##### Table of Contents





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

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2007o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    
    SECURITIES EXCHANGE ACT OF 1934For the Transition Period
    from          to   Commission file number:
    001-08205
  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:
   Securities registered pursuant to Section 12(g) of the
    Act:
   o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer þ
    Smaller
    reporting
    company o   Rule 12b-2 o þ
      DOCUMENTS INCORPORATED BY REFERENCE




---



##### 





RAND
    CAPITAL CORPORATION
    TABLE OF CONTENTS FOR
    FORM 10-K
  
  PART IItem 1.

Business


1Item 1A.

Risk Factors


5Item 2.

Properties


6Item 3.

Legal Proceedings


6Item 4.

Submission of Matters to a Vote of Security
    Holders


6PART IIItem 5.

Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


7Item 6.

Selected Financial Data


9Item 7.

Managements Discussion and Analysis of
    Financial Condition and Results of Operations


10Item 7A.

Quantitative and Qualitative Disclosures about
    Market Risk


22Item 8.

Financial Statements and Supplementary Data


23Item 9.

Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


42Item 9A.

Controls and Procedures


42Item 9A(T).

Managements Annual Report on Internal
    Control Over Financial Reporting


42Item 9B.

Other Information


42PART IIIItem 10.

Directors, Executive Officers and Corporate
    Governance


42Item 11.

Executive Compensation


43Item 12.

Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


43Item 13.

Certain Relationships and Related Transactions,
    and Director Independence


43Item 14.

Principal Accountant Fees and Services


43PART IVItem 15.

Exhibits and Financial Statement Schedules


43Ex-31.1Ex-31.2Ex-32.1Ex-32.2




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##### Table of Contents



PART I  Item 1.
    Business        Form 10-K, Form 10-Q, Form 8-K,
    Regulation
    as a BDC
         1




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##### Table of Contents



SBIC
    Subsidiary
      Rule 17d-1
 2




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##### Table of Contents




    a BDC (Rand) to operate a BDC/small business investment company
    (Rand SBIC) as its wholly owned subsidiary in limited
    partnership form;
    Rand, Rand Management and Rand SBIC to engage in certain
    transactions that the Corporation would otherwise be permitted
    to engage in as a BDC if its component parts were organized as a
    single corporation;
    Rand, as a BDC, and Rand SBIC, as its BDC/SBIC subsidiary, to
    meet asset coverage requirements for senior securities on a
    consolidated basis;
    Rand SBIC, as a BDC/SBIC subsidiary of Rand as a BDC, to file
    Exchange Act reports on a consolidated basis as part of
    Rands reports.             3




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##### Table of Contents



Regulation
    of SBIC Subsidiary
  Lending
    Restrictions
  and/or
      SBA
    Leverage
        10-year
 4




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##### Table of Contents



Employees
    Item 1A.
    Risk
    Factors  The
    Corporation is Subject to Risks Created by the Valuation of its
    Portfolio Investments
    The
    Corporations Portfolio Investments are
    Illiquid
    Investing
    in Private Companies involves a High Degree of
    Risk
      Investing
    in the Corporations Shares May be Inappropriate for the
    Investors Risk Tolerance
    The
    Corporation is Subject to Risks Created by its Regulated
    Environment
   5




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##### Table of Contents



The
    Corporation is Subject to Risks Created by Borrowing Funds from
    the SBA
    The
    Corporation is Dependent Upon Key Management Personnel for
    Future Success
    The
    Corporation Operates in a Competitive Market for Investment
    Opportunities
    Fluctuations
    of Quarterly Results
    Item 2.
    Properties    Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders   6




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##### Table of Contents



Part II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities    2007 Quarter ending:

High


LowMarch 31st

$
5.04


$
3.26June 30th

$
3.94


$
3.26September 30th

$
4.62


$
3.35December 31st

$
4.72


$
3.50   2006 Quarter ending:

High


LowMarch 31st

$
1.43


$
1.17June 30th

$
1.70


$
1.27September 30th

$
1.90


$
1.31December 31st

$
4.07


$
1.98     Profit
    Sharing and Stock Option Plans
      Shareholders
    of Record
    Stock
    Repurchase Plan
   7




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##### Table of Contents



Company
    Performance Graph
    COMPARISON
    OF 5-YEAR CUMULATIVE TOTAL RETURN
    AMONG RAND CAPITAL CORP.,
    NASDAQ MARKET INDEX AND PEER GROUP INDEX
  
  ASSUMES $100
    INVESTED ON DEC. 31, 2002
    ASSUMES DIVIDEND REINVESTED
    FISCAL YEAR ENDING DEC. 31, 2007
  COMPARISON
    OF CUMULATIVE TOTAL RETURN OF ONE OR MORE
    COMPANIES, PEER GROUPS, INDUSTRY INDEXES AND/OR BROAD
    MARKETS
  FISCAL
    YEAR ENDING
  COMPANY/INDEX/MARKET


12/31/2002


12/31/2003


12/31/2004


12/30/2005


12/29/2006


12/31/2007Rand Capital Corp.



