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QUESTIONMARK

Rand Capital Corp., coming off a disappointing period that saw its major investment evaporate and its net asset value plummet by 35 percent in 15 months, is positioning itself for a fresh start.

The Buffalo venture capital company, which has a new executive team in place to replace retired President Donald A. Ross, also is flush with cash and developing a new investment strategy.

"We have a highly liquid position," with about $3 million to invest in new ventures, Rand's new president, Pete Grum, told shareholders during the firm's 10-minute annual meeting on Thursday.

Grum and Nora B. Sullivan, its executive vice president, also met with the company's board of directors on Thursday to review the firm's new investment strategy, which will put more emphasis on latter-stage investments and partnerships with other local venture capital firms.

Grum said after the meeting that Rand will try to focus on investments that have ties to the Buffalo area, either through their operations or their management. The firm also will put more emphasis on investments, such as convertible debt or preferred stock, that also will generate some cash flow.

The strategy also will put a heavy emphasis on firms with strong management in industries that are either expanding or consolidating. "We think there are a lot of deals in Buffalo that are like that," Grum said.

Rand also said its net asset value slipped by 1 percent during the first quarter as the firm wrote off its investments in Aria Wireless Systems Inc. and Bydatel Corp., which were two of the main entities behind the wireless data transmission joint venture.

The firm's net asset value slipped to $8.87 million, or $2.10 per share, at the end of March from $9 million, or $2.21 per share, at the end of last year, mainly because of the Aria write-off and lower stock prices associated with its investments in Aria partner Comptek Research Inc. and Mobile Media Corp.

The company also has made major changes to its board. Thomas R. Beecher Jr., who has been the company's chairman since 1991, has relinquished that position, although he will remain on the board.

Reginald B. Newman II, the president of Noco Energy Corp. and a Rand director since 1987, was named to replace Beecher as the company's chairman.

Rand also added three new directors to its board. Ross B. Kenzie, the former chairman of the defunct Goldome savings bank, was named to the board, along with Grum and Frederick W. Winter, the dean of the University at Buffalo's School of Management.

Emma K. Harrod and Buffalo attorney Robert P. Fine did not seek re-election to the board.

The only discussion during the brief meeting occurred when a shareholder asked why the company had not acted sooner to write down the value of its investment in Aria and Bydatel, which owned the technology that the venture used.

Rand wrote down the value of that investment in February to $231,000 from its old value of $6.92 million. The board wrote off the remaining investment on Thursday. At the end of September, Rand had 54 percent of its total assets invested in Aria and its partners.

"In essence, the company (Aria) went out of business in the last couple of months," Grum said.

Beecher said Rand maintained its higher value for its investment in the wireless data transmission joint venture until it became apparent that Aria would not be able to raise the new capital it so desperately needed through a private placement or an initial public stock offering.

"We reached the maximum that we were able to invest and we couldn't assist the others," Beecher said. "In essence, it was like falling off a cliff."

Rand made two new investments during the first quarter. It invested $85,000 in Commercial Maintenance, a Florida firm that provides cleaning and maintenance services to major chains. The other was a $100,000 investment in Healthways, a Syracuse firm that makes air monitoring and purifying devices.

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