##### 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, 2009
 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: 814-00235
 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
 Yes þ No o
  Large accelerated filer o
    
    Accelerated filer
o
    
    Non-accelerated filer
þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 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)
    
    
    1Condensed Consolidated Statements of Financial Position as of March 31,
2009 and December 31, 2008
    
    
    1Condensed Consolidated Statements of Operations for the Three Months
Ended March 31, 2009 and 2008
    
    
    2Condensed Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2009 and 2008
    
    
    3Condensed Consolidated Statements of Changes in Net Assets for the Three
Months Ended March 31, 2009 and 2008
    
    
    4Condensed Consolidated Schedule of Portfolio Investments as of March 31,
2009
    
    
    5Notes to the Consolidated Financial Statements
    
    
    9Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    22Item 4T. Controls and Procedures
    
    
    22PART II  OTHER INFORMATION
    
    
    24Item 1.Legal Proceedings
    
    
    24Item 1A. Risk Factors
    
    
    24Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    24Item 3.Defaults upon Senior Securities
    
    
    24Item 4.Submission of Matters to a Vote of Security Holders
    
    
    24Item 5.Other Information
    
    
    24Item 6.Exhibits
    
    
    25Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 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
 
 CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
 As of March 31, 2009 and December 31, 2008
 March 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)ASSETSInvestments at fair value (identified cost: 3/31/09 
$14,468,610; 12/31/08  $14,386,451)
    
    $
    28,208,441
    
    
    $
    28,126,282Cash and cash equivalents
    
    
    1,967,663
    
    
    
    2,757,653Interest receivable (net of allowance $122,817)
    
    
    1,109,958
    
    
    
    1,013,888Other assets
    
    
    597,285
    
    
    
    330,974Total assets
    
    $
    31,883,347
    
    
    $
    32,228,797LIABILITIES AND STOCKHOLDERS EQUITY (NET ASSETS)Liabilities:Debentures guaranteed by the SBA
    
    $
    8,100,000
    
    
    $
    8,100,000Deferred tax liability
    
    
    3,378,000
    
    
    
    3,490,000Income taxes payable
    
    
    59,217
    
    
    
    98,723Accounts payable and accrued expenses
    
    
    128,344
    
    
    
    292,731Deferred revenue
    
    
    12,059
    
    
    
    20,377Total liabilities
    
    
    11,677,620
    
    
    
    12,001,831Stockholders equity (net assets):Common stock, $.10 par; shares authorized 10,000,000; shares issued 5,763,034
    
    
    576,304
    
    
    
    576,304Capital in excess of par value
    
    
    6,973,454
    
    
    
    6,973,454Accumulated net investment (loss)
    
    
    (3,765,147
    )
    
    
    (3,743,908
    )Undistributed net realized gain on investments
    
    
    7,735,477
    
    
    
    7,735,477Net unrealized appreciation on investments
    
    
    8,732,845
    
    
    
    8,732,845Treasury stock, at cost, 44,100 shares
    
    
    (47,206
    )
    
    
    (47,206
    )Net assets (per share 3/31/09  $3.53, 12/31/08  $3.54)
    
    
    20,205,727
    
    
    
    20,226,966Total liabilities and stockholders equity (net assets)
    
    $
    31,883,347
    
    
    $
    32,228,797
  1




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##### Table of Contents



RAND CAPITAL CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Three Months Ended March 31, 2009 and 2008
 (Unaudited)
 Three months
    
    
    Three monthsended
    
    
    endedMarch 31, 2009
    
    
    March 31, 2008Investment income:Interest from portfolio companies
    
    $
    135,516
    
    
    $
    251,764Interest from other investments
    
    
    9,134
    
    
    
    34,584Dividend and other investment income
    
    
    224,526
    
    
    
    84,934Other income
    
    
    9,083
    
    
    
    7,083378,259
    
    
    
    378,365Operating expenses:Salaries
    
    
    111,922
    
    
    
    108,384Employee benefits
    
    
    36,176
    
    
    
