##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarter ended March 31, 2007
 o
    
    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: 001-08205
 Rand Capital Corporation
 (Exact Name of Registrant as specified in its Charter)
 New York
    
    16-0961359(State or Other Jurisdiction of Incorporation
    
    (IRS Employeror organization)
    
    Identification No.)2200 Rand Building, Buffalo, NY
    
    14203(Address of Principal executive offices)
    
    (Zip Code)
 (716) 853-0802  (Registrants Telephone No. Including Area Code)
 þ o
  o o þ
 o þ




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##### 



RAND CAPITAL CORPORATION
TABLE OF CONTENTS FOR FORM 10-Q
 PART I.  FINANCIAL INFORMATIONItem 1. Financial Statements and Supplementary Data (Unaudited)Consolidated Statements of Financial Position as of March 31, 2007 and
December 31, 2006Condensed Consolidated Statements of Operations for the Three Months
Ended March 31, 2007 and 2006Condensed Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2007 and 2006Condensed Consolidated Statements of Changes in Net Assets for the
Three Months Ended March 31, 2007 and 2006Condensed Consolidated Schedule of Portfolio Investments as of March
31, 2007Notes to the Consolidated Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and Results of
OperationsItem 3. Quantitative and Qualitative Disclosures about Market RiskItem 4. Controls and ProceduresPART II  OTHER INFORMATIONItem 1.Legal ProceedingsItem 1A. Risk FactorsItem 2.Unregistered Sales of Equity Securities and Use of ProceedsItem 3.Defaults upon Senior SecuritiesItem 4.Submission of Matters to a Vote of Security HoldersItem 5.Other InformationItem 6.ExhibitsEX-31.1EX-31.2EX-32.1EX-32.2




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##### Table of Contents



PART I.
FINANCIAL INFORMATION
 
 Item 1. Financial Statements and Supplementary Data
 Rand Capital Corporation and Subsidiaries
 
 Consolidated Statements of Financial Position
As of March 31, 2007 and December 31, 2006
 March 31, 2007
    
    
    December 31,(Unaudited)
    
    
    2006ASSETSInvestments at fair value (identified cost: 3/31/07 -
$13,126,870; 12/31/06 - $14,033,789)
    
    $
    22,852,516
    
    
    $
    23,649,814Cash and cash equivalents
    
    
    4,215,573
    
    
    
    4,299,852Interest receivable (net of allowance: 3/31/07 - $122,000; 12/31/06 -
$122,000)
    
    
    503,861
    
    
    
    507,242Other assets
    
    
    1,314,801
    
    
    
    1,007,036Total assets
    
    $
    28,886,751
    
    
    $
    29,463,944LIABILITIES AND STOCKHOLDERS EQUITY (NET ASSETS)Liabilities:Debentures guaranteed by the SBA
    
    $
    8,100,000
    
    
    $
    8,100,000Deferred income taxes
    
    
    3,412,000
    
    
    
    3,808,000Income tax payable
    
    
    8,591
    
    
    
    410,575Accounts payable and accrued expenses
    
    
    95,657
    
    
    
    317,359Deferred revenue
    
    
    40,377
    
    
    
    45,605Total liabilities
    
    
    11,656,625
    
    
    
    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)
    
    
    (6,162,940
    )
    
    
    (6,253,128
    )Undistributed net realized gain on investments
    
    
    9,724,130
    
    
    
    9,763,366Net unrealized appreciation on investments
    
    
    6,166,384
    
    
    
    5,769,615Treasury stock, at cost, 44,100 shares
    
    
    (47,206
    )
    
    
    (47,206
    )Net assets (per share: 3/31/07-$3.01 , 12/31/2006-$2.93)
    
    
    17,230,126
    
    
    
    16,782,405Total liabilities and stockholders equity (net assets)
    
