Rand Capital Invests $2.2 Million in Second Quarter of 2016
BUFFALO, NY--(Marketwired - August 02, 2016) -
- Net Asset Value per share of $5.28 at quarter end
- Added eHealth Global Technologies to portfolio with $1.5 million debt investment
- Provided $0.7 million in loans as follow-on funding to support growth of five portfolio companies
- Strong cash position with $14.4 million on hand; current priority to build investment income
/EINPresswire.com/ -- Rand Capital Corporation (NASDAQ: RAND) ("Rand"), a venture capital company that makes primarily equity investments in companies with emerging product, service or technology concepts, announced its results for the quarter ended June 30, 2016.
Allen F. ("Pete") Grum, President and Chief Executive Officer of Rand Capital, commented, "While we have a strong balance sheet and sufficient capital, we are currently prioritizing debt instrument investments to generate interest income. Our goal is to replace the income previously generated from investments exited in the trailing first quarter. All of the follow-on and initial investments we made in the second quarter were loans."
He added, "We believe we have a straight-forward portfolio strategy:
- Identify investments with strong growth potential to drive capital appreciation,
- Balance the maturities of our investments to allow for staging of exits,
- And, make investments that provide dividend or interest income to support operating costs.
Our pipeline of investment opportunities is strong. And, we believe that with this approach, we can repeat the levels of growth and success we have had over the last five and ten year periods."
Second Quarter Highlights
- Reported $5.28 net asset value (NAV) per share at June 30, 2016, up $0.12 per share, or 2%, over June 30, 2015.
- Invested $1.5 million in eHealth Global Technologies, Inc. during the quarter, a new addition to the Rand portfolio.
- Supported existing portfolio companies with approximately $748,000 of loans during the quarter:
- Empire Genomics, LLC: $250,000
- SciAps, Inc.: $200,000
- BeetNPath, LLC: $150,000
- Genicon, Inc.: $100,000
- Knoa Software, Inc.: $ 48,466
- Made investments in the first half of 2016 that are expected to generate approximately $375,000 in annualized interest income.
- Portfolio fair value was $27.7 million and cash was $14.4 million at the end of the 2016 second quarter.
Compared with the prior-year period, dividend and interest income was down $0.5 million in the second quarter of 2016. The decline was the result of the sale in the first quarter of Gemcor, a large dividend and interest generating asset. Additionally, operating expenses in the current quarter were up $104,723 compared with last year's second quarter, primarily due to higher professional fees related to evaluation of strategic options.
Selected portfolio highlights:
-
eHealth Global Technologies, Inc. (http://ehealthtechnologies.com/), a new investment this quarter, is an industry-leading provider of clinically-informed referral services. The company's eHealth Connect
® solution enhances patient and physician satisfaction by intelligently aggregating patients' clinical records to streamline referrals. The company's eHealth Connect® Image Exchange enables automated access to full diagnostic quality medical images within the context of an aggregated patient record. Rand provided $1.5 million in a senior subordinated secured term loan. - SciAps, Inc. (http://sciaps.com/), is a leading provider of handheld analytical instruments used in industrial, service/security, and mining markets to identify and analyze compounds, minerals and elements. Rand provided a $200,000 subordinated convertible note in the second quarter, supporting the company's investments in new products and market penetration initiatives. This is the third follow-on since the initial investment in July 2013, and brings Rand's total investment in SciAps to approximately $2.45 million at June 30, 2016.
- Tilson Technology Management, Inc. (http://www.tilsontech.com/). Another rapidly growing company within the Rand portfolio, Tilson is an information technology professional services and network construction company. Tilson recently announced that it was selected to manage the construction of security, communications and other elements for the final construction stages of a new US Embassy near Oslo, Norway. Tilson's headcount has approximately doubled in each of the past two years to support its growth initiatives. As of June 30, 2016, Rand's investment in Tilson was valued at $0.6 million in series B preferred shares issued in January 2015.
As of June 30, 2016, Rand's portfolio consisted of 31 active businesses. The portfolio is comprised of approximately 68% in equity investments and 32% in debt investments, compared with 77% in equity investments and 23% in debt investments at the same time last year.