    43,630Directors fees
    
    
    10,500
    
    
    
    11,750Professional fees
    
    
    71,221
    
    
    
    60,290Stockholders and office operating
    
    
    34,405
    
    
    
    24,508Insurance
    
    
    14,878
    
    
    
    10,500Corporate development
    
    
    9,534
    
    
    
    16,562Other operating
    
    
    2,453
    
    
    
    1,978291,089
    
    
    
    277,602Interest on SBA obligations
    
    
    118,359
    
    
    
    125,766Total expenses
    
    
    409,448
    
    
    
    403,368Investment (loss) gain before income taxes
    
    
    (31,189
    )
    
    
    (25,003
    )Current income tax expense
    
    
    102,050
    
    
    
    136,113Deferred income tax benefit
    
    
    (112,000
    )
    
    
    (152,813
    )Net investment (loss)
    
    
    (21,239
    )
    
    
    (8,303
    )Realized and unrealized loss on investments:Unrealized appreciation on investments:Beginning of period
    
    
    13,739,831
    
    
    
    13,137,846End of period
    
    
    13,739,831
    
    
    
    13,008,146Change in unrealized appreciation
before income taxes
    
    
    
    
    
    
    (129,700
    )Deferred income tax benefit
    
    
    
    
    
    
    (46,187
    )Net decrease in unrealized appreciation
    
    
    
    
    
    
    (83,513
    )Net realized and unrealized loss on investments
    
    
    
    
    
    
    (83,513
    )Net decrease in net assets from operations
    
    $
    (21,239
    )
    
    $
    (91,816
    )Weighted average shares outstanding
    
    
    5,718,934
    
    
    
    5,718,934Basic and diluted net decrease in net assets per
share from operations
    
    $
    (0.00
    )
    
    $
    (0.02
    )
   2




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##### Table of Contents



RAND CAPITAL CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Three Months Ended March 31, 2009 and 2008
 (Unaudited)
 March 31,
    
    
    March 31,2009
    
    
    2008Cash flows from operating activities:Net decrease in net assets from operations
    
    $
    (21,239
    )
    
    $
    (91,816
    )Adjustments to reconcile net decrease in net
assets to net cash used in operating
activities:Depreciation and amortization
    
    
    8,945
    
    
    
    8,195Decrease in unrealized appreciation of
investments
    
    
    
    
    
    
    129,700Deferred tax benefit
    
    
    (112,000
    )
    
    
    (199,000
    )Payment in kind, interest accrued
    
    
    (4,840
    )
    
    
    Non-cash conversion of debenture interest
    
    
    (11,918
    )
    
    
    Changes in operating assets and liabilities:Increase in interest receivable
    
    
    (96,070
    )
    
    
    (211,549
    )Increase in other assets
    
    
    (275,256
    )
    
    
    (137,689
    )Increase in prepaid income taxes
    
    
    
    
    
    
    (43,157
    )Decrease in income taxes payable
    
    
    (39,506
    )
    
    
    (474,465
    )Decrease in accounts payable and accrued expenses
    
    
    (164,387
    )
    
    
    (168,862
    )Decrease in deferred revenue
    
    
    (8,318
    )
    
    
    (23,930
    )Total adjustments
    
    
    (703,350
    )
    
    
    (1,120,757
    )Net cash used in operating activities
    
    
    (724,589
    )
    
    
    (1,212,573
    )Cash flows from investing activities:Investments originated
    
    
    (81,756
    )
    
    
    (524,990
    )Proceeds from loan repayments
    
    
    16,355
    
    
    
    548,499Capital expenditures
    
    
    
    
    
    
    (1,190
    )Net cash (used) provided by investing
activities
    
    
    (65,401
    )
    
    
    22,319Net decrease in cash and cash equivalents
    
    
    (789,990
    )
    
    
    (1,190,254
    )Cash and cash equivalents:Beginning of period
    
    
    2,757,653
    
    
    
