UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
SECURITIES
EXCHANGE ACT OF 1934 
For the fiscal year ended December 31, 2001

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from _____ to _______

Commission File Number: 811-1825

Rand Capital Corporation
(Exact Name of Registrant as specified in its Charter)

|New York(State or Other Jurisdiction of Incorporation   
or organization) | 16-0961359(IRS Employer 
 Identification No.)
|------------------------------------------------------------------------- | ---------------------------------------------

|2200 Rand Building, Buffalo, NY
    (Address of Principal executive offices) | 14203
    (Zip Code)
|---------------------------------------------------------------------------- | --------------------

(716) 853-0802
(Registrant's Telephone No. Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 par value

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
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days

Yes: X                 No ___

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)

The aggregate market value of the registrant's common stock held by
non-affiliates of the registrant as of March 14, 2002 was approximately $1.20
based upon the last sale price as quoted by NASDAQ SmallCap Market on such date.
As of March 14, 2002 there were 5,763,034 shares of the registrant's common
stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The Corporation's definitive proxy statement for the Annual Meeting of
Stockholders to be held on April 24, 2002 is incorporated by reference into
certain sections of Part III herein.

RAND CAPITAL CORPORATION

TABLE OF CONTENTS FOR FORM 10-K

PART I

Item 1. Business

Item 2. Properties

Item 3. Legal Proceedings

Item 4. Submission of Matters to a Vote of Security Holders

PART II

Item 5. Market for Registrant's Common Equity and Related
          Stockholder Matters

Item 6. Selected Financial Data

Item 7. Management's Discussion and Analysis of Financial Condition
          and Results of Operations

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure

PART III

Item 10. Directors and Executive Officers of the Registrant

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and
          Management

Item 13. Certain Relationships and Related Transactions

Item 14. Exhibits, Financial Statement Schedules, and Reports on
          Form 8-K

PART I

Item 1. Business

Rand Capital Corporation ("Rand" or "Corporation") was incorporated under the
law of New York on February 24, 1969. Commencing in 1971, Rand operated as a
publicly traded, closed-end, diversified management company that was registered
under Section 8(b) of the Investment Company Act of 1940 (the "1940 Act"). On
August 16, 2001, Rand filed an election to be treated as a business development
company ("BDC") under the 1940 Act, which became effective on the date of
filing.

Throughout its history, Rand's principal business has been to make venture
capital investments in small, early-stage and developing enterprises that are
principally engaged in the development or exploitation of inventions,
technological improvements, and new products and services not previously
generally available. Rand's principal objective is long-term capital
appreciation. Rand typically invests in debt securities of small, developing
companies and concurrently acquires an equity interest in the form of stock,
warrants or options to acquire stock or the right to convert the debt securities
into stock. Consistent with its status as a BDC and the purposes of the
regulatory framework for BDCs under the 1940 Act, Rand provides managerial
assistance to the developing companies in which it invests.

Rand operates as an internally managed investment company whereby its
officers and employees conduct its operations under the general supervision of
its Board of Directors. Rand has not elected to qualify to be taxed as a
regulated investment company as defined under Subchapter M of the Internal
Revenue Code.

Regulation as a BDC

Although the 1940 Act exempts a BDC from registration under that Act, it
contains significant limitations on the operations of BDCs. Among other things,
the 1940 Act contains prohibitions and restrictions relating to transactions
between a BDC and its affiliates, principal underwriters and affiliates of its
affiliates or underwriters, and it requires that a majority of the BDC's
directors be persons other than "interested persons," as defined under the 1940
Act. The 1940 Act also prohibits a BDC from changing the nature of its business
so as to cease to be, or to withdraw its election as, a BDC unless so authorized
by the vote of the holders of a majority of its outstanding voting securities.
BDCs are not required to maintain fundamental investment policies relating to
diversification and concentration of investments within a single industry.

Generally, a BDC must be primarily engaged in the business of furnishing
capital and managerial expertise to companies that do not have ready access to
capital through conventional financial channels. Such portfolio companies are
termed "eligible portfolio companies." More specifically, in order to qualify as
a BDC, a company must (1) be a domestic company; (2) have registered a class of
its equity securities or have filed a registration statement with the Commission
pursuant to Section 12 of the Securities Exchange Act of 1934; (3) operate for
the purpose of investing in the securities of certain types of portfolio
companies, namely immature or emerging companies and businesses suffering or
just recovering from financial distress; (4) extend significant managerial
assistance to such portfolio companies; and (5) have a majority of
"disinterested" directors (as defined in the 1940 Act).

An eligible portfolio company is, generally, a U.S. company that is not an
investment company and that (1) does not have a class of securities registered
on an exchange or included in the Federal Reserve Board's over-the-counter
margin list; or (2) is actively controlled by a BDC and has an affiliate of a
BDC on its board of directors; or (3) meets such other criteria as may be
established by the Securities and Exchange Commission. Control under the 1940
Act is generally presumed to exist where a BDC owns 25% of the outstanding
voting securities of the company.

The 1940 Act prohibits or restricts companies subject to the 1940 Act from
investing in certain types of companies, such as brokerage firms, insurance
companies, investment banking firms and investment companies. Moreover, the 1940
Act limits the type of assets that BDCs may acquire to "qualifying assets" and
certain assets necessary for its operations (such as office furniture, equipment
and facilities) if, at the time of acquisition, less than 70% of the value of
the BDC's assets consist of qualifying assets. Qualifying assets include: (1)
securities of companies that were eligible portfolio companies at the time the
BDC acquired their securities; (2) securities of bankrupt or insolvent companies
that were eligible at the time of the BDC's initial acquisition of their
securities but are no longer eligible, provided that the BDC has maintained a
substantial portion of its initial investment in those companies; (3) securities
received in exchange for or distributed in or with respect to any of the
foregoing; and (4) cash items, government securities and high-quality short-term
debt. The 1940 Act also places restrictions on the nature of the transactions in
which, and the persons from whom, securities can be purchased in order for the
securities to be considered qualifying assets. These restrictions include
limiting purchases to transactions not involving a public offering and acquiring
securities from either the portfolio company or its officers, directors, or
affiliates.

A BDC is permitted to invest in the securities of public companies and other
investments that are not qualifying assets, but those kinds of investments may
not exceed 30% of the BDC's total asset value at the time of the investment.

A BDC must make significant managerial assistance available to the issuers of
eligible portfolio securities in which it invests. Making available significant
managerial assistance means, among other things, any arrangement whereby the BDC,
through its directors, officers or employees, offers to provide, and, if
accepted does provide, significant guidance and counsel concerning the
management, operations or business objectives and policies of a portfolio
company; or in the case of an SBIC, making loans to a portfolio company.

SBIC Subsidiary

On January 16, 2002, Rand organized a wholly owned subsidiary, Rand Capital
SBIC, L.P., as a Delaware limited partnership ("Rand SBIC"). At the same time,
Rand organized another wholly owned subsidiary, Rand Capital Management, LLC, as
a Delaware limited liability company ("Rand Management"), to act as the general
partner of Rand SBIC.

Rand formed Rand SBIC as a subsidiary for the purpose of causing it to be
licensed as a small business investment company (an "SBIC") under the Small
Business Investment act of 1958 (the "SBA Act") by the Small Business
Administration (the "SBA"), in order to have access to various forms of leverage
provided by the SBA to SBICs. Rand received the preliminary approval of the SBA
and was given permission to submit an application for approval to operate as an
SBIC and, on February 1, 2002, Rand SBIC submitted an application to operate as
an SBIC. Rand intends to file an exemption application with the SEC for certain
exemptions under the 1940 Act from restrictions on the operation of subsidiaries
that the SEC has commonly granted to BDCs that have wholly owned SBIC
subsidiaries.

Rand intends to operate Rand SBIC through Rand Management for the same
investment purposes, and with investments in the same kinds of securities, as
Rand. Rand SBIC's operations will be consolidated with those of Rand for both
financial reporting and tax purposes.

Regulation of SBIC Subsidiary

Lending Restrictions. The SBA licenses SBICs as part of a program
designed to stimulate the flow of private debt and/or equity capital to
"Eligible Concerns" and "Smaller Concerns." SBICs use funds borrowed from the
SBA, together with their own capital, to provide loans to, and make equity
investments in, concerns that (a) do not have a net worth in excess of $18
million and do not have average net income after U.S. federal income taxes for
the two years preceding any date of determination of more than $6 million, or
(b) meet size standards set by the SBA that are measured by either annual
receipts or number of employees, depending on the industry in which the concerns
are primarily engaged. The types and dollar amounts of the loans and other
investments an SBIC may make are limited by the 1940 Act, the SBA Act and SBA
regulations. The SBA is authorized to examine the operations of SBICs, and an
SBIC's ability to obtain funds from the SBA is also governed by SBA regulations.

SBA regulations also set certain limitations on the terms of loans by SBICs.
The maximum maturity of these loans may not exceed 20 years. A borrower from an
SBIC cannot be required during the first five years to repay, on a cumulative
basis, more principal than an amount calculated on a straight line, five year
amortization schedule. SBIC regulations also limit the rate of interest that an
SBIC can charge on the loans it makes, the amount of the limit depending upon
whether or not equity components are included with the loan.

