##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







|☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended September 30, 2017



|☐ | 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)





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  ☒    No  ☐

Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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   |  | ☒  (Do not check if a smaller reporting company) |  | 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  ☒

As of November 6, 2017, there were 6,321,988 shares
of the registrants common stock outstanding.









---

##### Table of Contents

RAND CAPITAL CORPORATION

TABLE OF CONTENTS FOR FORM 10-Q



|                                |  |                                                                                                                                     |  |   
|------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------- |  | --
|PART I.  FINANCIAL INFORMATION
|                                |  |                                                                                                                                    
|Item 1.                         |  | Financial Statements and Supplementary Data                                                                                         |  | 3 
|                                |  |                                                                                                                                    
|                                |  | Consolidated Statements of Financial Position as of September 
30, 2017 (Unaudited) and December 31, 2016                           |  | 3 
|                                |  |                                                                                                                                    
|                                |  | Consolidated Statements of Operations for the Three Months and Nine Months Ended
 September 30, 2017 and 2016 (Unaudited)           |  | 4 
|                                |  |                                                                                                                                    
|                                |  | Consolidated Statements of Changes in Net Assets for the Three Months and Nine
Months Ended September 30, 2017 and 2016 (Unaudited) |  | 5 
|                                |  |                                                                                                                                    
|                                |  | Consolidated Statements of Cash Flows for the Nine Months Ended September 30,
 2017 and 2016 (Unaudited)                            |  | 6 
|                                |  |                                                                                                                                    
|                                |  | Consolidated Schedule of Portfolio Investments as of September 
30, 2017 (Unaudited)                                                |  | 7 
|                                |  |                                                                                                                                    
|                                |  | Consolidated Schedule of Portfolio Investments as of December 
31, 2016                                                             |  | 15
|                                |  |                                                                                                                                    
|                                |  | Notes to the Consolidated Financial Statements (Unaudited)                                                                          |  | 23
|                                |  |                                                                                                                                    
|Item 2.                         |  | Managements Discussion and Analysis of Financial Condition and Results
 of Operations                                              |  | 35
|                                |  |                                                                                                                                    
|Item 3.                         |  | Quantitative and Qualitative Disclosures about Market Risk                                                                          |  | 44
|                                |  |                                                                                                                                    
|Item 4.                         |  | Controls and Procedures                                                                                                             |  | 45
|                               
|PART II.  OTHER INFORMATION   
|                                |  |                                                                                                                                    
|Item 1.                         |  | Legal Proceedings                                                                                                                   |  | 46
|                                |  |                                                                                                                                    
|Item 1A.                        |  | Risk Factors                                                                                                                        |  | 46
|                                |  |                                                                                                                                    
|Item 2.                         |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                         |  | 46
|                                |  |                                                                                                                                    
|Item 3.                         |  | Defaults upon Senior Securities                                                                                                     |  | 46
|                                |  |                                                                                                                                    
|Item 4.                         |  | Mine Safety Disclosures                                                                                                             |  | 46
|                                |  |                                                                                                                                    
|Item 5.                         |  | Other Information                                                                                                                   |  | 46
|                                |  |                                                                                                                                    
|Item 6.                         |  | Exhibits                                                                                                                            |  | 47



2



---

##### Table of Contents

PART I. FINANCIAL INFORMATION



|Item 1. | Financial Statements and Supplementary Data
|------- | -------------------------------------------

RAND CAPITAL CORPORATION AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION



|                                                                                                                                       |  |                              |            |   |                  |   |            |  
|-------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ---------- | - | ---------------- | - | ---------- | -
|                                                                                                                                       |  | September 30,2017(Unaudited) |            |   | December 31,2016 |  
|ASSETS                                                                                                                                 |  |                              |            |   |                  |   |            |  
|Investments at fair value:                                                                                                             |  |                              |            |   |                  |   |            |  
|Control investments (cost of $99,500)                                                                                                  |  | $                            | 99,500     |   |                  | $ | 99,500     |  
|Affiliate investments (cost of $19,356,165 and $17,589,623, respectively)                                                              |  |                              | 14,706,841 |   |                  |   | 13,605,974 |  
|Non-Control/Non-Affiliate
investments (cost of $16,358,555 and $13,941,907, respectively)                                              |  |                              | 15,889,347 |   |                  |   | 13,795,007 |  
|                                                                                                                                       |  |                              |            |   |                  |   |            |  
|Total investments, at fair value (cost of $35,814,220 and $31,631,030, respectively)                                                   |  |                              | 30,695,688 |   |                  |   | 27,500,481 |  
|Cash                                                                                                                                   |  |                              | 6,373,128  |   |                  |   | 12,280,140 |  
|Interest receivable (net of allowance: $161,000)                                                                                       |  |                              | 202,562    |   |                  |   | 324,237    |  
|Deferred tax asset                                                                                                                     |  |                              | 1,708,081  |   |                  |   | 1,165,164  |  
|Prepaid income taxes                                                                                                                   |  |                              | 266,935    |   |                  |   |           |  
|Other assets                                                                                                                           |  |                              | 584,010    |   |                  |   | 1,148,508  |  
|                                                                                                                                       |  |                              |            |   |                  |   |            |  
|Total assets                                                                                                                           |  | $                            | 39,830,404 |   |                  | $ | 42,418,530 |  
|                                                                                                                                       |  |                              |            |   |                  |   |            |  
|LIABILITIES AND STOCKHOLDERS EQUITY (NET ASSETS)                                                                                      | 
|Liabilities:                                                                                                                           |  |                              |            |   |                 
|Debentures guaranteed by the SBA, net                                                                                                  |  | $                            | 7,848,323  |   |                  | $ | 7,827,773  |  
|Profit sharing and bonus payable                                                                                                       |  |                              | 132,000    |   |                  |   | 1,270,052  |  
|Accounts payable and accrued expenses                                                                                                  |  |                              | 114,365    |   |                  |   | 324,537    |  
|Deferred revenue                                                                                                                       |  |                              | 43,240     |   |                  |   | 46,797     |  
|Income tax payable                                                                                                                     |  |                              |           |   |                  |   | 320,008    |  
|                                                                                                                                       |  |                              |            |   |                  |   |            |  
|Total liabilities                                                                                                                      |  |                              | 8,137,928  |   |                  |   | 9,789,167  |  
|                                                                                                                                       |  |                              |            |   |                  |   |            |  
|Commitments and contingencies (See Note 5)                                                                                             |  |                              |            |   |                 
|                                                                                                                                       | 
|Stockholders equity (net assets):                                                                                                     |  |                              |            |   |                 
|Common stock, $.10 par; shares authorized 10,000,000; shares issued 6,863,034; shares outstanding
of 6,321,988 at 9/30/17 and 12/31/16 |  |                              | 686,304    |   |                  |   | 686,304    |  
|Capital in excess of par value                                                                                                         |  |                              | 10,581,789 |   |                  |   | 10,581,789 |  
|Accumulated net investment loss                                                                                                        |  |                              | (1,876,712 | ) |                  |   | (1,577,848 | )
|Undistributed net realized gain on investments                                                                                         |  |                              | 27,127,054 |   |                  |   | 27,127,054 |  
|Net unrealized depreciation on investments                                                                                             |  |                              | (3,356,854 | ) |                  |   | (2,718,831 | )
|Treasury stock, at cost: 541,046 shares                                                                                                |  |                              | (1,469,105 | ) |                  |   | (1,469,105 | )
|                                                                                                                                       |  |                              |            |   |                  |   |            |  
|Total stockholders equity (net assets) (per share $5.01 at 9/30/17; $5.16 at
12/31/16)                                                |  |                              | 31,692,476 |   |                  |   | 32,629,363 |  
|                                                                                                                                       |  |                              |            |   |                  |   |            |  
|Total liabilities and stockholders equity (net assets)                                                                                |  | $                            | 39,830,404 |   |                  | $ | 42,418,530 |  
|                                                                                                                                       |  |                              |            |   |                  |   |            |  

See accompanying notes



3



---

##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



|                                                                                      |  |                                    |           |   |                                    |    |            |                                   |  |    |                                   |   |  |    |             |  
|------------------------------------------------------------------------------------- |  | ---------------------------------- | --------- | - | ---------------------------------- | -- | ---------- | --------------------------------- |  | -- | --------------------------------- | - |  | -- | ----------- | -
|                                                                                      |  | Three monthsendedSeptember 30,2017 |           |   | Three monthsendedSeptember 30,2016 |    |            | Nine monthsendedSeptember 30,2017 |  |    | Nine monthsendedSeptember 30,2016 |  
|Investment income:                                                                    |  |                                    |           |   |                                    |    |            |                                   |  |    |                                   |   |  |    |             |  
|Interest from portfolio companies:                                                    |  |                                    |           |   |                                    |    |            |                                   |  |    |                                   |   |  |    |             |  
|Control investments                                                                   |  | $                                  |          |   |                                    | $  |           |                                   |  | $  |                                  |   |  | $  | 11,828      |  
|Affiliate investments                                                                 |  |                                    | 142,247   |   |                                    |    | 113,643    |                                   |  |    | 416,247                           |   |  |    | 273,218     |  
|Non-Control/Non-Affiliate
investments                                                 |  |                                    | 167,675   |   |                                    |    | 110,395    |                                   |  |    | 417,406                           |   |  |    | 240,027     |  
|                                                                                      |  |                                    |           |   |                                    |    |            |                                   |  |    |                                   |   |  |    |             |  
|Total interest from portfolio companies                                               |  |                                    | 309,922   |   |                                    |    | 224,038    |                                   |  |    | 833,653                           |   |  |    | 525,073     |  
|                                                                                      |  |                                    |           |  
|Interest from other investments:                                                      |  |                                    |           |   |                                    |    |            |                                   |  |    |                                   |   |  |    |             |  
|Non-Control/Non-Affiliate
investments                                                 |  |                                    | 6,348     |   |                                    |    | 11,974     |                                   |  |    | 24,182                            |   |  |    | 33,683      |  
|                                                                                      |  |                                    |           |   |                                    |    |            |                                   |  |    |                                   |   |  |    |             |  
|Total interest from other investments                                                 |  |                                    | 6,348     |   |                                    |    | 11,974     |                                   |  |    | 24,182                            |   |  |    | 33,683      |  
|                                                                                      |  |                                    |           |  
|Dividend and other investment income:                                                 |  |                                    |           |   |                                    |    |            |                                   |  |    |                                   |   |  |    |             |  
|Affiliate investments                                                                 |  |                                    | 74,408    |   |                                    |    | 69,010     |                                   |  |    | 189,805                           |   |  |    | 149,807     |  
|Non-Control/Non-Affiliate
investments                                                 |  |                                    | 2,405     |   |                                    |    | 3,011      |                                   |  |    | 7,598                             |   |  |    | 3,011       |  
|                                                                                      |  |                                    |           |   |                                    |    |            |                                   |  |    |                                   |   |  |    |             |  
|Total dividend and other investment income                                            |  |                                    | 76,813    |   |                                    |    | 72,021     |                                   |  |    | 197,403                           |   |  |    | 152,818     |  
|                                                                                      |  |                                    |           |  
|Fee income:                                                                           |  |                                    |           |   |                                    |    |            |                                   |  |    |                                   |   |  |    |             |  
|Control investments                                                                   |  |                                    |          |   |                                    |    |           |                                   |  |    |                                  |   |  |    | 2,000       |  
|Affiliate investments                                                                 |  |                                    | 2,166     |   |                                    |    | 2,083      |                                   |  |    | 6,250                             |   |  |    | 3,945       |  
|Non-Control/Non-Affiliate
investments                                                 |  |                                    | 1,770     |   |                                    |    | 5,770      |                                   |  |    | 13,307                            |   |  |    | 13,004      |  
|                                                                                      |  |                                    |           |   |                                    |    |            |                                   |  |    |                                   |   |  |    |             |  
|Total fee income                                                                      |  |                                    | 3,936     |   |                                    |    | 7,853      |                                   |  |    | 19,557                            |   |  |    | 18,949      |  
|                                                                                      |  |                                    |           |   |                                    |    |            |                                   |  |    |                                   |   |  |    |             |  
|Total investment income                                                               |  |                                    | 397,019   |   |                                    |    | 315,886    |                                   |  |    | 1,074,795                         |   |  |    | 730,523     |  
|                                                                                      |  |                                    |           |   |                                    |    |            |                                   |  |    |                                   |   |  |    |             |  
|Expenses:                                                                             |  |                                    |           |   |                                    |    |            |                                   |  |    |                                   |   |  |    |             |  
|Salaries                                                                              |  |                                    | 165,413   |   |                                    |    | 155,437    |                                   |  |    | 496,239                           |   |  |    | 466,312     |  
|Bonus and profit sharing                                                              |  |                                    |          |   |                                    |    |           |                                   |  |    |                                  |   |  |    | 1,411,659   |  
|Employee benefits                                                                     |  |                                    | 38,454    |   |                                    |    | 38,730     |                                   |  |    | 138,523                           |   |  |    | 164,952     |  
|Directors fees                                                                       |  |                                    | 36,374    |   |                                    |    | 47,380     |                                   |  |    | 107,623                           |   |  |    | 142,135     |  
|Professional fees                                                                     |  |                                    | 48,433    |   |                                    |    | 86,938     |                                   |  |    | 310,628                           |   |  |    | 237,986     |  
|Stockholders and office operating                                                     |  |                                    | 45,355    |   |                                    |    | 50,846     |                                   |  |    | 193,290                           |   |  |    | 174,882     |  
|Insurance                                                                             |  |                                    | 8,058     |   |                                    |    | 8,358      |                                   |  |    | 25,618                            |   |  |    | 25,876      |  
|Corporate development                                                                 |  |                                    | 16,621    |   |                                    |    | 17,794     |                                   |  |    | 49,938                            |   |  |    | 49,319      |  
|Other operating                                                                       |  |                                    | 2,772     |   |                                    |    | 3,495      |                                   |  |    | 8,055                             |   |  |    | 9,470       |  
|                                                                                      |  |                                    |           |   |                                    |    |            |                                   |  |    |                                   |   |  |    |             |  
|                                                                                      |  |                                    | 361,480   |   |                                    |    | 408,978    |                                   |  |    | 1,329,914                         |   |  |    | 2,682,591   |  
|Interest on SBA obligations                                                           |  |                                    | 77,568    |   |                                    |    | 77,570     |                                   |  |    | 232,706                           |   |  |    | 232,709     |  
|                                                                                      |  |                                    |           |   |                                    |    |            |                                   |  |    |                                   |   |  |    |             |  
|Total expenses                                                                        |  |                                    | 439,048   |   |                                    |    | 486,548    |                                   |  |    | 1,562,620                         |   |  |    | 2,915,300   |  
|                                                                                      |  |                                    |           |   |                                    |    |            |                                   |  |    |                                   |   |  |    |             |  
|Net investment loss before income taxes                                               |  |                                    | (42,029   | ) |                                    |    | (170,662   | )                                 |  |    | (487,825                          | ) |  |    | (2,184,777  | )
|Income tax benefit                                                                    |  |                                    | (17,050   | ) |                                    |    | (55,934    | )                                 |  |    | (188,961                          | ) |  |    | (833,525    | )
|                                                                                      |  |                                    |           |   |                                    |    |            |                                   |  |    |                                   |   |  |    |             |  
|Net investment loss                                                                   |  |                                    | (24,979   | ) |                                    |    | (114,728   | )                                 |  |    | (298,864                          | ) |  |    | (1,351,252  | )
|                                                                                      |  |                                    |           |   |                                    |    |            |                                   |  |    |                                   |   |  |    |             |  
|Net realized gain on sales and dispositions of investments:                           |  |                                    |           |   |                                    |    |            |                                   |  |    |                                   |   |  |    |             |  
|Control investments                                                                   |  |                                    |          |   |                                    |    | 1,412,500  |                                   |  |    |                                  |   |  |    | 14,588,813  |  
|Non-Control/Non-Affiliate
investments                                                 |  |                                    |          |   |                                    |    |           |                                   |  |    |                                  |   |  |    | 168,140     |  
|                                                                                      |  |                                    |           |   |                                    |    |            |                                   |  |    |                                   |   |  |    |             |  
|Net realized gain before income tax expense                                           |  |                                    |          |   |                                    |    | 1,412,500  |                                   |  |    |                                  |   |  |    | 14,756,953  |  
|Income tax expense                                                                    |  |                                    |          |   |                                    |    | 526,862    |                                   |  |    |                                  |   |  |    | 5,504,343   |  
|                                                                                      |  |                                    |           |   |                                    |    |            |                                   |  |    |                                   |   |  |    |             |  
|Net realized gain on investments                                                      |  |                                    |          |   |                                    |    | 885,638    |                                   |  |    |                                  |   |  |    | 9,252,610   |  
|Net change in unrealized (depreciation) or appreciation on investments:               |  |                                    |           |   |                                    |    |            |                                   |  |    |                                   |   |  |    |             |  
|Control investments                                                                   |  |                                    |          |   |                                    |    | (1,412,500 | )                                 |  |    |                                  |   |  |    | (12,775,000 | )
|Affiliate investments                                                                 |  |                                    |          |   |                                    |    | (666,011   | )                                 |  |    | (665,675                          | ) |  |    | (1,413,811  | )
|Non-Control/Non-Affiliate
investments                                                 |  |                                    | 111,000   |   |                                    |    |           |                                   |  |    | (322,308                          | ) |  |    | 69,444      |  
|                                                                                      |  |                                    |           |   |                                    |    |            |                                   |  |    |                                   |   |  |    |             |  
|Change in unrealized depreciation or appreciation before income tax expense (benefit) |  |                                    | 111,000   |   |                                    |    | (2,078,511 | )                                 |  |    | (987,983                          | ) |  |    | (14,119,367 | )
|Deferred income tax expense (benefit)                                                 |  |                                    | 28,090    |   |                                    |    | (736,301   | )                                 |  |    | (349,960                          | ) |  |    | (5,231,097  | )
|                                                                                      |  |                                    |           |   |                                    |    |            |                                   |  |    |                                   |   |  |    |             |  
|Net change in unrealized depreciation or appreciation on investments                  |  |                                    | 82,910    |   |                                    |    | (1,342,210 | )                                 |  |    | (638,023                          | ) |  |    | (8,888,270  | )
|                                                                                      |  |                                    |           |   |                                    |    |            |                                   |  |    |                                   |   |  |    |             |  
|Net realized and unrealized gain (loss) on investments                                |  |                                    | 82,910    |   |                                    |    | (456,572   | )                                 |  |    | (638,023                          | ) |  |    | 364,340     |  
|                                                                                      |  |                                    |           |   |                                    |    |            |                                   |  |    |                                   |   |  |    |             |  
|Net increase (decrease) in net assets from operations                                 |  | $                                  | 57,931    |   |                                    | ($ | 571,300    | )                                 |  | ($ | 936,887                           | ) |  | ($ | 986,912     | )
|                                                                                      |  |                                    |           |   |                                    |    |            |                                   |  |    |                                   |   |  |    |             |  
|Weighted average shares outstanding                                                   |  |                                    | 6,321,988 |   |                                    |    | 6,325,299  |                                   |  |    | 6,321,988                         |   |  |    | 6,327,074   |  
|Basic and diluted net increase (decrease) in net assets from operations per
share     |  | $                                  | 0.01      |   |                                    | ($ | 0.09       | )                                 |  | ($ | 0.15                              | ) |  | ($ | 0.16        | )

