Rand Capital(RAND) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides a comprehensive overview of the company's financial performance and position, including statements, portfolio details, and accounting notes Item 1. Financial Statements and Supplementary Data This section presents Rand Capital Corporation's unaudited consolidated financial statements, including statements of financial position, operations, cash flows, and detailed notes for the periods ended June 30, 2025, and December 31, 2024 Consolidated Statements of Financial Position This statement details the company's assets, liabilities, and equity at specific points in time, reflecting its financial health Consolidated Statements of Financial Position Highlights: | Metric | Dec 31, 2024 | Jun 30, 2025 | Change | % Change | | :----------------------------------- | :----------- | :----------- | :------- | :------- | | Total assets | $72,457,433 | $57,639,539 | $(14,817,894) | (20.5)% | | Total investments, at fair value | $70,818,041 | $52,364,254 | $(18,453,787) | (26.1)% | | Cash | $834,805 | $4,419,813 | $3,585,008 | 429.4% | | Total liabilities | $7,124,913 | $925,585 | $(6,199,328) | (87.0)% | | Line of credit | $600,000 | $0 | $(600,000) | (100.0)% | | Capital gains incentive fees | $1,565,000 | $0 | $(1,565,000) | (100.0)% | | Total stockholders' equity (net assets) | $65,332,520 | $56,713,954 | $(8,618,566) | (13.2)% | | Net assets per share | $25.31 | $19.10 | $(6.21) | (24.5)% | Consolidated Statements of Operations This statement summarizes the company's revenues, expenses, and net income or loss over a period, indicating operational performance Consolidated Statements of Operations Highlights (Six Months Ended June 30): | Metric | 2024 | 2025 | Change | | :------------------------------------------------- | :-------------------------- | :-------------------------- | :------- | | Total investment income | $4,203,368 | $3,610,201 | $(593,167) | | Total (benefits) expenses | $3,879,638 | $(73,094) | $(3,952,732) | | Net investment income (loss) | $322,390 | $3,696,349 | $3,373,959 | | Net realized gain (loss) on sales and dispositions of investments | $3,878,200 | $925,332 | $(2,952,868) | | Net change in unrealized appreciation/depreciation on investments | $4,936,564 | $(11,516,388) | $(16,452,952) | | Net (decrease) increase in net assets from operations | $9,137,154 | $(6,894,707) | $(16,031,861) | | Basic and diluted net (decrease) increase in net assets from operations per share | $3.54 | $(2.36) | $(5.90) | Consolidated Statements of Changes in Net Assets This statement outlines the changes in the company's net assets (stockholders' equity) over a period, including operations and dividends Consolidated Statements of Changes in Net Assets Highlights (Six Months Ended June 30): | Metric | 2024 | 2025 | Change | | :----------------------------------------- | :-------------------------- | :-------------------------- | :------- | | Net assets at beginning of period | $60,815,213 | $65,332,520 | $4,517,307 | | Net (decrease) increase in net assets from operations | $9,137,154 | $(6,894,707) | $(16,031,861) | | Declaration of dividend | $(1,393,751) | $(1,723,859) | $(330,108) | | Net assets at end of period | $68,558,616 | $56,713,954 | $(11,844,662) | Consolidated Statements of Cash Flows This statement reports the cash generated and used by the company from operating, investing, and financing activities over a period Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30): | Metric | 2024 | 2025 | Change | | :---------------------------------------- | :-------------------------- | :-------------------------- | :------- | | Net cash provided by (used in) operating activities | $(558,344) | $8,076,925 | $8,635,269 | | Net cash used in financing activities | $(443,751) | $(4,491,917) | $(4,048,166) | | Net increase (decrease) in cash | $(1,002,095) | $3,585,008 | $4,587,103 | | Cash, end of period | $2,293,226 | $4,419,813 | $2,126,587 | Consolidated Schedule of Portfolio Investments This schedule provides a detailed listing and classification of the company's investment portfolio, including fair values and cost Total Investments at Fair Value: | Metric | Dec 31, 2024 | Jun 30, 2025 | Change | % Change | | :-------------------------------- | :----------- | :----------- | :------- | :------- | | Investments, at cost | $68,120,235 | $61,277,046 | $(6,843,189) | (10.0)% | | Unrealized (depreciation) appreciation, net | $2,697,806 | $(8,912,792) | $(11,610,598) | (430.4)% | | Investments, at fair value | $70,818,041 | $52,364,254 | $(18,453,787) | (26.1)% | Investment Category Breakdown (Fair Value): | Category | Dec 31, 2024 | Jun 30, 2025 | Change | % Change | | :-------------------------------- | :----------- | :----------- | :------- | :------- | | Non-Control/Non-Affiliate Investments | $16,649,897 | $7,646,779 | $(9,003,118) | (54.1)% | | Affiliate Investments | $51,668,144 | $42,717,475 | $(8,950,669) | (17.3)% | | Control Investments | $2,500,000 | $2,000,000 | $(500,000) | (20.0)% | Industry