SBICs may invest directly in the equity of their portfolio companies, but
they may not become a general partner of a non-incorporated entity or otherwise
become jointly or severally liable for the general obligations of a
non-incorporated entity. An SBIC may acquire options or warrants in its
portfolio companies, and the options or warrants may have redemption provisions,
subject to certain restrictions. In general, an SBIC may not "control" a
portfolio company. For SBA Act purposes, control is defined as the ownership (or
control) of a 50% or greater interest in the outstanding voting securities of a
portfolio company if it is held by fewer than 50 shareholders, or if there are
50 or more shareholders, a 20% to 25% interest (depending on the holdings of the
other shareholders in the portfolio company).

SBA Leverage. The SBA raises capital to enable it to provide funds to
SBICs by guaranteeing certificates or bonds that are pooled and sold to
purchasers of the government guaranteed securities. The amount of funds that the
SBA may lend is determined by annual Congressional appropriations of amounts
necessary to cover anticipated losses in the program. Congress authorizes
appropriations to the extent it determines to fund SBIC borrowings from the SBA.

In order to obtain SBA leverage, an SBIC must demonstrate its need to the
SBA. To demonstrate need, an SBIC must invest 50% of its Leverageable Capital
(defined as Regulatory Capital less unfunded commitments and federal funds) and
any outstanding SBA Leverage. Other requirements include compliance with SBA
regulations, adequacy of capital, and meeting liquidity standards. An SBIC's
license entitles an SBIC to apply for SBA leverage, but does not assure that it
will be available, or if available, that it will be available at the level of
the relevant matching ratio. Availability depends on the SBIC's continued
regulatory compliance and sufficient SBA funds being available when the SBIC
applies to draw down SBA leverage.

SBA debentures are issued with 10-year maturities. Interest only is payable
semi-annually until maturity. Ten-year SBA debentures may be prepaid with a
penalty during the first 5 years, and then are pre-payable without penalty. Rand
initially capitalized Rand SBIC with $5 million in Regulatory Capital. Rand
expects that Rand SBIC will be approved to obtain SBA leverage at a 2:1 matching
ratio, resulting in a total capital pool eligible for investment of $15 million.
The SBA's review of Rand SBIC's application and the completion of the licensing
process will take at least 6 to 9 months. Rand expects to use Rand SBIC as
Rand's primary investment vehicle.

Employees

As of December 31, 2001, Rand had three full time employees.

Risk Factors and Other Considerations

Investing in Rand's Stock is Highly Speculative and an Investor Could Lose
Some or All of the Amount Invested

The value of Rand's common stock may decline and may be affected by numerous
market conditions, which could result in the loss of some or the entire amount
invested in Rand's shares. The securities markets frequently experience extreme
price and volume fluctuations which affect market prices for securities of
companies generally, and technology and very small capitalization companies in
particular. General economic conditions, and general conditions in the Internet
and information technology, life sciences, material sciences and other high
technology industries, will also affect Rand's stock price. The recent
decimalization of the stock exchanges, particularly NASDAQ, is a new risk factor
that may decrease liquidity of smaller capitalization issues such as the
Corporation's own common stock and that of its publicly traded holdings.

Investing in Rand's Shares May be Inappropriate for the Investor's Risk
Tolerance

Rand's investments, in accordance with its investment objective and principal
strategies, result in a far above average amount of risk and volatility and may
well result in loss of principal. Rand's investments in portfolio companies are
highly speculative and aggressive and, therefore, an investment in its shares
may not be suitable for investors for whom such risk is inappropriate.

Competition

Rand faces competition in its investing activities from private venture
capital funds, investment affiliates of large industrial, technology, service
and financial companies, small business investment companies, wealthy
individuals and foreign investors. As a regulated Business Development Company
("BDC"), the Company is required to disclose quarterly the name and business
description of portfolio companies and value of any portfolio securities. Most
of Rand's competitors are not subject to this disclosure requirement. Rand's
obligation to disclose this information could hinder its ability to invest in
certain portfolio companies. Additionally, other regulations, current and
future, may make Rand less attractive as a potential investor to a given
portfolio company than a private venture capital fund.

Rand is Subject to Risks Created by its Regulated Environment

Rand and Rand SBIC are subject to regulation as BDCs, and Rand SBIC is
subject to regulation as an SBIC. The loans and other investments that Rand
makes, and Rand SBIC is expected to make, in small business concerns are
extremely speculative. Substantially all of these concerns are and will be
privately held. Even if a public market for their securities later develops, the
debt obligations and other securities purchased by Rand and Rand SBIC are likely
to be restricted from sale or other transfer for significant periods of time.
These securities will be very illiquid.

Rand's and Rand SBIC's capital may include large amounts of debt securities
issued to the SBA, and all of the debentures issued to the SBA will have fixed
interest rates. Until and unless Rand SBIC is able to invest substantially all
of the proceeds from debentures that it sells to the SBA at annualized interest
or other rates of return that substantially exceed annualized interest rates
that Rand SBIC must pay the SBA under debentures sold to it, Rand's operating
results will be adversely affected which may, in turn, depress the market price
of Rand's common stock.

Rand is Dependent Upon Key Management Personnel for Future Success

Rand is dependent for the selection, structuring, closing and monitoring of
its investments on the diligence and skill of its two senior officers, Allen F.
Grum and Daniel P. Penberthy. The future success of Rand depends to a
significant extent on the continued service and coordination of its senior
management team. The departure of either of its executive officers could
materially adversely affect Rand's ability to implement its business strategy.
Rand does not maintain key man life insurance on any of its officers or
employees.

Investment in Small, Private Companies

There are significant risks inherent in Rand's venture capital business. Rand
typically invests a substantial portion of its assets in early stage or start-up
companies. These private businesses tend to be thinly capitalized, unproven
small companies with risky technologies that lack management depth and have not
attained profitability or have no history of operations. Because of the
speculative nature and the lack of a public market for these investments, there
is significantly greater risk of loss than is the case with traditional
investment securities. Rand expects that some of its venture capital investments
will be a complete loss or will be unprofitable and that some will appear to be
likely to become successful but never realize their potential. Rand has been
risk seeking rather than risk averse in its approach to venture capital and
other investments. Neither Rand's investments nor an investment in Rand is
intended to constitute a balanced investment program. Rand has in the past
relied, and continues to rely to a large extent, upon proceeds from sales of
investments rather than investment income to defray a significant portion of its
operating expenses. Such sales are unpredictable and may not occur. The
terrorist acts in the United States of September 11, 2001 are the type of events
that could severely impact a small company that does not have as many resources
to ride out market downturns and would need immediate investment capital that
might be temporarily unavailable.

Illiquidity of Portfolio Investments

Most of the investments of Rand are or will be either equity securities
acquired directly from small companies or below investment grade subordinated
debt securities. The Corporation's portfolio of equity securities is and will
usually be subject to restrictions on resale or otherwise have no established
trading market. The illiquidity of most of the Corporation's portfolio may
adversely affect the ability of the Company to dispose of such securities at
times when it may be advantageous for the Company to liquidate such investments.

Even if Rand's portfolio companies are able to develop commercially viable
products, the market for new products and services is highly competitive and
rapidly changing. Commercial success is difficult to predict and the marketing
efforts of Rand's portfolio companies may not be successful.

Valuation of Portfolio Investments

There is typically no public market of equity securities of the small
privately held companies in which Rand invests. As a result, the valuation of
the equity securities in Rand's portfolio are stated at fair value as determined
by the good faith estimate of Rand's Board of Directors. In the absence of a
readily ascertainable market value, the estimated value of Rand's portfolio of
securities may differ significantly, favorably or unfavorably, from the values
that would be placed on the portfolio if a ready market for the equity
securities existed. Any changes in estimated net asset value are recorded in
Rand's statement of operations as "Change in unrealized appreciation on
investments."

Fluctuations of Quarterly Results

Rand's quarterly operating results could fluctuate as a result of a number of
factors. These factors include, among others, variations in and the timing of
the recognition of realized and unrealized gains or losses, the degree to which
portfolio companies encounter competition in their markets and general economic
conditions. As a result of these factors, results for any one quarter should not
be relied upon as being indicative of performance in future quarters.

Subsequent Events

Rand has formed a wholly owned subsidiary, Rand Capital SBIC, L.P., for the
purpose of operating it as a small business investment company. On January 25,
2002, Rand transferred $5 million in cash to this subsidiary to serve as
"regulatory capital." On February 1, 2002, Rand received notification that its
small business investment company (SBIC) application for the subsidiary had been
received by the Small Business Administration. The licensing process is expected
to take from six to nine months.

Item 2. Properties

Rand maintains its offices at 2200 Rand Building, Buffalo, New York 14203,
where it leases approximately 1,290 square feet of office space pursuant to a
lease agreement that expired September 30, 2001. Since that time Rand has been
paying rent on a month-to-month basis at the amount stated on the expired lease.
Rand believes that its leased facilities are adequate to support its current
staff and expected future needs, and that adequate alternative facilities are
readily available if it does not renew its lease.