    4,396,595End of period
    
    $
    1,967,663
    
    
    $
    3,206,341
   3




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##### Table of Contents



RAND CAPITAL CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
 For the Three Months Ended March 31, 2009 and 2008
 (Unaudited)
 Three months
    
    
    Three monthsended
    
    
    endedMarch 31, 2009
    
    
    March 31, 2008Net assets at beginning of period
    
    $
    20,226,966
    
    
    $
    19,817,823Net investment (loss)
    
    
    (21,239
    )
    
    
    (8,303
    )Net change in unrealized appreciation
of investments
    
    
    
    
    
    
    (83,513
    )Net decrease in net assets from operations
    
    
    (21,239
    )
    
    
    (91,816
    )Net assets at end of period
    
    $
    20,205,727
    
    
    $
    19,726,007
   4




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##### Table of Contents



RAND
CAPITAL CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS
 March 31, 2009
(Unaudited)
 (b)
    
    
    (c)
    
    
    
    
    
    
    (d)
    
    
    PerDate
    
    
    
    
    
    
    
    
    
    
    
    
    ShareCompany, Geographic Location, Business Description, (Industry) and Website
    
    Type of Investment
    
    Acquired
    
    
    Equity
    
    
    Cost
    
    
    Value
    
    
    of RandNon-Control/Non-Affiliate Investments: (k)Adampluseve, Inc. (dba Adam) (g)
New York, NY. Luxury sports wear designer for men and women. (Fashion Design)
www.shopadam.com
    
    Warrants to purchase 1,715 Series A preferred shares.
    
    
    7/14/06
    
    
    
    2
    %
    
    $
    68,000
    
    
    $
    133,341
    
    
    $
    .02GridApp Systems, Inc. (e)(g)
New York, NY. Provider of database automation software that helps businesses gain control of their heterogeneous database applications through a centralized software console. (Software)
www.gridapp.com
    
    $660,000 term note at 4% simple interest, 8% deferred interest (PIK) due January 4, 2012.  $6,667 convertible note at 4% due November 28, 2018.
    
    
    11/25/08
    
    
    
    3
    %
    
    
    671,507
    
    
    
    671,507
    
    
    
    .12Kionix, Inc.
Ithaca, NY. Develops innovative MEMS based inertial sensors used in consumer electronics, automation and healthcare sectors. (Manufacturing)
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
    
    
    
    2,000,000
    
    
    
    .35Mezmeriz, Inc. (g)
Ithaca, NY. Developer of micro mirror technology that replaces silicon with carbon fibers in micro-electronic mechanical systems (MEMS) enabling efficient, wide-angle, Pico projectors
to be embedded in mobile devices. (Electronics Developer)
www.mezmeriz.com
    
    $100,000 convertible note at 9% due January 9, 2010.
    
    
    1/9/08
    
    
    
    
    
    
    
    100,000
    
    
    
    100,000
    
    
    
    .02Photonic Products Group, Inc (OTC:PHPG.OB) (a)(i)
Northvale, NJ. Develops and manufactures products for laser photonics industry. (Manufacturing)
www.inrad.com
    
    66,000 shares common stock.
    
    
    10/31/00
    
    
    
    <1
    %
    
    
    165,000
    
    
    
    112,000
    
    
    
    .02Somerset Gas Transmission Company, LLC (e)
Columbus, OH. Natural gas transportation company. (Oil and Gas)
www.somersetgas.com
    
    26.5337 units.
    
    
    7/10/02
    
    
    
    2
    %
    
    
    719,097
    
    
    
    786,748
    
    
    
    .14Synacor Inc. (g)
Buffalo, NY. Develops provisioning platforms for aggregation and delivery of content and services across multiple digital devices. (Software)
www.synacor.com
    
    234,558 Series A preferred shares.  600,000 Series B preferred shares.  240,378 Series C preferred shares.  897,438 common shares.
    
