SOURCE: Rand Capital Corporation

Rand Capital Corporation

August 07, 2017 08:30 ET

Rand Capital Announces Second Quarter 2017 Results

BUFFALO, NY--(Marketwired - August 07, 2017) -

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

Rand Capital Corporation (NASDAQ: RAND) ("Rand"), a venture capital company which invests in growth businesses with unique product, service or technology concepts, announced its results for the quarter and year-to-date periods ended June 30, 2017.

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

Second Quarter 2017 Financial Highlights

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

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

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

Selected Portfolio Highlights

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

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

Webcast and Conference Call

Rand will host a conference call and live webcast today, August 7, 2017, at 1:30 p.m. Eastern Time to review its financial condition and results for the 2017 second quarter, as well as its strategy and outlook. The review will be accompanied by a slide presentation which will be available on Rand's website at www.randcapital.com under the heading "Investor Relations." A question-and-answer session will follow the formal presentation.

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

A telephonic replay will be available from approximately 4:30 p.m. Eastern Time today through Monday, August 14, 2017. To listen to the archived call, dial (412) 317-6671, and enter conference ID number 13666555. A transcript of the call will be placed on Rand's website, once available.

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

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

FINANCIAL TABLES FOLLOW

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

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About this company Rand Capital Corporation
From this industry Aerospace and Defense
Computers and Software
Financial Services
Manufacturing and Production
Medical and Healthcare
From this sub-industry Aircraft
Venture Capital
Machinery and Tools
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Medical Devices

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