Capital Allocation Priorities and Growth Strategy
Rand's priority for its capital is investment in its portfolio. However, the Company also maintains a share repurchase program which was authorized by the Board of Directors in October 2015. Under the program, the Company may repurchase up to approximately 465,000 shares through October 22, 2016. Rand will opportunistically use its capital to repurchase shares as a means of returning capital to shareholders.
Rand's growth strategy is to increase net asset value by capitalizing on maturing investments and leveraging those returns for further investment. Rand invests in companies at various stages of maturity with new or unique products or services that offer competitive advantage and compelling future potential.
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 wholly-owned subsidiary is licensed by the U.S. Small Business Administration (SBA) as a Small Business Investment Company (SBIC). 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: 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 Subsidiary
Consolidated Statements of Financial Position
------------- -------------
June 30,
2016 December 31,
(Unaudited) 2015
------------- -------------
ASSETS
----------------------------------------------
Investments at fair value:
Control investments (cost of $99,500 and
$1,141,472, respectively) $ 1,512,000 $ 13,916,472
Affiliate investments (cost of $16,708,952
and $17,663,217, respectively) 12,824,154 14,662,219
Non-Control/Non-affiliate investments
(cost of $13,468,832 and $8,606,053,
respectively). 13,321,933 8,253,709
------------- -------------
Total investments, at fair value (cost of
$30,277,284 and $27,410,742, respectively 27,658,087 36,832,400
Cash 14,376,673 5,844,795
Interest receivable (net of allowance:
$122,000 at 6/30/16 and 12/31/15) 254,801 215,224
Deferred tax asset 633,086 -
Prepaid income taxes - 65,228
Other assets 1,650,534 1,604,413
------------- -------------
Total assets $ 44,573,181 $ 44,562,060
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (NET
ASSETS)
----------------------------------------------
Liabilities:
Debentures guaranteed by the SBA (net of
debt issuance costs) $ 7,814,073 $ 7,800,373
Income tax payable 1,417,888 -
Deferred tax liability - 2,361,186
Profit sharing and bonus payable 1,593,659 282,000
Accounts payable and accrued expenses 249,177 238,911
Deferred revenue 60,336 25,930
------------- -------------
Total liabilities 11,135,133 10,708,400
Stockholders' equity (net assets):
Common stock, $.10 par; shares authorized
10,000,000; shares issued 6,863,034; shares
outstanding of 6,328,538 as of 6/30/16 and
12/31/15 686,304 686,304
Capital in excess of par value 10,581,789 10,581,789
Accumulated net investment loss (1,261,104 ) (24,580)
Undistributed net realized gain on
investments 26,629,373 18,262,401
Net unrealized (depreciation) appreciation
on investments (1,750,823 ) 5,795,237
Treasury stock, at cost; 534,496 shares as
of 6/30/16 and 12/31/15 (1,447,491 ) (1,447,491)
------------- -------------
Total stockholders' equity (net assets)
(per share 6/30/16: $5.28, 12/31/15:
$5.35) 33,438,048 33,853,660
------------- -------------
Total liabilities and stockholders'
equity $ 44,573,181 $ 44,562,060
============= =============
Rand Capital Corporation and Subsidiary
Consolidated Statements of Operations
(Unaudited)
-------------------------------------------------
For the Quarter Ended For the Six Months Ended
June 30, June 30,
---------------------- -------------------------
2016 2015 2016 2015
---------- ---------- ------------- ----------
Investment income:
Interest from portfolio
companies:
Control investments $ - $ 20,275 $ 11,828 $ 42,420
Affiliate investments 94,614 96,522 159,575 211,651
Non-Control/Non-
Affiliate
investments 68,527 66,422 129,632 115,222
---------- ---------- ------------- ----------
Total interest from
portfolio
companies 163,141 183,219 301,035 369,293