    
    11/18/02
    
    
    
    4
    %
    
    
    1,349,479
    
    
    
    4,168,001
    
    
    
    .73Subtotal Non-Control/Non-Affiliate Investments
    
    
    
    
    
    
    
    
    
    
    
    $
    4,579,127
    
    
    $
    7,971,597
    
    
    $
    1.40Affiliate Investments: (l)APF Group, Inc. (e)(g)
Yonkers, NY. Manufacturer of museum quality picture frames and framed mirrors for museums, art galleries, retail frame shops, upscale designers and prominent collectors. (Manufacturing) www.apfgroup.com
    
    $587,796 consolidated senior subordinated note at 8% due June 30, 2011.  $13,514 senior subordinated note at 14% due June 30, 2011.  Warrants to purchase 10.2941 shares of common stock.7/8/04
    
    
    
    6
    %
    
    $
    619,253
    
    
    $
    311,918
    
    
    $
    .05
  5




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RAND CAPITAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 2009 (Continued)
(Unaudited)
 (b)
    
    
    (c)
    
    
    
    
    
    
    (d)
    
    
    PerDate
    
    
    
    
    
    
    
    
    
    
    
    
    ShareCompany, Geographic Location, Business Description, (Industry) and Website
    
    Type of Investment
    
    Acquired
    
    
    Equity
    
    
    Cost
    
    
    Value
    
    
    of RandAffiliate Investments: (l) (Continued)Associates Interactive, LLC (e)(g)
Buffalo, NY. Provider of training content and certifications used to train retail sales associates. (Education and Training) www.associatesinteractive.com
    
    $247,813 promissory note at 9% due December 19, 2012.  $43,518 secured note at 10% due December 19, 2012.  Investor units totaling 22.55% of company.
    
    
    10/15/07
    
    
    
    23
    %
    
    
    293,518
    
    
    
    293,518
    
    
    
    .05Carolina Skiff LLC (e)(g)
Waycross, GA. Manufacturer of fresh water, ocean fishing and pleasure boats. (Manufacturing) www.carolinaskiff.com
    
    $985,000 Class A preferred membership interest at 7.5%. Redeemable January 31, 2010. 5% common membership interest. (j)Interest receivable $669,327.
    
    
    1/30/04
    
    
    
    5
    %
    
    
    1,000,000
    
    
    
    1,000,000
    
    
    
    .17EmergingMed.com, Inc. (g)
New York, NY. Cancer clinical trial matching and referral service. (Software) www.emergingmed.com
    
    $500,000 senior subordinated note at 10% due December 19, 2010.  Warrants for 7.0% of common stock. (j)Interest receivable $164,167.
    
    
    12/19/05
    
    
    
    7
    %
    
    
    500,000
    
    
    
    500,000
    
    
    
    .09Golden Goal LLC (g)
Fort Ann, NY. Youth soccer and lacrosse tournament park. (Sports and Entertainment)
 www.goldengoalpark.com
    
    191,811 Class C units at 4%.  $38,237.98 convertible promissory notes at 13% due January 26, 2012.
    
    
    12/10/07
    
    
    
    6
    %
    
    
    675,652
    
    
    
    438,238
    
    
    
    .08Innov-X Systems, Inc. (g)
Woburn, MA. Manufactures portable x-ray fluorescence (XRF) analyzers used in metals/alloy analysis. (Manufacturing) www.innovxsys.com
    
    2,642 Series A preferred stock.  Warrants for 21,596 common shares.  8% cumulative dividend. (j)Interest receivable $182,411.
    
    
    9/27/04
    
    
    
    9
    %
    
    
    1,000,000
    
    
    
    8,761,700
    
    
    
    1.53Niagara Dispensing Technologies, Inc.
Amherst, NY. Beverage dispensing technology development and products manufacturer, specializing in rapid pour beer dispensing systems for high volume stadium and concession operations. (Manufacturing)
www.exactpour.com
    
    202,081 Series B preferred stock. (g)463,691 Series A preferred stock.  518,752 Series B preferred stock.
    
