In addition, we hold publicly traded equity securities of several BDCs and ACV Auctions, which are available for future liquidity requirements.

During the second quarter of 2022, we entered into a $25 million Credit Facility. The amount we can borrow, at any given time, under the Credit Facility is tied to a borrowing base, which is measured as (i) 75% of the aggregate sum of the fair market values of the publicly traded equity securities we hold (other than shares of ACV Auctions) plus (ii) the least of (a) 75% of the fair market value of the shares of ACV Auctions we hold, (b) $6.25 million and (c) 25% of the aggregate borrowing base availability for the Credit Facility at any date of determination plus (iii) 50% of the aggregate sum of the fair market values of eligible private loans we hold that meet specified criteria plus (iv) the lesser of (a) 50% of the aggregate sum of the fair market values of unsecured private loans we hold that meet specified criteria and (b) $1.25 million minus (v) such reserves as the Lender may establish from time to time in its sole discretion. The Credit Facility has a maturity date of June 27, 2027. The outstanding balance drawn on the Credit Facility at September 30, 2023 was $13,750,000. Under the borrowing base formula described above, the unused line of credit balance for the Credit Facility was $11,250,000 at September 30, 2023.

Our borrowings under the Credit Facility bear interest at a variable rate determined as a rate per annum equal to 3.50 percentage points above the greater of (i) the applicable daily simple secured overnight financing rate (SOFR) and (ii) 0.25%. At September 30, 2023, our applicable interest rate was 8.81%.

The Credit Agreement contains representations and warranties and affirmative, negative and financial covenants usual and customary for agreements of this type, including among others covenants that prohibit, subject to certain specified exceptions, our ability to merge or consolidate with other companies, sell any material part of our assets, incur other indebtedness, incur liens on our assets, make investments or loans to third parties other than permitted investments and permitted loans, and declare any distribution or dividend other than certain permitted distributions. The Credit Agreement includes the following financial covenants: (i) a tangible net worth covenant that requires us to maintain a Tangible Net Worth (defined in the Credit Agreement as our aggregate assets, excluding intangible assets, less all of our liabilities) of not less than $50.0 million, which is measured quarterly at the end of each fiscal quarter, (ii) an asset coverage ratio covenant that requires us to maintain an Asset Coverage Ratio (defined in the Credit Agreement as the ratio of the fair market value of all of our assets to the sum of all of our obligations for borrowed money plus all capital lease obligations) of not less than 3:1, which is measured quarterly at the end of each fiscal quarter and (iii) an interest coverage ratio covenant that requires us to maintain an Interest Coverage Ratio (defined in the Credit Agreement as the ratio of Cash Flow (as defined in the Credit Agreement) to Interest Expense (as defined in the Credit Agreement)) of not less than 2.5:1, which is measured quarterly on a trailing twelve-months basis. We believe we were in compliance with these covenants at September 30, 2023. See “Note 6. Senior Secured Revolving Credit Facility” on our Notes to the Consolidated Financial Statements for additional information regarding the terms of our Credit Facility.

For the nine months ended September 30, 2023, we experienced a net increase in cash of approximately $2,111,000, which is a net effect of approximately $7,283,000 of cash used in our operating activities and approximately $9,393,000 provided by our financing activities.

We anticipate that we will continue to fund our investment activities through cash generated through our ongoing operating activities, the sale of our publicly traded liquid investments, and through borrowings under the $25 million Credit Facility. 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.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are subject to financial market risks, including changes in interest rates and the valuation of our investment portfolio.

Interest Rate Risk

Changes in interest rates may affect our interest expense on the debt outstanding under our Credit Facility. Our debt borrowings under the Credit Facility bear interest at a variable rate determined as a rate per annum equal to 3.50 percentage points above the greater of (i) the applicable daily simple secured overnight financing rate (SOFR) and (ii) 0.25%. Changes in interest rates can also affect, among other things, our ability to acquire and originate loans and securities and the value of our investment portfolio. As of September 30, 2023, all of our debt investments had fixed interest rates and were not directly impacted by changes in market interest rates.

Based on our Consolidated Statement of Financial Position as of September 30, 2023, the following table shows the approximate annualized increase (decrease) in net investment income due to hypothetical base rate changes in interest rates under our Credit Facility, assuming no changes in our borrowings as of September 30, 2023. Because we often borrow money to make investments, our net investment income is dependent upon the difference between our borrowing rate and the rate we earn on the invested proceeds borrowed. In periods of rising interest rates, the rate we earn on our debt investments with fixed interest rates will remain the same, while the interest incurred on our borrowings under the Credit Facility will increase.


	Impact on net investment income from a change in interest rates on our Credit Facility at:
	1%			2%			3%
Increase in interest rate	$	(137,500	)	$	(275,000	)	$	(412,500	)
Decrease in interest rate		137,500			275,000			412,500

Although we believe that this analysis is indicative of our existing interest rate sensitivity under our Credit Facility at September 30, 2023, it does not adjust for changes in the credit quality, size and composition of our investment portfolio, and other business developments, including borrowing under our Credit Facility, that could affect our net investment income. Accordingly, no assurances can be given that actual results would not differ materially from the results under this hypothetical analysis.

We do not currently engage in any hedging activities. However, we may, in the future, hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of lower interest rates with respect to our borrowed funds.

Valuation Risk

We carry our investments at fair value, as determined in good faith by RCM and approved by our Board. Determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio company investment while employing a consistent valuation process. Due to the inherent uncertainty of determining the fair value of portfolio investments, there may be material risks associated with this determination including that estimated fair values may differ from the values that would have been used had a readily available market value for the investments existed and these differences could be material if our assumptions and judgments differ from results of actual liquidation events. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the value realized on these investments to be different than the valuations that are assigned. The types of factors that we may take into account in valuation of our investments include, as relevant, third party valuations, the portfolio company’s ability to make payments and its earnings, the markets in which the portfolio company does business, comparison to publicly-traded securities, recent sales of or offers to buy comparable companies, and other relevant factors.

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 September 30, 2023. 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 September 30, 2023.

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.

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, 2022.

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


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)
7/1/2023 – 7/31/2023		—		—		—	$	1,500,000
8/1/2023 – 8/31/2023		—		—		—	$	1,500,000
9/1/2023 – 9/30/2023		—		—		—	$	1,500,000
Total		—		—		—

(1)

There were no shares repurchased during the quarter.

(2)

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

(3)

On April 19, 2023, 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 19, 2024.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

During the three months ended September 30, 2023, no director or officer of the Corporation adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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.

101.INS*	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

101.SCH*	Inline XBRL Taxonomy Extension Schema Document

101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document

104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

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: November 6, 2023


	/s/ Daniel P. Penberthy
	Daniel P. Penberthy, Chief Executive
	Officer and President
	(Chief Executive Officer)
Dated: November 6, 2023



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