100.00




140.78




151.46




130.10




339.81




349.32Peer Group Index



100.00




162.64




178.10




179.81




244.29




195.52NASDAQ Market Index



100.00




150.36




163.00




166.58




183.68




201.91    
 8




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##### Table of Contents



Item 6.
    Selected
    Financial Data    Balance
    Sheet Data as of December 31:
  2007


2006


2005


2004


2003Total assets

$
32,722,151


$
29,463,944


$
16,063,605


$
12,743,109


$
9,385,137Total liabilities

$
12,904,328


$
12,681,539


$
7,447,671


$
3,716,055


$
146,649Net assets

$
19,817,823


$
16,782,405


$
8,615,934


$
9,027,054


$
9,238,488Net asset value per outstanding share

$
3.47


$
2.93


$
1.51


$
1.58


$
1.62Common stock shares outstanding


5,718,934



5,718,934



5,718,934



5,718,934



5,718,934   Operating
    Data for the year ended December 31:
  2007


2006


2005


2004


2003Investment income

$
2,302,870


$
1,326,962


$
736,573


$
757,704


$
449,858Total expenses

$
1,650,947


$
1,519,184


$
1,265,846


$
900,812


$
942,799Net investment gain (loss)

$
425,406


$
(1,264,802
)

$
(175,179
)

$
(112,384
)

$
(346,043
)Net realized (loss) gain on sales and dispositions of investments

$
(68,748
)

$
3,456,441


$
(382,353
)

$
26,727


$
87,841Net increase (decrease) in unrealized appreciation

$
2,362,507


$
5,974,832


$
146,412


$
(125,777
)

$
(86,441
)Net increase (decrease) in net assets from operations

$
2,719,165


$
8,166,471


$
(411,120
)

$
(211,434
)

$
(344,643
)  9




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##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations    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 Corporation 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 contained in Part I, Item 1A, which is
    incorporated herein by reference.
  There may be other factors that we have not identified
    that affect the likelihood that the forward-looking statements
    may prove to be accurate. Further, any forward-looking statement
    speaks only as of the date it is made and, except as required by
    law, we undertake no obligation to update any forward-looking
    statement to reflect events or circumstances after the date on
    which it is made or to reflect the occurrence of anticipated or
    unanticipated events or circumstances. New factors emerge from
    time to time that may cause our business not to develop as we
    expect, and we cannot predict all of them.
  Overview
                 10




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##### Table of Contents



2007
    Highlights and Outlook
         11




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##### Table of Contents



Critical
    Accounting Policies
      Valuation
    of Investments
       12




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##### Table of Contents



Revenue
    Recognition (Interest Income)
      Recent
    Accounting Pronouncements
    FAS 157-b
   13




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##### Table of Contents



Financial
    Condition
  Overview:
  12/31/07


12/31/06


Increase


% IncreaseTotal assets

$
32,722,151


$
29,463,944


$
3,258,207



11.1
%Total liabilities


12,904,328



12,681,539



222,789



1.8
%Net assets

$
19,817,823


$
16,782,405


$
3,035,418



18.1
%     (Decrease)


% (Decrease)12/31/07


12/31/06


Increase


IncreaseInvestments, at cost

$
13,390,644


$
14,033,789


$
(643,145
)


(4.6
)%Unrealized appreciation, net


13,137,846



9,616,025



3,521,821



36.6
%Investments at fair value

$
26,528,490


$
23,649,814


$
2,878,676



12.2
%     New Investments:

AmountGolden Goal LLC

$
637,414Allworx Corp. (Allworx)


500,000Synacor


350,001Niagara Dispensing Technologies, Inc. (Niagara Dispensing)


325,010RAMSCO (Ramsco)


300,000Rocket Broadband Networks, Inc. (Rocket)


280,000Associates Interactive


50,000New Monarch Machine Tool, Inc. (Monarch)


22,841Total of investments made during the year ended
    December 31, 2007

$
2,465,266Other Changes to investments:Adampluseve, Inc. (Adampluseve) warrant accretion


62,333Niagara Dispensing interest conversion


40,000Photonics interest conversion


10,000Total of new investments and changes to investments during
    the year ended December 31, 2007

$
2,577,599   14




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##### Table of Contents



Sales/Investment
    Repayments

AmountRamsco


(819,428
)Topps Meat Company LLC (Topps)


(595,000
)Adampluseve


(561,000
)Allworx


(500,000
)UStec, Inc. (UStec)


(350,000
)Monarch


(172,516
)Takeform


(135,000
)Gemcor II, LLC (Gemcor)


(57,482
)APF Group, Inc. (APF)


(19,984
)Contract Staffing


(10,334
)Total of sales and investment repayments during the year
    ended December 31, 2007


(3,220,744
)Total change in investment balance, at cost, during the year
    ended December 31, 2007

$
(643,145
)             Results
    of Operations
  Investment
    Income
   15




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##### Table of Contents



Comparison
    of the years ended December 31, 2007 and 2006
  December 31,


December 31,


(Decrease)


% (Decrease)2007


2006


Increase


IncreaseInterest from portfolio companies

$
618,430


$
757,824


$
(139,394
)


(18.4
)%Interest from other investments


173,664



53,104



120,560



227.0
%Dividend and other investment income


1,469,864



432,296



1,037,568



240.0
%Other income


40,912



83,738



(42,826
)