    
    3/8/06
    
    
    
    14
    %
    
    
    1,281,783
    
    
    
    1,170,783
    
    
    
    .21RAMSCO (e)(g)
Albany, NY. Distributor of water, sanitary, storm sewer and specialty construction materials to the contractor, highway and municipal construction markets. (Distributor)
www.ramsco.com
    
    $300,000 promissory notes at 9% due October 20, 2010.  Warrants for 5.99% of common stock.
    
    
    11/19/02
    
    
    
    6
    %
    
    
    300,000
    
    
    
    300,000
    
    
    
    .05SOMS Technologies, LLC (g)
Valhalla, NY. Produces and markets the microGreen Extended Performance Oil Filter. (Auto Parts Developer)
www.microgreenfilter.com
    
    $250,000 secured convertible note at 10% due December 2, 2010.
    
    
    12/2/08
    
    
    
    
    
    
    
    250,000
    
    
    
    250,000
    
    
    
    .04Ultra  Scan Corporation
Amherst, NY. Biometrics application developer of ultrasonic fingerprint technology. (Electronics Hardware/Software) 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
    
    
    
    .21Subtotal Affiliate Investments
    
    
    
    
    
    
    
    
    
    
    
    $
    6,858,370
    
    
    $
    14,229,157
    
    
    $
    2.48
  6




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RAND CAPITAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 2009 (Continued)
(Unaudited)
 Per(b)
    
    
    (c)
    
    
    
    
    
    
    (d)
    
    
    ShareCompany, Geographic Location, Business
    
    
    
    Date
    
    
    
    
    
    
    
    
    
    
    
    
    ofDescription, (Industry) and Website
    
    Type of Investment
    
    Acquired
    
    
    Equity
    
    
    Cost
    
    
    Value
    
    
    RandControl Investments (m)Gemcor II, LLC (e)(g)(h)West
Seneca, NY.  Designs and sells automatic riveting machines used in
the assembly of aircraft components. (Manufacturing)
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
    %
    
    $
    586,844
    
    
    $
    5,786,845
    
    
    $
    1.02G-TEC Natural Gas SystemsBuffalo,
NY. Manufactures and distributes systems that allow natural gas to be
used as an alternative fuel to gases. (Manufacturing)
www.gas-tec.com
    
    28.925% Class A membership interest. 8% cumulative dividend.
    
    
    8/31/99
    
    
    
    29
    %
    
    
    400,000
    
    
    
    198,000
    
    
    
    .03Subtotal Control Investments
    
    
    
    
    
    
    
    
    
    
    
    $
    986,844
    
    
    $
    5,984,845
    
    
    $
    1.05Other Investments(e)
    
    Various
    
    
    
    
    
    
    
    
    
    
    2,044,269
    
    
    
    22,842
    
    
    
    .00Total portfolio investments
    
    
    
    
    
    
    
    
    
    $
    14,468,610
    
    
    $
    28,208,441
    
    
    $
    4.93
  7




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##### Table of Contents



RAND CAPITAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS
March 31, 2009 (Continued)
(Unaudited)
 Notes to Consolidated Schedule of Portfolio Investments
               8




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Rand Capital Corporation and Subsidiaries
 
 Notes to the Consolidated Financial Statements
 For the Three Months Ended March 31, 2009 and 2008
 (Unaudited)
 Note 1. ORGANIZATION
   SBIC Subsidiary
      9




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
    
    Rand and Rand SBIC to engage in certain related party 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; and
 
    
    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 Exchange Act reports.
  10




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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, 2008Form 10-Q
    
    Quarterly Report on Form 10-Q for the quarters ended September 30, 2008,
June 30, 2008 and March 31, 2008Form N-23C-1
    
    Reports by closed-end investment companies of purchases of their own securities
  Principles of Consolidation
 Cash
and Cash Equivalents
 Revenue Recognition  Interest Income
  11




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Original Issue Discount
 Deferred Debenture Costs
 Net Assets per Share
 Supplemental Cash Flow Information
 Accounting Estimates
 Stockholders Equity (Net Assets) 
  Profit Sharing and Stock Option Plan
  12




