Rand Capital (NASDAQ: RAND) Q1 2026 results show lower income and NAV
Rand Capital Corporation reported a small net loss for the quarter as lower investment income and unrealized losses offset gains. Total investment income was $1.24M for the three months ended March 31, 2026, down from $2.01M a year earlier, mainly due to lower interest and fee income from portfolio companies.
Expenses declined to $0.64M from $0.79M, but the net change in unrealized depreciation on investments was a loss of $1.99M, compared with a $1.30M loss in the prior-year quarter. After including realized gains of $1.08M, Rand recorded a net decrease in net assets from operations of $0.37M, versus an increase of $0.84M last year.
Net assets were $50.95M, or $17.16 per share, at March 31, 2026, slightly below $17.57 per share at December 31, 2025. The company invested heavily in new and existing portfolio positions, driving cash and cash equivalents down to $0.33M from $4.21M, and drew $0.50M on its credit facility. A quarterly dividend of $0.29 per share was declared and paid.
Positive
- None.
Negative
- None.
Insights
Lower income, higher unrealized losses, but portfolio deployment continues.
Rand Capital saw total investment income fall to $1.24M from $2.01M, as interest and fee income from affiliate and non-control investments declined. Net investment income roughly halved to $0.55M, even though operating expenses were lower year over year.
The key swing factor was valuation: the net change in unrealized depreciation on investments widened to a loss of $1.99M. That pushed overall results to a $0.37M net decrease in net assets from operations and nudged NAV per share down from $17.57 to $17.16. These are non-cash marks but matter for long-term value.
Management continued to deploy capital, with more than $5.1M invested into portfolio companies, which reduced cash and required a $0.50M credit facility draw. Three debt investments on non-accrual carried $17.4M cost and $7.3M fair value, a meaningful portion of the portfolio, while PIK interest represented 19.7% of investment income, underscoring credit and valuation sensitivity going forward.
Key Figures
Key Terms
Business development company regulatory
Payment in kind (PIK) financial
Non-accrual status financial
Level 3 investments financial
Senior secured revolving credit facility financial
Regulated investment company (RIC) tax
Earnings Snapshot
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
For the Transition Period from _____ to _______
Commission File Number:
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Securities registered pursuant to Section 12(b) of the Act:
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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.
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).
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.
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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 May 6, 2026, there were
Table of Contents
RAND CAPITAL CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS FOR FORM 10-Q
PART I. – FINANCIAL INFORMATION |
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Item 1. |
Financial Statements and Supplementary Data |
1 |
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Consolidated Statements of Financial Position as of March 31, 2026 (Unaudited) and December 31, 2025 |
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Consolidated Statements of Operations for the Three Months Ended March 31, 2026 and 2025 (Unaudited) |
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Consolidated Statements of Changes in Net Assets for the Three Months Ended March 31, 2026 and 2025 (Unaudited) |
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Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2026 and 2025 (Unaudited) |
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Consolidated Schedule of Portfolio Investments as of March 31, 2026 (Unaudited) |
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Consolidated Schedule of Portfolio Investments as of December 31, 2025 |
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Notes to the Consolidated Financial Statements (Unaudited) |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
36 |
Item 3. |
Quantitative and Qualitative Disclosures about Market Risk |
45 |
Item 4. |
Controls and Procedures |
46 |
PART II. – OTHER INFORMATION |
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Item 1. |
Legal Proceedings |
48 |
Item 1A. |
Risk Factors |
48 |
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
48 |
Item 3. |
Defaults upon Senior Securities |
48 |
Item 4. |
Mine Safety Disclosures |
48 |
Item 5. |
Other Information |
48 |
Item 6. |
Exhibits |
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Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements and Supplementary Data
RAND CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
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March 31, |
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December 31, |
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ASSETS |
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Investments at fair value: |
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Control investments (cost of $ |
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$ |
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$ |
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Affiliate investments (cost of $ |
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Non-Control/Non-Affiliate investments (cost of $ |
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Total investments, at fair value (cost of $ |
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Cash and cash equivalents |
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Interest receivable (net of allowance of $ |
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Prepaid income taxes |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY (NET ASSETS) |
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Liabilities: |
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Due to investment adviser (see Note 8) |
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Accounts payable and accrued expenses |
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Line of credit (see Note 6) |
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Deferred revenue |
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Total liabilities |
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Commitments and contingencies (see Note 5) |
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Stockholders’ equity (net assets): |
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Common stock, $ |
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Capital in excess of par value |
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Treasury stock, at cost: |
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Total distributable earnings |
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Total stockholders’ equity (net assets) (per share – 3/31/26: $ |
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Total liabilities and stockholders’ equity (net assets) |
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$ |
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$ |
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See accompanying notes
1
Table of Contents
RAND CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three months ended |
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Three months ended |
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Investment income: |
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Interest from portfolio companies: |
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Control investments |
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$ |
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$ |
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Affiliate investments |
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Non-Control/Non-Affiliate investments |
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Total interest from portfolio companies |
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Interest from other investments: |
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Non-Control/Non-Affiliate investments |
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Total interest from other investments |
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Dividend and other investment income: |
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Affiliate investments |
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Total dividend and other investment income |
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Fee income: |
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Control investments |
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Affiliate investments |
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Non-Control/Non-Affiliate investments |
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Total fee income |
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Total investment income |
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Expenses: |
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Base management fee (see Note 8) |
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Income based incentive fees (see Note 8) |
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Capital gains incentive fees (see Note 8) |
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Interest expense |
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Professional fees |
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Stockholders and office operating |
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Directors' fees |
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Administrative fees |
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Insurance |
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Corporate development |
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Bad debt expense |
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Total expenses |
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Net investment income before income taxes: |
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Income tax expense (benefit) |
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Net investment income |
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Net realized gain on sales and dispositions of investments: |
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Affiliate investments |
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Non-Control/Non-Affiliate investments |
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Net realized gain on sales and dispositions of investments |
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Net change in unrealized appreciation/depreciation |
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Control investments |
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Affiliate investments |
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Change in unrealized appreciation/depreciation before income taxes |
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Deferred income tax (benefit) expense |
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Net change in unrealized appreciation/depreciation on investments |
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Net realized and unrealized loss on investments |
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Net (decrease) increase in net assets from operations |
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$ |
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$ |
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Weighted average shares outstanding |
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Basic and diluted net (decrease) increase in net assets from operations per share |
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$ |
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$ |
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See accompanying notes
2
Table of Contents
RAND CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
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Three months ended |
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Three months ended |
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Net assets at beginning of period |
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$ |
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$ |
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Net investment income |
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Net realized gain on sales and dispositions of investments |
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Net change in unrealized appreciation/depreciation on investments |
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Net (decrease) increase in net assets from operations |
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Declaration of dividend |
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Net assets at end of period |
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$ |
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$ |
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See accompanying notes
3
Table of Contents
RAND CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Three months ended |
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Three months ended |
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Cash flows from operating activities: |
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Net (decrease) increase in net assets from operations |
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$ |
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$ |
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Adjustments to reconcile net (decrease) increase in net assets to net cash (used in) provided by operating activities: |
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Investments in portfolio companies |
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Proceeds from sale of portfolio investments |
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Proceeds from loan repayments |
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Net realized gain on sales and dispositions of portfolio investments |
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Change in unrealized appreciation/depreciation on investments |
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Deferred income tax benefit |
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Amortization |
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Original issue discount amortization |
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Non-cash conversion of debenture interest |
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Non-cash conversion of loan modification fee |
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Change in interest receivable allowance |
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Changes in operating assets and liabilities: |
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(Increase) decrease in interest receivable |
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Increase in other assets |
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( |
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( |
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Increase in prepaid income taxes |
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( |
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( |
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Decrease in accounts payable and accrued expenses |
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( |
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( |
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Increase (decrease) in due to investment adviser |
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Decrease in capital gains incentive fees payable |
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Increase (decrease) in deferred revenue |
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Total adjustments |
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Net cash (used in) provided by operating activities |
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Cash flows from financing activities: |
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Net proceeds from (repayment of) line of credit |
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Payment of cash dividend |
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Net cash used in financing activities |
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Net (decrease) increase in cash and cash equivalents |
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Cash and cash equivalents: |
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Beginning of period |
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End of period |
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$ |
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$ |
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See accompanying notes
4
Table of Contents
RAND CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 2026
(Unaudited)
Company, Geographic Location, Business Description, (Industry) and Website |
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Cost |
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(d)(f) |
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Percent of Net Assets |
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Non-Control/Non-Affiliate Investments – |
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Caitec, Inc. (k)(q) |
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$ |
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www.caitec.com |
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— |
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$ |
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— |
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Total Caitec |
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GoNoodle, Inc. (k)(q) |
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$ |
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< |
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education software providing core aligned |
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Warrant for |
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physical activity breaks. (Software) |
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Total GoNoodle |
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www.gonoodle.com |
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OnCore Golf Technology, Inc. (g)(q) |
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Open Exchange, Inc. (g)(q) |
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Lincoln, MA. Online presentation and |
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— |
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training software. (Software) |
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Total Open Exchange |
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www.openexc.com |
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PostProcess Technologies, Inc. (g)(q) |
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< |
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— |
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SQF LLC d/b/a Verta (g)(q) |
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— |
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Portland, ME. Develops and operates |
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& wireless telecom transmission. |
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Total SQF LLC |
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(Professional and Business Services) |
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www.vertawireless.com |
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Subtotal Non-Control/Non-Affiliate Investments |
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$ |
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$ |
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Affiliate Investments – |
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AME Holdco, LLC (o)(q) |
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$ |
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service center design, equipment, installation |
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and service. |
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Total AME |
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(Professional and Business Services) |
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www.amecompanies.com |
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Applied Image, Inc. (i)(q) |
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$ |
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imaged optical components and calibration |
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Warrant for |
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— |
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— |
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standards for a wide range of industries and |
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Total Applied Image |
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applications. (Manufacturing) |
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www.appliedimage.com |
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See accompanying notes
5
Table of Contents
RAND CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 2026 (Continued)
(Unaudited)
Company, Geographic Location, Business Description, (Industry) and Website |
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(b) |
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(c) |
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Cost |
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(d)(f) |
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Percent of Net Assets |
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Autotality (g)(k)(o)(q) |
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$ |
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booth filter services for collision shops. |
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— |
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(Automotive) |
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— |
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www.autotality.com |