(51.1
)%Total investment income

$
2,302,870


$
1,326,962


$
975,908



73.5
%   Interest from portfolio companies
      Interest


Investment


Year that InterestCompany

Rate


Cost


Accrual CeasedG-Tec


8
%


400,000



2004UStec


5
%


100,000



2006WineIsIt.com


10
%


801,918



2005   Interest from other investments
  Dividend and other investment income
    Other income
 16




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##### Table of Contents



Comparison
    of the years ended December 31, 2006 and 2005
  December 31,


December 31,2006


2005


Increase


% IncreaseInterest from portfolio companies

$
757,824


$
593,125


$
164,699



27.8
%Interest from other investments


53,104



3,601



49,503



1374.7
%Dividend and other investment income


432,296



94,930



337,366



355.4
%Other income


83,738



44,917



38,821



86.4
%Total investment income

$
1,326,962


$
736,573


$
590,389



80.2
%   Interest from portfolio companies
  Interest from other investments
  Dividend and other investment income
    Other income
  Operating
    Expenses
  Comparison
    of the years ended December 31, 2007 and 2006
  December 31,


December 31,2007


2006


Increase


% IncreaseTotal expenses

$
1,650,947


$
1,519,184


$
131,763



9.0
%        17




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##### Table of Contents



Comparison
    of the years ended December 31, 2006 and 2005
  December 31,


December 31,2006


2005


Increase


% IncreaseTotal expenses

$
1,519,184


$
1,265,846


$
253,338



20.0
%       Net
    Realized Gains and Losses on Investments
  Comparison
    of the years ended December 31, 2007 and 2006
  December 31,


December 31,2007


2006


DecreaseNet Realized (Loss) Gain

$
(68,748
)

$
3,456,441


$
(3,525,189
)                18




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##### Table of Contents



Comparison
    of the years ended December 31, 2006 and 2005
  December 31,

December 31,2006

2005

Increase

% IncreaseNet Realized Gain (Loss)

$
3,456,441


$
(382,353
)

$
3,838,794



1,004.0
%     Net
    Change in Unrealized Appreciation of Investments
  For
    the years ended December 31, 2007 and 2006
  December 31,

December 31,2007

2006

Decrease

% DecreaseNet Change in Unrealized Appreciation

$
3,521,821


$
9,958,053


$
(6,436,232
)


(64.6
)%       December 31, 2007Increase Gemcor valuation

$
3,500,000Reclass Takeform to a realized loss


130,000Increase Photonics valuation


119,480Adampluseve warrants


65,341Reclass USTec to realized loss


39,000Reclass Topps to realized loss


(332,000
)Total Change in net Unrealized Appreciation during the
    year ended
    December 31, 2007

$
3,521,821        19




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##### Table of Contents



S-1 S-1 S-1
    For
    the years ended December 31, 2006 and 2005
  December 31,

December 31,2006

2005

Increase

% IncreaseNet Change in Unrealized Appreciation

$
9,958,053


$
244,020


$
9,714,033



3,980.8
%     December 31, 2006Increase Innov-X valuation

$
7,761,700Increase Synacor valuation


2,809,849Increase Carolina Skiff valuation


189,000Vanguard Sale


135,000Decrease G-Tec valuation


(102,000
)Decrease USTec valuation


(164,000
)Remove Minrad unrealized appreciation


(199,578
)Decrease Wineisit valuation


(471,918
)Total Change in net Unrealized Appreciation during the
    year ended December 31, 2006

$
9,958,053          20




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##### Table of Contents



Net
    Increase (Decrease) in Net Assets from Operations
      Liquidity
    and Capital Resources
             21




---



##### Table of Contents



Cash Receipts due by year2012 and2008

2009

2010

2011

beyondScheduled Cash Receipts from Portfolio Companies

$
1,300,000


$
530,000


$
3,040,000


$
550,000


$
0     Disclosure
    of Contractual Obligations
    Payments due by periodLess than


1-3


3-5


MoreTotal


1 Year


Years


Years


than 5 yrsSBA Debentures

$
8,100,000


$
0


$
0


$
0


$
8,100,000Operating Lease Obligations (Rent of office space)

$
48,240


$
15,720


$
32,520


$
0


$
0Total

$
8,148,240


$
15,720


$
32,520


$
0


$
8,100,000   Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk       22




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data                     23




---



##### Table of Contents



RAND
    CAPITAL CORPORATION AND SUBSIDIARIES
  CONDENSED
    CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
 December 31,
  2007


2006AssetsInvestments at fair value (identified cost: 2007 
    $13,390,644;
    2006  $14,033,789)

$
26,528,490


$
23,649,814Cash and cash equivalents


4,396,595



4,299,852Interest receivable ( net of allowance $122,000)


647,001



507,242Other assets


1,150,065



1,007,036Total assets

$
32,722,151


$
29,463,944Liabilities and Stockholders Equity (net assets)Liabilities:Debentures guaranteed by the SBA

$
8,100,000


$
8,100,000Deferred tax liability


3,955,000



3,808,000Income taxes payable


474,465



410,575Accounts payable and accrued expenses


321,210



317,359Deferred revenue


53,653



45,605Total liabilities


12,904,328



12,681,539Stockholders equity (net assets):Common stock, $.10 par; shares authorized 10,000,000;
    shares issued 5,763,034


576,304



576,304Capital in excess of par value


6,973,454



6,973,454Accumulated net investment (loss)


(3,940,409
)


(6,253,128
)Undistributed net realized gain on investments


7,796,289



9,763,366Net unrealized appreciation on investments


8,459,391



5,769,615Treasury stock, at cost, 44,100 shares


(47,206
)


