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 June 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 August 4, 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 June 30, 2023 (Unaudited) and December 31, 2022	1
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2023 and 2022 (Unaudited)	2
	Consolidated Statements of Changes in Net Assets for the Three and Six Months Ended June 30, 2023 and 2022 (Unaudited)	3
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022 (Unaudited)	4
	Consolidated Schedule of Portfolio Investments as of June 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	35
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	45
Item 4.	Controls and Procedures	46
PART II. – OTHER INFORMATION
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 3.	Defaults upon Senior Securities	47
Item 4.	Mine Safety Disclosures	47
Item 5.	Other Information	47
Item 6.	Exhibits	48

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements and Supplementary Data

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

	June 30, 2023 (Unaudited)			December 31, 2022
ASSETS
Investments at fair value:
Control investments (cost of $5,155,545 and $4,660,017, respectively)	$	4,031,735		$	3,536,207
Affiliate investments (cost of $35,940,068 and $30,204,160,    respectively)		43,090,799			38,241,589
Non-Control/Non-Affiliate investments (cost of $19,873,405 and    $20,852,060, respectively)		19,669,209			19,726,463
Total investments, at fair value (cost of $60,969,018 and $55,716,237,    respectively)		66,791,743			61,504,259
Cash		8,356,401			1,368,996
Interest receivable		199,587			208,338
Prepaid income taxes		—			76,396
Deferred tax asset		174,826			28,160
Other assets		532,280			295,043
Total assets	$	76,054,837		$	63,481,192
LIABILITIES AND STOCKHOLDERS’ EQUITY (NET ASSETS)
Liabilities:
Due to investment adviser	$	255,867		$	562,221
Accounts payable and accrued expenses		79,983			66,680
Income taxes payable		253,870			—
Line of credit (see Note 6)		10,650,000			2,550,000
Capital gains incentive fees		2,949,000			2,167,000
Deferred revenue		464,089			413,971
Total liabilities		14,652,809			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 6/30/23 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 6/30/23 and 12/31/22		(1,566,605	)		(1,566,605	)
Total distributable earnings		11,239,474			7,558,766
Total stockholders’ equity (net assets) (per share –6/30/23: $23.79;    12/31/22: $22.36)		61,402,028			57,721,320
Total liabilities and stockholders’ equity (net assets)	$	76,054,837		$	63,481,192

See accompanying notes

1

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended June 30, 2023		Three months ended June 30, 2022			Six months ended June 30, 2023		Six months ended June 30, 2022
Investment income:
Interest from portfolio companies:
Control investments	$	179,922	$	—		$	330,838	$	—
Affiliate investments		941,201		614,997			1,729,022		1,185,113
Non-Control/Non-Affiliate investments		352,417		389,835			710,583		731,858
Total interest from portfolio companies		1,473,540		1,004,832			2,770,443		1,916,971
Interest from other investments:
Non-Control/Non-Affiliate investments		104		1			236		1
Total interest from other investments		104		1			236		1
Dividend and other investment income:
Affiliate investments		59,677		202,785			406,825		246,510
Non-Control/Non-Affiliate investments		132,920		113,735			260,515		243,000
Total dividend and other investment income		192,597		316,520			667,340		489,510
Fee income:
Control investments		4,311		—			8,211		—
Affiliate investments		138,902		22,515			206,744		52,820
Non-Control/Non-Affiliate investments		5,978		9,314			13,956		18,628
Total fee income		149,191		31,829			228,911		71,448
Total investment income		1,815,432		1,353,182			3,666,930		2,477,930
Expenses:
Base management fee (see Note 8)		255,867		230,767			501,260		471,042
Capital gains incentive fees (see Note 8)		491,000		(663,000	)		782,000		(902,760	)
Interest expense		258,912		—			417,312		—
Professional fees		100,307		212,138			271,282		443,221
Stockholders and office operating		85,080		64,890			149,384		121,588
Directors' fees		67,391		44,883			131,241		89,983
Administrative fees		37,250		—			74,500		—
Insurance		10,380		13,353			23,340		22,263
Corporate development		554		726			4,267		3,753
Other operating		—		45			—		90
Total expenses		1,306,741		(96,198	)		2,354,586		249,180
Net investment income before income taxes:		508,691		1,449,380			1,312,344		2,228,750
Income taxes, including excise tax expense		16,061		31,243			104,798		38,610
Net investment income		492,630		1,418,137			1,207,546		2,190,140
Net realized gain on sales and dispositions of investments:
Affiliate investments		2,537,765		167,159			2,596,094		167,159
Non-Control/Non-Affiliate investments