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



[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
SECURITIES
EXCHANGE ACT OF 1934 
For the quarter ended March 31, 2002

[ ] 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 and Subsidiary
(Exact Name of Registrant as specified in its Charter)

|New York                                                                | 16-0961359                           
|----------------------------------------------------------------------- | -------------------------------------
|(State or Other Jurisdiction of Incorporation
    Or organization)      | (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)



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 ___

Number of shares outstanding of each of the issuer's classes of common stock,
as of the latest practicable date (April 30, 2002) : 5,763,034



RAND CAPITAL CORPORATION
TABLE OF CONTENTS FOR FORM 10-Q

PART I. - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Condensed Consolidated Statements of Financial Position as of
        
                        March
        31, 2002 and December 31, 2001

Condensed Consolidated Statements of Operation for the Three-Months
        Ended 
                        March 31, 2002 and 2001

Condensed Consolidated Statements of Cash Flows for the Three-Months
        Ended 
                        March 31, 2002 and 2001

Condensed Consolidated Statements of Changes in Net Assets for the
        Three-Months Ended 
                        March 31, 2002  and 2001

Schedule of Portfolio Investments as of March 31, 2002

Notes to Financial Statements

Item 2. Management's Discussion and Analysis of Financial Condition
          and Results of Operations

Item 3. Quantitative and Qualitative Disclosures about Market Risk

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Item 2. Changes in Securities and Use of Proceeds

Item 3. Defaults upon Senior Securities

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

Item 5. Other Information

Item 6. Exhibits and Reports on Form 8-K

PART I.
FINANCIAL INFORMATION

Item 1. Financial Statements and Supplementary Data

Condensed Consolidated Statements of Financial Position
As of March 31, 2002 and December 31, 2001
(unaudited)

|                                                                                                                                                    | March 31,
    2002 | December 31,
    2001
|--------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------ | ---------------------
|ASSETS                                                                                                                                              |                    |                      
|Investments at fair
    value (identified cost:                                                                                                     |                    |                      
|3/31/02 -
    $3,018,176, 12/31/2001 - $3,157,017)                                                                                                  | $3,223,880         | $4,010,891           
|Cash and cash
    equivalents                                                                                                                       | 6,712,310          | 5,941,517            
|Interest receivable
    (net of allowance of $13,167                                                                                                |                    |                      
|at 3/31/02 and
    12/31/2001)                                                                                                                      | 195,301            | 167,844              
|Promissory notes
    receivable                                                                                                                     | 139,530            | 150,605              
|Other assets                                                                                                                                        | 37,019             | 11,636               
|TOTAL ASSETS                                                                                                                                        | $10,308,040        | $10,282,493          
|                                                                                                                                                    |                    |                      
|LIABILITIES AND
    STOCKHOLDERS' EQUITY (NET ASSETS)                                                                                              
|                                                                                                                                                   
|LIABILITIES:                                                                                                                                        |                    |                      
|Accounts payable
    and accrued expenses                                                                                                           | $24,866            | $33,679              
|Income taxes
    payable                                                                                                                            | 49,530             | 40,530               
|Deferred tax
    liability                                                                                                                          | 128,000            | 150,000              
|                                                                                                                                                    |                    |                      
|Total liabilities                                                                                                                                   | 202,396            | 224,209              
|                                                                                                                                                    |                    |                      
|STOCKHOLDERS'
    EQUITY (NET ASSETS)                                                                                                               |                    |                      
|                                                                                                                                                    |                    |                      
|Common stock, $.10
    par - shares authorized 10,000,000,
      issued and outstanding
    5,763,034 at March 31, 2002 and
      December 31, 2001 | 576,304            | 576,304              
|Capital in excess
    of par value                                                                                                                  | 6,973,454          | 6,973,454            
|Accumulated net
    investment (loss)                                                                                                               | (4,145,409)        | (3,616,673)          
|Undistributed net
    realized gain on investments                                                                                                  | 6,634,200          | 5,686,311            
|Net unrealized
    appreciation (depreciation) on investments                                                                                       | 67,095             | 438,888              
|                                                                                                                                                    |                    |                      
|Net assets (per
    share 3/31/02-$1.75, 12/31/01-$1.75)                                                                                            | 10,105,644         | 10,058,284           
|                                                                                                                                                    |                    |                      
|TOTAL LIABILITIES
    AND STOCKHOLDERS' EQUITY                                                                                                      | $10,308,040        | $10,282,493          

See notes to the condensed consolidated financial statements.