(47,206
)Net assets (per share 2007  $3.47 , 2006 
    $2.93)


19,817,823



16,782,405Total liabilities and stockholders equity (net
    assets)

$
32,722,151


$
29,463,944    24




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##### Table of Contents



RAND
    CAPITAL CORPORATION AND SUBSIDIARIES
  CONDENSED
    CONSOLIDATED STATEMENTS OF OPERATIONS
 For The
    Years Ended December 31, 2007, 2006 and 2005
  2007


2006


2005Investment income:Interest from portfolio companies

$
618,430


$
757,824


$
593,125Interest from other investments


173,664



53,104



3,601Dividend and other investment income


1,469,864



432,296



94,930Other income


40,912



83,738



44,9172,302,870



1,326,962



736,573Operating expenses:Salaries


460,917



482,067



400,340Employee benefits


112,147



101,785



99,569Directors fees


77,750



59,500



54,200Professional fees


212,822



116,068



96,917Stockholders and office operating


122,332



108,687



115,386Insurance


43,674



43,674



46,017Corporate development


66,854



54,233



51,875Other operating


51,389



10,769



9,3851,147,885



976,783



873,689Interest on SBA obligations


503,062



472,526



277,287Bad debt expense






69,875



114,870Total expenses


1,650,947



1,519,184



1,265,846Investment gain (loss) before income taxes


651,923



(192,222
)


(529,273
)Current income tax expense


901,511



401,801



23,514Deferred income tax (benefit) expense


(674,994
)


670,779



(377,608
)Net investment gain (loss)


425,406



(1,264,802
)


(175,179
)Realized and unrealized gain (loss) on investments:Net realized (loss) gain on sales and dispositions


(68,748
)


3,456,441



(382,353
)Unrealized appreciation (depreciation) on investments: Beginning
    of year


9,616,025



(342,028
)


(586,048
)End of year


13,137,846



9,616,025



(342,028
)Change in unrealized appreciation (depreciation) before income
    taxes


3,521,821



9,958,053



244,020Deferred income tax expense


1,159,314



3,983,221



97,608Net increase in unrealized appreciation


2,362,507



5,974,832



146,412Net realized and unrealized gain (loss) on investments


2,293,759



9,431,273



(235,941
)Net increase (decrease) in net assets from operations

$
2,719,165


$
8,166,471


$
(411,120
)Weighted average shares outstanding


5,718,934



5,718,934



5,718,934Basic and diluted net increase (decrease) in net assets from
    operations per share

$
0.48


$
1.43


$
(0.07
)    25




---



##### Table of Contents



RAND
    CAPITAL CORPORATION AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CHANGES IN NET ASSETS
 For The
    Years Ended December 31, 2007, 2006 and 2005
  2007


2006


2005Net assets at beginning of period

$
16,782,405


$
8,615,934


$
9,027,054Net investment gain(loss)


425,406



(1,264,802
)


(175,179
)Cumulative effect adjustment for uncertain tax
    positions  FIN 48


316,253







Net realized (loss) gain on sales and dispositions of investments


(68,748
)


3,456,441



(382,353
)Net increase in unrealized appreciation


2,362,507



5,974,832



146,412Net increase (decrease) in net assets from operations


3,035,418



8,166,471



(411,120
)Net assets at end of period

$
19,817,823


$
16,782,405


$
8,615,934    26




---



##### Table of Contents



RAND
    CAPITAL CORPORATION AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
 For The
    Years Ended December 31, 2007, 2006 and 2005
  2007


2006


2005Cash flows from operating activities:Net increase (decrease) in net assets from operations

$
2,719,165


$
8,166,471


$
(411,120
)Adjustments to reconcile net increase (decrease) in net assets
    to net cash used in operating activities:Depreciation and amortization


33,598



26,672



23,297Original issue discount accretion


(62,333
)






Change in interest receivable allowance










114,870Increase in unrealized appreciation of investments


(3,521,821
)


(9,958,053
)


(244,020
)Deferred tax expense (benefit)


484,453



4,654,000



(280,000
)Net realized loss (gain) on portfolio investments


68,748



(3,456,441
)


382,353Non-cash conversion of debenture interest


(50,000
)


(34,356
)


(30,852
)Changes in operating assets and liabilities:(Increase) in interest receivable


(139,759
)


(209,623
)


(151,999
)(Increase) decrease in other assets


(35,229
)


42,440



(48,207
)Increase in income taxes payable


63,890







(Decrease) increase in accounts payable and accrued liabilities


(17,350
)


560,246



34,891Increase (decrease) in deferred revenue


8,048



(34,278
)


(3,275
)Total adjustments


(3,167,755
)


(8,409,393
)


(202,942
)Net cash used in operating activities


(448,590
)


(242,922
)


(614,062
)Cash flows from investing activities:Investments originated


(2,165,266
)


(3,383,769
)


(2,605,260
)Proceeds from sale of portfolio investments


255,440



4,374,762



17,647Proceeds from loan repayments


2,456,509



1,473,322



181,271Capital expenditures


(1,350
)


(12,255
)


(4,001
)Net cash provided by (used in) investing activities


545,333



2,452,060



(2,410,343
)Cash flows from financing activities:Proceeds from SBA debenture






900,000



3,700,000Origination costs to SBA






(19,125
)