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Total Autotality |
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|
||
Bauer Sheet Metal and Fabricating, LLC |
|
$ |
|
|
|
|
|
|
|
|
|
|||||
Muskegon, MI. Sheet metal fabricator and |
|
Warrant for |
|
|
|
|
|
|
|
|
|
|
|
|
||
installer. (Manufacturing) |
|
Total Bauer |
|
|
|
|
|
|
|
|
|
|
|
|
||
www.bauersheetmetal.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
BlackJet Direct Marketing, LLC (k)(o)(q) |
|
$ |
|
|
|
|
|
|
|
|
|
|||||
agency specializing in the travel/tourism, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
home services and legal services markets. |
|
Total BlackJet Direct Marketing |
|
|
|
|
|
|
|
|
|
|
|
|
||
(Marketing) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
www.blackjetmarketing.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
BMP Food Service Supply Holdco, LLC (g)(h)(k)(o)(q) |
|
$ |
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|||
|
|
Total BMP Food Service Supply |
|
|
|
|
|
|
|
|
|
|
|
|
||
BMP Swanson Holdco, LLC (k)(o)(q) |
|
$ |
|
|
|
|
|
|
|
|
|
|||||
(Professional and Business Services) |
|
Preferred Membership Interest for |
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
Total BMP Swanson |
|
|
|
|
|
|
|
|
|
|
|
|
||
Carolina Skiff LLC (g)(o)(q) |
|
|
|
|
|
|
|
|
|
|
||||||
fishing and pleasure boats. (Manufacturing) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
www.carolinaskiff.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
FCM Industries Holdco LLC (k)(q) |
|
$ |
|
|
|
|
|
|
|
|
|
|||||
installation company that serves a range |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|||
(Professional and Business Services) |
|
Total FCM Industries |
|
|
|
|
|
|
|
|
|
|
|
|
||
www.firstcoastmulch.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Highland All About People Holdings, Inc. (k)(q) |
|
$ |
|
|
|
|
|
|
|
|
|
|||||
Phoenix, AZ. Full-service staffing and |
|
|
|
|
|
|
|
|
|
|
|
|
||||
executive search firm with a focus on the |
|
Total Highland All About People |
|
|
|
|
|
|
|
|
|
|
|
|
||
healthcare industry. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Inter-National Electronic Alloys LLC |
|
$ |
|
|
|
|
|
|
|
|
|
|||||
Oakland, NJ. Stocking distributor of |
|
|
|
|
|
|
|
|
|
|
|
|
||||
controlled expansion alloys, electronic grade |
|
Total EFINEA |
|
|
|
|
|
|
|
|
|
|
|
|
||
nickels, refractory grade metals and alloys, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
See accompanying notes
6
Table of Contents
RAND CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 2026 (Continued)
(Unaudited)
Company, Geographic Location, Business Description, (Industry) and Website |
|
(a) |
|
(b) |
|
(c) |
|
Cost |
|
|
(d)(f) |
|
|
Percent of Net Assets |
||
Mobile RN Holdings LLC d/b/a Mobile IV Nurses (k)(o)(q) |
|
$ |
|
|
|
|
|
|
|
|
|
|||||
Phoenix, AZ. IV hydration therapy service |
|
|
|
|
|
|
|
|
|
|
|
|
||||
provider. (Health and Wellness) |
|
Total Mobile IV Nurses |
|
|
|
|
|
|
|
|
|
|
|
|
||
www.mobileivnurses.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Mountain Regional Equipment Solutions (g)(h)(o)(q) |
|
$ |
|
|
|
|
|
|
|
|
|
|||||
Salt Lake City, UT. Provider of maintenance, |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|||
www.mountainregionaleq.com |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|||
|
|
Warrant for |
|
|
|
|
|
|
|
|
— |
|
|
|
||
|
|
Total Mountain Regional Equipment Solutions |
|
|
|
|
|
|
|
|
|
|
|
|
||
Subtotal Affiliate Investments |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
||
Control Investments - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
ITA Acquisition, LLC (h)(k)(o)(q) |
|
$ |
|
|
|
|
|
|
|
|
|
|||||
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|||
|
|
Total ITA |
|
|
|
|
|
|
|
|
|
|
|
|
||
Subtotal Control Investments |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
||
TOTAL INVESTMENTS – |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
||
Money Market Funds (included in cash and cash equivalents) - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
JPMorgan U.S. Government Money Market Fund Premier, |
|
|
|
N/A |
|
N/A |
|
|
|
|
|
|
|
|||
Subtotal Money Market Funds |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
||
TOTAL INVESTMENTS AND MONEY MARKET FUNDS – |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
||
LIABILITIES IN EXCESS OF OTHER ASSETS - ( |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
NET ASSETS – |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
||
See accompanying notes
7
Table of Contents
RAND CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 2026 (Continued)
(Unaudited)
Notes to the Consolidated Schedule of Portfolio Investments
8
Table of Contents
RAND CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 2026 (Continued)
(Unaudited)
Investments in and Advances to Affiliates
Company |
|
Type of Investment |
|
January 1, 2026, Fair Value |
|
|
Net Change in Unrealized Appreciation (Depreciation) |
|
|
Gross Additions |
|
|
Gross Reductions |
|
|
March 31, 2026, Fair Value |
|
|
Net Realized Gains (Losses) |
|
|
Interest/ |
|
|||||||
Control Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
ITA Acquisition, LLC |
|
$ |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
|
|
$ |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
Total ITA |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
|
|
Total Control Investments |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
Affiliate Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
AME Holdco, LLC |
|
$ |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
|
|
Total AME |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Applied Image, Inc. |
|
$ |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
|||
|
|
Warrant for |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Total Applied Image |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
|||
Autotality |
|
$ |
|
|
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
Total Autotality |
|
|
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Bauer Sheet Metal and Fabricating LLC |
|
$ |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
|
|
Warrant for |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
|
|
Total Bauer |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||||
BlackJet Direct Marketing, LLC |
|
$ |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
|
|
Total BlackJet |
|
|
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
BMP Food Service Supply Holdco, LLC |
|
$ |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
Total FSS |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
BMP Swanson Holdco, LLC |
|
$ |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
|
|
Preferred Membership Interest for |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||
|
|
Total BMP Swanson |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Carolina Skiff LLC |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
||
|
|
Total Carolina Skiff |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|||
See accompanying notes
9
Table of Contents
RAND CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 2026 (Continued)
(Unaudited)
Company |
|
Type of Investment |
|
January 1, 2026, Fair Value |
|
|
Net Change in Unrealized Appreciation (Depreciation) |
|
|
Gross Additions |
|
|
Gross Reductions |
|
|
March 31, 2026, Fair Value |
|
|
Net Realized Gains (Losses) |
|
|
Interest/ |
|
|||||||
FCM Industries Holdco LLC |
|
$ |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
|
|
$ |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
|
|
Total FCM |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Highland All About People Holdings, Inc. |
|
$ |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||||
|
|
Total All About People |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||||
Inter-National Electronic Alloys |
|
$ |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
LLC |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
|
|
Total EFINEA |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Mobile RN Holdings LLC |
|
$ |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
|
|
Total Mobile IV Nurses |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Mountain Regional Equipment Solutions |
|
$ |
|
|
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
|
|
$ |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
||||
|
|
Warrant for |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Total MRES |
|
|
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Seybert’s Billiards |
|
Warrant for |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
— |
|
||
Corporation |
|
Warrant for |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
— |
|
||
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
— |
|
|||
|
|
Total Seybert’s |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
— |
|
||
|
|
Total Affiliate Investments |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||
|
|
Total Control and Affiliate Investments |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||
This schedule should be read in conjunction with the Corporation’s Consolidated Financial Statements, including the Notes to the Consolidated Financial Statements and the Consolidated Schedule of Portfolio Investments.
See accompanying notes
10
Table of Contents
RAND CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 2026 (Continued)
(Unaudited)
Industry Classification |
|
Percentage of Total Investments (at fair value) as of March 31, 2026 |
|
|
Professional and Business Services |
|
|
% |
|
Manufacturing |
|
|
|
|
Distribution |
|
|
|
|
Consumer Product |
|
|
|
|
Health and Wellness |
|
|
|
|
Marketing |
|
|
|
|
Automotive |
|
|
|
|
Software |
|
|
|
|
Total Investments |
|
|
% |
|
See accompanying notes
11
Table of Contents
RAND CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 2025
Company, Geographic Location, Business Description, (Industry) and Website |
|
(a) |
|
(b) |
|
(c) |
|
Cost |
|
|
(d)(f) |
|
|
Percent of Net Assets |
||
Non-Control/Non-Affiliate Investments – |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Caitec, Inc. (k)(q) |
|
$ |
|
|
|
|
|
|
|
|
|
|||||
www.caitec.com |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|||
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|||
|
|
Total Caitec |
|
|
|
|
|
|
|
|
|
|
|
|
||
GoNoodle, Inc. (k)(q) |
|
$ |
|
|
< |
|
|
|
|
|
|
|
||||
education software providing core aligned |
|
Warrant for |
|
|
|
|
|
|
|
|
|
|
|
|||
physical activity breaks. (Software) |
|
Total GoNoodle |
|
|
|
|
|
|
|
|
|
|
|
|
||
www.gonoodle.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
OnCore Golf Technology, Inc. (g)(q) |
|
|
|
|
|
|
|
|
|
|
||||||
Open Exchange, Inc. (g)(q) |
|
|
|
|
|
|
|
|
|
|
||||||
Lincoln, MA. Online presentation and |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|||
training software. (Software) |
|
Total Open Exchange |
|
|
|
|
|
|
|
|
|
|
|
|
||
www.openexc.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
PostProcess Technologies, Inc. (g)(q) |
|
|
|
< |
|
|
|
|
|
— |
|
|
||||
SQF LLC d/b/a Verta (g)(q) |
|
|
|
|
|
— |
|
|
|
|
|
|||||
Portland, ME. Develops and operates |
|
|
|
|
|
|
|
|
|
|
|
|
||||
innovative pole and tower solutions for 5G |
|
Total SQF LLC |
|
|
|
|
|
|
|
|
|
|
|
|
||
& wireless telecom transmission. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
(Professional and Business Services) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
www.vertawireless.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Subtotal Non-Control/Non-Affiliate Investments |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
||
Affiliate Investments – |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Applied Image, Inc. (q) |
|
$ |
|
|
|
|
|
|
|
|
|
|||||
imaged optical components and calibration |
|
Warrant for |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
standards for a wide range of industries and |
|
Total Applied Image |
|
|
|
|
|
|
|
|
|
|
|
|
||
applications. (Manufacturing) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
www.appliedimage.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Autotality (formerly Filterworks Acquisition USA, LLC) (g)(k)(o)(q) |
|
$ |
|
|
|
|
|
|
|
|
|
|||||
equipment, frame repair machines and paint |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|||
booth filter services for collision shops. |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|||
(Automotive) |
|
Total Autotality |
|
|
|
|
|
|
|
|
|
|
|
|
||
www.autotality.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
See accompanying notes
12
Table of Contents
RAND CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 2025 (Continued)
Company, Geographic Location, Business Description, (Industry) and Website |
|
(a) |
|
(b) |
|
(c) |
|
Cost |
|
|
(d)(f) |
|
|
Percent of Net Assets |
||
Bauer Sheet Metal and Fabricating Inc. |
|
$ |
|
|
|
|
|
|
|
|
|
|||||
Muskegon, MI. Sheet metal fabricator and installer. (Manufacturing) |
|
Warrant for |
|
|
|
|
|
|
|
|
|
|
|
|
||
www.bauersheetmetal.com |
|
Total Bauer |
|
|
|
|
|
|
|
|
|
|
|
|
||
BlackJet Direct Marketing, LLC (k)(o)(q) |
|
$ |
|
|
|
|
|
|
|
|
|
|||||
agency specializing in the travel/tourism, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
home services and legal services markets. |
|
Total BlackJet Direct Marketing |
|
|
|
|
|
|
|
|
|
|
|
|
||
(Marketing) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
www.blackjetmarketing.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
BMP Food Service Supply Holdco, LLC (h)(k)(o)(q) |
|
$ |
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|||
|
|
Total BMP Food Service Supply |
|
|
|
|
|
|
|
|
|
|
|
|
||
BMP Swanson Holdco, LLC (k)(o)(q) |
|
$ |
|
|
|
|
|
|
|
|
|
|||||
(Professional and Business Services) |
|
Preferred Membership Interest for |
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
Total BMP Swanson |
|
|
|
|
|
|
|
|
|
|
|
|
||
Carolina Skiff LLC (g)(o)(q) |
|
|
|
|
|
|
|
|
|
|
||||||
fishing and pleasure boats. (Manufacturing) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
www.carolinaskiff.com |
|
Total Carolina Skiff |
|
|
|
|
|
|
|
|
|
|
|
|
||
FCM Industries Holdco LLC (k)(q) |
|
$ |
|
|
|
|
|
|
|
|
|
|||||
installation company that serves a range |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|||
(Professional and Business Services) |
|
Total FCM Industries |
|
|
|
|
|
|
|
|
|
|
|
|
||
www.firstcoastmulch.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Highland All About People Holdings, Inc. (k)(q) |
|
$ |
|
|
|
|
|
|
|
|
|
|||||
Phoenix, AZ. Full-service staffing and |
|
|
|
|
|
|
|
|
|
|
|
|
||||
executive search firm with a focus on the |
|
Total Highland All About People |
|
|
|
|
|
|
|
|
|
|
|
|
||
healthcare industry. |
|
(j) Interest Receivable $ |
|
|
|
|
|
|
|
|
|
|
|
|
||
Inter-National Electronic Alloys LLC |
|
$ |
|
|
|
|
|
|
|
|
|
|||||
Oakland, NJ. Stocking distributor of |
|
|
|
|
|
|
|
|
|
|
|
|
||||
controlled expansion alloys, electronic grade |
|
Total EFINEA |
|
|
|
|
|
|
|
|
|
|
|
|
||
nickels, refractory grade metals and alloys, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Mobile RN Holdings LLC d/b/a Mobile IV Nurses (k)(o)(q) |
|
$ |
|
|
|
|
|
|
|
|
|
|||||
Phoenix, AZ. IV hydration therapy service |
|
|
|
|
|
|
|
|
|
|
|
|
||||
provider. (Health and Wellness) |
|
Total Mobile IV Nurses |
|
|
|
|
|
|
|
|
|
|
|
|
||
www.mobileivnurses.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
See accompanying notes
13
Table of Contents
RAND CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 2025 (Continued)
Company, Geographic Location, Business Description, (Industry) and Website |
|
(a) |
|
(b) |
|
(c) |
|
Cost |
|
|
(d)(f) |
|
|
Percent of Net Assets |
||
Mountain Regional Equipment Solutions (g)(h)(k)(o)(q) |
|
$ |
|
|
|
|
|
|
|
|
|
|||||
safety, fluid transfer, and custom fabrication |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|||
products. (Distribution) |
|
Warrant for |
|
|
|
|
|
|
|
|
— |
|
|
|
||
www.mountainregionaleq.com |
|
Total Mountain Regional Equipment Solutions |
|
|
|
|
|
|
|
|
|
|
|
|
||
Seybert’s Billiards Corporation |
|
|
|
|
|
|
|
|
|
|
||||||
d/b/a The Rack Group (g)(q) |
|
Warrant for |
|
|
|
|
|
|
|
|
|
|
|
|||
Coldwater, MI. Billiard supplies. |
|
Warrant for |
|
|
|
|
|
|
|
|
|
|
|
|||
(Consumer Product) |
|
Total Seybert’s |
|
|
|
|
|
|
|
|
|
|
|
|
||
www.seyberts.com |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Subtotal Affiliate Investments |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
||
Control Investments - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
ITA Acquisition, LLC (h)(k)(o)(q) |
|
$ |
|
|
|
|
|
|
|
|
|
|||||
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Total ITA |
|
|
|
|
|
|
|
|
|
|
|
|
||
Subtotal Control Investments |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
||
TOTAL INVESTMENTS – |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
||
OTHER ASSETS IN EXCESS OF LIABILITIES - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
NET ASSETS – |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
||
See accompanying notes
14
Table of Contents
RAND CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 2025 (Continued)
Notes to the Consolidated Schedule of Portfolio Investments
15
Table of Contents
RAND CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 2025 (Continued)
Investments in and Advances to Affiliates
Company |
|
Type of Investment |
|
January 1, 2025, Fair Value |
|
|
Net Change in Unrealized Appreciation (Depreciation) |
|
|
Gross Additions |
|
|
Gross Reductions |
|
|
December 31, 2025, Fair Value |
|
|
Net Realized Gains (Losses) |
|
|
Interest/ |
|
|||||||
Control Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
ITA Acquisition, LLC |
|
$ |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||
|
|
$ |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
Total ITA |
|
|
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
|
|
Total Control Investments |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||
Affiliate Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Applied Image, Inc. |
|
$ |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
|
|
Warrant for |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Total Applied Image |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Autotality (formerly Filterworks Acquisition USA, LLC) |
|
$ |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
Total Autotality |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Bauer Sheet Metal and Fabricating Inc. |
|
$ |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
|
|
Warrant for |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||
|
|
Total Bauer |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
BlackJet Direct Marketing, LLC |
|
$ |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||||
|
|
Total BlackJet |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
BMP Food Service Supply Holdco, LLC |
|
$ |
|
|
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
|
|
Total FSS |
|
|
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
BMP Swanson Holdco, LLC |
|
$ |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
|
|
Preferred Membership Interest for |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||
|
|
Total BMP Swanson |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Carolina Skiff LLC |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
— |
|
|||
|
|
Total Carolina Skiff |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
— |
|
||||
FCM Industries Holdco LLC |
|
$ |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
|
|
$ |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
|
|
Total FCM |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||||
See accompanying notes
16
Table of Contents
RAND CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 2025 (Continued)
Company |
|
Type of Investment |
|
January 1, 2025, Fair Value |
|
|
Net Change in Unrealized Appreciation (Depreciation) |
|
|
Gross Additions |
|
|
Gross Reductions |
|
|
December 31, 2025, Fair Value |
|
|
Net Realized Gains (Losses) |
|
|
Interest/ |
|
|||||||
Highland All About People Holdings, Inc. |
|
$ |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
|
|
Total All About People |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Inter-National Electronic Alloys |
|
$ |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
LLC |
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||||
|
|
Total EFINEA |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||||
Microcision LLC |
|
Membership Interest Purchase Warrant for |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
Mobile RN Holdings LLC |
|
$ |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||||
|
|
Total Mobile IV Nurses |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||||
Mountain Regional Equipment Solutions |
|
$ |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Warrant for |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Total MRES |
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Pressure Pro, Inc. |
|
$ |
|
|
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|||
|
|
Warrant for |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
— |
|
||
|
|
Total Pressure Pro |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
||||
Seybert’s Billiards Corporation |
|
$ |
|
|
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|||
|
|
Warrant for |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
|
|
$ |
|
|
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|||
|
|
Warrant for |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||||
|
|
Total Seybert’s |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
|||||
Tilson Technology |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
|
|||
Management, Inc. |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
||
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
||
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
||
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
||
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
|
|
Total Tilson |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
|
||
|
|
Total Affiliate Investments |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
Total Control and Affiliate Investments |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
See accompanying notes
17
Table of Contents
RAND CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 2025 (Continued)
This schedule should be read in conjunction with the Corporation’s Consolidated Financial Statements, including the Notes to the Consolidated Financial Statements and the Consolidated Schedule of Portfolio Investments.