Condensed Consolidated Statements of Operations
for the Three-Months Ended March 31, 2002 and 2001
(unaudited)

| | Three-Months
    Ended
    March 31, 2002 | Three-Months
    Ended
    March 31, 2001
| | ----------------------------------------- | -----------------------------------------

|Investment Income:                                         |           |           
|---------------------------------------------------------- | --------- | ----------
|Interest from
    portfolio companies                      | $30,456   | $33,036   
|Interest from other
    investments                        | 30,680    | 4,014     
|Other investment
    income                                | 5,540     | 8,087     
|                                                           | 66,676    | 45,137    
|                                                           |           |           
|Expenses:                                                  |           |           
|Salaries                                                   | 112,469   | 128,125   
|Employee benefits                                          | 33,264    | 29,535    
|Directors' fees                                            | 6,750     | 5,000     
|Professional fees                                          | 12,940    | 17,022    
|Stockholders and
    office operating                      | 31,154    | 26,137    
|Insurance                                                  | 11,250    | 6,750     
|Corporate
    development                                  | 7,731     | 6,459     
|Other operating                                            | 4,686     | 9,340     
|                                                           | 220,244   | 228,368   
|                                                           |           |           
|Organizational
    costs                                   | 67,594    | 16,994    
|Bad debt expense                                           | -         | 17,266    
|Total expenses                                             | 287,838   | 262,628   
|                                                           |           |           
|Investment (loss) before
    income taxes:                 | (221,162) | (217,491) 
|Income tax
    provision                                   | 53,197    | 819       
|Deferred income tax
    expense (benefit)                  | 254,376   | -         
|                                                           |           |           
|Net investment (loss)                                      | (528,735) | (218,310) 
|                                                           |           |           
|Realized and unrealized
    gain on investments:           |           |           
|Net gain on sales
    and dispositions                     | 947,889   | 693       
|                                                           |           |           
|Unrealized appreciation
    (depreciation) on investments: |           |           
|Beginning of period                                        | 853,874   | 974,597   
|End of period                                              | 205,704   | 581,259   
|Change in
    unrealized (depreciation)                    |           |           
|appreciation before
    income taxes                       | (648,170) | (393,338) 
|Deferred income tax
    (benefit) expense                  | (276,376) | (217,000) 
|                                                           |           |           
|Net (decrease) in
    unrealized appreciation              | (371,794) | (176,338) 
|                                                           |           |           
|Net realized and
    unrealized gain (loss) on investments | 576,095   | (175,645) 
|                                                           |           |           
|Net increase (decrease)
    in net assets from operations  | $47,360   | $(393,955)
|Weighted average
    shares outstanding                    | 5,763,034 | 5,760,034 
|                                                           |           |           
|Basic and diluted net increase (decrease)                  |           |           
|in net assets from
    operations per share                | $0.00     | $(0.07)   

See notes to the condensed consolidated financial statements.

Condensed Consolidated Statements of Cash Flows for the
Three-Months Ended March 31, 2002 and 2001
(unaudited)

| | Three-Months
    Ended
    March 31, 2002 | Three-Months
    Ended
    March 31, 2001
| | ----------------------------------------- | -----------------------------------------