Classification (June 30, 2025): | Industry Classification | Percentage of Total Investments (at fair value) | | :-------------------------------- | :---------------------------------------------- | | Professional and Business Services | 36.6% | | Consumer Product | 24.9% | | Distribution | 13.1% | | Manufacturing | 8.7% | | Health and Wellness | 5.8% | | Automotive | 5.7% | | Software | 5.2% | Notes to the Consolidated Schedule of Portfolio Investments These notes provide additional context and details regarding the valuation and characteristics of the company's investment portfolio - At June 30, 2025, restricted securities represented 100% of the fair value of the investment portfolio, and all investments were classified as "Level 3" assets under ASC 820[27] - Non-income producing investments include Caitec, OnCore Golf Technology, Inc., Open Exchange, Inc., PostProcess Technologies, Inc., and Carolina Skiff LLC[27] - As of June 30, 2025, the total cost of investment securities was approximately $61.3 million, with a net unrealized depreciation of approximately ($8.9) million[27] Investments in and Advances to Affiliates (June 30, 2025) This section details the company's investments in and advances to affiliated entities as of June 30, 2025, highlighting changes in unrealized depreciation - Control Investments (ITA Acquisition, LLC) experienced a net change in unrealized depreciation of $(875,000) for the six months ended June 30, 2025, with gross additions of $375,000[29] - Affiliate Investments saw a net change in unrealized depreciation of $(10,545,654) and net realized gains of $925,357 for the six months ended June 30, 2025[31] - Tilson Technology Management, Inc. (Affiliate Investment) had a significant net change in unrealized depreciation of $(9,500,000) during the period[31] Industry Classification (June 30, 2025) This section categorizes the company's investment portfolio by industry as of June 30, 2025, showing concentration levels Industry Classification of Total Investments (at fair value) as of June 30, 2025: | Industry Classification | Percentage of Total Investments | | :-------------------------------- | :------------------------------ | | Professional and Business Services | 36.6% | | Consumer Product | 24.9% | | Distribution | 13.1% | | Manufacturing | 8.7% | | Health and Wellness | 5.8% | | Automotive | 5.7% | | Software | 5.2% | Consolidated Schedule of Portfolio Investments (December 31, 2024) This schedule provides a detailed listing and classification of the company's investment portfolio as of December 31, 2024 Investment Category Breakdown (Fair Value) as of December 31, 2024: | Category | Fair Value | | :-------------------------------- | :----------- | | Non-Control/Non-Affiliate Investments | $16,649,897 | | Affiliate Investments | $51,668,144 | | Control Investments | $2,500,000 | | TOTAL INVESTMENTS | $70,818,041 | - Tilson Technology Management, Inc. was the largest Affiliate Investment at fair value ($11,500,000), representing 17.6% of net assets[42] - Mattison Avenue Holdings LLC was a significant Non-Control/Non-Affiliate Investment at fair value ($5,572,902), representing 8.5% of net assets[36] Notes to the Consolidated Schedule of Portfolio Investments (December 31, 2024) These notes provide additional context and details regarding the valuation and characteristics of the company's investment portfolio as of December 31, 2024 - At December 31, 2024, restricted securities represented 100% of the fair value of the investment portfolio, and all investments were classified as "Level 3" assets under ASC 820[44] - As of December 31, 2024, the total cost of investment securities was approximately $68.1 million, with a net unrealized appreciation of approximately $2.7 million[44] Investments in and Advances to Affiliates (December 31, 2024) This section details the company's investments in and advances to affiliated entities as of December 31, 2024, highlighting changes in unrealized appreciation - Control Investments (ITA Acquisition, LLC) experienced a net change in unrealized depreciation of $(2,565,130) for the year ended December 31, 2024, with gross additions of $916,170[46] - Affiliate Investments saw a net change in unrealized appreciation of $1,400,942 and net realized gains of $6,165,419 for the year ended December 31, 2024[48] - SciAps, Inc. (Affiliate Investment) had significant net realized gains of $7,716,461 from reductions in 2024[48] Industry Classification (December 31, 2024) This section categorizes the company's investment portfolio by industry as of December 31, 2024, showing concentration levels Industry Classification of Total Investments (at fair value) as of December 31, 2024: | Industry Classification | Percentage of Total Investments | | :-------------------------------- | :------------------------------ | | Professional and Business Services | 47.6% | | Consumer Product | 17.7% | | Manufacturing | 12.7% | | Distribution | 9.7% | | Software | 4.1% | | Automotive | 4.1% | | Health and Wellness | 4.1% | Notes to the Consolidated