---------- ---------- ------------- ----------
Interest from other
investments:
Non-Control/Non-
Affiliate
investments 18,648 8,369 21,709 15,190
---------- ---------- ------------- ----------
Total interest from
other investments 18,648 8,369 21,709 15,190
---------- ---------- ------------- ----------
Dividend and other
investment income:
Control investments - 491,208 - 903,359
Affiliate investments 33,232 29,061 80,797 58,429
---------- ---------- ------------- ----------
Total dividend and
other investment
income 33,232 520,269 80,797 961,788
---------- ---------- ------------- ----------
Fee income:
Control investments - 2,000 2,000 4,000
Affiliate investments 1,167 416 1,862 1,833
Non-Control/Non-
Affiliate
investments 4,318 4,251 7,234 8,167
---------- ---------- ------------- ----------
Total fee income 5,485 6,667 11,096 14,000
---------- ---------- ------------- ----------
Total investment income 220,506 718,524 414,637 1,360,271
---------- ---------- ------------- ----------
Operating expenses:
Salaries 155,437 149,555 310,875 299,110
Bonus and profit
sharing - - 1,411,659 -
Employee benefits 36,711 29,394 126,222 59,801
Directors' fees 47,380 29,300 94,755 51,050
Professional fees 86,288 20,433 151,048 93,502
Stockholders and office
operating 61,542 55,717 124,036 115,114
Insurance 6,258 6,300 17,518 17,554
Corporate development 16,055 14,400 31,525 31,381
Other operating 2,375 2,224 5,975 5,874
---------- ---------- ------------- ----------
412,046 307,323 2,273,613 673,386
Interest on SBA
obligations 77,570 77,569 155,139 151,891
---------- ---------- ------------- ----------
Total operating
expenses 489,616 384,892 2,428,752 825,277
---------- ---------- ------------- ----------
Net investment (loss)
income before income
taxes (269,110) 333,632 (2,014,115) 534,994
Income tax (benefit)
expense (114,564) 101,920 (777,591) 173,987
---------- ---------- ------------- ----------
Net investment (loss)
income (154,546) 231,712 (1,236,524) 361,007
---------- ---------- ------------- ----------
Net realized gain on
investments:
Control investments - - 13,176,313 -
Non-Control/Non-
Affiliate investments 168,140 131,181 168,140 262,925
---------- ---------- ------------- ----------
Net realized gain
before income taxes 168,140 131,181 13,344,453 262,925
Income tax expense 34,520 42,591 4,977,481 89,742
---------- ---------- ------------- ----------
Net realized gain on
investments 133,620 88,590 8,366,972 173,183
Net change in unrealized
depreciation or
appreciation on
investments:
Control investments - - (11,362,500) -
Affiliate investments (325,000) (193,436) (747,800) (193,436)
Non-Control/Non-
Affiliate investments 69,444 (73,219) 69,444 (127,728)
---------- ---------- ------------- ----------
Change in unrealized
depreciation or
appreciation before
income taxes (255,556) (266,655) (12,040,856) (321,164)
Deferred income tax
benefit (78,390) (89,449) (4,494,796) (109,618)
---------- ---------- ------------- ----------
Net decrease in
unrealized
depreciation or
appreciation on
investments (177,166) (177,206) (7,546,060) (211,546)
---------- ---------- ------------- ----------
Net realized and
unrealized (loss) gain
on investments (43,546) (88,616) 820,912 (38,363)
---------- ---------- ------------- ----------
Net (decrease) increase
in net assets from
operations $ (198,092) $ 143,096 $ (415,612) $ 322,644
========== ========== ============= ==========
Weighted average shares
outstanding 6,328,538 6,328,538 6,328,538 6,328,538
Basic and diluted net
(decrease) increase in
net assets from
operations per share $ (0.03) $ 0.02 $ (0.07) $ 0.05
========== ========== ============= ==========
Contacts:
Company:
Allen F. ("Pete") Grum
President and CEO
Phone: 716.853.0802
Email: pgrum@randcapital.com
Investors:
Deborah K. Pawlowski
Kei Advisors LLC
Phone: 716.843.3908
Email: dpawlowski@keiadvisors.com
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