|CASH FLOWS FROM
    OPERATING ACTIVITIES:                   |            |           
|----------------------------------------------------------- | ---------- | ----------
|Net increase
    (decrease) in net assets from operations   | $47,360    | $(393,955)
|                                                            |            |           
|Adjustments to
    reconcile net increase (decrease) in net |            |           
|assets to net cash
    used in operating activities:        |            |           
|Depreciation and
    amortization                           | 3,900      | 3,750     
|Interest receivable
    allowance                           | -          | 17,266    
|Decrease in
    unrealized appreciation                     |            |           
|of investments                                              | 648,170    | 393,338   
|Change in deferred
    taxes                                | (22,000)   | (217,000) 
|Net realized (gain)
    loss on portfolio investments       | (947,889)  | (693)     
|Non cash conversion
    of debentures                       |            |           
|Changes in
    operating assets and liabilities:            |            |           
|(Increase) in
    interest receivable                       | (27,456)   | (21,634)  
|(Increase) in other
    assets                              | (29,282)   | (12,875)  
|Increase (decrease)
    in accounts payable and other       |            |           
|accrued liabilities                                         | 185        | (23,572)  
|                                                            |            |           
|Total adjustments                                           | (374,372)  | 138,580   
|                                                            |            |           
|Net cash used in
    operating activities                   | (327,012)  | (255,375) 
|                                                            |            |           
|CASH FLOWS FROM
    INVESTING ACTIVITIES:                   |            |           
|Proceeds from sale
    of portfolio investments             | 1,086,730  | 215,299   
|Proceeds from loan
    repayments                           | 11,075     | -         
|New portfolio
    investments                               | -          | (55,000)  
|                                                            |            |           
|Net cash used in
    investing activities                   | 1,097,805  | 160,299   
|CASH FLOWS FROM
    FINANCING ACTIVITIES:                   |            |           
|Proceeds from
    issuance of stock                         | -          | 31,875    
|                                                            |            |           
|NET INCREASE
    (DECREASE) IN CASH AND                     |            |           
|CASH EQUIVALENTS                                            | 770,793    | (63,201)  
|                                                            |            |           
|CASH AND CASH
    EQUIVALENTS,                              |            |           
|BEGINNING OF PERIOD                                         | 5,941,517  | 304,152   
|                                                            |            |           
|CASH AND CASH
    EQUIVALENTS,                              |            |           
|END OF PERIOD                                               | $6,712,310 | $240,951  

See notes to condensed consolidated financial statements.

Condensed Consolidated Statements of Changes in Net Assets for
the
Three-Months Ended March 31, 2002 and 2001
(unaudited)

| | Three-Months
    Ended
    March 31, 2002 | Three-Months
    Ended
    March 31, 2001
| | ----------------------------------------- | -----------------------------------------

|Net assets at
    beginning of period                                       | $10,058,284 | $8,385,697
|--------------------------------------------------------------------------- | ----------- | ----------
|                                                                            |             |           
|Net investment
    (loss)                                                   | (528,735)   | (218,310) 
|                                                                            |             |           
|Net realized gain
    (loss) on investments                                 | 947,889     | 693       
|                                                                            |             |           
|Net (decrease)
    increase in unrealized appreciation on
      investments | (371,794)   | (176,338) 
|                                                                            |             |           
|Net increase
    (decrease) in net assets from operations                   | 47,360      | (393,955) 
|                                                                            |             |           
|Net proceeds of
    private stock offerings                                 | -           | 31,875    
|                                                                            |             |           
|Net assets at end
    of period                                             | $10,105,644 | $8,023,617

See notes the condensed consolidated financial statements.



Schedule Of Portfolio Investments March 31, 2002
(Unaudited)

|Company and
    Business                                                                                                                                                               | DateType of
    Investment                                                                                                                                                    | (b)Acquired | (c)Equity | Cost       | (d)Value  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | --------- | ---------- | ----------
|ADIC
    (NASDAQ:ADIC)* ^Redmond, WA. Manufactures data storage systems and
    specialized storage management software. www.adic.com.
    
    Acquired Pathlight Technology 5/11/01. | 61,051
    shares sold January 2002average price of $17.87. 13,683 shares continue
    to be held in escrow.                                                                  | 5/11/01     | <1%       | $31,117    | $0        
|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, LLCMt. 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 SystemsBuffalo, 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%        | 105,000    | 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    | 50,000    
|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 CorporationAmherst, NY. Ultrasonic Fingerprint
    Technology
    www.ultra-scan.com                                                                                      | 8 for 1
    stock split, 394,320 Common shares, 32,000 warrants 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    | 835,480   
|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 SystemsPhiladelphia, 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     | 19,663    
|                                                                                                                                                                                       |                                                                                                                                                                               |             |           |            |           
|                                                                                                                                                                                       | Total portfolio
    investments                                                                                                                                               |             |           | $3,018,176 | $3,223,880

See notes to condensed consolidated financial statements.

Notes to Schedule of Portfolio 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 March 31, 2002 restricted
    securities represented 100% 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.

* Publicly-owned Company





Rand Capital Corporation
Notes to the Condensed Consolidated Financial Statements
For the Three-Months Ended March 31, 2002 and 2001
(Unaudited)

1.    BASIS OF PRESENTATION

In Management's opinion, the accompanying condensed consolidated financial
statements include all adjustments necessary for a fair presentation of the
consolidated financial position, results of operations, and cash flows for the
interim periods presented. Certain information and note disclosures normally
included in audited annual financial statements prepared in accordance with
accounting principles generally accepted in the United States of America, have
been omitted; however, the Corporation believes that the disclosures made are
adequate to make the information presented not misleading. The interim results
for the three-months ended March 31, 2002 are not necessarily indicative of the
results for the full year.