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Income Taxes 
    Concentration of Credit Risk 
 Note 3. INVESTMENTS
   13




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Assets Measured at Fair Value on a Recurring Basis
 Fair Value Measurements at Reported Date UsingQuoted Prices in
    
    
    Significant
    
    
    Other SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableMarch 31,
    
    
    Identical Assets
    
    
    Inputs
    
    
    InputsDescription
    
    2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Venture Capital
Investments
    
    $
    28,208,441
    
    
    $
    112,000
    
    
    $
    0
    
    
    $
    28,096,441
 Assets Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)
 Fair Value Measurements Using SignificantUnobservable Inputs (Level 3)Venture Capital InvestmentsBeginning Balance, December 31, 2008, of Level 3 Assets
    
    
    
    
    
    $
    28,014,282Realized Gains or Losses included in net change in net assets from operations
    
    
    
    
    
    
    Unrealized gains or losses included in net change in net assets from operations
    
    
    
    
    
    
    Purchases of SecuritiesAssociates Interactive, LLC
    
    $
    43,518Golden Goal LLC
    
    $
    38,238APF Group, Inc
    
    $
    11,917GridApp Systems Inc.
    
    $
    4,840
    
    
    $
    98,513Repayments of SecuritiesGemcor II, LLC
    
    $
    (16,354
    )$
    (16,354
    )Transfers in or out of Level 3
    
    
    
    
    
    
    Ending Balance, March 31, 2009, of Level 3 Assets
    
    
    
    
    
    $
    28,096,441The amount of total gains or losses for the period included in earnings
(or changes in net assets) attributable to the change in unrealized gains
or losses relating to assets still held at the reporting date.
    
    
    
    
    
    
    Gains and losses (realized and unrealized) included in Net decrease
in net assets from operations for the period above are reported as follows:Net Gain (Loss) on Sales and Dispositions
    
    
    
    
    
    $
    0Change in unrealized gains or losses relating to assets still held at reporting date
    
    
    
    
    
    $
    0
  14




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##### Table of Contents



Note 4. FINANCIAL HIGHLIGHTS
  Three months ended
    
    
    Three months endedMarch 31, 2009
    
    
    March 31, 2008(Unaudited)
    
    
    (Unaudited)Income from investment operations (1):Investment income
    
    $
    0.06
    
    
    $
    0.07Expenses
    
    
    0.07
    
    
    
    0.07Investment (loss) gain before income taxes
    
    
    (0.01
    )
    
    
    0.00Income tax benefit
    
    
    0.00
    
    
    
    0.00Net investment (loss) gain
    
    
    (0.01
    )
    
    
    0.00Net realized and unrealized gain on investments
    
    
    0.00
    
    
    
    (0.02
    )(Decrease) increase in net asset value
    
    
    (0.01
    )
    
    
    (0.02
    )Net asset value, beginning of period
    
    
    3.54
    
    
    
    3.47Net asset value, end of period
    
    $
    3.53
    
    
    $
    3.45Per share market price, end of period
    
    $
    3.98
    
    
    $
    4.58Total return based on market value
    
    
    13.71
    %
    
    
    27.22
    %Total return based on net asset value
    
    
    (0.01
    )%
    
    
    (0.50
    )%Supplemental data:Ratio of expenses before income taxes to average net
assets
    
    
    2.03
    %
    
    
    2.04
    %Ratio of expenses including taxes to average net assets
    
    
    1.98
    %
    
    
    1.96
    %Ratio of net investment (loss) gain to average net assets
    
    
    (0.11
    )%
    
    
    (0.04
    )%Portfolio turnover
    
    
    0.35
    %
    
    
    1.98
    %Net assets, end of period
    
    $
    20,205,727
    
    
    $
    19,726,007Weighted average shares outstanding, end of period
    
    
    5,718,934
    
    
    
    5,718,934
 (1)
    
    Per share data are based on weighted average shares outstanding and the results are
rounded   15




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##### Table of Contents



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.
 Corporate Structure
   Business Developments
   16




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##### Table of Contents




    
    The ability of the Corporations portfolio companies to obtain
necessary credit financing for their operations may be impaired.
    