See accompanying notes



4



---

##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(Unaudited)



|                                                                     |  |                                    |            |   |                                    |    |            |                                   |  |    |                                   |   |  |    |            |  
|-------------------------------------------------------------------- |  | ---------------------------------- | ---------- | - | ---------------------------------- | -- | ---------- | --------------------------------- |  | -- | --------------------------------- | - |  | -- | ---------- | -
|                                                                     |  | Three monthsendedSeptember 30,2017 |            |   | Three monthsendedSeptember 30,2016 |    |            | Nine monthsendedSeptember 30,2017 |  |    | Nine monthsendedSeptember 30,2016 |  
|Net assets at beginning of period                                    |  | $                                  | 31,634,545 |   |                                    | $  | 33,438,048 |                                   |  | $  | 32,629,363                        |   |  | $  | 33,853,660 |  
|                                                                     |  |                                    |            |  
|Net investment loss                                                  |  |                                    | (24,979    | ) |                                    |    | (114,728   | )                                 |  |    | (298,864                          | ) |  |    | (1,351,252 | )
|Net realized gain on investments                                     |  |                                    |           |   |                                    |    | 885,638    |                                   |  |    |                                  |   |  |    | 9,252,610  |  
|Net change in unrealized depreciation or appreciation on investments |  |                                    | 82,910     |   |                                    |    | (1,342,210 | )                                 |  |    | (638,023                          | ) |  |    | (8,888,270 | )
|                                                                     |  |                                    |            |   |                                    |    |            |                                   |  |    |                                   |   |  |    |            |  
|Net increase (decrease) in net assets from operations                |  |                                    | 57,931     |   |                                    |    | (571,300   | )                                 |  |    | (936,887                          | ) |  |    | (986,912   | )
|Purchase of treasury shares                                          |  |                                    |           |   |                                    |    | (21,614    | )                                 |  |    |                                  |   |  |    | (21,614    | )
|                                                                     |  |                                    |            |   |                                    |    |            |                                   |  |    |                                   |   |  |    |            |  
|Total increase (decrease) in net assets                              |  |                                    | 57,931     |   |                                    |    | (592,914   | )                                 |  |    | (936,887                          | ) |  |    | (1,008,526 | )
|                                                                     |  |                                    |            |   |                                    |    |            |                                   |  |    |                                   |   |  |    |            |  
|Net assets at end of period                                          |  | $                                  | 31,692,476 |   |                                    | $  | 32,845,134 |                                   |  | $  | 31,692,476                        |   |  | $  | 32,845,134 |  
|                                                                     |  |                                    |            |   |                                    |    |            |                                   |  |    |                                   |   |  |    |            |  
|Accumulated net investment loss                                      |  | ($                                 | 1,876,712  | ) |                                    | ($ | 1,375,832  | )                                 |  | ($ | 1,876,712                         | ) |  | ($ | 1,375,832  | )
|                                                                     |  |                                    |            |   |                                    |    |            |                                   |  |    |                                   |   |  |    |            |  

See accompanying notes



5



---

##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                                            |  |                                   |            |   |                                   |    |             |  
|----------------------------------------------------------------------------------------------------------- |  | --------------------------------- | ---------- | - | --------------------------------- | -- | ----------- | -
|                                                                                                            |  | Nine monthsendedSeptember 30,2017 |            |   | Nine monthsendedSeptember 30,2016 |   
|Cash flows from operating activities:                                                                       |  |                                   |            |   |                                   |    |             |  
|Net decrease in net assets from operations                                                                  |  | ($                                | 936,887    | ) |                                   | ($ | 986,912     | )
|Adjustments to reconcile net decrease in net assets to net cash (used in) provided by operating
activities: |  |                                   |            |   |                                   |    |             |  
|Investments in portfolio companies                                                                          |  |                                   | (3,900,000 | ) |                                   |    | (5,883,012  | )
|Proceeds from sale of investments                                                                           |  |                                   |           |   |                                   |    | 14,313,203  |  
|Proceeds from loan repayments                                                                               |  |                                   |           |   |                                   |    | 416,972     |  
|Change in unrealized depreciation or appreciation on investments                                            |  |                                   | 987,983    |   |                                   |    | 14,119,367  |  
|Change in deferred tax benefit                                                                              |  |                                   | (542,917   | ) |                                   |    | (3,448,438  | )
|Realized gain on portfolio investments                                                                      |  |                                   |           |   |                                   |    | (14,756,953 | )
|Depreciation and amortization                                                                               |  |                                   | 23,550     |   |                                   |    | 25,034      |  
|Original issue discount accretion                                                                           |  |                                   | (21,085    | ) |                                   |    | (7,497      | )
|Non-cash conversion of debenture interest                                                                   |  |                                   | (262,105   | ) |                                   |    | (16,711     | )
|Changes in operating assets and liabilities:                                                                |  |                                   |            |   |                                   |    |             |  
|Decrease (increase) in interest receivable                                                                  |  |                                   | 121,675    |   |                                   |    | (97,299     | )
|Decrease in other assets                                                                                    |  |                                   | 561,499    |   |                                   |    | 61,484      |  
|(Increase) decrease in prepaid income taxes                                                                 |  |                                   | (266,935   | ) |                                   |    | 65,228      |  
|(Decrease) increase in income tax payable                                                                   |  |                                   | (320,008   | ) |                                   |    | 826,983     |  
|Decrease in accounts payable and accrued expenses                                                           |  |                                   | (210,173   | ) |                                   |    | (85,678     | )
|(Decrease) increase in profit sharing and bonus payable                                                     |  |                                   | (1,138,052 | ) |                                   |    | 1,311,659   |  
|(Decrease) increase in deferred revenue                                                                     |  |                                   | (3,557     | ) |                                   |    | 27,553      |  
|                                                                                                            |  |                                   |            |   |                                   |    |             |  
|Total adjustments                                                                                           |  |                                   | (4,970,125 | ) |                                   |    | 6,871,895   |  
|                                                                                                            |  |                                   |            |   |                                   |    |             |  
|Net cash (used in) provided by operating activities                                                         |  |                                   | (5,907,012 | ) |                                   |    | 5,884,983   |  
|                                                                                                            |  |                                   |            |   |                                   |    |             |  
|Cash flows from financing activities:                                                                       |  |                                   |            |   |                                   |    |             |  
|Purchase of treasury shares                                                                                 |  |                                   |           |   |                                   |    | (21,614     | )
|                                                                                                            |  |                                   |            |   |                                   |    |             |  
|Net cash used in financing activities                                                                       |  |                                   |           |   |                                   |    | (21,614     | )
|                                                                                                            |  |                                   |            |   |                                   |    |             |  
|Net (decrease) increase in cash                                                                             |  |                                   | (5,907,012 | ) |                                   |    | 5,863,369   |  
|Cash:                                                                                                       |  |                                   |            |   |                                   |    |             |  
|Beginning of period                                                                                         |  |                                   | 12,280,140 |   |                                   |    | 5,844,795   |  
|                                                                                                            |  |                                   |            |   |                                   |    |             |  
|End of period                                                                                               |  | $                                 | 6,373,128  |   |                                   | $  | 11,708,164  |  
|                                                                                                            |  |                                   |            |   |                                   |    |             |  

See accompanying notes



6



---

##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

September 30, 2017

(Unaudited)



|                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                               |  |                   |          |  |             |  |     |      |  |  |                                         |  |  |                     |                                |  |  |      
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | -------- |  | ----------- |  | --- | ---- |  |  | --------------------------------------- |  |  | ------------------- | ------------------------------ |  |  | -----
|(a)
Company, Geographic Location, Business
Description, (Industry) and Website                                                                                                                                               |  | Type of Investment                                                                                                                                                                                                                                                                            |  | (b)
Date
Acquired |          |  | (c) 
Equity |  |     | Cost |  |  | (d)(f)
Fair
Value                       |  |  | Percentof NetAssets
|                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                               |  |                   |          | 
|Non-Control/Non-Affiliate Investments  50.1% of net assets: (j)                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                               |  |                   |          |  |             |  |     |      |  |  |                                         |  |  |                     |                                |  |  |      
|                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                               |  |                   |          | 
|ACV Auctions, Inc. (e)(g) Buffalo, NY.
Live mobile auctions for new and used car dealers. (Software) www.acvauctions.com                                                                                                     |  | 1,181,160 Series A preferred shares.                                                                                                                                                                                                                                                          |  |                   | 8/12/16  |  |             |  | 1%  |      |  |  | $163,000                                |  |  |                     | $282,356                       |  |  | 0.9% 
|                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                               |  |                   |          | 
|Athenex, Inc. NASDAQ: ATNX (e)(g)(o)(p)
(Formerly Kinex Pharmaceuticals, Inc.) Buffalo, NY.
Specialty pharmaceutical and drug development. (Health Care) www.athenex.com                                                     |  | 46,296 restricted common shares valued at $15.66 per share.                                                                                                                                                                                                                                   |  |                   | 9/8/14   |  |             |  | <1% |      |  |  | 143,285                                 |  |  |                     | 725,000                        |  |  | 2.3% 
|                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                               |  |                   |          | 
|Centivo Corporation (e)(n) New York, NY.
Tech-enabled health solutions company that helps self-insured employers and their employees save money and have a better experience. (Health Care)                                  |  | $100,000 convertible unsecured note at 2% due February 1, 2019.                                                                                                                                                                                                                               |  |                   | 7/5/17   |  |             |  | 0%  |      |  |  | 100,000                                 |  |  |                     | 100,000                        |  |  | 0.3% 
|                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                               |  |                   |          | 
|City Dining Cards, Inc. (Loupe) (e)(g)
Buffalo, NY. Customer loyalty technology company for restaurants. (Software)                                                                                                          |  | 9,525.25 Series B preferred shares.                                                                                                                                                                                                                                                           |  |                   | 9/1/15   |  |             |  | 4%  |      |  |  | 500,000                                 |  |  |                     | 0                              |  |  | 0.0% 
|                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                               |  |                   |          | 
|eHealth Global Technologies, Inc.
Henrietta, NY. eHealth Connect® improves health care delivery through intelligently aggregated clinical
record and images for patient referrals. (Health Care)
www.ehealthtechnologies.com |  | (g)$1,500,000 term note at 10% due September 2, 2019.
(n)$2,000,000 term note at 10% due September 28, 2019.
Total eHealth                                                                                                                                                                    |  |                   | 6/28/16  |  |             |  | 0%  |      |  |  | 1,500,000
 2,000,000
3,500,000          |  |  |                     | 1,500,000
 2,000,000
3,500,000 |  |  | 11.0%
|                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                               |  |                   |          | 
|Empire Genomics, LLC (g) Buffalo, NY.
Molecular diagnostics company that offers a comprehensive menu of assay services for diagnosing and guiding patient therapeutic treatments. (Health Care)
www.empiregenomics.com       |  | $1,101,489 senior secured convertible term notes at 10% due April 30, 2018.
$250,000 promissory note at 12% due December 31, 2019.
(i) Interest receivable $51,359. Total
Empire                                                                                                              |  |                   | 6/13/14  |  |             |  | 0%  |      |  |  | 1,101,489
 250,000
 1,351,489           |  |  |                     | 1,101,489
 250,000
 1,351,489  |  |  | 4.3% 
|                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                               |  |                   |          | 
|GoNoodle, Inc. (g)(m) (Formerly
HealthTeacher, Inc.) Nashville, TN. Student engagement education software providing core aligned physical activity breaks. (Software)
www.gonoodle.com                                       |  | $1,000,000 secured note at 12% due January 31, 2020, (1% Payment in Kind (PIK)).
Warrant for 47,324 Series C Preferred shares.
Total GoNoodle                                                                                                                                                 |  |                   | 2/6/15   |  |             |  | <1% |      |  |  | 1,026,763 
25
1,026,788                 |  |  |                     | 1,026,763 
25
1,026,788        |  |  | 3.2% 
|                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                               |  |                   |          | 
|Mercantile Adjustment Bureau, LLC (g)
Williamsville, NY. Full service accounts receivable management and collections company.
(Contact Center) www.mercantilesolutions.com                                                   |  | $1,199,039 subordinated secured note at 13% (3% for the calendar year 2017) due January 31, 2018.
(e)$150,000 subordinated debenture at 8% due June 30, 2018.
Warrant for 3.29% membership interests. Option for 1.5% membership interests.
(i) Interest receivable $57,490. Total
Mercantile |  |                   | 10/22/12 |  |             |  | 4%  |      |  |  | 1,198,187
 
150,000 
 97,625
 1,445,812 |  |  |                     | 948,187
 
-
 
-
 948,187       |  |  | 3.0% 
|                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                               |  |                   |          | 
|Outmatch Holdings, LLC (e)(g) (Chequed
Holdings, LLC) Dallas, TX. Web based predictive employee selection and reference checking. (Software)
www.outmatch.com                                                                |  | 2,542,167 Class P1 Units. 109,788
Class C1 Units. Total Outmatch                                                                                                                                                                                                                              |  |                   | 11/18/10 |  |             |  | 4%  |      |  |  | 2,140,0075,489
2,145,496                |  |  |                     | 2,140,0075,489
2,145,496       |  |  | 6.8% 



7



---

##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

September 30, 2017 (Continued)