Item 3. Legal Proceedings

None

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable

Part II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

Rand's common stock, par value $0.10 per share ("Common Stock"), is traded on
the NASDAQ Small Cap Market ("NASDAQ") under the symbol "RAND." The following
table sets forth, for the period indicated, the range of high and low closing
prices per share as reported by NASDAQ:

|2001 Quarter ending: | High    | Low    
|-------------------- | ------- | -------
|March 31st           | $ 3.500 | $ 1.313
|June 30th            | $ 2.500 | $ 1.688
|September 30th       | $ 2.200 | $ 1.010
|December 31st        | $ 1.740 | $ 1.010
|                     |         |        
|2000 Quarter ending: | High    | Low    
|March 31st           | $ 9.188 | $ 1.344
|June 30th            | $ 4.000 | $ 1.500
|September 30th       | $ 3.938 | $ 2.031
|December 31st        | $ 3.250 | $ 1.500

Rand did not sell any securities during the period covered by this report
that were not registered under the Securities Act.

On March 14, 2002, the Corporation had an estimated total of 999
shareholders, which included approximately 145 record holders of its common
stock, and an estimated 854 shareholders with shares held under beneficial
ownership in nominee name or under clearinghouse positions of brokerage firms or
banks.

On October 18, 2001 the Board of Directors authorized the repurchase of up to
5% of the Corporation's outstanding stock through purchases on the open market
during the one-year period ending October 18, 2002. Such repurchases, if any,
must be made in accordance with restrictions under the Investment Company Act.
As of December 31, 2001 no stock repurchases had occurred.

Item 6. Selected Financial Data

The following table provides selected financial data of the Corporation for
the periods indicated. You should read the selected financial data set forth
below in conjunction with Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and with our financial
statements and related notes appearing elsewhere in this report.

|Balance Sheet Data as of December 31: | 2001        | 2000       | 1999       | 1998       | 1997      
|------------------------------------- | ----------- | ---------- | ---------- | ---------- | ----------
|Total assets                          | $10,282,493 | $8,441,884 | $7,648,947 | $8,306,038 | $8,455,500
|Total liabilities                     | 224,209     | 56,187     | 44,204     | 69,006     | 114,280   
|Net assets                            | 10,058,284  | 8,385,697  | 7,604,743  | 8,237,032  | 8,341,220 
|Net asset value per outstanding share | $ 1.75      | $ 1.46     | $ 1.33     | $ 1.44     | $ 1.46    
|Common stock shares outstanding       | 5,763,034   | 5,748,034  | 5,708,034  | 5,708,034  | 5,708,034 



|Operating Data for the year ended December 31: | 2001        | 2000      | 1999      | 1998      | 1997     
|---------------------------------------------- | ----------- | --------- | --------- | --------- | ---------
|Investment income                              | $159,479    | $239,769  | $363,094  | $593,086  | $457,514 
|Total expenses                                 | 825,765     | 633,403   | 738,803   | 758,630   | 772,511  
|Net investment (loss)                          | (1,551,001) | (109,864) | (387,097) | (56,339)  | (301,749)
|Net realized gain (loss) on investments        | 3,286,078   | (296,298) | (42,625)  | (316,559) | 797,329  
|Net (decrease) increase in unrealized         
|appreciation                                   | (94,365)    | 1,129,416 | (202,567) | 268,710   | (840,162)
|Net Increase (decrease) in net assets         
|from operations                                | 1,640,712   | 723,254   | (632,289) | (104,188) | (344,582)

Item 7. 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 our financial statements
and related notes included elsewhere in this report.

FORWARD LOOKING STATEMENTS

Statements included in this Management's Discussion and Analysis of Financial
Condition and Results of Operations and elsewhere in this document 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,
and in Section 21F of the Securities Exchange Act of 1934. Additional oral or
written forward-looking statements may be made by the Company from time to time,
and those statements may be included in documents that are filed with the
Securities and Exchange Commission. Such forward-looking statements involve
risks and uncertainties that could cause results or outcomes to differ
materially from those expressed in the forward-looking statements.
Forward-looking statements may include, without limitation, statements relating
to the Corporation's plans, strategies, objectives, expectations and intentions
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 are intended to identify forward-looking
statements. Among the important factors on which such statements are based are
assumptions concerning the state of the national economy and the local markets
in which the Corporation's portfolio companies operate, the state of the
securities markets in which the securities of the Corporation's portfolio
company trade or could be traded, liquidity within the national financial
markets, and inflation. Forward-looking statements are also subject to the risks
and uncertainties described under the caption "Risk Factors and Other
considerations" contained in Part I, Item 1, which is incorporated herein by
reference.

Financial Condition

Rand's total assets increased by $1,840,609 or 22% to $10,282,493 and its net
assets increased by $1,672,587 or 20% to $10,058,284 at December 31, 2001,
versus $8,441,884 and $8,385,697 at December 31, 2000, respectively.

This increase was primarily due to the realization of proceeds from the
investment in Pathlight Technology, Inc. (Pathlight). Rand had a 5% ownership in
Pathlight when it was acquired in February 2001 by Advanced Digital Information
Corporation (ADIC). The Pathlight securities, with a cost basis of $1.2 million,
were converted into 558,047 shares of ADIC common stock in 2001, and became
tradable in August 2001. The subsequent sale of ADIC stock for a $5.3 million
realized gain attributed to the increase in assets and net assets.

Rand's financial condition is dependent on the success of its holdings. Rand
has invested a substantial portion of its assets in early stage or start-up
companies. These private businesses generally tend to be unproven, thinly
capitalized small companies that may lack experienced management and may have no
history of operations. The following summarizes Rand's investment portfolio at
the year-ends indicated.

|                             | December 31, 2001 | December 31, 2000
|---------------------------- | ----------------- | -----------------
|Investments at cost          | $3,157,017        | $6,159,330       
|Unrealized appreciation, net | 853,874           | 974,597          
|Investments at fair value    | $4,010,891        | $7,133,927       

The decrease in investment cost is due to the sale of the Pathlight/ADIC
stock (cost basis of $1.2 million) as well as the realized losses of several
investments in 2001. Among the significant realized losses were ARIA Wireless
Systems, Inc. (ARIA) for $543,840, BNKR, Inc. (BNKR) for $400,000, Reflection
Technology for $500,000 and TSS Transnet for $316,401.

Rand's total investments at fair value approximated 40% of net assets at
December 31, 2001 and 85% of net assets at December 31, 2000. This decrease can
be attributed to the liquidation of 483,313 shares of the ADIC stock from August
2001 to December 2001 resulting in a realized gain of approximately $5.3 million
and the realized losses previously discussed. Rand's cash and cash equivalents
approximated 59% of net assets at December 31, 2001 compared to 4% at December
31, 2000. The cash increase at December 31, 2001 is due primarily from the
proceeds from the sale of the ADIC stock in 2001.

Other investing activity during the twelve months ended December 31, 2001
included the sale of Rand's investments of preferred stock in Motorola and
Texaco, in 2001, valued at $208,000 at December 31, 2000. New investments
included $200,000 in bridge loans to Ultra-Scan Corporation, the exercise of
$94,000 in ADIC warrants and a $55,000 follow-on investment in Platform
Technologies Holdings.

The effect of the portfolio valuation changes, net operating losses for the
period, and the realized gain from the sale of ADIC securities, resulted in a
net change in net deferred tax assets from $660,790 at December 31, 2000 to a
net deferred tax liability of ($150,000) at December 31, 2001.

Results of Operations

On May 11, 2001, one of Rand's privately held portfolio investments,
Pathlight, was acquired by ADIC. In exchange for Rand's estimated 5% ownership
of Pathlight (cost basis of approximately $1.2 million), Rand has received
558,047 shares of ADIC common stock with 13,683 of these shares held in escrow.
The shares being held by ADIC in escrow under the terms of the acquisition
agreement are not valued in the December 31, 2001 portfolio. The ADIC shares
received by Rand were subject to sale restrictions under Rule 145 and became
tradable August 20, 2001.

Between August 20th and December 31, 2001, Rand sold a total of 483,313
shares at a price range of $10.10 to $17.20 with gross proceeds of $6.4 million
and a realized gain of approximately $5.3 million. Rand's average cost basis per
share for the ADIC securities is $2.27. In January 2002, Rand sold an additional
61,051 of the ADIC stock at a price range of $17.30 to $18.45 with gross
proceeds of approximately $1.1 million and a realized gain of approximately $1.0
million.

Investment Income and Expenses

Investment income for the years ended December 31, 2001, 2000 and 1999 were
$159,479, $239,769 and $363,094, respectively. This income is comprised mainly
of interest income from portfolio companies and income on cash and cash
equivalents.

Rand's primary investment objective is to achieve long-term capital
appreciation on its portfolio investments. Therefore, a considerable portion of
the investment portfolio is structured to realize capital appreciation over the
long-term and not necessarily generate income in the form of dividends or
interest. The company does earn interest income from investing its idle funds in
money market instruments.

Rand had portfolio income of $118,192, $169,590, $152,548 for the years ended
December 31, 2001, 2000 and 1999, which comprised 74%, 71% and 42% of the total
investment income for those years. This income includes investments that have
high interest accruals and often do not pay a current yield. In 1999, idle fund
balances were high for a significant part of the year and Rand was able to earn
substantial interest on these idle funds. Interest from other investments was
$29,194 (18%), $69,585 (29%) and $153,988 (42%) for the years ended December 31,
2001, 2000 and 1999, respectively.

Operating expenses were $825,765 in 2001, $633,403 in 2000 and $738,803 in
1999. The operating expenses predominately consist of employee compensation and
benefits, shareholder related costs, office expenses, expenses related to
identifying and reviewing investment opportunities and professional fees.
Included in the 2001 expenses were non-routine costs of $166,147 related
primarily to professional costs (consulting and advisory fees) incurred for
restructuring the Corporation to a Business Development Company ("BDC") and
preparing an application for the Small Business Administration (SBA) for
participation in the SBIC program and transaction fees associated with the sale
of the ADIC securities.

