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News and Information Article
- Net Asset Value increases 83% during the quarter ending December 31, 2006
to $2.93 per share
- Invests $1.5 million in the quarter
- 2006 Investment income grows over 80% compared to 2005, with primary
growth due to fourth quarter dividends and interest income
- $6 million in funding remains available for future investment
BUFFALO, N.Y., Jan. 26 /-FirstCall/ -- Rand Capital
Corporation (Nasdaq: RAND) ("Rand"), a business development company (BDC)
that provides capital and managerial expertise for small to medium-sized
private companies, announced its financial results for the fourth quarter
ended December 31, 2006. Rands net asset value increased by $1.33 during
the quarter, to close the quarter and year ended December 31, 2006 at $2.93
per share. The net asset value increased $1.42 per share, or 94%, from
$1.51 at December 31, 2005. This was the fourth consecutive quarterly
increase in net assets for the Company during the year. At December 31,
2006, Rands total investment portfolio was valued at $23 million, which
exceeds its cost basis of $14 million, reflecting $9 million in net
unrealized appreciation.
Allen F. Grum, President of Rand Capital stated "I am pleased with the
results of the quarter and the year. The new financings by Innov-X and
Synacor, that we participated in, provide working capital that allows them
to significantly expand their businesses. Many of our other businesses had
record years and we believe these results will be reflected in higher
equity values over time."
Revenue
Investment income increased by 80% or approximately $590,000 to $1.3
million for the year ended December 31, 2006 compared with the same period
last year. The growth in 2006 was driven by increases in dividends and
interest from portfolio companies, primarily occurring during the third and
fourth quarters of 2006.
Dividend and other investment income grew primarily because of higher
Limited Liability Corporation (LLC) distributions from companies in the
portfolio that have improving operational trends, in particular Gemcor II,
LLC, (http://www.gemcor.com) Topps Meat Company LLC, (http://www.toppsmeat.com) and
Carolina Skiff LLC, (http://www.carolina-skiff.com). Gemcor designs and sells
automatic riveting machines to manufacturers of airframes, missile bodies,
space system accessories, and other aerospace equipment. Topps is a 66 year
old manufacturer and supplier of premium frozen meat products. Carolina
Skiff is a leading manufacturer of affordable fishing and recreational
boats. LLC dividends can fluctuate based on portfolio companies
profitability and the timing of distributions.
The cash balance at December 31, 2006 was $4.3 million which was $3.1
million higher than at the end of last year. The increase was primarily due
to portfolio investment repayments and loan repayments. In addition, Rand
has $1.9 million of outstanding leverage available from the Small Business
Administration (SBA) for future investment.
Daniel Penberthy, Rands Executive Vice President stated, "Rand has
sufficient capital available to continue a strong investment pace over the
next couple of years, and we are actively searching for new investment
opportunities with similar growth rates to those being experienced by our
current portfolio, which we believe will have further positive impact to
net asset value and shareholders."
Fourth Quarter 2006 Investments
During the quarter, Rands wholly-owned subsidiary, Rand Capital SBIC,
L.P., invested $1,000,000 in Innov-X Systems, Inc. (Woburn, MA)
(http://www.innovx-sys.com), in a $28.75 million minority round of financing in
the form of preferred equity shares led by Summit Partners,
(http://www.summitpartners.com). Simultaneously with this investment, Innov-X
repaid Rands $600,000 note. Innov-X develops systems that perform rapid,
accurate chemical analysis to identify, differentiate and quantify most
materials by elemental composition. Their products are commonly used in
manufacturing and compliance testing environments. Innov-X previously
announced a joint venture with A.P. Moller-Maersk Group (http://www.maersk.com)
for its SEA-Mate elemental analyzer. Innov-X will supply X-Ray Fluorescence
(XRF) systems for on-board analysis of lubricants, fuels and related fluids
to Maersk Fluid Technology, Inc., which will be the exclusive sales channel
for Innov-X XRF systems into the Marine, Power Generation, and Oil & Gas
markets.
Innov-X has incorporated its XRF technology into recently released
RoHS-Star software which, as part of the Innov-X handheld detector, assists
manufacturers in complying with the European Unions Restriction on
Hazardous Substance (RoHS) directive. RoHS bans from the EU new electrical
and electronic equipment containing more than agreed levels of lead,
cadmium, mercury and several other hazardous substances. Innov-Xs new
software enables rapid screening of electronics systems, PC boards, plastic
parts and components for RoHS compliance. Many States in the USA are
expected to adopt similar standards domestically, with California already
requiring testing effective January 1, 2007 for video screens and
electronics recycling.