(Unaudited)



|                                                                                                                                                                                                                      |  |                                                                                                                                                                   |  |                   |  |             |  |      |                                   |  |                   |  |                                          |                     |  |     
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- |  | ----------- |  | ---- | --------------------------------- |  | ----------------- |  | ---------------------------------------- | ------------------- |  | ----
|(a)
Company, Geographic Location, Business
Description, (Industry) and Website                                                                                                                                        |  | Type of Investment                                                                                                                                                |  | (b)
Date
Acquired |  | (c) 
Equity |  | Cost |                                   |  | (d)(f)
Fair
Value |  |                                          | Percentof NetAssets
|                                                                                                                                                                                                                      |  |                                                                                                                                                                   |  |                   |  |            
|PostProcess Technologies LLC (e)(g)
Buffalo, NY. Provides innovative solutions for the post-processing of additive manufactured 3D parts. (Manufacturing)
www.postprocess.com                                         |  | $300,000 convertible promissory note at 5% due July 28, 2018.                                                                                                     |  | 7/25/16           |  | 0%          |  |      | 300,000                           |  |                   |  | 300,000                                  |                     |  | 0.9%
|                                                                                                                                                                                                                      |  |                                                                                                                                                                   |  |                   |  |            
|Rheonix, Inc. (e) Ithaca, NY. Developer of
fully automated microfluidic based molecular assay and diagnostic testing devices. (Health Care) www.rheonix.com                                                           |  | 9,676 common shares. (g)1,839,422 Series
A preferred shares. (g) 50,593 common shares. (g)
589,420 Series B preferred shares. Total Rheonix                       |  | 10/29/09          |  | 4%          |  |      | -2,099,999
-
702,732
2,802,731    |  |                   |  | 11,0002,165,999
59,000
702,732
2,938,731 |                     |  | 9.3%
|                                                                                                                                                                                                                      |  |                                                                                                                                                                   |  |                   |  |            
|SocialFlow, Inc. (e)(g) New York, NY.
Provides instant analysis of social networks using a proprietary, predictive analytic algorithm to optimize advertising and publishing. (Software)
www.socialflow.com           |  | 1,049,538 Series B preferred shares. 1,204,819
Series B-1 preferred shares. 717,772 Series C preferred shares.
Total Social Flow                                  |  | 4/5/13            |  | 4%          |  |      | 500,000750,000
500,000
1,750,000  |  |                   |  | 731,431839,648
500,221
2,071,300         |                     |  | 6.5%
|                                                                                                                                                                                                                      |  |                                                                                                                                                                   |  |                   |  |            
|Somerset Gas Transmission Company, LLC (e)
Columbus, OH. Natural gas transportation. (Oil and Gas)
www.somersetgas.com                                                                                                |  | 26.5337 units.                                                                                                                                                    |  | 7/10/02           |  | 3%          |  |      | 719,097                           |  |                   |  | 500,000                                  |                     |  | 1.6%
|                                                                                                                                                                                                                      |  |                                                                                                                                                                   |  |                   |  |            
|Other Non-Control/Non-Affiliate Investments:                                                                                                                                                                          |  |                                                                                                                                                                   |  |                   |  |             |  |      |                                   |  |                   |  |                                          |                     |  |     
|                                                                                                                                                                                                                      |  |                                                                                                                                                                   |  |                   |  |            
|DataView, LLC(Software) (e)                                                                                                                                                                                           |  | Membership Interest.                                                                                                                                              |  | -                 |  | -           |  |      | 310,357                           |  |                   |  | -                                        |                     |  | 0.0%
|                                                                                                                                                                                                                      |  |                                                                                                                                                                   |  |                   |  |            
|UStec/Wi3 (Manufacturing) (e)                                                                                                                                                                                         |  | Common Stock.                                                                                                                                                     |  | -                 |  | -           |  |      | 100,500                           |  |                   |  | -                                        |                     |  | 0.0%
|                                                                                                                                                                                                                      |  |                                                                                                                                                                   |  |                   |  |            
|Subtotal Non-Control/Non-Affiliate Investments                                                                                                                                                                        |  |                                                                                                                                                                   |  |                   |  |             |  |      |                                   |  |                   |  |                                          |                     |  |     
|                                                                                                                                                                                                                      |  |                                                                                                                                                                   |  |                   |  |             |  |      |                                   |  |                   | 
|                                                                                                                                                                                                                      |  |                                                                                                                                                                   |  |                   |  |             |  |      | $16,358,555                       |  |                   |  | $15,889,347                              |                     |  |     
|                                                                                                                                                                                                                      |  |                                                                                                                                                                   |  |                   |  |             |  |      |                                   |  |                   | 
|Affiliate Investments  46.5% of net assets (k)                                                                                                                                                                       |  |                                                                                                                                                                   |  |                   |  |             |  |      |                                   |  |                   |  |                                          |                     |  |     
|                                                                                                                                                                                                                      |  |                                                                                                                                                                   |  |                   |  |            
|BeetNPath, LLC (Grainful) (e)(g) Ithaca,
NY. Frozen entrées and packaged dry side dishes made from 100% whole grain steel cut oats under Grainful brand name. (Consumer Product)
www.grainful.com                     |  | 1,119,024 Series A-2 Preferred Membership Units.
1,032,918 Series B Preferred Membership Units.
Total BeetNPath                                                   |  | 10/20/14          |  | 9%          |  |      | $359,000
 261,277
620,277         |  |                   |  | $359,000
 291,000
650,000                |                     |  | 2.1%
|                                                                                                                                                                                                                      |  |                                                                                                                                                                   |  |                   |  |            
|Carolina Skiff LLC (g) Waycross, GA.
Manufacturer of fresh water, ocean fishing and pleasure boats. (Manufacturing)
www.carolinaskiff.com                                                                             |  | 6.0825% Class A common membership interest.                                                                                                                       |  | 1/30/04           |  | 7%          |  |      | 15,000                            |  |                   |  | 1,100,000                                |                     |  | 3.5%
|                                                                                                                                                                                                                      |  |                                                                                                                                                                   |  |                   |  |            
|ClearView Social, Inc. (e)(g) Buffalo, NY.
Social media publishing tool for law, CPA and professional firms. (Software) www.clearviewsocial.com                                                                       |  | 312,500 Series seed plus preferred shares.                                                                                                                        |  | 1/4/16            |  | 6%          |  |      | 200,000                           |  |                   |  | 200,000                                  |                     |  | 0.6%
|                                                                                                                                                                                                                      |  |                                                                                                                                                                   |  |                   |  |            
|First Wave Products Group, LLC (e)(g)
Batavia, NY. Sells First Crush automated pill crusher that crushes and grinds medical pills for nursing homes and medical institutions. (Health Care)
www.firstwaveproducts.com |  | $500,000 senior term notes at 10% due July 31, 2017.
$280,000 junior term notes at 10% due July 31, 2017.
Warrant for 41,619 capital securities.
Total First Wave |  | 4/19/12           |  | 7%          |  |      | 661,563
 316,469
22,000
1,000,032 |  |                   |  | 250,000
 -
-
250,000                     |                     |  | 0.8%



8



---

##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

September 30, 2017 (Continued)

(Unaudited)



|                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                           |  |                   |  |             |  |      |                                                        |  |                   |  |                                                        |                     |  |      
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- |  | ----------- |  | ---- | ------------------------------------------------------ |  | ----------------- |  | ------------------------------------------------------ | ------------------- |  | -----
|(a)
Company, Geographic Location, Business
Description, (Industry) and Website                                                                                                                                    |  | Type of Investment                                                                                                                                                                                                                                                                        |  | (b)
Date
Acquired |  | (c) 
Equity |  | Cost |                                                        |  | (d)(f)
Fair
Value |  |                                                        | Percentof NetAssets
|                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                           |  |                   |  |            
|Genicon, Inc. Winter Park, FL. Designs,
produces and distributes patented surgical instrumentation. (Health Care) www.geniconendo.com                                                                             |  | (g)1,586,902 Series B preferred shares.
(g)$2,000,000 promissory note at 8% due May 1, 2020.
(g)Warrant for 250,000 common shares.
(n)$1,000,000 promissory note at 8% due May 1, 2020.
(n)Warrant for 125,000 common shares.
Total Genicon                                               |  | 4/10/15           |  | 6%          |  |      | 1,000,000 1,929,144
 80,000
 964,444
 40,000
4,013,588 |  |                   |  | 1,000,000 1,929,144
 80,000
 964,444
 40,000
4,013,588 |                     |  | 12.7%
|                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                           |  |                   |  |            
|GiveGab, Inc. (e)(g) Ithaca, NY. Online
fundraising, day of giving supporter engagement software for non-profit organizations. (Software)
www.givegab.com                                                         |  | 5,084,329 Series Seed preferred shares.                                                                                                                                                                                                                                                   |  | 3/13/13           |  | 7%          |  |      | 616,221                                                |  |                   |  | 424,314                                                |                     |  | 1.3% 
|                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                           |  |                   |  |            
|G-TEC Natural Gas Systems (e)
Buffalo, NY. Manufactures and distributes systems that allow natural gas to be used as an alternative fuel to gases. (Manufacturing)
www.gas-tec.com                                |  | 16.930% Class A membership interest. 8% cumulative dividend.                                                                                                                                                                                                                              |  | 8/31/99           |  | 17%         |  |      | 400,000                                                |  |                   |  | 100,000                                                |                     |  | 0.3% 
|                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                           |  |                   |  |            
|Intrinsiq Materials, Inc. (e)(g)
Rochester, NY. Produces printable electronics utilizing a unique process of nanomaterial based ink in a room-temperature environment. (Manufacturing)
www.intrinsiqmaterials.com |  | 4,161,747 Series A preferred shares.                                                                                                                                                                                                                                                      |  | 9/19/13           |  | 12%         |  |      | 1,125,673                                              |  |                   |  | 780,000                                                |                     |  | 2.5% 
|                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                           |  |                   |  |            
|Knoa Software, Inc. (g) New York, NY. End
user experience management and performance (EMP) solutions utilizing enterprise applications. (Software) www.knoa.com                                                   |  | 973,533 Series A-1 convertible preferred shares.
1,876,922 Series B preferred shares. $48,466
convertible promissory note at 8% due May 9, 2018. Total Knoa                                                                                                                               |  | 11/20/12          |  | 7%          |  |      | 750,000
479,155 
48,466
1,277,621                      |  |                   |  | -
449,455 
48,466
497,921                              |                     |  | 1.6% 
|                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                           |  |                   |  |            
|KnowledgeVision Systems, Inc. (e)(g)
Lincoln, MA. Online presentation and training software. (Software)
www.knowledgevision.com                                                                                   |  | 200,000 Series A-1 preferred shares.
214,285 Series A-2 preferred shares.
129,033 Series A-3 preferred shares.
Warrant for 46,743 Series A-3 shares.
$50,000 subordinated promissory note at 8% payable on demand of majority of noteholders after August 31, 2017.
Total KnowledgeVision |  | 11/13/13          |  | 7%          |  |      | 250,000300,000
165,001 35,000
 50,000
 800,001         |  |                   |  | -300,000
165,001 35,000
 50,000
 550,001               |                     |  | 1.7% 
|                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                           |  |                   |  |            
|Mezmeriz, Inc. (e)(g) Ithaca, NY.
Micro-electronic mechanical systems (MEMS) developer of carbon fiber MEMS mirror modules for gesture recognition and 3D scanning. (Electronics Developer)
www.mezmeriz.com      |  | 1,554,565 Series Seed preferred shares.                                                                                                                                                                                                                                                   |  | 1/9/08            |  | 14%         |  |      | 742,850                                                |  |                   |  | 351,477                                                |                     |  | 1.1% 
|                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                           |  |                   |  |            
|Microcision LLC (g)(m) Pennsauken
Township, NJ. Manufacturer of precision machined medical implants, components and assemblies. (Manufacturing) www.microcision.com                                               |  | $1,500,000 subordinated promissory note at 12% (1% PIK) due December 31, 2024.
15% Class A common membership interest.
Total Microcision                                                                                                                                                  |  | 9/24/09           |  | 15%         |  |      | 1,909,367

-
1,909,367                                 |  |                   |  | 1,909,367

-
1,909,367                                 |                     |  | 6.0% 
|                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                           |  |                   |  |            
|New Monarch Machine Tool, Inc. (g)
Cortland, NY. Manufactures and services vertical/horizontal machining centers. (Manufacturing)
www.monarchmt.com                                                               |  | 22.84 common shares.                                                                                                                                                                                                                                                                      |  | 9/24/03           |  | 15%         |  |      | 22,841                                                 |  |                   |  | 22,841                                                 |                     |  | 0.1% 



9



---

##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

September 30, 2017 (Continued)

(Unaudited)



|                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                     |  |                   |  |             |  |      |                                                      |                   |             |                       |                                                    |  |  |     
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- |  | ----------- |  | ---- | ---------------------------------------------------- | ----------------- | ----------- | --------------------- | -------------------------------------------------- |  |  | ----
|(a)
Company, Geographic Location, Business
Description, (Industry) and Website                                                                                                                                     |  | Type of Investment                                                                                                                                                                                                                  |  | (b)
Date
Acquired |  | (c)
 Equity |  | Cost |                                                      | (d)(f)
Fair
Value |             | Percent
of Net
Assets
|                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                     |  |                   |  |            
|OnCore Golf Technology, Inc. (e)(g)
Buffalo, NY. Maker of patented golf balls. (Consumer Product)
www.oncoregolf.com                                                                                               |  | 150,000 Series AA preferred shares. $300,000
subordinated convertible promissory notes at 6% due January 24, 2018. Total OnCore                                                                                                     |  | 12/31/14          |  | 7%          |  |      | 375,000 300,000
675,000                              |                   |             |                       | - 300,000
300,000                                  |  |  | 0.9%
|                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                     |  |                   |  |            
|SciAps, Inc. (e)(g) Woburn, MA.
Instrumentation company producing portable analytical devices using XRF, LIBS and RAMAN spectroscopy to identify compounds, minerals, and elements. (Manufacturing)
www.sciaps.com |  | 187,500 Series A convertible preferred shares.
274,299 Series A-1 convertible preferred shares.
117,371 Series B convertible preferred shares. 113,636 Series C
preferred shares. 369,698 Series C-1 preferred shares.
Total SciAps |  | 7/12/13           |  | 9%          |  |      | 1,500,000 504,710
 250,000
175,000
399,274
2,828,984 |                   |             |                       | 700,000 504,710
 250,000
175,000
399,274
2,028,984 |  |  | 6.4%
|                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                     |  |                   |  |            
|SOMS Technologies, LLC (g) Valhalla, NY.
Produces and markets the microGreen Extended Performance Oil Filter. (Consumer Products) www.microgreenfilter.com                                                         |  | 5,959,490 Series B membership interests.                                                                                                                                                                                            |  | 12/2/08           |  | 9%          |  |      | 472,632                                              |                   |             |                       | 528,348                                            |  |  | 1.7%
|                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                     |  |                   |  |            
|Teleservices Solutions Holdings, LLC (e) (g)(m)
Montvale, NJ. Customer contact center specializing in customer acquisition and retention for selected industries. (Contact Center)
www.ipacesetters.com            |  | 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. PIK dividend for Series C and
D at 12% and 14%, respectively. Total Teleservices               |  | 5/30/14           |  | 6%          |  |      | 250,0001,190,680
91,200
104,198 
1,636,078           |                   |             |                       | --
- -
 -                                          |  |  | 0.0%
|                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                     |  |                   |  |            
|Tilson Technology Management, Inc.(g)
Portland, ME. Cellular, fiber optic and wireless information systems, construction, and management. (Professional Services)
www.tilsontech.com                               |  | 120,000 Series B preferred shares. 21,391 Series
C convertible preferred shares. $200,000 subordinated promissory note at 8% due September 28, 2021.
Total Tilson                                                                   |  | 1/20/15           |  | 8%          |  |      | 600,000 200,000
 200,000
1,000,000                   |                   |             |                       | 600,000 200,000
 200,000
1,000,000                 |  |  | 3.2%
|                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                     |  |                   | 
|                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                     |  |                   |  |             |  |      |                                                      |                   |             |                      
|Subtotal Affiliate Investments                                                                                                                                                                                     |  |                                                                                                                                                                                                                                     |  |                   |  |             |  |      | $19,356,165                                          |                   |             |                       | $14,706,841                                        |  |  |     
|                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                     |  |                   |  |             |  |      |                                                      |                   |             |                      
|                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                     |  |                   |  |            
|Control Investments  0.3% of net assets (l)                                                                                                                                                                       |  |                                                                                                                                                                                                                                     |  |                   |  |             |  |      |                                                      |                   |             |                       |                                                    |  |  |     
|                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                     |  |                   |  |            
|Advantage 24/7 LLC (e)(g) Williamsville,
NY. Marketing program for wine and spirits dealers. (Marketing Company) www.advantage24-7.com                                                                             |  | 53% Membership interest.                                                                                                                                                                                                            |  | 12/30/10          |  | 53%         |  |      | $99,500                                              |                   |             |                       | $99,500                                            |  |  | 0.3%
|                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                     |  |                   | 
|                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                     |  |                   |  |             |  |      |                                                      |                   |             |                      
|Subtotal Control Investments                                                                                                                                                                                       |  |                                                                                                                                                                                                                                     |  |                   |  |             |  |      | $99,500                                              |                   |             |                       | $99,500                                            |  |  |     
|                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                     |  |                   |  |             |  |      |                                                      |                   |             |                      
|                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                     |  |                   |  |            
|TOTAL INVESTMENTS  96.9%                                                                                                                                                                                          |  |                                                                                                                                                                                                                                     |  |                   |  |             |  |      | $35,814,220                                          |                   |             |                       | $30,695,688                                        |  |  |     
|OTHER ASSETS IN EXCESS OF LIABILITIES  3.1%                                                                                                                                                                       |  |                                                                                                                                                                                                                                     |  |                   |  |             |  |      |                                                      |                   |             |                       | 996,788                                            |  |  |     
|                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                     |  |                   |  |             |  |      |                                                      |                   |             |                       |                                                    |  |  |     
|                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                     |  |                   | 
|NET ASSETS  100%                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                     |  |                   |  |             |  |      |                                                      |                   | $31,692,476 |                       |                                                    | 
|                                                                                                                                                                                                                   |  |                                                                                                                                                                                                                                     |  |                   |  |             |  |      |                                                      |                   |             |                       |                                                    | 



10



---

##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

September 30, 2017 (Continued)

(Unaudited)



Notes to the Consolidated Schedule of Portfolio Investments

(a) At September 30, 2017, 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.

