UNITED
STATESSECURITIES 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 quarterly period ended September 30, 2020



[  ]
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 or Organization) |  | (IRS
    Employer Identification No.)



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



(716)
853-0802

(Registrant’s
telephone number, including area code)



Securities
registered pursuant to Section 12(b) of the Act:



|Title
    of each class           |  | Trading
        Symbol(s) |  | Name
        of each exchange
        on
        which registered
|--------------------------------- |  | ------------------------- |  | -----------------------------------------------------------------
|Common
    Stock, $0.10 par value |  | RAND                      |  | Nasdaq
    Capital Market                                        



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 of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.

Yes
[X] No [  ]



Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit such files). Yes [  ] No [  ]



Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”,
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



|Large
    accelerated filer | [  ] | Accelerated
    filer         | [  ]
|--------------------------- | ---- | ----------------------------- | ----
|Non-accelerated
    filer   | [X]  | Smaller
    reporting company | [  ]
|                            |      | Emerging
    growth company   | [  ]



If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]



Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [  ] No [X]



As
of October 30, 2020, there were 2,583,772 shares of the registrant’s common stock outstanding.


















RAND
CAPITAL CORPORATION

TABLE
OF CONTENTS FOR FORM 10-Q



|PART I. – FINANCIAL INFORMATION | 
|------------------------------- | 
|                                | 
|Item
    1.                     | 
|                                | 
|                                | 
|                                | 
|                                | 
|                                | 
|                                | 
|                                | 
|                                | 
|                                | 
|                                | 
|                                | 
|                                | 
|                                | 
|                                | 
|                                | 
|Item
    2.                     | 
|                                | 
|Item
    3.                     | 
|                                | 
|Item
    4.                     | 
|                                | 
|PART II. – OTHER INFORMATION    | 
|                                | 
|Item
    1.                     | 
|                                | 
|Item
    1A.                    | 
|                                | 
|Item
    2.                     | 
|                                | 
|Item
    3.                     | 
|                                | 
|Item
    4.                     | 
|                                | 
|Item
    5.                     | 
|                                | 
|Item
    6.                     | 













PART
I. FINANCIAL INFORMATION



Item
1. Financial Statements and Supplementary Data



RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION



|                                                                                                                                                                                          |  | September 30,
 2020
 (Unaudited) |            |   | December 31,
 2019 |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ---------- | - | ------------------ | -
|ASSETS                                                                                                                                                                                    |  |                                  |            |   |                    |  
|Investments at fair value:                                                                                                                                                                |  |                                  |            |   |                    |  
|Affiliate investments (cost of $22,859,230 and $19,035,446, respectively)                                                                                                                 |  | $                                | 15,459,415 |   |                    | $
|Non- Control/Non-Affiliate investments (cost of $26,961,995 and $25,584,017, respectively)                                                                                                |  |                                  | 26,223,106 |   |                    |  
|Total investments, at fair value (cost of $49,821,225 and $44,619,463, respectively)                                                                                                      |  |                                  | 41,682,521 |   |                    |  
|Cash and cash equivalents                                                                                                                                                                 |  |                                  | 19,074,372 |   |                    |  
|Interest receivable (net of allowance: $142,413 at 9/30/20 and $166,413 at 12/31/19)                                                                                                      |  |                                  | 457,501    |   |                    |  
|Deferred tax asset                                                                                                                                                                        |  |                                  | -          |   |                    |  
|Prepaid income taxes                                                                                                                                                                      |  |                                  | 40,789     |   |                    |  
|Other assets                                                                                                                                                                              |  |                                  | 53,732     |   |                    |  
|Total assets                                                                                                                                                                              |  | $                                | 61,308,915 |   |                    | $
|                                                                                                                                                                                          |  |                                  |            |   |                    |  
|LIABILITIES AND STOCKHOLDERS’ EQUITY (NET ASSETS)                                                                                                                                         |  |                                  |            |   |                    |  
|Liabilities:                                                                                                                                                                              |  |                                  |            |   |                    |  
|Debentures guaranteed by the SBA (net of debt issuance costs)                                                                                                                             |  | $                                | 10,815,169 |   |                    | $
|Amounts due to investment adviser                                                                                                                                                         |  |                                  | 152,447    |   |                    |  
|Accounts payable and accrued expenses                                                                                                                                                     |  |                                  | 82,785     |   |                    |  
|Deferred tax payable                                                                                                                                                                      |  |                                  | 228,695    |   |                    |  
|Bonus payable                                                                                                                                                                             |  |                                  | -          |   |                    |  
|Deferred revenue                                                                                                                                                                          |  |                                  | 79,666     |   |                    |  
|Total liabilities                                                                                                                                                                         |  |                                  | 11,358,762 |   |                    |  
|Commitments and contingencies (See Note 5)                                                                                                                                                |  |                                  |            |   |                    |  
|                                                                                                                                                                                          |  |                                  |            |   |                    |  
|Stockholders’ equity (net assets):                                                                                                                                                        |  |                                  |            |   |                    |  
|Common stock, $0.10 par; shares authorized 100,000,000; shares issued: 2,648,916 at 9/30/20 and 1,688,485 at 12/31/19; shares outstanding: 2,585,403 at 9/30/20 and 1,628,369 at 12/31/19 |  |                                  | 2,384,547  |   |                    |  
|Capital in excess of par value                                                                                                                                                            |  |                                  | 34,142,455 |   |                    |  
|Treasury stock, at cost: shares: 63,513 at 9/30/20 and 60,116 at 12/31/19                                                                                                                 |  |                                  | (1,507,093 | ) |                    |  
|Total distributable earnings                                                                                                                                                              |  |                                  | 14,930,244 |   |                    |  
|Total stockholders’ equity (net assets) (per share – 9/30/20: $19.32, 12/31/19: $32.93)                                                                                                   |  |                                  | 49,950,153 |   |                    |  
|Total liabilities and stockholders’ equity (net assets)                                                                                                                                   |  | $                                | 61,308,915 |   |                    | $



See
accompanying notes



1







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
STATEMENTS OF OPERATIONS

(Unaudited)



|                                                                                  |  | Three months
 ended September 30, 
2020 |           |   | Three months
 ended September
                       30, 2019 |   |            | Nine months
 ended September
                       30, 2020 |  |   | Nine months
 ended September 30, 
2019 |  
|--------------------------------------------------------------------------------- |  | --------------------------------------- | --------- | - | ------------------------------------------------------------- | - | ---------- | ------------------------------------------------------------ |  | - | -------------------------------------- | -
|Investment income:                                                                |  |                                         |           |   |                                                               |   |            |                                                              |  |   |                                        |  
|Interest from portfolio companies:                                                |  |                                         |           |   |                                                               |   |            |                                                              |  |   |                                        |  
|Affiliate investments                                                             |  | $                                       | 178,714   |   |                                                               | $ | 217,953    |                                                              |  | $ | 487,822                                |  
|Non-Control/Non-Affiliate investments                                             |  |                                         | 456,160   |   |                                                               |   | 110,150    |                                                              |  |   | 1,253,439                              |  
|Total interest from portfolio companies                                           |  |                                         | 634,874   |   |                                                               |   | 328,103    |                                                              |  |   | 1,741,261                              |  
|                                                                                  |  |                                         |           |   |                                                               |   |            |                                                              |  |   |                                        |  
|Interest from other investments:                                                  |  |                                         |           |   |                                                               |   |            |                                                              |  |   |                                        |  
|Non-Control/Non-Affiliate investments                                             |  |                                         | 1,157     |   |                                                               |   | 36,797     |                                                              |  |   | 87,161                                 |  
|Total interest from other investments                                             |  |                                         | 1,157     |   |                                                               |   | 36,797     |                                                              |  |   | 87,161                                 |  
|                                                                                  |  |                                         |           |   |                                                               |   |            |                                                              |  |   |                                        |  
|Dividend and other investment income:                                             |  |                                         |           |   |                                                               |   |            |                                                              |  |   |                                        |  
|Affiliate investments                                                             |  |                                         | 13,125    |   |                                                               |   | 65,996     |                                                              |  |   | 39,375                                 |  
|Non-Control/Non-Affiliate investments                                             |  |                                         | 80,212    |   |                                                               |   | -          |                                                              |  |   | 161,525                                |  
|Total dividend and other investment income                                        |  |                                         | 93,337    |   |                                                               |   | 65,996     |                                                              |  |   | 200,900                                |  
|                                                                                  |  |                                         |           |   |                                                               |   |            |                                                              |  |   |                                        |  
|Fee income:                                                                       |  |                                         |           |   |                                                               |   |            |                                                              |  |   |                                        |  
|Affiliate investments                                                             |  |                                         | 5,000     |   |                                                               |   | 3,607      |                                                              |  |   | 10,417                                 |  
|Non-Control/Non-Affiliate investments                                             |  |                                         | 2,500     |   |                                                               |   | 2,852      |                                                              |  |   | 7,500                                  |  
|Total fee income                                                                  |  |                                         | 7,500     |   |                                                               |   | 6,459      |                                                              |  |   | 17,917                                 |  
|Total investment income                                                           |  |                                         | 736,868   |   |                                                               |   | 437,355    |                                                              |  |   | 2,047,239                              |  
|Expenses:                                                                         |  |                                         |           |   |                                                               |   |            |                                                              |  |   |                                        |  
|Base management fee (see Note 8)                                                  |  |                                         | 152,438   |   |                                                               |   | -          |                                                              |  |   | 434,201                                |  
|Interest on SBA obligations                                                       |  |                                         | 104,190   |   |                                                               |   | 94,191     |                                                              |  |   | 312,570                                |  
|Professional fees                                                                 |  |                                         | 126,759   |   |                                                               |   | 68,931     |                                                              |  |   | 383,795                                |  
|Stockholders and office operating                                                 |  |                                         | 50,022    |   |                                                               |   | 85,782     |                                                              |  |   | 217,866                                |  
|Directors’ fees                                                                   |  |                                         | 28,375    |   |                                                               |   | 30,124     |                                                              |  |   | 85,125                                 |  
|Insurance                                                                         |  |                                         | 8,033     |   |                                                               |   | 10,500     |                                                              |  |   | 26,101                                 |  
|Corporate development                                                             |  |                                         | 10,474    |   |                                                               |   | 18,301     |                                                              |  |   | 12,480                                 |  
|Other operating                                                                   |  |                                         | 107       |   |                                                               |   | 604        |                                                              |  |   | 572                                    |  
|Salaries                                                                          |  |                                         | -         |   |                                                               |   | 181,500    |                                                              |  |   | -                                      |  
|Employee benefits                                                                 |  |                                         | -         |   |                                                               |   | 40,606     |                                                              |  |   | -                                      |  
|Bad debt (recovery) expense                                                       |  |                                         | (24,000   | ) |                                                               |   | -          |                                                              |  |   | (24,000                                | )
|Total expenses                                                                    |  |                                         | 456,398   |   |                                                               |   | 530,539    |                                                              |  |   | 1,448,710                              |  
|Net investment income (loss) before income taxes                                  |  |                                         | 280,470   |   |                                                               |   | (93,184    | )                                                            |  |   | 598,529                                |  
|Income tax benefit                                                                |  |                                         | -         |   |                                                               |   | (27,635    | )                                                            |  |   | (419,101                               | )
|Net investment income (loss)                                                      |  |                                         | 280,470   |   |                                                               |   | (65,549    | )                                                            |  |   | 1,017,630                              |  
|                                                                                  |  |                                         |           |   |                                                               |   |            |                                                              |  |   |                                        |  
|Net realized gain (loss) on sales and dispositions of investments:                |  |                                         |           |   |                                                               |   |            |                                                              |  |   |                                        |  
|Control investments                                                               |  |                                         | -         |   |                                                               |   | -          |                                                              |  |   | -                                      |  
|Affiliate investments                                                             |  |                                         | -         |   |                                                               |   | -          |                                                              |  |   | 56,916                                 |  
|Non-Control/Non-Affiliate investments                                             |  |                                         | -         |   |                                                               |   | -          |                                                              |  |   | 2,355,130                              |  
|Income tax benefit                                                                |  |                                         | -         |   |                                                               |   | -          |                                                              |  |   | -                                      |  
|Net realized gain (loss) on sales and dispositions of investments                 |  |                                         | -         |   |                                                               |   | -          |                                                              |  |   | 2,412,046                              |  
|Net change in unrealized depreciation on investments:                             |  |                                         |           |   |                                                               |   |            |                                                              |  |   |                                        |  
|Affiliate investments                                                             |  |                                         | -         |   |                                                               |   | (1,847,468 | )                                                            |  |   | (515,804                               | )
|Non-Control/Non-Affiliate investments                                             |  |                                         | (17,947   | ) |                                                               |   | (1,749,661 | )                                                            |  |   | (24,229                                | )
|                                                                                  |  |                                         |           |   |                                                               |   |            |                                                              |  |   |                                        |  
|Change in unrealized depreciation before income taxes                             |  |                                         | (17,947   | ) |                                                               |   | (3,597,129 | )                                                            |  |   | (540,033                               | )
|Deferred income tax (benefit) expense                                             |  |                                         | -         |   |                                                               |   | (783,790   | )                                                            |  |   | 1,773,412                              |  
|Net change in unrealized depreciation on investments                              |  |                                         | (17,947   | ) |                                                               |   | (2,813,339 | )                                                            |  |   | (2,313,445                             | )
|                                                                                  |  |                                         |           |   |                                                               |   |            |                                                              |  |   |                                        |  
|Net realized and unrealized (loss) gain on investments                            |  |                                         | (17,947   | ) |                                                               |   | (2,813,339 | )                                                            |  |   | 98,601                                 |  
|Net increase (decrease) in net assets from operations                             |  | $                                       | 262,523   |   |                                                               | $ | (2,878,888 | )                                                            |  | $ | 1,116,231                              |  
|Weighted average shares outstanding                                               |  |                                         | 2,587,155 |   |                                                               |   | 702,443    |                                                              |  |   | 2,162,308                              |  
|Basic and diluted net increase (decrease) in net assets from operations per share |  | $                                       | 0.10      |   |                                                               | $ | (4.10      | )                                                            |  | $ | 0.52                                   |  



See
accompanying notes





2







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
STATEMENTS OF CHANGES IN NET ASSETS

(Unaudited)



|                                                                  |  | Three months ended September 30, 2020 |            |   | Three months ended September 30, 2019 |   |            | Nine months ended September 30, 2020 |  |   | Nine months ended September 30, 2019 |  
|----------------------------------------------------------------- |  | ------------------------------------- | ---------- | - | ------------------------------------- | - | ---------- | ------------------------------------ |  | - | ------------------------------------ | -
|                                                                  |  |                                       |            |   |                                       |   |            |                                      |  |   |                                      |  
|Net assets at beginning of period                                 |  | $                                     | 49,711,314 |   |                                       | $ | 30,632,053 |                                      |  | $ | 53,628,516                           |  
|                                                                  |  |                                       |            |   |                                       |   |            |                                      |  |   |                                      |  
|Net investment income (loss)                                      |  |                                       | 280,470    |   |                                       |   | (65,549    | )                                    |  |   | 1,017,630                            |  
|Net realized gain (loss) on sales and dispositions of investments |  |                                       | -          |   |                                       |   | -          |                                      |  |   | 2,412,046                            |  
|Net change in unrealized depreciation on investments              |  |                                       | (17,947    | ) |                                       |   | (2,813,339 | )                                    |  |   | (2,313,445                           | )
|Net increase (decrease) in net assets from operations             |  |                                       | 262,523    |   |                                       |   | (2,878,888 | )                                    |  |   | 1,116,231                            |  
|Purchase of treasury shares                                       |  |                                       | (23,684    | ) |                                       |   | -          |                                      |  |   | (37,988                              | )
|Payment of cash dividend                                          |  |                                       | -          |   |                                       |   | -          |                                      |  |   | (4,756,606                           | )
|Net assets at end of period                                       |  | $                                     | 49,950,153 |   |                                       | $ | 27,753,165 |                                      |  | $ | 49,950,153                           |  



See
accompanying notes



3







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                                                       |  | Nine months ended September 30,
 2020 |            |   | Nine months ended September 30,
 2019 |  
|---------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------- | ---------- | - | ------------------------------------- | -
|Cash flows from operating activities:                                                                                  |  |                                       |            |   |                                       |  
|Net increase (decrease) in net assets from operations                                                                  |  | $                                     | 1,116,231  |   |                                       | $
|Adjustments to reconcile net increase (decrease) in net assets to net cash (used in) provided by operating activities: |  |                                       |            |   |                                       |  
|Investments in portfolio companies                                                                                     |  |                                       | (7,027,982 | ) |                                       |  
|Proceeds from sale of portfolio investments                                                                            |  |                                       | 4,557,542  |   |                                       |  
|Proceeds from loan repayments                                                                                          |  |                                       | -          |   |                                       |  
|Net realized (gain) loss on portfolio investments                                                                      |  |                                       | (2,412,046 | ) |                                       |  
|Change in unrealized depreciation on investments before income taxes                                                   |  |                                       | 540,033    |   |                                       |  
|Deferred tax benefit                                                                                                   |  |                                       | 1,432,893  |   |                                       |  
|Depreciation and amortization                                                                                          |  |                                       | 28,256     |   |                                       |  
|Original issue discount amortization                                                                                   |  |                                       | (38,552    | ) |                                       |  
|Non-cash conversion of debenture interest                                                                              |  |                                       | (280,724   | ) |                                       |  
|Change in interest receivable allowance                                                                                |  |                                       | (24,000    | ) |                                       |  
|Changes in operating assets and liabilities:                                                                           |  |                                       |            |   |                                       |  
|(Increase) decrease in interest receivable                                                                             |  |                                       | (291,236   | ) |                                       |  
|Decrease (increase) in other assets                                                                                    |  |                                       | 211,644    |   |                                       |  
|Decrease in prepaid income taxes                                                                                       |  |                                       | 302,307    |   |                                       |  
|Decrease in accounts payable and accrued expenses                                                                      |  |                                       | (125,088   | ) |                                       |  
|Decrease in bonus payable                                                                                              |  |                                       | (80,000    | ) |                                       |  
|Increase in due to investment advisor                                                                                  |  |                                       | 101,883    |   |                                       |  
|Increase (decrease) in deferred revenue                                                                                |  |                                       | 42,085     |   |                                       |  
|Total adjustments                                                                                                      |  |                                       | 3,062,985  |   |                                       |  
|Net cash (used in) provided by operating activities                                                                    |  |                                       | (1,946,754 | ) |                                       |  
|                                                                                                                       |  |                                       |            |   |                                       |  
|Cash flows from financing activities:                                                                                  |  |                                       |            |   |                                       |  
|Payment of cash dividend                                                                                               |  |                                       | (4,756,606 | ) |                                       |  
|Purchase of treasury shares                                                                                            |  |                                       | (37,988    | ) |                                       |  
|Proceeds from SBA debentures                                                                                           |  |                                       | -          |   |                                       |  
|Origination costs to SBA                                                                                               |  |                                       | -          |   |                                       |  
|Net cash (used in) provided by financing activities                                                                    |  |                                       | (4,794,594 | ) |                                       |  
|                                                                                                                       |  |                                       |            |   |                                       |  
|Net (decrease) increase in cash and cash equivalents                                                                   |  |                                       | (6,741,348 | ) |                                       |  
|Cash and cash equivalents:                                                                                             |  |                                       |            |   |                                       |  
|Beginning of period                                                                                                    |  |                                       | 25,815,720 |   |                                       |  
|End of period                                                                                                          |  | $                                     | 19,074,372 |   |                                       | $



See
accompanying notes



4









RAND
CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

September
30, 2020

(Unaudited)





|Company,
                                         Geographic Location, Business
                                                                                                                                                                                                                                       Description,
                                         (Industry) and Website |  | (a) Type
                                         of Investment                                                                         |  | (b) Date Acquired |  | (c)  Equity |    |   | Cost |   |           | (d)(f) Fair Value |  |   | Percent
    of Net Assets | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- |  | ----------- | -- | - | ---- | - | --------- | ----------------- |  | - | ------------------------- | 
|                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                         |  |                   |  |             |    |   |      |   |           |                   |  |   |                           | 
|Non-Control/Non-Affiliate
                                         Investments – 52.5% of
                                                                                net
                                         assets: (j)                                                                                                                                                                  |  |                                                                                                                                         |  |                   |  |             |    |   |      |   |           |                   |  |   |                           | 
|                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                         |  |                   |  |             |    |   |      |   |           |                   |  |   |                           | 
|ACV
                                         Auctions, Inc. (e)(g) Buffalo,
                                         NY. Live mobile wholesale auctions for new
                                                                              and
                                         used car dealers. (Software) www.acvauctions.com                                                         |  | 1,181,160
    Series A Preferred.                                                                                                       |  | 8/12/16           |  |             | <1 | % |      | $ | 163,000   |                   |  | $ | 6,531,815                 | 
|                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                         |  |                   |  |             |    |   |      |   |           |                   |  |   |                           | 
|Advantage
24/7 LLC (g)                                                                                                                                                                                                                                                                                                                                                                              |  | $140,000
Term Note at 7% due                                                                                                            |  | 1/1/19            |  |             | 0  | % |      |   |           |                   |  |   |                           | 
|Williamsville,
    NY. Marketing program for wine and
    spirits dealers. (Marketing Company)
    www.advantage24-7.com                                                                                                                                                                                                                                                                            |  | January 1, 2022                                                                                                                         |  |                   |  |             |    |   |      |   | 65,000    |                   |  |   | 65,000                    | 
|                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                         |  |                   |  |             |    |   |      |   |           |                   |  |   |                           | 
|AIKG
                                         LLC (Andretti) (e)(i)(l) Marietta,
                                         GA. Entertainment company engaged in
                                                                                 indoor
                                         karting, games and food. (Entertainment) www.andrettikarting.com                                    |  | $4,250,000
                                         Term Notes at 12% (+4% PIK) due December 28, 2023. (i)Interest receivable $225,081. |  | 11/8/19           |  |             | 0  | % |      |   | 4,533,387 |                   |  |   | 4,533,387                 | 
|                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                         |  |                   |  |             |    |   |      |   |           |                   |  |   |                           | 
|Apollo
                                         Investment Corporation NASDAQ: AINV
                                                                           (n)
                                         Public BDC New
                                         York, NY.                                                                                                                       |  | 35,000
    shares.                                                                                                                      |  | 3/16/20           |  |             | <1 | % |      |   | 364,084   |                   |  |   | 292,717                   | 
|                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                         |  |                   |  |             |    |   |      |   |           |                   |  |   |                           | 
|Ares
                                         Capital Corporation NASDAQ: ARCC (n)
                                                                           Public
                                         BDC New
                                         York, NY.                                                                                                                            |  | 27,000
    shares.                                                                                                                      |  | 3/16/20           |  |             | <1 | % |      |   | 343,460   |                   |  |   | 378,000                   | 
|                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                         |  |                   |  |             |    |   |      |   |           |                   |  |   |                           | 
|Barings
                                         BDC, Inc. NYSE: BBDC (n) Public BDC New
                                         York, NY.                                                                                                                                                                                                                                                         |  | 40,000
    shares.                                                                                                                      |  | 8/13/20           |  |             | <1 | % |      |   | 333,352   |                   |  |   | 319,867                   | 
|                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                         |  |                   |  |             |    |   |      |   |           |                   |  |   |                           | 
|Centivo
    Corporation (e)(g)                                                                                                                                                                                                                                                                                                                                                                      |  | 190,967
    Series A-1 Preferred.                                                                                                       |  | 3/19/18           |  |             | <1 | % |      |   | 200,000   |                   |  |   | 200,000                   | 
|New
    York, NY.  Tech-enabled health solutions                                                                                                                                                                                                                                                                                                                                                    |  | 337,808
    Series A-2 Preferred.                                                                                                       |  | 3/19/18           |  |             |    |   |      |   | 101,342   |                   |  |   | 101,342                   | 
|company
    that helps self-insured employers and their                                                                                                                                                                                                                                                                                                                                             |  | Total
    Centivo                                                                                                                       |  |                   |  |             |    |   |      |   | 301,342   |                   |  |   | 301,342                   | 
|employees
    save money and have a better experience.                                                                                                                                                                                                                                                                                                                                              |  |                                                                                                                                         |  |                   |  |             |    |   |      |   |           |                   |  |   |                           | 
|(Health
    Care)                                                                                                                                                                                                                                                                                                                                                                                   |  |                                                                                                                                         |  |                   |  |             |    |   |      |   |           |                   |  |   |                           | 
|www.centivo.com                                                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                                                                         |  |                   |  |             |    |   |      |   |           |                   |  |   |                           | 
|                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                         |  |                   |  |             |    |   |      |   |           |                   |  |   |                           | 
|Empire
    Genomics, LLC (g)                                                                                                                                                                                                                                                                                                                                                                        |  | $1,209,014
    Senior Secured due                                                                                                       |  | 6/13/14           |  |             | 0  | % |      |   |           |                   |  |   |                           | 
|Buffalo,
    NY.  Molecular diagnostics company that                                                                                                                                                                                                                                                                                                                                                |  | Convertible
    Term Notes at 10%                                                                                                       |  |                   |  |             |    |   |      |   |           |                   |  |   |                           | 
|offers
    a comprehensive menu of assay services for                                                                                                                                                                                                                                                                                                                                               |  | December
    31, 2020.                                                                                                                  |  |                   |  |             |    |   |      |   | 1,308,675 |                   |  |   | 157,654                   | 
|diagnosing
    and guiding patient therapeutic treatments.                                                                                                                                                                                                                                                                                                                                          |  | $444,915
    Promissory Note at 9%                                                                                                      |  | 10/1/18           |  |             |    |   |      |   |           |                   |  |   |                           | 
|(Health
    Care)                                                                                                                                                                                                                                                                                                                                                                                   |  | due
    December 31, 2020.                                                                                                              |  |                   |  |             |    |   |      |   | 444,915   |                   |  |   | 444,915                   | 
|www.empiregenomics.com                                                                                                                                                                                                                                                                                                                                                                              |  | Total
    Empire                                                                                                                        |  |                   |  |             |    |   |      |   | 1,753,590 |                   |  |   | 602,569                   | 
|                                                                                                                                                                                                                                                                                                                                                                                                    |  | (i)
    Interest receivable $50,692.                                                                                                    |  |                   |  |             |    |   |      |   |           |                   |  |   |                           | 
|                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                         |  |                   |  |             |    |   |      |   |           |                   |  |   |                           | 
|First
                                         Wave Technologies, Inc. (e)(g) Batavia,
                                         NY. Sells First Crush automated pill crusher that
                                         crushes and grinds pills for nursing homes and medical
                                         institutions. (Health Care) www.firstwavetechnologies.com                |  | 670,443.2
                                         Class A Common.                                                                      |  | 4/19/12           |  |             | 4  | % |      |   | 661,563   |                   |  |   | 33,000                    | 
|                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                         |  |                   |  |             |    |   |      |   |           |                   |  |   |                           | 
|FS
                                         KKR Capital Corp. NYSE: FSK (n) Public BDC Philadelphia,
                                         PA.                                                                                                                                                                                                                                                   |  | 25,000
    shares                                                                                                                       |  | 3/16/20           |  |             | <1 | % |      |   | 338,980   |                   |  |   | 398,167                   | 
|                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                         |  |                   |  |             |    |   |      |   |           |                   |  |   |                           | 
|GiveGab,
                                         Inc. (e)(g) Ithaca,
                                         NY. Nonprofit giving platform that provides an easy
                                         and effective way for fundraising professionals to raise
                                         money online. (Software) www.givegab.com                                              |  | 5,084,329
    Series Seed Preferred.                                                                                                    |  | 1/14/15           |  |             | 4  | % |      |   | 616,221   |                   |  |   | 616,221                   | 
|                                                                                                                                                                                                                                                                                                                                                                                                    |  |                                                                                                                                         |  |                   |  |             |    |   |      |   |           |                   |  |   |                           | 
|Golub
                                         Capital BDC, Inc. NASDAQ: GBDC (n) Public BDC New
                                         York, NY.                                                                                                                                                                                                                                                 |  | 31,250
    shares                                                                                                                       |  | 3/16/20           |  |             | <1 | % |      |   | 403,910   |                   |  |   | 410,833                   | 





5







RAND
CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

September
30, 2020 (Continued)