See accompanying notes
18
Table of Contents
RAND CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 2025 (Continued)
Industry Classification |
|
Percentage of Total Investments (at fair value) as of December 31, 2025 |
|
|
Professional and Business Services |
|
|
% |
|
Manufacturing |
|
|
|
|
Distribution |
|
|
|
|
Consumer Product |
|
|
|
|
Automotive |
|
|
|
|
Health and Wellness |
|
|
|
|
Marketing |
|
|
|
|
Software |
|
|
|
|
Total Investments |
|
|
% |
|
See accompanying notes
19
Table of Contents
RAND CAPITAL CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. ORGANIZATION
Rand Capital Corporation (“Rand”, the “Corporation”, “we”, “us” and “our”) was incorporated under the laws of New York in February 1969. We completed our initial public offering in 1971 and operated as an internally managed, closed end, management investment company from that time until November 2019.
In November 2019, Rand completed a stock sale transaction (the “Closing”) with East Asset Management (“East”). The transaction consisted of a $
In connection with the Closing, we also entered into a shareholder agreement with East (the “Shareholder Agreement”). Pursuant to the terms of the Shareholder Agreement, East has the right to designate two or three persons, depending upon the size of the Board, for nomination for election to the Board. East has the right to designate (i) up to two persons if the size of the Board is composed of fewer than seven directors or (ii) up to three persons if the size of the Board is composed of seven or more directors. East’s right to designate persons for nomination for election to the Board under the Shareholder Agreement is the exclusive means by which East may designate or nominate persons for election to the Board. The Board currently consists of five directors, and Adam S. Gusky and Benjamin E. Godley are East’s designees on the Board.
We currently operate as an externally managed, closed-end, non-diversified management investment company. We have elected to be regulated as a business development company (“BDC”) under the 1940 Act. As a BDC, we are required to comply with certain regulatory requirements specified in the 1940 Act. For instance, we generally have to invest at least 70% of our total assets in “qualifying assets” and provide managerial assistance to the portfolio companies in which we invest. See “Item 1. Business - Regulations, Business Development Company Regulations” in our Annual Report on Form 10-K for the year ended December 31, 2025.
In connection with the completion of the Transaction, we have shifted to an investment strategy focused on higher yielding debt investments and elected U.S. Federal tax treatment as a regulated investment company (“RIC”).
The Board declared the following dividend during the three months ended March 31, 2026:
|
|
Dividend/Share |
|
|
Record Date |
|
Payment Date |
|
1st |
|
$ |
|
|
|
|||
In order to continue to qualify as a RIC, Rand holds several of its equity investments in wholly-owned subsidiaries that facilitate a tax structure that is advantageous to the RIC election. Rand has the following wholly-owned blocker subsidiaries at March 31, 2026: Rand BMP Swanson Holdings Corp., Rand Carolina Skiff Holdings Corp., Rand DSD Holdings Corp., Rand Filterworks Holdings Corp., Rand FSS Holdings Corp., Rand INEA Holdings Corp., and Rand ITA Holdings Corp. (collectively the “Blocker Corps”). These subsidiaries are consolidated with the Corporation under United States generally accepted accounting principles (“GAAP”) for financial reporting purposes.
20
Table of Contents
On November 14, 2025, Rand, RCM and certain of RCM’s affiliates were granted a new order for exemptive relief (the “Order”) by the U.S. Securities and Exchange Commission (the “SEC”) that superseded all prior co-investment exemptive relief orders issued to Rand and its affiliates by the SEC. The Order permits Rand to co-invest in portfolio companies with certain of RCM’s affiliates if such co-investments are done on the same terms and at the same time, as further detailed in the Order. The Order requires that a “required majority” (as defined in Section 57(o) of the 1940 Act) of the Board make certain findings (1) in most instances when Rand co-invests with RCM’s affiliates in an issuer where RCM’s affiliates have an existing investment in the issuer, and (2) if Rand disposes of an investment acquired in a co-investment transaction unless the disposition is done on a pro rata basis. Pursuant to the Order, the Board oversees Rand’s participation in the co-investment program. As required by the Order, Rand has adopted policies and procedures reasonably designed to ensure compliance with the terms of the Order, and RCM’s and Rand’s Chief Compliance Officers will provide reporting to the Board regarding compliance with such policies and procedures.
The accompanying consolidated financial statements describe the operations of Rand and its wholly-owned subsidiaries, Rand Capital Sub, LLC (“Rand Sub”) and the Blocker Corps (collectively, the “Corporation”).
Our corporate office is located in Buffalo, NY and our website address is www.randcapital.com. We make available on our website our annual and quarterly reports, proxy statements and other information as soon as reasonably practicable after such material is filed with the SEC. Our shares are traded on the Nasdaq Capital Market under the symbol “RAND.”
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation – It is our opinion that the accompanying consolidated financial statements include all adjustments of a normal recurring nature necessary for a fair presentation in accordance with GAAP of the consolidated financial position, results of operations, cash flows and statement of changes in net assets for the interim periods presented. The Corporation is an investment company following accounting and reporting guidance in Accounting Standards Codification (“ASC”) 946, Financial Services—Investment Companies. Certain information and note disclosures normally included in audited annual consolidated financial statements prepared in accordance with GAAP have been omitted; however, we believe that the disclosures made are adequate to make the information presented herein not misleading. The interim results for the three months ended March 31, 2026 are not necessarily indicative of the results to be expected for the full year.
These statements should be read in conjunction with the consolidated financial statements and the notes included in our Annual Report on Form 10-K for the year ended December 31, 2025. Information contained in this filing should also be reviewed in conjunction with our related filings with the SEC prior to the date of this report.
Cash and Cash Equivalents – Cash represents cash on hand and demand deposits held at financial institutions. Cash equivalents include short-term highly liquid investments of sufficient credit quality that are readily convertible to known amounts of cash and have original maturities of three months or less. Cash may be held in a money market fund from time to time, which is a Level 1 security. Cash equivalents are carried at cost, plus accrued interest, which approximates fair value. Cash equivalents are held to meet short-term liquidity requirements, rather than for investment purposes. As of March 31, 2026 and December 31, 2025, the Corporation had $
Fair Value of Financial Instruments – The carrying amounts reported in the consolidated statement of financial position of cash and cash equivalents, interest receivable, accounts payable and accrued expenses approximate fair value because of the immediate or short-term nature of these financial instruments.
Investment Classification – In accordance with the provisions of the 1940 Act, the Corporation classifies its investments by level of control. Under the 1940 Act, “Control Investments” are investments in companies that the Corporation is deemed to “Control” if it owns more than
Investments - Investments are valued at fair value as determined in good faith by RCM and approved by the Board. The Corporation generally invests in loan, debt, and equity instruments and there is no single standard for determining fair value of these investments. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio company while employing a consistent valuation process. Due to the inherent uncertainty of determining the fair value of
21
Table of Contents
portfolio investments, there may be material risks associated with this determination including that estimated fair values may differ from the values that would have been used had a readily available market value for the investments existed and these differences could be material if the Corporation’s assumptions and judgments differ from results of actual liquidation events. The Corporation analyzes and values each investment quarterly and records unrealized depreciation for an investment that it believes has become impaired, including where collection of a loan or debt security or realization of the recorded value of an equity security is doubtful. Conversely, the Corporation will record unrealized appreciation if it believes that an underlying portfolio company has appreciated in value and, therefore, the Corporation’s equity securities in the underlying portfolio company have also appreciated in value. Additionally, the Corporation continues to assess any material risks associated with this fair value determination, including risks associated with material conflicts of interest. Under the valuation policy of the Corporation, unrestricted publicly traded securities are valued at the closing price for these securities on the last trading day of the reporting period.
Qualifying Assets - As of March 31, 2026, the Corporation’s portfolio of investments only included qualifying assets as defined in Section 55(a) of the 1940 Act. The Corporation’s qualifying assets consist of qualifying investments in privately held businesses, principally based in the United States.
Revenue Recognition - Interest Income - Interest income is recognized on the accrual basis except where the investment is in default or where receipt of such interest is otherwise presumed to be in doubt. In such cases, interest is recognized at the time of receipt. A reserve for possible losses on interest receivable is maintained when appropriate. The reserve for possible losses of interest receivable was $
The Corporation holds debt securities in its investment portfolio that contain payment-in-kind (“PIK”) interest provisions. PIK interest, computed at the contractual rate specified in each debt agreement, is added to the principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment. For investments with PIK interest, the Corporation will not accrue PIK interest if the portfolio company valuation indicates that the PIK interest is not collectible. Loans that are on non-accrual status remain in such status until the borrower has demonstrated the ability and intent to pay contractual amounts due or such loans become current. As of March 31, 2026, three of the Corporation’s debt investments were on non-accrual status with a total cost of investment securities of $
Revenue Recognition - Dividend Income – The Corporation may receive cash distributions from portfolio companies that are limited liability companies or corporations, and these distributions are classified as dividend income on the consolidated statement of operations. Dividend income is recognized on an accrual basis for private portfolio companies only upon declaration or when a contractual obligation arises and the amount is reasonably determinable, or on the ex-dividend date for publicly traded portfolio companies.
The Corporation may hold preferred equity securities that contain cumulative dividend provisions. Cumulative dividends are recorded as dividend income, if declared and deemed collectible, and any dividends in arrears are recognized into income and added to the balance of the preferred equity investment. The actual collection of these dividends in arrears may be deferred until such time as the preferred equity is redeemed.
Revenue Recognition - Fee Income - Consists of the revenue associated with the amortization of financing fees charged to the portfolio companies upon successful closing of financings, income associated with portfolio company monitoring fees, income associated with early repayment fees and income associated with portfolio company loan modification fees.
Original Issue Discount – Investments may include “original issue discount”, or OID. This occurs when the Corporation purchases a warrant and a note from a portfolio company simultaneously, which requires an allocation of a portion of the purchase price to the warrant and reduces the purchase price allocated to the note by an equal amount in the form of a note discount or OID. The note is reported net of the OID and the OID is accreted into interest income over the life of the loan.