    The Corporations portfolio companies may experience greater
difficulty in obtaining equity financing to continue to fund their
operations.
    
    The slowdown in capital goods spending may impact the goods and
services that the portfolio companies sell.
    
    The Corporation may find it more difficult to exit its investments as
access to public markets and the merger and acquisition industry
become impaired.
    
    The Corporations diversified portfolio of investments may experience
unexpected growth despite these market uncertainties based on their
own capitalization, industry niche, and current market acceptance for
their products/services.
    
    The Corporations SBA leverage commitment expired September 30, 2008,
and the SBAs interest in renewing Rands $1.9 million in undrawn
leverage may be adversely affected by the status of the financial
markets.
  Critical Accounting Policies
   17




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##### Table of Contents



Financial Condition
  3/31/09
    
    
    12/31/08
    
    
    Decrease
    
    

% DecreaseTotal assets
    
    $
    31,883,347
    
    
    $
    32,228,797
    
    
    $
    (345,450
    )
    
    
    (1.1
    %)Total liabilities
    
    
    11,677,620
    
    
    
    12,001,831
    
    
    
    (324,211
    )
    
    
    (2.7
    %)Net assets
    
    $
    20,205,727
    
    
    $
    20,226,966
    
    
    $
    (21,239
    )
    
    
    (0.1
    %)
  3/31/09
    
    
    12/31/08
    
    
    Increase
    
    

% IncreaseInvestments, at cost
    
    $
    14,468,610
    
    
    $
    14,386,451
    
    
    $
    82,159
    
    
    
    0.6
    %Unrealized appreciation, net
    
    
    13,739,831
    
    
    
    13,739,831
    
    
    
    
    
    
    
    Investments at fair value
    
    $
    28,208,441
    
    
    $
    28,126,282
    
    
    $
    82,159
    
    
    
    0.6
    %
  New Investments:
    
    AmountAssociates Interactive, LLC (Associates Interactive)
    
    $
    43,518Golden Goal, LLC (Golden Goal)
    
    
    38,238Total of new investments made during the three months
ended March 31, 2009
    
    $
    81,756Changes to Investments:APF Group, Inc (APF) interest conversion
    
    $
    11,917GridApp Systems, Inc. (GridApp)
    
    
    4,840Total of changes to investments made during the three months
ended March 31, 2009
    
    $
    16,757Investment Repayments:Gemcor II, LLC (Gemcor)
    
    
    (16,354
    )Total of investment repayments during the three months
ended March 31, 2009
    
    
    (16,354
    )Total change in investments, at cost,
during the three months ended March 31, 2009
    
    $
    82,159
     18




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##### Table of Contents



Results of Operations
 Investment Income
  Comparison of the three months ended March 31, 2009 to the three months ended March 31, 2008
 Increase
    
    
    % IncreaseMarch 31, 2009
    
    
    March 31, 2008
    
    
    (Decrease)
    
    
    (Decrease)Interest from portfolio companies
    
    $
    135,516
    
    
    $
    251,764
    
    
    $
    (116,248
    )
    
    
    (46.2
    )%Interest from other investments
    
    
    9,134
    
    
    
    34,584
    
    
    
    (25,450
    )
    
    
    (73.6
    %)Dividend and other investment income
    
    
    224,526
    
    
    
    84,934
    
    
    
    139,592
    
    
    
    164.4
    %Other income
    
    
    9,083
    
    
    
    7,083
    
    
    
    2,000
    
    
    
    28.2
    %Total investment income
    
    $
    378,259
    
    
    $
    378,365
    
    
    $
    (106
    )
    
    
    0.0
    %
 Interest from portfolio companies
  Interest
    
    
    Investment
    
    
    Year that InterestCompany
    
    Rate
    
    
    Cost
    
    
    Accrual CeasedG-Tec Natural Gas Systems
    
    
    8
    %
    
    $
    400,000
    
    
    
    2004Rocket Broadband Networks, Inc.
    