Financial Statements These notes provide essential disclosures and explanations supporting the consolidated financial statements, detailing accounting policies and other relevant information Note 1. ORGANIZATION This note describes Rand Capital Corporation's structure, regulatory status as a BDC and RIC, and its external management arrangement - Rand Capital Corporation operates as an externally managed, closed-end, non-diversified management investment company, regulated as a Business Development Company (BDC) under the 1940 Act[58][152] - The company elected U.S. Federal tax treatment as a Regulated Investment Company (RIC), requiring distribution of substantially all investment company taxable income to shareholders[59][157] - East Asset Management owns approximately 64% of Rand Capital's outstanding common stock as of June 30, 2025, following a $25 million investment in November 2019[56] - Rand Capital Management, LLC (RCM) serves as the external investment adviser and administrator, with agreements extended through December 31, 2025[56][153] - The Board declared quarterly cash dividends of $0.29 per share for Q1 and Q2 2025; a $4.20 per share dividend declared in December 2024 was paid 20% cash and 80% stock in January 2025, increasing outstanding shares from 2,581,021 to 2,969,814[60][158] Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the key accounting principles and methods used in preparing the financial statements, including investment valuation and income recognition - The financial statements are prepared in accordance with GAAP, following ASC 946 for Investment Companies[64] - Investments are classified by level of control (Control, Affiliate, Non-Control/Non-Affiliate) as defined by the 1940 Act[67] - All investments are valued at fair value, determined in good faith by RCM and approved by the Board, with 100% classified as "Level 3" assets at June 30, 2025, and December 31, 2024[69][97] - Interest income is recognized on an accrual basis, except for investments in default, and includes Payment-in-Kind (PIK) interest; for the six months ended June 30, 2025, 33.9% of total investment income was non-cash PIK interest[71][72][195] - As of June 30, 2025, the debt investment in ITA Acquisition, LLC was on non-accrual status (cost $5.4M, fair value $2.0M), representing 8.9% of the investment portfolio; no investments were on non-accrual status at December 31, 2024[72] - The company maintains RIC status and generally avoids corporate-level U.S. federal income taxes by distributing substantially all taxable income[83] - The valuation allowance against U.S. federal deferred tax assets was $363,471 at June 30, 2025, and December 31, 2024[85] - Top five portfolio company concentrations at June 30, 2025, include Seybert's (16%), FSS (13%), EFINEA (9%), Caitec (9%), and First Coast Mulch (7%)[91] Note 3. INVESTMENTS This note details the company's investment valuation methodologies, significant unobservable inputs, and changes in Level 3 assets - All investments are Level 3 assets, valued using unobservable inputs; valuation approaches include cost, market (EBITDA/revenue multiples, transaction pricing), and income approaches[97][99][106] - Significant unobservable inputs for equity investments include EBITDA and revenue multiples, financial/operational performance, and debt/senior equity preferences[101] - Significant unobservable inputs for loan and debt securities include financial/operational performance, similar debt terms, and market acceptance of products/services[105] Summary of Level 3 Assets by Valuation Approach (June 30, 2025): | Investment Type | Market Approach (EBITDA Multiple) | Liquidation Seniority | Market Approach (Revenue Multiple) | Market Approach (Transaction Pricing) | Totals | | :-------------------------------- | :-------------------------------- | :-------------------- | :--------------------------------- | :------------------------------------ | :------- | | Non-Control/Non-Affiliate Equity | $0 | $0 | $700,000 | $100,038 | $800,038 | | Non-Control/Non-Affiliate Loan and Debt | $4,799,278 | $2,047,463 | $0 | $0 | $6,846,741 | | Affiliate Equity | $6,650,000 | $0 | $0 | $0 | $6,650,000 | | Affiliate Loan and Debt | $34,317,475 | $0 | $0 | $1,750,000 | $36,067,475 | | Control Equity | $0 | $0 | $0 | $0 | $0 | | Control Loan and Debt | $0 | $2,000,000 | $0 | $0 | $2,000,000 | | Total Level 3 Investments | $45,766,753 | $4,047,463 | $700,000 | $1,850,038 | $52,364,254 | - The ending balance of Level 3 Assets decreased from $70,818,041 at December 31, 2024, to $52,364,254 at June 30, 2025, primarily due to net unrealized losses of $(11,610,598) and repayments/sales of $(9,446,225)[109] Note 4. OTHER ASSETS This note provides a breakdown of the company's other assets, including prepaid expenses and deferred financing fees Other Assets Composition: | Metric | Dec 31, 2024 | Jun 30, 2025 | Change | | :---------------------- | :----------- | :----------- | :------- | | Prepaid expenses | $16,977 | $79,076 | $62,099 | | Deferred financing fees, net | $62,500 | $50,000 | $(12,500) | | Accounts receivable | $22,929 | $20,000 | $(2,929) | | Dividends receivable | $13,125 | $0 | $(13,125) | | Total other assets | $115,531 | $149,076 | $33,545 | Note 5. COMMITMENTS AND CONTINGENCIES This note discloses any material commitments or contingent liabilities affecting the company's financial position - The Corporation had no commitments at June 30, 2025, or December 31, 2024[112] Note 6. SENIOR SECURED REVOLVING CREDIT FACILITY This note describes the terms and status of the company's credit facility, including outstanding balances and compliance with covenants - The company has a $25.0 million senior secured revolving credit facility with M&T Bank, maturing June 27, 2027[113] - No outstanding balance was drawn on the Credit Facility at June 30, 2025 (vs. $600,000 at Dec 31, 2024)[119] - Unused line of credit balance was approximately $20.2 million at June 30, 2025[113][221] - Interest rate at June 30, 2025, was 7.95% (variable, SOFR + 3.50%)[114][221] - The company was in compliance with all financial covenants (tangible net worth > $50M, asset coverage ratio > 3:1, interest coverage ratio > 2.5:1) as of June 30, 2025[115][222] Credit Facility Average Debt and Interest Rate (Six Months Ended June 30): | Metric | 2024 | 2025 | | :-------------------------- | :-------------------------- | :-------------------------- | | Average debt outstanding | $17,132,143 | $301,657 | | Weighted average interest rate | 8.91% | 7.88% | Note 7. CHANGES IN STOCKHOLDERS' EQUITY (NET ASSETS) This note explains the factors contributing to changes in the company's net assets, such as operational results and dividend payments - Net assets decreased from $65,332,520 at January 1, 2025, to $56,713,954 at June 30, 2025[123] - This decrease was primarily due to a net decrease in net assets from operations of $(6,894,707) and dividend payments of $(1,723,859)[123] - A stock dividend payment in January 2025 increased common stock by $38,879 and capital in excess of par value by $8,631,884, while reducing stock dividends distributable by $8,672,231[123] Note 8. RELATED PARTY TRANSACTIONS This note details transactions and balances with related parties, including management fees and incentive fees payable to the investment adviser Amounts Payable to RCM (Due to Investment Adviser): | Metric | Dec 31, 2024 | Jun 30, 2025 | Change | | :-------------------------- | :----------- | :----------- | :------- | | Base Management Fee payable | $277,628 | $217,649 | $(59,979) | | Income Based Incentive Fees payable | $178,218 | $291,851 | $113,633 | | Capital Gains Fee payable | $1,727,000 | $0 | $(1,727,000) | | Total due to investment adviser | $2,182,846 | $509,500 | $(1,673,346) | - Base Management Fee for the six months ended June 30, 2025, was $469,857, a decrease from $625,267 in the prior year, reflecting lower total assets[125][203] - Income Based Incentive Fees for the six months ended June 30, 2025, were $119,673 (vs. $0 in 2024), resulting from an increase in Pre-Incentive Fee Net Investment Income above the applicable hurdle rate[133][204] - A capital gains incentive fee benefit of $(1,565,000) was recorded for the six months ended June 30, 2025 (vs. expense of $1,753,300 in 2024), due to net portfolio depreciation, particularly the write-down of Tilson; the $1,727,000 fee payable at Dec 31, 2024, was paid in H1 2025[138][201] - Administration fees for the six months ended June 30, 2025, were $99,000, an increase from $78,167 in the prior year[141] Note 9. FINANCIAL HIGHLIGHTS This note presents key financial ratios and per-share data, offering a summary of the company's financial performance and position Per Share Data (Six Months Ended June 30): | Metric | 2024 | 2025 | Change | | :------------------------------------------------- | :----- | :----- | :----- | | Net asset value, beginning of period | $23.56 | $25.31 | $1.75 | | Net investment income | $0.13 | $1.24 | $1.11 | | Net realized gain on sales and dispositions of investments | $1.50 | $0.31 | $(1.19) | | Net change in unrealized appreciation/depreciation on investments | $1.91 | $(3.88) | $(5.79) | | (Decrease) increase in net assets from operations | $3.54 | $(2.32) | $(5.86) | | Payment of cash dividend | $(0.54) | $(0.58) | $(0.04) | | Effect of stock dividend | $0 | $(3.31) | $(3.31) | | (Decrease) increase in net assets per share | $3.00 | $(6.21) | $(9.21) | | Net asset value, end of period | $26.56 | $19.10 | $(7.46) | | Per share market price, end of period | $15.22 | $16.12 | $0.90 | | Total return based on market value | 21.32% | (13.25)% | (34.57)% | | Total return based on net asset value | 15.02% | (22.26)% | (37.28)% | Supplemental Data (Six Months Ended June 30): | Metric | 2024 | 2025 | | :------------------------------------------ | :----- | :----- | | Ratio of expenses before income taxes to average net assets | 12.00% | (0.24)% | | Ratio of net investment income to average net assets | 1.00% | 12.11% | | Portfolio turnover | 13.33% | 0.67% | | Debt/equity ratio | 25.09% | 0% | Note 