SOURCE: Rand Capital Corporation

Rand Capital Corporation

November 06, 2017 08:30 ET

Rand Capital Announces Third Quarter 2017 Results

Net Asset Value per share grew sequentially to $5.01 at September 30

BUFFALO, NY--(Marketwired - November 06, 2017) - 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 September 30, 2017.

Allen F. ("Pete") Grum, President and Chief Executive Officer of Rand Capital, commented, "We closed on one investment during the third quarter. Centivo Corporation is a tech-enabled health solutions company and is a new addition to our portfolio. They are developing exciting new technology and administration services for self-insured companies."

He continued, "At the end of the quarter, we had $5.7 million of cash in our small business investment company subsidiaries and we continue to evaluate investment opportunities."

Third Quarter 2017 Financial Highlights

  • Reported $5.01 net asset value (NAV) per share at September 30, 2017, compared with $5.00 at June 30, 2017. The growth was due in part to increasing investment income, as more income-producing debt investments were originated in recent quarters.
  • Invested $100,000 in a new portfolio company, Centivo, a tech-enabled health solutions company that is developing solutions to help self-insured employers and their employees save money and have a better experience.
  • Investment income increased 26% over the prior-year third quarter.
  • At September 30, 2017, portfolio fair value was $30.7 million and consolidated cash was
    $6.4 million.

Total investment income in the third quarter of 2017 grew to approximately $397,000, up from $316,000 in the third quarter of 2016. The $81,000 increase was driven by the Company's success with focusing investments in income producing instruments. Total expenses in the 2017 and 2016 third quarters were approximately $439,000 and $487,000, respectively.

Mr. Grum added, "The increase in our investment income is moving us closer to operating cash breakeven."

Total investment income was approximately $1.1 million and $731,000 year-to-date in 2017 and 2016, respectively. Similar to the third quarter, the growth was driven by the Company's recent investment focus on income-generating instruments. Total expenses on a year-to-date basis were approximately $1.6 million in 2017, down from $2.9 million in 2016. The 2016 expenses included higher incentive compensation expenses related to the Company's Gemcor exit.

Selected Portfolio Highlights

  • PostProcess Technologies Inc. is the pioneer of the automated post-printing industry. It is the first and only provider of a comprehensive post-printing solution for additive manufacturing, including intelligent software, user-friendly hardware, and proprietary chemistry. PostProcess increases the consistency, throughput, and productivity of the third step of 3D printing -- post-printing. PostProcess has been growing rapidly, from three employees in early 2016 to 26 currently. With plans to grow revenue to $100 million in 2021, the company recently signed up its first channel partner and is seeking to expand its international presence in 2018 where 3D printing adoption is also quickly expanding. PostProcess recently launched a new product, the Hybrid DECI Duo, the world's only 2-in-1 automated post-processing solution that provides both surface finishing and support removal of 3D printed parts. At September 30, 2017 Rand's investment in PostProcess was valued at $300,000.
  • GiveGab, Inc. is a user-friendly social platform that cultivates long-term giving relationships by connecting donors and volunteers with nonprofits. The GiveGab team helps nonprofits thrive, providing an affordable, secure and customized way to engage with supporters, raise funds online, and manage data. The company is experiencing a break-out year in 2017, having over 8,000 nonprofits registered to raise money on its platform. Revenue is on pace to grow more than 600% in 2017, and transaction volume is expected to be up more than 900%. The significant growth is driven by multiple and larger Giving Days, including The Big Give in San Antonio, Give for Good Louisville and Cornell Giving Day, among many others. At September 30, 2017 Rand's investment in GiveGab was valued at $424,000.
  • Knoa Software, Inc. provides on-premise and cloud solutions that generate unique insights for the optimization of the end-user experience with solutions for vendors including SAP®. Earlier in 2017, Knoa launched a new version of its SAP® User Experience Management ("SAP UEM") application, providing support for the SAP S/4HANA® platform and the SAP SuccessFactors HCM Suite. SAP UEM delivers unprecedented visibility into user behavior to drive adoption and effective use of SAP® software, reducing costs and risks during or following migration projects. Further, it allows SAP® customers to leverage Knoa's user analytics for a broader range of operating environments, including end-user mobile devices, browser configurations and business applications. At September 30, 2017 Rand's investment in Knoa was valued at $498,000.

As of September 30, 2017, Rand's portfolio consisted of 30 active companies. At that date, the portfolio was comprised of approximately 58% in equity investments and 42% in debt investments, compared with 64% in equity investments and 36% in debt investments at the same time last year. The change in investment mix reflects Rand's strategy to generate sufficient investment income to cover operating expenses.

Capital Allocation Priority

Rand's priority for allocating capital continues to be investment in its portfolio. Additionally, the Board of Directors has authorized a share repurchase program of up to an aggregate of 1,000,000 shares of common stock. Approximately 459,000 shares remain available for repurchase under the program, which the Board recently extended through October 26, 2018.