Net investment losses from operations were ($1,551,001) in 2001, ($109,864)
in 2000 and ($387,097) in 1999. The fluctuations from year to year are partly
due to the deferred income tax expense (benefit). The deferred tax expense
(benefit) was $837,148 in 2001, ($297,288) in 2000 and $0 in 1999. The increase
in 2001 can be attributed to the tax consequence as a result of the realized
gain on the sale of the ADIC securities. Deferred income tax expense relates to
the net unrealized appreciation (depreciation) of investments. Such appreciation
(depreciation) is not included in taxable income until realized.  (See "Note 3
of Notes to Financial Statements" contained in Item 8. "Financial Statements and
Supplementary Data.")

Net Realized Gains and Losses on Investments:

During the twelve months ended December 31, 2001, Rand realized total net
gains of $3,286,078, including the $5.3 million gain on the sale of 483,313
shares of its ADIC holdings. Also, during 2001, Rand recognized realized losses
on several of its holdings, most notably ARIA for ($543,840), Reflection
Technology for ($500,000), BNKR for ($400,000) and TSS Transnet for ($316,401).

During 2000, Rand realized total net losses of ($296,298). These net losses
included realized losses of ($142,666) from Hammertime Kitchen & Bath Works,
Inc., ($98,115) from CMO, Inc. and ($55,517) in various publicly traded
securities.

During 1999, Rand had a total net loss from Lightbridge, Inc. for ($42,625).

Net Increase (Decrease) in Net Assets from Operations:

Rand accounts for its operations under accounting principles generally
accepted in the United States of America for investment companies. The principal
measure of its financial performance is "net increase (decrease) in net assets
from operations" on its statements of operations. For 2001, the net increase in
net assets from operations was $1,640,712 as compared to net increases
(decreases) in net assets from operations of $723,254 for 2000 and ($632,289)
for 1999. The increase in net realized and unrealized gain on investments during
2001 is primarily attributable to the sale of ADIC securities at a gain. The
2000 net increase is due to the change in unrealized appreciation on investments
from the Pathlight valuation offset by ($296,298) in net realized losses. The
1999 net decrease in net assets from operations is due to a net investment loss
of ($387,097), a realized loss on investments of ($42,625) and a net decrease in
unrealized appreciation of investments of ($202,567).

Liquidity and Capital Resources

Rand's principal objective is to achieve capital appreciation. Therefore, a
significant portion of the investment portfolio is structured to maximize the
potential for capital appreciation and certain Rand portfolio investments may be
structured to provide little or no current yield in the form of dividends or
interest payments. Rand does earn interest income on idle cash balances. Rand
has historically relied on and continues to rely to a large extent upon proceeds
from sales of investments rather than investment income to defray a significant
portion of its operating expenses. Because such sales cannot be predicted with
certainty, Rand attempts to maintain adequate working capital necessary for
short-term needs.

As of December 31, 2001, December 31, 2000 and December 31, 1999
respectively, Rand's total liquidity, consisting of cash and cash equivalents,
was $5,941,517, $304,152 and $1,139,708. Management believes that these cash and
cash equivalents will provide Rand with the liquidity necessary to fund
operations over the next twelve (12) months.

The increase in liquidity in 2001 was primarily due to the Pathlight/ADIC
sale augmented by the sale of certain preferred stocks throughout the year.
Rand's largest new investment in 2001 was a bridge loan for $200,000 to
Ultra-Scan Corporation.

From December 31, 1999 to 2000, the liquidity decreased by $835,556 as a
result of the investment is several new holdings in 2000. During the twelve
months ending December 31, 2000 Rand invested $1,629,939 for investments/loans
to several companies that included Pathlight Technology ($749,998), BNKR
($400,000) and TSS-Transnet ($316,401).

Subsequent Events

Rand has formed a wholly owned subsidiary, Rand Capital SBIC, L.P., for the
purpose of operating it as a small business investment company. On January 25,
2002, Rand transferred $5 million in cash to this subsidiary to serve as
"regulatory capital." On February 1, 2002, Rand received notification that its
small business investment company (SBIC) application for the subsidiary had been
received by the Small Business Administration. The licensing process is expected
to take from six to nine months. Reference is made to the information under the
headings "SBIC Subsidiary," and "SBIC Regulation" in Part I, Item 1 of this
report, which is incorporated herein by reference.

Item 7a. Quantitative and Qualitative Disclosures about Market Risk

Rand's investment activities contain elements of risk. The portion of Rand's
investment portfolio consisting of equity and equity-linked debt securities in
private companies is subject to valuation risk. Because there is typically no
public market for the equity and equity-linked debt securities in which Rand
invests, the valuation of the equity interests in the portfolio is stated at
"fair value" as determined in good faith by the Board of Directors in accordance
with the Corporation's investment valuation policy. (The discussion of valuation
policy contained in the "Notes to Schedule of Portfolio Investments" in the
financial statements contained in Item 8 of this report is hereby incorporated
herein by reference.) In the absence of a readily ascertainable market value,
the estimated value of Rand's portfolio may differ significantly for the values
that would be placed on the portfolio if a ready market for the investments
existed. Any changes in valuation are recorded in Rand's statement of operations
as "Net unrealized gain (loss) on investments."

At times a portion of Rand's portfolio may include marketable securities
traded in the over-the-counter market. In addition, there may be a portion of
the Corporation's portfolio for which no regular trading market exists. In order
to realize the full value of a security, the market must trade in an orderly
fashion or a willing purchaser must be available when a sale is to be made.
Should an economic or other event occur that would not allow the markets to
trade in an orderly fashion, the Company may not be able to realize the fair
value of its marketable investments or other investments in a timely manner.

As of December 31, 2001, the Company did not have any off-balance sheet
investments or hedging investments.

Item 8. Financial Statements and Supplementary Data

The following financial statements of our Corporation and report of
independent auditors thereon are set forth below:

Statements of Financial Position as of December 31, 2001 and 2000

Statements of Operation for the three years in the period ended
        December 31, 2001

Statements of Cash Flows for the three years in the period ended
        December 31, 2001

Statements of Changes in Net Assets for the three years in the period
        ended December 31, 2001

Schedule of Portfolio Investments as of December 31, 2001

Schedules of Selected Per Share Data and Ratios for the five years in
        the period ended December 31, 2001

Notes to Financial Statements

Supplemental Schedule of Changes in Investments at Cost and Realized
        Gain (Loss) for the year ended December 31, 2001

Independent Auditors' Report

Statements Of Financial Position December 31, 2001 and 2000

|                                                                                                                                 | 2001        | 2000       
|-------------------------------------------------------------------------------------------------------------------------------- | ----------- | -----------
|ASSETS                                                                                                                           |            
|Investments at fair value (identified cost: 
          2001 - $3,157,017, 2000 - $6,159,330)                                     | $4,010,891  | $7,133,927 
|Cash and cash equivalents                                                                                                        | 5,941,517   | 304,152    
|Interest receivable (net of allowance of $13,167 
          in 2001 and $21,729 in 2000)                                         | 167,844     | 136,780    
|Deferred tax asset                                                                                                               | -           | 660,790    
|Promissory notes receivable                                                                                                      | 150,605     | 186,000    
|Other assets                                                                                                                     | 11,636      | 20,235     
|TOTAL ASSETS                                                                                                                     | $10,282,493 | $8,441,884 
|                                                                                                                                 |             |            
|LIABILITIES AND STOCKHOLDERS' EQUITY (NET ASSETS)                                                                               
|                                                                                                                                 |            
|LIABILITIES:                                                                                                                     |            
|Accounts payable and accrued expenses                                                                                            | $33,679     | $54,657    
|Income taxes payable                                                                                                             | 40,530      | 1,530      
|Deferred tax liability                                                                                                           | 150,000     | -          
|                                                                                                                                 |             |            
|Total liabilities                                                                                                                | 224,209     | 56,187     
|                                                                                                                                 |            
|STOCKHOLDERS' EQUITY (NET ASSETS)                                                                                                |            
|                                                                                                                                 |            
|Common stock, $.10 par - shares authorized 10,000,000, issued and 
          outstanding 5,763,034 in 2001 and 5,748,034 in 2000 | 576,304     | 574,804    
|Capital in excess of par value                                                                                                   | 6,973,454   | 6,943,079  
|Accumulated net investment (loss)                                                                                                | (3,616,673) | (2,065,672)
|Undistributed net realized gain on investments                                                                                   | 5,686,311   | 2,400,233  
|Net unrealized appreciation (depreciation) on investments                                                                        | 438,888     | 533,253    
|                                                                                                                                 |             |            
|Net assets (per share 2001-$1.75; 2000-$1.46)                                                                                    | 10,058,284  | 8,385,697  
|                                                                                                                                 |             |            
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                       | $10,282,493 | $8,441,884 

See notes to financial statements.