    
    11.25
    %
    
    
    35,000
    
    
    
    2008UStec, Inc.
    
    
    5
    %
    
    
    100,000
    
    
    
    2006WineIsIt.com (Wineisit)
    
    
    10
    %
    
    
    801,918
    
    
    
    2005
 Interest from other investments
 Dividend and other investment income
  19




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##### Table of Contents



Other income
   Operating Expenses
 Comparison of the three months ended March 31, 2009 to the three months ended March 31, 2008
 March 31, 2009
    
    
    March 31, 2008
    
    
    Increase
    
    
    % IncreaseTotal Expenses
    
    $
    409,448
    
    
    $
    403,368
    
    
    $
    6,080
    
    
    
    1.5
    %
   Net Realized Gains and Losses on Investments
  Net Change in Unrealized Appreciation of Investments
   20




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##### Table of Contents



March 31, 2008Niagara Dispensing Technologies, Inc. (Niagara Dispensing)
    
    $
    (111,000
    )Bioworks
    
    
    (28,000
    )Photonic Products Group, Inc (Photonic)
    
    
    9,300Total change in net unrealized appreciation during the
three months ended March 31, 2008
    
    $
    (129,700
    )
     Net Decrease in Net Assets from Operations
  Liquidity and Capital Resources
     21




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
 Item 4T. Controls and Procedures
 Management report on Internal Control Over Financial Reporting
    22




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##### Table of Contents



Changes in Internal Control over Financial Reporting.
  23




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##### Table of Contents



PART II.
OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  Fluctuations of Quarterly Results
  
 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
   24




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##### Table of Contents



Item 6. Exhibits
 (a)
    
    Exhibits
  (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 Formation of Rand Capital SBIC, L.P.  incorporated by
reference to Exhibit 10.4 to the Corporations Form10-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
    )
    
    Certificate of Incorporation of Rand Merger Corporation as filed by the
NY Department of State on 12/18/08  incorporated by reference to
Exhibit 1(a) to Registration Statement No. 811-22276 on Form N-5 of Rand
Capital SBIC, Inc. filed with the SEC on 2/6/09.(10.8
    )
    
    By-laws of Rand Capital SBIC, Inc.  incorporated by reference to
Exhibit 2 to Registration Statement No. 811-22276 on Form N-5 of Rand
Capital SBIC, Inc. filed with the SEC on 2/6/09.(10.9
    )
    
    Certificate of Merger of Rand Capital SBIC, L.P. and Rand Capital
Management, LLC into Rand Merger Corporation, as filed by the NY
Department of State on 12/18/08  incorporated by reference to Exhibit
1(b) to Registration Statement No. 811-22276 on Form N-5 of Rand Capital
SBIC, Inc. filed with the SEC on 2/6/09.(10.10
    )
    
    Rand Capital Corporation Amended and Restated Profit Sharing Plan
applicable to Rand Capital SBIC, Inc.  incorporated by reference to
Exhibit 7 to Registration Statement No. 811-22276 on Form N-5 of Rand
Capital SBIC, Inc. filed with the SEC on 2/6/09.*(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  furnished herewith(32.2
    )
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 Rand Capital SBIC, Inc.  furnished herewith
 *
    
    Management contract or compensatory plan.  25




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##### Table of Contents



Signatures
 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
  RAND CAPITAL CORPORATIONBy:
    /s/ Allen F. GrumAllen F. Grum, PresidentBy:
    /s/ Daniel P. PenberthyDaniel P. Penberthy, TreasurerRAND CAPITAL SBIC, INC.By:
    /s/ Allen F. GrumAllen F. Grum, PresidentBy:
    /s/ Daniel P. PenberthyDaniel P. Penberthy, Treasurer  26




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##### Table of Contents



Exhibit Index
 ExhibitNo.
    
    Description(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  furnished herewith(32.2
    )
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  Rand
Capital SBIC, Inc.  furnished herewith
  27