    $
    28,886,751
    
    
    $
    29,463,944




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##### Table of Contents



Rand Capital Corporation and Subsidiaries
 
 Condensed Consolidated Statements of Operations
For the Three Months Ended March 31, 2007 and 2006
(Unaudited)
 Three months
    
    
    Three monthsended
    
    
    endedMarch 31, 2007
    
    
    March 31, 2006Investment income:Interest from portfolio companies
    
    $
    199,717
    
    
    $
    172,020Interest from other investments
    
    
    46,047
    
    
    
    5,143Dividend and other investment income
    
    
    229,420
    
    
    
    13,135Other income
    
    
    5,228
    
    
    
    10,947480,412
    
    
    
    201,245Operating expenses:Salaries
    
    
    106,970
    
    
    
    96,284Employee benefits
    
    
    42,313
    
    
    
    31,926Directors fees
    
    
    12,250
    
    
    
    13,500Professional fees
    
    
    31,678
    
    
    
    26,536Stockholders and office operating
    
    
    32,413
    
    
    
    26,228Insurance
    
    
    10,920
    
    
    
    10,920Corporate development
    
    
    14,790
    
    
    
    12,905Other operating
    
    
    2,479
    
    
    
    2,622253,813
    
    
    
    220,921Interest on SBA obligations
    
    
    125,766
    
    
    
    106,924Total expenses
    
    
    379,579
    
    
    
    327,845Investment gain (loss) before income taxes
    
    
    100,833
    
    
    
    (126,600
    )Current income tax expense
    
    
    98,297
    
    
    
    5,000Deferred income tax (benefit) expense
    
    
    (98,668
    )
    
    
    11,089Net investment gain (loss)
    
    
    101,204
    
    
    
    (142,689
    )Realized and unrealized gain on investments:Net (loss) gain on sales and dispositions
    
    
    (39,236
    )
    
    
    187,953Unrealized appreciation (depreciation) on
investments:Beginning of period
    
    
    9,616,025
    
    
    
    (342,028
    )End of period
    
    
    9,725,646
    
    
    
    (94,751
    )Change in unrealized appreciation
(depreciation) before income taxes
    
    
    109,621
    
    
    
    247,277Deferred income tax expense
    
    
    40,121
    
    
    
    98,911Net change in unrealized appreciation (depreciation) on investments
    
    
    69,500
    
    
    
    148,366Net realized and unrealized gain on investments
    
    
    30,264
    
    
    
    336,319Net increase in net assets from operations
    
    $
    131,468
    
    
    $
    193,630Weighted average shares outstanding
    
    
    5,718,934
    
    
    
    5,718,934Basic and diluted net increase in net assets from operations per
share
    
    $
    0.02
    
    
    $
    0.03




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Rand Capital Corporation and Subsidiaries
 
 Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2007 and 2006
(Unaudited)
 March 31, 2007
    
    March 31, 2006Cash flows from operating activities:Net increase in net assets from operations
    
    $
    131,468
    
    
    $
    193,630Adjustments to reconcile net increase in net assets to net
cash used in operating activities:Depreciation and amortization
    
    
    8,496
    
    
    
    7,708Original issue discount amortization
    
    
    (62,333
    )
    
    
    Increase in unrealized appreciation of investments
    
    
    (109,621
    )
    
    
    (247,277
    )Deferred tax expense (benefit)
    
    
    (58,547
    )
    
    
    110,000Net realized loss (gain) on portfolio investments
    
    
    39,236
    
    
    
    (187,953
    )Non-cash conversion of debenture interest
    
    
    (40,000
    )
    
    
    (2,877
    )Changes in operating assets and liabilities:Decrease (increase) in interest receivable
    
    
    3,381
    
    
    
    (31,344
    )(Increase) decrease in other assets
    
    
    (314,910
    )
    
    
    30,986Decrease in accounts payable and accrued liabilities
    
    
    (644,886
    )
    
    
    (95,922
    )Decrease in deferred revenue
    
    
    (5,228
    )
    