22
Table of Contents
Deferred Financing Fees - Origination and commitment costs related to the senior secured revolving credit facility with M&T Bank, (See Note 6—Senior Secured Revolving Credit Facility), are amortized ratably over the term of the Credit Agreement.
Supplemental Cash Flow Information - Net income taxes paid during the three months ended March 31, 2026 and 2025 were $
Accounting Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Stockholders’ Equity (Net Assets) - At March 31, 2026 and December 31, 2025, there were
On April 22, 2026, the Board approved a share repurchase plan which authorizes the Corporation to repurchase shares of Rand’s outstanding common stock with an aggregate cost of up to $
Segment Reporting - In accordance with ASC Topic 280 - Segment Reporting (“ASC 280”), the Corporation has determined that it has a single operating and reporting segment. As a result, the Corporation’s segment accounting policies are the same as described herein and the Corporation does not have any intra-segment sales and transfers of assets.
Income Taxes – The Corporation elected to be treated, for U.S. federal income tax purposes, as a RIC under Subchapter M of the Code. The Corporation must distribute substantially all of its investment company taxable income each tax year as dividends to its shareholders to maintain its RIC status. If the Corporation continues to qualify as a RIC and continues to satisfy the annual distribution requirement, the Corporation will not have to pay corporate level U.S. federal income taxes on any income that the Corporation distributes to its stockholders.
The Blocker Corps, which are consolidated under U.S. GAAP for financial reporting purposes, are subject to U.S. federal and state income taxes. Therefore, the Corporation accounts for income taxes pursuant to FASB ASC Topic 740, Income Taxes. Under FASB ASC Topic 740, deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The Corporation records a valuation allowance against the deferred tax assets if and to the extent it is more likely than not that the Corporation will not recover the deferred tax assets. In evaluating the need for a valuation allowance, the Corporation weights all relevant positive and negative evidence, and considers among other factors, historical financial performance, projected future taxable income, scheduled reversals of deferred tax liabilities, the overall business environment, and tax planning strategies. Changes in circumstances, including the Blocker Corps generating significant taxable income and tax planning strategies, could cause a change in judgment about the need for a valuation allowance of the related deferred tax assets. Any change in the valuation allowance will be included in income in the period of the change in estimate.
Accordingly, as of March 31, 2026 and December 31, 2025, the valuation allowance against the Corporation’s deferred tax assets was $
The Corporation reviews the tax positions it has taken to determine if they meet a “more likely than not threshold” for the benefit of the tax position to be recognized in the consolidated financial statements. A tax position that fails to meet the more likely than not recognition threshold will result in either a reduction of a current or deferred tax asset or receivable, or the recording of a current or deferred tax liability. There were
Depending on the level of taxable income earned in a tax year, the Corporation may choose to carry forward taxable income in excess of current year dividend distributions from such current year taxable income into the next tax year and pay a
23
Table of Contents
excess taxable income as such taxable income is earned. The Corporation did
Distributions from net investment income and distributions from net realized capital gains are determined in accordance with U.S. federal tax regulations, which may differ from amounts determined in accordance with GAAP and those differences could be material. These book-to-tax differences are either temporary or permanent in nature. Reclassifications due to permanent book-tax differences, including the offset of net operating losses against short-term gains and nondeductible meals and entertainment, have no impact on net assets.
The Corporation is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended December 31, 2022 through 2025. In general, the Corporation’s state income tax returns are open to audit under the statute of limitations for the years ended December 31, 2022 through 2025.
It is the Corporation’s policy to include interest and penalties related to income tax liabilities in income tax expense on the Consolidated Statement of Operations. There were
Concentration of Credit and Market Risk – The Corporation’s financial instruments potentially subject it to concentrations of credit risk. Cash and cash equivalents are invested with banks in amounts which, at times, exceed insured limits. The Corporation does not anticipate non-performance by such banks.
The following are the concentrations of the top five portfolio company values compared to the fair value of the Corporation’s total investment portfolio:
|
|
March 31, 2026 |
|
|
Inter-National Electronic Alloys LLC (EFINEA) |
|
|
% |
|
Caitec, Inc. (Caitec) |
|
|
% |
|
Highland All About People Holdings, Inc. (All About People) |
|
|
% |
|
BMP Food Service Supply Holdco, LLC (FSS) |
|
|
% |
|
AME Holdco, LLC (AME) |
|
|
% |
|
|
|
December 31, 2025 |
|
|
EFINEA |
|
|
% |
|
Caitec |
|
|
% |
|
FCM Industries Holdco LLC (First Coast Mulch) |
|
|
% |
|
All About People |
|
|
% |
|
FSS |
|
|
% |
|
Note 3. INVESTMENTS
The Corporation’s investments are carried at fair value in accordance with FASB ASC 820, “Fair Value Measurements and Disclosures”, which defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements.
Loan investments are defined as traditional loan financings typically with no equity features or required equity co-investment. Debt investments are defined as debt financings that include one or more equity features such as conversion rights, stock purchase warrants, and/or stock purchase options. Equity investments are direct investments into a portfolio company and may include preferred stock, common stock, warrants and limited liability company membership interests.
The Corporation uses several approaches to determine the fair value of an investment. The main approaches are:
24
Table of Contents
ASC 820 classifies the inputs used to measure fair value into the following hierarchy:
Level 1: Quoted prices in active markets for identical assets or liabilities, used in the Corporation’s valuation at the measurement date. Under the valuation policy, the Corporation values unrestricted publicly traded companies, categorized as Level 1 investments, at the closing price on the last trading day of the reporting period.
Level 2: Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices.
Level 3: Unobservable and significant inputs to determining the fair value.
Financial assets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Any changes in estimated fair value are recorded in the statement of operations.
At March 31, 2026 and December 31, 2025, all of the Corporation’s investments were Level 3 investments. There were
In the valuation process, the Corporation values restricted securities categorized as Level 3 investments, using information from these portfolio companies, and, when considered appropriate, third-party valuation inputs, which may include:
The valuation may be reduced if a portfolio company’s performance and potential have deteriorated significantly. If the factors that led to a reduction in valuation are overcome, the valuation may be adjusted accordingly.
Equity Securities
Equity securities may include preferred stock, common stock, warrants and limited liability company membership interests.
25
Table of Contents
The significant unobservable inputs used in the fair value measurement of the Corporation’s equity investments are EBITDA and revenue multiples, where applicable, the financial and operational performance of the business, and the debt and senior equity preferences that may exist in a deemed liquidation event. Standard industry multiples may be used when available; however, the Corporation’s portfolio companies are typically privately-held, lower middle market companies and these industry standards may be adjusted to more closely match the specific financial and operational characteristics of the portfolio company. Due to the nature of certain investments, fair value measurements may be based on other criteria, which may include third party appraisals. Significant changes in any of these unobservable inputs may result in a significantly higher or lower fair value estimate.
Another key factor used in valuing equity investments is a significant recent arms-length equity transaction entered into by the portfolio company with a sophisticated, non-strategic, and unrelated new investor. The terms of these equity transactions may not be identical to the equity transactions between the portfolio company and the Corporation, and the impact of the difference in transaction terms on the market value of the portfolio company may be difficult or impossible to quantify.
When appropriate the Black-Scholes pricing model is used to estimate the fair value of warrants for accounting purposes. This model requires the use of highly subjective inputs including expected volatility and expected life, in addition to variables for the valuation of minority equity positions in small private and early stage companies. Significant changes in any of these unobservable inputs may result in a significantly higher or lower fair value estimate.
For investments made within the last year, the Corporation generally relies on the cost basis, which is deemed to represent the fair value, unless other fair value inputs are identified causing the Corporation to depart from this basis.
Loan and Debt Securities
The significant unobservable inputs used in the fair value measurement of the Corporation’s loan and debt securities are the financial and operational performance of the portfolio company, similar debt with similar terms with other portfolio companies, as well as the market acceptance for the portfolio company’s products or services. These inputs will likely provide an indicator as to the probability of principal recovery of the investment. The Corporation’s loan and debt investments are often junior secured or unsecured securities. Fair value may also be determined based on other criteria where appropriate. Significant changes to the unobservable inputs may result in a change in fair value. For recent investments, the Corporation generally relies on the cost basis, which is deemed to represent the fair value, unless other fair value inputs are identified causing the Corporation to depart from this basis.
The following table provides a summary of the significant unobservable inputs used to determine the fair value of the Corporation’s Level 3 portfolio investments as of March 31, 2026:
|
|
Market Approach EBITDA Multiple |
|
|
Market Approach Liquidation Seniority |
|
|
Market Approach |
|
|
Market Approach Transaction Pricing |
|
|
Totals |
|
|||||
Non-Control/Non-Affiliate Equity |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Non-Control/Non-Affiliate Loan and Debt |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Total Non-Control/Non-Affiliate |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Affiliate Equity |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|||
Affiliate Loan and Debt |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|||
Total Affiliate |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|||
Control Equity |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Control Loan and Debt |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total Control |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Total Level 3 Investments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Range |
|
4X - 14.7X |
|
|
1X |
|
|
3.85X |
|
|
Not Applicable |
|
|
|
|
|||||
Unobservable Input |
|
EBITDA Multiple |
|
|
Asset Value |
|
|
Revenue Multiple |
|
|
Transaction Price |
|
|
|
|
|||||
Weighted Average |
|
6.1X |
|
|
1X |
|
|
3.85X |
|
|
Not Applicable |
|
|
|
|
|||||
26
Table of Contents
The following table provides a summary of the significant unobservable inputs used to determine the fair value of the Corporation’s Level 3 portfolio investments as of December 31, 2025:
|
|
Market Approach EBITDA Multiple |
|
|
Market Approach Liquidation Seniority |
|
|
Market Approach |
|
|
Market Approach Transaction Pricing |
|
|
Totals |
|
|||||
Non-Control/Non-Affiliate Equity |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Non-Control/Non-Affiliate Loan and Debt |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Total Non-Control/Non-Affiliate |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Affiliate Equity |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|||
Affiliate Loan and Debt |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|||
Total Affiliate |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|||
Control Equity |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Control Loan and Debt |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total Control |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Total Level 3 Investments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Range |
|
4X - 14.7X |
|
|
1X |
|
|
3.9X |
|
|
Not Applicable |
|
|
|
|
|||||
Unobservable Input |
|
EBITDA Multiple |
|
|
Asset Value |
|
|
Revenue Multiple |
|
|
Transaction Price |
|
|
|
|
|||||
Weighted Average |
|
6.1X |
|
|
1X |
|
|
3.9X |
|
|
Not Applicable |
|
|
|
|
|||||
The following table provides a summary of the components of Level 1, 2 and 3 portfolio investment assets measured at fair value at March 31, 2026:
|
|
|
|
|
Fair Value Measurements at Reported Date Using |
|
||||||||||
|
|
March 31, 2026 |
|
|
Quoted Prices in Active Markets for Identical Assets |
|
|
Significant |
|
|
Other Significant |
|
||||
Loan investments |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Debt investments |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Equity investments |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
The following table provides a summary of the components of Level 1, 2 and 3 portfolio investment assets measured at fair value at December 31, 2025:
|
|
|
|
|
Fair Value Measurements at Reported Date Using |
|
||||||||||
|
|
December 31, 2025 |
|
|
Quoted Prices in Active Markets for Identical Assets |
|
|
Significant |
|
|
Other Significant |
|
||||
Loan investments |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Debt investments |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Equity investments |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Total |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
27
Table of Contents
The following table provides a summary of changes in portfolio investment assets measured at fair value using significant unobservable inputs (Level 3) for the three months ended March 31, 2026:
|
|
Fair Value Measurements Using Significant |
|
|||||||||||||
Description |
|
Loan Investments |
|
|
Debt |
|
|
Equity |
|
|
Total |
|
||||
Ending balance December 31, 2025, of Level 3 Assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Realized gains included in net change in net assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Carolina Skiff LLC (Carolina Skiff) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Seybert’s Billiards Corporation (Seybert’s) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Total realized gains, net |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Unrealized (losses) gains included in net change in net assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Autotality |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Bauer Sheet Metal and Fabricating, LLC (Bauer) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
BlackJet Direct Marketing, LLC (BlackJet) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Highland All About People Holdings, Inc. (All About People) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Mountain Regional Equipment Solutions (MRES) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Seybert’s |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Total unrealized losses, net |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Purchases of securities/changes to securities/non-cash |
|
|
|
|
|
|
|
|
|
|
|
|
||||
AME Holdco, LLC (AME) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
Autotality |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Bauer |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
BlackJet |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
BMP Food Service Supply Holdco, LLC (FSS) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
BMP Swanson Holdco, LLC (Swanson) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Caitec, Inc. (Caitec) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
FCM Industries Holdco LLC (First Coast Mulch) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
GoNoodle, Inc. (GoNoodle) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Highland All About People Holdings, Inc. (All About People) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Mobile RN Holdings LLC (Mobile IV Nurses) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
MRES |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Total purchases of securities/changes to securities/non-cash |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Repayments and sales of securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Applied Image, Inc. (Applied Image) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Carolina Skiff |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Seybert's |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Total repayments and sales of securities |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Ending balance March 31, 2026, of Level 3 Assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Change in unrealized appreciation/depreciation included in earnings related to Level 3 investments still held at reporting date |
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
|||
28
Table of Contents
The following table provides a summary of changes in portfolio investment assets measured at fair value using significant unobservable inputs (Level 3) for the three months ended March 31, 2025:
|
|
Fair Value Measurements Using Significant |
|
|||||||||||||
|
|
Loan Investments |
|
|
Debt |
|
|
Equity |
|
|
Total |
|
||||
Ending balance December 31, 2024, of Level 3 Assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Realized gains (losses) included in net change in net assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
GoNoodle, Inc. (GoNoodle) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Microcision, LLC (Microcision) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Pressure Pro, Inc. (Pressure Pro) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Total realized gains, net |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Unrealized gains (losses) included in net change in net assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
BMP Food Service Supply Holdco, LLC (FSS) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Inter-National Electronic Alloys LLC (EFINEA) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
ITA Acquisition, LLC (ITA) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Pressure Pro |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Seybert’s Billiards Corporation (Seybert’s) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Total unrealized losses, net |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Purchases of securities/changes to securities/non-cash |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Autotality (formerly Filterworks Acquisition USA, LLC) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Caitec, Inc. (Caitec) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
FCM Industries Holdco LLC (First Coast Mulch) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
FSS |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
GoNoodle, Inc. (GoNoodle) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Highland All About People Holdings, Inc. (All About People) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
ITA |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Mobile RN Holdings LLC (Mobile IV Nurses) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Mountain Regional Equipment Solutions (MRES) |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Pressure Pro |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Seybert’s |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Total purchases of securities/changes to securities/non-cash |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Repayments and sales of securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
HDI Acquisition LLC (Hilton Displays) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Mattison Avenue Holdings LLC (Mattison) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Microcision |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Pressure Pro |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total repayments and sales of securities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Ending balance March 31, 2025, of Level 3 Assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Change in unrealized appreciation/depreciation included in earnings related to Level 3 investments still held at reporting date |
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
|||
29
Table of Contents
Note 4. OTHER ASSETS
At March 31, 2026 and December 31, 2025, other assets was comprised of the following:
|
|
March 31, 2026 |
|
|
December 31, 2025 |
|
||
Prepaid expenses |
|
$ |
|
|
$ |
|
||
Deferred financing fees, net |
|
|
|
|
|
|
||
Total other assets |
|
$ |
|
|
$ |
|
||
Note 5. COMMITMENTS AND CONTINGENCIES
The Corporation had no commitments at March 31, 2026 or December 31, 2025.