These statements should be read in conjunction with the financial statements
and the notes included in the Corporation's Annual Report on Form 10-K for the
year ended December 31, 2001. Information contained in this filing should also
be reviewed in conjunction with Rand Capital Corporation's related filings with
the Securities & Exchange Commission ("SEC") during the period of time covered
by this filing. These filings include, but are not limited to the following:

N-30-B2 Quarterly & Annual Reports to Shareholders
    N-54A Election to Adopt Business Development Company status
    |NSAR-A Semi-Annual filing as closed end investment company
    NSAR-B Semi-Annual filing as closed end investment company
    DEF-14A Definitive Proxy Statement submitted to

2.
    THE ENTITY AND A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation - The condensed consolidated Financial Statements
include the accounts of Rand Capital Corporation ("Rand") and Rand Capital SBIC,
L.P. ("Rand SBIC")(collectively, "The Corporation"). All significant
intercompany balances and transactions have been eliminated in consolidation.

Nature of the Business - Effective August 16, 2001 Rand 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,
Rand 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." Rand was founded in 1969 and is headquartered in
Buffalo, New York. Its investment strategy is to seek capital appreciation
through venture capital investments in small, unseasoned, developing companies,
primarily in Upstate New York.

During the first quarter of 2002, Rand formed a wholly-owned subsidiary, Rand
Capital SBIC, L.P., (Rand SBIC) 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. 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. There has been no investment activity by
Rand Capital SBIC, L.P. in the first quarter of 2002.

Investments - Investments are stated at fair value as determined in good
faith by the Board of Directors. 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.

Subsequent Event - In April 2002, Rand SBIC adopted a model valuation
policy as established by the United States Small Business Administration (SBA).
At the same time the Board of Directors of Rand also adopted a new valuation
policy that mirrored the Rand SBIC policy and is not materially different from
the prior Rand valuation policy.  Reference is made to the following
Exhibits to this Form 10-Q Report, which are incorporated herein by reference:

Exhibit 99.1 -- Rand Capital SBIC,
L.P. Investment Valuation Policy; and
        Exhibit 99.2 -- Rand Capital
Corporation Investment Valuation Policy.

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.

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.

Income Taxes - Rand has not elected pass-through tax treatment as a
regulated investment company under Subchapter M of the Internal Revenue Code for
Income tax purposes. Therefore, Rand is taxed as a corporation under regulation
C.

The tax effect of the major temporary difference and carry-forwards that give
rise to the Corporation's net deferred tax liabilities (assets) at March 31,
2002 and December 31, 2001 are as follows:

| | March 31, 2002 | December 31, 2001 | 
| | -------------- | ----------------- | 

|Operations                               | $(85,247)  |  | $(113,019)
|---------------------------------------- | ---------- |  | ----------
|Investments                              | (86,520)   |  | (362,896) 
|Net operating loss credit carry-forwards | 43,767     |  | 325,915   
|Capital loss carry-forward               | -          |  | -         
|Subtotal                                 | $(128,000) |  | $(150,000)
|Valuation allowance                      | 0          |  | -         
|Deferred tax liability (assets), net     | $(128,000) |  | $(150,000)

At March 31, 2002 and December 31, 2001, Rand had a federal and state net
operating loss carry-forward of approximately $1,000 and $781,000, respectively,
which expire commencing in 2012.

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.

Stockholders Equity (Net Assets)

At March 31, 2002, 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, Rand 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 2002.

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

In July 2001, the shareholders of Rand 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 March 31, 2002, 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.

Item 2. Management's Discussion and Analysis of Financial Condition and
    Results of Operations

You should read the following discussion and analysis of our financial
condition and results of operations in conjunction with 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 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 and Other
considerations" below.

Formation of SBIC Subsidiary

On January 14, 2002, Rand formed a wholly-owned subsidiary, Rand Capital
SBIC, L.P., for the purpose of operating it as a small business investment
company (SBIC). On January 25, 2002, Rand transferred $5 million in cash to Rand
SBIC to serve a "regulatory capital" for purposes of Small Business
Administration (SBA) regulation. On February 1, 2002, Rand SBIC's application
for a license to operate as an SBIC was submitted to the SBA. The SBA licensing
process is expected to take six to nine months to complete. Rand intends to
operate Rand SBIC for the same purposes, 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. Rand intends to file an
application with the SEC for exemptions from certain restrictions under the
Investment Company Act of 1940 on the operation of subsidiaries that the SEC has
commonly granted to Business Development Companies with wholly-owned SBIC
subsidiaries.