(b) The Date Acquired column indicates the year in which the Corporation first acquired an
investment in the company or a predecessor company.

(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 Accounting Standards Codification (ASC) 820 Fair Value Measurements
and Disclosures, which defines fair value and establishes guidelines for measuring fair value. At September 30, 2017, ASC 820 designates 98% of the Corporations investments as Level 3 assets. Under the valuation
policy of the Corporation, unrestricted publicly held securities are valued at the average closing bid price for these securities for the last three trading days of the reporting period. Restricted securities are subject to restrictions on resale,
and, other than with respect to the shares of common stock of Athenex, Inc. owned by the Corporation, are valued at fair value as determined by the management of the Corporation and submitted to the Board of Directors for approval. The Corporation
valued the shares of common stock of Athenex using the average closing bid price for the last three trading days of the reporting period, and applied a discount to that value to address the sale restriction. 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.

(f) As of
September 30, 2017 the total cost of investment securities was approximately $35.8 million. Net unrealized depreciation was approximately ($5.1) million, which was comprised of $2.3 million of unrealized appreciation of investment
securities and ($7.4) million of unrealized depreciation of investment securities. At September 30, 2017, the aggregate gross unrealized gain for federal income tax purposes was $2.6 million and the aggregate gross unrealized loss for
federal income tax purposes was ($6.9) million. The net unrealized loss for federal income tax purposes was ($4.3) million based on a tax cost of $35.0 million.

(g) Rand Capital SBIC, Inc. investment.

(h) Reduction in cost
and value from previously reported balances reflects current principal repayment. There were no principal repayments during the nine months ended September 30, 2017.

(i) Represents interest due (amounts over $50,000) from investments included as interest receivable on the Corporations Statement 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) Control Investments are defined by the 1940 Act as investments in companies in which more than 25% of the voting securities are owned by the Corporation or
where greater than 50% of the board representation is maintained.

(m) Payment in kind (PIK) represents earned interest that is added to the cost basis of
the investment.

(n) Rand Capital SBIC II, L.P. investment.

(o) Publicly-traded company.

(p) At September 30, 2017,
shares of common stock of Athenex owned by the Corporation were categorized as a Level 2 investment because these shares were subject to restriction on sale as of the end of the period. The Corporation valued the shares of common stock of
Athenex that it owns using the average closing bid price for the last three trading days of the reporting period, and applied a discount to that value to address the sale restriction. See Athenexs publicly disclosed financial reports at
sec.gov for additional information on Athenexs industry, financial results and business operations.



11



---

##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

September 30, 2017 (Continued)

(Unaudited)



|                                          |  |                                                                                                                                                                                                                                                          |  |                              |                                              |                    |  |                      |                                                  |                               |  |                             |                                                          |                                              |  |  |                                                        |  |  |                 |  |                                         
|----------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | -------------------------------------------- | ------------------ |  | -------------------- | ------------------------------------------------ | ----------------------------- |  | --------------------------- | -------------------------------------------------------- | -------------------------------------------- |  |  | ------------------------------------------------------ |  |  | --------------- |  | ----------------------------------------
|Investments in and Advances to Affiliates
|Company                                   |  | Type of Investment                                                                                                                                                                                                                                       |  | December 31,
2016
Fair Value |                                              | GrossAdditions (1) |  | Gross
Reductions (2) |                                                  | September 30,
2017
Fair Value |  | Net
Realized Gains
(Losses) |                                                          | Amount of
Interest/ Dividend/
Fee Income
(3)
|Control Investments:                      |  |                                                                                                                                                                                                                                                          |  |                              |                                              |                    |  |                      |                                                  |                               |  |                             |                                                          |                                              |  |  |                                                        |  |  |                 |  |                                         
|Advantage 24/7 LLC                        |  | 53% Membership interest.                                                                                                                                                                                                                                 |  |                              | $99,500                                      |                    |  |                      | $-                                               |                               |  |                             | $-                                                       |                                              |  |  | $99,500                                                |  |  | $-              |  | $-                                      
|                                          |  |                                                                                                                                                                                                                                                          |  |                              |                                             
|                                          |  |                                                                                                                                                                                                                                                          |  |                              |                                              |                    | 
|                                          |  | Total Control Investments                                                                                                                                                                                                                                |  |                              | $99,500                                      |                    |  |                      | $0                                               |                               |  |                             | $0                                                       |                                              |  |  | $99,500                                                |  |  | -               |  | $0                                      
|                                          |  |                                                                                                                                                                                                                                                          |  |                              |                                             
|Affiliate Investments:                    |  |                                                                                                                                                                                                                                                          |  |                              |                                              |                    |  |                      |                                                  |                               |  |                             |                                                          |                                              |  |  |                                                        |  |  |                 |  |                                         
|BeetNPath, LLC                            |  | 1,119,024 Series A-2 Preferred Membership Units.
1,032,918 Series B Preferred Membership Units $150,000 convertible
promissory note at 8%. Total BeetNPath                                                                                               |  |                              | $359,000-
150,000
509,000                    |                    |  | $                    | -291,000
-
291,000                               |                               |  |                             | $--
(150,000)
(150,000)                                  |                                              |  |  | $359,000291,000
0
650,000                              |  |  | - -
- -         |  | $        -
- 4,800
4,800                
|                                          |  |                                                                                                                                                                                                                                                          |  |                              |                                              |                    | 
|Carolina Skiff LLC                        |  | 6.0825% Class A common membership interest.                                                                                                                                                                                                              |  |                              | 1,100,000                                    |                    |  |                      | -                                                |                               |  |                             | -                                                        |                                              |  |  | 1,100,000                                              |  |  | -               |  | 141,372                                 
|                                          |  |                                                                                                                                                                                                                                                          |  |                              |                                              |                    | 
|ClearView Social, Inc.                    |  | 312,500 Series seed plus preferred shares.                                                                                                                                                                                                               |  |                              | 200,000                                      |                    |  |                      | -                                                |                               |  |                             | -                                                        |                                              |  |  | 200,000                                                |  |  | -               |  | -                                       
|First Wave Products Group, LLC            |  | $500,000 senior term notes at 10%. $280,000
junior term notes at 10%. Warrant for 41,619 capital securities.
Total First Wave                                                                                                                            |  |                              | 250,000-
-
250,000                           |                    |  |                      | --
- -                                           |                               |  |                             | --
- -                                                   |                                              |  |  | 250,000-
-
250,000                                     |  |  | -
- -
-         |  | - -
- -                                 
|                                          |  |                                                                                                                                                                                                                                                          |  |                              |                                              |                    | 
|Genicon, Inc.                             |  | 1,586,902 Series B preferred shares.
$1,100,000 senior term loans at 12%. $600,000 term loan at 14%.
$2,000,000 promissory note at 8% $1,000,000 promissory note at
8% Warrant for 250,000 common shares Warrant for 125,000 common
shares Total Genicon |  |                              | 1,000,0001,100,000
600,000 -
- -
-
2,700,000 |                    |  |                      | --
- 2,009,144
1,004,444 80,000
40,000
3,133,588 |                               |  |                             | -(1,100,000)
(600,000) (80,000)
(40,000) -
-
(1,820,000) |                                              |  |  | 1,000,000-
- 1,929,144
964.444 80,000
40,000
4,013,588 |  |  | -
- -
- -
- -
- |  | - 50,234
32,200 81,088
35,833 
-
199,355
|                                          |  |                                                                                                                                                                                                                                                          |  |                              |                                              |                    | 
|GiveGab, Inc.                             |  | 5,084,329 Series Seed preferred shares.                                                                                                                                                                                                                  |  |                              | 424,314                                      |                    |  |                      | -                                                |                               |  |                             | -                                                        |                                              |  |  | 424,314                                                |  |  | -               |  | -                                       
|                                          |  |                                                                                                                                                                                                                                                          |  |                              |                                              |                    | 
|G-TEC Natural Gas Systems                 |  | 16.930% Class A membership interest. 8% cumulative dividend.                                                                                                                                                                                             |  |                              | 100,000                                      |                    |  |                      | -                                                |                               |  |                             | -                                                        |                                              |  |  | 100,000                                                |  |  | -               |  | -                                       
|                                          |  |                                                                                                                                                                                                                                                          |  |                              |                                              |                    | 
|Intrinsiq Materials, Inc.                 |  | 4,161,747 Series A preferred shares.                                                                                                                                                                                                                     |  |                              | 780,000                                      |                    |  |                      | -                                                |                               |  |                             | -                                                        |                                              |  |  | 780,000                                                |  |  | -               |  | -                                       
|                                          |  |                                                                                                                                                                                                                                                          |  |                              |                                              |                    | 
|Knoa Software, Inc.                       |  | 973,533 Series A-1 convertible preferred shares. 1,876,922 Series B preferred shares.
$48,466 convertible promissory note at 8%. Total
Knoa                                                                                                              |  |                              | -449,455
48,466
497,921                      |                    |  |                      | --
- -                                           |                               |  |                             | --
- -                                                   |                                              |  |  | -449,455
48,466
497,921                                |  |  | -
- -
-         |  | -
- 2,908
2,908                         
|                                          |  |                                                                                                                                                                                                                                                          |  |                              |                                              |                    | 
|KnowledgeVision Systems, Inc.             |  | 200,000 Series A-1 preferred shares.
214,285 Series A-2 preferred shares.
129,033 Series A-3 preferred shares.
$50,000 subordinated promissory note at 8% Warrant for 46,743
Series A-3 shares. Total Knowledge Vision                                   |  |                              | -300,000
165,001 -
35,000
500,001            |                    |  |                      | --
- 50,000
-
50,000                             |                               |  |                             | --
- -
- -                                               |                                              |  |  | -300,000
165,001 50,000
35,000
550,001                 |  |  | -
- -
- -
-     |  | -
- -
2,751
-
2,751                     
|                                          |  |                                                                                                                                                                                                                                                          |  |                              |                                              |                    | 
|Mezmeriz, Inc.                            |  | 1,554,565 Series seed preferred shares.                                                                                                                                                                                                                  |  |                              | 351,477                                      |                    |  |                      | -                                                |                               |  |                             | -                                                        |                                              |  |  | 351,477                                                |  |  | -               |  | -                                       
|                                          |  |                                                                                                                                                                                                                                                          |  |                              |                                              |                    | 
|Microcision LLC                           |  | $1,500,000 subordinated promissory note at 11%.                                                                                                                                                                                                          |  |                              | 1,891,964                                    |                    |  |                      | 17,403                                           |                               |  |                             | -                                                        |                                              |  |  | 1,909,367                                              |  |  | -               |  | 170,959                                 
|                                          |  |                                                                                                                                                                                                                                                          |  |                              |                                              |                    | 
|New Monarch Machine Tool, Inc.            |  | 22.84 common shares.                                                                                                                                                                                                                                     |  |                              | 22,841                                       |                    |  |                      | -                                                |                               |  |                             | -                                                        |                                              |  |  | 22,841                                                 |  |  | -               |  | 28,409                                  
|                                          |  |                                                                                                                                                                                                                                                          |  |                              |                                              |                    | 
|OnCore Golf Technology, Inc.              |  | 150,000 Series AA preferred shares. $300,000
subordinated convertible promissory notes at 6%. Total OnCore                                                                                                                                               |  |                              | -
300,000 300,000                            |                    |  |                      | -
- -                                            |                               |  |                             | -
- -                                                    |                                              |  |  | -
300,000 300,000                                      |  |  | -
 -
-          |  | -

21,650
21,650                        



12



---

##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

September 30, 2017 (Continued)

(Unaudited)



|                                          |  |                                                                                                                                                                                                                                                                                                                                          |  |                              |                                                         |                     |  |                      |                                   |                              |  |                            |                                             |                                              |  |  |                                                       |  |  |  |                 |  |  |  |                             | 
|----------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------------------------------------------------------- | ------------------- |  | -------------------- | --------------------------------- | ---------------------------- |  | -------------------------- | ------------------------------------------- | -------------------------------------------- |  |  | ----------------------------------------------------- |  |  |  | --------------- |  |  |  | --------------------------- | 
|Investments in and
Advances to Affiliates | 
|Company                                   |  | Type of Investment                                                                                                                                                                                                                                                                                                                       |  | December 31,
2016
Fair Value |                                                         | Gross
Additions (1) |  | Gross
Reductions (2) |                                   | September 30,2017
Fair Value |  | Net
Realized Gains
(Losses |                                             | Amount of
Interest/ Dividend/
Fee Income (3)
|SciAps, Inc.                              |  | 187,500 Series A convertible preferred shares.
274,299 Series A-1 convertible preferred shares.
117,371 Series B convertible preferred shares. 113,636 Series C
preferred shares. 369,698 Series C-1 preferred shares.
$200,000 subordinated promissory note at 10%. $100,000 secured
subordinated convertible note at 10%. Total SciAps |  |                              | 1,000,000504,710
250,000 -
- 200,000
 100,000
2,054,710 |                     |  |                      | --
- 175,000
399,274 -

-
574,274 |                              |  |                            | (300,000-
- -
- (200,000
 (100,000
(600,000 | )  
 
) 
) )                                 |  |  | 700,000504,710
250,000 175,000
399,274 -

-
2,028,984 |  |  |  | --
- -
- -
 -
- |  |  |  | --
- -
- 4,731
 2,376
7,107 | 
|                                          |  |                                                                                                                                                                                                                                                                                                                                          |  |                              |                                                         |                     | 
|SOMS Technologies, LLC                    |  | 5,959,490 Series B membership interests.                                                                                                                                                                                                                                                                                                 |  |                              | 528,348                                                 |                     |  |                      | -                                 |                              |  |                            | -                                           |                                              |  |  | 528,348                                               |  |  |  | -               |  |  |  | 6,024                       | 
|                                          |  |                                                                                                                                                                                                                                                                                                                                          |  |                              |                                                         |                     | 
|Teleservices Solutions Holdings, LLC      |  | 250,000 Class B shares. 1,000,000
Class C shares. 80,000 Class D preferred units.
104,198 Class E preferred units. Total
Teleservices                                                                                                                                                                                                    |  |                              | -200,000
91,200 104,198
395,398                         |                     |  |                      | --
- -
-                          |                              |  |                            | -(200,000
( 91,200 (104,198
(395,398        | ) )
) )                                      |  |  | --
- -
-                                              |  |  |  | --
- -
-        |  |  |  | --
- -
-                    | 
|                                          |  |                                                                                                                                                                                                                                                                                                                                          |  |                              |                                                         |                     | 
|Tilson Technology Management, Inc.        |  | 120,000 Series B preferred shares. 21,391
Series C convertible preferred shares. $200,000 subordinated promissory note at 8%.
Total Tilson                                                                                                                                                                                               |  |                              | 600,000200,000
200,000
1,000,000                        |                     |  |                      | --
- -                            |                              |  |                            | --
- -                                      |                                              |  |  | 600,000200,000
200,000
1,000,000                      |  |  |  | --
- -          |  |  |  | 15,000-
11,967 26,967       | 
|                                          |  |                                                                                                                                                                                                                                                                                                                                          |  |                              |                                                         |                    
|                                          |  |                                                                                                                                                                                                                                                                                                                                          |  |                              |                                                         |                     | 
|                                          |  | Total Affiliate Investments                                                                                                                                                                                                                                                                                                              |  |                              | $13,605,974                                             |                     |  |                      | $4,066,265                        |                              |  |                            | ($2,965,398                                 | )                                            |  |  | $14,706,841                                           |  |  |  | -               |  |  |  | $612,302                    | 
|                                          |  |                                                                                                                                                                                                                                                                                                                                          |  |                              |                                                         |                    
|                                          |  |                                                                                                                                                                                                                                                                                                                                          |  |                              |                                                         |                     | 
|                                          |  | Total Control and Affiliate Investments                                                                                                                                                                                                                                                                                                  |  |                              | $13,705,474                                             |                     |  |                      | $4,066,265                        |                              |  |                            | ($2,965,398                                 | )                                            |  |  | $14,806,341                                           |  |  |  | -               |  |  |  | $612,302                    | 
|                                          |  |                                                                                                                                                                                                                                                                                                                                          |  |                              |                                                         |                    

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

(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 net increases in unrealized appreciation or net decreases in unrealized depreciation,
and 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, net increases in unrealized depreciation, net decreases in unrealized appreciation, 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.