    
    (3,948
    )Total adjustments
    
    
    (1,184,412
    )
    
    
    (420,627
    )Net cash used in operating activities
    
    
    (1,052,944
    )
    
    
    (226,997
    )Cash flows from investing activities:Investments originated
    
    
    
    
    
    
    (800,000
    )Proceeds from sale of portfolio investments
    
    
    
    
    
    
    581,396Proceeds from loan repayments
    
    
    970,015
    
    
    
    26,544Capital expenditures
    
    
    (1,350
    )
    
    
    Net cash provided (used) by investing activities
    
    
    968,665
    
    
    
    (192,060
    )Net decrease in cash and cash equivalents
    
    
    (84,279
    )
    
    
    (419,057
    )Cash and cash equivalents:Beginning of period
    
    
    4,299,852
    
    
    
    1,209,839End of period
    
    $
    4,215,573
    
    
    $
    790,782




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Rand Capital Corporation and Subsidiaries
 
 Condensed Consolidated Statements of Changes in Net Assets
For the Three Months Ended March 31, 2007 and 2006
(Unaudited)
 Three months
    
    
    Three monthsended
    
    
    endedMarch 31, 2007
    
    
    March 31, 2006Net assets at beginning of period
    
    $
    16,782,405
    
    
    $
    8,615,934Cumulative effect adjustment for uncertain
tax positions  FIN 48
    
    
    316,253
    
    
    
    Net investment gain (loss)
    
    
    101,204
    
    
    
    (142,689
    )Net realized gain (loss) on investments
    
    
    (39,236
    )
    
    
    187,953Net change in unrealized appreciation
on investments
    
    
    69,500
    
    
    
    148,366Net increase in net assets
    
    
    447,721
    
    
    
    193,630Net assets at end of period
    
    $
    17,230,126
    
    
    $
    8,809,564




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##### Table of Contents



Rand Capital Corporation and Subsidiaries
 
 Condensed Consolidated Schedule of Portfolio Investments
March 31, 2007
(Unaudited)
 (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. (g)(h)
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
    
    $584,328 Consolidated Senior
Subordinated note at 12.74%
due June 30, 2011. Warrants
to purchase 10.2941 shares of
common stock.
    
    7/8/04
    
    
    6
    %
    
    
    570,960
    
    
    
    570,960
    
    
    
    .10Carolina 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 11%.
Redeemable January 31,
2010. 5% common
membership interest.
    
    1/30/04
    
    
    5
    %
    
    
    1,000,000
    
    
    
    1,227,000
    
    
    
    .21Contract Staffing
Buffalo, NY. PEO providing human resource
administration for small businesses.
www.contract-staffing.com
    
    Preferred Stock Repurchase
Agreement through March 31,
2010 at 5%.
    
    11/8/99
    
    
    10
    %
    
    
    141,400
    
    
    
    141,400
    
    
    
    .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.
    
    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
    %
    
    
    708,989
    
    
    
    708,989
    
    
    
    .12G-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
    
    
    
    .03Innov-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. Warrants for 22.84
shares of common stock.
    
    9/24/03
    
    
    11
    %
    
    
    651,333
    
    
    
    651,333
    
    
    
    .11Niagara Dispensing Technologies, Inc. (g)
Tonawanda, NY. Beverage dispensing
technology development and products
manufacturer, specializing in beer
dispensing systems.
www.exactpour.com
    
    $500,000 Senior Subordinated
note at 8% due March 7, 2011.
Adjustable warrant for 4% of
common stock.
    