(Unaudited)



|Company,
                                         Geographic Location, Business Description,
                                         (Industry) and Website                                                                                                                                          |  | (a)  Type
                                         of Investment |  | (b) Date Acquired |  | (c)  Equity |    |   | Cost |  |           | (d)(f) Fair Value |  |  | Percent
    of Net Assets | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------- |  | ----------------- |  | ----------- | -- | - | ---- |  | --------- | ----------------- |  |  | ------------------------- | 
|                                                                                                                                                                                                                                                                                                      |  |                                                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|GoNoodle, Inc. (g)(l)                                                                                                                                                                                                                                                                                 |  | $1,500,000 Secured Note at 12%
    (1%                           |  | 11/1/19           |  |             | <1 | % |      |  |           |                   |  |  |                           | 
|Nashville, TN.  Student engagement education                                                                                                                                                                                                                                                          |  | PIK) due September 30, 2024.                                     |  |                   |  |             |    |   |      |  | 1,513,754 |                   |  |  | 1,513,754                 | 
|software providing core aligned physical activity                                                                                                                                                                                                                                                     |  | Warrant for 47,324 Series C Preferred.                           |  | 3/1/15            |  |             |    |   |      |  | 25        |                   |  |  | 25                        | 
|breaks. (Software)                                                                                                                                                                                                                                                                                    |  | Warrant for 21,948 Series
    D Preferred.                       |  | 11/1/19           |  |             |    |   |      |  | 38        |                   |  |  | 38                        | 
|www.gonoodle.com                                                                                                                                                                                                                                                                                      |  | Total
    GoNoodle                                               |  |                   |  |             |    |   |      |  | 1,513,817 |                   |  |  | 1,513,817                 | 
|                                                                                                                                                                                                                                                                                                      |  |                                                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|HDI Acquisition LLC (Hilton Displays) (l)                                                                                                                                                                                                                                                             |  | $1,245,119 Term Loan at 12% (+2%                                 |  | 11/8/19           |  |             | 0  | % |      |  |           |                   |  |  |                           | 
|Greenville, NC. HDI is engaged in manufacturing, installation and
    maintenance of signage and brands. (Manufacturing) www.hiltondisplays.com                                                                                                                                                       |  | PIK) due June 20, 2023.                                          |  |                   |  |             |    |   |      |  | 1,268,656 |                   |  |  | 1,268,656                 | 
|                                                                                                                                                                                                                                                                                                      |  |                                                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|Lumious (Tech 2000, Inc.) (g)                                                                                                                                                                                                                                                                         |  | $850,000 Replacement Term Note at                                |  | 11/16/18          |  |             | 0  | % |      |  |           |                   |  |  |                           | 
|Herndon, VA. Develops and delivers IT training. (Software) www.t2000inc.com                                                                                                                                                                                                                           |  | 14% due November 15, 2021.                                       |  |                   |  |             |    |   |      |  | 860,777   |                   |  |  | 860,777                   | 
|                                                                                                                                                                                                                                                                                                      |  |                                                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|Mattison Avenue Holdings LLC (e)(l)                                                                                                                                                                                                                                                                   |  | $1,031,406 Second Amended, Restated                              |  | 11/8/19           |  |             | 0  | % |      |  |           |                   |  |  |                           | 
|Dallas, TX.  Provider of upscale salon spaces for                                                                                                                                                                                                                                                     |  | and Consolidated Promissory Note at                              |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|lease.  (Professional Services)                                                                                                                                                                                                                                                                       |  | 14% (2% PIK) due June 9, 2022.                                   |  |                   |  |             |    |   |      |  | 1,116,498 |                   |  |  | 1,116,498                 | 
|www.mattisonsalonsuites.com                                                                                                                                                                                                                                                                           |  |                                                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|                                                                                                                                                                                                                                                                                                      |  |                                                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|Mercantile Adjustment Bureau, LLC (g)                                                                                                                                                                                                                                                                 |  | $1,199,039 Subordinated Secured Note                             |  | 10/22/12          |  |             | 4  | % |      |  |           |                   |  |  |                           | 
|Williamsville, NY.  Full service accounts                                                                                                                                                                                                                                                             |  | at 13% (8% effective August 2020)                                |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|receivable management and collections company.                                                                                                                                                                                                                                                        |  | due January 31, 2022.                                            |  |                   |  |             |    |   |      |  | 1,199,040 |                   |  |  | 500,000                   | 
|(Contact Center) www.mercantilesolutions.com                                                                                                                                                                                                                                                          |  | (e)
    $150,000 Subordinated Debenture                          |  | 6/30/14           |  |             |    |   |      |  |           |                   |  |  |                           | 
|                                                                                                                                                                                                                                                                                                      |  | at 8% due January 31, 2022.                                      |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|                                                                                                                                                                                                                                                                                                      |  | Warrant for 3.29% Membership                                     |  | 10/22/12          |  |             |    |   |      |  | 150,000   |                   |  |  | -                         | 
|                                                                                                                                                                                                                                                                                                      |  | Interests.  Option for 1.5%                                      |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|                                                                                                                                                                                                                                                                                                      |  | Membership Interests.                                            |  |                   |  |             |    |   |      |  | 97,625    |                   |  |  | -                         | 
|                                                                                                                                                                                                                                                                                                      |  | Total
    Mercantile                                             |  |                   |  |             |    |   |      |  | 1,446,665 |                   |  |  | 500,000                   | 
|                                                                                                                                                                                                                                                                                                      |  |                                                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|Open Exchange, Inc. (g)                                                                                                                                                                                                                                                                               |  | 397,899 Series C Preferred                                       |  | 11/13/13          |  |             | 4  | % |      |  | 1,193,697 |                   |  |  | 543,283                   | 
|(Formerly KnowledgeVision Systems, Inc.)                                                                                                                                                                                                                                                              |  | 397,899 Common.                                                  |  | 10/22/19          |  |             |    |   |      |  | 208,243   |                   |  |  | 108,656                   | 
|Lincoln, MA.  Online presentation and training                                                                                                                                                                                                                                                        |  | $450,000 Replacement Term Note at                                |  | 10/22/19          |  |             |    |   |      |  |           |                   |  |  |                           | 
|software.  (Software)                                                                                                                                                                                                                                                                                 |  | 9% due September 30,
    2022.                                   |  |                   |  |             |    |   |      |  | 450,000   |                   |  |  | 450,000                   | 
|www.openexc.com                                                                                                                                                                                                                                                                                       |  | Total
    Open Exchange                                          |  |                   |  |             |    |   |      |  | 1,851,940 |                   |  |  | 1,101,939                 | 
|                                                                                                                                                                                                                                                                                                      |  |                                                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|Owl
                                 Rock Capital Corporation NYSE: ORRC (n) Public BDC New
                                         York, NY.                                                                                                                                                        |  | 30,000 shares.                                                   |  | 3/16/20           |  |             | <1 | % |      |  | 347,067   |                   |  |  | 364,700                   | 
|                                                                                                                                                                                                                                                                                                      |  |                                                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|PennantPark
                                 Investment Corporation NASDAQ: PNNT (n) Public BDC New
                                         York, NY.                                                                                                                                                |  | 100,000 shares.                                                  |  | 8/13/20           |  |             | <1 | % |      |  | 370,130   |                   |  |  | 322,000                   | 
|                                                                                                                                                                                                                                                                                                      |  |                                                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|PostProcess
                                 Technologies, Inc. (e)(g) Buffalo,
                                         NY. Provides innovative solutions for the post-processing of additive manufactured 3D
                                         parts. (Manufacturing) www.postprocess.com    |  | 360,002 Series A1 Preferred.                                     |  | 11/1/19           |  |             | <1 | % |      |  | 348,875   |                   |  |  | 471,603                   | 
|                                                                                                                                                                                                                                                                                                      |  |                                                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|Rheonix, Inc. (e)                                                                                                                                                                                                                                                                                     |  | 9,676 Common.                                                    |  | 10/29/09          |  |             | 4  | % |      |  | -         |                   |  |  | -                         | 
|Ithaca, NY.  Developer of fully automated                                                                                                                                                                                                                                                             |  | (g)
    1,839,422 Series A Preferred.                            |  | 12/12/13          |  |             |    |   |      |  | 2,099,999 |                   |  |  | -                         | 
|microfluidic based molecular assay and diagnostic                                                                                                                                                                                                                                                     |  | (g)
    50,593 Common.                                           |  | 10/24/09          |  |             |    |   |      |  | -         |                   |  |  | -                         | 
|testing devices. (Health Care)                                                                                                                                                                                                                                                                        |  | (g)
    589,420 Series B Preferred.                              |  | 9/29/15           |  |             |    |   |      |  | 702,732   |                   |  |  | 702,732                   | 
|www.rheonix.com                                                                                                                                                                                                                                                                                       |  | Total
    Rheonix                                                |  |                   |  |             |    |   |      |  | 2,802,731 |                   |  |  | 702,732                   | 
|                                                                                                                                                                                                                                                                                                      |  |                                                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|Science and Medicine Group, Inc. (SMG) (g)                                                                                                                                                                                                                                                            |  | $1,900,000 Promissory Note
    at 12% due                        |  | 7/31/20           |  |             | 0  | % |      |  |           |                   |  |  |                           | 
|Arlington,
                                 VA. Research and advisory firm serving the life science, analytical instrument, diagnostic, healthcare,
                                 radiology, and dental industries. (Health Care)
                                 www.scienceandmedicinegroup.com |  | March 5, 2023.                                                   |  |                   |  |             |    |   |      |  | 1,900,000 |                   |  |  | 1,900,000                 | 



6







RAND
CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

September
30, 2020 (Continued)

(Unaudited)



|Company,
                                         Geographic Location, Business Description,
                                         (Industry) and Website |  | (a)  Type
                                         of Investment |  | (b) Date Acquired |  | (c)  Equity |    |   | Cost |   |            | (d)(f) Fair Value |  |   | Percent
    of Net Assets | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------------------------------------------- |  | ----------------- |  | ----------- | -- | - | ---- | - | ---------- | ----------------- |  | - | ------------------------- | 
|                                                                                                                                                             |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|SocialFlow, Inc. (e)(g)                                                                                                                                      |  | 1,049,538 Series B Preferred.                                    |  | 4/5/13            |  |             | 4  | % |      |   | 500,000    |                   |  |   | 209,908                   | 
|New York, NY.  Provides instant analysis of                                                                                                                  |  | 1,204,819 Series B-1 Preferred.                                  |  | 4/8/14            |  |             |    |   |      |   | 750,000    |                   |  |   | 324,761                   | 
|social networks using a proprietary, predictive                                                                                                              |  | 717,772 Series C Preferred.                                      |  | 6/26/15           |  |             |    |   |      |   | 500,000    |                   |  |   | 215,332                   | 
|analytic algorithm to optimize advertising
    and                                                                                                           |  | Total
    Social Flow                                            |  |                   |  |             |    |   |      |   | 1,750,000  |                   |  |   | 750,000                   | 
|publishing.  (Software) www.socialflow.com                                                                                                                   |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|                                                                                                                                                             |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|Somerset
                                 Gas Transmission Company, LLC (e)(m)                                                                               |  | 26.5337 Units.                                                   |  | 4/1/05            |  |             | 3  | % |      |   | 719,097    |                   |  |   | 500,000                   | 
|Columbus, OH. Natural gas transportation.
    (Oil and Gas) www.somersetgas.com                                                                              |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|                                                                                                                                                             |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|TCG
                                 BDC, Inc. NASDAQ: CGBD (n) Public BDC                                                                                   |  | 40,000 shares.                                                   |  | 8/13/20           |  |             | <1 | % |      |   | 376,996    |                   |  |   | 367,466                   | 
|New York, NY.                                                                                                                                                |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|                                                                                                                                                             |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|Other Non-Control/Non-Affiliate Investments:                                                                                                                 |  | Membership Interest.                                             |  | 10/1/98           |  |             | 5  | % |      |   | 310,357    |                   |  |   | -                         | 
|DataView,
                                 LLC (e)                                                                                                           |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|(Software)                                                                                                                                                   |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|                                                                                                                                                             |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|UStec/Wi3
                                         (e)                                                                                                       |  | Common stock.                                                    |  | 12/17/98          |  |             | <1 | % |      |   | 100,500    |                   |  |   | -                         | 
|(Manufacturing)                                                                                                                                              |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|Subtotal
                                 Non-Control/Non-Affiliate Investments                                                                              |  |                                                                  |  |                   |  |             |    |   |      | $ | 26,961,995 |                   |  | $ | 26,223,106                | 
|                                                                                                                                                             |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|Affiliate Investments – 30.9% of net assets
    (k)                                                                                                          |  | 1,119,024 Series A-2 Preferred                                   |  | 10/20/14          |  |             | 9  | % |      |   |            |                   |  |   |                           | 
|BeetNPath, LLC (Grainful) (e)(g)(m)                                                                                                                          |  | Membership Units.                                                |  |                   |  |             |    |   |      | $ | 359,000    |                   |  | $ | -                         | 
|Ithaca, NY.  Frozen entrées made from 100%                                                                                                                   |  | 1,032,918 Series B Preferred                                     |  | 10/16/15          |  |             |    |   |      |   |            |                   |  |   |                           | 
|whole grain steel cut oats under Grainful brand                                                                                                              |  | Membership Units.                                                |  |                   |  |             |    |   |      |   | 261,277    |                   |  |   | -                         | 
|name.  (Consumer Product)                                                                                                                                    |  | $262,626.64 Convertible Secured Notes                            |  | 6/17/16           |  |             |    |   |      |   |            |                   |  |   |                           | 
|www.grainful.com                                                                                                                                             |  | at 8% due December 21,
    2019.                                 |  |                   |  |             |    |   |      |   | 262,627    |                   |  |   | -                         | 
|                                                                                                                                                             |  | Total
    BeetNPath                                              |  |                   |  |             |    |   |      |   | 882,904    |                   |  |   | -                         | 
|                                                                                                                                                             |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|Carolina Skiff LLC (e)(g)(m)                                                                                                                                 |  | 6.0825% Class A Common Membership                                |  | 1/30/04           |  |             | 7  | % |      |   |            |                   |  |   |                           | 
|Waycross, GA.  Manufacturer of ocean fishing                                                                                                                 |  | Interest.                                                        |  |                   |  |             |    |   |      |   | 15,000     |                   |  |   | 1,750,000                 | 
|and pleasure boats.  (Manufacturing)                                                                                                                         |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|www.carolinaskiff.com                                                                                                                                        |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|                                                                                                                                                             |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|ClearView
Social, Inc. (e)(g)                                                                                                                                |  | 312,500 Series Seed Plus Preferred.                              |  | 1/4/16            |  |             | 6  | % |      |   | 200,000    |                   |  |   | 200,000                   | 
|Buffalo, NY. Social media publishing tool for 
    law, CPA and professional firms. (Software)
    www.clearviewsocial.com                                   |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|                                                                                                                                                             |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|Filterworks Acquisition USA, LLC (l)(m)                                                                                                                      |  | $2,283,702 Term Note at 12% (+2%                                 |  | 11/8/19           |  |             | 9  | % |      |   |            |                   |  |   |                           | 
|Deerfield Beach, FL.  Provides spray booth                                                                                                                   |  | PIK) due December 4, 2023.                                       |  |                   |  |             |    |   |      |   | 2,337,882  |                   |  |   | 2,337,882                 | 
|equipment, frame repair machines and paint
    booth                                                                                                         |  | 562.5 Class A Units                                              |  |                   |  |             |    |   |      |   | 562,500    |                   |  |   | 562,500                   | 
|filter services for collision shops. (Automotive)                                                                                                            |  | Total
    Filterworks                                            |  |                   |  |             |    |   |      |   | 2,900,382  |                   |  |   | 2,900,382                 | 
|www.filterworksusa.com                                                                                                                                       |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|                                                                                                                                                             |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|Genicon, Inc. (e)(g)(l)                                                                                                                                      |  | 1,586,902 Series B Preferred.                                    |  | 4/10/15           |  |             | 6  | % |      |   | 1,000,000  |                   |  |   | -                         | 
|Winter Park, FL.  Designs, produces and                                                                                                                      |  | $3,250,000 Promissory Notes at 10%                               |  | 11/2/18           |  |             |    |   |      |   |            |                   |  |   |                           | 
|distributes patented surgical instrumentation.                                                                                                               |  | due June 12, 2022, (10% PIK).                                    |  |                   |  |             |    |   |      |   | 3,743,377  |                   |  |   | -                         | 
|(Health Care)                                                                                                                                                |  | $250,000 Promissory
    Note at 10% due                          |  | 6/14/19           |  |             |    |   |      |   |            |                   |  |   |                           | 
|www.geniconendo.com                                                                                                                                          |  | June 12, 2021 (10% PIK).                                         |  |                   |  |             |    |   |      |   | 262,184    |                   |  |   | 250,000                   | 
|                                                                                                                                                             |  | Warrants for Common.                                             |  | 11/2/18           |  |             |    |   |      |   | 120,000    |                   |  |   | -                         | 
|                                                                                                                                                             |  | Total Genicon                                                    |  |                   |  |             |    |   |      |   | 5,125,561  |                   |  |   | 250,000                   | 
|                                                                                                                                                             |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|Knoa Software, Inc. (e)(g)                                                                                                                                   |  | 973,533 Series A-1 Convertible                                   |  | 11/20/12          |  |             | 7  | % |      |   |            |                   |  |   |                           | 
|New York, NY.  End user experience                                                                                                                           |  | Preferred.                                                       |  |                   |  |             |    |   |      |   | 750,000    |                   |  |   | 750,000                   | 
|management and performance (EMP) solutions                                                                                                                   |  | 1,876,922 Series B Preferred.                                    |  | 6/9/14            |  |             |    |   |      |   | 479,155    |                   |  |   | 479,155                   | 
|utilizing enterprise applications.  (Software)                                                                                                               |  | Total
    Knoa                                                   |  |                   |  |             |    |   |      |   | 1,229,155  |                   |  |   | 1,229,155                 | 
|www.knoa.com                                                                                                                                                 |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 



7







RAND
CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

September
30, 2020 (Continued)

(Unaudited)



|Company,
                                         Geographic Location, Business Description,
                                         (Industry) and Website                                         |  | (a)  Type
                                         of Investment |  | (b) Date Acquired |  | (c)  Equity |    |   | Cost |   |            | (d)(f) Fair Value |  |   | Percent
    of Net Assets | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------- |  | ----------------- |  | ----------- | -- | - | ---- | - | ---------- | ----------------- |  | - | ------------------------- | 
|                                                                                                                                                                                                     |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|Mezmeriz,
                                         Inc. (e)(g)                                                                                                                                       |  | 1,554,565
    Series Seed Preferred.                             |  | 5/14/15           |  |             | 12 | % |      |   | 742,850    |                   |  |   | -                         | 
|Ithaca, NY. Technology company developing
    novel reality capture tools for 3D mapping, reality
    modeling, object tracking and classification.
    (Electronics Developer)
    www.mezmeriz.com |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|                                                                                                                                                                                                     |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|Microcision
    LLC (g)                                                                                                                                                                              |  | $1,500,000 Subordinated
    Promissory                           |  | 1/10/20           |  |             | 5  | % |      |   |            |                   |  |   |                           | 
|Pennsauken Township,
    NJ.  Manufacturer of                                                                                                                                                        |  | Note at 11% due January
    10, 2025.                            |  |                   |  |             |    |   |      |   | 1,406,498  |                   |  |   | 1,406,498                 | 
|precision machined medical
    implants,                                                                                                                                                             |  | Membership Interest
    Purchase Warrant                         |  | 1/10/20           |  |             |    |   |      |   |            |                   |  |   |                           | 
|components
    and assemblies. (Manufacturing)                                                                                                                                                       |  | for
    5%.                                                      |  |                   |  |             |    |   |      |   | 110,000    |                   |  |   | 110,000                   | 
|www.microcision.com                                                                                                                                                                                  |  | Total
    Microcision                                            |  |                   |  |             |    |   |      |   | 1,516,498  |                   |  |   | 1,516,498                 | 
|                                                                                                                                                                                                     |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|New
                                 Monarch Machine Tool, Inc. (e)(g)                                                                                                                               |  | 22.84 Common.                                                    |  | 1/17/08           |  |             | 15 | % |      |   | 22,841     |                   |  |   | 22,841                    | 
|Cortland, NY. Manufactures and services
    vertical/horizontal machining centers.
    (Manufacturing)
    www.monarchmt.com                                                                         |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|                                                                                                                                                                                                     |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|OnCore
Golf Technology, Inc. (e)(g)                                                                                                                                                                  |  | 300,483 Preferred AA.                                            |  | 11/30/18          |  |             | 8  | % |      |   | 752,712    |                   |  |   | 300,000                   | 
|Buffalo, NY. Patented and proprietary golf balls
    utilizing technology and innovation.
    (Consumer Product)
    www.oncoregolf.com                                                              |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|                                                                                                                                                                                                     |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|SciAps,
    Inc. (e)(g)                                                                                                                                                                              |  | 187,500 Series A Preferred.                                      |  | 7/12/13           |  |             | 6  | % |      |   | 1,500,000  |                   |  |   | -                         | 
|Woburn, MA.  Instrumentation
    company                                                                                                                                                             |  | 274,299 Series A1 Convertible
    Preferred.                     |  | 4/4/14            |  |             |    |   |      |   | 504,710    |                   |  |   | -                         | 
|producing portable analytical
    devices using XRF,                                                                                                                                                 |  | 117,371 Series B Convertible
    Preferred.                      |  | 8/31/15           |  |             |    |   |      |   | 250,000    |                   |  |   | 250,000                   | 
|LIBS and RAMAN spectroscopy
    to identify                                                                                                                                                          |  | 113,636 Series C Convertible
    Preferred.                      |  | 4/7/16            |  |             |    |   |      |   | 175,000    |                   |  |   | 175,000                   | 
|compounds, minerals,
    and elements.                                                                                                                                                               |  | 369,698 Series C1 Convertible
    Preferred.                     |  | 4/7/16            |  |             |    |   |      |   | 399,274    |                   |  |   | 399,274                   | 
|(Manufacturing)                                                                                                                                                                                      |  | 147,059 Series D Convertible
    Preferred.                      |  | 5/9/17            |  |             |    |   |      |   | 250,000    |                   |  |   | 250,000                   | 
|www.sciaps.com                                                                                                                                                                                       |  | Warrant to purchase
    Series D-1                               |  | 5/9/17            |  |             |    |   |      |   |            |                   |  |   |                           | 
|                                                                                                                                                                                                     |  | Preferred.                                                       |  |                   |  |             |    |   |      |   | 45,000     |                   |  |   | 45,000                    | 
|                                                                                                                                                                                                     |  | $1,500,000 Secured Subordinated                                  |  | 4/23/20           |  |             |    |   |      |   |            |                   |  |   |                           | 
|                                                                                                                                                                                                     |  | Promissory Note at 12%
    due April 23,                         |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|                                                                                                                                                                                                     |  | 2023.                                                            |  |                   |  |             |    |   |      |   | 1,461,250  |                   |  |   | 1,461,250                 | 
|                                                                                                                                                                                                     |  | Total
    SciAps                                                 |  |                   |  |             |    |   |      |   | 4,585,234  |                   |  |   | 2,580,524                 | 
|                                                                                                                                                                                                     |  | (i)
    Interest receivable $78,500.                             |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|                                                                                                                                                                                                     |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|Teleservices
    Solutions Holdings, LLC (e)(g)(l)                                                                                                                                                   |  | 250,000 Class B Preferred
    Units.                             |  | 5/30/14           |  |             | 6  | % |      |   | 250,000    |                   |  |   | -                         | 
|Montvale, NJ.  Customer
    contact center                                                                                                                                                           |  | 1,000,000 Class C Preferred
    Units.                           |  | 5/30/14           |  |             |    |   |      |   | 1,190,680  |                   |  |   | -                         | 
|specializing in customer
    acquisition and retention                                                                                                                                               |  | 80,000 Class D Preferred
    Units.                              |  | 12/19/14          |  |             |    |   |      |   | 91,200     |                   |  |   | -                         | 
|for selected industries.  (Contact
    Center)                                                                                                                                                       |  | 104,198 Class E Preferred
    Units.                             |  | 6/10/15           |  |             |    |   |      |   | -          |                   |  |   | -                         | 
|www.ipacesetters.com                                                                                                                                                                                 |  | PIK dividend for Series
    C and D at 12%                       |  | 3/27/16           |  |             |    |   |      |   |            |                   |  |   |                           | 
|                                                                                                                                                                                                     |  | and
    14%, respectively.                                       |  |                   |  |             |    |   |      |   | 104,198    |                   |  |   | -                         | 
|                                                                                                                                                                                                     |  | Total
    Teleservices                                           |  |                   |  |             |    |   |      |   | 1,636,078  |                   |  |   | -                         | 
|                                                                                                                                                                                                     |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|Tilson
    Technology Management, Inc. (g)                                                                                                                                                           |  | *120,000 Series B Preferred.                                     |  | 1/20/15           |  |             | 9  | % |      |   | 600,000    |                   |  |   | 1,950,000                 | 
|Portland, ME.  Provides
    network deployment                                                                                                                                                       |  | *21,391 Series C Preferred.                                      |  | 9/28/16           |  |             |    |   |      |   | 200,000    |                   |  |   | 347,604                   | 
|construction and information
    system services                                                                                                                                                     |  | *70,176 Series D Preferred.                                      |  | 9/29/17           |  |             |    |   |      |   | 800,000    |                   |  |   | 1,140,360                 | 
|management for cellular,
    fiber optic and wireless                                                                                                                                                |  | *15,385 Series E Preferred.                                      |  | 3/15/19           |  |             |    |   |      |   | 500,012    |                   |  |   | 500,012                   | 
|systems providers.  Its
    affiliated entity, SQF, LLC                                                                                                                                              |  | 211,567 SQF Hold Co.
    Common.                                 |  | 3/15/19           |  |             |    |   |      |   | -          |                   |  |   | 22,036                    | 
|is
    a CLEC supporting small cell 5G deployment.                                                                                                                                                   |  | 23,077
    Series F Preferred.                                   |  | 6/15/20           |  |             |    |   |      |   | 750,003    |                   |  |   | 750,003                   | 
|(Professional
    Services)                                                                                                                                                                          |  | Total
    Tilson                                                 |  |                   |  |             |    |   |      |   | 2,850,015  |                   |  |   | 4,710,015                 | 
|www.tilsontech.com                                                                                                                                                                                   |  | *2.5% dividend payable
    quarterly.                            |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|                                                                                                                                                                                                     |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|Other
    Affiliate Investments:                                                                                                                                                                     |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|G-TEC
    Natural Gas Systems (e)(m) (Manufacturing)                                                                                                                                                 |  | Membership
    Interest                                          |  | 8/31/99           |  |             | 17 | % |      |   | 400,000    |                   |  |   | -                         | 
|                                                                                                                                                                                                     |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  |   |                           | 
|Subtotal
    Affiliate Investments                                                                                                                                                                   |  |                                                                  |  |                   |  |             |    |   |      | $ | 22,859,230 |                   |  | $ | 15,459,415                | 
|Total
    investments – 83.4%                                                                                                                                                                        |  |                                                                  |  |                   |  |             |    |   |      | $ | 49,821,225 |                   |  | $ | 41,682,521                | 
|Other
    Assets in excess of liabilities – 16.6%                                                                                                                                                    |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  | $ | 8,267,632                 | 
|Net
    Assets  – 100%                                                                                                                                                                               |  |                                                                  |  |                   |  |             |    |   |      |   |            |                   |  | $ | 49,950,153                | 



8







RAND
CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

September
30, 2020 (Continued)

(Unaudited)





Notes
to the Consolidated Schedule of Portfolio Investments



(a)
At September 30, 2020, restricted securities represented 93% of the fair value of the investment portfolio. Restricted securities
are subject to one or more restrictions on resale and are not freely marketable. Type of investment for equity position is in
the form of shares unless otherwise noted as units or interests, i.e., preferred shares, common shares.



(b)
The Date Acquired column indicates the date on which the Corporation first acquired an investment.



(c)
Each equity percentage estimates the Corporation’s ownership interest in the applicable portfolio investment. The
estimated ownership is calculated based on the percent of outstanding voting securities held by the Corporation or the
potential percentage of voting securities held by the Corporation upon exercise of warrants or conversion of debentures, or
other available data. If applicable, the symbol “<1%” indicates that the Corporation holds an equity interest
of less than one percent.



(d)
The Corporation’s investments are carried at fair value in accordance with Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) 820 “Fair Value Measurements and Disclosures,” which defines fair value
and establishes guidelines for measuring fair value. At September 30, 2020, ASC 820 designates 93% of the Corporation’s
investments as “Level 3” assets. Under the valuation policy of the Corporation, unrestricted publicly traded
securities are valued at the average closing price for these securities for the last three trading days of the reporting
period. Restricted securities are subject to restrictions on resale, and are valued at fair value as determined by our
external investment advisor Rand Capital Management, LLC (“RCM”) and submitted to the Board of Directors for
approval. Fair value is considered to be the amount that the Corporation may reasonably expect to receive for portfolio
securities when sold on the valuation date. Valuations as of any particular date, however, are not necessarily indicative of
amounts which may ultimately be realized as a result of future sales or other dispositions of securities and these favorable
or unfavorable differences could be material. Among the factors considered 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 (see Note 3. “Investments” to the
Consolidated Financial Statements).



(e)
These investments are non-income producing. All other investments are income producing. Non-income producing investments have
not generated cash payments of interest or dividends including LLC tax-related distributions within the last twelve months, or
are not expected to do so going forward. However, if a debt or a preferred equity investment fails to make its most recent payment,
then the investment will also be classified as non-income producing.



(f)
As of September 30, 2020, the total cost of investment securities was approximately $49.8 million. Net unrealized depreciation
was approximately ($8.1) million, which was comprised of $10.1 million of unrealized appreciation of investment securities and
($18.2) million of unrealized depreciation of investment securities. At September 30, 2020, the aggregate gross unrealized gain
for federal income tax purposes was $10.1 million and the aggregate gross unrealized loss for federal income tax purposes was
($16.9) million. The net unrealized loss for federal income tax purposes was ($6.8) million based on a tax cost of $48.6 million.



(g)
Rand Capital SBIC, Inc. investment.



(h)
Reduction in cost and value from previously reported balances reflects current principal repayment.



(i)
Represents interest due (amounts over $50,000) from investments included as interest receivable on the Corporation’s Consolidated
Statements of Financial Position.



(j)
Non-Control/Non-Affiliate Investments are investments that are neither Control Investments nor Affiliate Investments.



(k)
Affiliate Investments are defined by the Investment Company Act of 1940, as amended (“1940 Act”), as those Non-Control
investments in companies in which between 5% and 25% of the voting securities are owned by the Corporation.



(l)
Payment in kind (PIK) represents earned interest that is added to the cost basis of the investment and due at maturity. The amount
of PIK earned is included in the interest rate detailed in the “Type of Investment” column, unless it has been noted
with a (+), in which case the PIK is in addition to the face amount of interest due on the security.



(m)
Equity holdings are held in a wholly owned (100%) “blocker corporation” of Rand Capital Corporation or Rand Capital
SBIC, Inc. for federal income tax and Regulated Investment Company (RIC) compliance.



(n)
Publicly traded company.