(92,500
)Net cash provided by financing activities






880,875



3,607,500Net increase in cash and cash equivalents


96,743



3,090,013



583,095Cash and cash equivalents:Beginning of year


4,299,852



1,209,839



626,744End of year

$
4,396,595


$
4,299,852


$
1,209,839    27




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##### Table of Contents



RAND
    CAPITAL CORPORATION AND SUBSIDIARIES
  CONSOLIDATED
    SCHEDULE OF PORTFOLIO INVESTMENTS
 December 31,
    2007
  (b)










PerDate

(c)





(d)


ShareCompany and Business

Type of Investment

Acquired

Equity


Cost


Value


of RandAdampluseve, Inc. (g)New York, NY. Luxury sports wear company for men and women.
    www.adampluseve.com

Warrants to purchase 1,715 Series A convertible preferred shares.


7/14/06



3
%

$
68,000


$
133,341



.02APF Group, Inc. (e) (g)Mount Vernon, NY. Manufacturer of museum quality picture
    frames and framed mirrors for museums, art galleries, retail
    frame shops, upscale designers and prominent collectors.
    www.apfgroup.com

$566,504 consolidated senior subordinated note at 12.74% due
    December 30, 2010. Warrants to purchase 10.2941 shares of
    common stock.


7/8/04



6
%


566,504



566,504



.10Associates Interactive (e) (g)Buffalo, NY. Provider of training content and certifications
    used to train retail sales associates.
    www.associatesinteractive.com

$50,000 promissory note at 8% due October 15, 2008.


10/15/07







50,000



50,000



.01Carolina Skiff LLC (e) (g)Waycross, GA. Manufacturer of fresh water, ocean fishing and
    pleasure boats. www.carolinaskiff.com

$985,000 Class A preferred membership interest at 7%.
    Redeemable January 31, 2010.       5% common membership interest.


1/30/04



5
%


1,000,000



1,227,000



.21Contract Staffing (e) (h)Buffalo, NY. PEO providing human resource administration for
    small businesses. www.contract-staffing.com

Preferred stock repurchase agreement through March 31, 2010 at
    5%. 11 shares of common stock.


11/8/99



10
%


131,066



131,066



.02EmergingMed.com, Inc. (g) New York, NY. Cancer clinical trial matching and referral
    service. www.emergingmed.com

$500,000 senior subordinated note at 10% due December 19, 2010.
    Warrants for 5.5% of common stock.


12/19/05



5
%


500,000



500,000



.09Gemcor II, LLC (e) (g) (h)West Seneca, NY. Designs and sells automatic riveting
    machines used in the assembly of aircraft components.
    www.gemcor.com

$250,000 subordinated note at 8% due June 28, 2010 with warrant
    to purchase 6.25 membership units.  25 membership units.


6/28/04



31
%


665,451



4,165,451



.73Golden Goal LLC (g) 
    Fort Ann, NY. Youth soccer and lacrosse tournament park.
    www.goldengoalpark.com

191,811 Class C units at 4%.


12/10/07



6
%


637,414



637,414



.11G-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

33.057% Class A membership interest. 8% cumulative dividend.


8/31/99



33
%


400,000



198,000



.03 28




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##### Table of Contents



RAND
    CAPITAL CORPORATION AND SUBSIDIARIES
  CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS
 December 31, 2007  (Continued)
  (b)










PerDate

(c)





(d)


ShareCompany and Business

Type of Investment

Acquired

Equity


Cost


Value


of RandInnov-X Systems, Inc. (g)Woburn, MA. Manufactures portable x-ray fluorescence  (XRF)
    analyzers used in metals/alloy analysis. www.innovxsys.com

2,642 Series A convertible preferred stock. Warrants for 21,596
    common shares.


9/27/04



9
%


1,000,000



8,761,700



1.53Kionix, Inc. 
    Ithaca, NY. Develops innovative MEMS based technology
    applications.
    www.kionix.com

30,241 shares Series B preferred stock. 696,296 shares
    Series C preferred stock. (g) 2,862,091 shares Series A
    preferred stock. 714,285 shares Series B preferred stock.


5/17/02



2
%


1,506,044



1,221,568



.21New Monarch Machine 
    Tool, Inc. (e) (g) (h) Cortland, NY. Manufactures and services vertical/horizontal
    machining centers. www.monarchmt.com

$527,877 note at 12% due January 13, 2009. $300,000 note at 12%
    due January 13, 2009.  22.84 shares of common stock.


9/24/03



15
%

$
542,988


$
542,988



.10Niagara Dispensing Technologies, Inc. (e) (g)Amherst, NY. Beverage dispensing technology development and
    products manufacturer, specializing in beer dispensing systems.
    www.exactpour.com

$500,000 senior subordinated note at 9% due March 7, 2011.
    200 shares common stock. $250,000 promissory note at 14%
    due July 10, 2008. $75,000 bridge note at 14% due December 10,
    2008. Contingent warrants.


3/8/06



4
%


865,010



865,010



.15Photonic Products Group, Inc (OTC:PHPG.OB) (a) (i)Northvale, NJ. Develops and manufactures products for laser
    photonics industry. www.inrad.com

66,000 shares common stock.