13



---

##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

September 30, 2017 (Continued)

(Unaudited)



|                        |  |                                                                       
|----------------------- |  | ----------------------------------------------------------------------
|Industry Classification |  | Percentage of TotalInvestments (at fair value)as of September 30, 2017
|                        | 
|Healthcare              |  | 42.0%                                                                 
|                        | 
|Software                |  | 23.5%                                                                 
|                        | 
|Manufacturing           |  | 20.3%                                                                 
|                        | 
|Consumer Product        |  | 4.8%                                                                  
|                        | 
|Professional Services   |  | 3.3%                                                                  
|                        | 
|Contact Center          |  | 3.1%                                                                  
|                        | 
|Oil and Gas             |  | 1.6%                                                                  
|                        | 
|Electronics             |  | 1.1%                                                                  
|                        | 
|Marketing               |  | 0.3%                                                                  
|                        |  |                                                                       
|                        | 
|Total Investments       |  | 100%                                                                  
|                        |  |                                                                       



14



---

##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2016



|                                                                                                                                                                                                                                 |                                                                               |                                                                                                   |  |                   |  |             |  |      |           |                   |  |                     |  |           |           |  |  |     
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------- |  | ----------------- |  | ----------- |  | ---- | --------- | ----------------- |  | ------------------- |  | --------- | --------- |  |  | ----
|(a)
Company, Geographic Location, Business
Description, (Industry) and Website                                                                                                                                                   |                                                                               | Type of Investment                                                                                |  | (b)
Date
Acquired |  | (c)
 Equity |  | Cost |           | (d)(f)
Fair
Value |  | Percentof NetAssets
|                                                                                                                                                                                                                                 |                                                                               |                                                                                                   |  |                   |  |            
|Non-Control/Non-Affiliate Investments  42.3% of net assets: (j)                                                                                                                                                                 |                                                                               |                                                                                                   |  |                   |  |             |  |      |           |                   |  |                     |  |           |           |  |  |     
|                                                                                                                                                                                                                                 |                                                                               |                                                                                                   |  |                   |  |            
|ACV Auctions, Inc. (e)(g) Buffalo, NY.
Live mobile auctions for new and used car dealers. (Software) www.acvauctions.com                                                                                                         |                                                                               | 118,116 Series A preferred shares.                                                                |  | 8/12/16           |  | 1%          |  |      |           | $163,000          |  |                     |  |           | $163,000  |  |  | 0.5%
|                                                                                                                                                                                                                                 |                                                                               |                                                                                                   |  |                   |  |            
|Athenex, Inc. (e)(g) (Formerly Kinex
Pharmaceuticals, Inc.) Buffalo, NY. Specialty pharmaceutical and drug development. (Health Care)
www.athenex.com                                                                            |                                                                               | 46,296 common shares.                                                                             |  | 9/8/14            |  | <1%         |  |      |           | 143,285           |  |                     |  |           | 416,664   |  |  | 1.3%
|                                                                                                                                                                                                                                 |                                                                               |                                                                                                   |  |                   |  |            
|City Dining Cards, Inc. (Loupe) (e)(g)
Buffalo, NY. Customer loyalty technology company that helps businesses attract and retain customers. (Software)
www.loupeapp.io                                                           |                                                                               | 9,525.25 Series B preferred shares.                                                               |  | 9/1/15            |  | 4%          |  |      |           | 500,000           |  |                     |  |           | 500,000   |  |  | 1.5%
|                                                                                                                                                                                                                                 |                                                                               |                                                                                                   |  |                   |  |            
|eHealth Global Technologies, Inc. (g)
Henrietta, NY. eHealth Connect® improves health care delivery through intelligently aggregated clinical
record and images for patient referrals. (Health Care)
www.ehealthtechnologies.com |                                                                               | $1,500,000 term note at 9% due September 2, 2019.                                                 |  | 6/28/16           |  | 0%          |  |      |           | 1,500,000         |  |                     |  |           | 1,500,000 |  |  | 4.6%
|                                                                                                                                                                                                                                 |                                                                               |                                                                                                   |  |                   |  |            
|Empire Genomics, LLC (e)(g)
Buffalo, NY. Molecular diagnostics company that offers a comprehensive menu of assay services for diagnosing and guiding patient therapeutic treatments. (Health
Care) www.empiregenomics.com        |                                                                               | $900,000 senior secured convertible term notes at 10% due April 1, 2017.                          |  | 6/13/14           |  | 0%          |  |      |           | 900,000           |  |                     |  |           | 900,000   |  |  | 3.5%
|                                                                                                                                                                                                                                 | $250,000 promissory note at 12% due December 31, 2019.                        |                                                                                                   |  |                   |  |             |  |      | 250,000   |                   |  |                     |  | 250,000   |           |  | 
|                                                                                                                                                                                                                                 | (i) Interest receivable $200,339.                                             |                                                                                                   |  |                   |  |             |  |      |           |                   |  |                     |  |           |           |  | 
|                                                                                                                                                                                                                                 | Total Empire                                                                  |                                                                                                   |  |                   |  |             |  |      | 1,150,000 |                   |  |                     |  | 1,150,000 |           |  | 
|                                                                                                                                                                                                                                 |                                                                               |                                                                                                   |  |                   |  |            
|GoNoodle, Inc. (g)
(Formerly HealthTeacher, Inc.) Nashville, TN. Student
engagement education software providing core aligned physical activity breaks. (Software) www.gonoodle.com                                              |                                                                               | $1,000,000 secured note at 12% due January 31,                                                    |  | 2/6/15            |  | <1%         |  |      |           |                   |  |                     |  |           |           |  |  | 3.1%
|                                                                                                                                                                                                                                 | 2020, (1% Payment in Kind (PIK)).                                             |                                                                                                   |  |                   |  |             |  |      | 1,019,101 |                   |  |                     |  | 1,019,101 |           |  | 
|                                                                                                                                                                                                                                 | Warrant for 47,324 Series C Preferred shares.                                 |                                                                                                   |  |                   |  |             |  |      | 25        |                   |  |                     |  | 25        |           |  | 
|                                                                                                                                                                                                                                 | Total GoNoodle                                                                |                                                                                                   |  |                   |  |             |  |      | 1,019,126 |                   |  |                     |  | 1,019,126 |           |  | 
|                                                                                                                                                                                                                                 |                                                                               |                                                                                                   |  |                   |  |             |  |      |           |                   |  |                     |  |           |           |  | 
|                                                                                                                                                                                                                                 |                                                                               |                                                                                                   |  |                   |  |             |  |      |           |                   |  |                     |  |           |           |  | 
|                                                                                                                                                                                                                                 |                                                                               |                                                                                                   |  |                   |  |            
|Mercantile Adjustment Bureau, LLC (g)
Williamsville, NY. Full service accounts receivable management and collections company.
(Contact Center) www.mercantilesolutions.com                                                       |                                                                               | $1,099,039 subordinated secured note at 13% (3% for the calendar year 2016) due October 30, 2017. |  | 10/22/12          |  | 4%          |  |      |           | 1,090,690         |  |                     |  |           | 1,090,690 |  |  | 3.3%
|                                                                                                                                                                                                                                 | (e) $150,000 subordinated debenture at 8% due June 30, 2018.                  |                                                                                                   |  |                   |  |             |  |      | 150,000   |                   |  |                     |  | -         |           |  | 
|                                                                                                                                                                                                                                 | Warrant for 3.29% membership interests. Option for 1.5% membership interests. |                                                                                                   |  |                   |  |             |  |      | 97,625    |                   |  |                     |  | -         |           |  | 
|                                                                                                                                                                                                                                 |                                                                               | Total Mercantile                                                                                  |  |                   |  |             |  |      |           | 1,338,315         |  |                     |  |           | 1,090,690 |  |  |     
|                                                                                                                                                                                                                                 |                                                                               |                                                                                                   |  |                   |  |            
|Outmatch Holdings, LLC (e)(g)                                                                                                                                                                                                    |                                                                               | 2,446,199 Class P1 Units.                                                                         |  | 11/18/10          |  | 4%          |  |      |           | 2,140,007         |  |                     |  |           | 2,140,007 |  |  | 6.6%
|(Chequed Holdings, LLC)                                                                                                                                                                                                          |                                                                               | 109,788 Class C1 Units.                                                                           |  |                   |  |             |  |      |           | 5,489             |  |                     |  |           | 5,489     |  |  |     
|Dallas, TX. Web based predictive employee selection and reference checking. (Software)
www.outmatch.com                                                                                                                          |                                                                               | Total Outmatch                                                                                    |  |                   |  |             |  |      |           | 2,145,496         |  |                     |  |           | 2,145,496 |  |  |     
|                                                                                                                                                                                                                                 |                                                                               |                                                                                                   |  |                   |  |             |  |      |           |                   |  |                     |  |           |           |  | 
|                                                                                                                                                                                                                                 |                                                                               |                                                                                                   |  |                   |  |             |  |      |           |                   |  |                     |  |           |           |  | 
|                                                                                                                                                                                                                                 |                                                                               |                                                                                                   |  |                   |  |            
|PostProcess Technologies LLC (e)(g)
Buffalo, NY. Provides innovative solutions for the post-processing of additive manufactured 3D parts. (Manufacturing)
www.postprocess.com                                                    |                                                                               | $300,000 convertible promissory note at 5% due July 28, 2018.                                     |  | 7/25/16           |  | 0%          |  |      |           | 300,000           |  |                     |  |           | 300,000   |  |  | 0.9%



15



---

##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2016 (Continued)



|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |             |           |           |             |  |                   |           |             |                     |  |     
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ------------------------------------------------------- |  | ----------------- |  | ----------- | --------- | --------- | ----------- |  | ----------------- | --------- | ----------- | ------------------- |  | ----
|(a)
Company, Geographic Location, Business
Description, (Industry) and Website                                                                                                                                        |                                                                  | Type of Investment                                      |  | (b)
Date
Acquired |  | (c)
 Equity |           | Cost      |             |  | (d)(f)
Fair
Value |           |             | Percentof NetAssets
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |            
|Rheonix, Inc. (e) Ithaca, NY.
Developer of fully automated microfluidic based molecular assay and diagnostic testing devices. (Health Care)
www.rheonix.com                                                           |                                                                  | 9,676 common shares.                                    |  | 10/29/09          |  | 4%          |           |           | -           |  |                   |           | 11,000      |                     |  | 9.0%
|                                                                                                                                                                                                                      | (g)1,839,422 Series A preferred shares.                          |                                                         |  |                   |  |             |           | 2,099,999 |             |  |                   | 2,165,999 |             |                     | 
|                                                                                                                                                                                                                      | (g)50,593 common shares.                                         |                                                         |  |                   |  |             |           | -         |             |  |                   | 59,000    |             |                     | 
|                                                                                                                                                                                                                      | (g)589,420 Series B preferred shares.                            |                                                         |  |                   |  |             |           | 702,732   |             |  |                   | 702,732   |             |                     | 
|                                                                                                                                                                                                                      | Total Rheonix                                                    |                                                         |  |                   |  |             |           | 2,802,731 |             |  |                   | 2,938,731 |             |                     | 
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |            
|SocialFlow, Inc. (e)(g) New
York, NY. Provides instant analysis of social networks using a proprietary, predictive analytic algorithm to optimize advertising and publishing.
(Software) www.socialflow.com           |                                                                  | 1,049,538 Series B preferred shares.                    |  | 4/5/13            |  | 4%          |           |           | 500,000     |  |                   |           | 731,431     |                     |  | 6.3%
|                                                                                                                                                                                                                      | 1,204,819 Series B-1 preferred shares.                           |                                                         |  |                   |  |             |           | 750,000   |             |  |                   | 839,648   |             |                     | 
|                                                                                                                                                                                                                      | 717,772 Series C preferred shares.                               |                                                         |  |                   |  |             |           | 500,000   |             |  |                   | 500,221   |             |                     | 
|                                                                                                                                                                                                                      | Total Social Flow                                                |                                                         |  |                   |  |             |           | 1,750,000 |             |  |                   | 2,071,300 |             |                     | 
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |             |           |           |             |  |                   |           |             |                     | 
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |             |           |           |             |  |                   |           |             |                     | 
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |            
|Somerset Gas Transmission Company, LLC (e)
Columbus, OH. Natural gas transportation. (Oil and Gas)
www.somersetgas.com                                                                                                |                                                                  | 26.5337 units.                                          |  | 7/10/02           |  | 3%          |           |           | 719,097     |  |                   |           | 500,000     |                     |  | 1.5%
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |            
|Other Non-Control/Non-Affiliate Investments:                                                                                                                                                                          |                                                                  |                                                         |  |                   |  |             |           |           |             |  |                   |           |             |                     |  |     
|DataView, LLC(Software) (e)                                                                                                                                                                                           |                                                                  | Membership Interest.                                    |  | -                 |  | -           |           |           | 310,357     |  |                   |           | -           |                     |  | 0.0%
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |            
|UStec/Wi3(Manufacturing) (e)                                                                                                                                                                                          |                                                                  | Common Stock.                                           |  | -                 |  | -           |           |           | 100,500     |  |                   |           | -           |                     |  | 0.0%
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |             |           |           |             |  |                   |          
|Subtotal Non-Control/Non-Affiliate Investments                                                                                                                                                                        |                                                                  |                                                         |  |                   |  |             |           |           | $13,941,907 |  |                   |           | $13,795,007 |                     |  |     
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |             |           |           |             |  |                   |          
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |            
|Affiliate Investments  41.7% of net assets (k)                                                                                                                                                                       |                                                                  |                                                         |  |                   |  |             |           |           |             |  |                   |           |             |                     |  |     
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |            
|BeetNPath, LLC (Grainful) (e)(g)
Ithaca, NY. Frozen entrées and packaged dry side dishes made from 100% whole grain steel cut oats under Grainful brand name. (Consumer Product)
www.grainful.com                     |                                                                  | 1,119,024 Series A-2 PreferredMembership Units.         |  | 10/20/14          |  | 9%          |           |           |             |  |                   |           |             |                     |  | 1.6%
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |             | $359,000  |           |             |  | $359,000          |           |             |                    
|                                                                                                                                                                                                                      | $150,000 convertible promissory noteat 8% due September 1, 2017. |                                                         |  |                   |  |             |           |           |             |  |                   |           |             |                     | 
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |             | 150,000   |           |             |  | 150,000           |           |             |                    
|                                                                                                                                                                                                                      | Total BeetNPath                                                  |                                                         |  |                   |  |             |           | 509,000   |             |  |                   | 509,000   |             |                     | 
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |            
|Carolina Skiff LLC (g)
Waycross, GA. Manufacturer of fresh water, ocean fishing and pleasure boats. (Manufacturing)
www.carolinaskiff.com                                                                             |                                                                  | 6.0825% Class A common membership interest.             |  | 1/30/04           |  | 7%          |           |           | 15,000      |  |                   |           | 1,100,000   |                     |  | 3.4%
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |             |           |           |             |  |                   |           |             |                    
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |             |           |           |             |  |                   |           |             |                     | 
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |             |           |           |             |  |                   |           |             |                     | 
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |             |           |           |             |  |                   |           |             |                     | 
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |            
|ClearView Social, Inc. (e)(g)
Buffalo, NY. Social media publishing tool for law, CPA and professional firms. (Software)
www.clearviewsocial.com                                                                       |                                                                  | 312,500 Series seed plus preferred shares.              |  | 1/4/16            |  | 6%          |           |           |             |  |                   |           |             |                     |  | 0.6%
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |             | 200,000   |           |             |  | 200,000           |           |             |                    
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |             |           |           |             |  |                   |           |             |                     | 
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |             |           |           |             |  |                   |           |             |                     | 
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |            
|First Wave Products Group, LLC (e)(g)
Batavia, NY. Sells First Crush automated pill crusher that crushes and grinds medical pills for nursing homes and medical institutions. (Health Care)
www.firstwaveproducts.com |                                                                  | $500,000 senior term notes at 10% due January 31, 2017. |  | 4/19/12           |  | 7%          |           |           |             |  |                   |           |             |                     |  | 0.8%
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |             | 661,563   |           |             |  | 250,000           |           |             |                    
|                                                                                                                                                                                                                      | $280,000 junior term notes at 10% due January 31, 2017.          |                                                         |  |                   |  |             |           |           |             |  |                   |           |             |                     | 
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |             | 316,469   |           |             |  | -                 |           |             |                    
|                                                                                                                                                                                                                      | Warrant for 41,619 capital securities.                           |                                                         |  |                   |  |             |           | 22,000    |             |  |                   | -         |             |                     | 
|                                                                                                                                                                                                                      | Total First Wave                                                 |                                                         |  |                   |  |             |           | 1,000,032 |             |  |                   | 250,000   |             |                     | 
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |            
|Genicon, Inc. (g)
Winter Park, FL. Designs, produces and distributes patented surgical instrumentation. (Health Care)
www.geniconendo.com                                                                             |                                                                  | 1,586,902 Series B preferred shares.                    |  | 4/10/15           |  | 6%          |           |           | 1,000,000   |  |                   |           | 1,000,000   |                     |  | 8.3%
|                                                                                                                                                                                                                      | $1,100,000 promissory note at 12%
due April 1, 2019.             |                                                         |  |                   |  |             |           |           |             |  |                   |           |             |                     | 
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |             | 1,100,000 |           |             |  | 1,100,000         |           |             |                    
|                                                                                                                                                                                                                      | $600,000 promissory note at 14% due March 31, 2018.              |                                                         |  |                   |  |             |           |           |             |  |                   |           |             |                     | 
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |             | 600,000   |           |             |  | 600,000           |           |             |                    
|                                                                                                                                                                                                                      | Total Genicon                                                    |                                                         |  |                   |  |             |           | 2,700,000 |             |  |                   | 2,700,000 |             |                     | 
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |            
|GiveGab, Inc. (e)(g) Ithaca,
NY. Online fundraising, day of giving supporter engagement software for non-profit organizations. (Software) www.givegab.com                                                             |                                                                  | 5,084,329 Series Seed preferred shares.                 |  | 3/13/13           |  | 7%          |           |           | 616,221     |  |                   |           | 424,314     |                     |  | 1.3%
|                                                                                                                                                                                                                      |                                                                  |                                                         |  |                   |  |             |           |           |             |  |                   |           |             |                    