9







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

September
30, 2020 (Continued)

(Unaudited)



Investments in and Advances
to Affiliates



|Company                       |  | Type
    of Investment                                           |  | December
    31, 2019 Fair Value |           |  | Net
    Change in Unrealized Appreciation (Depreciation) |   |          | Gross
    Additions (1) |  |   | Gross
    Reductions (2) |  |  | September
    30, 2020 Fair Value |         |   | Net
    Realized Gains (Losses) |   |           | Amount
    of Interest/ Dividend/ Fee Income (3) | 
|----------------------------- |  | ---------------------------------------------------------------- |  | -------------------------------- | --------- |  | -------------------------------------------------------- | - | -------- | ----------------------- |  | - | ------------------------ |  |  | --------------------------------- | ------- | - | ------------------------------- | - | --------- | ------------------------------------------------ | 
|Control
    Investments:      |  |                                                                  |  |                                  |           |  |                                                          |   |          |                         |  |   |                          |  |  |                                   |         |   |                                 |   |           |                                                  | 
|                              |  | Total
    Control Investments                                    |  | $                                | -         |  |                                                          | $ | -        |                         |  | $ | -                        |  |  | $                                 | -       |   |                                 | $ | -         |                                                  | 
|Affiliate
    Investments:    |  |                                                                  |  |                                  |           |  |                                                          |   |          |                         |  |   |                          |  |  |                                   |         |   |                                 |   |           |                                                  | 
|BeetNPath,
    LLC            |  | 1,119,024
    Series A-2 Preferred Membership Units.             |  | $                                | -         |  |                                                          | $ | -        |                         |  | $ | -                        |  |  | $                                 | -       |   |                                 | $ | -         |                                                  | 
|                              |  | 1,032,918
    Series B Preferred Membership Units.               |  |                                  | -         |  |                                                          |   | -        |                         |  |   | -                        |  |  |                                   | -       |   |                                 |   | -         |                                                  | 
|                              |  | $262,626.64
    Convertible Secured Notes at 8%                  |  |                                  | -         |  |                                                          |   | -        |                         |  |   | -                        |  |  |                                   | -       |   |                                 |   | -         |                                                  | 
|                              |  | Total
    BeetNPath                                              |  |                                  | -         |  |                                                          |   | -        |                         |  |   | -                        |  |  |                                   | -       |   |                                 |   | -         |                                                  | 
|                              |  |                                                                  |  |                                  |           |  |                                                          |   |          |                         |  |   |                          |  |  |                                   |         |   |                                 |   |           |                                                  | 
|Carolina
    Skiff LLC        |  | 6.0825%
    Class A Common Membership interest.                  |  |                                  | 1,750,000 |  |                                                          |   | -        |                         |  |   | -                        |  |  |                                   | -       |   |                                 |   | 1,750,000 |                                                  | 
|                              |  |                                                                  |  |                                  |           |  |                                                          |   |          |                         |  |   |                          |  |  |                                   |         |   |                                 |   |           |                                                  | 
|ClearView
    Social, Inc.    |  | 312,500
    Series Seed Plus Preferred.                          |  |                                  | 200,000   |  |                                                          |   | -        |                         |  |   | -                        |  |  |                                   | -       |   |                                 |   | 200,000   |                                                  | 
|                              |  |                                                                  |  |                                  |           |  |                                                          |   |          |                         |  |   |                          |  |  |                                   |         |   |                                 |   |           |                                                  | 
|Filterworks                   |  | $2,283,702
    Term Note at 12%.                                 |  |                                  | 2,302,653 |  |                                                          |   | -        |                         |  |   | 35,229                   |  |  |                                   | -       |   |                                 |   | 2,337,882 |                                                  | 
|Acquisition
    USA,          |  | 562.5
    Class A Units.                                         |  |                                  | 562,500   |  |                                                          |   | -        |                         |  |   | -                        |  |  |                                   | -       |   |                                 |   | 562,500   |                                                  | 
|LLC                           |  | Total
    Filterworks                                            |  |                                  | 2,865,153 |  |                                                          |   | -        |                         |  |   | 35,229                   |  |  |                                   | -       |   |                                 |   | 2,900,382 |                                                  | 
|                              |  |                                                                  |  |                                  |           |  |                                                          |   |          |                         |  |   |                          |  |  |                                   |         |   |                                 |   |           |                                                  | 
|Genicon,
    Inc.             |  | 1,586,902
    Series B Preferred.                                |  |                                  | -         |  |                                                          |   | -        |                         |  |   | -                        |  |  |                                   | -       |   |                                 |   | -         |                                                  | 
|                              |  | $3,250,000
    Promissory Notes at 10%.                          |  |                                  | 500,000   |  |                                                          |   | (500,000 | )                       |  |   | -                        |  |  |                                   | -       |   |                                 |   | -         |                                                  | 
|                              |  | $250,000
    Promissory Note at 10%                              |  |                                  | 250,000   |  |                                                          |   | -        |                         |  |   | -                        |  |  |                                   | -       |   |                                 |   | 250,000   |                                                  | 
|                              |  | Warrant
    for Common.                                          |  |                                  | -         |  |                                                          |   | -        |                         |  |   | -                        |  |  |                                   | -       |   |                                 |   | -         |                                                  | 
|                              |  | Total
    Genicon                                                |  |                                  | 750,000   |  |                                                          |   | (500,000 | )                       |  |   | -                        |  |  |                                   | -       |   |                                 |   | 250,000   |                                                  | 
|                              |  |                                                                  |  |                                  |           |  |                                                          |   |          |                         |  |   |                          |  |  |                                   |         |   |                                 |   |           |                                                  | 
|G-TEC
    Natural Gas Systems |  | 16.639%
    Class A Membership Interest. 8% cumulative dividend. |  |                                  | -         |  |                                                          |   | -        |                         |  |   | -                        |  |  |                                   | -       |   |                                 |   | -         |                                                  | 
|                              |  |                                                                  |  |                                  |           |  |                                                          |   |          |                         |  |   |                          |  |  |                                   |         |   |                                 |   |           |                                                  | 
|Knoa
    Software, Inc.       |  | 973,533
    Series A-1 Convertible Preferred.                    |  |                                  | 750,000   |  |                                                          |   | -        |                         |  |   | -                        |  |  |                                   | -       |   |                                 |   | 750,000   |                                                  | 
|                              |  | 1,876,922
    Series B Preferred.                                |  |                                  | 479,155   |  |                                                          |   | -        |                         |  |   | -                        |  |  |                                   | -       |   |                                 |   | 479,155   |                                                  | 
|                              |  | Total
    Knoa                                                   |  |                                  | 1,229,155 |  |                                                          |   | -        |                         |  |   | -                        |  |  |                                   | -       |   |                                 |   | 1,229,155 |                                                  | 
|                              |  |                                                                  |  |                                  |           |  |                                                          |   |          |                         |  |   |                          |  |  |                                   |         |   |                                 |   |           |                                                  | 
|Mezmeriz,
    Inc.            |  | 1,554,565
    Series Seed Preferred.                             |  |                                  | -         |  |                                                          |   | -        |                         |  |   | -                        |  |  |                                   | -       |   |                                 |   | -         |                                                  | 
|                              |  |                                                                  |  |                                  |           |  |                                                          |   |          |                         |  |   |                          |  |  |                                   |         |   |                                 |   |           |                                                  | 
|Microcision                   |  | $1,500,000
    Subordinated Promissory Note at 10%               |  |                                  | -         |  |                                                          |   | -        |                         |  |   | 1,406,498                |  |  |                                   | -       |   |                                 |   | 1,406,498 |                                                  | 
|                              |  | Membership
    Interest Purchase Warrant for 5%                  |  |                                  | -         |  |                                                          |   | -        |                         |  |   | 110,000                  |  |  |                                   | -       |   |                                 |   | 110,000   |                                                  | 
|                              |  | Total
    Microcision                                            |  |                                  | -         |  |                                                          |   | -        |                         |  |   | 1,516,498                |  |  |                                   | -       |   |                                 |   | 1,516,498 |                                                  | 
|                              |  |                                                                  |  |                                  |           |  |                                                          |   |          |                         |  |   |                          |  |  |                                   |         |   |                                 |   |           |                                                  | 
|New
    Monarch               |  | 22.84
    Common.                                                |  |                                  | 22,841    |  |                                                          |   | -        |                         |  |   | -                        |  |  |                                   | -       |   |                                 |   | 22,841    |                                                  | 
|Machine Tool, Inc.            |  |                                                                  |  |                                  |           |  |                                                          |   |          |                         |  |   |                          |  |  |                                   |         |   |                                 |   |           |                                                  | 
|                              |  |                                                                  |  |                                  |           |  |                                                          |   |          |                         |  |   |                          |  |  |                                   |         |   |                                 |   |           |                                                  | 
|OnCore
    Golf               |  | 300,483
    Series AA Preferred.                                 |  |                                  | 300,000   |  |                                                          |   | -        |                         |  |   | -                        |  |  |                                   | -       |   |                                 |   | 300,000   |                                                  | 
|Technology, Inc.              |  |                                                                  |  |                                  |           |  |                                                          |   |          |                         |  |   |                          |  |  |                                   |         |   |                                 |   |           |                                                  | 
|                              |  |                                                                  |  |                                  |           |  |                                                          |   |          |                         |  |   |                          |  |  |                                   |         |   |                                 |   |           |                                                  | 
|SciAps,
    Inc.              |  | 187,500
    Series A Preferred.                                  |  |                                  | -         |  |                                                          |   | -        |                         |  |   | -                        |  |  |                                   | -       |   |                                 |   | -         |                                                  | 
|                              |  | 274,299
    Series A-1 Convertible Preferred.                    |  |                                  | -         |  |                                                          |   | -        |                         |  |   | -                        |  |  |                                   | -       |   |                                 |   | -         |                                                  | 
|                              |  | 117,371
    Series B Convertible Preferred.                      |  |                                  | 250,000   |  |                                                          |   | -        |                         |  |   | -                        |  |  |                                   | -       |   |                                 |   | 250,000   |                                                  | 
|                              |  | 113,636
    Series C Convertible Preferred.                      |  |                                  | 175,000   |  |                                                          |   | -        |                         |  |   | -                        |  |  |                                   | -       |   |                                 |   | 175,000   |                                                  | 
|                              |  | 369,698
    Series C-1 Convertible Preferred.                    |  |                                  | 399,274   |  |                                                          |   | -        |                         |  |   | -                        |  |  |                                   | -       |   |                                 |   | 399,274   |                                                  | 
|                              |  | 147,059
    Series D Convertible Preferred.                      |  |                                  | 250,000   |  |                                                          |   | -        |                         |  |   | -                        |  |  |                                   | -       |   |                                 |   | 250,000   |                                                  | 
|                              |  | Warrant
    to Purchase Series D-1 Preferred.                    |  |                                  | -         |  |                                                          |   | -        |                         |  |   | 45,000                   |  |  |                                   |         |   |                                 |   | 45,000    |                                                  | 
|                              |  | $1,500,000
    Subordinated Promissory Note at 12%.              |  |                                  | -         |  |                                                          |   | -        |                         |  |   | 1,500,000                |  |  |                                   | (38,750 | ) |                                 |   | 1,461,250 |                                                  | 
|                              |  | Total
    SciAps                                                 |  |                                  | 1,074,274 |  |                                                          |   | -        |                         |  |   | 1,545,000                |  |  |                                   | (38,750 | ) |                                 |   | 2,580,524 |                                                  | 
|                              |  |                                                                  |  |                                  |           |  |                                                          |   |          |                         |  |   |                          |  |  |                                   |         |   |                                 |   |           |                                                  | 
|Teleservices                  |  | 250,000
    Class B Preferred Units.                             |  |                                  | -         |  |                                                          |   | -        |                         |  |   | -                        |  |  |                                   | -       |   |                                 |   | -         |                                                  | 
|Solutions Holdings, LLC       |  | 1,000,000
    Class C Preferred Units.                           |  |                                  | -         |  |                                                          |   | -        |                         |  |   | -                        |  |  |                                   | -       |   |                                 |   | -         |                                                  | 
|                              |  | 80,000
    Class D Preferred Units.                              |  |                                  | -         |  |                                                          |   | -        |                         |  |   | -                        |  |  |                                   | -       |   |                                 |   | -         |                                                  | 
|                              |  | 104,198
    Class E Preferred Units.                             |  |                                  | -         |  |                                                          |   | -        |                         |  |   | -                        |  |  |                                   | -       |   |                                 |   | -         |                                                  | 
|                              |  | Total
    Teleservices                                           |  |                                  | -         |  |                                                          |   | -        |                         |  |   | -                        |  |  |                                   | -       |   |                                 |   | -         |                                                  | 





10







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

September
30, 2020 (Continued)

(Unaudited)



Investments in and Advances
to Affiliates



|Company              |  | Type
    of Investment                      |  | December
                                         31,
        2019
        Fair
        Value |            |  | Net
                                         Change in
        Unrealized
        Appreciation
        (Depreciation) |   |          | Gross
        Additions
        (1) |  |   | Gross
        Additions
        (2) |  |  | September
                                         30,
        2020
        Fair
        Value |         |   | Net
        Realized
        Gains
        (Losses) |   |            | Amount
    of Interest/ Dividend/ Fee Income (3) | 
|-------------------- |  | ------------------------------------------- |  | --------------------------------------------------------------------------------------------- | ---------- |  | --------------------------------------------------------------------------------------------------------------------- | - | -------- | ----------------------------------- |  | - | ----------------------------------- |  |  | ---------------------------------------------------------------------------------------------- | ------- | - | --------------------------------------------------- | - | ---------- | ------------------------------------------------ | 
|Tilson               |  | 120,000
    Series B Preferred.             |  |                                                                                               | 1,950,000  |  |                                                                                                                       |   | -        |                                     |  |   | -                                   |  |  |                                                                                                | -       |   |                                                     |   | 1,950,000  |                                                  | 
|Technology           |  | 21,391
    Series C Preferred.              |  |                                                                                               | 347,604    |  |                                                                                                                       |   | -        |                                     |  |   | -                                   |  |  |                                                                                                | -       |   |                                                     |   | 347,604    |                                                  | 
|Management,
    Inc. |  | 70,176
    Series D Preferred.              |  |                                                                                               | 1,140,360  |  |                                                                                                                       |   | -        |                                     |  |   | -                                   |  |  |                                                                                                | -       |   |                                                     |   | 1,140,360  |                                                  | 
|                     |  | 15,385
    Series E Preferred.              |  |                                                                                               | 500,012    |  |                                                                                                                       |   | -        |                                     |  |   | -                                   |  |  |                                                                                                | -       |   |                                                     |   | 500,012    |                                                  | 
|                     |  | 23,077
    Series F Preferred.              |  |                                                                                               | -          |  |                                                                                                                       |   | -        |                                     |  |   | 750,003                             |  |  |                                                                                                | -       |   |                                                     |   | 750,003    |                                                  | 
|                     |  | 211,567
    SQF Hold Co. Common.            |  |                                                                                               | 22,036     |  |                                                                                                                       |   | -        |                                     |  |   | -                                   |  |  |                                                                                                | -       |   |                                                     |   | 22,036     |                                                  | 
|                     |  | Total
    Tilson                            |  |                                                                                               | 3,960,012  |  |                                                                                                                       |   | -        |                                     |  |   | 750,003                             |  |  |                                                                                                | -       |   |                                                     |   | 4,710,015  |                                                  | 
|                     |  |                                             |  |                                                                                               |            |  |                                                                                                                       |   |          |                                     |  |   |                                     |  |  |                                                                                                |         |   |                                                     |   |            |                                                  | 
|                     |  | Total
    Affiliate Investments             |  | $                                                                                             | 12,151,435 |  |                                                                                                                       | $ | (500,000 | )                                   |  | $ | 3,846,730                           |  |  | $                                                                                              | (38,750 | ) |                                                     | $ | 15,459,415 |                                                  | 
|                     |  | Total
    Control and Affiliate Investments |  | $                                                                                             | 12,151,435 |  |                                                                                                                       | $ | (500,000 | )                                   |  | $ | 3,846,730                           |  |  | $                                                                                              | (38,750 | ) |                                                     | $ | 15,459,415 |                                                  | 



This
schedule should be read in conjunction with the Corporation’s Consolidated Financial Statements, including the Notes to
the Consolidated Financial Statements and the Consolidated Schedule of Portfolio Investments.



(1)
Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow on investments,
capitalized interest and the accretion of discounts. Gross additions also include the movement of an existing portfolio company
into this category and out of another category.



(2)
Gross reductions include decreases in the cost basis of investments resulting from principal repayments, sales, note conversions,
the exchange of existing securities for new securities and the movement of an existing portfolio company out of this category
and into another category.



(3)
Represents the total amount of interest, fees or dividends credited to income for the portion of the period an investment was
included in “Control or Affiliate” categories, respectively.





11







RAND
                                         CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

September
30, 2020 (Continued)

(Unaudited)





|Industry Classification |  | Percentage
of
 Total Investments
 (at fair value) as of
 September 30, 2020 |     
|----------------------- |  | --------------------------------------------------------------------------- | ----
|Software                |  |                                                                             | 30.7
|Manufacturing           |  |                                                                             | 18.3
|Professional Services   |  |                                                                             | 14.0
|Entertainment           |  |                                                                             | 10.8
|Healthcare              |  |                                                                             | 9.1 
|Automotive              |  |                                                                             | 7.0 
|BDC Investment Fund     |  |                                                                             | 6.8 
|Contact Center          |  |                                                                             | 1.2 
|Oil and Gas             |  |                                                                             | 1.2 
|Consumer Product        |  |                                                                             | 0.7 
|Marketing               |  |                                                                             | 0.2 
|Total Investments       |  |                                                                             | 100 





12







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

December
31, 2019





|Company,
    Geographic Location, Business 
    Description, (Industry) and Website                                                                                             |  | (a)
        Type
        of Investment     |  | (b)
        Date
        Acquired |  | (c)
        Equity |    |   | Cost |   |           | (d)(f)
        Fair
        Value |  |   | Percent
    of Net Assets | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------ |  | --------------------------------- |  | ------------------ | -- | - | ---- | - | --------- | --------------------------------- |  | - | ------------------------- | 
|Non-Control/Non-Affiliate
    Investments – 46.3% of net assets: (j)                                                                                                            |  |                                            |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|                                                                                                                                                                                |  |                                            |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|ACV
    Auctions, Inc. (e)(g)                                                                                                                                                   |  | 1,181,160
    Series A Preferred.          |  | 8/12/16                           |  |                    | <1 | % |      | $ | 163,000   |                                   |  | $ | 6,531,815                 | 
|Buffalo, NY. Live mobile
    wholesale auctions for new and used car dealers. (Software)                                                                                        |  |                                            |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|www.acvauctions.com                                                                                                                                                             |  |                                            |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|                                                                                                                                                                                |  |                                            |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|Advantage
    24/7 LLC (g)(h)                                                                                                                                                   |  | $140,000 Term Note at
    7% due           |  | 12/30/10                          |  |                    | 0  | % |      |   |           |                                   |  |   |                           | 
|Williamsville, NY. Marketing
    program for wine and                                                                                                                           |  | January 1, 2022                            |  |                                   |  |                    |    |   |      |   | 65,000    |                                   |  |   | 65,000                    | 
|spirits dealers. (Marketing
    Company)                                                                                                                                        |  |                                            |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|www.advantage24-7.com                                                                                                                                                           |  |                                            |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|                                                                                                                                                                                |  |                                            |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|AIKG
    LLC (Andretti) (l)                                                                                                                                                     |  | $4,250,000 Term Notes
    at 12%           |  | 11/8/19                           |  |                    | 0  | % |      |   |           |                                   |  |   |                           | 
|Marietta, GA. Entertainment
    company engaged in                                                                                                                              |  | (+4% PIK) due December 28, 2023.           |  |                                   |  |                    |    |   |      |   | 4,398,125 |                                   |  |   | 4,398,125                 | 
|indoor karting, games
    and food. (Entertainment)                                                                                                                             |  |                                            |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|www.andrettikarting.com                                                                                                                                                         |  |                                            |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|                                                                                                                                                                                |  |                                            |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|Centivo
    Corporation (e)(g)                                                                                                                                                  |  | 190,967 Series A-1 Preferred.              |  | 7/5/17                            |  |                    | <1 | % |      |   | 200,000   |                                   |  |   | 200,000                   | 
|New
    York, NY. Tech-enabled health solutions                                                                                                                                 |  | 337,808
    Series A-2 Preferred.          |  |                                   |  |                    |    |   |      |   | 101,342   |                                   |  |   | 101,342                   | 
|company
    that helps self-insured employers and their                                                                                                                         |  | Total
    Centivo                          |  |                                   |  |                    |    |   |      |   | 301,342   |                                   |  |   | 301,342                   | 
|employees save money
    and have a better experience.                                                                                                                          |  |                                            |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|(Health Care)                                                                                                                                                                   |  |                                            |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|www.centivo.com                                                                                                                                                                 |  |                                            |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|                                                                                                                                                                                |  |                                            |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|Empire
    Genomics, LLC (g)                                                                                                                                                    |  | $1,209,014 Senior Secured                  |  | 6/13/14                           |  |                    | 0  | % |      |   |           |                                   |  |   |                           | 
|Buffalo, NY. Molecular
    diagnostics company that                                                                                                                             |  | Convertible Term Notes
    at 10%          |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|offers a comprehensive
    menu of assay services for                                                                                                                           |  | due December 31, 2020.                     |  |                                   |  |                    |    |   |      |   | 1,308,675 |                                   |  |   | 157,654                   | 
|diagnosing
and guiding patient therapeutic                                                                                                                                      |  | $444,915 Promissory
    Note at 9% (5%     |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|treatments.
    (Health Care) www.empiregenomics.com                                                                                                                            |  | deferred)
    due December 31, 2020.       |  |                                   |  |                    |    |   |      |   | 444,915   |                                   |  |   | 444,915                   | 
|                                                                                                                                                                                |  | Total
    Empire                           |  |                                   |  |                    |    |   |      |   | 1,753,590 |                                   |  |   | 602,569                   | 
|                                                                                                                                                                                |  |                                            |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|First
    Wave Technologies, Inc. (e)(g)                                                                                                                                        |  | 670,443.2 Class A Common.                  |  | 4/19/12                           |  |                    | 4  | % |      |   | 661,563   |                                   |  |   | 33,000                    | 
|Batavia, NY. Sells First
    Crush automated pill crusher that crushes and grinds pills for nursing homes and medical institutions. (Health Care) www.firstwavetechnologies.com |  |                                            |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|                                                                                                                                                                                |  |                                            |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|GiveGab,
    Inc. (e)(g)                                                                                                                                                        |  | 5,084,329 Series Seed
    Preferred.       |  | 3/13/13                           |  |                    | 4  | % |      |   | 616,221   |                                   |  |   | 616,221                   | 
|Ithaca, NY. Nonprofit
    giving platform that provides an easy and effective way for fundraising professionals to raise money online. (Software) www.givegab.com               |  |                                            |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|                                                                                                                                                                                |  |                                            |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|GoNoodle,
    Inc. (g)(l)                                                                                                                                                       |  | $1,500,000 Secured Note
    at 12%         |  | 2/6/15                            |  |                    | <1 | % |      |   |           |                                   |  |   |                           | 
|Nashville, TN. Student
    engagement education                                                                                                                                 |  | (1% PIK) due September 30, 2024.           |  |                                   |  |                    |    |   |      |   | 1,502,458 |                                   |  |   | 1,502,458                 | 
|software providing core
    aligned physical activity                                                                                                                           |  | Warrant for 47,324 Series
    C Preferred. |  |                                   |  |                    |    |   |      |   | 25        |                                   |  |   | 25                        | 
|breaks.
    (Software) www.gonoodle.com                                                                                                                                         |  | Warrant
    for 21,948 Series D Preferred. |  |                                   |  |                    |    |   |      |   | 38        |                                   |  |   | 38                        | 
|                                                                                                                                                                                |  | Total
    GoNoodle                         |  |                                   |  |                    |    |   |      |   | 1,502,521 |                                   |  |   | 1,502,521                 | 
|                                                                                                                                                                                |  |                                            |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|HDI
    Acquisition LLC (Hilton Displays) (l)                                                                                                                                   |  | $1,245,119 Term Loan
    at 12%            |  | 11/8/19                           |  |                    | 0  | % |      |   |           |                                   |  |   |                           | 
|Greenville, NC. HDI
    is engaged in manufacturing,                                                                                                                            |  | (+2% PIK) due June 20, 2023.               |  |                                   |  |                    |    |   |      |   | 1,249,539 |                                   |  |   | 1,249,539                 | 
|installation and maintenance
    of signage and brands.                                                                                                                         |  |                                            |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|(Manufacturing)                                                                                                                                                                 |  |                                            |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|www.hiltondisplays.com                                                                                                                                                          |  |                                            |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|                                                                                                                                                                                |  |                                            |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|Mattison
    Avenue Holdings LLC (l)                                                                                                                                            |  | $1,031,406 Second Amended,                 |  | 11/8/19                           |  |                    | 0  | % |      |   |           |                                   |  |   |                           | 
|Dallas, TX. Provider
    of upscale salon spaces for                                                                                                                            |  | Restated and Consolidated
    Promissory   |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|lease. (Professional
    Services)                                                                                                                                              |  | Note at 14% (2% PIK)                       |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|www.mattisonsalonsuites.com                                                                                                                                                     |  | due June 9, 2022.                          |  |                                   |  |                    |    |   |      |   | 1,036,678 |                                   |  |   | 1,036,678                 | 





13







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

December
31, 2019 (Continued)





|Company,
    Geographic Location, Business 
    Description, (Industry) and Website                                                           |  | (a)
        Type
        of Investment                                            |  | (b)
        Date
        Acquired |  | (c)
        Equity |    |   | Cost |   |            | (d)(f)
        Fair
        Value |  |   | Percent
    of Net Assets | 
|--------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------- |  | --------------------------------- |  | ------------------ | -- | - | ---- | - | ---------- | --------------------------------- |  | - | ------------------------- | 
|Mercantile
    Adjustment Bureau, LLC (g)                                                                                                     |  | $1,199,039 Subordinated
    Secured Note                                          |  | 10/22/12                          |  |                    | 4  | % |      |   |            |                                   |  |   |                           | 
|Williamsville, NY. Full
    service accounts receivable management and collections company.                                                   |  | at
    13% (3% for the calendar year 2019) due January 31, 2022.                  |  |                                   |  |                    |    |   |      |   | 1,199,040  |                                   |  |   | 500,000                   | 
|(Contact
    Center) www.mercantilesolutions.com                                                                                              |  | (e)
    $150,000 Subordinated Debenture at 8% due January 31, 2022.               |  |                                   |  |                    |    |   |      |   | 150,000    |                                   |  |   | -                         | 
|                                                                                                                                              |  | Warrant
    for 3.29% Membership Interests. Option for 1.5% Membership Interests. |  |                                   |  |                    |    |   |      |   | 97,625     |                                   |  |   | -                         | 
|                                                                                                                                              |  | Total
    Mercantile                                                              |  |                                   |  |                    |    |   |      |   | 1,446,665  |                                   |  |   | 500,000                   | 
|                                                                                                                                              |  |                                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|Microcision
    LLC (g)(l)                                                                                                                    |  | $1,500,000 Subordinated
    Promissory                                            |  | 9/24/09                           |  |                    | 0  | % |      |   |            |                                   |  |   |                           | 
|Pennsauken Township,
    NJ. Manufacturer of                                                                                                  |  | Note at 12% (1% PIK)
    due December                                             |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|precision machined medical
    implants, components                                                                                           |  | 31, 2024.                                                                         |  |                                   |  |                    |    |   |      |   | 1,500,000  |                                   |  |   | 1,500,000                 | 
|and assemblies. (Manufacturing)                                                                                                               |  |                                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|www.microcision.com                                                                                                                           |  |                                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|                                                                                                                                              |  |                                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|Open
    Exchange, Inc. (g)                                                                                                                   |  | 397,899 Series C Preferred                                                        |  | 11/13/13                          |  |                    | 4  | % |      |   | 1,193,697  |                                   |  |   | 543,283                   | 
|(Formerly
    KnowledgeVision Systems, Inc.)                                                                                                  |  | 397,899 Common.                                                                   |  |                                   |  |                    |    |   |      |   | 208,243    |                                   |  |   | 108,656                   | 
|Lincoln,
    MA. Online presentation and training software. (Software)                                                                        |  | $450,000
    Replacement Term Note at 9% due September 30, 2022.                  |  |                                   |  |                    |    |   |      |   | 450,000    |                                   |  |   | 450,000                   | 
|www.openexc.com                                                                                                                               |  | Total
    Open Exchange                                                           |  |                                   |  |                    |    |   |      |   | 1,851,940  |                                   |  |   | 1,101,939                 | 
|                                                                                                                                              |  |                                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|Outmatch
    Holdings, LLC (e)(g)                                                                                                             |  | 3,081,522 Class P1 Units.                                                         |  | 11/18/10                          |  |                    | 4  | % |      |   | 2,140,007  |                                   |  |   | 2,140,007                 | 
|Dallas,
    TX. Web based predictive employee                                                                                                 |  | 109,788
    Class C1 Units.                                                       |  |                                   |  |                    |    |   |      |   | 5,489      |                                   |  |   | 5,489                     | 
|selection
    and reference checking. (Software)                                                                                              |  | Total
    Outmatch                                                                |  |                                   |  |                    |    |   |      |   | 2,145,496  |                                   |  |   | 2,145,496                 | 
|www.outmatch.com                                                                                                                              |  |                                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|                                                                                                                                              |  |                                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|PostProcess
    Technologies, Inc. (e)(g)                                                                                                     |  | 360,002 Series A1 Preferred.                                                      |  | 7/25/16                           |  |                    | <1 | % |      |   | 348,875    |                                   |  |   | 471,603                   | 
|Buffalo,
    NY. Provides innovative solutions for the post-processing of additive manufactured 3D parts. (Manufacturing) www.postprocess.com |  |                                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|                                                                                                                                              |  |                                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|Rheonix,
    Inc. (e)                                                                                                                         |  | 9,676 Common.                                                                     |  | 10/29/09                          |  |                    | 4  | % |      |   | -          |                                   |  |   | -                         | 
|Ithaca, NY. Developer
    of fully automated                                                                                                  |  | (g) 1,839,422 Series A Preferred.                                                 |  |                                   |  |                    |    |   |      |   | 2,099,999  |                                   |  |   | -                         | 
|microfluidic based molecular
    assay and diagnostic                                                                                         |  | (g)
    50,593 Common.                                                            |  |                                   |  |                    |    |   |      |   | -          |                                   |  |   | -                         | 
|testing
    devices. (Health Care)                                                                                                            |  | (g)
    589,420 Series B Preferred.                                               |  |                                   |  |                    |    |   |      |   | 702,732    |                                   |  |   | 702,732                   | 
|www.rheonix.com                                                                                                                               |  | Total
    Rheonix                                                                 |  |                                   |  |                    |    |   |      |   | 2,802,731  |                                   |  |   | 702,732                   | 
|                                                                                                                                              |  |                                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|SocialFlow,
    Inc. (e)(g)                                                                                                                   |  | 1,049,538 Series B Preferred.                                                     |  | 4/5/13                            |  |                    | 4  | % |      |   | 500,000    |                                   |  |   | 209,908                   | 
|New York, NY. Provides
    instant analysis of social                                                                                         |  | 1,204,819 Series B-1 Preferred.                                                   |  |                                   |  |                    |    |   |      |   | 750,000    |                                   |  |   | 324,761                   | 
|networks
    using a proprietary, predictive analytic                                                                                         |  | 717,772
    Series C Preferred.                                                   |  |                                   |  |                    |    |   |      |   | 500,000    |                                   |  |   | 215,332                   | 
|algorithm
    to optimize advertising and publishing.                                                                                         |  | Total
    Social Flow                                                             |  |                                   |  |                    |    |   |      |   | 1,750,000  |                                   |  |   | 750,000                   | 
|(Software) www.socialflow.com                                                                                                                 |  |                                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|                                                                                                                                              |  |                                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|Somerset
    Gas Transmission Company, LLC (e)(m)                                                                                             |  | 26.5337 Units.                                                                    |  | 7/10/02                           |  |                    | 3  | % |      |   | 719,097    |                                   |  |   | 500,000                   | 
|Columbus, OH. Natural
    gas transportation. (Oil and Gas) www.somersetgas.com                                                               |  |                                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|                                                                                                                                              |  |                                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|Tech
    2000, Inc. (Lumious) (g)                                                                                                             |  | $850,000 Replacement
    Term Note at                                             |  | 11/16/18                          |  |                    | 0  | % |      |   |            |                                   |  |   |                           | 
|Herndon, VA. Develops
    and delivers IT training.                                                                                           |  | 14% due November 15, 2021.                                                        |  |                                   |  |                    |    |   |      |   | 860,777    |                                   |  |   | 860,777                   | 
|(Software) www.t2000inc.com                                                                                                                   |  |                                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|                                                                                                                                              |  |                                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|Other Non-Control/Non-Affiliate Investments:                                                                                                  |  |                                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|                                                                                                                                              |  |                                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|DataView,
    LLC (e)                                                                                                                         |  | Membership Interest.                                                              |  | 10/1/98                           |  |                    | 5  | % |      |   | 310,357    |                                   |  |   | -                         | 
|(Software)                                                                                                                                    |  |                                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|                                                                                                                                              |  |                                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|UStec/Wi3
    (e)                                                                                                                             |  | Common
    stock.                                                                 |  | 12/17/98                          |  |                    | <1 | % |      |   | 100,500    |                                   |  |   | -                         | 
|(Manufacturing)                                                                                                                               |  |                                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|                                                                                                                                              |  |                                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|Subtotal
    Non-Control/Non-Affiliate Investments                                                                                            |  |                                                                                   |  |                                   |  |                    |    |   |      | $ | 25,584,017 |                                   |  | $ | 24,869,357                | 