    3/8/06
    
    
    4
    %
    
    
    540,000
    
    
    
    540,000
    
    
    
    .09




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Rand Capital Corporation and Subsidiaries
 Condensed Consolidated
Schedule of Portfolio Investments
March 31, 2007 (Continued)
(Unaudited)
 Per(b)
    
    
    
    
    
    
    
    
    
    
    
    
    
    ShareDate
    
    (c)
    
    
    
    
    
    (d)
    
    ofCompany and Business
    
    Type of Investment
    
    Acquired
    
    Equity
    
    Cost
    
    Value
    
    RandPhotonic Products Group, Inc
(OTC:PHPG.OB) (i)
Northvale, NJ. Develops and manufactures
products for laser photonics industry.
www.inrad.com
    
    100 shares convertible Series B
preferred stock, 10% dividend.
(a) 22,000 shares common stock.
    
    10/31/00
    
    <1%
    
    
    155,000
    
    
    
    138,500
    
    
    
    .02RAMSCO (e)(g)(h)
Albany, NY. Distributor of water,
sanitary, storm sewer and specialty
construction materials to the contractor,
highway and municipal construction markets.
www.ramsco.com
    
    $916,947.23 notes at 13% due
November 18, 2007. Warrants to
purchase 12.5% of common
shares.
    
    11/19/02
    
    
    13
    %
    
    
    793,644
    
    
    
    793,644
    
    
    
    .14Rocket Broadband Networks, Inc. (g)
Rochester, NY. Communications service
provider of satellite TV, broadband
internet and VoIP digital phone targeting
multiple dwelling units.
www.rocketbroadband.com
    
    533,827 Series A-1 Preferred
shares.
    
    12/20/05
    
    
    8
    %
    
    
    400,000
    
    
    
    400,000
    
    
    
    .07Somerset Gas Transmission Company, LLC
Columbus, OH. Natural gas transportation
company.
www.somersetgas.com
    
    26.5337 Units.
    
    7/10/02
    
    
    2
    %
    
    
    719,097
    
    
    
    786,748
    
    
    
    .14Synacor Inc. (e)(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.
Warrants for 299,146 common
shares.
    
    11/18/02
    
    
    4
    %
    
    
    999,478
    
    
    
    3,818,000
    
    
    
    .67Topps Meat Company LLC (e)(g)
Elizabeth, NJ. Producer and supplier of
premium branded frozen hamburgers and
other portion controlled meat products.
www.toppsmeat.com
    
    Preferred A and Class A common
membership interest.
    
    4/3/03
    
    
    3
    %
    
    
    595,000
    
    
    
    927,000
    
    
    
    .16Ultra  Scan Corporation
Amherst, 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
    
    
    
    .21Ustec, Inc.
Victor, NY. Markets digital wiring
systems for new home construction.
www.ustecnet.com
    
    $100,000 note at 5% due
February 1, 2007. 50,000
common shares. Warrants for
139,395 common shares.
    
    6/26/98
    
    <1%
    
    
    100,500
    
    
    
    0
    
    
    
    .00Wineisit.Com, Corp. (e)
Amherst, NY. Marketing company
specializing in customer loyalty programs
supporting the wine and spirit industry.
www.wineisit.com
    
    $20,000 note at 12% due April
26, 2007.(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.
    
    12/18/02
    
    
    2
    %
    
    
    821,918
    
    
    
    100,000
    
    
    
    .02Other Investments
    
    Various
    
    
    
    
    
    
    
    
    517,343
    
    
    
    31,333
    
    
    
    .02Total portfolio investments
    
    
    
    
    
    
    
    $
    13,126,870
    
    
    $
    22,852,516




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Rand Capital Corporation and Subsidiaries
 
 Condensed Consolidated Schedule of Portfolio Investments
March 31, 2007 (Continued)
(Unaudited)
 Notes to Consolidated Schedule of Portfolio Investments




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Rand Capital Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
For the Three Months Ended March 31, 2007 and 2006
(Unaudited)
 Note 1. ORGANIZATION
  Formation of SBIC Subsidiary




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
    
    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.