Financial Condition

The following financial discussion will include Rand and Rand SBIC's
financial position and results of operations. The only financial activity that
occurred in the first quarter of 2002 with respect to Rand SBIC was the transfer
of $5,000,000 from Rand to a Rand SBIC bank account and the resulting earned
interest revenue. Due to the minimal financial activity of Rand SBIC the
financial discussions that follow will include the results only from Rand,
unless otherwise specified.

Rand's total assets increased by $25,547 or 0.2% to $10,308,040 and its net
assets increased by $47,360 or 0.5% to $10,105,644 at March 31, 2002, versus
$10,282,493 and $10,058,284 at December 31, 2001, respectively.

These increases were primarily due to the realization of proceeds from the
sale of ADIC stock in January 2002. The ADIC securities, with a cost basis of
$138,841, were sold for net proceeds of $1,086,730.

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 the Corporation's investment
portfolio at the year-ends indicated.

| | March 31, 2002 | December 31, 2001
| | -------------- | -----------------

|Investments at cost          | 3,018,176  | $3,157,017
|---------------------------- | ---------- | ----------
|Unrealized appreciation, net | 205,704    | 853,874   
|Investments at fair value    | $3,223,880 | $4,010,891

The decrease in investment cost is due to the sale of the ADIC stock during
January 2002 with a cost basis of $138,841 and a value of $976,816 at December
31, 2001. In addition, during the quarter the corporation increased the
valuation of its investment in Ultra-Scan by $239,805 and decreased the
valuation of Memberware by ($50,000).

Rand's total investments at fair value approximated 32% of net assets at
March 31, 2002 and 40% of net assets at December 31, 2001.

No investment activity in Rand or Rand SBIC occurred in the three-months
ended March 31, 2002.

Results of Operations

Between January 3 and 4th, 2002 Rand sold a total of 61,051 shares of ADIC
stock at a price range of $17.30 to $18.45 with gross proceeds of $1.1 million
and a realized gain of approximately $948,000. Rand's average cost basis per
share for the ADIC securities is $2.27.



Investment Income and Expenses

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.

Total investment income for the three-months ended March 31, 2002 and 2001
was $66,676 and $45,137, respectively, of which $30,456 (46%) and $33,036 (73%)
consisted of interest from portfolio companies during the quarter. This income
includes investments that have high interest accruals and often do not pay a
current yield. See the Schedule of Portfolio Investments footnote (e) to
identify the investments that pay a current yield. The remaining investment
income is comprised of interest on idle cash balances and other temporary
short-term investments. The interest income for the three-months ending March
31, 2002 was $30,680 versus $4,014 for the same period in 2001. This interest
income is higher at March 31, 2002 mainly due to higher idle cash balance of
$6,712,310 at March 31, 2002 versus $240,951 at March 31, 2001.

Operating expenses for the three-months ended March 31, 2002 and 2001 were
$287,838 and $262,628, respectively. 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. The increase in expense for the three-month period ended
March 31, 2002 was due to $67,595 of professional costs (consulting and advisory
fees) incurred for preparing an application for the Small Business
Administration (SBA) for participation in the SBIC program. These professional
costs were $16,994 for the same period in 2001.

Net investment losses from operations for the three-month period ended March
31, 2002 and 2001 were ($528,735) and ($218,310), respectively. The fluctuations
from year to year are partly due to the increase in interest revenue in 2002
generated by higher idle cash balances than the prior year and the deferred
income tax expense of $254,376 for the three-months ended March 31, 2002. The
deferred income tax expense in the three-months ended March 31, 2001 was $0.

Net Realized Gains and Losses on Investments:

During the three-months ended March 31, 2002, Rand realized total net gains
of $947,889 on the sale of 61,051 shares of its ADIC holdings. During the
three-months ended March 31, 2001 Rand recognized a minor realized gain of $693
on the sale of preferred stock held in its portfolio of investments.