14







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

December
31, 2019 (Continued)





|Company,
        Geographic Location, Business
        Description, (Industry) and Website                                                                                                   |  | (a)
        Type
        of Investment                                 |  | (b)
        Date
        Acquired |  | (c)
        Equity |    |   | Cost |   |           | (d)(f)
        Fair
        Value |  |   | Percent
    of Net Assets | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------- |  | --------------------------------- |  | ------------------ | -- | - | ---- | - | --------- | --------------------------------- |  | - | ------------------------- | 
|Affiliate
    Investments – 22.7% of net assets (k)                                                                                                                                          |  |                                                                        |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|                                                                                                                                                                                             |  |                                                                        |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|BeetNPath,
    LLC (Grainful) (e)(g)(m)                                                                                                                                                      |  | 1,119,024
    Series A-2 Preferred                                     |  | 10/20/14                          |  |                    | 9  | % |      |   |           |                                   |  |   |                           | 
|Ithaca, NY. Frozen entrées
    made from 100%                                                                                                                                                |  | Membership Units.                                                      |  |                                   |  |                    |    |   |      | $ | 359,000   |                                   |  | $ | -                         | 
|whole
    grain steel cut oats under Grainful brand                                                                                                                                          |  | 1,032,918 Series B Preferred
    Membership Units.                     |  |                                   |  |                    |    |   |      |   | 261,277   |                                   |  |   | -                         | 
|name.
                                         (Consumer Product)
        www.grainful.com                                                                                                   |  | $262,626.64
    Convertible Secured Notes at 8% due December 21, 2019. |  |                                   |  |                    |    |   |      |   | 262,627   |                                   |  |   | -                         | 
|                                                                                                                                                                                             |  | Total
    BeetNPath                                                    |  |                                   |  |                    |    |   |      |   | 882,904   |                                   |  |   | -                         | 
|                                                                                                                                                                                             |  |                                                                        |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|Carolina
    Skiff LLC (g)(m)                                                                                                                                                                |  | 6.0825% Class A Common
    Membership                                  |  | 1/30/04                           |  |                    | 7  | % |      |   |           |                                   |  |   |                           | 
|Waycross, GA. Manufacturer
    of ocean fishing                                                                                                                                              |  | Interest.                                                              |  |                                   |  |                    |    |   |      |   | 15,000    |                                   |  |   | 1,750,000                 | 
|and pleasure boats.
    (Manufacturing) www.carolinaskiff.com                                                                                                                                |  |                                                                        |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|                                                                                                                                                                                             |  |                                                                        |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|ClearView Social,
    Inc. (e)(g)                                                                                                                                                            |  | 312,500 Series Seed
    Plus Preferred.                                |  | 1/4/16                            |  |                    | 6  | % |      |   | 200,000   |                                   |  |   | 200,000                   | 
|Buffalo, NY. Social
    media publishing tool for law, CPA and professional firms. (Software) www.clearviewsocial.com                                                                        |  |                                                                        |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|                                                                                                                                                                                             |  |                                                                        |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|Filterworks
    Acquisition USA, LLC (l)(m)                                                                                                                                                  |  | $2,283,702 Term Note
    at 12% (+2%                                   |  | 11/8/19                           |  |                    | 9  | % |      |   |           |                                   |  |   |                           | 
|Deerfield Beach, FL.
    Provides spray booth                                                                                                                                                |  | PIK) due December 4, 2023.                                             |  |                                   |  |                    |    |   |      |   | 2,302,653 |                                   |  |   | 2,302,653                 | 
|equipment,
    frame repair machines and paint booth                                                                                                                                         |  | 562.5
    Class A Units                                                |  |                                   |  |                    |    |   |      |   | 562,500   |                                   |  |   | 562,500                   | 
|filter
    services for collision shops. (Automotive)                                                                                                                                        |  | Total
    Filterworks                                                  |  |                                   |  |                    |    |   |      |   | 2,865,153 |                                   |  |   | 2,865,153                 | 
|www.filterworksusa.com                                                                                                                                                                       |  |                                                                        |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|                                                                                                                                                                                             |  |                                                                        |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|Genicon,
    Inc. (e)(g)(l)                                                                                                                                                                  |  | 1,586,902 Series B Preferred.                                          |  | 4/10/15                           |  |                    | 6  | % |      |   | 1,000,000 |                                   |  |   | -                         | 
|Winter Park, FL. Designs,
    produces and distributes patented surgical instrumentation.                                                                                                    |  | $3,250,000 Promissory
    Notes at 10% due June 12, 2022, (10% PIK).   |  |                                   |  |                    |    |   |      |   | 3,727,573 |                                   |  |   | 500,000                   | 
|(Health Care)                                                                                                                                                                                |  | $250,000 Promissory
    Note at 10% due                                |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|www.geniconendo.com                                                                                                                                                                          |  | June 12, 2021 (10% PIK).                                               |  |                                   |  |                    |    |   |      |   | 262,184   |                                   |  |   | 250,000                   | 
|                                                                                                                                                                                             |  | Warrants
    for Common.                                               |  |                                   |  |                    |    |   |      |   | 120,000   |                                   |  |   | -                         | 
|                                                                                                                                                                                             |  | Total
    Genicon                                                      |  |                                   |  |                    |    |   |      |   | 5,109,757 |                                   |  |   | 750,000                   | 
|                                                                                                                                                                                             |  |                                                                        |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|Knoa
    Software, Inc. (e)(g)                                                                                                                                                               |  | 973,533 Series A-1 Convertible                                         |  | 11/20/12                          |  |                    | 7  | % |      |   |           |                                   |  |   |                           | 
|New York, NY. End user
    experience                                                                                                                                                        |  | Preferred.                                                             |  |                                   |  |                    |    |   |      |   | 750,000   |                                   |  |   | 750,000                   | 
|management
    and performance (EMP) solutions                                                                                                                                               |  | 1,876,922
    Series B Preferred.                                      |  |                                   |  |                    |    |   |      |   | 479,155   |                                   |  |   | 479,155                   | 
|utilizing
    enterprise applications. (Software)                                                                                                                                            |  | Total
    Knoa                                                         |  |                                   |  |                    |    |   |      |   | 1,229,155 |                                   |  |   | 1,229,155                 | 
|www.knoa.com                                                                                                                                                                                 |  |                                                                        |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|                                                                                                                                                                                             |  |                                                                        |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|Mezmeriz,
    Inc. (e)(g)                                                                                                                                                                    |  | 1,554,565 Series Seed Preferred.                                       |  | 1/9/08                            |  |                    | 12 | % |      |   | 742,850   |                                   |  |   | -                         | 
|Ithaca, NY. Technology
    company developing novel reality capture tools for 3D mapping, reality modeling, object tracking and classification. (Electronics
    Developer) www.mezmeriz.com |  |                                                                        |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|                                                                                                                                                                                             |  |                                                                        |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|New
    Monarch Machine Tool, Inc. (g)                                                                                                                                                       |  | 22.84 Common.                                                          |  | 9/24/03                           |  |                    | 15 | % |      |   | 22,841    |                                   |  |   | 22,841                    | 
|Cortland, NY. Manufactures
    and services vertical/horizontal machining centers. (Manufacturing) www.monarchmt.com                                                                         |  |                                                                        |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|                                                                                                                                                                                             |  |                                                                        |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 
|OnCore
    Golf Technology, Inc. (e)(g)                                                                                                                                                      |  | 300,483 Preferred AA.                                                  |  | 12/31/14                          |  |                    | 8  | % |      |   | 752,712   |                                   |  |   | 300,000                   | 
|Buffalo, NY. Patented
    and proprietary golf balls utilizing technology and innovation. (Consumer Product) www.oncoregolf.com                                                              |  |                                                                        |  |                                   |  |                    |    |   |      |   |           |                                   |  |   |                           | 



15







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

December
31, 2019 (Continued)





|Company,
        Geographic Location, Business
        Description, (Industry) and Website |  | (a)
        Type
        of Investment                            |  | (b)
        Date
        Acquired |  | (c)
        Equity |    |   | Cost |   |            | (d)(f)
        Fair
        Value |  |   | Percent
    of Net Assets | 
|------------------------------------------------------------------------------------------ |  | ----------------------------------------------------------------- |  | --------------------------------- |  | ------------------ | -- | - | ---- | - | ---------- | --------------------------------- |  | - | ------------------------- | 
|                                                                                           |  |                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|SciAps,
    Inc. (e)(g)                                                                    |  | 187,500
    Series A Preferred.                                   |  | 7/12/13                           |  |                    | 6  | % |      |   | 1,500,000  |                                   |  |   | -                         | 
|Woburn, MA. Instrumentation
    company                                                    |  | 274,299 Series A-1 Convertible
    Preferred.                     |  |                                   |  |                    |    |   |      |   | 504,710    |                                   |  |   | -                         | 
|producing portable analytical
    devices using XRF,                                       |  | 117,371 Series B Convertible
    Preferred.                       |  |                                   |  |                    |    |   |      |   | 250,000    |                                   |  |   | 250,000                   | 
|LIBS and RAMAN spectroscopy
    to identify                                                |  | 113,636 Series C Convertible
    Preferred.                       |  |                                   |  |                    |    |   |      |   | 175,000    |                                   |  |   | 175,000                   | 
|compounds,
    minerals, and elements.                                                     |  | 369,698 Series C-1 Convertible
    Preferred.                     |  |                                   |  |                    |    |   |      |   | 399,274    |                                   |  |   | 399,274                   | 
|(Manufacturing)                                                                            |  | 147,059
    Series D Convertible Preferred.                       |  |                                   |  |                    |    |   |      |   | 250,000    |                                   |  |   | 250,000                   | 
|www.sciaps.com                                                                             |  | Total
    SciAps                                                  |  |                                   |  |                    |    |   |      |   | 3,078,984  |                                   |  |   | 1,074,274                 | 
|                                                                                           |  |                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|Teleservices
    Solutions Holdings, LLC (e) (g)(l)                                        |  | 250,000 Class B Preferred
    Units.                              |  | 5/30/14                           |  |                    | 6  | % |      |   | 250,000    |                                   |  |   | -                         | 
|Montvale, NJ. Customer
    contact center                                                  |  | 1,000,000 Class C Preferred
    Units.                            |  |                                   |  |                    |    |   |      |   | 1,190,680  |                                   |  |   | -                         | 
|specializing in customer
    acquisition and retention                                     |  | 80,000 Class D Preferred
    Units.                               |  |                                   |  |                    |    |   |      |   | 91,200     |                                   |  |   | -                         | 
|for selected industries.
    (Contact Center)                                              |  | 104,198 Class E Preferred
    Units.                              |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|www.ipacesetters.com                                                                       |  | PIK
    dividend for Series C and D at 12% and 14%, respectively. |  |                                   |  |                    |    |   |      |   | 104,198    |                                   |  |   | -                         | 
|                                                                                           |  | Total
    Teleservices                                            |  |                                   |  |                    |    |   |      |   | 1,636,078  |                                   |  |   | -                         | 
|                                                                                           |  |                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|Tilson
    Technology Management, Inc. (g)(h)                                              |  | 120,000 Series B Preferred.                                       |  | 1/20/15                           |  |                    | 9  | % |      |   | 600,000    |                                   |  |   | 1,950,000                 | 
|Portland, ME. Provides
    network deployment                                              |  | 21,391 Series C Preferred.                                        |  |                                   |  |                    |    |   |      |   | 200,000    |                                   |  |   | 347,604                   | 
|construction and information
    system services                                           |  | 70,176 Series D Preferred.                                        |  |                                   |  |                    |    |   |      |   | 800,000    |                                   |  |   | 1,140,360                 | 
|management for cellular,
    fiber optic and wireless                                      |  | 15,385 Series E Preferred.                                        |  |                                   |  |                    |    |   |      |   | 500,012    |                                   |  |   | 500,012                   | 
|systems
    providers. Its affiliated entity, SQF, LLC                                     |  | 211,567
    SQF Hold Co. Common.                                  |  |                                   |  |                    |    |   |      |   | -          |                                   |  |   | 22,036                    | 
|is
    a CLEC supporting small cell 5G deployment.                                         |  | Total
    Tilson                                                  |  |                                   |  |                    |    |   |      |   | 2,100,012  |                                   |  |   | 3,960,012                 | 
|(Professional Services)
    www.tilsontech.com                                             |  |                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|                                                                                           |  |                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|Other
    Affiliate Investments:                                                           |  |                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|                                                                                           |  |                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|G-TEC
    Natural Gas Systems(e)(m) (Manufacturing)                                        |  | Membership
    Interest                                           |  | 8/31/99                           |  |                    | 17 | % |      |   | 400,000    |                                   |  |   | -                         | 
|                                                                                           |  |                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|Subtotal
    Affiliate Investments                                                         |  |                                                                   |  |                                   |  |                    |    |   |      | $ | 19,035,446 |                                   |  | $ | 12,151,435                | 
|                                                                                           |  |                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|Total
    investments – 69%                                                                |  |                                                                   |  |                                   |  |                    |    |   |      | $ | 44,619,463 |                                   |  | $ | 37,020,792                | 
|Other
    Assets in excess of liabilities – 31%                                            |  |                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   | 16,607,724                | 
|Net
    Assets – 100%                                                                      |  |                                                                   |  |                                   |  |                    |    |   |      |   |            |                                   |  | $ | 53,628,516                | 



16







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

December
31, 2019 (Continued)



Notes
to the Consolidated Schedule of Portfolio Investments



(a)
At December 31, 2019, restricted securities represented 100% of the fair value of the investment portfolio. Restricted securities
are subject to one or more restrictions on resale and are not freely marketable. Type of investment for equity position is in
form of shares unless otherwise noted as units or interests, i.e., preferred shares, common shares.



(b)
The Date Acquired column indicates the date on which the Corporation first acquired an investment.



(c)
Each equity percentage estimates the Corporation’s ownership interest in the applicable portfolio investment. The estimated
ownership is calculated based on the percent of outstanding voting securities held by the Corporation or the potential percentage
of voting securities held by the Corporation upon exercise of warrants or conversion of debentures, or other available data. If
applicable, the symbol “<1%” indicates that the Corporation holds an equity interest of less than one percent.



(d)
The Corporation’s investments are carried at fair value in accordance with Financial Accounting Standards Board (FASB) Accounting
Standards Codification (ASC) 820 “Fair Value Measurements and Disclosures,” which defines fair value and establishes
guidelines for measuring fair value. At December 31, 2019, ASC 820 designates 100% of the Corporation’s investments as “Level
3” assets. Under the valuation policy of the Corporation, unrestricted publicly traded securities are valued at the average
closing price for these securities for the last three trading days of the reporting period. Restricted securities are subject
to restrictions on resale, and are valued at fair value as determined by RCM and submitted to the Board of Directors for approval.
Fair value is considered to be the amount that the Corporation may reasonably expect to receive for portfolio securities when
sold on the valuation date. Valuations as of any particular date, however, are not necessarily indicative of amounts which may
ultimately be realized as a result of future sales or other dispositions of securities and these favorable or unfavorable differences
could be material. Among the factors considered 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 (see Note 3. “Investments” to the Consolidated Financial Statements).



(e)
These investments are non-income producing. All other investments are income producing. Non-income producing investments have
not generated cash payments of interest or dividends including LLC tax-related distributions within the last twelve months, or
are not expected to do so going forward. However, if a debt or a preferred equity fails to make its most recent payment, then
the investment will also be classified as non-income producing.



(f)
As of December 31, 2019, the total cost of investment securities was approximately $44.6 million. Net unrealized depreciation
was approximately ($7.6) million, which was comprised of $10.1 million of unrealized appreciation of investment securities and
($17.7) million of unrealized depreciation of investment securities. At December 31, 2019, the aggregate gross unrealized gain
for federal income tax purposes was $10.2 million and the aggregate gross unrealized loss for federal income tax purposes was
($14.7) million. The net unrealized loss for federal income tax purposes was ($4.5) million based on a tax cost of $41.4 million.



(g)
Rand Capital SBIC, Inc. investment.



(h)
Reduction in cost and value from previously reported balances reflects current principal repayment.



(i)
Represents interest due (amounts over $50,000) from investments included as interest receivable on the Corporation’s Consolidated
Statements of Financial Position. (None at December 31, 2019)



(j)
Non-Control/Non-Affiliate Investments are investments that are neither Control Investments nor Affiliate Investments.



(k)
Affiliate Investments are defined by the Investment Company Act of 1940, as amended (“1940 Act”), as those Non-Control
investments in companies in which between 5% and 25% of the voting securities are owned by the Corporation.



(l)
Payment in kind (PIK) represents earned interest that is added to the cost basis of the investment and due at maturity. The amount
of PIK earned is included in the interest rate detailed in the “Type of Investment” column, unless it has been noted
with a (+), in which case the PIK is in addition to the face amount of interest due on the security.



(m)
Equity holdings are held in a wholly owned (100%) “blocker corporation” of Rand Capital Corporation or Rand Capital
SBIC, Inc. for federal income tax and Regulated Investment Company (RIC) compliance.



17







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

December
31, 2019 (Continued)



Investments
in and Advances to Affiliates








|Company                              |  | Type
    of Investment                                           |  | December
    31, 2018 Fair Value |           |  | Net
    Change in Unrealized Appreciation (Depreciation) |   |            | Gross
    Additions (1) |  |   | Gross
    Reductions (2) |  |  | December
    31, 2019 Fair Value |            |   | Net
    Realized Gains (Losses) |   |           | Amount
    of Interest/ Dividend/ Fee Income (3) | 
|------------------------------------ |  | ---------------------------------------------------------------- |  | -------------------------------- | --------- |  | -------------------------------------------------------- | - | ---------- | ----------------------- |  | - | ------------------------ |  |  | -------------------------------- | ---------- | - | ------------------------------- | - | --------- | ------------------------------------------------ | 
|Control
    Investments:             |  |                                                                  |  |                                  |           |  |                                                          |   |            |                         |  |   |                          |  |  |                                  |            |   |                                 |   |           |                                                  | 
|Advantage
    24/7 LLC               |  | $140,000
    Term Note at 7%.                                    |  | $                                | 99,500    |  |                                                          | $ | -          |                         |  | $ | -                        |  |  | $                                | (99,500    | ) |                                 | $ | -         |                                                  | 
|Gemcor
    II, LLC                   |  |                                                                  |  |                                  | -         |  |                                                          |   | -          |                         |  |   | -                        |  |  |                                  | -          |   |                                 |   | -         |                                                  | 
|                                     |  | Total
    Control Investments                                    |  | $                                | 99,500    |  |                                                          | $ | -          |                         |  | $ | -                        |  |  | $                                | (99,500    | ) |                                 | $ | -         |                                                  | 
|                                     |  |                                                                  |  |                                  |           |  |                                                          |   |            |                         |  |   |                          |  |  |                                  |            |   |                                 |   |           |                                                  | 
|Affiliate
    Investments:           |  |                                                                  |  |                                  |           |  |                                                          |   |            |                         |  |   |                          |  |  |                                  |            |   |                                 |   |           |                                                  | 
|BeetNPath,
    LLC                   |  | 1,119,024 Series A-2
    Preferred Membership Units.             |  | $                                | -         |  |                                                          | $ | -          |                         |  | $ | -                        |  |  | $                                | -          |   |                                 | $ | -         |                                                  | 
|                                     |  | 1,032,918 Series B Preferred
    Membership Units.               |  |                                  | 261,277   |  |                                                          |   | (261,277   | )                       |  |   | -                        |  |  |                                  | -          |   |                                 |   | -         |                                                  | 
|                                     |  | $262,626.64
    Convertible Secured Notes at 8%.                 |  |                                  | 262,627   |  |                                                          |   | (262,627   | )                       |  |   | -                        |  |  |                                  | -          |   |                                 |   | -         |                                                  | 
|                                     |  | Total
    BeetNPath                                              |  |                                  | 523,904   |  |                                                          |   | (523,904   | )                       |  |   | -                        |  |  |                                  | -          |   |                                 |   | -         |                                                  | 
|                                     |  |                                                                  |  |                                  |           |  |                                                          |   |            |                         |  |   |                          |  |  |                                  |            |   |                                 |   |           |                                                  | 
|Carolina
    Skiff LLC               |  | 6.0825% Class A Common
    Membership interest.                  |  |                                  | 1,750,000 |  |                                                          |   | -          |                         |  |   | -                        |  |  |                                  | -          |   |                                 |   | 1,750,000 |                                                  | 
|                                     |  |                                                                  |  |                                  |           |  |                                                          |   |            |                         |  |   |                          |  |  |                                  |            |   |                                 |   |           |                                                  | 
|ClearView
    Social, Inc.           |  | 312,500 Series Seed
    Plus Preferred.                          |  |                                  | 200,000   |  |                                                          |   | -          |                         |  |   | -                        |  |  |                                  | -          |   |                                 |   | 200,000   |                                                  | 
|                                     |  |                                                                  |  |                                  |           |  |                                                          |   |            |                         |  |   |                          |  |  |                                  |            |   |                                 |   |           |                                                  | 
|Filterworks
    Acquisition USA, LLC |  | $2,283,702 Term Note
    at 12%.                                 |  |                                  | -         |  |                                                          |   | -          |                         |  |   | 2,302,653                |  |  |                                  | -          |   |                                 |   | 2,302,653 |                                                  | 
|                                     |  | 562.5
    Class A Units.                                         |  |                                  | -         |  |                                                          |   | -          |                         |  |   | 562,500                  |  |  |                                  | -          |   |                                 |   | 562,500   |                                                  | 
|                                     |  | Total
    Filterworks                                            |  |                                  | -         |  |                                                          |   | -          |                         |  |   | 2,865,153                |  |  |                                  | -          |   |                                 |   | 2,865,153 |                                                  | 
|                                     |  |                                                                  |  |                                  |           |  |                                                          |   |            |                         |  |   |                          |  |  |                                  |            |   |                                 |   |           |                                                  | 
|First
    Wave Technologies, Inc.    |  | 670,443.2 Class A Common.                                        |  |                                  | 33,000    |  |                                                          |   | -          |                         |  |   | -                        |  |  |                                  | (33,000    | ) |                                 |   | -         |                                                  | 
|                                     |  |                                                                  |  |                                  |           |  |                                                          |   |            |                         |  |   |                          |  |  |                                  |            |   |                                 |   |           |                                                  | 
|Genicon,
    Inc.                    |  | 1,586,902 Series B Preferred.                                    |  |                                  | 1,000,000 |  |                                                          |   | (1,000,000 | )                       |  |   | -                        |  |  |                                  | -          |   |                                 |   | -         |                                                  | 
|                                     |  | $3,250,000 Promissory
    Notes at 10%.                          |  |                                  | 3,385,586 |  |                                                          |   | (3,154,750 | )                       |  |   | 269,164                  |  |  |                                  | -          |   |                                 |   | 500,000   |                                                  | 
|                                     |  | $250,000 Promissory
    Note at 10%                              |  |                                  | -         |  |                                                          |   | (7,797     | )                       |  |   | 257,797                  |  |  |                                  | -          |   |                                 |   | 250,000   |                                                  | 
|                                     |  | Warrant
    for Common.                                          |  |                                  | 37,500    |  |                                                          |   | (37,500    | )                       |  |   | -                        |  |  |                                  | -          |   |                                 |   | -         |                                                  | 
|                                     |  | Total
    Genicon                                                |  |                                  | 4,423,086 |  |                                                          |   | (4,200,047 | )                       |  |   | 526,961                  |  |  |                                  | -          |   |                                 |   | 750,000   |                                                  | 
|                                     |  |                                                                  |  |                                  |           |  |                                                          |   |            |                         |  |   |                          |  |  |                                  |            |   |                                 |   |           |                                                  | 
|G-TEC
    Natural Gas Systems        |  | 16.639% Class A
    Membership Interest. 8% cumulative dividend. |  |                                  | -         |  |                                                          |   | -          |                         |  |   | -                        |  |  |                                  | -          |   |                                 |   | -         |                                                  | 
|                                     |  |                                                                  |  |                                  |           |  |                                                          |   |            |                         |  |   |                          |  |  |                                  |            |   |                                 |   |           |                                                  | 
|Knoa
    Software, Inc.              |  | 973,533 Series A-1 Convertible
    Preferred.                    |  |                                  | 750,000   |  |                                                          |   | -          |                         |  |   | -                        |  |  |                                  | -          |   |                                 |   | 750,000   |                                                  | 
|                                     |  | 1,876,922
    Series B Preferred.                                |  |                                  | 479,155   |  |                                                          |   | -          |                         |  |   | -                        |  |  |                                  | -          |   |                                 |   | 479,155   |                                                  | 
|                                     |  | Total
    Knoa                                                   |  |                                  | 1,229,155 |  |                                                          |   | -          |                         |  |   | -                        |  |  |                                  | -          |   |                                 |   | 1,229,155 |                                                  | 
|                                     |  |                                                                  |  |                                  |           |  |                                                          |   |            |                         |  |   |                          |  |  |                                  |            |   |                                 |   |           |                                                  | 
|KnowledgeVision
    Systems, Inc.    |  | 200,000 Series A-1 Preferred.                                    |  |                                  | -         |  |                                                          |   | -          |                         |  |   | -                        |  |  |                                  | -          |   |                                 |   | -         |                                                  | 
|                                     |  | 214,285 Series A-2 Preferred.                                    |  |                                  | -         |  |                                                          |   | -          |                         |  |   |                          |  |  |                                  | -          |   |                                 |   | -         |                                                  | 
|                                     |  | 129,033 Series A-3 Preferred.                                    |  |                                  | 165,001   |  |                                                          |   | -          |                         |  |   | -                        |  |  |                                  | (165,001   | ) |                                 |   | -         |                                                  | 
|                                     |  | $75,000 Subordinated
    Promissory Notes at 8%.                 |  |                                  | 75,000    |  |                                                          |   | -          |                         |  |   |                          |  |  |                                  | (75,000    | ) |                                 |   | -         |                                                  | 
|                                     |  | $900,000 Term Note at
    13%.                                   |  |                                  | 750,000   |  |                                                          |   | -          |                         |  |   | 150,000                  |  |  |                                  | (900,000   | ) |                                 |   | -         |                                                  | 
|                                     |  | Warrant
    for 46,743 Series A-3.                               |  |                                  | 35,000    |  |                                                          |   | -          |                         |  |   | -                        |  |  |                                  | (35,000    | ) |                                 |   | -         |                                                  | 
|                                     |  | Total
    KnowledgeVision                                        |  |                                  | 1,025,001 |  |                                                          |   | -          |                         |  |   | 150,000                  |  |  |                                  | (1,175,001 | ) |                                 |   | -         |                                                  | 
|                                     |  |                                                                  |  |                                  |           |  |                                                          |   |            |                         |  |   |                          |  |  |                                  |            |   |                                 |   |           |                                                  | 
|Mezmeriz,
    Inc.                   |  | 1,554,565 Series Seed
    Preferred.                             |  |                                  | 351,477   |  |                                                          |   | (351,477   | )                       |  |   | -                        |  |  |                                  | -          |   |                                 |   | -         |                                                  | 
|                                     |  |                                                                  |  |                                  |           |  |                                                          |   |            |                         |  |   |                          |  |  |                                  |            |   |                                 |   |           |                                                  | 
|Microcision
    LLC                  |  | $1,500,000 Subordinated
    Promissory Note at 12% (1% PIK).     |  |                                  | 1,933,353 |  |                                                          |   | -          |                         |  |   | 14,536                   |  |  |                                  | (1,947,889 | ) |                                 |   | -         |                                                  | 
|                                     |  | 15%
    Class A Common Membership Interest.                      |  |                                  | 610,000   |  |                                                          |   | -          |                         |  |   | -                        |  |  |                                  | (610,000   | ) |                                 |   | -         |                                                  | 
|                                     |  | Total
    Microcision                                            |  |                                  | 2,543,353 |  |                                                          |   | -          |                         |  |   | 14,536                   |  |  |                                  | (2,557,889 | ) |                                 |   | -         |                                                  | 
|                                     |  |                                                                  |  |                                  |           |  |                                                          |   |            |                         |  |   |                          |  |  |                                  |            |   |                                 |   |           |                                                  | 
|New
    Monarch Machine Tool, Inc.   |  | 22.84 Common.                                                    |  |                                  | 22,841    |  |                                                          |   | -          |                         |  |   | -                        |  |  |                                  | -          |   |                                 |   | 22,841    |                                                  | 
|                                     |  |                                                                  |  |                                  |           |  |                                                          |   |            |                         |  |   |                          |  |  |                                  |            |   |                                 |   |           |                                                  | 
|OnCore
    Golf Technology, Inc.     |  | 300,483 Series AA Preferred.                                     |  |                                  | 300,000   |  |                                                          |   | -          |                         |  |   | -                        |  |  |                                  | -          |   |                                 |   | 300,000   |                                                  | 