16



---

##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2016 (Continued)



|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |             |  |           |           |                   |  |                     |           |           |         |  |  |     
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------ | ------------------------------------------------------------------------------ |  | ----------------- |  | ----------- |  | --------- | --------- | ----------------- |  | ------------------- | --------- | --------- | ------- |  |  | ----
|(a)
Company, Geographic Location, Business
Description, (Industry) and Website                                                                                                                                     |                                                                                | Type of Investment                                                             |  | (b)
Date
Acquired |  | (c)
 Equity |  | Cost      |           | (d)(f)
Fair
Value |  | Percentof NetAssets
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |            
|G-TEC Natural Gas Systems (e)
Buffalo, NY. Manufactures and distributes systems that allow natural gas to be used as an alternative fuel to gases. (Manufacturing)
www.gas-tec.com                                 |                                                                                | 16.930% Class A membership interest.                                           |  | 8/31/99           |  | 18%         |  |           |           | 400,000           |  |                     |           |           | 100,000 |  |  | 0.3%
|                                                                                                                                                                                                                   | 8% cumulative dividend.                                                        |                                                                                |  |                   |  |             |  |           |           |                   |  |                     |           |           |         |  | 
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |             |  |           |           |                   |  |                     |           |           |         |  | 
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |             |  |           |           |                   |  |                     |           |           |         |  | 
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |             |  |           |           |                   |  |                     |           |           |         |  | 
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |            
|Intrinsiq Materials, Inc. (e)(g)
Rochester, NY. Produces printable electronics utilizing a unique process of nanomaterial based ink in a room-temperature environment. (Manufacturing)
www.intrinsiqmaterials.com  |                                                                                | 4,161,747 Series A preferred shares.                                           |  | 9/19/13           |  | 12%         |  |           |           | 1,125,673         |  |                     |           |           | 780,000 |  |  | 2.4%
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |             |  |           |           |                   |  |                     |           |           |         |  | 
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |             |  |           |           |                   |  |                     |           |           |         |  | 
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |             |  |           |           |                   |  |                     |           |           |         |  | 
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |             |  |           |           |                   |  |                     |           |           |         |  | 
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |            
|Knoa Software, Inc. (e)(g) New
York, NY. End user experience management and performance (EMP) solutions utilizing enterprise applications. (Software)
www.knoa.com                                                 |                                                                                | 973,533 Series A-1 convertible preferred shares.                               |  | 11/20/12          |  | 7%          |  |           |           |                   |  |                     |           |           |         |  |  | 1.5%
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |             |  | 750,000   |           |                   |  |                     | -         |           |         | 
|                                                                                                                                                                                                                   | 1,876,922 Series B preferred shares.                                           |                                                                                |  |                   |  |             |  |           | 479,155   |                   |  |                     |           | 449,455   |         |  | 
|                                                                                                                                                                                                                   | $48,466 convertible promissory note at 8% due May 9, 2018.                     |                                                                                |  |                   |  |             |  |           | 48,466    |                   |  |                     |           | 48,466    |         |  | 
|                                                                                                                                                                                                                   |                                                                                | Total Knoa                                                                     |  |                   |  |             |  |           |           | 1,277,621         |  |                     |           |           | 497,921 |  |  |     
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |            
|KnowledgeVision Systems, Inc. (e)(g)
Lincoln, MA. Online presentation and training software. (Software)
www.knowledgevision.com                                                                                    |                                                                                | 200,000 Series A-1 preferred shares.                                           |  | 11/13/13          |  | 7%          |  |           |           | 250,000           |  |                     |           |           | -       |  |  | 1.5%
|                                                                                                                                                                                                                   | 214,285 Series A-2 preferred shares.                                           |                                                                                |  |                   |  |             |  |           | 300,000   |                   |  |                     |           | 300,000   |         |  | 
|                                                                                                                                                                                                                   | 129,033 Series A-3 preferred shares.                                           |                                                                                |  |                   |  |             |  |           | 165,001   |                   |  |                     |           | 165,001   |         |  | 
|                                                                                                                                                                                                                   | Warrant for 46,743 Series A-3 shares.                                          |                                                                                |  |                   |  |             |  |           | 35,000    |                   |  |                     |           | 35,000    |         |  | 
|                                                                                                                                                                                                                   | Total KnowledgeVision                                                          |                                                                                |  |                   |  |             |  |           | 750,001   |                   |  |                     |           | 500,001   |         |  | 
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |            
|Mezmeriz, Inc. (e)(g) Ithaca,
NY. Micro-electronic mechanical systems (MEMS) developer of carbon fiber MEMS mirror modules for gesture recognition and 3D scanning. (Electronics Developer)
www.mezmeriz.com       |                                                                                | 1,554,565 Series Seed preferred shares.                                        |  | 1/9/08            |  | 14%         |  |           |           | 742,850           |  |                     |           |           | 351,477 |  |  | 1.1%
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |             |  |           |           |                   |  |                     |           |           |         |  | 
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |             |  |           |           |                   |  |                     |           |           |         |  | 
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |             |  |           |           |                   |  |                     |           |           |         |  | 
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |             |  |           |           |                   |  |                     |           |           |         |  | 
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |            
|Microcision LLC (g) Pennsauken
Township, NJ. Manufacturer of precision machined medical implants, components and assemblies. (Manufacturing) www.microcision.com                                                   |                                                                                | $1,500,000 subordinated promissory note at 12% (1% PIK) due December 31, 2024. |  | 9/24/09           |  | 15%         |  |           |           |                   |  |                     |           |           |         |  |  | 5.8%
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |             |  | 1,891,964 |           |                   |  |                     | 1,891,964 |           |         | 
|                                                                                                                                                                                                                   | 15% Class A common membership interest.                                        |                                                                                |  |                   |  |             |  |           | -         |                   |  |                     |           | -         |         |  | 
|                                                                                                                                                                                                                   | Total Microcision                                                              |                                                                                |  |                   |  |             |  |           | 1,891,964 |                   |  |                     |           | 1,891,964 |         |  | 
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |            
|New Monarch Machine Tool, Inc. (g)
Cortland, NY. Manufactures and services vertical/horizontal machining centers. (Manufacturing)
www.monarchmt.com                                                                |                                                                                | 22.84 common shares.                                                           |  | 9/24/03           |  | 15%         |  |           |           | 22,841            |  |                     |           |           | 22,841  |  |  | 0.1%
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |             |  |           |           |                   |  |                     |           |           |         |  | 
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |             |  |           |           |                   |  |                     |           |           |         |  | 
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |             |  |           |           |                   |  |                     |           |           |         |  | 
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |             |  |           |           |                   |  |                     |           |           |         |  | 
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |            
|OnCore Golf Technology, Inc. (e)(g)
Buffalo, NY. Maker of patented hollow-metal core golf balls. (Consumer Product)
www.oncoregolf.com                                                                             |                                                                                | 150,000 Series AA preferred shares.                                            |  | 12/31/14          |  | 7%          |  |           |           | 375,000           |  |                     |           |           | -       |  |  | 0.9%
|                                                                                                                                                                                                                   | $300,000 subordinated convertible promissory notes at 6% due January 24, 2017. |                                                                                |  |                   |  |             |  |           |           |                   |  |                     |           |           |         |  | 
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |             |  | 300,000   |           |                   |  |                     | 300,000   |           |         | 
|                                                                                                                                                                                                                   | Total OnCore                                                                   |                                                                                |  |                   |  |             |  |           | 675,000   |                   |  |                     |           | 300,000   |         |  | 
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |            
|SciAps, Inc. (e)(g) Woburn,
MA. Instrumentation company producing portable analytical devices using XRF, LIBS and RAMAN spectroscopy to identify compounds, minerals, and elements. (Manufacturing)
www.sciaps.com |                                                                                | 187,500 Series A convertible preferred shares.                                 |  | 7/12/13           |  | 9%          |  |           |           |                   |  |                     |           |           |         |  |  | 6.3%
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |             |  | 1,500,000 |           |                   |  |                     | 1,000,000 |           |         | 
|                                                                                                                                                                                                                   | 274,299 Series A-1 convertible preferred shares.                               |                                                                                |  |                   |  |             |  |           | 504,710   |                   |  |                     |           | 504,710   |         |  | 
|                                                                                                                                                                                                                   | 117,371 Series B convertible preferred shares.                                 |                                                                                |  |                   |  |             |  |           | 250,000   |                   |  |                     |           | 250,000   |         |  | 
|                                                                                                                                                                                                                   | $200,000 subordinated convertible note at 10% due April 8, 2017.               |                                                                                |  |                   |  |             |  |           | 200,000   |                   |  |                     |           | 200,000   |         |  | 
|                                                                                                                                                                                                                   | $100,000 secured subordinated convertible note at 10% due December 31, 2017.   |                                                                                |  |                   |  |             |  |           | 100,000   |                   |  |                     |           | 100,000   |         |  | 
|                                                                                                                                                                                                                   |                                                                                |                                                                                |  |                   |  |             |  | 2,554,710 |           |                   |  |                     | 2,054,710 |           |         | 
|                                                                                                                                                                                                                   | Total SciAps                                                                   |                                                                                |  |                   |  |             |  |           |           |                   |  |                     |           |           |         |  | 



17



---

##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2016 (Continued)



|                                                                                                                                                                                                        |                                                                     |                                          |  |                   |  |             |  |      |           |                   |  |                     |  |           |             |  |  |     
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------- | ---------------------------------------- |  | ----------------- |  | ----------- |  | ---- | --------- | ----------------- |  | ------------------- |  | --------- | ----------- |  |  | ----
|(a)
Company, Geographic Location, Business
Description, (Industry) and Website                                                                                                                          |                                                                     | Type of Investment                       |  | (b)
Date
Acquired |  | (c)
 Equity |  | Cost |           | (d)(f)
Fair
Value |  | Percentof NetAssets
|                                                                                                                                                                                                        |                                                                     |                                          |  |                   |  |            
|SOMS Technologies, LLC (g) Valhalla, NY.
Produces and markets the microGreen Extended Performance Oil Filter. (Consumer Products) www.microgreenfilter.com                                              |                                                                     | 5,959,490 Series B membership interests. |  | 12/2/08           |  | 9%          |  |      |           | 472,632           |  |                     |  |           | 528,348     |  |  | 1.6%
|                                                                                                                                                                                                        |                                                                     |                                          |  |                   |  |            
|Teleservices Solutions Holdings, LLC (e) (g)(m)
Montvale, NJ. Customer contact center specializing in customer acquisition and retention for selected industries. (Contact Center)
www.ipacesetters.com |                                                                     | 250,000 Class B preferred units.         |  | 5/30/14           |  | 6%          |  |      |           | 250,000           |  |                     |  |           | -           |  |  | 1.2%
|                                                                                                                                                                                                        | 1,000,000 Class C preferred units.                                  |                                          |  |                   |  |             |  |      | 1,190,680 |                   |  |                     |  | 200,000   |             |  | 
|                                                                                                                                                                                                        | 80,000 Class D preferred units.                                     |                                          |  |                   |  |             |  |      | 91,200    |                   |  |                     |  | 91,200    |             |  | 
|                                                                                                                                                                                                        | 104,198 Class E preferred units.                                    |                                          |  |                   |  |             |  |      | 104,198   |                   |  |                     |  | 104,198   |             |  | 
|                                                                                                                                                                                                        | PIK dividend for Series C and D at 12% and 14%, respectively.       |                                          |  |                   |  |             |  |      |           |                   |  |                     |  |           |             |  | 
|                                                                                                                                                                                                        |                                                                     |                                          |  |                   |  |             |  |      |           |                   |  |                     |  |           |             | 
|                                                                                                                                                                                                        | Total Teleservices                                                  |                                          |  |                   |  |             |  |      | 1,636,078 |                   |  |                     |  | 395,398   |             |  | 
|                                                                                                                                                                                                        |                                                                     |                                          |  |                   |  |            
|Tilson Technology Management, Inc.(g)
Portland, ME. Cellular, fiber optic and wireless information systems, construction, and management. (Professional Services)
www.tilsontech.com                    |                                                                     | 120,000 Series B preferred shares.       |  | 1/20/15           |  | 8%          |  |      |           | 600,000           |  |                     |  |           | 600,000     |  |  | 3.1%
|                                                                                                                                                                                                        | 21,391 Series C convertible preferred shares.                       |                                          |  |                   |  |             |  |      | 200,000   |                   |  |                     |  | 200,000   |             |  | 
|                                                                                                                                                                                                        | $200,000 subordinated promissory note at 8% due September 28, 2021. |                                          |  |                   |  |             |  |      | 200,000   |                   |  |                     |  | 200,000   |             |  | 
|                                                                                                                                                                                                        | Total Tilson                                                        |                                          |  |                   |  |             |  |      | 1,000,000 |                   |  |                     |  | 1,000,000 |             |  | 
|                                                                                                                                                                                                        |                                                                     |                                          |  |                   |  |             |  |      |           |                   |  |                     |  |           |             |  | 
|                                                                                                                                                                                                        |                                                                     |                                          |  |                   |  |             |  |      |           |                   |  |                     | 
|Subtotal Affiliate Investments                                                                                                                                                                          |                                                                     |                                          |  |                   |  |             |  |      |           | $17,589,623       |  |                     |  |           | $13,605,974 |  |  |     
|                                                                                                                                                                                                        |                                                                     |                                          |  |                   |  |             |  |      |           |                   |  |                     | 
|                                                                                                                                                                                                        |                                                                     |                                          |  |                   |  |            
|Control Investments  0.3% of net assets (l)                                                                                                                                                            |                                                                     |                                          |  |                   |  |             |  |      |           |                   |  |                     |  |           |             |  |  |     
|                                                                                                                                                                                                        |                                                                     |                                          |  |                   |  |            
|Advantage 24/7 LLC (e)(g)
Williamsville, NY. Marketing program for wine and spirits dealers. (Marketing Company)
www.advantage24-7.com                                                                  |                                                                     | 53% Membership interest.                 |  | 12/30/10          |  | 53%         |  |      |           | $99,500           |  |                     |  |           | $99,500     |  |  | 0.3%
|                                                                                                                                                                                                        |                                                                     |                                          |  |                   |  |             |  |      |           |                   |  |                     |  |           |             |  | 
|                                                                                                                                                                                                        |                                                                     |                                          |  |                   |  |             |  |      |           |                   |  |                     |  |           |             |  | 
|                                                                                                                                                                                                        |                                                                     |                                          |  |                   |  |             |  |      |           |                   |  |                     |  |           |             |  | 
|                                                                                                                                                                                                        |                                                                     |                                          |  |                   |  |             |  |      |           |                   |  |                     |  |           |             |  |  |     
|                                                                                                                                                                                                        |                                                                     |                                          |  |                   |  |             |  |      |           |                   |  |                     | 
|Subtotal Control Investments                                                                                                                                                                            |                                                                     |                                          |  |                   |  |             |  |      |           | $99,500           |  |                     |  |           | $99,500     |  |  |     
|                                                                                                                                                                                                        |                                                                     |                                          |  |                   |  |             |  |      |           |                   |  |                     | 
|                                                                                                                                                                                                        |                                                                     |                                          |  |                   |  |            
|TOTAL INVESTMENTS  84.3%                                                                                                                                                                               |                                                                     |                                          |  |                   |  |             |  |      |           | $31,631,030       |  |                     |  |           | $27,500,481 |  |  |     
|OTHER ASSETS IN EXCESS OF                                                                                                                                                                               |                                                                     |                                          |  |                   |  |             |  |      |           |                   |  |                     |  |           |             |  |  |     
|LIABILITIES  15.7%                                                                                                                                                                                     |                                                                     |                                          |  |                   |  |             |  |      |           |                   |  |                     |  |           | 5,128,882   |  |  |     
|                                                                                                                                                                                                        |                                                                     |                                          |  |                   |  |             |  |      |           |                   |  |                     |  |           |             |  |  |     
|                                                                                                                                                                                                        |                                                                     |                                          |  |                   |  |            
|NET ASSETS  100%                                                                                                                                                                                       |                                                                     |                                          |  |                   |  |             |  |      |           |                   |  |                     |  |           | $32,629,363 |  |  |     
|                                                                                                                                                                                                        |                                                                     |                                          |  |                   |  |             |  |      |           |                   |  |                     |  |           |             |  |  |     



18



---

##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2016 (Continued)



Notes to the Consolidated Schedule of Portfolio Investments

(a)  At December 31, 2016, 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.