10/31/00



<1
%


165,000



262,700



.04RAMSCO (e) (g)Albany, NY. Distributor of water, sanitary, storm sewer and
    specialty construction materials to the contractor, highway and
    municipal construction markets. www.ramsco.com

$300,000 promissory notes at 8% due October 20, 2010. Warrants
    for 5.99% of common stock.


11/19/02



6
%


300,000



300,000



.05Rocket Broadband 
    Networks, Inc. (g)Amherst, NY. Communications service provider of satellite
    TV, broadband internet and VoIP digital phone targeting multiple
    dwelling units. www.rocketbroadband.com

285,829 Series A preferred shares. 247,998 Series A-1 preferred
    shares. 996,441 Series B preferred shares


12/20/05



11
%


680,000



680,000



.12Somerset Gas Transmission Company, LLC (e)Columbus, OH. Natural gas transportation company.
    www.somersetgas.com

26.5337 units.


7/10/02



2
%


719,097



786,748



.14 29




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##### Table of Contents



RAND
    CAPITAL CORPORATION AND SUBSIDIARIES
  CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS
 December 31, 2007  (Continued)
  (b)










PerDate

(c)





(d)


ShareCompany and Business

Type of Investment

Acquired

Equity


Cost


Value


of RandSynacor Inc. (g)Buffalo, NY. Develops provisioning platforms for aggregation
    and delivery of content for broadband access providers. 
    www.synacor.com

200,000 shares of Series B preferred stock. 78,186 Series A
    preferred shares. 80,126 Series C preferred shares. 299,146
    common shares.


11/18/02



4
%


1,349,479



4,168,001



.73Ultra  Scan CorporationAmherst, NY. Biometrics application developer of ultrasonic
    fingerprint technology. 
    www.ultra-scan.com

536,596 common shares, 107,104 Series A-1 preferred shares.
    (g) 95,284 Series A-1 preferred shares.


12/11/92



4
%


938,164



1,203,000



.21WineIsIt.com, Corp.Williamsville, NY. Marketing company specializing in
    customer loyalty programs supporting the wine and spirit
    industry. 
    www.wineisit.com

(g) $500,000 senior subordinated note at 10% due December 17,
    2009. $250,000 note at 10% due April 16, 2005. Warrants to
    purchase 100,000 shares Class B common stock.
    (e) $20,000 note at 18% due April 26, 2008.


12/18/02



2
%


821,918



100,000



.02Other Investments

Various










484,509



28,000



.02Total portfolio investments (f)









$
13,390,644


$
26,528,490


$
4.64  30




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##### Table of Contents



RAND
    CAPITAL CORPORATION AND SUBSIDIARIES
  CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS
 December 31, 2007  (Continued)
  Notes to
    Consolidated Schedule of Portfolio Investments
  (a)
    Unrestricted securities 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, 2007 restricted securities represented 99% of
    the value of the investment portfolio. Freed Maxick &
    Battaglia, CPAs PC 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 upon exercise of its warrants
    or conversion of debentures, or other available data. Freed
    Maxick & Battaglia, CPAs, PC has not audited the
    equity percentages of the portfolio companies. The symbol
    <1% indicates that the Corporation holds an
    equity interest of less than one percent.  (d)
    The Corporation has adopted the SBAs valuation guidelines
    for SBICs, which describe the policies and procedures used
    in valuing investments. These valuation guidelines are similar
    to the accounting principals generally accepted in the United
    States of America. 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-held companies that 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 when 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. Income producing investments have
    generated cash payments of interest or dividends within the last
    twelve months.  (f)
    Income Tax Information  As of December 31, 2007,
    the aggregate cost of investment securities approximated
    $13.4 million. Net unrealized appreciation aggregated
    approximately $13.1 million of which $14.8 million
    related to appreciated investment securities and
    $1.7 million related to depreciated investment securities.  (g)
    Rand Capital SBIC, L.P. investment.(h)
    Reduction in cost and value reflects current principal repayment.  (i)
    Publicly owned company. 31




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##### Table of Contents



RAND
    CAPITAL CORPORATION AND SUBSIDIARIES
  SCHEDULES
    OF SELECTED PER SHARE DATA AND RATIOS
 For the
    Five Years Ended December 31, 2007, 2006, 2005, 2004 and
    2003
    Year Ended December 31,2007


2006


2005


2004


2003Income from investment operations(1):Investment income

$
0.40


$
0.23


$
0.13


$
0.13


$
0.08Expenses


0.28



0.26



0.22



0.16



0.16Investment gain (loss) before income taxes


0.12



(0.03
)


(0.09
)


(0.03
)


(0.08
)Income tax expense (benefit)


0.04



0.19



(0.06
)


(0.01
)


(0.03
)Net investment gain (loss)


0.08



(0.22
)


(0.03
)


(0.02
)


(0.05
)Cumulative effect for uncertain tax positions- FIN 48


0.06



0.00



0.00



0.00



0.00Net realized and unrealized gain (loss) on investments


0.40



1.65



(0.04
)


(0.02
)


0.00Increase (decrease) in net asset value


0.54



1.43



(0.07
)


(0.04
)