Note 6. SENIOR SECURED REVOLVING CREDIT FACILITY
On June 27, 2022, the Corporation entered into a credit agreement (the “Credit Agreement”) with M&T Bank, as lender (the “Lender”), which provides the Corporation with a senior secured revolving credit facility in a principal amount not to exceed $
The Corporation’s borrowings under the Credit Facility bear interest at a variable rate determined as a rate per annum equal to
The Credit Agreement contains representations and warranties and affirmative, negative and financial covenants usual and customary for agreements of this type, including among others, covenants that prohibit, subject to certain specified exceptions, the Corporation’s ability to merge or consolidate with other companies, sell any material part of the Corporation’s assets, incur other indebtedness, incur liens on the Corporation’s assets, make investments or loans to third parties other than permitted investments and permitted loans, and declare any distribution or dividend other than certain permitted distributions. The Credit Agreement includes the following financial covenants: (i) a tangible net worth covenant that requires the Corporation to maintain a Tangible Net Worth (defined in the Credit Agreement as the Corporation’s aggregate assets, excluding intangible assets, less all liabilities) of not less than $
Events of default under the Credit Agreement which permit the Lender to exercise its remedies, including acceleration of the principal and interest on the Credit Facility, include, among others: (i) default in the payment of principal or interest on the Credit Facility, (ii) default by the Corporation on any other obligation, condition, covenant or other provision under the Credit Agreement and related documents, (iii) failure by the Corporation to pay any material indebtedness or obligation owing to any third party or affiliate, or the failure by the Corporation to perform any agreement with any third party or affiliate that would have a material adverse effect on the Corporation and its subsidiaries taken as a whole, (iv) the sale of all or substantially all of the Corporation’s assets to a third party, (v) various bankruptcy and insolvency events, and (vi) any material adverse change in the Corporation and its subsidiaries,
30
Table of Contents
taken as a whole, or their business, assets, operations, management, ownership, affairs, condition (financial or otherwise) or the Lender’s collateral that the Lender reasonably determines will have a material adverse effect on the Lender’s collateral, the Corporation and its subsidiaries, taken as a whole, or their business, assets, operation or condition (financial or otherwise) or on the Corporation’s ability to repay its debts.
In connection with entry into the Credit Facility, the Corporation and each of its subsidiaries that guaranty the Credit Facility entered into a general security agreement, dated June 27, 2022, with the Lender (the “Security Agreement”). The Security Agreement secures all of the Corporation’s obligations to the Lender, including, without limitation, principal and interest on the Credit Facility and any fees and charges. The security interest granted under the Security Agreement covers all of the Corporation’s personal property including, among other things, all accounts, chattel paper, investment property, deposit accounts, general intangibles, inventory, and all of the fixtures. The Security Agreement contains various representations, warranties, covenants and agreements customary in security agreements and various events of default with remedies under the New York Uniform Commercial Code and the Security Agreement. Events of default under the Security Agreement, which permit the Lender to exercise its various remedies, are similar to those contained in the Credit Agreement.
The outstanding balance drawn on the Credit Facility at March 31, 2026 and December 31, 2025 was $
For the three months ended March 31, 2026 and 2025, the average debt outstanding under the Credit Facility and weighted average interest rate were as follows:
|
|
Three months ended |
|
|
Three months ended |
|
||
Average debt outstanding |
|
$ |
|
|
$ |
|
||
Weighted average interest rate |
|
|
% |
|
|
% |
||
Note 7. CHANGES IN STOCKHOLDERS’ EQUITY (NET ASSETS)
The following schedule analyzes the changes in stockholders’ equity (net assets) section of the Consolidated Statements of Financial Position for the three months ended March 31, 2026 and 2025, respectively:
|
|
Common Stock |
|
|
Capital in excess of par value |
|
|
Stock dividends distributable |
|
|
Treasury Stock, at cost |
|
|
Total distributable earnings (losses) |
|
|
Total Stockholders’ |
|
||||||
January 1, 2026 |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||
Payment of dividend |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Net decrease in net assets from operations |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
March 31, 2026 |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||
|
|
Common Stock |
|
|
Capital in excess of par value |
|
|
Stock dividends distributable |
|
|
Treasury Stock, at cost |
|
|
Total distributable earnings (losses) |
|
|
Total Stockholders’ |
|
||||||
January 1, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
Payment of dividend |
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
||
Net increase in net assets from operations |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
March 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||||
Note 8. RELATED PARTY TRANSACTIONS
Investment Management Agreement
Concurrent with the Closing, RCM, a registered investment adviser, was retained by the Corporation as its external investment adviser and administrator, which resulted in Daniel Penberthy, the Corporation’s President and Chief Executive Officer, and Margaret Brechtel, the Corporation’s Executive Vice President, Treasurer, Chief Financial Officer and Secretary, serving as officers and
31
Table of Contents
employees of RCM. Under the Investment Management Agreement, the Corporation pays RCM, as compensation for the investment advisory and management services, fees consisting of two components: (i) the Base Management Fee and (ii) the Incentive Fee.
At March 31, 2026 and December 31, 2025, amounts payable to RCM were comprised of the following, and are reported on the “Due to investment adviser” line on the Consolidated Statements of Financial Position:
|
|
March 31, 2026 |
|
|
December 31, 2025 |
|
||
Base Management Fee payable |
|
$ |
|
|
$ |
|
||
Income Based Incentive Fees payable |
|
|
|
|
|
|
||
Total due to investment adviser |
|
$ |
|
|
$ |
|
||
The “Base Management Fee” is calculated at an annual rate of
The “Incentive Fee” is comprised of two parts: (1) the “Income Based Fee” and (2) the “Capital Gains Fee”. The Income Based Fee is calculated and payable quarterly in arrears based on the “Pre-Incentive Fee Net Investment Income” (as defined in the Investment Management Agreement) for the immediately preceding calendar quarter, subject to a hurdle rate of
The Corporation pays RCM an Incentive Fee with respect to its Pre-Incentive Fee Net Investment Income in each calendar quarter as follows:
The Income Based Fee paid to RCM for any calendar quarter shall not be in excess of the Incentive Fee Cap. The “Incentive Fee Cap” for any quarter is an amount equal to (1)
For purposes of the calculation of the Income Based Fee, “Income Based Fee Calculation Period” is defined as, with reference to a calendar quarter, the period of time consisting of such calendar quarter and the additional quarters that comprise the eleven calendar quarters immediately preceding such calendar quarter.
For purposes of the calculation of the Income Based Fee, “Cumulative Net Return” is defined as (1) the aggregate net investment income in respect of the relevant Income Based Fee Calculation Period minus (2) any Net Capital Loss, if any, in respect of the relevant Income Based Fee Calculation Period. If, in any quarter, the Incentive Fee Cap is zero or a negative value, the Corporation pays no Income Based Fee to RCM for such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is a positive value but is less than the Income Based Fee that is payable to RCM for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, the Corporation pays an Income Based Fee to RCM equal to the Incentive Fee Cap for such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is equal to or greater than the Income Based Fee that is payable to RCM for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, the Corporation pays an Income Based Fee to the Adviser equal to the Income Based Fee calculated as described above for such quarter without regard to the Incentive Fee Cap.
For purposes of the calculation of the Income Based Fee, “Net Capital Loss,” in respect of a particular period, means the difference, if positive, between (1) aggregate capital losses, whether realized or unrealized, in such period and (2) aggregate capital gains, whether realized or unrealized, in such period.
32
Table of Contents
Any Income Based Fee otherwise payable under the Investment Management Agreement with respect to Accrued Unpaid Income (as described below) (such fees being the “Accrued Unpaid Income Based Fees”) shall be deferred, on a security by security basis, and shall become payable to RCM only if, as, when and to the extent cash is received in respect of any Accrued Unpaid Income. Any Accrued Unpaid Income that is subsequently reversed in connection with a write-down, write-off, impairment or similar treatment of the investment giving rise to such Accrued Unpaid Income will, in the applicable period of reversal, (1) reduce Pre-Incentive Fee Net Investment Income and (2) reduce the amount of Accrued Unpaid Income Based Fees. For purposes of the Investment Management Agreement, Accrued Unpaid Income is defined as any net investment income that consists of any accretion of original issue discount, market discount, payment-in-kind interest, payment-in-kind dividends or other types of deferred or accrued income, including in connection with zero coupon securities, that the Corporation has recognized in accordance with GAAP, but has not yet received in cash. Subsequent payments of Accrued Unpaid Income Based Fees that are deferred as provided for in the Investment Management Agreement shall not reduce the amounts otherwise payable for any quarter as an Income Based Fee.
For the three months ended March 31, 2026,
The second part of the Incentive Fee is the “Capital Gains Fee”. This fee is determined and payable in arrears as of the end of each calendar year. Under the terms of the Investment Management Agreement, the Capital Gains Fee is calculated at the end of each applicable year by subtracting (1) the sum of the cumulative aggregate realized capital losses and aggregate unrealized capital depreciation from (2) the cumulative aggregate realized capital gains, in each case calculated from November 8, 2019. If this amount is positive at the end of any calendar year, then the Capital Gains Fee for such year is equal to
For purposes of the Capital Gains Fee:
For purposes of calculating the amount of the capital gains incentive fee accrual to be included as part of a company’s financial statements, GAAP requires a company to consider, as part of such calculation, the amount of cumulative aggregate unrealized capital appreciation that such company has with respect to its investments. As a result, the capital gains incentive fee accrual under GAAP is calculated using both the cumulative aggregate realized capital gains and losses and the aggregate net change in unrealized capital appreciation/depreciation at the close of the period. If the calculated amount is positive, GAAP requires the Corporation to record a capital gains incentive fee accrual equal to
As of March 31, 2026, there was
In accordance with GAAP, the Corporation is required to accrue a capital gains incentive fee on all realized and unrealized gains and losses. At March 31, 2026,
33
Table of Contents
The expense (benefit) related to the accrued capital gains incentive fee was $
Administration Agreement
Under the terms of the Administration Agreement, RCM agreed to perform (or oversee, or arrange for, the performance of) the administrative services necessary for the Corporation’s operations, including, but not limited to, office facilities, equipment, clerical, bookkeeping, finance, accounting, compliance and record keeping services at such office facilities and such other services as RCM, subject to review by the Board, will from time to time determine to be necessary or useful to perform its obligations under the Administration Agreement. RCM shall also arrange for the services of, and oversee, custodians, depositories, transfer agents, dividend disbursing agents, other shareholder servicing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed to be necessary or desirable.
RCM is responsible for the Corporation’s financial and other records that are required to be maintained and prepares all reports and other materials required to be filed with the SEC or any other regulatory authority, including reports to shareholders. In addition, RCM assists the Corporation in determining and publishing the Corporation’s net asset value (NAV), overseeing the preparation and filing of the tax returns, and the printing and dissemination of reports to shareholders, and generally overseeing the payment of expenses and the performance of administrative and professional services rendered by others. RCM provides, on the Corporation’s behalf, managerial assistance to those portfolio companies that have accepted its offer to provide such assistance.