(b)  The Date Acquired column indicates the year in which the Corporation first
acquired an investment in the company or a predecessor company.

(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 Accounting Standards Codification (ASC) 820 Fair Value
Measurements and Disclosures, which defines fair value and establishes guidelines for measuring fair value. At December 31, 2016, ASC 820 designates 100% of the Corporations investments as Level 3 assets. Under the
valuation policy of the Corporation, unrestricted publicly held securities are valued at the average closing bid price for these securities for the last three trading days of the month. Restricted securities are subject to restrictions on resale,
and are valued at fair value as determined by the management of the Corporation 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.

(f)  As of December 31, 2016 the total cost of investment securities was approximately
$31.6 million. Net unrealized depreciation was approximately ($4.1) million, which was comprised of $1.9 million of unrealized appreciation of investment securities and ($6.0) million of unrealized depreciation of investment securities. At
December 31, 2016, the aggregate gross unrealized gain for federal income tax purposes was $2.2 million and the aggregate gross unrealized loss for federal income tax purposes was ($5.4) million. The net unrealized loss for federal income
tax purposes was ($3.3) million based on a tax cost of $30.8 million.

(g)  Rand Capital SBIC, Inc. investment.

(h)  Reduction in cost and value from previously reported balances reflects current principal repayment. There were no principal repayments during the
three months ended December 31, 2016.

(i)  Represents interest due (amounts over $50,000 net of reserves) from investment included as interest
receivable on the Corporations Statement 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)  Control Investments are defined by the 1940 Act as investments in companies in which more than 25% of the voting securities are owned by the
Corporation or where greater than 50% of the board representation is maintained.

(m)  Payment in kind (PIK) represents earned interest that is added
to the cost basis of the investment.



19



---

##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2016 (Continued)



|                                          |  |                                                  |  |                            |             |  |                   |   |           |                    |  |  |                           |   |  |                          |           |  |                                                          |   |            |  |  |   |                | 
|----------------------------------------- |  | ------------------------------------------------ |  | -------------------------- | ----------- |  | ----------------- | - | --------- | ------------------ |  |  | ------------------------- | - |  | ------------------------ | --------- |  | -------------------------------------------------------- | - | ---------- |  |  | - | -------------- | 
|Investments in and Advances to Affiliates |  |                                                  |  |                            |             |  |                   |   |           |                    |  |  |                           |   |  |                         
|                                          | 
|Company                                   |  | Type of Investment                               |  | December31, 2015Fair Value |             |  | GrossAdditions(1) |   |           | GrossReductions(2) |  |  | December31, 2016FairValue |   |  | NetRealizedGains(Losses) |           |  | Amount of    Interest/    Dividend/    Fee Income    (3) |  
|                                          | 
|Control
Investments:                      |  |                                                  |  |                            |             |  |                   |   |           |                    |  |  |                           |   |  |                          |           |  |                                                          |   |            |  |  |   |                | 
|Advantage 24/7                            |  | 53% Membership interest.                         |  |                            | $99,500     |  |                   | $ | -         |                    |  |  | $            -            |   |  |                          | $99,500   |  |                                                          |   | $      -   |  |  |   | $            - | 
|LLC                                       |  |                                                  |  |                            |             |  |                   |   |           |                    |  |  |                           |   |  |                          |           |  |                                                          |   |            |  |  |   |                | 
|Gemcor II, LLC                            |  | $1,000,000 subordinated promissory note at 15%.  |  |                            | 416,972     |  |                   |   | -         |                    |  |  | (416,972                  | ) |  |                          | -         |  |                                                          |   | 14,620,063 |  |  |   | 11,828         | 
|                                          |  | 31.25 membership units.                          |  |                            | 13,400,000  |  |                   |   | -         |                    |  |  | (13,400,000               | ) |  |                          | -         |  |                                                          |   | -          |  |  |   | 2,000          | 
|                                          |  | Escrow receivable due from sale of business.     |  |                            | -           |  |                   |   | -         |                    |  |  | -                         |   |  |                          | -         |  |                                                          |   | -          |  |  |   | -              | 
|                                          |  | Total Gemcor                                     |  |                            | 13,816,972  |  |                   |   | -         |                    |  |  | (13,816,972               | ) |  |                          | -         |  |                                                          |   | -          |  |  |   | 13,828         | 
|                                          |  |                                                  |  |                            |             | 
|                                          |  |                                                  |  |                            |             |  |                  
|                                          |  | Total Control Investments                        |  |                            | $13,916,472 |  |                   |   | $0        |                    |  |  | ($13,816,972)             |   |  |                          | $99,500   |  |                                                          |   | 14,620,063 |  |  | $ | 13,828         | 
|                                          |  |                                                  |  |                            |             | 
|Affiliate
Investments:                    |  |                                                  |  |                            |             |  |                   |   |           |                    |  |  |                           |   |  |                          |           |  |                                                          |   |            |  |  |   |                | 
|BeetNPath, LLC                            |  | 1,119,024 Series A-2 Preferred Membership        |  |                            |             |  |                   | $ | -         |                    |  |  | $            -            |   |  |                          | $359,000  |  |                                                          | $ | -          |  |  |   | $      -       | 
|                                          |  | Units.                                           |  |                            | $359,000    |  |                   |   | 150,000   |                    |  |  | -                         |   |  |                          | 150,000   |  |                                                          |   | -          |  |  |   | 6,477          | 
|                                          |  | $150,000 convertible promissory note at 8%.      |  |                            | -           |  |                   |   | 150,000   |                    |  |  | -                         |   |  |                          | 509,000   |  |                                                          |   | -          |  |  |   | 6,477          | 
|                                          |  | Total BeetNPath                                  |  |                            | 359,000     |  |                   |   |           |                    |  |  |                           |   |  |                          |           |  |                                                          |   |            |  |  |   |                | 
|Carolina Skiff LLC                        |  | 6.0825% Class A common membership interest.      |  |                            | 600,000     |  |                   |   | 500,000   |                    |  |  | -                         |   |  |                          | 1,100,000 |  |                                                          |   | -          |  |  |   | 131,785        | 
|                                          |  |                                                  |  |                            |             |  |                  
|ClearView Social,                         |  | 312,500 Series seed plus preferred shares.       |  |                            | -           |  |                   |   | 200,000   |                    |  |  | -                         |   |  |                          | 200,000   |  |                                                          |   | -          |  |  |   | -              | 
|Inc.                                      |  |                                                  |  |                            |             |  |                   |   |           |                    |  |  |                           |   |  |                          |           |  |                                                          |   |            |  |  |   |                | 
|First Wave                                |  | $500,000 senior term notes at 10%.               |  |                            | 250,000     |  |                   |   | -         |                    |  |  | -                         |   |  |                          | 250,000   |  |                                                          |   | -          |  |  |   | 834            | 
|Products Group,                           |  | $280,000 junior term notes at 10%.               |  |                            | -           |  |                   |   | -         |                    |  |  | -                         |   |  |                          | -         |  |                                                          |   | -          |  |  |   | -              | 
|LLC                                       |  | Warrant for 41,619 capital securities.           |  |                            | -           |  |                   |   | -         |                    |  |  | -                         |   |  |                          | -         |  |                                                          |   | -          |  |  |   | -              | 
|                                          |  | Total First Wave                                 |  |                            | 250,000     |  |                   |   | -         |                    |  |  | -                         |   |  |                          | 250,000   |  |                                                          |   | -          |  |  |   | 834            | 
|                                          |  |                                                  |  |                            |             |  |                  
|Genicon, Inc.                             |  | 1,586,902 Series B preferred shares.             |  |                            | 1,000,000   |  |                   |   | -         |                    |  |  | -                         |   |  |                          | 1,000,000 |  |                                                          |   | -          |  |  |   | 3,028          | 
|                                          |  | $1,100,000 senior term loans at 12%.             |  |                            | -           |  |                   |   | 1,100,000 |                    |  |  | -                         |   |  |                          | 1,100,000 |  |                                                          |   | -          |  |  |   | 109,700        | 
|                                          |  | $600,000 term loan at 14%.                       |  |                            | -           |  |                   |   | 600,000   |                    |  |  | -                         |   |  |                          | 600,000   |  |                                                          |   | -          |  |  |   | 28,700         | 
|                                          |  | Total Genicon                                    |  |                            | 1,000,000   |  |                   |   | 1,700,000 |                    |  |  | -                         |   |  |                          | 2,700,000 |  |                                                          |   | -          |  |  |   | 141,428        | 
|                                          |  |                                                  |  |                            |             |  |                  
|GiveGab, Inc.                             |  | 5,084,329 Series Seed preferred shares.          |  |                            | 424,314     |  |                   |   | -         |                    |  |  | -                         |   |  |                          | 424,314   |  |                                                          |   | -          |  |  |   | -              | 
|                                          |  |                                                  |  |                            |             |  |                  
|G-TEC Natural Gas                         |  | 17.845% Class A membership interest. 8%          |  |                            |             |  |                   |   |           |                    |  |  |                           |   |  |                          |           |  |                                                          |   |            |  |  |   |                | 
|Systems                                   |  | cumulative dividend.                             |  |                            | 100,000     |  |                   |   | -         |                    |  |  | -                         |   |  |                          | 100,000   |  |                                                          |   | -          |  |  |   | -              | 
|                                          |  |                                                  |  |                            |             |  |                  
|Intrinsiq Materials,                      |  | 4,161,747 Series A preferred shares.             |  |                            | -           |  |                   |   | 780,000   |                    |  |  | -                         |   |  |                          | 780,000   |  |                                                          |   | -          |  |  |   | -              | 
|Inc.                                      |  | $95,000 convertible promissory note at 8%.       |  |                            | 95,000      |  |                   |   | -         |                    |  |  | (95,000                   | ) |  |                          | -         |  |                                                          |   | -          |  |  |   | 6,689          | 
|                                          |  | Total Intrinsiq                                  |  |                            | 95,000      |  |                   |   | 780,000   |                    |  |  | (95,000                   | ) |  |                          | 780,000   |  |                                                          |   | -          |  |  |   | 6,689          | 
|                                          |  |                                                  |  |                            |             |  |                  
|Knoa Software, Inc.                       |  | 973,533 Series A-1 convertible preferred shares. |  |                            | 381,503     |  |                   |   | -         |                    |  |  | (381,503                  | ) |  |                          | -         |  |                                                          |   | -          |  |  |   | -              | 
|                                          |  | 1,876,922 Series B preferred shares.             |  |                            | 490,752     |  |                   |   | -         |                    |  |  | ( 41,297                  | ) |  |                          | 449,455   |  |                                                          |   | -          |  |  |   | -              | 
|                                          |  | $48,466 convertible promissory note at 8%.       |  |                            | -           |  |                   |   | 48,466    |                    |  |  | -                         |   |  |                          | 48,466    |  |                                                          |   | -          |  |  |   | 2,499          | 
|                                          |  | Total Knoa                                       |  |                            | 872,255     |  |                   |   | 48,466    |                    |  |  | (422,800                  | ) |  |                          | 497,921   |  |                                                          |   | -          |  |  |   | 2,499          | 
|                                          |  |                                                  |  |                            |             |  |                  
|KnowledgeVision                           |  | 200,000 Series A-1 preferred shares.             |  |                            | -           |  |                   |   | -         |                    |  |  | -                         |   |  |                          | -         |  |                                                          |   |            |  |  |   | -              | 
|Systems, Inc.                             |  | 214,285 Series A-2 preferred shares.             |  |                            | 300,000     |  |                   |   | -         |                    |  |  | -                         |   |  |                          | 300,000   |  |                                                          |   | -          |  |  |   | -              | 
|                                          |  | 129,033 Series A-3 preferred shares.             |  |                            | 165,001     |  |                   |   | -         |                    |  |  | -                         |   |  |                          | 165,001   |  |                                                          |   | -          |  |  |   | -              | 
|                                          |  | Warrant for 46,743 Series A-3 shares.            |  |                            | 35,000      |  |                   |   | -         |                    |  |  | -                         |   |  |                          | 35,000    |  |                                                          |   | -          |  |  |   | -              | 
|                                          |  | Total Knowledge Vision                           |  |                            | 500,001     |  |                   |   | -         |                    |  |  | -                         |   |  |                          | 500,001   |  |                                                          |   | -          |  |  |   | -              | 
|                                          |  |                                                  |  |                            |             |  |                  
|Mezmeriz, Inc.                            |  | 1,554,565 Series seed preferred shares.          |  |                            | 351,477     |  |                   |   | -         |                    |  |  | -                         |   |  |                          | 351,477   |  |                                                          |   | -          |  |  |   | -              | 
|                                          |  |                                                  |  |                            |             |  |                  
|Microcision LLC                           |  | $1,500,000 subordinated promissory note at       |  |                            |             |  |                   |   |           |                    |  |  |                           |   |  |                          |           |  |                                                          |   |            |  |  |   |                | 
|                                          |  | 11%.                                             |  |                            | 1,891,964   |  |                   |   | -         |                    |  |  | -                         |   |  |                          | 1,891,964 |  |                                                          |   | -          |  |  |   | 211,269        | 
|                                          |  | 15% Class A common membership interest.          |  |                            | -           |  |                   |   | -         |                    |  |  | -                         |   |  |                          | -         |  |                                                          |   | -          |  |  |   | -              | 
|                                          |  | Total Microcision                                |  |                            | 1,891,964   |  |                   |   | -         |                    |  |  | -                         |   |  |                          | 1,891,964 |  |                                                          |   | -          |  |  |   | 211,269        | 
|                                          |  |                                                  |  |                            |             |  |                  
|New Monarch                               |  | 22.84 common shares.                             |  |                            | 22,841      |  |                   |   | -         |                    |  |  | -                         |   |  |                          | 22,841    |  |                                                          |   | -          |  |  |   | 29,409         | 
|Machine Tool, Inc.                        |  |                                                  |  |                            |             |  |                   |   |           |                    |  |  |                           |   |  |                          |           |  |                                                          |   |            |  |  |   |                | 
|                                          |  |                                                  |  |                            |             |  |                  
|OnCore Golf                               |  | 150,000 Series AA preferred shares.              |  |                            | 187,500     |  |                   |   | -         |                    |  |  | (187,500                  | ) |  |                          | -         |  |                                                          |   | -          |  |  |   | -              | 
|Technology, Inc.                          |  | $300,000 subordinated convertible promissory     |  |                            |             |  |                   |   |           |                    |  |  |                           |   |  |                          |           |  |                                                          |   |            |  |  |   |                | 
|                                          |  | notes at 6%.                                     |  |                            | 150,000     |  |                   |   | 150,000   |                    |  |  | -                         |   |  |                          | 300,000   |  |                                                          |   | -          |  |  |   | 17,186         | 
|                                          |  | Total OnCore                                     |  |                            | 337,500     |  |                   |   | 150,000   |                    |  |  | (187,500                  | ) |  |                          | 300,000   |  |                                                          |   | -          |  |  |   | 17,186         | 