(0.05
)Net asset value, beginning of year


2.93



1.51



1.58



1.62



1.67Net asset value, end of year

$
3.47


$
2.93


$
1.51


$
1.58


$
1.62Per share market value, end of year

$
3.60


$
3.50


$
1.34


$
1.56


$
1.45Total return based on market value


2.86
%


161.2
%


(14.1
)%


7.6
%


40.8
%Total return based on net asset value


18.1
%


94.8
%


(4.6
)%


(2.5
)%


(3.8
)%Supplemental data:Ratio of expenses before income taxes to average net assets


9.02
%


11.96
%


14.35
%


9.86
%


10.01
%Ratio of expenses including taxes to average net assets


10.26
%


20.41
%


10.34
%


9.53
%


8.45
%Ratio of net investment gain (loss) to average net assets


2.32
%


(9.96
)%


(1.99
)%


(1.23
)%


(3.67
)%Portfolio turnover


8.6
%


18.1
%


21.6
%


50.4
%


24.3
%Net assets end of year

$
19,817,823


$
16,782,405


$
8,615,934


$
9,027,054


$
9,238,489Weighted average shares outstanding at end of year


5,718,934



5,718,934



5,718,934



5,718,934



5,722,776     (1)
    
    Per share data are based on weighted average shares outstanding
    and results are rounded. 32




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##### Table of Contents



RAND
    CAPITAL CORPORATION AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTS
  Note 1. 
    Summary
    of Significant Accounting Policies  Nature of Business
        Principles of Consolidation
  Investments
      Cash and Cash Equivalents
  Revenue Recognition  Interest
    Income
   33




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##### Table of Contents



RAND
    CAPITAL CORPORATION AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Original Issue Discount
  Deferred Debenture Costs
  Deferred Revenue
  Net Assets Per Share
  Supplemental Cash Flow Information
  Concentration of Credit and Market
    Risk
    Income Taxes
   34




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##### Table of Contents



RAND
    CAPITAL CORPORATION AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Accounting Estimates
  Recent Accounting Pronouncements Accounting for Uncertainty in Income Taxes 
    an interpretation of FASB Statement No. 109
  Fair Value
    Measurements FAS 157-b
  The Fair Value Option for Financial Assets and Financial
    Liabilities
 35




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##### Table of Contents



RAND
    CAPITAL CORPORATION AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 2. 
    Other
    Assets    2007


2006Escrow receivable from Innov-X

$
711,249


$
711,249Deferred debenture costs


219,428



247,410Escrow receivable from Allworx


140,048



Escrow receivable from USTec


69,421



Property, plant and equipment (net)


8,628



12,895Dividend receivables


1,013



19,254Operating receivables


278



16,228Total other assets

$
1,150,065


$
1,007,036         Note 3. 
    Income
    Taxes      2007


2006Operations

$
574,000


$
(125,000
)Investments


(4,678,000
)


(3,846,000
)Tax credit carryforwards


149,000



163,000Deferred tax (liability), net

$
(3,955,000
)


(3,808,000
)    36




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##### Table of Contents



RAND
    CAPITAL CORPORATION AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2007


2006


2005Current:Federal

$
837,752


$
398,154


$
State


63,759



3,647



23,514901,511



401,801



23,514Deferred:Federal


472,266



3,956,000



(112,000
)State


12,054



698,000



(168,000
)484,320



4,654,000



(280,000
)Total

$
1,385,831


$
5,055,801


$
(256,486
)     2007


2006


2005Net investment gain (loss) and realized gain (loss) before
    income tax expense (benefit)

$
4,104,996


$
13,222,272


$
(667,606
)Expected tax expense (benefit) at statutory rate

$
1,395,699


$
4,495,572


$
(226,986
)State  net of federal effect


87,430



793,336



(40,057
)Tax credits and other


(97,298
)


(233,107
)


10,557Total

$
1,385,831


$
5,055,801


$
(256,486
)     Note 4. 
    SBA
    Debenture Obligations    Note 5. 
    Stockholders
    Equity (Net Assets)     37




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##### Table of Contents



RAND
    CAPITAL CORPORATION AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Accumulated


Undistributed


Net unrealizedNet


Net Realized


AppreciationInvestment


Gain (Loss) on


(Depreciation)Loss


Investments


on InvestmentsBalance, December 31, 2005

$
(4,988,326
)

$
6,306,925


$
(205,217
)Net (decrease) increase in net assets from operations


(1,264,802
)


3,456,441



5,974,832Balance, December 31, 2006

$
(6,253,128
)

$
9,763,366


$
5,769,615Net increase (decrease) in net assets from operations


2,312,719



(1,967,077
)


2,689,776Balance, December 31, 2007

$
(3,940,409
)

$
7,796,289


$
8,459,391   Note 6. 
    Stock
    Option Plans    Note 7. 
    Employee
    Benefit Plans      Note 8. 
    Commitments
    And Contingencies     38




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##### Table of Contents



RAND
    CAPITAL CORPORATION AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 9. 
    Subsequent
    Events    Note 10. 
    Quarterly Operations And Earnings Data 
    Unaudited
  4th


3rd


2nd


1stQuarter


Quarter


Quarter


Quarter2007Investment income

$
1,081,127


$
365,603


$
375,728


$
480,412Net increase (decrease) in net assets from operations


2,780,856



(351,099
)


157,940



131,468Basic and diluted net increase (decrease) in net assets from
    operations per share


0.49



(0.06
)


0.03



0.022006Investment income

$
506,419


$
406,127


$
213,171


$
201,245Net increase in net assets from operations


7,653,329



81,037



238,475



193,630Basic and diluted net increase in net assets
    from operations per share