Webcast and Conference Call

Rand will host a conference call and live webcast today, November 6, 2017, at 1:30 p.m. Eastern Time to review its financial condition and results for the 2017 third 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, November 13, 2017. To listen to the archived call, dial (412) 317-6671, and enter conference ID number 13671708. 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
          
   September 30,   December 31,  
   2017   2016  
   (Unaudited)      
ASSETS         
 Investments at fair value:           
  Control investments (cost of $99,500)  $99,500   $99,500  
  Affiliate investments (cost of $19,356,165 and $17,589,623, respectively)   14,706,841    13,605,974  
  Non-Control/Non-Affiliate investments (cost of $16,358,555 and $13,941,907, respectively)   15,889,347    13,795,007  
 Total investments, at fair value (cost of $35,814,220 and $31,631,030, respectively)   30,695,688    27,500,481  
 Cash   6,373,128    12,280,140  
 Interest receivable (net of allowance: $161,000)   202,562    324,237  
 Deferred tax asset   1,708,081    1,165,164  
 Prepaid income taxes   266,935    -  
 Other assets   584,010    1,148,508  
   Total assets  $39,830,404   $42,418,530  
            
LIABILITIES AND STOCKHOLDERS' EQUITY (NET ASSETS)  
 Liabilities:           
 Debentures guaranteed by the SBA, net  $7,848,323   $7,827,773  
 Profit sharing and bonus payable   132,000    1,270,052  
 Accounts payable and accrued expenses   114,365    324,537  
 Deferred revenue   43,240    46,797  
 Income tax payable   -    320,008  
   Total liabilities   8,137,928    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 9/30/17 and 12/31/16   
686,304
   
686,304
 
 Capital in excess of par value   10,581,789    10,581,789  
 Accumulated net investment loss   (1,876,712 )  (1,577,848 )
 Undistributed net realized gain on investments   27,127,054    27,127,054  
 Net unrealized depreciation on investments   (3,356,854 )  (2,718,831 )
 Treasury stock, at cost; 541,046 shares   (1,469,105 )  (1,469,105 )
   Total stockholders' equity (net assets) (per share $5.01 at 9/30/17; $5.16 at 12/31/16)   31,692,476    32,629,363  
   Total liabilities and stockholders' equity (net assets)  $39,830,404   $42,418,530  
            
 
Rand Capital Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
                  
   For the Quarter Ended
September 30,
  For the Nine Months Ended
September 30,
 
   2017   2016   2017   2016  
Investment income:                     
 Interest from portfolio companies:                     
  Control investments  $-   $-   $-   $11,828  
  Affiliate investments   142,247    113,643    416,247    273,218  
  Non-Control/Non-Affiliate investments   167,675    110,395    417,406    240,027  
   Total interest from portfolio companies   309,922    224,038    833,653    525,073  
                      
 Interest from other investments:                     
  Non-Control/Non-Affiliate investments   6,348    11,974    24,182    33,683  
   Total interest from other investments   6,348    11,974    24,182    33,683  
                      
 Dividend and other investment income:                     
  Affiliate investments   74,408    69,010    189,805    149,807  
  Non-Control/Non-Affiliate investments   2,405    3,011    7,598    3,011  
   Total dividend and other investment income   76,813    72,021    197,403    152,818  
                      
 Fee income:                     
  Control investments   -    -    -    2,000  
  Affiliate investments   2,166    2,083    6,250    3,945  
  Non-Control/Non-Affiliate investments   1,770    5,770    13,307    13,004  
   Total fee income   3,936    7,853    19,557    18,949  
Total investment income   397,019    315,886    1,074,795    730,523  
                      
Expenses:                     
 Salaries   165,413    155,437    496,239    466,312  
 Bonus and profit sharing   -    -    -    1,411,659  
 Employee benefits   38,454    38,730    138,523    164,952  
 Directors' fees   36,374    47,380    107,623    142,135  
 Professional fees   48,433    86,938    310,628    237,986  
 Stockholders and office operating   45,355    50,846    193,290    174,882  
 Insurance   8,058    8,358    25,618    25,876  
 Corporate development   16,621    17,794    49,938    49,319  
 Other operating   2,772    3,495    8,055    9,470  
    361,480    408,978    1,329,914    2,682,591  
 Interest on SBA obligations   77,568    77,570    232,706    232,709  
 Total expenses   439,048    486,548    1,562,620    2,915,300  
Net investment loss before income taxes   (42,029 )  (170,662 )  (487,825 )  (2,184,777 )
 Income tax benefit   (17,050 )  (55,934 )  (188,961 )  (833,525 )
Net investment loss   (24,979 )  (114,728 )  (298,864 )  (1,351,252 )
                      
Net realized gain on sales and dispositions of investments:                     
 Control investments   -    1,412,500    -    14,588,813  
 Non-Control/Non-Affiliate investments   -    -    -    168,140  
 Net realized gain before income tax expense   -    1,412,500    -    14,756,953  
 Income tax expense   -    526,862    -    5,504,343  
 Net realized gain on investments   -    885,638    -    9,252,610  
                      
Net change in unrealized (depreciation) or appreciation on investments:                     
 Control investments   -    (1,412,500 )  -    (12,775,000 )
 Affiliate investments   -    (666,011 )  (665,675 )  (1,413,811 )
 Non-Control/Non-Affiliate investments   111,000    -    (322,308 )  69,444  
 Change in unrealized depreciation or appreciation before income tax expense (benefit)   111,000    (2,078,511 )  (987,983 )  (14,119,367 )
 Deferred income tax expense (benefit)   28,090    (736,301 )  (349,960 )  (5,231,097 )
 Net change in unrealized depreciation or appreciation on investments   82,910    (1,342,210 )  (638,023 )  (8,888,270 )
                      
Net realized and unrealized gain (loss) on investments   82,910    (456,572 )  (638,023 )  364,340  
Net increase (decrease) in net assets from operations  $57,931   $(571,300 ) $(936,887 ) $(986,912 )
Weighted average shares outstanding   6,321,988    6,325,299    6,321,988    6,327,074  
Basic and diluted net increase (decrease) in net assets from operations per share  $0.01   $(0.09 ) $(0.15 ) $(0.16 )

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