Statements Of Operations Years Ended December 31, 2001, 2000 and 1999

|                                                                                                 | 2001        | 2000      | 1999      
|------------------------------------------------------------------------------------------------ | ----------- | --------- | ----------
|Investment Income:                                                                               |             |           |           
|Interest from portfolio companies                                                                | $118,192    | $169,590  | $152,548  
|Interest from other investments                                                                  | 29,194      | 69,585    | 153,988   
|Other investment income                                                                          | 12,093      | 594       | 56,558    
|                                                                                                 | 159,479     | 239,769   | 363,094   
|                                                                                                 |             |          
|Expenses:                                                                                        |             |          
|Salaries                                                                                         | 304,520     | 279,969   | 334,463   
|Employee benefits                                                                                | 63,690      | 46,370    | 60,189    
|Directors' fees                                                                                  | 30,000      | 26,250    | 33,500    
|Professional fees                                                                                | 59,790      | 71,596    | 56,625    
|Stockholders and office operating                                                                | 113,906     | 100,452   | 131,858   
|Insurance                                                                                        | 26,676      | 31,355    | 37,336    
|Corporate development                                                                            | 36,891      | 40,707    | 60,064    
|Other operating                                                                                  | 24,145      | 36,704    | 24,768    
|                                                                                                 |             |           |           
|                                                                                                 | 659,618     | 633,403   | 738,803   
|Organizational costs                                                                             | 81,523      | -         | -         
|Bad debt expense                                                                                 | 46,715      | -         | -         
|Transaction fees on ADIC sales                                                                   | 37,909      | -         | -         
|Total expenses                                                                                   | 825,765     | 633,403   | 738,803   
|                                                                                                 |             |           |           
|Investment (loss) before income taxes:                                                           | (666,286)   | (393,634) | (375,709) 
|Income tax provision                                                                             | 47,567      | 13,518    | 11,388    
|Deferred income tax expense (benefit)                                                            | 837,148     | (297,288) | -         
|                                                                                                 |             |           |           
|Net investment (loss)                                                                            | (1,551,001) | (109,864) | (387,097) 
|                                                                                                 |             |           |           
|Realized and unrealized gain (loss) on investments:                                              |             |           |           
|Net gain (loss) on sales and dispositions                                                        | 3,286,078   | (296,298) | (42,625)  
|                                                                                                 |             |           |           
|Unrealized appreciation (depreciation) on investments:                                          
|Beginning of period                                                                              | 974,597     | (863,197) | (660,630) 
|End of period                                                                                    | 853,874     | 974,597   | (863,197) 
|Change in unrealized (depreciation)   
                    
    appreciation before income taxes | (120,723)   | 1,837,794 | (202,567) 
|Deferred income tax (benefit) expense                                                            | (26,358)    | 708,378   | -         
|                                                                                                 |             |           |           
|Net (decrease) increase in unrealized appreciation                                               | (94,365)    | 1,129,416 | (202,567) 
|                                                                                                 |             |           |           
|Net realized and unrealized gain (loss) on investments                                           | 3,191,713   | 833,118   | (245,192) 
|                                                                                                 |             |           |           
|Net increase (decrease) in net assets from operations                                            | $1,640,712  | $723,254  | $(632,289)
|Weighted average shares outstanding                                                              | 5,762,294   | 5,746,776 | 5,708,034 
|                                                                                                 |             |           |           
|Basic and diluted net increase (decrease) in
    
          net assets from operations per share | $0.28       | $0.13     | $(0.11)   

See notes to financial statements.

Statements Of Cash Flows Years Ended December 31, 2001, 2000 and 1999

|                                                                                                                            | 2001        | 2000        | 1999       
|--------------------------------------------------------------------------------------------------------------------------- | ----------- | ----------- | -----------
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                      
|Net increase (decrease) in net assets from operations                                                                       | $1,640,712  | $723,254    | $(632,289) 
|Adjustments to reconcile net increase (decrease) in 
    net assets to net cash (used in) provided by operating activities:
|Depreciation and amortization                                                                                               | 13,041      | 13,329      | 14,768     
|Interest receivable allowance                                                                                               | (8,562)     | 8,562       | -          
|Decrease (increase) in unrealized appreciation
    
                 of investments, net of deferred income tax             | 94,365      | (1,129,416) | 202,567    
|Change in deferred taxes                                                                                                    | 810,790     | 411,090     | -          
|Net realized (gain) loss on portfolio investments                                                                           | (3,286,078) | 296,298     | 42,625     
|Non cash conversion of debentures                                                                                           |             | (186,000)  
|Changes in operating assets and liabilities:                                                                                |             |            
|(Increase) in interest receivable                                                                                           | (22,502)    | (44,694)    | (22,844)   
|Decrease in other assets                                                                                                    | 2,489       | 872         | 5,548      
|Increase (decrease) in accounts payable
    
          and other accrued liabilities                                        | 18,022      | 11,983      | (24,800)   
|Total adjustments                                                                                                           | (2,378,435) | (617,976)   | 217,864    
|Net cash (used in) provided by operating activities                                                                         | (737,723)   | 105,278     | (414,425)  
|                                                                                                                            |             |             |            
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                                      
|Proceeds from sale of portfolio investments                                                                                 | 6,653,474   | 631,405     | 175,646    
|Proceeds from loan repayments                                                                                               | 35,395      | -           | 436,647    
|New portfolio investments                                                                                                   | (338,725)   | (1,629,939) | (2,789,715)
|Capital expenditures                                                                                                        | (6,931)     | -           | (25,844)   
|Net cash provided by (used in) investing activities                                                                         | 6,343,213   | (998,534)   | (2,203,266)
|                                                                                                                            |             |             |            
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                                       |             |            
|Proceeds from issuance of stock                                                                                             | 31,875      | 57,700      | -          
|                                                                                                                            |             |             |            
|NET INCREASE (DECREASE) IN CASH AND 
          CASH EQUIVALENTS                                                             | 5,637,365   | (835,556)   | (2,617,691)
|                                                                                                                            |             |             |            
|CASH AND CASH EQUIVALENTS, 
          BEGINNING OF YEAR                                                                     | 304,152     | 1,139,708   | 3,757,399  
|                                                                                                                            |             |             |            
|CASH AND CASH EQUIVALENTS, 
          END OF YEAR                                                                           | $5,941,517  | $304,152    | $1,139,708 

See notes to financial statements.

Statements Of Changes In Net Assets Years Ended December 31, 2001, 2000 and
1999

|                                                                                                                                                              | 2001        | 2000       | 1999      
|------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | ---------- | ----------
|Net assets at beginning of period (includes accumulated 
          net investment loss of $2,065,672, $1,955,808
    
          and $1,568,711, respectively) | $8,385,697  | $7,604,743 | $8,237,032
|Net investment (loss)                                                                                                                                         | (1,551,001) | (109,864)  | (387,097) 
|Net realized gain (loss) on investments                                                                                                                       | 3,286,078   | (296,298)  | (42,625)  
|Net (decrease) increase in unrealized appreciation on investments                                                                                             | (94,365)    | 1,129,416  | (202,567) 
|Net increase (decrease) in net assets from operations                                                                                                         | 1,640,712   | 723,254    | (632,289) 
|Net proceeds of private stock offerings                                                                                                                       | 31,875      | 57,700     | -         
|Net assets at end of period (including accumulated 
          net investment loss of $3,616,673, $2,065,672
    
          and $1,955,808, respectively)      | $10,058,284 | $8,385,697 | $7,604,743

See notes to financial statements.

Schedule Of Portfolio Investments December 31, 2001

|                                                                                                                                                                                                 |                                                                                                                                                                      | (b)      | (c)    |            | (d)       
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------- | ------ | ---------- | ----------
|                                                                                                                                                                                                 | Date                                                                                                                                                                 |          |        |           
|Company and Business                                                                                                                                                                             | Type of Investment                                                                                                                                                   | Acquired | Equity | Cost       | Value     
|ADIC (NASDAQ:ADIC)* ^ (f) 
    Redmond, WA. Manufactures data storage   
    systems and specialized storage management 
    software. www.adic.com. 
    Acquired Pathlight Technology 5/11/01. | 74,734 shares Common Stock
    (61,051 shares sold in January 2002)                                                                                                  | 5/11/01  | <1%    | $169,958   | $976,816  
|                                                                                                                                                                                                 |                                                                                                                                                                      |         
|American Tactile CorporationMedina, NY. Develops equipment and systems   
    to produce commercial signage.
    www.americantactile.com                                                         | Convertible
    debentures at 8%   
    due June 2000 and April 2001
    with detachable warrants                                                                    | 6/23/95  | <1%    | 150,000    | 25,000    
|BioWorks, Inc.   
    Geneva, NY. Develops and manufactures   
    biological alternative to chemical pesticides.
    www.bioworksbiocontrol.com                                                 | Series A convertible preferred  
    
    stock - 32,000 shares                                                                                                      | 11/6/95  | <1%    | 56,000     | 28,000    
|Clearview Cable TV, Inc.   
    New Providence, NJ. Cable television operator.                                                                                                                   | Common stock - 400 shares                                                                                                                                            | 2/23/96  | 5%     | 55,541     | 28,000    
|Contract StaffingBuffalo, NY. PEO providing human resource 
    administration for small businesses. 
    www.contract-staffing.com                                                              | Series A 8%
    Cumulative
    preferred stock - 10,000 shares                                                                                                       | 11/8/99  | 10%    | 100,000    | 100,000   
|DataView, LLC 
    Mt. Kisco, NY. Designs, develops and markets
    browser based software for investment
professionals.
    www.marketgauge.com                                                 | 5% Membership interest                                                                                                                                               | 10/1/98  | 5%     | 310,357    | 155,179   
|G-TEC Natural Gas Systems   
    Buffalo, NY. Manufactures and distributes   
    systems that allow natural gas to be used 
    as an alternative fuel to gases. 
    www.gas-tec.com           | 41.67% Class A
    Membership   
    interest. 8% cumulative dividend                                                                                                | 8/31/99  | 42%    | 300,000    | 300,000   
|INRAD, Inc. (OTC: INRD.OB) *   
    Northvale, NJ. Develops and manufactures   
    products for laser photonics industry.   
    www.inrad.com                                                  | Series B Preferred Stock -  
    
    100 shares. 10% dividend. 
    Common stock - 2,000 shares                                                                     | 10/31/00 | 2%     | 100,000    | 102,000   
|MemberWare Technologies, Inc. (e)Pittsford, NY. Internet company engaged in   
    web related consulting services.   
    www.memberware.com                                                    | Promissory Note at prime rate  
    
    + 4.5% due September 2004.
    Common stock - 40,000
    34,000 warrants for shares of stock                                | 9/16/99  | 2%     | 100,000    | 100,000   
|MINRAD, Inc.   
    Buffalo, NY. Developer of laser devices.                                                                                                                                     | 608,193 Common shares.  
    