10. SUBSEQUENT EVENT This note discloses significant events that occurred after the reporting period but before the financial statements were issued - On July 28, 2025, Rand's Board of Directors declared a quarterly cash dividend of $0.29 per share, payable on or about September 12, 2025, to shareholders of record as of August 29, 2025[146] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Rand Capital's financial condition and operating results for the three and six months ended June 30, 2025, highlighting portfolio value changes and liquidity FORWARD LOOKING STATEMENTS This section cautions readers about statements regarding future plans, strategies, and financial performance, which are subject to various risks and uncertainties - The report contains forward-looking statements regarding plans, strategies, objectives, expectations, investment strategies, co-investment intentions, RIC tax impact, liquidity, capital gains fees, and future dividend payments[149] - These statements are subject to risks and uncertainties, including economic conditions, securities markets, liquidity, and inflation, as detailed in the "Risk Factors" section[149] Overview This section provides a general description of Rand Capital's business model, regulatory status, investment focus, and recent significant events - Rand Capital is an externally managed, non-diversified investment company focused on lending to and investing in lower middle market companies, primarily through higher-yielding debt instruments[151] - The company operates as a Business Development Company (BDC) and has elected Regulated Investment Company (RIC) tax treatment[152][157] - The asset coverage requirement for senior securities changed from 200% to 150% effective January 24, 2025, but the Credit Agreement requires a 300% Asset Coverage Ratio[155] - The investment in Tilson Technology Management, Inc. was reduced to $0 after it filed for Chapter 11 bankruptcy, impacting net assets by approximately 14.5% as of March 31, 2025[159] - The company holds a separate investment in SQF Holdco LLC, valued at $2.0 million at June 30, 2025, which is not part of the Tilson bankruptcy[160] - The company is permitted to co-invest with affiliates under an SEC exemptive order[161][162][163] SEC Exemptive Order This section explains the SEC order permitting Rand Capital to co-invest with affiliates, subject to independent director approval and fair terms - An SEC exemptive order (New Order, March 29, 2021) permits Rand to co-invest in portfolio companies with affiliates managed by RCM and Callodine[162] - Co-investments require approval by a "required majority" of Rand's independent directors, ensuring fair terms, consistency with investment objectives, and no disadvantage to Rand[163] - An amendment (September 6, 2022) allows participation in follow-on investments with Affiliated Funds that do not hold existing investments in those portfolio companies[163] Critical Accounting Policies This section refers to the company's annual report for a summary of key accounting policies and the use of estimates in financial reporting - The company's consolidated financial statements are prepared in accordance with United States generally accepted accounting principles (GAAP), requiring the use of estimates and assumptions[164] - A summary of critical accounting policies can be found in the Annual Report on Form 10-K for the year ended December 31, 2024[164] Financial Condition This section analyzes the company's balance sheet, including assets, liabilities, and net assets, highlighting changes over the reporting period Financial Condition Overview: | Metric | Dec 31, 2024 | Jun 30, 2025 | Decrease | % Decrease | | :------------ | :----------- | :----------- | :------- | :------- | | Total assets | $72,457,433 | $57,639,539 | $(14,817,894) | (20.5)% | | Total liabilities | $7,124,913 | $925,585 | $(6,199,328) | (87.0)% | | Net assets | $65,332,520 | $56,713,954 | $(8,618,566) | (13.2)% | | NAV per share | $25.31 | $19.10 | $(6.21) | (24.5)% | - Cash approximated 7.8% of net assets at June 30, 2025, compared to 1.3% at December 31, 2024, indicating a significant increase in cash holdings[166] - There was no outstanding balance drawn on the $25 million senior secured revolving credit facility at June 30, 2025[167] Composition of Our Investment Portfolio This section details the structure and changes within the company's investment portfolio, including fair value, cost, and investment objectives Investment Portfolio Summary: | Metric | Dec 31, 2024 | Jun 30, 2025 | Decrease | % Decrease | | :-------------------------------- | :----------- | :----------- | :------- | :------- | | Investments, at cost | $68,120,235 | $61,277,046 | $(6,843,189) | (10.0)% | | Unrealized (depreciation) appreciation, net | $2,697,806 | $(8,912,792) | $(11,610,598) | (430.4)% | | Investments, at fair value | $70,818,041 | $52,364,254 | $(18,453,787) | (26.1)% | - Total investments at fair value approximated 92% of net assets at June 30, 2025, down from approximately 108% at December 31, 