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Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation 
  N-30-B2/ARS
    
    Quarterly & Annual Reports to ShareholdersN-54A
    
    Election to Adopt Business Development Company statusDEF-14A
    
    Definitive Proxy Statement submitted to shareholdersForm 10-K
    
    Annual Report on Form 10-K for the year ended December 31, 2006Form 10-Q
    
    Quarterly Report on Form 10-Q for the quarters ended September 30, 2006,
June 30, 2006, and March 31, 2006Form N-23C-1
    
    Reports by closed-end investment companies of purchases of their own securities
  Principles of Consolidation
 Investments




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Cash and Cash Equivalents
 Revenue Recognition  Interest Income
  Original Issue Discount
 Deferred Debenture Costs
 Net Assets per Share
 Supplemental Cash Flow Information
 Accounting Estimates
 Stockholders Equity (Net Assets) 




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Stock Option Plan 
 Uncertain Tax Positions 




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Item 2. 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 companies 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 in Part II, Item 1A of this report, the text of 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
   Critical Accounting Policies




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Financial Condition
  Increase
    
    % Increase3/31/07
    
    12/31/06
    
    (Decrease)
    
    (Decrease)Total assets
    
    $
    28,886,751
    
    
    $
    29,463,944
    
    
    
    ($577,193
    )
    
    
    (2.0
    %)Total liabilities
    
    
    11,656,625
    
    
    
    12,681,539
    
    
    
    (1,024,914
    )
    
    
    (8.1
    %)Net assets
    
    $
    17,230,126
    
    
    $
    16,782,405
    
    
    $
    447,721
    
    
    
    2.7
    %
  Increase
    
    % Increase3/31/07
    
    12/31/06
    
    (Decrease)
    
    (Decrease)Investments, at cost
    
    $
    13,126,870
    
    
    $
    14,033,789
    
    
    
    ($906,919
    )
    
    
    (6.5
    %)Unrealized appreciation, net
    
    
    9,725,646
    
    
    
    9,616,025
    
    
    
    109,621
    
    
    
    1.1
    %Investments at fair value
    
    $
    22,852,516
    
    
    $
    23,649,814
    
    
    
    ($797,298
    )
    
    
    (3.4
    %)
  Changes to investments:
    
    AmountAdampluseve, Inc. (Adampluseve) warrant amortization
    
    $
    62,333Niagara Dispensing Technologies, Inc. (Niagara Dispensing)
interest conversion
    
    
    40,000Total of changes in investments during
the three months ended March 31, 2007
    
    $
    102,333Sales/Investment RepaymentsAdampluseve
    
    
    (561,000
    )UStec, Inc. (UStec)
    
    
    (350,000
    )New Monarch Machine Tool, Inc. (Monarch)
    
    
    (41,330
    )Ramsco
    
    
    (25,784
    )APF Group, Inc. (APF)
    
    
    (15,528
    )Gemcor II, LLC (Gemcor)
    
    
    (13,944
    )Takeform
    
    
    (1,666
    )Total of sales or investment repayments
during the three months ended March 31, 2007
    
    
    (1,009,252
    )Total change in investment balance, at cost
during the three months ended March 31, 2007
    
    
    ($906,919
    )




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##### Table of Contents



Results of Operations
 Investment Income
  Comparison of the three months ended March 31, 2007 to the three months ended March 31, 2006
 Increase
    
    % IncreaseMarch 31, 2007
    
    March 31, 2006
    

    (Decrease)
    
    (Decrease)Interest from portfolio companies
    
    $
    199,717
    
    
    $
    172,020
    
    
    $
    27,697
    
    
    
    16.1
    %Interest from other investments
    
    
    46,047
    
    
    
    5,143
    
    
    
    40,904
    
    
    
    795.3
    %Dividend and other investment income
    
    
    229,420
    
    
    
    13,135
    
    
    
    216,285
    
    
    
    1,646.6
    %Other income
    
    
    5,228
    
    
    
    10,947
    
    
    
    (5,719
    )
    
    
    (52.2
    %)Total investment income
    
    $
    480,412
    
    
    $
    201,245
    
    
    $
    279,167
    
    
    