18







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

December
31, 2019 (Continued)



Investments
in and Advances to Affiliates






|Company                              |  | Type of Investment                           |  | December 31, 2018 Fair Value |            |  | Net Change in Unrealized Appreciation
(Depreciation) |   |            | Gross Additions (1) |  |   | Gross Reductions (2) |  |  | December 31, 2019 Fair Value |            |   | Net Realized Gains (Losses) |   |            | Amount of Interest/ Dividend/ Fee Income (3) | 
|------------------------------------ |  | -------------------------------------------- |  | ---------------------------- | ---------- |  | ---------------------------------------------------- | - | ---------- | ------------------- |  | - | -------------------- |  |  | ---------------------------- | ---------- | - | --------------------------- | - | ---------- | -------------------------------------------- | 
|SciAps, Inc.                         |  | 187,500 Series A Preferred.                  |  |                              | 700,000    |  |                                                      |   | (700,000   | )                   |  |   | -                    |  |  |                              | -          |   |                             |   | -          |                                              | 
|                                     |  | 274,299 Series A-1 Convertible Preferred.    |  |                              | 250,000    |  |                                                      |   | (250,000   | )                   |  |   | -                    |  |  |                              | -          |   |                             |   | -          |                                              | 
|                                     |  | 117,371 Series B Convertible Preferred.      |  |                              | 250,000    |  |                                                      |   | -          |                     |  |   | -                    |  |  |                              | -          |   |                             |   | 250,000    |                                              | 
|                                     |  | 113,636 Series C Convertible Preferred.      |  |                              | 175,000    |  |                                                      |   | -          |                     |  |   | -                    |  |  |                              | -          |   |                             |   | 175,000    |                                              | 
|                                     |  | 369,698 Series C-1 Convertible Preferred.    |  |                              | 399,274    |  |                                                      |   | -          |                     |  |   | -                    |  |  |                              | -          |   |                             |   | 399,274    |                                              | 
|                                     |  | 147,059 Series D Convertible Preferred.      |  |                              | 250,000    |  |                                                      |   | -          |                     |  |   | -                    |  |  |                              | -          |   |                             |   | 250,000    |                                              | 
|                                     |  | Total SciAps                                 |  |                              | 2,024,274  |  |                                                      |   | (950,000   | )                   |  |   | -                    |  |  |                              | -          |   |                             |   | 1,074,274  |                                              | 
|                                     |  |                                              |  |                              |            |  |                                                      |   |            |                     |  |   |                      |  |  |                              |            |   |                             |   |            |                                              | 
|SOMS Technologies, LLC               |  | 5,959,490 Series B membership Interests.     |  |                              | -          |  |                                                      |   |            |                     |  |   | -                    |  |  |                              | -          |   |                             |   | -          |                                              | 
|                                     |  |                                              |  |                              |            |  |                                                      |   |            |                     |  |   |                      |  |  |                              |            |   |                             |   |            |                                              | 
|Teleservices Solutions Holdings, LLC |  | 250,000 Class B Preferred Units.             |  |                              | -          |  |                                                      |   |            |                     |  |   | -                    |  |  |                              | -          |   |                             |   | -          |                                              | 
|                                     |  | 1,000,000 Class C Preferred Units.           |  |                              | -          |  |                                                      |   |            |                     |  |   | -                    |  |  |                              | -          |   |                             |   | -          |                                              | 
|                                     |  | 80,000 Class D Preferred Units.              |  |                              | -          |  |                                                      |   |            |                     |  |   | -                    |  |  |                              | -          |   |                             |   | -          |                                              | 
|                                     |  | 104,198 Class E Preferred Units.             |  |                              | -          |  |                                                      |   |            |                     |  |   | -                    |  |  |                              | -          |   |                             |   | -          |                                              | 
|                                     |  | Total Teleservices                           |  |                              | -          |  |                                                      |   |            |                     |  |   | -                    |  |  |                              | -          |   |                             |   | -          |                                              | 
|                                     |  |                                              |  |                              |            |  |                                                      |   |            |                     |  |   |                      |  |  |                              |            |   |                             |   |            |                                              | 
|Tilson Technology Management, Inc.   |  | 120,000 Series B Preferred.                  |  |                              | 600,000    |  |                                                      |   | 1,350,000  |                     |  |   | -                    |  |  |                              | -          |   |                             |   | 1,950,000  |                                              | 
|                                     |  | 21,391 Series C Preferred.                   |  |                              | 200,000    |  |                                                      |   | 147,604    |                     |  |   | -                    |  |  |                              | -          |   |                             |   | 347,604    |                                              | 
|                                     |  | 70,176 Series D Preferred.                   |  |                              | 800,000    |  |                                                      |   | 340,360    |                     |  |   | -                    |  |  |                              | -          |   |                             |   | 1,140,360  |                                              | 
|                                     |  | 15,385 Series E Preferred.                   |  |                              | -          |  |                                                      |   | -          |                     |  |   | 500,012              |  |  |                              | -          |   |                             |   | 500,012    |                                              | 
|                                     |  | 211,567 SQF Hold Co. Common.                 |  |                              | -          |  |                                                      |   | 22,036     |                     |  |   | -                    |  |  |                              | -          |   |                             |   | 22,036     |                                              | 
|                                     |  | $200,000 Subordinated Promissory Note at 8%. |  |                              | 200,000    |  |                                                      |   | -          |                     |  |   | -                    |  |  |                              | (200,000   | ) |                             |   | -          |                                              | 
|                                     |  | $800,000 Subordinated Promissory Note at 8%. |  |                              | 800,000    |  |                                                      |   | -          |                     |  |   | -                    |  |  |                              | (800,000   | ) |                             |   | -          |                                              | 
|                                     |  | Total Tilson                                 |  |                              | 2,600,000  |  |                                                      |   | 1,860,000  |                     |  |   | 500,012              |  |  |                              | (1,000,000 | ) |                             |   | 3,960,012  |                                              | 
|                                     |  |                                              |  |                              |            |  |                                                      |   |            |                     |  |   |                      |  |  |                              |            |   |                             |   |            |                                              | 
|                                     |  | Total Affiliate Investments                  |  | $                            | 17,026,091 |  |                                                      | $ | (4,165,428 | )                   |  | $ | 4,056,662            |  |  | $                            | (4,765,890 | ) |                             | $ | 12,151,435 |                                              | 
|                                     |  | Total Control and Affiliate Investments      |  | $                            | 17,125,591 |  |                                                      | $ | (4,165,428 | )                   |  | $ | 4,056,662            |  |  | $                            | (4,865,390 | ) |                             | $ | 12,151,435 |                                              | 



This
schedule should be read in conjunction with the Corporation’s Consolidated Financial Statements, including the Notes to
the Consolidated Financial Statements and the Consolidated Schedule of Portfolio Investments.



(1)
Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow on investments,
capitalized interest and the accretion of discounts. Gross additions also include the movement of an existing portfolio company
into this category and out of another category.



(2)
Gross reductions include decreases in the cost basis of investments resulting from principal repayments, sales, note conversions,
the exchange of existing securities for new securities and the movement of an existing portfolio company out of this category
and into another category.



(3)
Represents the total amount of interest, fees or dividends credited to income for the portion of the period an investment was
included in “Control or Affiliate” categories, respectively.



19







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

December
31, 2019 (Continued)



|Industry Classification |  | Percentage of Total Investments (at fair value) as of December 31, 2019 |     
|----------------------- |  | ----------------------------------------------------------------------- | ----
|Software                |  |                                                                         | 40.4
|Manufacturing           |  |                                                                         | 16.4
|Professional Services   |  |                                                                         | 13.6
|Entertainment           |  |                                                                         | 11.9
|Automotive              |  |                                                                         | 7.7 
|Healthcare              |  |                                                                         | 6.4 
|Contact Center          |  |                                                                         | 1.3 
|Oil and Gas             |  |                                                                         | 1.3 
|Consumer Product        |  |                                                                         | 0.8 
|Marketing               |  |                                                                         | 0.2 
|Total Investments       |  |                                                                         | 100 



20







Rand
Capital Corporation and Subsidiaries

Notes
to the Consolidated Financial Statements

(Unaudited)



Note
1. ORGANIZATION



Rand
Capital Corporation (“Rand”, “we”, “us” and “our”) was incorporated under the
laws of New York in February 1969. We completed our initial public offering in 1971 as an internally managed, closed-end, diversified,
investment management company. We have elected to be treated as a business development company (“BDC”) under the Investment
Company Act of 1940, as amended (the “1940 Act”). As a BDC, we are required to comply with certain regulatory requirements.
For instance, we generally have to invest at least 70% of our total assets in “qualifying assets” and provide managerial
assistance to the portfolio companies in which we invest. See Item 1. Business – Regulations - Business Development Company
Regulations in our Annual Report on Form 10-K for the year ended December 31, 2019.



In
2002, Rand formed a wholly-owned subsidiary for the purpose of operating it as a small business investment company (“SBIC”)
licensed by the U.S. Small Business Administration (“SBA”). The subsidiary received an SBA license to operate as an
SBIC in 2002. The subsidiary, which had been organized as a Delaware limited partnership, was converted into a New York corporation
on December 31, 2008, at which time its operations as a licensed SBIC were continued by the newly formed corporation under the
name of Rand Capital SBIC, Inc. (“Rand SBIC”). In 2012, the SEC (as defined herein) granted an Order of Exemption
for Rand with respect to the operations of Rand SBIC. At that time, although Rand SBIC was operated as if it were a BDC, it was
registered as an investment company under the 1940 Act. Upon Rand’s receipt of the order granting the exemptions, Rand SBIC
filed an election to be regulated as a BDC under the 1940 Act.



In
November 2019, Rand completed (the “Closing”) a stock sale transaction with East Asset Management (“East”).
The transaction consisted of a $25 million investment in Rand by East, in exchange for approximately 8.3 million shares of Rand
common stock. The consideration paid by East for the shares of Rand common stock was comprised of approximately $15.5 million
of cash and a contribution of $9.5 million of portfolio assets (the “Contributed Assets”). Concurrent with the Closing,
Rand’s management and staff became employees of Rand Capital Management, LLC (“RCM”), a registered investment
adviser that has been retained by Rand as its external investment adviser. In connection with retaining RCM as our investment
adviser, Rand entered into an investment advisory and management agreement (the “Investment Management Agreement”)
and an administration agreement (the “Administration Agreement”) with RCM pursuant to which RCM serves as Rand’s
investment adviser and administrator (the Closing and the retention of RCM as our investment adviser and administrator are collectively
referred to herein as the “Transaction”). Pursuant to the terms of the Investment Management Agreement, Rand pays
RCM a base management fee and may pay an incentive fee, if specified benchmarks are met.



In
connection with the completion of the Transaction, Rand is shifting to an investment strategy focused on higher yielding debt
investments and intends to elect U.S. federal tax treatment as a regulated investment company (“RIC”) as of January
1, 2020 on its timely filed Federal tax return for the 2020 tax year. As required for the RIC election, Rand paid a special dividend
to shareholders to distribute all of its accumulated earnings and profits. Rand’s Board of Directors declared a special
dividend of $23.7 million, or approximately $1.62 per share, on March 3, 2020. The cash and shares of Rand’s common stock
comprising the special dividend were distributed on May 11, 2020 to shareholders. Rand intends to adopt a new dividend policy
going forward that may include regular cash dividends to shareholders. In order to qualify to make the RIC election, Rand placed
several of its investments in newly formed holding companies that facilitate a tax structure that is advantageous to the RIC election.
In December 2019, Rand formed Rand Somerset Holdings Corp., Rand BeetNPath Holdings Corp., Rand Carolina Skiff Holdings Corp.,
Rand Filterworks Holdings Corp. and Rand GTEC Holdings Corp., (“Blocker Corps”) as wholly owned subsidiaries of Rand
to hold certain equity investments. These subsidiaries are consolidated using United States generally accepted accounting principles
(“GAAP”) for financial reporting purposes.



21







In
addition, Rand effected a 1-for-9 reverse stock split of its common stock effective May 21, 2020. The reverse stock split affected
all issued and outstanding shares of Rand’s common stock, including shares held in treasury. The reverse stock split reduced
the number of issued and outstanding shares of Rand’s common stock from 23,845,470 shares and 23,304,424 shares, respectively,
to 2,648,916 shares and 2,588,800 shares, respectively. The reverse stock split affected all shareholders uniformly and did not
alter any shareholder’s percentage interest in Rand’s outstanding common stock, except for adjustments for fractional
shares.



On
October 7, 2020, the Corporation, RCM and certain of their affiliates received exemptive relief from the SEC to permit the Corporation
to co-invest in portfolio companies with certain other funds, including other BDCs and registered investment companies, managed
by RCM and certain of its affiliates in a manner consistent with the Corporation’s investment objective, positions, policies,
strategies and restrictions as well as regulatory requirements, subject to compliance with certain conditions (the “Order”).
Pursuant to the Order, the Corporation is generally permitted to co-invest with affiliated funds if a “required majority”
(as defined in Section 57(o) of the 1940 Act) of the Corporation’s independent directors makes certain conclusions in connection
with a co-investment transaction, including that (1) the terms of the transaction, including the consideration to be paid, are
reasonable and fair to the Corporation and its shareholders and do not involve overreaching in respect of the Corporation or its
shareholders on the part of any person concerned and (2) the transaction is consistent with the interests of the Corporation’s
shareholders and is consistent with the Corporation’s investment objective and strategies.



The
following discussion describes the operations of Rand and its wholly-owned subsidiaries Rand SBIC, Rand Somerset Holdings Corp.,
Rand BeetNPath Holdings Corp., Rand Carolina Skiff Holdings Corp., Rand Filterworks Holdings Corp. and Rand GTEC Holdings Corp.,
(collectively, the “Corporation”).



Our
corporate office is located in Buffalo, NY and our website address is www.randcapital.com. We make available free of charge on
our website our annual and periodic reports, proxy statements and other information as soon as reasonably practicable after such
material is filed with the Securities and Exchange Commission (“SEC”). Our shares are traded on the Nasdaq Capital
Market under the ticker symbol “RAND”.



Note
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Basis
of Presentation –It is our opinion that the accompanying consolidated financial statements include all adjustments
of a normal recurring nature necessary for a fair presentation in accordance with GAAP of the consolidated financial position,
results of operations, cash flows and statement of changes in net assets for the interim periods presented. Certain information
and note disclosures normally included in audited annual consolidated financial statements prepared in accordance with GAAP have
been omitted; however, we believe that the disclosures made are adequate to make the information presented herein not misleading.
The interim results for the nine months ended September 30, 2020 are not necessarily indicative of the results to be expected
for the full year.



These
statements should be read in conjunction with the consolidated financial statements and the notes included in our Annual Report
on Form 10-K for the year ended December 31, 2019. Information contained in this filing should also be reviewed in conjunction
with our related filings with the SEC prior to the date of this report.



Reclassification– Certain prior year amounts in the stockholders’ equity section of the “Statement of Financial Position”
have been reclassified. In addition, certain other balance sheet and income statement amounts have been reclassified to comply
with regulatory rules.



22







Principles
of Consolidation - The consolidated financial statements include the accounts of Rand and its wholly-owned subsidiaries.
All intercompany accounts and transactions have been eliminated in consolidation.



Fair
Value of Financial Instruments – The carrying amounts reported in the consolidated statement of financial position
of cash, interest receivable, accounts payable and accrued expenses approximate fair value because of the immediate or short-term
nature of these financial instruments.



Fair
Value of SBA Debentures -In September 2020, the SBIC Funding Corporation completed a pooling of SBA debentures that have
a coupon rate of 1.034%, excluding a mandatory SBA annual charge estimated to be 0.275%, resulting in a total estimated ten year
fixed rate of 1.309%. The carrying value of Rand’s SBA debentures is a reasonable estimate of fair value because their stated
interest rates approximate current interest rates that are available for debt with similar terms.



Investment
Classification –In accordance with the provisions of the 1940 Act, the Corporation classifies its investments by
level of control. Under the 1940 Act, “Control Investments” are investments in companies that the Corporation is deemed
to “Control” because it owns more than 25% of the voting securities of the company or has greater than 50% representation
on the company’s board. “Affiliate Investments” are companies in which the Corporation owns between 5% and 25%
of the voting securities. “Non-Control/Non-Affiliate Investments” are those companies that are neither Control Investments
nor Affiliate Investments.



Investments- Investments are valued at fair value as determined in good faith by RCM and approved by our Board of Directors. The
Corporation invests in loan instruments, debt instruments, and equity instruments. There is no single standard for determining
fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances
of each portfolio investment while employing a consistent valuation process. The Corporation analyzes and values each investment
quarterly, and records unrealized depreciation for an investment that it believes has become impaired, including where collection
of a loan or debt security or realization of the recorded value of an equity security is doubtful. Conversely, the Corporation
will record unrealized appreciation if it believes that an underlying portfolio company has appreciated in value and, therefore,
its equity securities have also appreciated in value. These estimated fair values may differ from the values that would have been
used had a ready market for the investments existed and these differences could be material if RCM’s assumptions and judgments
differ from results of actual liquidation events. Under the valuation policy of the Corporation, unrestricted publicly traded
securities are valued at the average closing price for these securities for the last three trading days of the reporting period.



Qualifying
Assets- More than 70% of the Corporation’s investments are in privately held small business enterprises, that were
not investment companies, are principally based in the United States, and represent qualifying assets as defined by Section 55(a)
of the 1940 Act.



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



Revenue
Recognition - Interest Income - Interest income is recognized on the accrual basis except where the investment is in default
or otherwise presumed to be in doubt. In such cases, interest is recognized at the time of receipt. A reserve for possible losses
on interest receivable is maintained when appropriate.



Rand
SBIC’s interest accrual is also regulated by the SBA’s “Accounting Standards and Financial Reporting Requirements
for Small Business Investment Companies.” Under these rules, interest income cannot be recognized if collection is doubtful,
and a 100% reserve must be established. The collection of interest is presumed to be in doubt when there is substantial doubt
about a portfolio company’s ability to continue as a going concern or a loan is in default for more than 120 days. Management
also uses other qualitative and quantitative measures to determine the value of a portfolio investment and the collectability
of any accrued interest.



23







The
following investments are on non-accrual status: BeetNPath, LLC (Beetnpath), G-TEC Natural Gas Systems (G-Tec) and a portion of
the Mercantile Adjustment Bureau, LLC (Mercantile) outstanding loan balance.



The
Corporation holds debt securities in its investment portfolio that contain payment-in-kind (“PIK”) interest provisions.
PIK interest, computed at the contractual rate specified in each debt agreement, is added to the principal balance of the debt
and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal
repayment.



Revenue
Recognition - Dividend Income –The Corporation may receive cash distributions from portfolio companies that are
limited liability companies or corporations and these distributions are classified as dividend income on the consolidated statement
of operations. Dividend income is recognized on an accrual basis when it can be reasonably estimated.



The
Corporation may hold preferred equity securities that contain cumulative dividend provisions. Cumulative dividends are recorded
as dividend income, if declared and deemed collectible, and any dividends in arrears are recognized into income and added to the
balance of the preferred equity investment. The actual collection of these dividends in arrears may be deferred until such time
as the preferred equity is redeemed.



Revenue
Recognition - Fee Income- Consists of the revenue associated with the amortization of financing fees charged to the portfolio
companies upon successful closing of SBIC financings and income associated with portfolio company board attendance fees. The income
associated with the amortization of financing fees was $17,917 and $48,887 for the nine months ended September 30, 2020 and 2019,
respectively. During the nine months ended September 30, 2019, the Corporation recognized a one-time fee of $225,000 in conjunction
with the repayment of the eHealth loan instrument. The board fees were $0 and $500 for the nine months ended September 30, 2020
and 2019, respectively.



Realized
Gain or Loss and Unrealized Appreciation or Depreciation of Investments -Amounts reported as realized gains and losses
are measured by the difference between the proceeds from the sale or exchange and the cost basis of the investment without regard
to unrealized gains or losses recorded in prior periods. The cost of securities that have, in management’s judgment, become
worthless are written off and reported as realized losses when appropriate. Unrealized appreciation or depreciation reflects the
difference between the fair value of the investments and the cost basis of the investments.



Original
Issue Discount – Investments may include “original issue discount” or OID income. This occurs when the
Corporation purchases a warrant and a note from a portfolio company simultaneously, which requires an allocation of a portion
of the purchase price to the warrant and reduces the note or debt instrument by an equal amount in the form of a note discount
or OID. The note is reported net of the OID and the OID is accreted into interest income over the life of the loan. The Corporation
recognized $38,552 and $30,573 in OID income for the nine months ended September 30, 2020 and 2019, respectively. OID income is
estimated to be approximately $9,300 for the remainder of 2020.



Deferred
Debenture Costs - SBA debenture origination and commitment costs, which are netted against the debenture obligation (See
Note 6 “SBA Debentures”), will be amortized ratably over the terms of the SBA debentures. Amortization expense was
$28,256 and $27,614 for the nine months ended September 30, 2020 and 2019, respectively. Amortization expense on currently outstanding
debentures for the next five years is estimated to average approximately $24,000 per year.



SBA
Debentures -The Corporation had $11,000,000 in outstanding SBA debentures at September 30, 2020 and December 31, 2019,
respectively, with a weighted average interest rate, including the SBA annual fee, of 3.45% at September 30, 2020. The debentures
are presented net of deferred debenture costs (See Note 6 “SBA Debentures”). The $11,000,000 in outstanding SBA leverage
matures from 2022 through 2029.



24







In
the event of a future default of such SBA obligations, the Corporation has consented to the exercise, by the SBA, of all rights
of the SBA under 13 C.F.R. 107.1810(i) “SBA remedies for automatic events of default” and has agreed to take all actions
that the SBA may so require. These actions may include the Corporation’s automatic consent to the appointment of the SBA,
or its designee, as receiver under Section 311(c) of the Small Business Investment Act of 1958.



Net
Assets per Share - Net assets per share are based on the number of shares of common stock outstanding, adjusted retroactively
for the reverse stock split that occurred in May 2020. The Corporation does not have any common stock equivalents outstanding.



Supplemental
Cash Flow Information - Income taxes refunded during the nine months ended September 30, 2020 and 2019 were $380,890 and
$644,821, respectively. Interest paid during each of the nine months ended September 30, 2020 and 2019 was $380,124 and $339,605,
respectively. The Corporation converted $280,724 and $344,222 of interest receivable into investments during the nine months ended
September 30, 2020 and 2019, respectively.



Accounting
Estimates - The preparation of financial statements in conformity with GAAP 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.



Stockholders’
Equity (Net Assets) -At September 30, 2020 and December 31, 2019, there were 500,000 shares of $10.00 par value preferred
stock authorized and unissued.



On
April 22, 2020, the Board of Directors approved a new share repurchase plan, which authorizes the Corporation to repurchase shares
of the Corporation’s outstanding common stock with an aggregate cost of up to $1,500,000 at prices per share of common stock
no greater than the then current net asset value. This new share repurchase authorization lasts for a period of 12 months from
the authorization date, until April 22, 2021. This new share repurchase plan supplants and replaces the share repurchase authorization
that was previously approved by the Board of Directors in October 2019. Prior to the April 22, 2020 new share repurchase plan,
in October 2019 the Board of Directors extended the repurchase authorization of up to 1,541,046 shares of the Common Stock on
the open market at prices no greater than the then current net asset value. The Corporation purchased 3,397 shares of common stock
for the treasury at a total cost of $37,988 during the nine months ended September 30, 2020. No shares of common stock were repurchased
during the nine months ended September 30, 2019.



The
Corporation paid a special dividend to shareholders, as a means to distribute all of the Corporation’s accumulated earnings
and profits, in May 2020, in preparation for the Corporation’s intended regulated investment company (“RIC”)
election. The Corporation’s Board of Directors declared a special dividend of $23.7 million, or approximately $1.62 per
share, on March 3, 2020. The cash and shares of Rand’s common stock representing the special dividend were distributed on
May 11, 2020 to shareholders.



On
May 21, 2020, the Corporation effected a 1-for-9 reverse stock split of its common stock (the “Reverse Stock Split”).
The Reverse Stock Split affected all issued and outstanding shares of its common stock, including shares held in treasury. The
Reverse Stock Split reduced the number of issued and outstanding shares of the Corporation’s common stock from 23,845,470
shares and 23,304,424 shares, respectively, to 2,648,916 shares and 2,588,800 shares, respectively. The Reverse Stock Split did
not change the authorized number of shares or the par value of the common stock. Share and per share data included herein has
been retroactively restated to reflect the effect of the Reverse Stock Split, as applicable. The Reverse Stock Split affected
all shareholders uniformly and did not alter any shareholder’s percentage interest in the Corporation’s outstanding
common stock, except for minor adjustments resulting from the cash payment received for any fractional shares that would have
been received as a result of the Reverse Stock Split.





25







Income
Taxes –The Corporation intends to elect U.S. federal tax treatment as a RIC as of January 1, 2020 on its timely
filed Federal tax return for the 2020 tax year. In order to qualify as a RIC, among other things, the Corporation will be required
to meet certain source of income and asset diversification requirements and timely distribute to its shareholders at least 90%
of investment company taxable income, as defined by the Code, for each tax year. The Corporation intends to make the requisite
distributions to its shareholders, which will generally relieve the Corporation from U.S. federal income taxes with respect to
all income distributed to its shareholders.



In
anticipation of the RIC election and in accordance with GAAP, a net deferred tax asset of $1,451,658 was eliminated. This asset
related to book/tax differences that are no longer applicable now that the Corporation intends to elect RIC status for income
tax purposes.



Certain
investments that generate non-qualifying income for a RIC, and the deferred tax liability related to these investments of $247,460,
were placed in blocker corporations in December 2019. These blocker corporations will be subject to federal and state income taxes.



The
Corporation reviews the tax positions it has taken to determine if they meet a “more likely than not threshold” for
the benefit of the tax position to be recognized in the consolidated financial statements. A tax position that fails to meet the
more likely than not recognition threshold will result in either a reduction of a current or deferred tax asset or receivable,
or the recording of a current or deferred tax liability. There were no uncertain tax positions recorded at September 30, 2020
or December 31, 2019.



Under
the provisions of Section 382 the Internal Revenue Code of 1986, as amended, (the “Code”), net operating loss and
credit carryforwards and other tax attributes may be subject to limitations if there has been a significant change in ownership
in the Corporation, as defined by the Code. Prior to the completion of the Transactions, the Corporation was able to utilize its
remaining federal net operating losses (“NOL”). The Coronavirus Aid, Relief, and Economic Security Act (the “CARES
Act”), signed into law by President Trump on March 27, 2020, made changes to the NOL carryback rules for businesses. The
Corporation was able to carryback a portion of its NOL, under the CARES Act and received a tax benefit of $90,141.



The
Corporation is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended December
31, 2016 through 2019. In general, the Corporation’s state income tax returns are open to audit under the statute of limitations
for the years ended December 31, 2016 through 2019.



It
is the Corporation’s policy to include interest and penalties related to income tax liabilities in income tax expense. There
were no amounts recognized for interest or penalties for the nine months ended September 30, 2020 or 2019.



Concentration
of Credit and Market Risk – The Corporation’s financial instruments potentially subject it to concentrations
of credit risk. Cash is invested with banks in amounts which, at times, exceed insurable limits. The Corporation does not anticipate
non-performance by such banks.



The
following are the concentrations of the top five portfolio company values compared to the fair value of the Corporation’s
total investment portfolio:



|                                               |  | September
    30, 2020 |   
|---------------------------------------------- |  | ---------------------- | --
|ACV Auctions, Inc. (ACV)                       |  |                        | 16
|Tilson Technology Management, Inc. (Tilson)    |  |                        | 11
|AIKG, LLC (Andretti)                           |  |                        | 11
|Filterworks Acquisition USA, LLC (Filterworks) |  |                        | 7 
|SciAps, Inc. (Sciaps)                          |  |                        | 6 



|                                               |  | December
    31, 2019 |   
|---------------------------------------------- |  | --------------------- | --
|ACV Auctions, Inc. (ACV)                       |  |                       | 18
|AIKG, LLC (Andretti)                           |  |                       | 12
|Tilson Technology Management, Inc. (Tilson)    |  |                       | 11
|Filterworks Acquisition USA, LLC (Filterworks) |  |                       | 8 
|Outmatch (Outmatch)                            |  |                       | 6 



26







Note
3. INVESTMENTS



The
Corporation’s investments are carried at fair value in accordance with FASB Accounting Standards Codification (ASC) 820,
“Fair Value Measurements and Disclosures”, which defines fair value, establishes a framework for measuring fair value
in accordance with GAAP, and expands disclosures about fair value measurements.



Loan
investments are defined as traditional loan financings with no equity features. Debt investments are defined as debt financings
that include one or more equity features such as conversion rights, stock purchase warrants, and/or stock purchase options. A
financing may also be categorized as a debt financing if it is accompanied by the direct purchase of an equity interest in the
company.