2024[168] - The company's investment objective is to generate current income and capital appreciation, primarily through higher-yielding debt instruments and related equity investments in privately held, lower middle market companies[169] - Changes in investments at cost for the six months ended June 30, 2025, included $409,755 in new investments, $1,267,949 from other changes (interest conversion, OID amortization), and $(8,520,893) from repayments, sales, or liquidations[171] Results of Operations This section analyzes the company's financial performance, comparing investment income, expenses, and net changes in assets for the reported periods Comparison of the three months ended June 30, 2025 to the three months ended June 30, 2024 This section provides a detailed comparison of the company's financial results for the second quarter of 2025 versus 2024 Investment Income This section analyzes the sources and changes in the company's investment income for the specified three-month period Investment Income (Three Months Ended June 30): | Metric | 2024 | 2025 | Change | % Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :------- | :------- | | Interest from portfolio companies | $1,995,227 | $1,514,562 | $(480,665) | (24.1)% | | Interest from other investments | $144 | $36,556 | $36,412 | 25286.1% | | Dividend and other investment income | $73,175 | $0 | $(73,175) | (100.0)% | | Fee income | $67,603 | $51,179 | $(16,424) | (24.3)% | | Total investment income | $2,136,149 | $1,602,297 | $(533,852) | (25.0)% | - Interest from portfolio companies decreased by 24% due to repayments of several interest-yielding investments (Hilton, Mattison, Nailbiter, Pressure Pro, SciAps) without replacement[173] - Non-cash PIK interest income accounted for 37.4% of total investment income in Q2 2025, up from 21.8% in Q2 2024[174] - Dividend income decreased to $0 in Q2 2025 from $73,175 in Q2 2024, as prior year included dividends from FS KKR, Pennantpark, Tilson, and Barings[176] Expenses This section details the company's operating expenses and incentive fees, explaining significant changes for the specified three-month period Total (Benefits) Expenses (Three Months Ended June 30): | Metric | 2024 | 2025 | Decrease | % Decrease | | :------------------------ | :-------------------------- | :-------------------------- | :------- | :------- | | Total (benefits) expenses | $2,652,782 | $(864,159) | $(3,516,941) | (132.6)% | - The decrease in total expenses was primarily due to a $3,131,000 decrease in the capital gains incentive fee expense, a $367,755 decrease in interest expense, and a $105,023 decrease in base management fees[177] - The capital gains incentive fee benefit in Q2 2025 was due to a net increase in net unrealized depreciation, primarily from the $9,500,000 write-down of Tilson[178] - Interest expense decreased from $393,172 in Q2 2024 to $25,417 in Q2 2025 due to lower average outstanding debt balances under the Credit Facility[179] Net Investment Income (Loss) This section reports the company's net investment income or loss after deducting expenses from investment income for the specified three-month period Net Investment Income (Loss) (Three Months Ended June 30): | Metric | 2024 | 2025 | Change | | :-------------------------- | :-------------------------- | :-------------------------- | :------- | | Net investment income (loss) | $(517,195) | $2,478,234 | $2,995,429 | Realized Gain on Investments This section details the gains or losses realized from the sale or disposition of investments during the specified three-month period Realized Gain on Investments (Three Months Ended June 30): | Metric | 2024 | 2025 | Change | | :--------------------------------------- | :-------------------------- | :-------------------------- | :------- | | Realized gain on investments before income taxes | $428,108 | $0 | $(428,108) | - Q2 2024 included net realized gains from sales of Carlyle Secured Lending Inc., PennantPark Investment Corporation, Ares Capital Corporation, and proceeds from Tilson/SQF assets, partially offset by a realized loss from Knoa Software, Inc. liquidation[182][183] Change in Unrealized (Depreciation) Appreciation of Investments This section explains the fluctuations in the fair value of the investment portfolio due to unrealized gains or losses for the specified three-month period Change in Unrealized (Depreciation) Appreciation of Investments (Three Months Ended June 30): | Metric | 2024 | 2025 | Change | | :---------------------------------------------------------------- | :-------------------------- | :-------------------------- | :------- | | Change in unrealized (depreciation) appreciation of investments before income taxes | $7,779,026 | $(10,312,214) | $(18,091,240) | - Q2 2025 saw significant depreciation, primarily due to a $(9,500,000) write-down of Tilson Technology Management, Inc. after it filed for Chapter 11 bankruptcy[184][186] - Valuations of Carolina Skiff, FSS, Lumious, and MRES also decreased, while EFINEA, First Coast Mulch, and Mobile IV Nurses