For the three months ended March 31, 2026 and 2025, the Corporation recorded and paid administrative fees of $
Note 9. FINANCIAL HIGHLIGHTS
The following schedule provides the financial highlights, calculated based on shares outstanding, for the periods indicated:
|
|
Three months ended March 31, 2026 |
|
|
Three months ended March 31, 2025 |
|
||
Per Share Data: (1) |
|
|
|
|
|
|
||
Net asset value, beginning of period |
|
|
|
|
|
|
||
Income from operations: |
|
|
|
|
|
|
||
Net investment income |
|
|
|
|
|
|
||
Net realized (loss) gain on sales and dispositions of investments |
|
|
|
|
|
|
||
Net change in unrealized appreciation/depreciation on investments |
|
|
( |
) |
|
|
( |
) |
(Decrease) increase in net assets from operations |
|
|
( |
) |
|
|
|
|
Payment of cash dividend |
|
|
( |
) |
|
|
( |
) |
Effect of stock dividend |
|
|
|
|
|
( |
) |
|
(Decrease) increase in net assets per share |
|
|
( |
) |
|
|
( |
) |
Net asset value, end of period |
|
$ |
|
|
$ |
|
||
Per share market price, end of period |
|
$ |
|
|
$ |
|
||
Total return based on market value (2) |
|
|
% |
|
|
( |
)% |
|
Total return based on net asset value (3) |
|
|
( |
)% |
|
|
( |
)% |
Supplemental Data: |
|
|
|
|
|
|
||
Ratio of expenses before income taxes to average net assets (4) |
|
|
% |
|
|
% |
||
Ratio of expenses including income taxes to average net assets (4) |
|
|
% |
|
|
% |
||
Ratio of net investment income to average net assets (4) |
|
|
% |
|
|
% |
||
Portfolio turnover |
|
|
% |
|
|
% |
||
Debt/equity ratio |
|
|
% |
|
|
% |
||
Net assets, end of period |
|
$ |
|
|
$ |
|
||
Total amount of senior securities outstanding, exclusive of treasury securities |
|
$ |
|
|
$ |
|
||
Asset coverage per unit (5) |
|
|
|
N/A |
|
|||
34
Table of Contents
* Amounts are rounded.
The Corporation’s interim period results could fluctuate as a result of a number of factors; therefore results for any interim period should not be relied upon as being indicative of performance for the full year or in future periods.
Note 10. SEGMENT REPORTING
The Corporation operates through a single operating and reporting segment with an investment objective to generate both current income and capital appreciation through debt and equity investments.
Note 11. SUBSEQUENT EVENT
Subsequent to the quarter end, on
35
Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the consolidated financial statements and related notes included elsewhere in this report. Historical results and percentage relationships among any amounts in the consolidated financial statements are not necessarily indicative of trends in operating results for any future periods.
FORWARD LOOKING STATEMENTS
Statements included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report that do not relate to present or historical conditions are “forward-looking statements” within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and in Section 21E of the Securities Exchange Act of 1934, as amended. Additional oral or written forward-looking statements may be made by us from time to time, and forward-looking statements may be included in documents that are filed with the SEC. Forward-looking statements involve risks and uncertainties that could cause our results or outcomes to differ materially from those expressed in the forward-looking statements. Forward-looking statements may include, without limitation, statements relating to our plans, strategies, objectives, expectations and intentions, including statements related to our investment strategies and our intention to co-invest with certain of our affiliates; the impact of our election as a RIC for U.S. federal tax purposes on the payment of corporate level U.S. federal income taxes by Rand; statements regarding our liquidity and financial resources; statements regarding any Capital Gains Fee that may be due to RCM upon a hypothetical liquidation of our portfolio and the amount of the Capital Gains Fee that may be payable to RCM for 2026; and statements regarding our compliance with the RIC requirements as of March 31, 2026; and statements regarding future dividend payments, and are intended to be made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as “believes,” “forecasts,” “intends,” “possible,” “expects,” “estimates,” “anticipates,” or “plans” and similar expressions (including their negative counterparts or other various or comparable terminology) are intended to identify forward-looking statements. Among the important factors on which such statements are based are assumptions concerning the state of the United States economy and the local markets in which our portfolio companies operate, the state of the securities markets in which the securities of our portfolio companies could be traded, liquidity within the United States financial markets, and inflation. All forward-looking statements are subject to risks and uncertainties described under the caption “Risk Factors” contained in Part II, Item 1A of this report and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025.
There may be other factors not identified that affect the accuracy of our forward-looking statements. Further, any forward-looking statement speaks only as of the date when it is made and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.
Overview
We are an externally managed non-diversified investment company that lends to and invests in lower middle market companies. Our investment objective is to generate current income and when possible, complement this current income with capital appreciation. As a result, our investments are primarily in higher yielding debt instruments. Our investment activities are managed by our investment adviser, Rand Capital Management, LLC (“RCM”).
We have elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). As a BDC, we are required to comply with certain regulatory requirements specified in the 1940 Act.
In November 2019, Rand completed a stock sale transaction (the “Closing”) with East Asset Management (“East”). The transaction consisted of a $25 million investment in Rand by East, in the form of cash and contributed portfolio assets, in exchange for approximately 8.3 million shares of Rand common stock. Concurrent with the Closing, RCM, a registered investment adviser, was retained by Rand as its external investment adviser and administrator (the Closing and the retention of RCM as our investment adviser and administrator are collectively referred to herein as the “Transaction”). The term of the new investment advisory and management agreement (the “Investment Management Agreement”) with RCM was extended after approval of its renewal by our Board of Directors (the “Board”) in October 2025 and is currently scheduled to expire on December 31, 2026. In addition, the term of the administration agreement (the “Administration Agreement”) with RCM was extended after approval of its renewal by the Board in October 2025 and is currently scheduled to expire on December 31, 2026. The Investment Management Agreement and Administration Agreement can continue for successive annual periods after December 31, 2026 provided that such continuance is specifically approved at least annually by (i) (A) the affirmative vote of a majority of the Board or (B) the affirmative vote of a majority of our outstanding voting securities, and (ii) the affirmative vote of a majority of our directors who are not “interested persons,” as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended (the “1940 Act”), of us, RCM or our respective affiliates.
36
Table of Contents
On January 24, 2024, the Board, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act) of the Board, approved the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act. As a result, our asset coverage requirement under the 1940 Act for senior securities was changed from 200% to 150%, effective January 24, 2025. We monitor our compliance with this coverage ratio on a regular basis. As of March 31, 2026, our asset coverage ratio for senior securities as of March 31, 2026 was substantially in excess of 150%. For a discussion of the risks associated with our adoption of a modified asset coverage requirement of 150%, please see the discussion of risks under the caption “Risk Factors – Risks related to our Indebtedness” contained in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025. Notwithstanding the reduction of our asset coverage requirement under the 1940 Act from 200% to 150% effective January 24, 2025, under the terms of the Credit Agreement, we are required to maintain an Asset Coverage Ratio (defined in the Credit Agreement as the ratio of the fair market value of all of the Corporation’s assets to the sum of all of the Corporation’s obligations for borrowed money plus all capital lease obligations) of not less than 300%.
Pursuant to the terms of the Investment Management Agreement, Rand pays RCM a base management fee and may pay an incentive fee, comprised of two parts: (1) the “Income Based Fee” and (2) the “Capital Gains Fee”, if specified benchmarks are met.
We elected U.S. federal tax treatment as a regulated investment company (“RIC”) under subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). To maintain our qualification as a RIC, we must, among other things, meet certain source of income and asset diversification requirements. As of March 31, 2026, we believe we were in compliance with the RIC requirements. As a RIC, we generally will not be subject to corporate-level U.S. federal income taxes on any net ordinary income or capital gains that we timely distribute to our shareholders as dividends. In addition, as a RIC, we must distribute annually to our shareholders at least 90% of our ordinary net income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. Accordingly, our Board has regularly declared a quarterly cash dividend since our RIC election.
Our Board declared the following dividend during the three months ended March 31, 2026:
|
|
Dividend/Share |
|
|
Record Date |
|
Payment Date |
|
1st |
|
$ |
0.29 |
|
|
March 11, 2026 |
|
March 25, 2026 |
We may co-invest, subject to the conditions included in the exemptive relief order we received from the SEC, with certain of our affiliates. See “SEC Exemptive Order” below. We believe these types of co-investments are likely to afford us additional investment opportunities and provide an ability to achieve greater diversification in our investment portfolio.
SEC Exemptive Order
On November 14, 2025, Rand, RCM and certain of RCM’s affiliates were granted a new order for exemptive relief (the “Order”) by the SEC that superseded all prior co-investment exemptive relief orders issued to Rand and its affiliates by the SEC. The Order permits Rand to co-invest in portfolio companies with certain of RCM’s affiliates if such co-investments are done on the same terms and at the same time, as further detailed in the Order and without the need to obtain Board approval. The Order requires that a “required majority” (as defined in Section 57(o) of the 1940 Act) of the Board make certain findings (1) in most instances when Rand co-invests with RCM’s affiliates in an issuer where RCM’s affiliates have an existing investment in the issuer, and (2) if Rand disposes of an investment acquired in a co-investment transaction unless the disposition is done on a pro rata basis. Pursuant to the Order, the Board oversees Rand’s participation in the co-investment program. As required by the Order, Rand has adopted policies and procedures reasonably designed to ensure compliance with the terms of the Order, and RCM’s and Rand’s Chief Compliance Officer will provide reporting to the Board regarding compliance with such policies and procedures.
Critical Accounting Policies
We prepare our consolidated financial statements in accordance with United States generally accepted accounting principles (GAAP), which require the use of estimates and assumptions that affect the reported amounts of assets and liabilities. For a summary of all significant accounting policies, including critical accounting policies, see Note 2—Summary of Significant Accounting Policies to the Consolidated Financial Statements in Item 1, Financial Statements and Supplementary Data, of this Quarterly Report.
The increasing complexity of the business environment and applicable authoritative accounting guidance requires us to monitor our accounting policies and procedures. We have two critical accounting policies that require the use of significant judgment. The following summary of critical accounting policies is intended to enhance a reader’s ability to assess our financial condition and results of operations and the potential volatility due to changes in estimates.
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Table of Contents
Valuation of Investments
Our investments are carried at fair value in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820, “Fair Value Measurements and Disclosures”, which defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements.
Investments are valued at fair value as determined in good faith by RCM and approved by our Board. We generally invest in loan, debt, and equity instruments and there is no single standard for determining fair value of these investments. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio company while employing a consistent valuation process. Due to the inherent uncertainty of determining the fair value of portfolio investments, there may be material risks associated with this determination including that estimated fair values may differ from the values that would have been used had a readily available market value for the investments existed and these differences could be material if our assumptions and judgments differ from results of actual liquidation events. We analyze and value each investment quarterly and record unrealized depreciation for an investment that we believe has become impaired, including where collection of a loan or debt security or realization of the recorded value of an equity security is doubtful. Conversely, we will record unrealized appreciation if we believe that an underlying portfolio company has appreciated in value and, therefore, our equity securities in the underlying portfolio company have also appreciated in value. Additionally, we continue to assess any material risks associated with this fair value determination, including risks associated with material conflicts of interest.
Loan investments are defined as traditional loan financings typically with no equity features or required equity co-investment. Debt investments are defined as debt financings that include one or more equity features such as conversion rights, stock purchase warrants, and/or stock purchase options. Equity investments are direct investments into a portfolio company and may include preferred stock, common stock, warrants and limited liability company membership interests.
We utilize several approaches to determine the fair value of an investment. The main approaches are:
ASC 820 classifies the inputs used to measure fair value into the following hierarchy:
Level 1: Quoted prices in active markets for identical assets or liabilities, used in our valuation at the measurement date. Under the valuation policy, we value unrestricted publicly traded companies, categorized as Level 1 investments, at the closing price on the last trading day of the reporting period.
Level 2: Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices.
Level 3: Unobservable and significant inputs to determining the fair value.
Financial assets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Any changes in estimated fair value are recorded in the statement of operations.
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Table of Contents
At March 31, 2026 and December 31, 2025, all of our investments were Level 3 investments. There were no Level 1 or Level 2 investments at March 31, 2026 or December 31, 2025.
In the valuation process, we value restricted securities, categorized as Level 3 investments, using information from these portfolio companies, and, when considered appropriate, third-party valuation inputs, which may include:
The valuation may be reduced if a portfolio company’s performance and potential have deteriorated significantly. If the factors that led to a reduction in valuation are overcome, the valuation may be adjusted accordingly.
Equity Securities
Equity securities may include preferred stock, common stock, warrants and limited liability company membership interests.
The significant unobservable inputs used in the fair value measurement of our equity investments are EBITDA and revenue multiples, where applicable, the financial and operational performance of the business, and the debt and senior equity preferences that may exist in a deemed liquidation event. Standard industry multiples may be used when available; however, our portfolio companies are typically privately-held, lower middle market companies, and these industry standards may be adjusted to more closely match the specific financial and operational characteristics of the portfolio company. Due to the nature of certain investments, fair value measurements may be based on other criteria, which may include third party appraisals. Significant changes in any of these unobservable inputs may result in a significantly higher or lower fair value estimate.