The
Corporation uses several approaches to determine the fair value of an investment. The main approaches are:



| | ● | Loan
    and debt securities are valued at cost when it is representative of the fair value of the investment or sufficient assets
    or liquidation proceeds are expected to exist from a sale of a portfolio company at its estimated fair value. However, they
    may be valued at an amount other than cost given the carrying interest rate versus the related inherent portfolio risk of
    the investment. A loan or debt instrument may be reduced in value if it is judged to be of poor quality, collection is in
    doubt or insufficient liquidation proceeds exist.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ● | Equity
    securities may be valued using the “asset approach”, “market approach” or “income approach.”
    The asset approach involves estimating the liquidation value of the portfolio company’s assets. To the extent the value
    exceeds the remaining principal amount of the debt or loan securities of the portfolio company, the fair value of such securities
    is generally estimated to be their cost. However, where value is less than the remaining principal amount of the loan and
    debt securities, the Corporation may discount the value of an equity security. The market approach uses observable prices
    and other relevant information generated by similar market transactions. It may include the use of market multiples derived
    from a set of comparables to assist in pricing the investment. Additionally, the Corporation adjusts valuations if a subsequent
    significant equity financing has occurred that includes a meaningful portion of the financing by a sophisticated, unrelated
    new investor. The income approach employs a cash flow and discounting methodology to value an investment.



ASC
820 classifies the inputs used to measure fair value into the following hierarchy:



Level
1: Quoted prices in active markets for identical assets or liabilities, used in the Corporation’s valuation at the measurement
date. Under the valuation policy, the Corporation values unrestricted publicly traded companies, categorized as Level 1 investments,
at the average closing price for the last three trading days of the reporting period.



Level
2: Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities
in markets that are not active, or other observable inputs other than quoted prices.



Level
3: Unobservable and significant inputs to determining the fair value.



27







Financial
assets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Any changes
in estimated fair value are recorded in the statement of operations.



93%
of the Corporation’s investments were Level 3 at September 30, 2020 and 100% of the Corporation’s investments were
Level 3 at December 31, 2019.



Under
the valuation policy of the Corporation, unrestricted publicly traded securities are valued at the average closing price for these
securities for the last three trading days of the reporting period.



In
the valuation process, the Corporation values restricted securities, categorized as Level 3 investments, using information from
these portfolio companies, which may include:



| | ● | Audited
    and unaudited statements of operations, balance sheets and operating budgets;                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | Current
    and projected financial, operational and technological developments of the portfolio company;                                            
| | ● | Current
    and projected ability of the portfolio company to service its debt obligations;                                                          
| | ● | The
    current capital structure of the business and the seniority of the various classes of equity if a deemed liquidation event
    were to occur;
| | ● | Pending
    debt or capital restructuring of the portfolio company;                                                                                  
| | ● | Current
    information regarding any offers to purchase the investment, or recent fundraising transactions;                                         
| | ● | Current
    ability of the portfolio company to raise additional financing if needed;                                                                
| | ● | Changes
    in the economic environment which may have a material impact on the operating results of the portfolio company;                          
| | ● | Internal
    circumstances and events that may have an impact (both positive and negative) on the operating performance of the portfolio
    company;
| | ● | Qualitative
    assessment of key management;                                                                                                        
| | ● | Contractual
    rights, obligations or restrictions associated with the investment; and                                                              
| | ● | Other
    factors deemed relevant to assess valuation.                                                                                               



The
valuation may be reduced if a portfolio company’s performance and potential have deteriorated significantly. If the factors
that led to a reduction in valuation are overcome, the valuation may be readjusted.



Equity
Securities



Equity
securities may include preferred stock, common stock, warrants and limited liability company membership interests.



The
significant unobservable inputs used in the fair value measurement of the Corporation’s equity investments are earnings
before interest, tax and depreciation and amortization (EBITDA) and revenue multiples, where applicable, the financial and operational
performance of the business, and the debt and senior equity preferences that may exist in a deemed liquidation event. Standard
industry multiples may be used when available; however, the Corporation’s portfolio companies are typically small and in
early stages of development and these industry standards may be adjusted to more closely match the specific financial and operational
performance of the portfolio company. Due to the nature of certain investments, fair value measurements may be based on other
criteria, which may include third party appraisals. Significant changes in any of these unobservable inputs may result in a significantly
higher or lower fair value estimate.



28







Another
key factor used in valuing equity investments is a significant recent arms-length equity transaction entered into by the portfolio
company with a sophisticated, non-strategic, unrelated, new investor. The terms of these equity transactions may not be identical
to the equity transactions between the portfolio company and the Corporation, and the impact of the difference in transaction
terms on the market value of the portfolio company may be difficult or impossible to quantify.



When
appropriate the Black-Scholes pricing model is used to estimate the fair value of warrants for accounting purposes. This model
requires the use of highly subjective inputs including expected volatility and expected life, in addition to variables for the
valuation of minority equity positions in small private and early stage companies. Significant changes in any of these unobservable
inputs may result in a significantly higher or lower fair value estimate.



For
recent investments of less than one year old, the Corporation generally relies on the cost basis, which is deemed to represent
the fair value, unless other fair value inputs are identified causing the Corporation to depart from this basis.



Loan
and Debt Securities



The
significant unobservable inputs used in the fair value measurement of the Corporation’s loan and debt securities are the
financial and operational performance of the portfolio company, similar debt with similar terms with other portfolio companies,
as well as the market acceptance for the portfolio company’s products or services. These inputs will likely provide an indicator
as to the probability of principal recovery of the investment. The Corporation’s loan and debt investments are often junior
secured or unsecured securities. Fair value may also be determined based on other criteria where appropriate. Significant changes
to the unobservable inputs may result in a change in fair value. For recent investments, the Corporation generally relies on the
cost basis, which is deemed to represent the fair value, unless other fair value inputs are identified causing the Corporation
to depart from this basis.



The
following table provides a summary of the significant unobservable inputs used to determine the fair value of the Corporation’s
Level 3 portfolio investments as of September 30, 2020:



|Investment
                                         Type |  | Market
                                         Approach EBITDA
                                         Multiple |                                                          |  | Market
                                         Approach Liquidation
                                         Seniority |   |                                                      | Market
                                         Approach Revenue
                                         Multiple |  |   | Market
                                         Approach Transaction Pricing |  |  | Totals |                                                           
|-------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------- | - | ---------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------ |  | - | ---------------------------------------------------------------------------- |  |  | ------ | ----------------------------------------------------------
|                                                         |  |                                                                                                                   |                                                          |  |                                                                                                                         |   |                                                      |                                                                                                                    |  |   |                                                                              |  |  |        |                                                           
|Non-Control/Non-Affiliate
    Equity                     |  | $                                                                                                                 | -                                                        |  |                                                                                                                         | $ | 1,452,732                                            |                                                                                                                    |  | $ | 500,000                                                                      |  |  | $      | 8,605,983                                                 
|Non-Control/Non-Affiliate
    Loan and Debt              |  |                                                                                                                   | 500,000                                                  |  |                                                                                                                         |   | 2,374,531                                            |                                                                                                                    |  |   | 602,569                                                                      |  |  |        | 9,333,541                                                 
|Total
    Non-Control/Non-Affiliate                      |  | $                                                                                                                 | 500,000                                                  |  |                                                                                                                         | $ | 3,827,263                                            |                                                                                                                    |  | $ | 1,102,569                                                                    |  |  | $      | 17,939,524                                                
|                                                         |  |                                                                                                                   |                                                          |  |                                                                                                                         |   |                                                      |                                                                                                                    |  |   |                                                                              |  |  |        |                                                           
|Affiliate Equity                                         |  | $                                                                                                                 | 1,750,000                                                |  |                                                                                                                         | $ | 22,841                                               |                                                                                                                    |  | $ | 2,548,429                                                                    |  |  | $      | 7,143,765                                                 
|Affiliate Loan
    and Debt                              |  |                                                                                                                   | -                                                        |  |                                                                                                                         |   | 250,000                                              |                                                                                                                    |  |   | -                                                                            |  |  |        | 3,744,380                                                 
|Total
    Affiliate                                      |  | $                                                                                                                 | 1,750,000                                                |  |                                                                                                                         | $ | 272,841                                              |                                                                                                                    |  | $ | 2,548,429                                                                    |  |  | $      | 10,888,145                                                
|                                                         |  |                                                                                                                   |                                                          |  |                                                                                                                         |   |                                                      |                                                                                                                    |  |   |                                                                              |  |  |        |                                                           
|Total
    Level 3 Investments                            |  | $                                                                                                                 | 2,250,000                                                |  |                                                                                                                         | $ | 4,100,104                                            |                                                                                                                    |  | $ | 3,650,998                                                                    |  |  | $      | 28,827,669                                                
|                                                         |  |                                                                                                                   |                                                          |  |                                                                                                                         |   |                                                      |                                                                                                                    |  |   |                                                                              |  |  |        |                                                           
|Range                                                    |  |                                                                                                                   | 4.5-5X                                                   |  |                                                                                                                         |   | 1X                                                   |                                                                                                                    |  |   | 1X-3X                                                                        |  |  |        | Not
                                         Applicable   
|                                                         |  |                                                                                                                   |                                                          |  |                                                                                                                         |   |                                                      |                                                                                                                    |  |   |                                                                              |  |  |        |                                                           
|Unobservable Input                                       |  |                                                                                                                   | EBITDA
                                         Multiple |  |                                                                                                                         |   | Asset
                                         Value |                                                                                                                    |  |   | Revenue
                                         Multiple                    |  |  |        | Transaction
                                         Price
|                                                         |  |                                                                                                                   |                                                          |  |                                                                                                                         |   |                                                      |                                                                                                                    |  |   |                                                                              |  |  |        |                                                           
|Weighted Average                                         |  |                                                                                                                   | 4.6X                                                     |  |                                                                                                                         |   | 1X                                                   |                                                                                                                    |  |   | 2.5X                                                                         |  |  |        | Not
                                         Applicable   



29







The
following table provides a summary of the components of Level 1, 2 and 3 Assets Measured at Fair Value at September 30, 2020:



|                   |  |                    |            |  |                                                                 | Fair Value Measurements at Reported Date Using |          
|------------------ |  | ------------------ | ---------- |  | --------------------------------------------------------------- | ---------------------------------------------- | ---------
|Description        |  | September 30, 2020 |            |  | Quoted Prices in Active Markets for Identical Assets

(Level 1) |                                                |          
|Loan investments   |  | $                  | 3,720,692  |  |                                                                 | $                                              | -        
|Debt investments   |  |                    | 14,545,579 |  |                                                                 |                                                | -        
|Equity investments |  |                    | 23,416,250 |  |                                                                 |                                                | 2,853,750
|Total              |  | $                  | 41,682,521 |  |                                                                 | $                                              | 2,853,750



The
following table provides a summary of the components of Level 1, 2 and 3 Assets Measured at Fair Value at December 31, 2019:



|                   |  |                   |            |  |                                                                 | Fair Value Measurements at Reported Date Using |  
|------------------ |  | ----------------- | ---------- |  | --------------------------------------------------------------- | ---------------------------------------------- | -
|Description        |  | December 31, 2019 |            |  | Quoted Prices in Active Markets for Identical Assets

(Level 1) |                                                |  
|Loan investments   |  | $                 | 1,570,692  |  |                                                                 | $                                              | -
|Debt investments   |  |                   | 13,647,107 |  |                                                                 |                                                | -
|Equity investments |  |                   | 21,802,993 |  |                                                                 |                                                | -
|Total              |  | $                 | 37,020,792 |  |                                                                 | $                                              | -



The
following table provides a summary of changes in Assets Measured at Fair Value Using Significant Unobservable Inputs (Level 3)
for the nine months ended September 30, 2020:



|                                                                                                      |  | Fair Value Measurements Using Significant

Unobservable Inputs (Level 3) Venture Capital Investments |          
|----------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------- | ---------
|Description                                                                                           |  | Loan Investments                                                                                     |          
|Ending Balance, December
    31, 2019, of Level 3 Assets                                              |  | $                                                                                                    | 1,570,692
|                                                                                                      |  |                                                                                                      |          
|Realized
    gain included in net change in net assets from operations:                               |  |                                                                                                      |          
|Advantage 24/7 LLC
    (Advantage 24/7)                                                               |  |                                                                                                      | 36,877   
|Microcision LLC
    (Microcision)                                                                     |  |                                                                                                      | -        
|Outmatch
    Holdings, LLC (Outmatch)                                                                 |  |                                                                                                      | -        
|Total
    Realized Gains                                                                              |  |                                                                                                      | 36,877   
|                                                                                                      |  |                                                                                                      |          
|Unrealized
    Losses included in net change in net assets from operations:                           |  |                                                                                                      |          
|                                                                                                      |  |                                                                                                      |          
|Genicon,
    Inc. (Genicon)                                                                           |  |                                                                                                      | -        
|Total
    Unrealized Losses                                                                           |  |                                                                                                      | -        
|                                                                                                      |  |                                                                                                      |          
|Purchases
    of Securities/Changes to Securities/Non-cash conversions:                               |  |                                                                                                      |          
|AIKG LLC (Andretti)                                                                                   |  |                                                                                                      | -        
|Filterworks Acquisition
    USA, LLC                                                                  |  |                                                                                                      | -        
|Genicon                                                                                               |  |                                                                                                      | -        
|GoNoodle, Inc. (GoNoodle)                                                                             |  |                                                                                                      | -        
|HDI Acquisition
    LLC (Hilton Displays)                                                             |  |                                                                                                      | -        
|Mattison Avenue
    Holdings LLC (Mattison)                                                           |  |                                                                                                      | -        
|Microcision                                                                                           |  |                                                                                                      | -        
|SciAps, Inc. (Sciaps)                                                                                 |  |                                                                                                      | -        
|Science and Medicine
    Group, Inc. (SMG)                                                            |  |                                                                                                      | 1,900,000
|Tilson
    Technology Management, Inc. (Tilson)                                                       |  |                                                                                                      | -        
|Total
    Purchases of Securities/Changes to Securities/Non-cash conversions                          |  |                                                                                                      | 1,900,000
|                                                                                                      |  |                                                                                                      |          
|Repayments
    and Sale of Securities:                                                                |  |                                                                                                      |          
|Advantage 24/7                                                                                        |  |                                                                                                      | (36,877  
|Microcision LLC
    (Microcision)                                                                     |  |                                                                                                      | -        
|Outmatch
    Holdings, LLC (Outmatch)                                                                 |  |                                                                                                      | -        
|Total
    Repayments and Sale of Securities                                                           |  |                                                                                                      | (36,877  
|Transfers
    within Level 3                                                                          |  |                                                                                                      | 250,000  
|                                                                                                      |  |                                                                                                      |          
|Ending
                                      Balance September 30, 2020, of Level 3 Assets            |  | $                                                                                                    | 3,720,692
|                                                                                                      |  |                                                                                                      |          
|Change
    in unrealized depreciation on investments for the period included in changes in net assets |  | $                                                                                                    | (540,033 
|Net
    realized gain on investments for the period included in changes in net assets                 |  | $                                                                                                    | 2,412,046





30







The
following table provides a summary of changes in Assets Measured at Fair Value Using Significant Unobservable Inputs (Level 3)
for the nine months ended September 30, 2019:



|                                                                                                      |   | Fair Value Measurements Using Significant

Unobservable Inputs (Level 3) Venture Capital Investments |           
|----------------------------------------------------------------------------------------------------- | - | ---------------------------------------------------------------------------------------------------- | ----------
|Description                                                                                           |   | Loan Investments                                                                                     |           
|Ending Balance, December
    31, 2018, of Level 3 Assets                                              |   | $                                                                                                    | 4,935,777 
|                                                                                                      |   |                                                                                                      |           
|Realized
    gain included in net change in net assets from operations:                               |   |                                                                                                      |           
|Advantage 24/7 LLC
    (Advantage 24/7)                                                               |   |                                                                                                      | -         
|Gemcor II LLC (Gemcor)                                                                                |   |                                                                                                      | -         
|SOMS
    Technologies, LLC (SOMS)                                                                     |   |                                                                                                      | -         
|Total
    Realized Gains and Losses                                                                   |   |                                                                                                      | -         
|                                                                                                      |   |                                                                                                      |           
|Unrealized
    Gains and Losses included in net change in net assets from operations:                 |   |                                                                                                      |           
|BeetNPath, LLC (Beetnpath)                                                                            |   |                                                                                                      | -         
|Empire Genomics,
    LLC (Empire Genomics)                                                            |   |                                                                                                      | -         
|Genicon, Inc. (Genicon)                                                                               |   |                                                                                                      | -         
|KnowledgeVision
    Systems, Inc. (Knowledge Vision)                                                  |   |                                                                                                      | -         
|Mercantile Adjustment
    Bureau, LLC (Mercantile)                                                    |   |                                                                                                      | -         
|Rheonix, Inc. (Rheonix)                                                                               |   |                                                                                                      | -         
|SciAps, Inc. (Sciaps)                                                                                 |   |                                                                                                      | -         
|SocialFlow, Inc.
    (Socialflow)                                                                     |   |                                                                                                      | -         
|SOMS                                                                                                  |   |                                                                                                      | -         
|Tilson
    Technology Management, Inc. (Tilson)                                                       |   |                                                                                                      | -         
|Total
    Unrealized Gains and Losses                                                                 |   |                                                                                                      | -         
|                                                                                                      |   |                                                                                                      |           
|Purchases
    of Securities/Changes to Securities/Non-cash conversions:                               |   |                                                                                                      |           
|Advantage 24/7                                                                                        |   |                                                                                                      | 140,000   
|Empire Genomics                                                                                       |   |                                                                                                      | -         
|Genicon                                                                                               |   |                                                                                                      | -         
|GoNoodle, Inc. (GoNoodle)                                                                             |   |                                                                                                      | -         
|Knowledge Vision                                                                                      |   |                                                                                                      | 150,000   
|Microcision LLC
    (Microcision)                                                                     |   |                                                                                                      | -         
|Tilson                                                                                                |   |                                                                                                      | -         
|Total
    Purchases of Securities/Changes to Securities/Non-cash conversions                          |   |                                                                                                      | 290,000   
|                                                                                                      |   |                                                                                                      |           
|Repayments
    and Sale of Securities:                                                                |   |                                                                                                      |           
|Advantage 24/7                                                                                        |   |                                                                                                      | (25,000   
|eHealth Global Technologies,
    Inc. (eHealth)                                                       |   |                                                                                                      | (3,500,000
|Gemcor                                                                                                |   |                                                                                                      | -         
|Tilson                                                                                                |   |                                                                                                      | -         
|Total
    Repayments and Sale of Securities                                                           |   |                                                                                                      | (3,525,000
|Transfers within
    Level 3                                                                          |   |                                                                                                      | 444,915   
|                                                                                                      |   |                                                                                                      |           
|Ending
                                      Balance, September 30, 2019, of Level 3 Assets           |   | $                                                                                                    | 2,145,692 
|                                                                                                      |   |                                                                                                      |           
|Change
    in unrealized depreciation on investments for the period included in changes in net assets | $ | (4,197,281                                                                                           | )         
|Net
    realized loss on investments for the period included in changes in net assets                 | $ | (392,239                                                                                             | )         





Note
4. OTHER ASSETS



At
September 30, 2020 and December 31, 2019, other assets was comprised of the following:



|                      |  | September
                                         30, 2020 |        |  | December
    31, 2019 |  
|--------------------- |  | ----------------------------------------------------------- | ------ |  | --------------------- | -
|Prepaid expenses      |  | $                                                           | 27,232 |  |                       | $
|Dividend receivable   |  |                                                             | 26,500 |  |                       |  
|Operating receivables |  |                                                             | -      |  |                       |  
|Total other assets    |  | $                                                           | 53,732 |  |                       | $



Note
5. COMMITMENTS AND CONTINGENCIES



The
Corporation had no commitments at September 30, 2020.





Note
6. SBA DEBENTURES



Pursuant
to FASB Accounting Standard Update (ASU) 2015-03, the debt origination costs associated with the SBA debt obligations are presented
as a direct deduction of the related debt obligation.



|                                          |  | September
                                         30, 2020 |            |   | December
    31, 2019 |  
|----------------------------------------- |  | ----------------------------------------------------------- | ---------- | - | --------------------- | -
|Debentures guaranteed by
    the SBA      |  | $                                                           | 11,000,000 |   |                       | $
|Less unamortized
    issue costs          |  |                                                             | (184,831   | ) |                       |  
|Debentures guaranteed
    by the SBA, net |  | $                                                           | 10,815,169 |   |                       | $



The
weighted average interest rate, including the SBA annual fee, at September 30, 2020 was 3.45%.



The
debenture terms require semiannual payments of interest at annual interest rates ranging from 2.245% to 3.644%, plus an annual
charge ranging from 0.804% to 0.94%. The debentures have fixed interest rates and a 10 year maturity date. As of September 30,
2020, the Corporation had $3,000,000 in additional leverage available from the SBA.





31







The
debentures outstanding at September 30, 2020 will mature as follows:



|Maturity
    Date     |  | Leverage |           
|--------------------- |  | -------- | ----------
|2022                  |  | $        | 3,000,000 
|2023                  |  |          | 2,500,000 
|2024                  |  |          | 1,500,000 
|2025                  |  |          | 1,000,000 
|2029                  |  |          | 3,000,000 
|Total
    Outstanding |  | $        | 11,000,000



Note
7. CHANGES IN STOCKHOLDERS’ EQUITY (NET ASSETS)



The
following schedule analyzes the changes in stockholders’ equity (net assets) section of the Consolidated Statement of Financial
Position for the three and nine months ended September 30, 2020 and 2019, respectively:



|                                               |  | Common
    Stock |           |  | Capital
                                         in excess of par value |   |            | Treasury
                                         Stock, at cost |  |   | Total
    distributable (losses) earnings |   |  | Total
                                         Stockholders’ Equity
                                         (Net Assets) |           
|---------------------------------------------- |  | ---------------- | --------- |  | ----------------------------------------------------------------------- | - | ---------- | ---------------------------------------------------------------- |  | - | ----------------------------------------- | - |  | ------------------------------------------------------------------------------------------------------------------------- | ----------
|July 1, 2020                                   |  | $                | 2,384,547 |  |                                                                         | $ | 34,142,455 |                                                                  |  | $ | (1,483,409                                | ) |  | $                                                                                                                         | 14,667,721
|Purchase of treasury shares                    |  |                  | -         |  |                                                                         |   | -          |                                                                  |  |   | (23,684                                   | ) |  |                                                                                                                           | -         
|Net increase
    in net assets from operations |  |                  | -         |  |                                                                         |   | -          |                                                                  |  |   | -                                         |   |  |                                                                                                                           | 262,523   
|September 30,
    2020                         |  | $                | 2,384,547 |  |                                                                         | $ | 34,142,455 |                                                                  |  | $ | (1,507,093                                | ) |  | $                                                                                                                         | 14,930,244



|                                               |  | Common
    Stock |         |  | Capital
                                         in excess of par value |   |            | Treasury
                                         Stock, at cost |  |   | Total
    distributable earnings |   |  | Total
                                         Stockholders’ Equity
                                         (Net Assets) |           
|---------------------------------------------- |  | ---------------- | ------- |  | ----------------------------------------------------------------------- | - | ---------- | ---------------------------------------------------------------- |  | - | -------------------------------- | - |  | ------------------------------------------------------------------------------------------------------------------------- | ----------
|July 1, 2019                                   |  | $                | 686,304 |  |                                                                         | $ | 10,581,789 |                                                                  |  | $ | (1,469,105                       | ) |  | $                                                                                                                         | 20,833,065
|Net decrease
    in net assets from operations |  |                  | -       |  |                                                                         |   | -          |                                                                  |  |   | -                                |   |  |                                                                                                                           | (2,878,888
|September 30,
    2019                         |  | $                | 686,304 |  |                                                                         | $ | 10,581,789 |                                                                  |  | $ | (1,469,105                       | ) |  | $                                                                                                                         | 17,954,177



|                                               |  | Common
    Stock |           |  | Capital
                                         in excess of par value |   |            | Treasury
                                         Stock, at cost |  |   | Total
    distributable (losses) earnings |   |  | Total
                                         Stockholders’ Equity
                                         (Net Assets) |           
|---------------------------------------------- |  | ---------------- | --------- |  | ----------------------------------------------------------------------- | - | ---------- | ---------------------------------------------------------------- |  | - | ----------------------------------------- | - |  | ------------------------------------------------------------------------------------------------------------------------- | ----------
|January 1, 2020                                |  | $                | 1,519,637 |  |                                                                         | $ | 34,142,455 |                                                                  |  | $ | (1,469,105                                | ) |  | $                                                                                                                         | 19,435,529
|Payment of Dividend                            |  |                  | 864,910   |  |                                                                         |   | -          |                                                                  |  |   | -                                         |   |  |                                                                                                                           | (5,621,516
|Purchase of treasury shares                    |  |                  | -         |  |                                                                         |   | -          |                                                                  |  |   | (37,988                                   | ) |  |                                                                                                                           |           
|Net increase
    in net assets from operations |  |                  | -         |  |                                                                         |   | -          |                                                                  |  |   | -                                         |   |  |                                                                                                                           | 1,116,231 
|September 30,
2020                             |  | $                | 2,384,547 |  |                                                                         | $ | 34,142,455 |                                                                  |  | $ | (1,507,093                                | ) |  | $                                                                                                                         | 14,930,244



|                                               |  | Common
    Stock |         |  | Capital
                                         in excess of par value |   |            | Treasury
                                         Stock, at cost |  |   | Total
    distributable (losses) earnings |   |  | Total
                                         Stockholders’ Equity
                                         (Net Assets) |           
|---------------------------------------------- |  | ---------------- | ------- |  | ----------------------------------------------------------------------- | - | ---------- | ---------------------------------------------------------------- |  | - | ----------------------------------------- | - |  | ------------------------------------------------------------------------------------------------------------------------- | ----------
|January 1, 2019                                |  | $                | 686,304 |  |                                                                         | $ | 10,581,789 |                                                                  |  | $ | (1,469,105                                | ) |  |                                                                                                                           | 21,725,199
|Net decrease
    in net assets from operations |  |                  | -       |  |                                                                         |   | -          |                                                                  |  |   | -                                         |   |  |                                                                                                                           | (3,771,022
|September 30,
    2019                         |  | $                | 686,304 |  |                                                                         | $ | 10,581,789 |                                                                  |  | $ | (1,469,105                                | ) |  | $                                                                                                                         | 17,954,177



32







Note
8. RELATED PARTY TRANSACTIONS



Investment
Management Agreement



Effective
with the Closing, RCM, a registered investment adviser, has been retained by the Corporation as its external investment adviser
and administrator. Under the Investment Management Agreement, the Corporation will pay RCM, as compensation for the investment
advisory and management services, fees consisting of two components: (i) the Base Management Fee and (ii) the Incentive Fee.



The
“Base Management Fee” is calculated at an annual rate of 1.50% of the Corporation’s total assets (other than
cash or cash equivalents but including assets purchased with borrowed funds). For the three and nine months ended September 30,
2020, the Base Management Fee was $152,438 and $434,201, respectively. For the year ended December 31, 2019, $85,483 in Base Management
Fees was earned by RCM. As of September 30, 2020 and December 31, 2019, the Corporation had $152,447 and $49,359 payable, respectively,
for the Base Management Fees on its Consolidated Statement of Financial Position. In addition, the Corporation had $1,205 payable
at December 31, 2019 to RCM for the expenses associated with the Administration Agreement. There were no amounts payable to RCM
for expenses associated with the Administration Agreement at September 30, 2020.



The
“Incentive Fee” is comprised of two parts: (1) the “Income Based Fee” and (2) the “Capital Gains
Fee”. The Income Based Fee is calculated and payable quarterly in arrears based on the “Pre-Incentive Fee Net Investment
Income” (as defined in the agreement) for the immediately preceding calendar quarter, subject to a hurdle rate of 1.75%
per quarter (7% annualized) and is payable promptly following the filing of the Corporation’s financial statements for such
quarter.



The
Corporation pays RCM an Income Based Fee with respect to its Pre-Incentive Fee Net Investment Income in each calendar quarter
as follows:



| | (i)   | no
    Income Based Fee in any quarter in which the Pre-Incentive Fee Net Investment Income for such quarter does not exceed the
    hurdle rate of 1.75% (7.00% annualized);                                                                                                                                    
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (ii)  | 100%
    of the Pre-Incentive Fee Net Investment Income for any calendar quarter with respect to that portion of the Pre-Incentive
    Fee Net Investment Income for such calendar quarter, if any, that exceeds the hurdle rate of 1.75% (7.00% annualized) but
    is less than 2.1875% (8.75% annualized); and
| | (iii) | 20%
    of the amount of the Pre-Incentive Fee Net Investment Income for any calendar quarter with respect to that portion of the
    Pre-Incentive Fee Net Investment Income for such calendar quarter, if any, that exceeds 2.1875% (8.75% annualized).                                                        



The
Income Based Fee paid to RCM for any calendar quarter that begins more than two years and three months after the effective date
of the Investment Management Agreement shall not be in excess of the Incentive Fee Cap. The “Incentive Fee Cap” for
any quarter is an amount equal to (1) 20.0% of the Cumulative Net Return (as defined below) during the relevant Income Based Fee
Calculation Period (as defined below) minus (2) the aggregate Income Based Fee that was paid in respect of the calendar quarters
included in the relevant Income Based Fee Calculation Period.



For
purposes of the calculation of the Income Based Fee, “Income Based Fee Calculation Period” is defined as, with reference
to a calendar quarter, the period of time consisting of such calendar quarter and the additional quarters that comprise the lesser
of (1) the number of quarters immediately preceding such calendar quarter that began more than two years after the effective date
of the Investment Management Agreement or (2) the eleven calendar quarters immediately preceding such calendar quarter.



For
purposes of the calculation of the Income Based Fee, “Cumulative Net Return” is defined as (1) the aggregate net investment
income in respect of the relevant Income Based Fee Calculation Period minus (2) any Net Capital Loss, if any, in respect of the
relevant Income Based Fee Calculation Period. If, in any quarter, the Incentive Fee Cap is zero or a negative value, we will pay
no Income Based Fee to RCM for such quarter. If, in any quarter, the Incentive Fee Cap for such quarter is a positive value but
is less than the Income Based Fee that is payable to RCM for such quarter (before giving effect to the Incentive Fee Cap) calculated
as described above, we will pay an Income Based Fee to RCM equal to the Incentive Fee Cap for such quarter. If, in any quarter,
the Incentive Fee Cap for such quarter is equal to or greater than the Income Based Fee that is payable to RCM for such quarter
(before giving effect to the Incentive Fee Cap) calculated as described above, we will pay an Income Based Fee to the Adviser
equal to the Income Based Fee calculated as described above for such quarter without regard to the Incentive Fee Cap.