increased due to improved performance[184][185] Comparison of the six months ended June 30, 2025 to the six months ended June 30, 2024 This section provides a detailed comparison of the company's financial results for the first half of 2025 versus 2024 Investment Income This section analyzes the sources and changes in the company's investment income for the specified six-month period Investment Income (Six Months Ended June 30): | Metric | 2024 | 2025 | Change | % Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :------- | :------- | | Interest from portfolio companies | $3,808,875 | $3,191,728 | $(617,147) | (16.2)% | | Interest from other investments | $2,058 | $46,939 | $44,881 | 2180.8% | | Dividend and other investment income | $225,010 | $13,125 | $(211,885) | (94.2)% | | Fee income | $167,425 | $358,409 | $190,984 | 114.1% | | Total investment income | $4,203,368 | $3,610,201 | $(593,167) | (14.1)% | - Interest from portfolio companies decreased by 16% due to repayments of several interest-yielding investments (Hilton, Mattison, Nailbiter, Pressure Pro, SciAps) without replacement[194] - Non-cash PIK interest income accounted for 33.9% of total investment income in H1 2025, up from 18.9% in H1 2024[195] - Dividend income decreased significantly from $225,010 in H1 2024 to $13,125 in H1 2025, as prior year included dividends from Tilson, FS KKR, Pennantpark, Carlyle, Barings, and Ares[197] - Fee income increased due to prepayment fees from Mattison and Pressure Pro, and a loan modification fee from MRES in H1 2025[197] Expenses This section details the company's operating expenses and incentive fees, explaining significant changes for the specified six-month period Total (Benefits) Expenses (Six Months Ended June 30): | Metric | 2024 | 2025 | Decrease | % Decrease | | :------------------------ | :-------------------------- | :-------------------------- | :------- | :------- | | Total (benefits) expenses | $3,879,638 | $(73,094) | $(3,952,732) | (101.9)% | - The decrease in total expenses was primarily due to a $3,318,300 decrease in the capital gains incentive fee expense, a $721,289 decrease in interest expense, and a $155,410 decrease in base management fees[200] - The capital gains incentive fee benefit in H1 2025 was due to a net increase in net unrealized depreciation in excess of realized capital gains, primarily from the $9,500,000 write-down of Tilson[201] - Interest expense decreased from $783,192 in H1 2024 to $61,903 in H1 2025 due to lower average outstanding debt balances under the Credit Facility[202] - The income based incentive fee increased by $119,673 in H1 2025 due to an increase in Pre-Incentive Fee Net Investment Income above the applicable hurdle rate[200][204] Net Investment Income (Loss) This section reports the company's net investment income or loss after deducting expenses from investment income for the specified six-month period Net Investment Income (Six Months Ended June 30): | Metric | 2024 | 2025 | Change | | :-------------------------- | :-------------------------- | :-------------------------- | :------- | | Net investment income | $322,390 | $3,696,349 | $3,373,959 | Realized Gain on Investments This section details the gains or losses realized from the sale or disposition of investments during the specified six-month period Realized Gain on Investments (Six Months Ended June 30): | Metric | 2024 | 2025 | Change | | :--------------------------------------- | :-------------------------- | :-------------------------- | :------- | | Realized gain on investments before income taxes | $3,878,200 | $925,332 | $(2,952,868) | - H1 2025 included an $870,000 gain from the sale of a Pressure Pro warrant and a $58,329 gain from additional proceeds from Microcision LLC, offset by a small loss on GoNoodle[206] - H1 2024 included significant gains from sales of ACV Auctions, Inc., Carlyle, Pennantpark, Ares, and Tilson/SQF assets, partially offset by a loss from Knoa liquidation[207][208] Change in Unrealized (Depreciation) Appreciation of Investments This section explains the fluctuations in the fair value of the investment portfolio due to unrealized gains or losses for the specified six-month period Change in Unrealized (Depreciation) Appreciation of Investments (Six Months Ended June 30): | Metric | 2024 | 2025 | Change | | :---------------------------------------------------------------- | :-------------------------- | :-------------------------- | :------- | | Change in unrealized (depreciation) appreciation of investments before income taxes | $4,888,730 | $(11,610,598) | $(16,499,328) | - H1 2025 saw significant depreciation, primarily due to a $(9,500,000) write-down of Tilson Technology Management, Inc. after it filed for Chapter 11 bankruptcy[209][211] - Valuations of Carolina Skiff, FSS, ITA, Lumious, and MRES also decreased, while EFINEA, First Coast Mulch, Mobile IV Nurses, and Seybert's increased due to improved performance[210] Liquidity and Capital Resources This section discusses the company's cash position, credit facility availability, and