    56,020 Preferred Series A shares. 
    13,767 Preferred Series B                                                                   | 8/4/97   | 5%     | 919,422    | 1,160,558 
|Ultra - Scan Corporation   
    Amherst, NY. Ultrasonic Fingerprint Technology 
    www.ultra-scan.com                                                                                           | Common Shares - 49,290. 
    Warrants - 4,000 for Common
    shares. Two Bridge Loans each for
    $100,000 at 12%, due on demand 
    anytime after March 31, 2002. | 12/11/92 | 4%     | 502,586    | 595,676   
|UStec, Inc. (e)   
    Victor, NY. Manufactures and markets   
    digital wiring systems for residential   
    new home construction.   
    www.ustecnet.com                                  | Promissory Note at 12%  
    
    due January 2003 
    50,000 Common Shares.
    8,200 Warrants for Common Shares                                                   | 12/17/98 | <1%    | 100,500    | 150,000   
|Vanguard Modular Building Systems   
    Philadelphia, PA. Leases and sells high-end   
    modular space solutions.
    www.vanguardmodular.com                                                 | Preferred Units -
    2,673 Units with   
     warrants, 14% interest rate.                                                                                          | 12/16/99 | <1%    | 270,000    | 270,000   
|Other Investments                                                                                                                                                                                | Other                                                                                                                                                                | Various  | -      | 17,653     | 19,662    
|                                                                                                                                                                                                 | Total portfolio investments                                                                                                                                          |          |        | $3,157,017 | $4,010,891

See notes to financial statements.

Notes to Portfolio of Investments

|(a) | Unrestricted securities (indicated by ^) are freely marketable
    securities having readily available market quotations. All other securities
    are restricted securities, which are subject to one or more restrictions on
    resale and are not freely marketable. At December 31, 2001 restricted
    securities represented approximately 76% of the value of the investment
    portfolio. Deloitte & Touche LLP has not examined the business descriptions
    of the portfolio companies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | The Date Acquired column indicates the year in which the Corporation
    acquired its first investment in the company or a predecessor company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(c) | The equity percentages estimate the Corporation's ownership interest
    in the portfolio investment. The estimated ownership is calculated based on
    the percent of outstanding voting securities held by the Corporation or the
    potential percentage of voting securities held by the Corporation or the
    potential percentage of voting securities held by the Corporation upon
    exercise of its warrants or conversion of debentures; or other available
    data. Deloitte & Touche LLP has not audited the equity percentages of the
    portfolio companies. The symbol "<1%" indicates that the Corporation holds
    equity interest of less than one percent.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(d) | Under the valuation policy of the Corporation, unrestricted
    securities are valued at the closing price for publicly held securities for
    the last three days of the month. Restricted securities, including
    securities of publicly-owned companies, which are subject to restrictions on
    resale, are valued at fair value as determined by the Board of Directors.
    Fair value is considered to be the amount, which the Corporation may
    reasonably expect to receive for portfolio securities if such securities
    were sold on the valuation date. Valuations as of any particular date,
    however, are not necessarily indicative of amounts which may ultimately be
    realized as a result of future sales or other dispositions of securities and
    these favorable or unfavorable differences could be material. Among the
    factors considered by the Board of Directors in determining the fair value
    of restricted securities are the financial condition and operating results,
    projected operations, and other analytical data relating to the investment.
    Also considered are the market prices for unrestricted securities of the
    same class (if applicable) and other matters which may have an impact on the
    value of the portfolio company.
|(e) | These investments are income producing. All other investments are
    non-income producing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(f) | See Note 2 to the financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(g) | Income Tax Information - As of December 31, 2001, the aggregate cost
    of investment securities approximated $3.2 million. Net unrealized
    appreciation aggregated approximately $850,000, of which $1,200,000 related
    to appreciated investment securities and $350,000 related to depreciated
    investment securities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | * Publicly-owned Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

Schedules Of Selected Per Share Data And Ratios Five Years Ended December 31,
2001

Selected data for each share of capital stock outstanding throughout the five
most current years is as follows:

|                                                               | Year Ended December 31,
|-------------------------------------------------------------- | -----------------------
|                                                               | 2001                   
|INCOME FROM INVESTMENT OPERATIONS (1):                         |                        
|Investment income                                              | $0.02                  
|Expenses                                                       | 0.14                   
|                                                               |                        
|Investment (loss) before income taxes                          | (0.12)                 
|Income tax expense (benefit)                                   | 0.15                   
|                                                               |                        
|Net investment (loss)                                          | (0.27)                 
|Net realized and unrealized gain (loss) on investments         | 0.55                   
|Net proceeds from private stock offering                       | 0.01                   
|                                                               |                        
|Increase (decrease) in net asset value                         | 0.29                   
|Net asset value, beginning of year                             | 1.46                   
|                                                               |                        
|Net asset value, end of year                                   | $1.75                  
|                                                               |                        
|Per share market value, end of year                            | $1.27                  
|                                                               |                        
|Total return based on market value                             | (42.0)%                
|Total return based on net asset value                          | 19.9%                  
|                                                               |                        
|SUPPLEMENTAL DATA:                                             |                        
|Ratio of expenses before income taxes to average net assets    | 8.95%                  
|Ratio of expenses including income taxes to average net assets | 18.55%                 
|Ratio of net investment (loss) to average net assets           | (16.82)%               
|Portfolio turnover                                             | 6.3%                   
|                                                               |                        
|                                                               |                        
|Net assets at end of year                                      | $10,058,284            
|                                                               |                        
|Weighted shares outstanding at end of year                     | 5,762,294              

(1) Per share data are based on weighted average shares outstanding.

See notes to financial statements.



Notes To Financial Statements Years Ended December 31, 2001, 2000 and 1999

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of the Business - Effective August 16, 2001 the Corporation
made an election, following an authorized vote of the shareholders to become a
Business Development Company, or "BDC." Generally, a BDC is a specialized type
of investment company that is primarily engaged in the business of furnishing
capital and managerial expertise to companies that do not have ready access to
capital through conventional finance channels. There was no impact on the
corporate structure as a result of the change to a BDC. Prior to this election,
the Corporation operated as a diversified closed-end management investment
company registered under the Investment Company Act of 1940. Rand continues to
operate as a publicly held venture capital company, listed on the NASDAQ Small
Cap Market under the symbol "RAND." The Corporation was founded in 1969 and is
headquartered in Buffalo, New York. The Corporation's investment strategy is to
seek capital appreciation through venture capital investments in small,
unseasoned, developing companies, primarily in Upstate New York.

Investments - Investments are stated at fair value as determined in
good faith by the Board of Directors, as described in the Notes to Schedule of
Portfolio Investments on page 25. Certain investment valuations have been
determined by the Board of Directors in the absence of readily ascertainable
fair values. The estimated valuations are not necessarily indicative of amounts
which may ultimately be realized as a result of future sales or other
dispositions of securities, and these favorable or unfavorable differences could
be material. Amounts reported as realized gains and losses are measured by the
difference between the proceeds of sale or exchange and the cost basis of the
investment without regard to unrealized gains or losses reported in prior
periods. The cost of securities that have, in the Board of Directors' judgment,
become worthless, are written off and reported as realized losses.

Cash and Cash Equivalents - Temporary cash investments having a
maturity of three months or less when purchased are considered to be cash
equivalents.

Interest Income - Interest income generally is recorded on the accrual
basis except where the investment is valued at less than cost to reflect risk of
loss. In such cases, interest is recorded at the time of receipt. A reserve for
possible losses on interest receivable is maintained when appropriate.

Organizational Costs - During 2001, the Corporation incurred $81,523
in legal and accounting related services in conjunction with its election to
become a BDC, the establishment of stock options plans, and the application to
the Small Business Administration regarding a pending establishment of a wholly
owned Small Business Investment Company subsidiary. These organizational related
costs have been expensed in 2001.

Net Assets per Share - Net assets per share are based on the number of
shares of common stock outstanding.

Use of Estimates - The preparation of the financial statements in
conformity with accounting principles generally accepted in the United States of
America 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.

Supplemental Cash Flow Information
- In 2001, the Corporation
converted $10,465 of interest receivable from ADIC into common stock of ADIC.