33







For
purposes of the calculation of the Income Based Fee, “Net Capital Loss,” in respect of a particular period, means
the difference, if positive, between (1) aggregate capital losses, whether realized or unrealized, in such period minus (2) aggregate
capital gains, whether realized or unrealized, in such period.



Any
Income Based Fee otherwise payable under the Investment Management Agreement with respect to Accrued Unpaid Income (such fees
being the “Accrued Unpaid Income Based Fees”) shall be deferred, on a security by security basis, and shall become
payable to RCM only if, as, when and to the extent cash is received by us in respect of any Accrued Unpaid Income. Any Accrued
Unpaid Income that is subsequently reversed by us in connection with a write-down, write-off, impairment or similar treatment
of the investment giving rise to such Accrued Unpaid Income will, in the applicable period of reversal, (1) reduce Pre-Incentive
Fee Net Investment Income and (2) reduce the amount of Accrued Unpaid Income Based Fees. Subsequent payments of Accrued Unpaid
Income Based Fees deferred pursuant to this paragraph shall not reduce the amounts otherwise payable for any quarter as an Income
Based Fee.



For
the nine months ended September 30, 2020, there were no Income Based Fees earned under the Investment Management Agreement.



The
second part of the Incentive Fee is the “Capital Gains Fee”. This fee will be determined and payable in arrears as
of the end of each calendar year. Under the terms of the Investment Management Agreement, the Capital Gains Fee is calculated
at the end of each applicable year by subtracting (1) the sum of the cumulative aggregate realized capital losses and aggregate
unrealized capital depreciation from (2) the cumulative aggregate realized capital gains, in each case calculated from the effective
date of the Investment Management Agreement. If this amount is positive at the end of any calendar year, then the Capital Gains
Fee for such year is equal to 20.0% of such amount, less the cumulative aggregate amount of Capital Gains Fees paid in all prior
years. If such amount is negative, then there is no Capital Gains Fee payable for that calendar year. If the Investment Management
Agreement is terminated as of a date that is not a calendar year end, the termination date shall be treated as though it were
a calendar year end for purposes of calculating and paying the Capital Gains Fee.



For
purposes of the Capital Gains Fee:



| | ● | The
    cumulative aggregate realized capital gains are calculated as the sum of the differences, if positive, between (a) the net
    sales price of each investment in the Corporations portfolio when sold minus (b) the accreted or amortized cost basis of such
    investment.                   
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                        
| | ● | The
    cumulative aggregate realized capital losses are calculated as the sum of the amounts by which (a) the net sales price of
    each investment in the portfolio when sold is less than (b) the accreted or amortized cost basis of such investment.                                             
| |   |                                                                                                                                                                                                                                                                                                        
| | ● | The
    aggregate unrealized capital depreciation is calculated as the sum of the amount, if negative, between (a) the valuation of
    each investment in the portfolio as of the applicable Capital Gains Fee calculation date minus (b) the accreted or amortized
    cost basis of such investment.



34







As
of September 30, 2020, there were no Capital Gains Fees earned or payable to RCM under the Investment Management Agreement because
unrealized losses on the portfolio exceed realized gains. If the entire portfolio were to be liquidated as of September 30, 2020,
there would be a capital gains incentive fee liability of approximately $750,000 based on those values. However, given the unlikely
and remote nature of such a transaction, the amount has not been recorded.



Investment
Adviser Change in Control



RCM
has advised the Corporation’s Board of Directors that Callodine Group, LLC (“Callodine”), an entity controlled
by James Morrow, intends to acquire the controlling interest in RCM currently held by East (the “Adviser Change in Control”).
As a result of the proposed Adviser Change in Control, Callodine will become the majority owner of RCM. Consummation of the Adviser
Change in Control will result in an assignment and subsequent termination of the current Investment Management Agreement in accordance
with the requirements of the 1940 Act. As a result, the Corporation’s Board of Directors has approved the Corporation’s
entry into a new investment advisory and management agreement with RCM (the “New Advisory Agreement”) on October 29,
2020, and has called a special meeting of shareholders for December 16, 2020 to seek shareholder approval of the New Advisory
Agreement. Although the ownership of the Adviser will change in connection with the completion of the Adviser Change in Control,
it is important to note that (i) RCM will continue to act as the investment adviser for the Corporation under the New Advisory
Agreement following consummation of the Adviser Change in Control, (ii) there will be no change in terms under the New Advisory
Agreement as compared to the terms of the current Investment Management Agreement, and (iii) the existing management team of RCM
will not change as a result of the Adviser Change in Control.



Administration
Agreement



In
connection with the Closing, the Corporation entered into an Administration Agreement with RCM. Under the terms of the Administration
Agreement, RCM agreed to perform (or oversee, or arrange for, the performance of) the administrative services necessary for the
Corporation’s operations, including, but not limited to, office facilities, equipment, clerical, bookkeeping, finance, accounting,
compliance and record keeping services at such office facilities and such other services as RCM, subject to review by the Corporation’s
Board of Directors, will from time to time determine to be necessary or useful to perform its obligations under the Administration
Agreement. RCM shall also arrange for the services of, and oversee, custodians, depositories, transfer agents, dividend disbursing
agents, other shareholder servicing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries,
insurers, banks and such other persons in any such other capacity deemed to be necessary or desirable.



RCM
is responsible for our financial and other records that are required to be maintained and prepares all reports and other materials
required to be filed with the SEC or any other regulatory authority, including reports to shareholders. In addition, RCM assists
us in determining and publishing the Corporation’s net asset value (NAV), overseeing the preparation and filing of our tax
returns, and the printing and dissemination of reports to shareholders, and generally overseeing the payment of our expenses and
the performance of administrative and professional services rendered by others. RCM provides, on the Corporation’s behalf,
managerial assistance to those portfolio companies that have accepted its offer to provide such assistance.



35







Note
9. FINANCIAL HIGHLIGHTS



The
following schedule provides the financial highlights, calculated based on shares outstanding, for the nine months ended September
30, 2020 and 2019. Share and per share data included in this schedule has been retroactively restated to reflect the effect of
the Reverse Stock Split that occurred during the nine months ended September 30, 2020.



|                                                                             |  | Nine
                                         months ended September
                                         30, 2020 (Unaudited)(2) |            |    | Nine
                                         months ended September
                                         30, 2019 (Unaudited)(2) |  
|---------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------- | ---------- | -- | ------------------------------------------------------------------------------------------------------------------------------------- | -
|Income (loss) from investment operations
    (1):                            |  |                                                                                                                                       |            |    |                                                                                                                                       |  
|Investment
    income                                                        |  | $                                                                                                                                     | 0.79       |    |                                                                                                                                       | $
|Expenses                                                                     |  |                                                                                                                                       | 0.56       |    |                                                                                                                                       |  
|Investment income
    (loss) before income taxes                             |  |                                                                                                                                       | 0.23       |    |                                                                                                                                       |  
|Income
    tax benefit                                                       |  |                                                                                                                                       | (0.16      | )  |                                                                                                                                       |  
|Net investment income
    (loss)                                             |  |                                                                                                                                       | 0.39       |    |                                                                                                                                       |  
|Net
    realized and unrealized gain (loss) on investments                   |  |                                                                                                                                       | 0.04       |    |                                                                                                                                       |  
|Increase (decrease)
    in net assets from operations                        |  |                                                                                                                                       | 0.43       |    |                                                                                                                                       |  
|Purchase of treasury shares                                                  |  |                                                                                                                                       | (0.01      | )  |                                                                                                                                       |  
|Payment of cash
    dividend                                                 |  |                                                                                                                                       | (1.84      | )  |                                                                                                                                       |  
|Effect
    of the Reverse Stock Split                                        |  |                                                                                                                                       | (12.19     | )  |                                                                                                                                       |  
|Decrease in net
    assets                                                   |  |                                                                                                                                       | (13.61     | )  |                                                                                                                                       |  
|Net asset value, beginning of period                                         |  |                                                                                                                                       | 32.93      |    |                                                                                                                                       |  
|Net asset value, end of period                                               |  | $                                                                                                                                     | 19.32      |    |                                                                                                                                       | $
|Per share market price, end of
    period                                    |  | $                                                                                                                                     | 11.10      |    |                                                                                                                                       | $
|Total return based on market value                                           |  |                                                                                                                                       | (54.0      | )% |                                                                                                                                       |  
|Total return based on net asset value                                        |  |                                                                                                                                       | (6.9       | )% |                                                                                                                                       |  
|Supplemental data:                                                           |  |                                                                                                                                       |            |    |                                                                                                                                       |  
|Ratio of operating
    expenses before income taxes to average net assets    |  |                                                                                                                                       | 2.80       | %  |                                                                                                                                       |  
|Ratio of operating
    expenses including income taxes to average net assets |  |                                                                                                                                       | 5.41       | %  |                                                                                                                                       |  
|Ratio of net investment
    income (loss) to average net assets              |  |                                                                                                                                       | 1.96       | %  |                                                                                                                                       |  
|Portfolio turnover                                                           |  |                                                                                                                                       | 17.9       | %  |                                                                                                                                       |  
|Net assets, end of period                                                    |  | $                                                                                                                                     | 49,950,153 |    |                                                                                                                                       | $
|Weighted shares outstanding, end of period                                   |  |                                                                                                                                       | 2,162,308  |    |                                                                                                                                       |  



| | (1) | Per
    share data is based on shares outstanding and the results are rounded to the nearest cent.                            
| | --- | ------------------------------------------------------------------------------------------------------------------------------
| | (2) | Share
    and per share data included herein has been retroactively restated to reflect the effect of the Reverse Stock Split.



The
Corporation’s interim period results could fluctuate as a result of a number of factors; therefore results for any interim
period should not be relied upon as being indicative of performance for the full year or in future periods.



36







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 the
consolidated financial statements and related notes included elsewhere in this report. Historical results and percentage relationships
among any amounts in the consolidated financial statements are not necessarily indicative of trends in operating results for any
future periods.



FORWARD
LOOKING STATEMENTS



Statements
included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in
this report 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, as amended, and in Section 21E of the Securities Exchange Act of 1934,
as amended. Additional oral or written forward-looking statements may be made by us from time to time, and forward-looking statements
may be included in documents that are filed with the Securities and Exchange Commission. Forward-looking statements involve risks
and uncertainties that could cause our results or outcomes to differ materially from those expressed in the forward-looking statements.
Forward-looking statements may include, without limitation, statements relating to our plans, strategies, objectives, expectations
and intentions, including statements related to our investment strategies, the impact of COVID-19 on our portfolio companies,
our intention to elect U.S. federal tax treatment as a RIC for the 2020 tax year and the associated impact of such election on
payment of corporate level taxes by Rand and our liquidity and financial resources, 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 scope of the impact of the COVID-19 pandemic and its specific impact on our portfolio
companies, the state of the United States economy and the local markets in which our portfolio companies operate, the state of
the securities markets in which the securities of our portfolio companies could be traded, liquidity within the United States
financial markets, and inflation. Forward-looking statements are also subject to the risks and uncertainties described under the
caption “Risk Factors” contained in Part II, Item 1A of this report and in Part I, Item 1A of our Annual Report on
Form 10-K for the year ended December 31, 2019.



There
may be other factors not identified that affect the accuracy of our forward-looking statements. Further, any forward-looking statement
speaks only as of the date when 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



We
are an externally managed investment company that lends to and invests in lower middle market companies. Our investment objective
is to generate current income and when also possible, capital appreciation, by targeting investment opportunities with favorable
risk-adjusted returns.



We
have elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as
amended (the “1940 Act”). As a BDC, we are required to comply with certain regulatory requirements. Historically,
we made the majority of our investments through our wholly-owned subsidiary, Rand Capital SBIC, Inc. (“Rand SBIC”),
which operates as a small business investment company (“SBIC”) and has been licensed by the U.S. Small Business Administration
(“SBA”) since 2002. With the capital raised in 2019, we now also have liquidity at Rand Capital Corporation, the parent
company, with which to make investments.



37







In
November 2019, Rand completed a stock sale transaction (the “Transaction”) with East Asset Management (“East”).
The Transaction consisted of a $25 million investment in Rand by East, in exchange for approximately 8.3 million shares of Rand
common stock. The consideration paid by East for the shares of Rand common stock was comprised of $15.5 million of cash and $9.5
million of portfolio assets. Concurrent with the closing of the transaction with East, Rand’s management and staff became
employees of Rand Capital Management, LLC (“RCM”), a registered investment adviser that has been retained by Rand
as its external investment adviser. In connection with retaining RCM as our investment adviser and administrator, Rand entered
into an investment advisory and management agreement (the “Investment Management Agreement”) and an administration
agreement (the “Administration Agreement”) with RCM. Pursuant to the terms of the Investment Management Agreement,
Rand will pay RCM a base management fee and may pay an incentive fee if specified benchmarks are met.



We
intend to elect U.S federal tax treatment as a regulated investment company (“RIC”) under subchapter M of the Internal
Revenue Code of 1986, as amended. With the election, we generally will not be subject to corporate-level U.S. federal income taxes
on any net ordinary income or capital gains that we timely distribute to our shareholders as dividends.



In
connection with our RIC election, we paid a special dividend of $23.7 million, or approximately $1.62 per share on the Corporation’s
common stock, par value $0.10 per shares (the “Common Stock”), to shareholders on May 11, 2020, which distributed
all of our accumulated earnings and profits since our inception through 2019. The total amount of cash distributed to all shareholders,
as part of the special dividend, was limited to $4.8 million, or 20% of the total special dividend that was paid. The remaining
80% of the special dividend was paid using approximately 8.6 million shares of Common Stock.



To
maintain our RIC status, we need to meet specified source-of-income and asset diversification requirements and distribute annually
to our shareholders at least 90% of our ordinary net income and realized net short-term capital gains in excess of realized net
long-term capital losses, if any. Accordingly, our Board of Directors has expressed its intention to adopt a new dividend policy
that may include regular cash dividends to shareholders going forward.



As
a result of the Transaction and our intention to elect RIC status, we have changed our investment objectives and strategy. Our
investment objective is to generate current income and, when possible, complement this current income with capital appreciation.
As a result, our future investments will be made primarily in debt and loan instruments, as well as high yielding publicly traded
equity instruments that provide income through dividends and relatively more liquidity than our private company investments.



SEC
Order



On
October 7, 2020, the Company, RCM and certain of their affiliates received exemptive relief from the SEC to permit the Company
to co-invest in portfolio companies with certain other funds, including other BDCs and registered investment companies, managed
by RCM and certain of its affiliates in a manner consistent with the Company’s investment objective, positions, policies,
strategies and restrictions as well as regulatory requirements, subject to compliance with certain conditions (the “Order”).
Pursuant to the Order, the Company is generally permitted to co-invest with affiliated funds if a “required majority”
(as defined in Section 57(o) of the 1940 Act) of the Company’s independent directors makes certain conclusions in connection
with a co-investment transaction, including that (1) the terms of the transaction, including the consideration to be paid, are
reasonable and fair to the Company and its shareholders and do not involve overreaching in respect of the Company or its shareholders
on the part of any person concerned and (2) the transaction is consistent with the interests of the Company’s shareholders
and is consistent with the Company’s investment objective and strategies.



38







Outlook



At
the end of the third quarter of 2020, we had $19.1 million in cash and cash equivalents available for future investments and expenses,
a decrease of $6.7 million from the end of 2019. The decrease was primarily due to approximately $7.0 million in additional portfolio
investments and approximately $4.8 million in cash distributed to our shareholders as part of the special dividend. This was partially
offset by approximately $4.6 million of cash received during the nine months ended September 30, 2020 from a portfolio exit.



Since
the outbreak of the COVID-19 pandemic, our investment adviser, Rand Capital Management (“RCM”), continues to engage
in active discussions with the management teams of the companies within our portfolio regarding actions taken by them for the
safety and welfare of their employees and their processes for phasing back to pre-COVID work environments. We also have been informed
by RCM on the impact of the COVID-19 induced recession on the businesses of the portfolio companies and the actions the portfolio
companies have taken and are taking to adapt to changes in demand, both increased and decreased, depending upon the portfolio
company. Most of our portfolio companies that qualified, have applied for, and received federal loans under the Paycheck Protection
Program and, where applicable, are also applying for other federal support programs. While we do not know what the ultimate impact
of the pandemic and the economic downturn will be on our portfolio companies, RCM is actively monitoring our portfolio companies,
their liquidity and operational status.



Trends
and Opportunities



We
believe the combination of cash on hand, proceeds from portfolio exits, SBA leverage, and prospective investment income provide
us the liquidity that enables us to add new investments to our portfolio and reinvest in existing portfolio companies that demonstrate
continued growth potential. We are actively building a pipeline of investment opportunities in order to put our capital to work.



The
following short and long-term trends provide us confidence in our ability to grow the Corporation:



| | ● | We
    expect that well run businesses will require capital to grow and should be able to compete effectively given eager reception
    of new technologies and service concepts, regardless of the macroeconomic environment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | We
    continue to manage risk by investing with other investors, when possible.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ● | We
    are involved with the governance and management of a majority of our portfolio companies, which enables us to support their
    operating and marketing efforts and facilitate their growth.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ● | As
    our portfolio expands, we are able to better leverage our externalized management structure.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ● | We
    believe receipt of cash and portfolio assets as consideration in the Transaction with East, as well as the establishment of
    RCM as our external investment adviser, broadens our potential pipeline of investment opportunities in order to build our
    portfolio, facilitate growth and reduce operating expenses as a percentage of portfolio assets. Strategically, we expect to
    advance our efforts to increase our income-producing investments to support a regular cash dividend for shareholders and complement
    our equity investments that drive capital appreciation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ● | We
    have sufficient cash to both invest in new opportunities and to repurchase shares. On April 22, 2020, our Board of Directors
    approved a new share repurchase plan, which authorizes the purchase of up to $1.5 million of our Common Stock through April
    22, 2021 at prices per share of common stock no greater than the then current net asset value. During the nine months ending
    September 30, 2020, we purchased 3,397 shares at an average price of $11.18 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ● | RCM
    has advised the Corporation’s Board of Directors that Callodine Group, LLC (“Callodine”), an entity controlled
    by James Morrow, intends to acquire the controlling interest in RCM currently held by East (the “Adviser Change in Control”).
    As a result of the proposed Adviser Change in Control, Callodine will become the majority owner of RCM. Consummation of the
    Adviser Change in Control will result in an assignment and subsequent termination of the current Investment Management Agreement
    in accordance with the requirements of the 1940 Act. As a result, the Corporation’s Board of Directors has approved
    the Corporation’s entry into a new investment advisory and management agreement with RCM (the “New Advisory Agreement”)
    on October __, 2020, and has called a special meeting of shareholders for December 16, 2020 to seek shareholder approval of
    the New Advisory Agreement. Although the ownership of the Adviser will change in connection with the completion of the Adviser
    Change in Control, it is important to note that (i) RCM will continue to act as the investment adviser for the Corporation
    under the New Advisory Agreement following consummation of the Adviser Change in Control, (ii) there will be no change in
    terms under the New Advisory Agreement as compared to the terms of the current Investment Management Agreement, and (iii)
    the existing management team of RCM will not change as a result of the Adviser Change in Control.



Critical
Accounting Policies



We
prepare our consolidated financial statements in accordance with United States generally accepted accounting principles (GAAP),
which require the use of estimates and assumptions that affect the reported amounts of assets and liabilities. A summary of our
critical accounting policies can be found in our Annual Report on Form 10-K for the year ended December 31, 2019 under Item 7
“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”



39







Financial
Condition



Overview:



|                  |  | September 30, 2020 |            |  | December 31, 2019 |   |            | (Decrease) Increase |  |   | % (Decrease) Increase |  
|----------------- |  | ------------------ | ---------- |  | ----------------- | - | ---------- | ------------------- |  | - | --------------------- | -
|Total assets      |  | $                  | 61,308,915 |  |                   | $ | 64,791,449 |                     |  | $ | (3,482,534            | )
|Total liabilities |  |                    | 11,358,762 |  |                   |   | 11,162,933 |                     |  |   | 195,829               |  
|Net assets        |  | $                  | 49,950,153 |  |                   | $ | 53,628,516 |                     |  | $ | (3,678,363            | )



Net
asset value per share (NAV) was $19.32 at September 30, 2020 and $32.93 at December 31, 2019. The NAV as of December 31, 2019
was retroactively adjusted for the 1-for-9 reverse stock split effected in May 2020 by the Corporation.



Our
gross outstanding SBA debentures at September 30, 2020 were $11,000,000 and they mature from 2022 through 2029. Cash and cash
equivalents approximated 38% of net assets at September 30, 2020, as compared to 48% at December 31, 2019.



Composition
of Our Investment Portfolio



Our
financial condition is dependent on the success of our portfolio holdings. The following summarizes our investment portfolio at
the dates indicated.



|                             |  | September
                                         30, 2020 |            |   | December
                                         31, 2019 |   |            | Increase (Decrease) |  |   | % Increase (Decrease) |  
|---------------------------- |  | ----------------------------------------------------------- | ---------- | - | ---------------------------------------------------------- | - | ---------- | ------------------- |  | - | --------------------- | -
|Investments, at cost         |  | $                                                           | 49,821,225 |   |                                                            | $ | 44,619,463 |                     |  | $ | 5,201,762             |  
|Unrealized depreciation, net |  |                                                             | (8,138,704 | ) |                                                            |   | (7,598,671 | )                   |  |   | (540,033              | )
|Investments at fair value    |  | $                                                           | 41,682,521 |   |                                                            | $ | 37,020,792 |                     |  | $ | 4,661,729             |  





Our
total investments at fair value, as determined by RCM and approved by our Board of Directors, approximated 83% of net assets at
September 30, 2020 versus 69% of net assets at December 31, 2019.



With
the completion of the Transaction, we changed our investment objectives and strategy. Our new investment objective is to generate
current income and, when possible, complement this current income with capital appreciation. As a result, our future investments
will be made primarily in higher yielding debt investments and may include public equity in other business development companies
that provide income through dividends and relatively more liquidity than our private company investments.



40







The
change in investments during the nine months ended September 30, 2020, at cost, is comprised of the following:





|                                                                   |  | Cost Increase (Decrease) |           
|------------------------------------------------------------------ |  | ------------------------ | ----------
|New investments:                                                   |  |                          |           
|Science and Medicine Group, Inc. (SMG)                             |  | $                        | 1,900,000 
|SciAps Inc. (Sciaps)                                               |  |                          | 1,500,000 
|Tilson Technology Management, Inc. (Tilson)                        |  |                          | 750,003   
|Golub Capital BDC, Inc. (Golub)                                    |  |                          | 403,910   
|TCG BDC, Inc. (TCG)                                                |  |                          | 376,996   
|PennantPark Investment Corporation (Pennantpark)                   |  |                          | 370,130   
|Apollo Investment Corporation (Apollo)                             |  |                          | 364,084   
|Owl Rock Capital Corporation (Owl Rock)                            |  |                          | 347,067   
|Ares Capital Corporation (Ares)                                    |  |                          | 343,460   
|Barings BDC, Inc. (Barings)                                        |  |                          | 333,352   
|FS KKR Capital Corp. (FS KKR)                                      |  |                          | 338,980   
|Total of new investments                                           |  |                          | 7,027,982 
|                                                                   |  |                          |           
|Other changes to investments:                                      |  |                          |           
|AIKG LLC (Andretti) interest conversion                            |  |                          | 135,262   
|Mattison Avenue Holdings LLC (Mattison) interest conversion        |  |                          | 79,819    
|Filterworks Acquisition USA, LLC (Filterworks) interest conversion |  |                          | 35,229    
|HDI Acquisition LLC (Hilton Displays) interest conversion          |  |                          | 19,117    
|Microcision LLC (Microcision) OID amortization                     |  |                          | 16,498    
|Genicon Inc. (Genicon) OID amortization                            |  |                          | 15,804    
|GoNoodle, Inc. (GoNoodle) interest conversion                      |  |                          | 11,297    
|Sciaps OID amortization                                            |  |                          | 6,250     
|Total of other changes to investments                              |  |                          | 319,276   
|                                                                   |  |                          |           
|Investments repaid, sold, liquidated or converted:                 |  |                          |           
|Outmatch Holdings, LLC (Outmatch) stock sale                       |  |                          | (2,145,496
|Total of investments repaid, sold, liquidated or converted         |  |                          | (2,145,496
|                                                                   |  |                          |           
|Net change in investments, at cost                                 |  | $                        | 5,201,762 



Results
of Operations



Comparison
of the three months ended September 30, 2020 to the three months ended September 30, 2019



Investment
Income



|                                     |  | Three months ended September 30, 2020 |         |  | Three months ended September 30, 2019 |   |         | Increase (Decrease) |  |   | % Increase (Decrease) |  
|------------------------------------ |  | ------------------------------------- | ------- |  | ------------------------------------- | - | ------- | ------------------- |  | - | --------------------- | -
|Interest from portfolio companies    |  | $                                     | 634,874 |  |                                       | $ | 328,103 |                     |  | $ | 306,771               |  
|Interest from other investments      |  |                                       | 1,157   |  |                                       |   | 36,797  |                     |  |   | (35,640               | )
|Dividend and other investment income |  |                                       | 93,337  |  |                                       |   | 65,996  |                     |  |   | 27,341                |  
|Fee income                           |  |                                       | 7,500   |  |                                       |   | 6,459   |                     |  |   | 1,041                 |  
|Total investment income              |  | $                                     | 736,868 |  |                                       | $ | 437,355 |                     |  | $ | 299,513               |  



The
total investment income that was received on a current basis during the three months ended September 30, 2020 was received from
thirteen portfolio companies. This contrasts with the ten portfolio companies generating current income during the three months
ended September 30, 2019.



Interest
from portfolio companies – Interest from portfolio companies was approximately 94% higher during the three months ended
September 30, 2020 versus the same period in 2019 due to the fact that we have more income-producing debt investments in the current
year. As part of the contributed assets received from East at the completion of the Transaction in November 2019, we received
debt instruments from Andretti, Filterworks, Hilton Displays and Mattison.



The
following investments are on non-accrual status: BeetNPath, LLC (Beetnpath), G-TEC Natural Gas Systems (G-Tec) and a portion of
the Mercantile Adjustment Bureau, LLC (Mercantile) outstanding loan balances.



Interest
from other investments - The decrease in interest from other investments is due to lower interest rates received on our cash
and cash equivalents during the three months ended September 30, 2020 versus the same period in 2019.



41







Dividend
and other investment income - Dividend income is comprised of cash distributions from limited liability companies (LLCs) and
corporations in which we have invested. Our investment agreements with certain LLCs require those LLCs to distribute funds to
us for payment of income taxes on our allocable share of the LLC’s profits. These portfolio companies may also elect to
make additional discretionary distributions. Dividend income will fluctuate based upon the profitability of these LLCs and corporations
and the timing of the distributions. The dividend distributions for the respective periods were:



|                                           |  | Three months ended September 30, 2020 |        |  | Three months ended September 30, 2019 |  
|------------------------------------------ |  | ------------------------------------- | ------ |  | ------------------------------------- | -
|Owl Rock Corporation (Owl Rock)            |  | $                                     | 23,400 |  |                                       | $
|Apollo Investment Corporation (Apollo)     |  |                                       | 15,750 |  |                                       |  
|TCG BDC, Inc. (TCG)                        |  |                                       | 14,800 |  |                                       |  
|Tilson Technology Management Inc. (Tilson) |  |                                       | 13,125 |  |                                       |  
|Ares Capital Corporation (Ares)            |  |                                       | 10,800 |  |                                       |  
|Golub Capital BDC, Inc. (Golub)            |  |                                       | 9,062  |  |                                       |  
|Barings BDC, Inc. (Barings)                |  |                                       | 6,400  |  |                                       |  
|Carolina Skiff LLC (Carolina Skiff)        |  |                                       | -      |  |                                       |  
|Total dividend and other investment income |  | $                                     | 93,337 |  |                                       | $



Fee
income - Fee income generally consists of the revenue associated with the amortization of financing fees charged to the portfolio
companies upon successful closing of SBIC financings, income from portfolio company board attendance fees and other miscellaneous
fees. The financing fees are amortized ratably over the life of the instrument associated with the fees. The unamortized fees
are carried on the balance sheet under the line item “Deferred revenue.”



The
income associated with the amortization of financing fees was $7,500 and $6,459 for the three months ended September 30, 2020
and 2019, respectively. There were no board fees for the three months ended September 30, 2020 or 2019.