strategies for funding future investment activities - Total liquidity at June 30, 2025, consisted of approximately $4.42 million in cash and $20.2 million of unused availability on the Credit Facility[219][221] - Net cash provided by operating activities for the six months ended June 30, 2025, was approximately $8.08 million, primarily from net investment income and sales/repayments of investments[223][224] - Net cash used in financing activities was approximately $4.49 million, including $600,000 repaid on the Credit Facility and approximately $3.89 million in cash dividends paid to shareholders[225] - The company anticipates funding investment activities through cash generated from ongoing operating activities and borrowings under the $25 million Credit Facility[226] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section details the company's exposure to market risks, including interest rate fluctuations on its credit facility and valuation risks for illiquid investments Interest Rate Risk This section analyzes the potential impact of interest rate changes on the company's financial performance, particularly concerning its variable-rate debt - Changes in interest rates may affect the company's interest expense on the variable-rate debt outstanding under its Credit Facility (SOFR + 3.50%)[228] - As of June 30, 2025, all of the company's debt investments had fixed interest rates and were not directly impacted by changes in market interest rates[228] - Due to no outstanding balance on the Credit Facility at June 30, 2025, hypothetical interest rate changes would have no immediate impact on net investment income[229][230] - The company does not currently engage in any hedging activities against interest rate fluctuations[232] Valuation Risk This section discusses the inherent uncertainties and judgments involved in determining the fair value of the company's privately held, illiquid investments - Investments are carried at fair value, determined in good faith by RCM and approved by the Board[233] - Determining fair value involves significant judgment due to the inherent uncertainty and lack of readily available market values for privately held investments[233] - Actual realized values on these investments may differ materially from estimated fair values due to market environment changes and other events[233] Item 4. Controls and Procedures Management confirms the effectiveness of disclosure controls and procedures and reports no material changes in internal control over financial reporting Disclosure Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as evaluated by management - The Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2025[234] - Based on their evaluation, they concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[234] Changes in Internal Control over Financial Reporting This section reports on any material changes to the company's internal control over financial reporting during the quarter - There have been no changes in the company's internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[235] PART II. OTHER INFORMATION This section provides additional disclosures not covered in the financial statements, including legal proceedings, risk factors, and equity sales Item 1. Legal Proceedings The company reported no legal proceedings during the period - The company reported no legal proceedings[238] Item 1A. Risk Factors This section directs readers to the annual report for a comprehensive discussion of the company's risk factors - Refer to the "Risk Factors" section in the annual report on Form 10-K for the year ended December 31, 2024, for detailed risk information[239] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports no share repurchases during the period and details the approval of a new share repurchase plan - No shares of Rand's common stock were repurchased by the Corporation during the six months ended June 30, 2025, or the six months ended June 30, 2024[82][240] - On April 23, 2025, the Board approved a new share repurchase plan authorizing repurchases of up to $1,500,000 of common stock at prices no greater than the current net asset value, effective through April 23, 2026[82][243] Item 3. Defaults upon Senior Securities The company reported no defaults upon senior securities during the period - The company reported no defaults upon senior securities[241] Item 4. Mine Safety Disclosures This item is not applicable to the company's operations - This item is not applicable[242] Item 5. Other Information This section confirms no director or officer adopted or terminated Rule 10b5-1 trading arrangements during the quarter - No director or officer adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the three months ended June 30, 2025[243] Item 6. Exhibits This section lists all exhibits filed with the report, including corporate documents, certifications, and XBRL data - Exhibits include corporate organizational documents (Certificate of Incorporation, By-laws), certifications (31.1, 31.2, 32.1), and Inline XBRL documents[246]