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 the three-month period
ending March 31, 2002, the net increase in net assets from operations was
$47,360 as compared to a net (decrease) in net assets from operations of
($393,955) for the same period in 2001. The increase in net realized and
unrealized gain on investments during 2002 is primarily attributable to the sale
of ADIC securities at a gain. The first quarter 2001 net decrease is due to the
realized loss on BNKR, Inc. for ($400,000) in the first quarter of 2001.

Liquidity and Capital Resources

The Corporation'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 portfolio
investments may be structured to provide little or no current yield in the form
of dividends or interest payments. The Corporation does earn interest income on
idle cash balances. It 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, the Corporation attempts to maintain
adequate working capital necessary for short-term needs.

At March 31, 2002, 66% of Rand's net assets are held in cash and cash
equivalents and compares to 59% at December 31, 2001.

As of March 31, 2002 and December 31, 2001, Rand's total liquidity,
consisting of cash and cash equivalents, was $6,712,310 and $5,941,517,
respectively. Included in the March 31, 2002 cash balance of $6,712,310 was
$5,016,172 ($5,000,000 initial investment plus interest revenue) in Rand SBIC,
L.P. cash. Management believes that these cash and cash equivalents will provide
Rand and Rand SBIC with the liquidity necessary to fund operations over the next
twelve (12) months.

The increase in liquidity in the first quarter 2002 was primarily due to the
sale of ADIC stock in January 2002 with net proceeds of $1,086,730.

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

The Corporation 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 Corporation is required to disclose quarterly the name and business
description of portfolio companies and value of any portfolio securities. Most
competitors are not subject to this disclosure requirement and the Corporation's
obligation to disclose this information could hinder its ability to invest in
certain portfolio companies. Additionally, other regulations, current and
future, may make the Corporation 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 BDC's, and Rand SBIC is
subject to regulation as an SBIC. The loans and other investments that Rand and
Rand SBIC make, or are 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 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 and Rand SBIC 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 the
Corporation 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 the Corporation's ability
to implement its business strategy. The Corporation 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 the venture capital business. The
Corporation 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. The Corporation 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. The
Corporation has been risk seeking rather than risk averse in its approach to
venture capital and other investments. Neither the Corporation's investments nor
an investment in the Corporation is intended to constitute a balanced investment
program. The Corporation 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 the Corporation's 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 Corporation to dispose of such
securities at times when it may be advantageous to liquidate such investments.

Even if the Corporation'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 the portfolio companies may not be successful.

Valuation of Portfolio Investments

There is typically no public market for equity securities of the small
privately held companies in which the Corporation invests. As a result, the
valuation of the equity securities in the portfolio are stated at fair value as
determined by the good faith estimate of the Board of Directors. In the absence
of a readily ascertainable market value, the estimated value of the 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 the
statement of operations as "Change in unrealized appreciation on investments."

Fluctuations of Quarterly Results

The Corporation'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.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Rand and Rand SBIC's investment activities contain elements of risk. The
portion of the 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 the Corporation 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 (See
Exhibits A and B). In the absence of a readily ascertainable market value, the
estimated value of Rand and Rand SBIC'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 the Corporation's
statement of operations as "Net unrealized gain (loss) on investments."

At times a portion of the Corporation'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 Corporation may not be able to
realize the fair value of its marketable investments or other investments in a
timely manner.

As of March 31, 2002, the Corporation did not have any off-balance sheet
investments or hedging investments.

PART II.
    OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 2. Changes in Securities and Use of Proceeds

None

Item 3. Defaults upon Senior Securities Holders

None

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

Rand held its annual shareholder meeting on April 24, 2002. The
      following matters 
                        were submitted to a vote of shareholders: Election of
      Directors and the approval of 
                        independent auditors.

Item 5. Other Information

None

Item 6. Exhibits and Reports on Form 8-K

No Form 8-K reports were filed during the quarter ended March 31, 2002.

The following exhibits are filed with this report:

99.1    -    Rand Capital SBIC, L.P.
      Investment Valuation Policy
                               
      99.2    -    Rand Capital Corporation Investment
      Valuation Policy







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-Q to be
signed on its behalf by the undersigned thereunto duly authorized.

Date: May 8, 2002

| | RAND CAPITAL CORPORATION                                                
| | ------------------------------------------------------------------------
| | RAND CAPITAL, SBIC ,L.P                                                 
| |                                                                         
| | By: /s/ Allen
    F. Grum
           Allen F. Grum, President           
|
| |                                                                         
| | By: /s/
    Daniel P. Penberthy
          Daniel P. Penberthy, Treasurer
|