Another key factor used in valuing equity investments is a significant recent arms-length equity transaction entered into by the portfolio company with a sophisticated, non-strategic and unrelated new investor. The terms of these equity transactions may not be identical to the equity transactions between the portfolio company and us, and the impact of the difference in transaction terms on the market value of the portfolio company may be difficult or impossible to quantify.
When appropriate the Black-Scholes pricing model is used to estimate the fair value of warrants for accounting purposes. This model requires the use of highly subjective inputs including expected volatility and expected life, in addition to variables for the valuation of minority equity positions in small private and early stage companies. Significant changes in any of these unobservable inputs may result in a significantly higher or lower fair value estimate.
For investments made within the last year, we generally rely on the cost basis, which is deemed to represent the fair value, unless other fair value inputs are identified causing us to depart from this basis.
Loan and Debt Securities
The significant unobservable inputs used in the fair value measurement of our loan and debt securities are the financial and operational performance of the portfolio company, similar debt with similar terms with other portfolio companies, as well as the market acceptance for the portfolio company’s products or services. These inputs will likely provide an indicator as to the probability
39
Table of Contents
of principal recovery of the investment. Our loan and debt investments are often junior secured or unsecured securities. Fair value may also be determined based on other criteria where appropriate. Significant changes to the unobservable inputs may result in a change in fair value. For recent investments, we generally rely on the cost basis, which is deemed to represent the fair value, unless other fair value inputs are identified causing us to depart from this basis.
Revenue Recognition
Interest income is recognized on the accrual basis except where the investment is in default or where receipt of such interest is otherwise presumed to be in doubt. In such cases, interest is recognized at the time of receipt. A reserve for possible losses on interest receivable is maintained when appropriate.
We hold debt securities in our investment portfolio that contain payment-in-kind (“PIK”) interest provisions. PIK interest, computed at the contractual rate specified in each debt agreement, is added to the principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment. For investments with PIK interest, we will not accrue PIK interest if the portfolio company valuation indicates that the PIK interest is not collectible. Loans that are on non-accrual status remain in such status until the borrower has demonstrated the ability and intent to pay contractual amounts due or such loans become current.
We may receive cash distributions from portfolio companies that are limited liability companies or corporations, and these distributions are classified as dividend income on our consolidated statement of operations. Dividend income is recognized on an accrual basis when it can be reasonably estimated for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies.
We may hold preferred equity securities that contain cumulative dividend provisions. Cumulative dividends are recorded as dividend income, if declared and deemed collectible, and any dividends in arrears are recognized into income and added to the balance of the preferred equity investment. The actual collection of these dividends in arrears may be deferred until such time as the preferred security is redeemed.
Financial Condition
Overview:
|
|
March 31, 2026 |
|
|
December 31, 2025 |
|
|
(Decrease) Increase |
|
|
% (Decrease) Increase |
|
||||
Total assets |
|
$ |
52,514,626 |
|
|
$ |
53,195,312 |
|
|
$ |
(680,686 |
) |
|
|
(1.3 |
)% |
Total liabilities |
|
|
1,559,771 |
|
|
|
1,011,859 |
|
|
|
547,912 |
|
|
|
54.1 |
% |
Net assets |
|
$ |
50,954,855 |
|
|
$ |
52,183,453 |
|
|
$ |
(1,228,598 |
) |
|
|
(2.4 |
)% |
Net asset value per share (NAV) was $
Cash and cash equivalents approximated 0.6% of net assets at March 31, 2026, as compared to 8.1% of net assets at December 31, 2025.
During 2022, we entered into a $25 million senior secured revolving credit facility (the “Credit Facility”) with M&T Bank, as lender (the “Lender”), with the amount that we can borrow thereunder, at any given time, determined based upon a borrowing base formula. The Credit Facility has a 5-year term with a maturity date of June 27, 2027. Our borrowings under the Credit Facility bear interest at a variable rate per annum equal to 3.50 percentage points above the greater of (i) the applicable daily simple secured overnight financing rate (SOFR) or (ii) 0.25%. At March 31, 2026, there was $500,000 drawn on the Credit Facility and the applicable interest rate was 7.18%.
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Table of Contents
Composition of Our Investment Portfolio
Our financial condition is dependent on the success of our portfolio holdings. The following summarizes our investment portfolio at the dates indicated:
|
|
March 31, 2026 |
|
|
December 31, 2025 |
|
|
Increase (Decrease) |
|
|
% Increase (Decrease) |
|
||||
Investments, at cost |
|
$ |
62,165,083 |
|
|
$ |
57,062,399 |
|
|
$ |
5,102,684 |
|
|
|
8.9 |
% |
Unrealized depreciation, net |
|
|
(10,622,019 |
) |
|
|
(8,581,903 |
) |
|
|
(2,040,116 |
) |
|
|
(23.8 |
)% |
Investments, at fair value |
|
$ |
51,543,064 |
|
|
$ |
48,480,496 |
|
|
$ |
3,062,568 |
|
|
|
6.3 |
% |
Our total investments at fair value, as determined by RCM and approved by our Board, approximated 101% of net assets at March 31, 2026 as compared to approximately 93% of net assets at December 31, 2025.
Our investment objective is to generate current income and when possible, complement this current income with capital appreciation. As a result, we are focused on investing in higher yielding debt instruments and related equity investments in privately held, lower middle market companies with a committed and experienced management team in a broad variety of industries.
The change in investments during the three months ended March 31, 2026, at cost, is comprised of the following:
|
|
Cost |
|
|
New investments: |
|
|
|
|
AME Holdco, LLC (AME) |
|
$ |
4,000,000 |
|
Mountain Regional Equipment Solutions (MRES) |
|
|
677,924 |
|
BMP Food Service Supply Holdco, LLC (FSS) |
|
|
400,000 |
|
Caitec, Inc. (Caitec) |
|
|
50,000 |
|
Total of new investments |
|
|
5,127,924 |
|
Other changes to investments: |
|
|
|
|
Autotality interest conversion |
|
|
123,886 |
|
Highland All About People Holdings, Inc. (All About People) interest conversion |
|
|
33,058 |
|
BMP Swanson Holdco, LLC (Swanson) interest conversion |
|
|
32,964 |
|
Caitec interest conversion |
|
|
25,292 |
|
FCM Industries Holdco LLC (First Coast Mulch) interest conversion |
|
|
13,521 |
|
Mobile RN Holdings LLC (Mobile IV Nurses) interest conversion |
|
|
6,330 |
|
BlackJet Direct Marketing, LLC (BlackJet) interest conversion |
|
|
5,642 |
|
GoNoodle, Inc. (GoNoodle) interest conversion |
|
|
3,637 |
|
MRES OID amortization |
|
|
3,000 |
|
Bauer Sheet Metal and Fabricating, LLC (Bauer) OID amortization |
|
|
600 |
|
Total of other changes to investments |
|
|
247,930 |
|
Investments repaid, sold, liquidated or converted: |
|
|
|
|
Applied Image, Inc. (Applied Image) debt repayment |
|
|
(29,170 |
) |
Seybert’s Billiards Corporation (Seybert’s) equity and warrant sale |
|
|
(244,000 |
) |
Total of investments repaid, sold, liquidated or converted |
|
|
(273,170 |
) |
Net change in investments, at cost |
|
$ |
5,102,684 |
|
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Table of Contents
Results of Operations
Comparison of the three months ended March 31, 2026 to the three months ended March 31, 2025:
Investment Income
|
|
Three months ended |
|
|
Three months ended |
|
|
(Decrease) Increase |
|
|
% (Decrease) Increase |
|
||||
Interest from portfolio companies |
|
$ |
1,182,759 |
|
|
$ |
1,677,166 |
|
|
$ |
(494,407 |
) |
|
|
(29.5 |
)% |
Interest from other investments |
|
|
13,801 |
|
|
|
10,383 |
|
|
|
3,418 |
|
|
|
32.9 |
% |
Dividend and other investment income |
|
|
— |
|
|
|
13,125 |
|
|
|
(13,125 |
) |
|
|
(100.0 |
)% |
Fee income |
|
|
43,289 |
|
|
|
307,230 |
|
|
|
(263,941 |
) |
|
|
(85.9 |
)% |
Total investment income |
|
$ |
1,239,849 |
|
|
$ |
2,007,904 |
|
|
$ |
(768,055 |
) |
|
|
(38.3 |
)% |
The total investment income during the three months ended March 31, 2026 was received from 15 portfolio companies. For the three months ended March 31, 2025, total investment income was received from 18 portfolio companies.
Interest from portfolio companies – Interest from portfolio companies was approximately 29% lower during the three months ended March 31, 2026 versus the same period in 2025 due to repayment of several interest-yielding investments during the last year, without corresponding new debt instrument originations in replacement. Debt instruments were repaid by HDI Acquisition LLC (Hilton), Lumious, Mattison Avenue Holdings LLC (Mattison), Pressure Pro, Inc. (Pressure Pro), and Seybert’s. In addition, our debt investments in FSS, ITA Acquisition, LLC (ITA), and MRES were placed on non-accrual status during 2025.
We hold debt securities in our investment portfolio that contain payment-in-kind (“PIK”) interest provisions. PIK interest, computed at the contractual rate specified in each debt agreement, is added to the principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment. Interest can also be shifted from current cash payment to PIK as part of a loan modification. For the three months ended March 31, 2026 and 2025, 19.7% and 31.1%, respectively, of our total investment income was attributable to non-cash PIK interest income.
Interest from other investments - The increase in interest from other investments is primarily due to higher average cash balances during the three months ended March 31, 2026 versus the same period in 2025.
Dividend and other investment income - Dividend income is comprised of cash distributions from limited liability companies (LLCs) and corporations in which we have invested. Our investment agreements with certain LLCs require those LLCs to distribute funds to us for payment of income taxes on our allocable share of the LLC’s profits. These portfolio companies may also elect to make additional discretionary distributions or dividends. Dividend income will fluctuate based upon the profitability of these LLCs and corporations and the timing of the distributions. No dividend income was recognized during the three months ended March 31, 2026. During the three months ended March 31, 2025, we recognized $13,125 in dividend income from Tilson Technology Management, Inc. (Tilson).
Fee income - Fee income generally consists of the revenue associated with the amortization of financing fees charged to the portfolio companies upon successful closing of financings, income associated with portfolio company monitoring fees, and other miscellaneous fees. The financing fees are amortized ratably over the life of the instrument associated with the fees. The unamortized fees are carried on the balance sheet under the line item “Deferred revenue.”
The income associated with the amortization of financing fees was $43,289 and $87,777 for the three months ended March 31, 2026 and 2025, respectively. During the three months ended March 31, 2025, we recognized a prepayment fee of $167,187 from our debt investment in Mattison, a loan monitoring fee of $20,000 from our debt investment in Pressure Pro, a prepayment fee of $17,266 from our debt investment in Pressure Pro, and a loan modification fee of $15,000 from our investment in MRES. No similar fees were received during the three months ended March 31, 2026.
Expenses
|
|
Three months ended |
|
|
Three months ended |
|
|
Decrease |
|
|
% Decrease |
|
||||
Total expenses |
|
$ |
641,917 |
|
|
$ |
791,065 |
|
|
$ |
(149,148 |
) |
|
|
(18.9 |
)% |
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Table of Contents
The decrease in total expenses during the three months ended March 31, 2026 versus the same period in 2025 was primarily due to a $119,673 decrease in the income based incentive fee expense and a $62,513 decrease in base management fee expense.
The income based incentive fee is calculated quarterly in accordance with the Investment Management Agreement. There was no income based incentive fee accrual during the three months ended March 31, 2026. The income based incentive fee accrued during the three months ended March 31, 2025 was $119,673, and was a result of Pre-Incentive Fee Net Investment Income being above the applicable hurdle rate during the applicable quarter, as set forth and described in the Investment Management Agreement. “Pre-Incentive Fee Net Investment Income” means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that we receive from portfolio companies) accrued during such calendar quarter, minus our operating expenses for such calendar quarter (including the Base Management Fee, expenses payable under the Administration Agreement, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding any portion of the Incentive Fee). Pre-Incentive Fee Net Investment Income includes any accretion of original issue discount, market discount, payment-in-kind interest, payment-in-kind dividends or other types of deferred or accrued income, including in connection with zero coupon securities, that we have recognized in accordance with GAAP, but have not yet received in cash (collectively, “Accrued Unpaid Income”). Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized and unrealized capital losses or unrealized capital appreciation or depreciation.
The base management fee payable to RCM under the Investment Management Agreement is calculated based upon total assets less cash, and, as investments are exited or repaid or the fair value of our investments decline, the base management fee payable to RCM will decrease accordingly. The base management fee expense for the three months ended March 31, 2026 and 2025 was $189,695 and $252,208, respectively.
Net Investment Income
The excess of investment income over total expenses, including income taxes, represents net investment income. The net investment income for the three months ended March 31, 2026 and 2025 was $545,027 and $1,218,115, respectively.