    138.7
    %
 Interest from portfolio companies
   Investment
    
    Year that InterestCompany
    
    Interest Rate
    
    Cost
    
    Accrual CeasedContract Staffing
    
    
    5
    %
    
    $
    141,400
    
    
    
    2006G-Tec
    
    
    8
    %
    
    
    400,000
    
    
    
    2004UStec
    
    
    5
    %
    
    
    100,000
    
    
    
    2006WineIsIt.com
    
    
    10
    %
    
    
    821,918
    
    
    
    2005
 Interest from other investments




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##### Table of Contents



Dividend and other investment income
 Other income
  Operating Expenses
 March 31, 2007
    
    March 31, 2006
    
    Increase
    
    % IncreaseTotal Expenses
    
    $
    379,579
    
    
    $
    327,845
    
    
    $
    51,734
    
    
    
    16
    %




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##### Table of Contents



Net Realized Gains and Losses on Investments
  Net Change in Unrealized Appreciation (Depreciation) of Investments
  March 31,2007Adampluseve warrants
    
    $
    65,341Reclass UStec to realized loss
    
    
    39,000Photonics valuation to market
    
    
    5,280Total increase in net unrealized appreciation
during the three months ended March 31, 2007
    
    $
    109,621
    March 31,2006Minrad valuation to market
    
    $
    329,453Photonics valuation to market
    
    
    2,880Reclass Minrad unrealized gain to realized gain
on shares sold
    
    
    (85,056
    )Total decrease in net unrealized depreciation
during the three months ended March 31, 2006
    
    $
    247,277




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##### Table of Contents



Net Increase in Net Assets from Operations
  Liquidity and Capital Resources
     
 Item 3. Quantitative and Qualitative Disclosures about Market Risk




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##### Table of Contents








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##### Table of Contents



Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures.
 Changes in Internal Control Over Financial Reporting.




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##### Table of Contents



PART II.
OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 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




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##### Table of Contents



The Corporation is Subject to Risks Created by its Regulated Environment
  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




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##### Table of Contents



Item 2. Unregistered Sales of Equity 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




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##### Table of Contents



Item 6. Exhibits
 (a)
    
    ExhibitsThe 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 to 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 Limited Partnership of Rand Capital SBIC, L.P. 
incorporated by reference to Exhibit 10.4 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 10.5 to the Corporations Form
10-K Report filed for the year ended December 31, 2001.(10.6)
    
    
    Certificate of Formation of Rand Capital Management, LLC incorporated
by reference to Exhibit 10.6 to the Corporations Form 10-K Report filed
for the year ended December 31, 2001.(10.7)
    
    
    N/A(10.8)
    
    
    Profit Sharing Plan  incorporated by reference to Exhibit 10.8 to the
Corporations Form 10-K Report filed for the year ended December 31,
2002.*(21)
    
    
    Subsidiaries of the Corporation  incorporated by
reference to Exhibit 21 to the Corporations Form 10-K Report filed for
the year ended December 31, 2001.(31.1)
    
    
    Certification of the Chief 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 Chief 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  filed herewith(32.2)
    
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 Rand Capital SBIC, L.P.  filed herewith
 
 *
    
    Management contract or compensatory plan.




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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-Q to be signed on its behalf by the undersigned
thereunto duly authorized.
  RAND CAPITAL CORPORATIONBy:
    
    /s/ Allen F. Grum

Allen F. Grum, PresidentBy:
    
    /s/ Daniel P. Penberthy

Daniel P. Penberthy, TreasurerRAND CAPITAL SBIC, L.P.By: RAND CAPITAL MANAGEMENT LLC
          General PartnerBy: RAND CAPITAL CORPORATION
           MemberBy:
    
    /s/ Allen F. GrumAllen F. Grum, PresidentBy:
    
    /s/ Daniel P. Penberthy

Daniel P. Penberthy, Treasurer