1.34



0.01



0.04



0.04   Note 11. 
    Allowance For Doubtful Accounts
    2007


2006


2005Balance at beginning of year

$
(122,000
)

$
(236,870
)

$
(122,000
)Provision for losses










(114,870
)Recoveries/Sales






114,870



Balance at end of year

$
(122,000
)

$
(122,000
)

$
(236,870
)  39




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##### Table of Contents



RAND
    CAPITAL CORPORATION AND SUBSIDIARIES
  SCHEDULE OF
    CONSOLIDATED CHANGES IN INVESTMENTS AT
    COST AND REALIZED LOSS
    For the Year Ended December 31, 2007
  Cost


RealizedIncrease


Gain(Decrease)


(Loss)New and additions to previous investmentsGolden Goal LLC

$
637,414Allworx


500,000Synacor


350,001Ramsco


300,000Rocket Broadband


280,000Niagara Dispensing


325,010Adam+Eve


62,333Associates Interactive


50,000Niagara Dispensing


40,000New Monarch


22,841Photonics


10,0002,577,599Investments sold/liquidatedRamsco repayment


(819,428
)

$
555,000Topps write off


(595,000
)


(595,000
)Adam+Eve repayment


(561,000
)Allworx repayment


(500,000
)


140,048USTec repayment


(350,000
)


(39,236
)New Monarch repayment


(172,516
)Takeform repayment


(135,000
)


(130,000
)Gemcor repayment


(57,482
)APF repayment


(19,984
)Contract Staffing repayment


(10,334
)Miscellaneous






440(3,220,744
)


(68,748
)Net change in investments at cost and realized (loss)

$
(643,145
)

$
(68,748
)  40




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
           Accounting for Uncertainty in
    Income Taxes
      
    41




---



##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures    Item 9A(T).
    Managements
    Annual Report on Internal Control Over Financial
    Reporting  Management report on Internal Control Over Financial
    Reporting
          Changes in Internal Control over Financial
    Reporting.
  Item 9B.
    Other
    Information   Part III  Item 10.
    Directors,
    Executive Officers, and Corporate Governance   42




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##### Table of Contents



Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions and Director
    Independence    Item 14.
    Principal
    Accountant Fees and Services   Part IV  Item 15.
    Exhibits,
    Financial Statement Schedules                       43




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##### Table of Contents



(b)
    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.*(10.3)
    Agreement of Limited Partnership for Rand Capital SBIC,
    L.P.  incorporated by reference to Exhibit 10.3
    to the Corporations
    Form 10-K
    filed for the year ended December 31, 2001.(10.4)
    Certificate of Formation of Rand Capital SBIC, L.P. 
    incorporated by reference to Exhibit 10.3 to the
    Corporations
    Form 10-K
    filed for the year ended December 31, 2001.(10.5)
    Limited Liability Corporation Agreement of Rand Capital
    Management, LLC  incorporated by reference to
    Exhibit 10.3 to the Corporations
    Form 10-K
    filed for the year ended December 31, 2001.(10.6)
    Certificate of Formation of Rand Capital Management,
    LLC   incorporated by reference to Exhibit 10.3
    to the Corporations
    Form 10-K
    filed for the year ended December 31, 2001.(10.8)
    Profit Sharing Plan  incorporated by reference to
    Exhibit 10.8 to the Corporations
    Form 10-K
    filed for the year ended December 31, 2002.*  (21)
    Subsidiaries of the Corporation  filed on the
    Corporations
    Form 10-K
    filed for the year ended December 31, 2001.  (31.1)
    Certification of Principal Executive Officer Pursuant to
    Rules 13a-14(a)/15d-14(a)
    under the Securities Exchange Act of 1934, as amended-filed
    herewith(31.2)
    Certification of Principal Financial Officer Pursuant to
    Rules 13a-14(a)/15d-14(a)
    under the Securities Exchange Act of 1934, as
    amended  filed herewith(32.1)
    Certification Pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002  Rand Capital Corporation 
    furnished herewith(32.2)
    Certification Pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002  Rand Capital SBIC, L.P. 
    furnished herewith  *
    
    Management contract or compensatory plan. 44




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##### Table of Contents



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.
     By:
    /s/  Allen
    F. Grum    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
    Corporation in the capacities and on the date indicated.
  Signature

Title(i) Principal Executive Officer:/s/  Allen
    F. GrumAllen
    F. Grum

President

March 25, 2008(ii) Principal Accounting & Financial
    Officer:/s/  Daniel
    P. PenberthyDaniel
    P. Penberthy

Treasurer

March 25, 2008(iii) Directors:/s/  Allen
    F. GrumAllen
    F. Grum

Director

March 25, 2008/s/  Erland
    E. KailbourneErland
    E. Kailbourne

Director

March 25, 2008/s/  Ross
    B. KenzieRoss
    B. Kenzie

Director

March 25, 2008/s/  Willis
    S. McLeeseWillis
    S. McLeese

Director

March 25, 2008/s/  Reginald
    B. Newman IIReginald
    B. Newman II

Director

March 25, 2008/s/  Jayne
    K. RandJayne
    K. Rand

Director

March 25, 2008/s/  Robert
    M. ZakRobert
    M. Zak

Director

March 25, 2008  45