Reclassifications - Certain prior year amounts have been reclassified
to conform with the 2001 financial statement presentation.

2. SALE OF INVESTMENT

The Corporation announced on February 1, 2001 the acquisition of Pathlight
Technology, Inc. ("Pathlight") by Advanced Digital Information Corporation
(NASDAQ: ADIC). At the time of announcement the Corporation owned approximately
5% of Pathlight, with a cost basis of approximately $1.2 million. The Pathlight
securities were converted into 558,047 shares of ADIC in 2001, and became freely
tradable in August 2001.

From August 2001 through December 31, 2001, the Corporation liquidated
483,313 shares of ADIC common stock resulting in a realized gain of
approximately $5.3 million. In January 2002 the Corporation sold an additional
61,051 of its ADIC common stock holdings for approximately $1.1 million. The
Corporation is eligible to receive an additional 13,683 shares of ADIC under the
terms of the agreement, however, such shares are being held by ADIC in escrow
under terms of the acquisition agreement. As such, these escrow shares have not
been valued in the December 31, 2001 portfolio.

3. INCOME TAXES

Deferred tax assets and liabilities are recorded for temporary differences
between the financial statement and tax bases of assets and liabilities using
the currently enacted tax rate expected to be in effect when the taxes are
actually paid or recovered.

The tax effect of the major temporary difference and carryforwards
that give rise to the Corporation's net deferred tax (liabilities) assets at
December 31, 2001 and 2000 are as follows

|                                       | 2001       | 2000     
|-------------------------------------- | ---------- | ---------
|Operations                             | $(113,019) | $(51,697)
|Investments                            | (362,896)  | (389,254)
|Net operating loss carryforwards       | 325,915    | 1,086,443
|Capital loss carryforwards             | -          | 183,948  
|                                       |            |          
|Subtotal                               | (150,000)  | 829,440  
|Valuation allowance                    | -          | (168,650)
|Deferred tax (liabilities) assets, net | $(150,000) | $660,790 

The net deferred tax (liabilities) assets are presented in the statements
    of financial position as follows:

|                                       | 2001       | 2000      
|-------------------------------------- | ---------- | ----------
|Deferred tax assets - current          | $369,488   | $1,113,470
|Deferred tax liabilities - current     | 519,488    | 452,680   
|                                       |            |           
|Deferred tax (liabilities) assets, net | $(150,000) | $660,790  

The components of income tax expense reported in the statements of operations
are as follows:

|          | 2001     | 2000     | 1999   
|--------- | -------- | -------- | -------
|Current:  |          |          |        
|Federal   | $34,000  | $-       | $-     
|State     | 13,567   | 13,518   | 11,388 
|          | 47,567   | 13,518   | 11,388 
|Deferred: |          |          |        
|Federal   | 575,215  | 357,825  | -      
|State     | 235,575  | 53,265   | -      
|          | 810,790  | 411,090  | -      
|Total     | $858,357 | $424,608 | $11,388

A reconciliation of the expense for income taxes at the federal statutory
rate to the expense reported is as follows:

|                                                                                               | 2001       | 2000       | 1999      
|---------------------------------------------------------------------------------------------- | ---------- | ---------- | ----------
|Net investment income (loss) and realized gain 
    (loss) before income tax expense (benefit) | $2,499,069 | $1,147,862 | $(620,901)
|Expected tax (benefit) at statutory rate                                                       | $850,706   | $390,273   | $(211,106)
|State - net of federal effect                                                                  | 164,434    | 44,070     | (14,343)  
|Other                                                                                          | (12,083)   | (9,735)    | 68,187    
|Valuation allowance                                                                            | (144,700)  | -          | 168,650   
|Total                                                                                          | $858,357   | $424,608   | $11,388   

Deferred income tax expense of approximately $363,000 and $389,000 at
December 31, 2001 and 2000, respectively, relate to net unrealized appreciation
(depreciation) of investments. Such appreciation (depreciation) is not included
in taxable income until realized.

At December 31, 2001 and 2000, the Corporation had a federal and state net
operating loss carryforward of approximately $781,000 and $2,720,000,
respectively, which expire commencing in 2007.

At December 31, 2000, the Corporation had established a valuation allowance
against the deferred tax asset in the event that the tax asset may not be
realized prior to its expiration. The entire valuation allowance was reversed
and taken into the net increase in net assets from operations in 2001.

4. STOCKHOLDERS' EQUITY (NET ASSETS)

At December 31, 2001 and 2000, there were 500,000 shares of $10.00 par value
preferred stock authorized and unissued.

On January 18, 2001, January 21, 2000 and October 2, 2000, the Corporation
sold 15,000, 15,000 and 25,000 shares of common stock through a private stock
offering at $2.125, $1.33 and $1.51 per share, respectively. There was no common
stock issued in 1999.

On October 18, 2001, the Board of Directors authorized the repurchase of up
to 5% of the Corporation's outstanding stock through purchases on the open
market during the one-year period ending October 18, 2002. As of December 31,
2001 no stock repurchases had occurred.

Summary of change in capital accounts:

|                                                            | Undistributed
    Net   Investment Loss | Undistributed   
    Realized Gain (Loss)   on Investments | Net Unrealized
    Appreciation (Depreciation)on Investments
|----------------------------------------------------------- | --------------------------------------- | ---------------------------------------------------------- | ------------------------------------------------------------
|                                                           
|                                                           
|Balance, January 1, 1999                                    | $(1,568,711)                            |                                                            | $2,739,156                                                  
|Net (decrease) increase in net 
     assets from operations | (387,097)                               |                                                            | (42,625)                                                    
|Balance, December 31, 1999                                  | (1,955,808)                             |                                                            | 2,696,531                                                   
|Net (decrease) increase in net 
     assets from operations | (109,864)                               |                                                            | (296,298)                                                   
|Balance, December 31, 2000                                  | (2,065,672)                             |                                                            | 2,400,233                                                   
|Net (decrease) increase in net
     assets from operations  | (1,551,001)                             |                                                            | 3,286,078                                                   
|Balance, December 31, 2001                                  | $(3,616,673)                            |                                                            | $5,686,311                                                  

|                           | Common Stock | Capital in
    Excess of Par
    Value
|-------------------------- | ------------ | --------------------------------------
|                           | Shares       | Amount                                
|                           |              |                                       
|Balance, December 31, 1999 | 5,708,034    |                                       
|Common stock issued        | 40,000       |                                       
|Balance, December 31, 2000 | 5,748,034    |                                       
|Common stock issued        | 15,000       |                                       
|Balance, December 31, 2001 | 5,763,034    |                                       

5. STOCK OPTION PLANS

In July 2001, the shareholders of the Corporation authorized the
establishment of two stock option plans - the Employee Plan, and the Director
Plan. The Plans provide for an aggregate of 200,000 and 100,000 shares,
respectively, to be awarded to eligible employees and non-officer directors. As
of December 31, 2001, no stock options have been awarded from either plan. The
Director Plan will not take effect, if at all, until an SEC exemption is
obtained from restrictions under the Investment Company Act of 1940.

6. COMMITMENTS AND CONTINGENCIES

The Corporation has an agreement that includes health benefits for the spouse
of a former officer of the Corporation. Remaining payments projected to be paid
to the surviving spouse have been fully accrued. Total accrued deferred
compensation under this agreement at December 31, 2001 and 2000 was $25,874 and
$29,296, respectively.

7. PENSION EXPENSE

The Corporation has a defined contribution 401(k) Plan. The Plan provides a
base contribution of 1% for eligible employees and also provides up to 5%
matching contribution. Pension plan expenses were $18,041, $15,822, and $18,317
in 2001, 2000 and 1999, respectively.

8. PROMISSORY NOTES RECEIVABLE

In January 2001, the Corporation received promissory notes from certain
principals of its former portfolio companies. Principal payments commenced in
January 2001. Interest, at the rate of 12%, will accrue during the term of the
promissory notes and may be waived by the Corporation if the payors meet certain
of the promissory notes' provisions. Principal installments due subsequent to
December 31, 2001 are as follows: 2002 - $28,600, 2003 - $45,745, 2004 -
$31,400, and 2005 - $44,860.



On February 1, 2002, Rand received notification that its Small Business
Investment Company (SBIC) application had been received by the United States
Small Business Administration's (SBA's) Investment Division. A review of the
application will take place before the SBIC license is granted. This licensing
process may take six to nine months. On January 25, 2002, Rand transferred
$5,000,000 in cash to its newly formed wholly owned subsidiary, Rand Capital
SBIC, L.P. Once approved and licensed by the SBA, this new subsidiary will be
able to obtain up to two times its initial $5,000,000 of "regulatory capital"
from the SBA for purposes of new investment.