Expenses



|               |  | Three months ended September 30, 2020 |         |  | Three months ended September 30, 2019 |   |         | Decrease |  |   | % Decrease |  
|-------------- |  | ------------------------------------- | ------- |  | ------------------------------------- | - | ------- | -------- |  | - | ---------- | -
|Total expenses |  | $                                     | 456,398 |  |                                       | $ | 530,539 |          |  | $ | (74,141    | )



In
November 2019, we completed a stock sale transaction with East and concurrently externalized the management of our portfolio to
Rand Capital Management, LLC (RCM) as our external investment adviser and administrator. Our primary operating expenses now include
the payment of fees to RCM under the Investment Management Agreement, and our allocable portion of overhead expenses and other
administrative expenses under the Administration Agreement with RCM. Under the terms of the Investment Management Agreement, the
compensation of the investment professionals of RCM and its staff, and the general office and overhead expenses incurred by RCM
in maintaining its place of business, will be provided and paid for by RCM and not by us. We will be responsible for all other
operating expenses, including those relating to:



| | (i)    | organization;                                                                                                                                                                                                                                                   
| | ------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (ii)   | costs
    of calculating our net asset value (including the cost and expenses of any independent valuation firm);                                                                                                                                               
| | (iii)  | expenses
    incurred by RCM payable to third parties, including agents, consultants or other advisors, in monitoring financial and legal
    affairs and in monitoring the our investments and performing due diligence on its prospective portfolio companies;
| | (iv)   | interest
    payable on debt, if any, incurred to finance our investments;                                                                                                                                                                                      
| | (v)    | offerings
    of our Common Stock and other securities;                                                                                                                                                                                                         
| | (vi)   | investment
    advisory and management fees payable under the Investment Management Agreement, but excluding any fees payable to any Sub-Adviser;                                                                                                               
| | (vii)  | administration
    fees payable under the Administration Agreement;                                                                                                                                                                                             
| | (viii) | transfer
    agent and custodial fees;                                                                                                                                                                                                                          



42







| | (ix)   | federal
    and state registration fees;                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (x)    | all
    costs of registration and listing our shares on any securities exchange;                                                                                                                                                                                                                                                                                                                                                                                
| | (xi)   | federal,
    state and local taxes;                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (xii)  | independent
    directors’ fees and expenses;                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (xiii) | costs
    of preparing and filing reports or other documents required by governmental bodies (including the SEC);                                                                                                                                                                                                                                                                                                                                               
| | (xiv)  | costs
    of any reports, proxy statements or other notices to shareholders, including printing costs;                                                                                                                                                                                                                                                                                                                                                          
| | (xv)   | our
    allocable portion of the fidelity bond, directors and officers/errors and omissions liability insurance, and any other insurance
    premiums;                                                                                                                                                                                                                                                                                                          
| | (xvi)  | direct
    costs and expenses of administration, including independent auditors and outside legal costs; and                                                                                                                                                                                                                                                                                                                                                    
| | (xvii) | all
    other expenses incurred by us or RCM in connection with administering our business (including payments under the Administration
    Agreement based upon our allocable portion of the RCM’s overhead in performing its obligations under the Administration
    Agreement, including rent and the allocable portion of the cost of our chief financial officer and chief compliance officer
    and their respective staffs (including travel expenses))



Expenses
decreased approximately $74,000 or 14% during the three months ended September 30, 2020 compared to the three months ended September
30, 2019. The decrease in operating expenses was primarily due to an approximately $36,000 or 42% decrease in stockholders and
office operating expenses and a bad debt recovery of $24,000. Stockholders and office operating expenses were higher during the
three months ended September 30, 2019 due to the fact that we held a special meeting of shareholders to approve all proposals
related to the Transaction. The decrease can also be attributable to the absence of the salary and benefits expense in the three
months ended September 30, 2020. The salary and benefit expense for the three months ended September 30, 2019 was approximately
$222,000. These decreases were offset by the new base management fee payable to RCM that amounted to $152,438 during the three
months ended September 30, 2020 and the increase of professional fees of approximately $58,000 during the three months ended September
30, 2020. There were no incentive fees earned by RCM for the three months ended September 30, 2020.



Realized
Gain (Loss) on Investments



There
were no realized gains or losses during the three months ended September 30, 2020 or September 30, 2019.



Change
in Unrealized Depreciation of Investments



The
coronavirus (COVID-19) pandemic is causing significant consequences around the globe, and we believe, based upon discussions with
our portfolio companies’ management, that many of our portfolio companies are experiencing uncertainty and concern for their
operations during this unprecedented time. We believe that it is too soon to know if there will be any temporary or permanent
impairment to their values, or other significant impact on their businesses. RCM and our Board of Directors will continue to assess
the consequences of COVID-19 on our portfolio companies and examine any changes in their valuations during the remainder of 2020.



|                                                                         |  | Three months ended September 30, 2020 |         |   | Three months ended September 30, 2019 |   |            | Change | 
|------------------------------------------------------------------------ |  | ------------------------------------- | ------- | - | ------------------------------------- | - | ---------- | ------ | 
|Change in unrealized depreciation of investments before income
    taxes |  | $                                     | (17,947 | ) |                                       | $ | (3,597,129 | )      | 



43







The
change in unrealized depreciation, before income taxes, for the three months ended September 30, 2020 was comprised of the following:



|                                                                               |  | Three months ended September 30, 2020 |        
|------------------------------------------------------------------------------ |  | ------------------------------------- | -------
|PennantPark Investment Corporation (Pennantpark)                               |  | $                                     | (48,130
|Apollo Investment Corporation (Apollo)                                         |  |                                       | (37,450
|Barings BDC, Inc. (Barings)                                                    |  |                                       | (13,485
|TCG BDC, Inc. (TCG)                                                            |  |                                       | (9,530 
|Owl Rock Capital Corporation (Owl Rock)                                        |  |                                       | (7,000 
|Ares Capital Corporation (Ares)                                                |  |                                       | (5,310 
|FS KKR Capital Corp. (FS KKR)                                                  |  |                                       | 50,250 
|Golub Capital BDC, Inc. (Golub)                                                |  |                                       | 52,708 
|Total change in net unrealized depreciation of investments before income taxes |  | $                                     | (17,947



Apollo,
Ares, Barings, FS KKR, Golub, Owl Rock, Pennantpark and TCG are all publicly traded stocks, and as such, are marked to market
at the end of each quarter.



The
change in unrealized depreciation, before income taxes, for the three months ended September 30, 2019 was comprised of the following:



|                                                                                |  | Three months ended September 30, 2019 |           
|------------------------------------------------------------------------------- |  | ------------------------------------- | ----------
|Rheonix, Inc. (Rheonix)                                                         |  | $                                     | (1,500,000
|Genicon, Inc. (Genicon)                                                         |  |                                       | (1,447,467
|Empire Genomics, LLC (Empire Genomics)                                          |  |                                       | (249,661  
|KnowledgeVision Systems, Inc. (KnowledgeVision)                                 |  |                                       | (200,001  
|SciAps, Inc. (Sciaps)                                                           |  |                                       | (200,000  
|Total change in net unrealized depreciation of investments, before income taxes |  | $                                     | (3,597,129



The
valuations of our investments in Empire Genomics, Genicon, KnowledgeVision, Rheonix and Sciaps were decreased after we reviewed
each of the portfolio company’s operations, commercial progress against their business plan, and past and projected financial
condition and determined that a valuation adjustment was necessary. Some of these decreases in value may be recoverable following
the completion of their respective future financings.



All
of these value adjustments resulted from a review by the Corporation’s management prior to the completion of the Transaction
and RCM management after the completion of the Transaction, using the guidance set forth by ASC 820 and our established valuation
policy.



Net
Increase in Net Assets from Operations



We
account for our operations under GAAP for investment companies. The principal measure of our financial performance is “net
increase in net assets from operations” on our consolidated statements of operations. For the three months ended September
30, 2020 and 2019, the net increase (decrease) in net assets from operations was $262,523 and ($2,878,888), respectively.



Comparison
of the nine months ended September 30, 2020 to the nine months ended September 30, 2019



Investment
Income



|                                     |  | Nine months ended September 30, 2020 |           |  | Nine months ended September 30, 2019 |   |           | Increase (Decrease) |  |   | %  Increase (Decrease) |  
|------------------------------------ |  | ------------------------------------ | --------- |  | ------------------------------------ | - | --------- | ------------------- |  | - | ---------------------- | -
|Interest from portfolio companies    |  | $                                    | 1,741,261 |  |                                      | $ | 1,049,557 |                     |  | $ | 691,704                |  
|Interest from other investments      |  |                                      | 87,161    |  |                                      |   | 108,146   |                     |  |   | (20,985                | )
|Dividend and other investment income |  |                                      | 200,900   |  |                                      |   | 307,681   |                     |  |   | (106,781               | )
|Fee income                           |  |                                      | 17,917    |  |                                      |   | 274,387   |                     |  |   | (256,470               | )
|Total investment income              |  | $                                    | 2,047,239 |  |                                      | $ | 1,739,771 |                     |  | $ | 307,468                |  



44







Interest
from portfolio companies – Interest from portfolio companies was approximately 66% higher during the nine months ended
September 30, 2020 versus the same period in 2019 due to the fact that we have more income-producing debt investments in the current
year. As part of the contributed assets received from East at the completion of the Transaction in November 2019, we received
debt instruments from Andretti, Filterworks, Hilton Displays and Mattison. In addition, we originated two loan instruments, during
the current year, totaling $3.4 million from SciAps, Inc. and Science and Medicine Group, Inc.



The
following investments are on non-accrual status: BeetNPath, LLC (Beetnpath), G-TEC Natural Gas Systems (G-Tec) and a portion of
the Mercantile Adjustment Bureau, LLC (Mercantile) outstanding loan balances.



Interest
from other investments - The decrease in interest from other investments is due to lower interest rates during the nine months
ended September 30, 2020 versus the same period in 2019. This was partially offset by higher average cash balances during the
nine months ended September 30, 2020 versus the same period in 2019.



Dividend
and other investment income - Dividend income is comprised of cash distributions from corporations and limited liability companies
(LLCs) in which we have invested. Our investment agreements with certain LLCs require those LLCs to distribute funds to us for
payment of income taxes on our allocable share of the LLC’s profits. These portfolio companies may also elect to make additional
discretionary distributions. Dividend income will fluctuate based upon the profitability of these corporations and LLCs and the
timing of the distributions. The dividend distributions for the respective periods were:



|                                           |  | Nine months ended September 30, 2020 |         |  | Nine months ended September 30, 2019 |  
|------------------------------------------ |  | ------------------------------------ | ------- |  | ------------------------------------ | -
|Tilson                                     |  | $                                    | 39,375  |  |                                      | $
|Owl Rock                                   |  |                                      | 35,100  |  |                                      |  
|FS KKR                                     |  |                                      | 34,000  |  |                                      |  
|Apollo                                     |  |                                      | 31,500  |  |                                      |  
|Ares                                       |  |                                      | 21,600  |  |                                      |  
|Golub                                      |  |                                      | 18,125  |  |                                      |  
|TCG                                        |  |                                      | 14,800  |  |                                      |  
|Barings                                    |  |                                      | 6,400   |  |                                      |  
|Knoa Software, Inc. (Knoa)                 |  |                                      | -       |  |                                      |  
|Carolina Skiff LLC (Carolina Skiff)        |  |                                      | -       |  |                                      |  
|Total dividend and other investment income |  | $                                    | 200,900 |  |                                      | $



Fee
income - Fee income generally consists of the revenue associated with the amortization of financing fees charged to the portfolio
companies upon successful closing of SBIC financings, income from portfolio company board attendance fees and other miscellaneous
fees. The financing fees are amortized ratably over the life of the instrument associated with the fees. The unamortized fees
are carried on the balance sheet under the line item “Deferred revenue.”



The
income associated with the amortization of financing fees was $17,917 and $48,887 for the nine months ended September 30, 2020
and 2019, respectively. During the nine months ended September 30, 2019, we recognized a one-time fee of $225,000 in conjunction
with the repayment of the eHealth loan instrument. The board fees were $500 for the nine months ended September 30, 2019. There
were no board fees for the nine months ended September 30, 2020.



45







Expenses



|               |  | Nine months ended September 30, 2020 |           |  | Nine months ended September 30, 2019 |   |           | Decrease |  |   | % Decrease |  
|-------------- |  | ------------------------------------ | --------- |  | ------------------------------------ | - | --------- | -------- |  | - | ---------- | -
|Total expenses |  | $                                    | 1,448,710 |  |                                      | $ | 2,044,351 |          |  | $ | (595,641   | )



Expenses
decreased approximately $596,000 or 29% during the nine months ended September 30, 2020 compared to the nine months ended September
30, 2019. The decrease in operating expenses was primarily due to an approximately $249,000 or 53% decrease in stockholders and
office operating expenses. Stockholders and office operating expenses were higher during the nine months ended September 30, 2019
due to the fact that we held a special meeting of shareholders to approve all proposals related to the Transaction during this
period. The decrease in expense can also be attributed to the absence of salary and benefits expense during the nine months ended
September 30, 2020. The salary and benefit expense for the nine months ended September 30, 2019 was approximately $688,000. These
decreases were offset by the new base management fee payable to RCM during the nine months ended September 30, 2020 of $434,201.
There were no incentive fees earned by RCM during the nine months ended September 30, 2020.



Because
of our intention to elect RIC status as of January 1, 2020, a net deferred tax asset of $1,451,658 was eliminated in accordance
with GAAP, resulting in deferred tax expense for the nine months ended September 30, 2020. In addition, certain portfolio investments,
that generate non-qualifying income for a RIC, and their related deferred tax liabilities of $247,460, were contributed to blocker
corporations in December 2019. These blocker corporations will be subject to federal and state income taxes.



Realized
Gain (Loss) on Investments



|                                                        |  | Nine months ended September 30, 2020 |           |  | Nine months ended September 30, 2019 |   |          | Change | 
|------------------------------------------------------- |  | ------------------------------------ | --------- |  | ------------------------------------ | - | -------- | ------ | 
|Realized gain (loss) on investments before income taxes |  | $                                    | 2,412,046 |  |                                      | $ | (392,239 | )      | 



During
the nine months ended September 30, 2020, we realized a $2.3 million gain when we exited our investment in Outmatch as part of
a strategic majority investment from Rubicon Technology Partners. We also received additional proceeds of approximately $57,000
from Microcision LLC (Microcision) related to the 2019 sale of our equity interest in Microcision and approximately $37,000 in
additional gain from Advantage 24/7.



During
the nine months ended September 30, 2019, we recognized a realized loss on our investment in SOMS Technologies, LLC after the
company ceased doing business and a $40,500 gain on our investment in Advantage 24/7 LLC after the company converted their equity
into a debt instrument. In addition, we received a final proceeds distribution of $39,893 from Gemcor II, LLC, a portfolio company
we exited in 2016.



Change
in Unrealized Depreciation of Investments



|                                                                     |  | Nine months ended September 30, 2020 |          |   | Nine months ended September 30, 2019 |   |            | Change | 
|-------------------------------------------------------------------- |  | ------------------------------------ | -------- | - | ------------------------------------ | - | ---------- | ------ | 
|Change in unrealized depreciation of investments before income taxes |  | $                                    | (540,033 | ) |                                      | $ | (4,197,281 | )      | 



46







The
change in unrealized depreciation, before income taxes, for the nine months ended September 30, 2020 was comprised of the following:



|                                                                               |  | Nine months ended September 30, 2020 |         
|------------------------------------------------------------------------------ |  | ------------------------------------ | --------
|Genicon, Inc. (Genicon)                                                        |  | $                                    | (515,804
|Apollo                                                                         |  |                                      | (71,367 
|Pennantpark                                                                    |  |                                      | (48,130 
|Barings                                                                        |  |                                      | (13,485 
|TCG                                                                            |  |                                      | (9,530  
|Golub                                                                          |  |                                      | 6,923   
|Owl Rock                                                                       |  |                                      | 17,633  
|Ares                                                                           |  |                                      | 34,540  
|FS KKR                                                                         |  |                                      | 59,187  
|Total change in net unrealized depreciation of investments before income taxes |  | $                                    | (540,033



The
valuation of our investment in Genicon was decreased after a review of their operations and financial condition.



Apollo,
Ares, Barings, FS KKR, Golub, Owl Rock, Pennantpark and TCG are all publicly traded stocks, and as such, are marked to market
at the end of each quarter.



The
change in unrealized depreciation, before income taxes, for the nine months ended September 30, 2019 was comprised of the following:

|                                                                               |  | Nine months ended September 30, 2019 |           
|------------------------------------------------------------------------------ |  | ------------------------------------ | ----------
|Genicon                                                                        |  | $                                    | (2,200,047
|Rheonix                                                                        |  |                                      | (1,500,000
|SocialFlow, Inc. (Socialflow)                                                  |  |                                      | (1,071,300
|Sciaps                                                                         |  |                                      | (585,000  
|BeetNPath, LLC (Beetnpath)                                                     |  |                                      | (523,904  
|Empire Genomics                                                                |  |                                      | (249,661  
|KnowledgeVision                                                                |  |                                      | (200,001  
|Mercantile Adjustment Bureau, LLC (Mercantile)                                 |  |                                      | (200,000  
|SOMS Technologies, LLC realized loss                                           |  |                                      | 472,632   
|Tilson Technology Management, Inc. (Tilson)                                    |  |                                      | 1,860,000 
|Total change in net unrealized depreciation of investments before income taxes |  | $                                    | (4,197,281



The
valuations of our investments in Beetnpath, Empire Genomics, KnowledgeVision, Mercantile, Rheonix, Sciaps, and Socialflow were
decreased after we reviewed each of the portfolio company’s operations, commercial progress against their business plan,
and past and projected financial condition and determined that a valuation adjustment was necessary.



Our
valuation of Genicon was decreased due to a then recent round of financing and after a review of their financial condition.



In
accordance with our valuation policy, we increased the value of our holdings in Tilson based on a significant equity financing
during the first quarter of 2019 with a sophisticated new non-strategic outside investor at a higher valuation than their prior
financing round valuation.



We
recognized a realized loss on our investment in SOMS during the nine months ended September 30, 2019.



47







All
of these value adjustments resulted from a review by our investment advisor, RCM, during the nine months ended September 30, 2020
and our management during the nine months ended September 30, 2019, using the guidance set forth by ASC 820 and our established
valuation policy.



Net
Increase (Decrease) in Net Assets from Operations



We
account for our operations under GAAP for investment companies. The principal measure of our financial performance is “net
increase (decrease) in net assets from operations” on our consolidated statements of operations. For the nine months ended
September 30, 2020 and 2019, the net increase (decrease) in net assets from operations was $1,116,231 and ($3,771,022), respectively.



Liquidity
and Capital Resources



With
the completion of the Transaction with East, we changed our investment objectives and strategy. Previously, our principal investment
objective was to achieve long-term capital appreciation on our equity investments while maintaining a current cash flow from debenture
and pass-through equity instruments to fund expenses. With the intention to elect U.S. federal tax treatment as a RIC, we will
be required to distribute at least 90% of our qualified net investment income in the form of a dividend, and our new investment
objective is to maximize total return to our shareholders with current income combined with capital appreciation. As a result,
our recent and future investments will be made primarily in yield generating investments and may include related equity options,
such as warrants or preferred equity.



As
of September 30, 2020, our total liquidity consisted of approximately $19,100,000 in cash and cash equivalents. In addition, we
had an outstanding SBA leverage commitment of $3,000,000.



Net
cash used in operating activities has averaged approximately $72,000 over the last three years. The cash used for investments
in portfolio companies has averaged approximately $3,200,000 over the last three years. We will generally use cash to fund our
operating expenses, invest in portfolio companies, pay dividends and repurchase shares. We anticipate that we will continue to
exit investments and shift our portfolio to income producing investments. However, the timing of liquidation events within the
portfolio is difficult to project. Starting in 2022 (See Note 6 in the Notes to the Consolidated Financial Statements), our outstanding
SBA debt begins to mature and this will require us to identify sources of future funding if liquidation of investments is not
sufficient to fund operations and repay the SBA debt obligation.



We
believe that the cash on hand at September 30, 2020, the undrawn SBA leverage commitment and the scheduled interest payments on
our portfolio investments will be sufficient to meet our cash needs throughout 2020. We continue to pursue current income and
distributions from portfolio companies to increase the liquidity available for new investments, operating expenses, dividends
and future SBA debenture obligations.



Our
ongoing liquidity is tied to the performance of our portfolio companies and, as such, it may be affected going forward based on
the impact of the COVID-19 pandemic and its lasting impact on the capital markets, our portfolio companies, and the U.S. economy
in general.





Item 3. Quantitative and Qualitative Disclosures about Market Risk



Our
investment activities contain elements of risk. Our investment portfolio consists of equity and debt securities in private companies
and is subject to valuation risk. Because there is typically no public market for the equity and debt securities in which we invest,
the valuation of the equity interests in the portfolio is stated at “fair value” as determined in good faith by RCM
and approved by our Board of Directors. This is in accordance with our investment valuation policy (see the discussion of valuation
policy contained in “Note 3. Investments” in the consolidated financial statements contained in Item 1 of this report,
which is hereby incorporated herein by reference.) In the absence of readily ascertainable market values, the estimated value
of investments in our portfolio may differ significantly from the values that would be placed on such investments in our portfolio
if a ready market for the investments existed. Any changes in valuation are recorded on the consolidated statement of operations
as “Net change in unrealized depreciation on investments.”



48







At
times, a portion of our portfolio may include, and does currently include, marketable securities traded in the over-the-counter
market or on other stock markets. In addition, there may be a portion of the 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 markets to trade in an orderly fashion,
we may not be able to realize the fair value of our marketable investments or other investments in a timely manner.



As
of September 30, 2020, we did not have any off-balance sheet arrangements or hedging or similar derivative financial instrument
investments.



Item
4. Controls and Procedures



Disclosure
Controls and Procedures.The Corporation maintains disclosure controls and procedures that are designed to ensure that information
required to be disclosed in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized, and reported within the time periods specified in the SEC’s rules and forms, and that this information is accumulated
and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosure. The Chief Executive Officer and the Chief Financial Officer carried out an evaluation
of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures as of September
30, 2020. Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial
Officer concluded that the Corporation’s controls and procedures were effective as of September 30, 2020.



Changes
in Internal Control over Financial Reporting.There have been no changes in our internal control over financial reporting
during the Corporation’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially
affect, the Corporation’s internal control over financial reporting.



49







PART
II.

OTHER
INFORMATION



Item
1. Legal Proceedings



None.



Item
1A. Risk Factors



In
addition to the information provided under the heading “Risk Factors” in our annual report on Form 10-K for the year
ended December 31, 2019, the Corporation identified the following risk and uncertainty that could materially affect our overall
business, financial condition and operating results.



The
recent COVID-19 outbreak was declared a pandemic by the World Health Organization on March 11, 2020 and has rapidly spread to
the United States, and may negatively affect the operating results, financial conditions or liquidity of our portfolio companies,
which may subsequently have a negative impact on our operating results and financial condition. In addition, the pandemic may
also negatively impact RCM’s ability, on our behalf, to invest a significant portion of the net proceeds from the Transaction
on acceptable terms or within a reasonable timeframe.



The
global outbreak of COVID-19 (“coronavirus”) has led to severe disruptions in general economic activities as businesses
and federal, state, and local governments take and have taken broad actions to mitigate this public health crisis, including restrictions
on travel and the temporary closure of many corporate offices, retail stores, and manufacturing facilities and factories across
the United States and the wider global community.



As
a result, the business, operating results, financial condition and liquidity of our portfolio companies have been, and may continue
to be, materially and adversely affected. The cumulative impact to our portfolio companies’ results from coronavirus will
depend to a large extent on the duration and severity of coronavirus and the actions taken by authorities and other entities to
contain coronavirus or treat its impact, all of which are beyond our control. Certain of our portfolio companies have had, and
may continue to have, their operations temporarily shut down or significantly curtailed, which we believe will further exacerbate
the impact of these events on those portfolio companies. In addition, even if our portfolio companies have availed themselves
of loans from the Small Business Administration under the Paycheck Protection Program or the other assistance provided by U.S.
federal and state governmental entities to mitigate the impacts of coronavirus, certain of our portfolio companies have experienced,
and may continue to experience, significant liquidity issues, which, in turn, may increasingly have negative effects the ability
of those portfolio companies to repay principal and interests on outstanding loans and other debt instruments owed to the Corporation,
including resulting in the Corporation having outstanding interest receivable balances owed to it and permitting certain portfolio
companies to capitalize interest amounts owed to the Corporation. In addition, certain portfolio companies may not be able to
continue as going concerns. In connection with the coronavirus pandemic we may be required to restructure certain of our investments
on terms that are less favorable to us to avoid potential bankruptcies and other insolvency issues for our portfolio companies.
A substantial negative impact to one or more of our portfolio companies as a result of coronavirus could have a material adverse
effect on our business, financial condition and results of operations.



Furthermore,
severe disruptions in general economic activities due to coronavirus may negatively affect RCM’s ability to invest a significant
portion of the net proceeds from the Transaction on acceptable terms or within a reasonable timeframe. Delays by RCM in investing
the net proceeds raised in the Transaction due to coronavirus may cause our performance to be worse than that of other fully invested
BDCs or other lenders or investors pursuing comparable investment strategies. RCM may be unable to invest the net proceeds from
the Transaction on acceptable terms during and after this pandemic, which could harm our financial condition and operating results.
We anticipate that, depending on market conditions, it may take RCM a substantial period of time to invest substantially all of
the net proceeds from the Transaction in securities meeting our investment objectives. This period may be further lengthened due
to the impact of the coronavirus.



50







We
may be subject to risks associated with our origination of, or investment in, covenant-lite loans to our portfolio companies.



We
have originated or invested in, and may in the future originate or invest in, covenant-lite loans to our portfolio companies,
which means the loan agreement or other debt instrument governing these debt obligations contains fewer maintenance covenants
than other loan agreements or debt obligations, or no maintenance covenants, and may not include covenants that the Corporation
could use to monitor the financial performance of the portfolio company borrower, including covenants based upon compliance with
financial ratios, and declare a default under the loan agreement or other debt instrument if the specified covenants are breached.
While these loans or other debt obligations to portfolio company borrowers may still contain other collateral protections, a covenant-lite
loan may carry more risk than a covenant-heavy loan made by the same portfolio company borrower as it does not require this borrower
to provide affirmation that certain specific financial tests have been satisfied on a routine basis, as is generally required
under a covenant-heavy loan agreement or other debt instrument. Generally, covenant-lite loans or other debt instruments provide
borrowers more freedom, which may negatively impact lenders because these covenants, if any, tend to be incurrence-based, meaning
they are only tested and can only be breached following an affirmative action of the borrower, rather than by deterioration in
the borrower’s financial condition. Should the financial condition of a portfolio company borrower begin to deteriorate,
our investment in or origination of covenant-lite loans or other debt instruments to such portfolio company borrower may potentially
reduce our ability to restructure such problematic loan and mitigate potential loss. As a result of our investment in or origination
of covenant-lite loans, our exposure to losses may be increased, which could result in an adverse impact on the Corporation’s
revenues, net income and NAV per share.



Item
2. Unregistered Sales of Equity Securities and Use of Proceeds



Issuer
                                         Purchases of Equity Securities



|Period               |  | Total number of shares purchased (1) |       |  | Average price paid per share (2) |   |       | Total number of shares purchased as part of publicly announced plan (3) |  |   | Maximum dollar amount of shares that may yet be purchased under the share repurchase program (3) | 
|-------------------- |  | ------------------------------------ | ----- |  | -------------------------------- | - | ----- | ----------------------------------------------------------------------- |  | - | ------------------------------------------------------------------------------------------------ | 
|7/1/2020 – 7/31/2020 |  |                                      | -     |  |                                  |   | -     |                                                                         |  |   | -                                                                                                | 
|8/1/2020 – 8/31/2020 |  |                                      | -     |  |                                  |   | -     |                                                                         |  |   | -                                                                                                | 
|9/1/2020 – 9/30/2020 |  |                                      | 2,097 |  |                                  | $ | 11.29 |                                                                         |  | $ | 2,097                                                                                            | 
|Total                |  |                                      | 2,097 |  |                                  | $ | 11.29 |                                                                         |  | $ | 2,097                                                                                            | 



| | (1) | There
                                         were 2,097 shares repurchased, in open market transactions, during the third quarter
                                         of 2020.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | The
                                         average price paid per share is calculated on a settlement basis and includes commission.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------

| | (3) | On
                                         April 22, 2020, the Board of Directors approved a new share repurchase plan, which authorizes
                                         the Corporation to repurchase shares of the Corporation’s outstanding common stock
                                         with an aggregate cost of up to $1,500,000 at prices per share of common stock of no
                                         greater than the then current net asset value. This new share repurchase authorization
                                         lasts for a period of 12 months from the authorization date, until April 22, 2021. This
                                         new share repurchase plan supplants and replaces the share repurchase authorization that
                                         was previously approved by the Board of Directors in October 2019.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Item
3. Defaults upon Senior Securities



None.



Item
4. Mine Safety Disclosures



Not
Applicable.



Item
5. Other Information



None.



51







Item 6. Exhibits



| | (a)        | Exhibits                                                                                                                                                                                                                                                                                                           
| | ---------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |            |                                                                                                                                                                                                                                                                                                                    
| |            | The
    following exhibits are filed with this report or are incorporated herein by reference to a prior filing, in accordance with
    Rule 12b-32 under the Securities Exchange Act of 1934.                                                                                                                     
| |            |                                                                                                                                                                                                                                                                                                                    
| | (3.1)(i)   | Certificate of Incorporation of the Corporation, incorporated by reference to Exhibit (a)(1) of Form N-2 filed with the SEC on April 22, 1997. (File No. 333-25617).                                                                                                                                               
| |            |                                                                                                                                                                                                                                                                                                                    
| | (3.1)(ii)  | Certificate of Amendment to the Certificate of Incorporation, as amended, incorporated by reference to Exhibit 3.1 to the Corporation’s Current Report on Form 8-K filed with the SEC on November 12, 2019.                                                                                                        
| |            |                                                                                                                                                                                                                                                                                                                    
| | (3.1)(iii) | Certificate of Amendment to the Certificate of Incorporation, as amended, incorporated by reference to Exhibit 3.1 to the Corporation’s Current Report on Form 8-K filed with the SEC on May 21, 2020.                                                                                                             
| |            |                                                                                                                                                                                                                                                                                                                    
| | (3.1)(iv)  | By-laws of the Corporation, incorporated by reference to Exhibit 3(ii) to the Corporation’s Quarterly Report on Form 10-Q for the period ended September 30, 2016 filed with the SEC on November 2, 2016. (File No. 814-00235).                                                                                    
| |            |                                                                                                                                                                                                                                                                                                                    
| | (3.2)(i)   | Certificate of Incorporation of Rand Merger Corporation as filed with the New York Department of State on December 18, 2008, 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 February 6, 2009. (File No. 811-22276).
| |            |                                                                                                                                                                                                                                                                                                                    
| | (3.2)(ii)  | 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 February 6, 2009. (File No. 811-22276).                                                                                            
| |            |                                                                                                                                                                                                                                                                                                                    
| | (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. (File No. 333-25617).                                                                                                                      
| |            |                                                                                                                                                                                                                                                                                                                    
| | (31.1)     | Certification of Principal Executive Officer Pursuant to Rules 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended – filed herewith.                                                                                                                                                         
| |            |                                                                                                                                                                                                                                                                                                                    
| | (31.2)     | Certification of Principal Financial Officer Pursuant to Rules 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended – filed herewith.                                                                                                                                                         
| |            |                                                                                                                                                                                                                                                                                                                    
| | (32.1)     | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Rand Capital Corporation – filed herewith.                                                                                                                                                                                               



52







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.



Dated:
November 6, 2020



| | RAND
    CAPITAL CORPORATION      
| | ----------------------------------
| |                                   
| | /s/ ALLEN
    F. GRUM             
| | Allen
    F. Grum, President      
| | (Chief
    Executive Officer)     
| |                                   
| | /s/ DANIEL
    P. PENBERTHY       
| | Daniel
    P. Penberthy, Treasurer
| | (Chief
    Financial Officer)     



53