Realized Gain on Investments
|
|
Three months ended |
|
|
Three months ended |
|
|
Change |
|
|||
Realized gain on investments before income taxes |
|
$ |
1,075,571 |
|
|
$ |
925,332 |
|
|
$ |
150,239 |
|
During the three months ended March 31, 2026, we sold our equity and warrant investments in Seybert’s and recognized a realized gain of $1,072,459. In addition, during the three months ended March 31, 2026, we recognized a gain of $3,112 from additional proceeds received from the sale of our preferred equity investment in Carolina Skiff.
During the three months ended March 31, 2025, we sold our warrant investment in Pressure Pro and recognized a realized gain of $870,000. In addition, during the three months ended March 31, 2025, we recognized a gain of $55,357 from additional proceeds received from Microcision LLC (Microcision), an investment we exited in 2022. We also recognized a realized loss of ($25) with respect to our investment in GoNoodle when our Series C warrant expired without exercise.
Change in Unrealized (Depreciation) Appreciation of Investments
|
|
Three months ended |
|
|
Three months ended |
|
|
Change |
|
|||
Change in unrealized (depreciation) appreciation of investments |
|
$ |
(2,040,116 |
) |
|
$ |
(1,298,384 |
) |
|
$ |
(741,732 |
) |
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Table of Contents
The change in net unrealized (depreciation) appreciation, before income taxes, for the three months ended March 31, 2026, was comprised of the following:
|
|
Three months ended |
|
|
All About People |
|
$ |
400,000 |
|
Bauer |
|
|
288,000 |
|
BlackJet |
|
|
(250,000 |
) |
MRES |
|
|
(403,000 |
) |
Autotality |
|
|
(1,023,457 |
) |
Seybert's |
|
|
(1,051,659 |
) |
Total change in net unrealized (depreciation) appreciation of investments before |
|
$ |
(2,040,116 |
) |
We exited our investment in Seybert’s during the three months ended March 31, 2026.
In accordance with the Corporation’s valuation policy, we increased the value of our investments in All About People and Bauer during the three months ended March 31, 2026 after a financial analysis of each of the portfolio companies indicated continued improved performance.
During the three months ended March 31, 2026, the valuation of our investments in BlackJet, MRES, and Autotality were each decreased after a review of their operations and financial condition.
The change in net unrealized (depreciation) appreciation, before income taxes, for the three months ended March 31, 2025, was comprised of the following:
|
|
Three months ended |
|
|
Inter-National Electronic Alloys LLC (EFINEA) |
|
$ |
288,235 |
|
Seybert's |
|
|
256,000 |
|
FSS |
|
|
(247,619 |
) |
Pressure Pro |
|
|
(720,000 |
) |
ITA |
|
|
(875,000 |
) |
Total change in net unrealized (depreciation) appreciation of investments before |
|
$ |
(1,298,384 |
) |
We sold our warrant investment in Pressure Pro during the three months ended March 31, 2025.
In accordance with the Corporation’s valuation policy, we increased the value of our investments in EFINEA and Seybert’s during the three months ended March 31, 2025 after a financial analysis of each of the portfolio companies indicating continued improved performance.
During the three months ended March 31, 2025, the valuation of our investments in FSS and ITA were decreased after a review of their operations and financial condition.
All of the valuation adjustments resulted from a determination of fair value in good faith by RCM, which was subsequently approved by our Board, using the guidance set forth by ASC 820 and our established valuation policy.
Net (Decrease) Increase in Net Assets from Operations
We account for our operations under GAAP for investment companies. The principal measure of our financial performance is “Net (decrease) increase in net assets from operations” on our consolidated statements of operations. The net (decrease) increase in net assets from operations for the three months ended March 31, 2026 and 2025 was ($367,469) and $841,447, respectively.
44
Table of Contents
Liquidity and Capital Resources
Liquidity is a measure of our ability to meet anticipated cash requirements, fund new and follow-on portfolio investments, pay distributions to our shareholders and respond to other general business demands. As of March 31, 2026, our total liquidity consisted of approximately $331,000 in cash and approximately $20,100,000 of unused availability on our Credit Facility.
During 2022, we entered into a $
Our borrowings under the Credit Facility bear interest at a variable rate determined as a rate per annum equal to 3.50 percentage points above the greater of (i) the applicable daily simple secured overnight financing rate (SOFR) or (ii) 0.25%. At March 31, 2026, our applicable interest rate was 7.18%.
The Credit Agreement contains representations and warranties and affirmative, negative and financial covenants usual and customary for agreements of this type, including among others covenants that prohibit, subject to certain specified exceptions, our ability to merge or consolidate with other companies, sell any material part of our assets, incur other indebtedness, incur liens on our assets, make investments or loans to third parties other than permitted investments and permitted loans, and declare any distribution or dividend other than certain permitted distributions. The Credit Agreement includes the following financial covenants: (i) a tangible net worth covenant that requires us to maintain a Tangible Net Worth (defined in the Credit Agreement as our aggregate assets, excluding intangible assets, less all of our liabilities) of not less than $50.0 million, which is measured quarterly at the end of each fiscal quarter, (ii) an asset coverage ratio covenant that requires us to maintain an Asset Coverage Ratio (defined in the Credit Agreement as the ratio of the fair market value of all of our assets to the sum of all of our obligations for borrowed money plus all capital lease obligations) of not less than 3:1, which is measured quarterly at the end of each fiscal quarter and (iii) an interest coverage ratio covenant that requires us to maintain an Interest Coverage Ratio (defined in the Credit Agreement as the ratio of Cash Flow (as defined in the Credit Agreement) to Interest Expense (as defined in the Credit Agreement)) of not less than 2.5:1, which is measured quarterly on a trailing twelve-months basis. We were in compliance with these covenants at March 31, 2026. See “Note 6. Senior Secured Revolving Credit Facility” on our Notes to the Consolidated Financial Statements for additional information regarding the terms of our Credit Facility.
For the three months ended March 31, 2026, we experienced a net decrease in cash of approximately $3,878,000, which is a net effect of approximately $3,517,000 of net cash used in our operating activities and approximately $361,000 of net cash used in our financing activities.
The $3,517,000 of net cash used in our operating activities during the three months ended March 31, 2026 resulted primarily from approximately $5,128,000 used to fund new or follow-on portfolio company investments, approximately $244,000 in non-cash interest income, and an approximately $141,000 net increase in operating assets. This was partially offset by net investment income of approximately $545,000, approximately $1,349,000 received from the sales of equity investments and repayments of debt investments, and an approximately $48,000 net increase in operating liabilities.
Net cash used in financing activities during the three months ended March 31, 2026 was approximately $361,000. This is comprised of approximately $861,000 in cash dividends paid to shareholders and $500,000 borrowed on the Credit Facility.
We anticipate that we will continue to fund our investment activities through cash generated through our ongoing operating activities and through borrowings under the $25 million Credit Facility. We anticipate that we will continue to exit investments. However, the timing of liquidation events with respect to our privately held investments is difficult to project.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are subject to financial market risks primarily consisting of risks resulting from changes in interest rates and the valuation of our investment portfolio.
45
Table of Contents
Interest Rate Risk
Changes in interest rates may affect our interest expense on the debt outstanding under our Credit Facility. Our debt borrowings under the Credit Facility bear interest at a variable rate determined as a rate per annum equal to 3.50 percentage points above the greater of (i) the applicable daily simple secured overnight financing rate (SOFR) and (ii) 0.25%. Changes in interest rates can also affect, among other things, our ability to acquire and originate loans and securities and the value of our investment portfolio. As of March 31, 2026, all of our debt investments that are not on non-accrual status had fixed interest rates and were not directly impacted by changes in market interest rates.
Based on our Consolidated Statement of Financial Position as of March 31, 2026, the following table shows the approximate annualized increase (decrease) in net investment income due to hypothetical base rate changes in interest rates under our Credit Facility, assuming no changes in our borrowings as of March 31, 2026. Because we often borrow money to make investments, our net investment income is dependent upon the difference between our borrowing rate and the rate we earn on the invested proceeds borrowed. In periods of rising interest rates, the rate we earn on our debt investments with fixed interest rates will remain the same, while the interest incurred on our borrowings under the Credit Facility will increase.
|
|
Impact on net investment income from a change in interest rates on our Credit Facility at: |
|
|||||||||
|
|
1% |
|
|
2% |
|
|
3% |
|
|||
Increase in interest rate |
|
$ |
(5,000 |
) |
|
$ |
(10,000 |
) |
|
$ |
(15,000 |
) |
Decrease in interest rate |
|
|
5,000 |
|
|
|
10,000 |
|
|
|
15,000 |
|
Although we believe that this analysis is indicative of our existing interest rate sensitivity under our Credit Facility at March 31, 2026, it does not adjust for changes in the credit quality, size and composition of our investment portfolio, and other business developments, including increased borrowings under our Credit Facility, that could affect our net investment income. Accordingly, no assurances can be given that actual results would not differ materially from the results under this hypothetical analysis.
We do not currently engage in any hedging activities. However, we may, in the future, hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of lower interest rates with respect to our borrowed funds.
Valuation Risk
We carry our investments at fair value in accordance with FASB Accounting Standards Codification (ASC) 820, “Fair Value Measurements and Disclosures”, as determined in good faith by RCM and approved by our Board. Determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio company investment while employing a consistent valuation process. Due to the inherent uncertainty of determining the fair value of portfolio investments, there are material risks associated with this determination including that estimated fair values may differ from the values that would have been used had a readily available market value for the investments existed and these differences could be material if our assumptions and judgments differ from results of actual liquidation events. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the value realized on these investments to be different than the valuations that are assigned. The types of factors that we may take into account in valuation of our investments include, as relevant, third party valuations, the portfolio company’s ability to make payments and its earnings, the markets in which the portfolio company does business, comparison to publicly-traded securities, recent sales of or offers to buy comparable companies, and other relevant factors.
Item 4. Controls and Procedures
Disclosure Controls and Procedures. The Corporation maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that this information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The Chief Executive Officer and the Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures as of March 31, 2026. Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s controls and procedures were not effective as of March 31, 2026 as a result of material weakness in the controls related to the accounting for income taxes and related disclosures discussed in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2025.
As previously disclosed in Part II, Item 9A of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2025, management commenced the following remediation actions relating to this material weakness:
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Table of Contents
The Chief Executive Officer and Chief Financial Officer believe these measures will remediate the identified material weakness; however, the material weakness will not be considered remediated until the enhanced controls have been implemented and have operated effectively for a sufficient period of time to enable management to conclude, through testing, that the controls are operating effectively.
Changes in Internal Control over Financial Reporting. Except for the material weakness and remediation efforts described above, there have been no changes in our internal control over financial reporting during the Corporation’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.
47
Table of Contents
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
See the information provided under the heading “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2025.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
|
Total number of shares purchased (1) |
|
|
Average price paid per share (2) |
|
|
Total number of shares purchased as part of publicly |
|
|
Maximum dollar amount of shares that may yet be purchased under the share repurchase program (3) |
|
||||
1/1/2026 – 1/31/2026 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
1,500,000 |
|
2/1/2026 – 2/28/2026 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
1,500,000 |
|
3/1/2026 – 3/31/2026 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
1,500,000 |
|
Total |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
During the three months ended March 31, 2026,
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Table of Contents
Item 6. Exhibits
The following exhibits are filed with this report or are incorporated herein by reference to a prior filing, in accordance with Rule 12b-32 under the Securities Exchange Act of 1934.
(3.1)(i) |
Certificate of Incorporation of the Corporation, incorporated by reference to Exhibit (a)(1) of Form N-2 filed with the SEC on April 22, 1997. (File No. 333-25617). |
|
|
(3.1)(ii) |
Certificate of Amendment to the Certificate of Incorporation, as amended, incorporated by reference to Exhibit 3.1 to the Corporation’s Current Report on Form 8-K filed with the SEC on November 12, 2019. |
|
|
(3.1)(iii) |
Certificate of Amendment to the Certificate of Incorporation, as amended, incorporated by reference to Exhibit 3.1 to the Corporation’s Current Report on Form 8-K filed with the SEC on May 21, 2020. |
|
|
(3.1)(iv) |
By-laws of the Corporation, incorporated by reference to Exhibit 3(ii) to the Corporation’s Quarterly Report on Form 10-Q for the period ended September 30, 2016 filed with the SEC on November 2, 2016. (File No. 814-00235). |
|
|
(4.1) |
Specimen certificate of common stock certificate, incorporated by reference to Exhibit (b) of Form N-2 filed with the SEC on April 22, 1997. (File No. 333-25617). |
|
|
(31.1) |
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended – filed herewith. |
|
|
(31.2) |
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended – filed herewith. |
|
|
(32.1) |
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Rand Capital Corporation – filed herewith. |
|
|
101.INS* |
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
|
|
101.SCH* |
Inline XBRL Taxonomy Extension Schema With Embedded Linkbases Document |
|
|
104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
49
Table of Contents
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
RAND CAPITAL CORPORATION
Dated: May 6, 2026 |
|
|
|
|
|
|
/s/ Daniel P. Penberthy |
|
Daniel P. Penberthy, Chief Executive |
|
Officer and President |
|
(Chief Executive Officer) |
Dated: May 6, 2026 |
|
|
|
|
|
|
|
|
/s/ Margaret W. Brechtel |
|
Margaret W. Brechtel, Executive Vice |
|
President, Chief Financial Officer and |
|
Treasurer |
|
(Chief Financial Officer) |
50