10. QUARTERLY OPERATIONS AND EARNINGS DATA - UNAUDITED

|                                                                                             | 4th
    Quarter | 3rd
    Quarter | 2nd
    Quarter | 1st
    Quarter
|-------------------------------------------------------------------------------------------- | --------------- | --------------- | --------------- | ---------------
|                                                                                            
|2001                                                                                        
|Investment income                                                                            | $55,552         | $27,578         | $31,212         | $45,137        
|Net increase (decrease) in net assets 
          from operations                             | 968,394         | 130,319         | 936,031         | (394,032)      
|Basic and diluted net increase (decrease) in 
          net assets from operations per share | 0.17            | 0.02            | 0.16            | (0.07)         
|                                                                                            
|2000                                                                                        
|Investment income                                                                            | $53,630         | $62,368         | $55,974         | $67,797        
|Net increase (decrease) in net assets 
          from operations                             | (319,009)       | (26,253)        | (279,522)       | 1,348,038      
|Basic and diluted net increase (decrease) in 
          net assets from operations per share | (0.06)          | 0.00            | (0.05)          | 0.24           

Changes In Investments At Cost And Realized Gain (Loss) Year Ended December
31, 2001

|                                                                 | Cost
    Increase
    (Decrease) | Realized
    Gain
    (Loss)
|---------------------------------------------------------------- | -------------------------------- | ----------------------------
|NEW AND ADDITIONS TO PREVIOUS INVESTMENTS                       
|ADIC/Pathlight Technology, Inc.                                  | $94,190                         
|Platform Technology Holdings                                     | 55,000                          
|Ultra-Scan Corporation                                           | 200,000                         
|                                                                 | 349,190                         
|INVESTMENTS SOLD/LIQUIDATED                                      |                                 
|ADIC/Pathlight Technology, Inc.                                  | (1,099,137)                      | $5,327,772                  
|Aria Wireless Systems, Inc.                                      | (543,840)                        | (543,840)                   
|BNKR, Inc.                                                       | (400,000)                        | (400,000)                   
|Fertility Acoustics, Inc.                                        | (87,440)                         | (87,440)                    
|HCI Systems, Inc.                                                | (100,500)                        | (100,500)                   
|MobileMedia                                                      | (94,250)                         | (94,250)                    
|Reflection Technology, Inc.                                      | (500,000)                        | (500,000)                   
|TSS Transnet                                                     | (316,401)                        | (316,401)                   
|Preferred Stocks (Motorola; Texaco)                              | (211,650)                        | 693                         
|                                                                 | (3,353,218)                      | 3,286,034                   
|OTHER CHANGES                                                   
|Debenture repayments, distributions and other                    | 1,715                            | 44                          
|NET CHANGE IN INVESTMENTS AT COST 
     AND REALIZED GAIN (LOSS) | $(3,002,313)                     | $3,286,078                  

Independent Auditors' Report Deloitte & Touche LLP

To the Board of Directors and Stockholders
Rand Capital Corporation
Buffalo, New York

We have audited the accompanying statements of financial position of Rand
Capital Corporation (the "Corporation") as of December 31, 2001 and 2000,
including the schedule of portfolio investments as of December 31, 2001, and the
related statements of operations, cash flows and changes in net assets for each
of the three years in the period ended December 31, 2001, and the selected per
share data and ratios for each of the five years in the period then ended. These
financial statements and the selected per share data and ratios are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these financial statements and selected per share data and ratios
based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and selected per share data and ratios are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
examination or confirmation of securities owned as of December 31, 2001, and
2000. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and selected per share data and
ratios referred to above present fairly, in all material respects, the financial
position of Rand Capital Corporation as of December 31, 2001 and 2000, the
results of its operations, its cash flows and the changes in its net assets for
each of the three years in the period ended December 31, 2001, and the selected
per share data and ratios for each of the five years in the period then ended,
in conformity with accounting principles generally accepted in the United States
of America.

As explained in Note 1, the financial statements include securities valued at
$3,034,075 (30% of net assets) and $7,133,927 (85% of net assets), as of
December 31, 2001 and 2000, respectively, whose fair values have been estimated
by the Board of Directors in the absence of readily ascertainable fair values.
We have reviewed the procedures used by the Board of Directors in arriving at
its estimate of fair value of such securities and have inspected underlying
documentation. In our opinion, those procedures are reasonable, and the
documentation is appropriate to determine the securities' estimated fair values.
The estimated valuations, however, are not necessarily indicative of the amounts
which may ultimately be realized as a result of future sales or other
dispositions of securities, and these favorable or unfavorable differences could
be material.

Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of changes in
investments at cost and realized gain for the year ended December 31, 2001 is
presented for the purpose of additional analysis and is not a required part of
the basic financial statements. This supplemental schedule is the responsibility
of the Corporation's management. Such schedule has been subjected to the
auditing procedures applied in our audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects when considered in
relation to the basic financial statements taken as a whole.

Deloitte & Touche LLP
                        Buffalo, New York
                        January 11, 2002
                        (February 1, 2002 as to Note 9)

Rand Capital Corporation Form 10-K

Item 9. Changes in and Disagreements with Accountants on Accounting and
      Financial Disclosure

None

Part III

Item 10. Directors and Executive Officers of the Registrant

Information in response to this Item is incorporated herein by reference to
the information provided in the Corporation's definitive Proxy Statement for its
Annual Meeting of Shareholders to be held April 24, 2002, to be filed under
Regulation 14A (the "2002 Proxy Statement") under the heading "ELECTION OF
DIRECTORS" and "EXECUTIVE OFFICERS."

Item 11. Executive Compensation

Information in response to this Item is incorporated herein by reference to
the information provided in the 2002 Proxy Statement under the heading "COMMITTEES AND MEETING DATA," "COMPENSATION" and "DIRECTOR
COMPENSATION."

Item 12. Security Ownership of Certain Beneficial Owners and Management

Information in response to this Item is incorporated herein by reference to
the information provided in the 2002 Proxy Statement under the heading
"BENEFICIAL OWNERSHIP OF SHARES."

Item 13. Certain Relationships and Related Transactions

There were no relationships or transactions within the meaning of this item
during the year ended December 31, 2001.

Item 14. Exhibits, Financial Statement Schedules and Reports on Form
      8-K

(a)    The following documents are filed as part of this report and included in
Item 8:

(1) FINANCIAL STATEMENTS

Statements of Financial Position as of December 31, 2001 and
              2000

Statements of Operations for the three years in the period
              ended December 31, 2001

Statements of Cash Flows for the three years in the period
              ended December 31, 2001

Statements of changes in Net Assets for the three years in the
              period ended December 31, 2001

Schedule of Portfolio Investments as of December 31, 2001

Schedules of Selected Per Share Data and Ratios for the five
              years in the period ended December 31, 2001

Notes to Financial Statements

Supplemental Schedule of Changes in Investments at Cost and
              Realized Gain (Loss) for the year ended December 31, 2001

Independent Auditors' Report

(2) FINANCIAL STATEMENT SCHEDULES

There were no schedules required to be filed as part of this
            report

(b) Reports on Form 8-K

No Form 8-K reports were filed during the quarter ended December
            31, 2001.

(c) 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)(i) Certificate of Incorporation of the Corporation,
            incorporated by reference to Exhibit (a)(1) of Form N-2 filed with
            the Securities Exchange Commission on April 22, 1997.

(3)(ii) By-laws of the Corporation incorporated by reference to
            Exhibit (b) of Form N-2 filed with the Securities Exchange
            Commission on April 22, 1997.

(4) Specimen certificate of common stock certificate,
            incorporated by reference to Exhibit (b) of Form N-2 filed with the
            Securities Exchange Commission on April 22, 1997.

(10.1) Employee Stock Option Plan - incorporated by reference
            Appendix B to the Corporation's definitive Proxy Statement filed on
            June 1, 2002.*

(10.2) Director Stock Option Plan - incorporated by reference
            Appendix C to the Corporation's definitive Proxy Statement filed on
            June 1, 2002.*

(10.3) Agreement of Limited Partnership for Rand Capital SBIC,
            L.P. - filed herewith.

(10.4) Certificate of Limited Partnership of Rand Capital SBIC, L.P. -
            filed herewith.

(10.5) Limited Liability Company Agreement of Rand Capital
            Management, LLC - filed herewith.

(10.6) Certificate of Formation of Rand Capital Management, LLC -
            filed herewith.

(11) Computation of Per Share Earnings is set forth under Item 8
            of this report.

(21) Subsidiaries of the Corporation - filed herewith.

*  Management contract or compensatory plan.

Signatures



Pursuant to the requirements of Section 13 or 15(d) of Securities Exchange
Act of 1934, the registrant has duly caused this Report on Form 10-K to be
signed on its behalf by the undersigned thereunto duly authorized.

|Date: March 14, 2002 | RAND CAPITAL CORPORATION
|-------------------- | ------------------------
|                     | By: /s/ Allen F. Grum   
|                     | Allen F. Grum, President

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report on Form 10-K has been signed below by the following persons on behalf of
the Company in the capacities and on the date indicated.

Signature/Title                               
(i) Principal Executive Officer:

/s/ Allen F. Grum                         

Allen F. Grum / President                    March 28, 2002

(ii) Principal Accounting & Financial Officer:

/s/ Daniel P. Penberthy                 

Daniel P. Penberthy / Treasurer             March 28, 2002

(iii) Directors:

/s/ Allen F. Grum                         

Allen F. Grum / Director                         March 28, 2002

/s/ Luiz F. Kahl                             

Luiz F. Kahl / Director                            March 28, 2002

/s/ Erland E. Kailbourne              

Erland E. Kailbourne / Director               March 28, 2002

/s/ Ross B. Kenzie                         

Ross B. Kenzie / Director                        March 28, 2002

/s/ Willis S. McLeese                     

Willis S. McLeese / Director                    March
28, 2002

Reginald B. Newman II / Director            March
__, 2002

/s/ Jayne K. Rand                          

Jayne K. Rand / Director                         March 28, 2002