Daniel Penberthy stated "Since Rands original investment in Innov-X in
2004, Innov-X has worked hard to identify new markets for its unique
analyzer, which has resulted in many applications, partnerships, and
increases in sales and profitability for the Company. Their success in the
market is evidenced by the Summit Partners investment, a well-healed,
experienced venture firm, who will join Rand Capital on the Innov-X Board
of Directors. This will allow Innov-X to fund its research, technology
development and sales development to continue its robust growth which will
lead to further liquidity for its shareholders and investors."
Rand Capital SBIC also increased its investment in Synacor, Inc.
(Buffalo, NY) (http://www.synacor.com) during the fourth quarter of 2006. Synacor
announced the closure of a $17 million "C Series" round of financing and
repaid Rands loan of $350,000. Concurrent with the repayment, Rand
participated in the financing round by purchasing $508,000 of the
securities. This "C Series" round of funding was led by North Atlantic
Capital and included financing from Mitsui Technology Investment Group,
both new investors in Synacor. Several existing Synacor investors, in
addition to Rand, participated in the round, including Crystal Ventures,
Advantage Capital Partners, Walden International, and Intel Capital. The
investment reinforces Synacors growing leadership position in the delivery
of premium online content and technology solutions that enable service
providers to extend ownership of their customers through the Internet to
create a highly personalized experience.
Investments in the portfolio companies were for working capital needs
to support the companies growth.
Sales and Principal Repayments
Consistent with Rands practice of selling publicly traded securities
that it acquires, Rand completed the liquidation of its position in Minrad
International, Inc. (http://www.minrad.com) (Amex: BUF). Rand sold the remaining
229,640 Minrad shares during the fourth quarter for a net gain of $656,232
in the quarter and a total realized gain of $1.25 million for the year.
In addition, Rand sold a portion of its Innov-X shares as part of the
Summit Financing, recognizing a realized gain of $2.28 million. Following
the sale, Rand holds an estimated 8.7% of Innov-X.
Portfolio Companies
Rands valuation policies provide that valuations should be adjusted
for a subsequent equity financing with new investors. In accordance with
this policy during the quarter, Rand recognized unrealized appreciation of
$7.76 million on its investment in Innov-X and $2.8 million in unrealized
appreciation on its investment in Synacor.
Also during the quarter Rand lowered its valuation of WineIsIt.com
(Amherst, NY) by $295,000, reflecting current business conditions of the
company.
Mr. Grum stated "As Rand seeks out new investment opportunities our
current portfolio should continue to mature and turn over. To date Rand,
through its SBIC subsidiary, has invested over $13.5 million into 18
companies, and participated in these companies growth by investing in
follow-on financings of 10 of these companies. The strengthening of the
portfolio is shown by a growth in employment count of our portfolio
companies by over 300+ jobs since the time of our initial investment, as
well as an increase in revenues of $106 million for these companies over
the same period. Their growth helps to attract new investors, and supports
the higher valuations reflected in our net asset value."
Subsequent Events
Subsequent to the quarter end, Rands portfolio company, UStec, was
acquired by On-Q/Legrand, with Rand receiving partial repayment of its
outstanding debentures. In addition, the debenture instrument in
Adampluseve, LLC was paid in full subsequent to year end.
Safe Harbor Statement
This release may contain forward-looking statements and reports the
consolidated operations of Rand Capital Corporation and Rand Capital SBIC,
L.P; all statements are pursuant to the Safe Harbor Provisions of the 1995
Private Securities Litigation Reform Act; and are subject to uncertainties
in predicting future results. These statements reflect the Corporations
current beliefs, and many factors could cause actual results to differ
materially from this release. See Rands previously issued Form 10-Q filed
with the Securities and Exchange Commission for a detailed discussion of
the risks associated with the Corporations business, including but not
limited to, risks associated with venture capital investing and other
factors that could affect actual results. Except as required by Federal
securities laws, Rand Capital Corporation and Rand Capital SBIC, L.P.
undertake no obligation to update or revise forward-looking statements for
new events and uncertainties.
ABOUT RAND CAPITAL
Rand Capital is a publicly held Business Development Company (BDC), and
its wholly owned subsidiary is licensed by the Small Business
Administration (SBA) as a Small Business Investment Company (SBIC). Rand
and its subsidiaries provide capital and managerial expertise to small and
medium sized private companies that lack sufficient channels to the capital
markets. Rand is traded on the NASDAQ under the symbol "RAND". Rand is
headquartered in Buffalo, NY. http://www.randcapital.com
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