20



---

##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2016 (Continued)



|                                          |                                               |                                                        |  |                            |            |  |                    |         |           |                     |  |           |                            |  |  |                            |            |  |                                                 |   |            |  |  |       |         | 
|----------------------------------------- | --------------------------------------------- | ------------------------------------------------------ |  | -------------------------- | ---------- |  | ------------------ | ------- | --------- | ------------------- |  | --------- | -------------------------- |  |  | -------------------------- | ---------- |  | ----------------------------------------------- | - | ---------- |  |  | ----- | ------- | 
|Investments in and Advances to Affiliates |                                               |                                                        |  |                            |            |  |                    |         |           |                     |  |           |                            |  |  |                            |           
|                                          |                                              
|Company                                   |                                               | Type of Investment                                     |  | December 31,2015 FairValue |            |  | GrossAdditions
(1) |         |           | GrossReductions (2) |  |           | December 31,2016 FairValue |  |  | Net
RealizedGains
(Losses) |            |  | Amount of    Interest/
Dividend/
Fee Income (3) |  
|                                          |                                              
|Rheonix, Inc.                             |                                               | 9,676 common shares.                                   |  |                            | 11,000     |  |                    |         | -         |                     |  |           | (11,000)                   |  |  |                            | -          |  |                                                 |   | -          |  |  |       | -       | 
|                                          |                                               | 1,839,422 Series A preferred shares.                   |  |                            | 2,165,999  |  |                    |         | -         |                     |  |           | (2,165,999)                |  |  |                            | -          |  |                                                 |   | -          |  |  |       | -       | 
|                                          |                                               | 50,593 common shares.                                  |  |                            | 59,000     |  |                    |         | -         |                     |  |           | (59,000)                   |  |  |                            | -          |  |                                                 |   | -          |  |  |       | -       | 
|                                          |                                               | 589,420 Series B preferred shares.                     |  |                            | 702,732    |  |                    |         | -         |                     |  |           | (702,732)                  |  |  |                            | -          |  |                                                 |   | -          |  |  |       | -       | 
|                                          |                                               | Total Rheonix                                          |  |                            | 2,938,731  |  |                    |         | -         |                     |  |           | (2,938,731)                |  |  |                            | -          |  |                                                 |   | -          |  |  |       | -       | 
|                                          |                                               |                                                        |  |                            |            |  |                   
|SciAps, Inc.                              |                                               | 187,500 Series A convertible preferred shares.         |  |                            | 1,000,000  |  |                    |         | -         |                     |  |           | -                          |  |  |                            | 1,000,000  |  |                                                 |   | -          |  |  |       | -       | 
|                                          |                                               | 274,299 Series A-1 convertible preferred shares.       |  |                            | 504,710    |  |                    |         | -         |                     |  |           | -                          |  |  |                            | 504,710    |  |                                                 |   | -          |  |  |       | -       | 
|                                          |                                               | 117,371 Series B preferred shares.                     |  |                            | 250,000    |  |                    |         | -         |                     |  |           | -                          |  |  |                            | 250,000    |  |                                                 |   | -          |  |  |       | -       | 
|                                          |                                               | $200,000 subordinated promissory note at 10%.          |  |                            | -          |  |                    |         | 200,000   |                     |  |           | -                          |  |  |                            | 200,000    |  |                                                 |   | -          |  |  |       | 14,611  | 
|                                          |                                               | $100,000 secured subordinated convertible note at 10%. |  |                            | -          |  |                    |         | 100,000   |                     |  |           | -                          |  |  |                            | 100,000    |  |                                                 |   | -          |  |  |       | 2,555   | 
|                                          |                                               | Total SciAps                                           |  |                            | 1,754,710  |  |                    |         | 300,000   |                     |  |           | -                          |  |  |                            | 2,054,710  |  |                                                 |   | -          |  |  |       | 17,166  | 
|                                          |                                               |                                                        |  |                            |            |  |                   
|SOMS
Technologies,
LLC                    |                                               | 5,959,490 Series B membership interests.               |  |                            | 528,348    |  |                    |         | -         |                     |  |           | -                          |  |  |                            | 528,348    |  |                                                 |   | -          |  |  |       | 13,464  | 
|                                          |                                               |                                                        |  |                            |            |  |                    |         |           |                     |  |           |                            |  |  |                            |            |  |                                                 |   |            |  |  |       |         | 
|                                          |                                               |                                                        |  |                            |            |  |                   
|Statisfy, Inc.                            |                                               | 65,000 Series seed preferred shares.                   |  |                            | 20,968     |  |                    |         | -         |                     |  |           | (20,968)                   |  |  |                            | -          |  |                                                 |   | (20,968)   |  |  |       | -       | 
|                                          |                                               | Warrant for 1,950,000 Series seed preferred shares.    |  |                            | 629,032    |  |                    |         | -         |                     |  |           | (629,032)                  |  |  |                            | -          |  |                                                 |   | (629,032)  |  |  |       | -       | 
|                                          |                                               | Total Statisfy                                         |  |                            | 650,000    |  |                    |         | -         |                     |  |           | (650,000)                  |  |  |                            | -          |  |                                                 |   | (650,000)  |  |  |       | -       | 
|                                          |                                               |                                                        |  |                            |            |  |                   
|Teleservices
Solutions
Holdings, LLC      |                                               | 250,000 Class B shares.                                |  |                            | -          |  |                    |         | -         |                     |  |           | -                          |  |  |                            | -          |  |                                                 |   | -          |  |  |       | -       | 
|                                          | 1,000,000 Class C shares.                     |                                                        |  | 1,190,680                  |            |  |                    | -       |           |                     |  | (990,680) |                            |  |  | 200,000                    |            |  |                                                 | - |            |  |  | -     |        
|                                          | 80,000 Class D preferred units.               |                                                        |  | 91,200                     |            |  |                    | -       |           |                     |  | -         |                            |  |  | 91,200                     |            |  |                                                 | - |            |  |  | -     |        
|                                          | 104,198 Class E preferred units.              |                                                        |  | 104,198                    |            |  |                    | -       |           |                     |  | -         |                            |  |  | 104,198                    |            |  |                                                 | - |            |  |  | -     |        
|                                          |                                               | Total Teleservices                                     |  |                            | 1,386,078  |  |                    |         | -         |                     |  |           | (990,680)                  |  |  |                            | 395,398    |  |                                                 |   | -          |  |  |       | -       | 
|                                          |                                               |                                                        |  |                            |            |  |                   
|Tilson
Technology
Management,
Inc.        |                                               | 12 Series B preferred shares.                          |  |                            | 600,000    |  |                    |         | -         |                     |  |           | -                          |  |  |                            | 600,000    |  |                                                 |   | -          |  |  |       | 16,250  | 
|                                          | 21,390 Series C convertible preferred shares. |                                                        |  | -                          |            |  |                    | 200,000 |           |                     |  | -         |                            |  |  | 200,000                    |            |  |                                                 | - |            |  |  | -     |        
|                                          | $200,000 subordinated promissory note at 8%.  |                                                        |  | -                          |            |  |                    | 200,000 |           |                     |  | -         |                            |  |  | 200,000                    |            |  |                                                 | - |            |  |  | 4,164 |        
|                                          |                                               | Total Tilson                                           |  |                            | 600,000    |  |                    |         | 400,000   |                     |  |           | -                          |  |  |                            | 1,000,000  |  |                                                 |   | -          |  |  |       | 20,414  | 
|                                          |                                               |                                                        |  |                            |            | 
|                                          |                                               | Total Affiliate Investments                            |  | $                          | 14,662,219 |  |                    | $       | 4,228,466 |                     |  | ($        | 5,284,711)                 |  |  | $                          | 13,605,974 |  |                                                 |   | (650,000)  |  |  | $     | 598,620 | 
|                                          |                                               |                                                        |  |                            |            | 
|                                          |                                               | Total Control and Affiliate Investments                |  | $                          | 28,578,691 |  |                    | $       | 4,228,466 |                     |  | ($        | 19,101,683)                |  |  | $                          | 13,705,474 |  |                                                 | $ | 13,970,063 |  |  | $     | 612,448 | 
|                                          |                                               |                                                        |  |                            |            | 

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

(1) Gross additions include increases in the cost basis
of investments resulting from new portfolio investment, follow on investments, capitalized interest and the accretion of discounts. Gross additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation,
and 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, net increases in unrealized depreciation, net decreases in unrealized appreciation, 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.



21



---

##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS

December 31, 2016 (Continued)



|                        |  |                                                                      
|----------------------- |  | ---------------------------------------------------------------------
|Industry Classification |  | Percentage of TotalInvestments (at fair value)as of December 31, 2016
|                        | 
|Healthcare              |  | 32.6%                                                                
|                        | 
|Software                |  | 27.3%                                                                
|                        | 
|Manufacturing           |  | 22.7%                                                                
|                        | 
|Contact Center          |  | 5.4%                                                                 
|                        | 
|Consumer Product        |  | 4.9%                                                                 
|                        | 
|Professional Services   |  | 3.6%                                                                 
|                        | 
|Oil and Gas             |  | 1.8%                                                                 
|                        | 
|Electronics             |  | 1.3%                                                                 
|                        | 
|Marketing               |  | 0.4%                                                                 
|                        |  |                                                                      
|Total Investments       |  | 100%                                                                 
|                        |  |                                                                      



22



---

##### Table of Contents

Rand Capital Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

For the Nine Months Ended September 30, 2017 and 2016

(Unaudited)

Note 1. ORGANIZATION

Rand Capital Corporation (Rand) 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, management investment 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  Regulation, Regulation as a Business Development Company in our Annual Report on Form 10-K for the year
ended December 31, 2016.

We have made the majority of our venture capital 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 its formation in 2002. Rand SBICs
predecessor was organized as a Delaware limited partnership and was converted into a New York corporation on December 31, 2008, at which time our operations as a licensed SBIC were continued. Although Rand SBIC was operated as if it were a BDC,
it was registered as an investment company under the 1940 Act. In 2012, the SEC granted an Order of Exemption for Rand with respect to the operations of Rand SBIC, and then Rand SBIC filed an election to be regulated as a BDC under the 1940 Act.
Rand SBICs board of directors is comprised of the directors of Rand, a majority of whom are not interested persons of Rand or Rand SBIC.

Responding to our request submitted during 2016, the SBA issued a green light or go forth letter authorizing Rand to
continue its application process to obtain a license to form and operate a second SBIC subsidiary. The application for the new SBIC fund was filed with the SBA in April 2017 and is currently under review by the SBA. We expect our new SBIC
subsidiary, Rand Capital SBIC II, L.P. (Rand SBIC II) will continue our investment strategy of focusing on privately-held, early stage and emerging growth businesses with proven management teams. Our initial wholly-owned subsidiary, Rand SBIC, has
historically been our primary investment vehicle since its formation and, once approved by the SBA, we expect to continue this investment strategy through our new SBIC subsidiary. Under the SBAs
pre-licensing approval protocols, we have begun investing using Rand SBIC II.

We operate as an
internally managed investment company whereby our officers and employees conduct the business of the Corporation under the general supervision of our Board of Directors. We have not elected to qualify to be taxed as a regulated investment company as
defined under Subchapter M of the Internal Revenue Code.

In this Quarterly Report on Form 10-Q,
unless the context otherwise requires, we, the Corporation, us, and our refer to Rand Capital Corporation, Rand SBIC, and Rand SBIC II.

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.



23



---

##### Table of Contents

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 United States generally accepted accounting principles (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. Our interim results for the nine months ended September 30, 2017 are not necessarily indicative of the results 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, 2016. 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. Those filings
include, but are not limited to, the following:



|          |  |                                                                                                
|--------- |  | -----------------------------------------------------------------------------------------------
|N-54A     |  | Election to Adopt Business Development Company status                                          
|DEF-14A   |  | 2017 Definitive Proxy Statement submitted to shareholders                                      
|Form 10-K |  | Annual Report on Form 10-K for the year ended December 31, 2016                                
|Form 10-Q |  | Quarterly Reports on Form 10-Q for the quarterly periods ended June 30, 2017 and March 31, 2017

Principles of Consolidation - The consolidated financial statements include the accounts
of Rand and its two wholly-owned SBIC 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 2017, the SBIC Funding Corporation completed a pooling of SBA debentures that have a
coupon rate of 2.518%, excluding a mandatory SBA annual charge estimated to be 0.804%, resulting in a total estimated fixed rate for ten years of 3.322%. 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 the management of the
Corporation and approved by the 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 the Corporations assumptions and judgments differ from results of actual liquidation events.



24



---

##### Table of Contents

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

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.

Accrual of interest by an SBIC is 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.

The following investments remain on non-accrual status: G-TEC Natural Gas Systems (G-Tec), First Wave Products Group, LLC (First Wave) 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 periodically 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 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 amortization of financing fees charged to the portfolio
companies upon successful closing of our SBIC funds financings and income associated with portfolio company board attendance fees. The income associated with the amortization of financing fees was $18,557 and $15,948 for the nine months ended
September 30, 2017 and 2016, respectively. The board fees were $1,000 and $3,000 for the nine months ended September 30, 2017 and 2016, 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 $21,085 and $7,497 in OID income for the nine months ended September 30, 2017 and 2016,
respectively. OID income is estimated to be approximately $13,000 for the remainder of 2017.



25



---

##### Table of Contents

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 $20,550 for each of the nine months ended September 30, 2017 and 2016.
Amortization expense on currently outstanding debentures for the next five years is estimated to average approximately $27,000 per year.

SBA Debenture - The Corporation had $8,000,000 in outstanding SBA debentures at September 30, 2017 and December 31,
2016 with a weighted average interest rate of 3.54%. The debentures are presented net of deferred debenture costs (see Note 6). The $8,000,000 in outstanding SBA leverage matures from 2022 through 2025.

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. The Corporation does not have any common stock equivalents outstanding.

Supplemental Cash Flow Information - Income taxes paid during the nine months ended September 30, 2017 and 2016, net of
refunds, was $590,940 and $1,995,948, respectively. Interest paid during the nine months ended September 30, 2017 and 2016 was $282,875 and $283,650, respectively. The Corporation converted $262,105 and $16,711 of interest receivable into
investments during the nine months ended September 30, 2017 and 2016, 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, 2017 and December 31, 2016, there were 500,000 shares of
$10.00 par value preferred stock authorized and unissued.

On October 26, 2017, the Board of Directors extended the repurchase
authorization for up to 1,000,000 shares of the Corporations outstanding common stock on the open market through October 26, 2018 at prices that are no greater than the then current net asset value. No shares were repurchased during the
nine months ended September 30, 2017. There were 6,550 shares repurchased during the nine months ended September 30, 2016. At September 30, 2017, the total treasury shares held was 541,046 shares with a total cost of $1,469,105.

Profit Sharing and Stock Option Plan - In 2001, the stockholders of the Corporation authorized the establishment of an Employee
Stock Option Plan (the Option Plan), that provides for the award of stock options to purchase up to 200,000 common shares to eligible employees. In 2002, the Corporation placed the Option Plan on inactive status as it developed a new
profit sharing plan for the Corporations employees in connection with the formation of its SBIC subsidiary. As of September 30, 2017, no stock options had been awarded under the Option Plan. Because Section 57(n) of the 1940 Act
prohibits maintenance of a profit sharing plan for the officers and employees of a BDC where any option, warrant or right is outstanding under an executive compensation plan, no stock options will be granted under the Option Plan while any profit
sharing plan is in effect with respect to the Corporation.



26



---

##### Table of Contents

In 2002, the Corporation established a Profit Sharing Plan (the Plan) for its
executive officers in accordance with Section 57(n) of the 1940 Act. Under the Plan, the Corporation will pay its executive officers aggregate profit sharing payments equal to 12% of the net realized capital gains of its SBIC subsidiary, net of
all realized capital losses and unrealized depreciation of the SBIC subsidiary, for the fiscal year, computed in accordance with the Plan and the Corporations interpretation of the Plan. Any profit sharing paid or accrued cannot exceed 20% of
the Corporations net income, as defined in the Plan. For purposes of the 20% profit sharing test, the Corporation interprets net income to be the total of the Corporations net investment gain (loss) and its net realized gain
(loss) on investments, prior to inclusion of the estimated profit sharing obligation. The profit sharing payments are split equally between the Corporations two executive officers, each of whom is fully vested in the Plan.

There were no amounts earned pursuant to the Plan for the nine months ended September 30, 2017. The Corporation had accrued $1,411,659
under the Plan for the nine months ended September 30, 2016. Estimated payroll taxes and benefits on the profit sharing under the Plan were also accrued at September 30, 2016. The amounts accrued were within the defined limits under the
Plan. At December 31, 2016, the Corporations final approved and accrued amount was $1,270,052 under the Plan, of which $1,138,052 was paid during the nine months ended September 30, 2017.

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, 2017.

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, 2017 or 2016.

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. Management does not anticipate non-performance by such banks.

At September 30, 2017, Genicon, Inc. (Genicon), eHealth Global
Technologies, Inc. (eHealth), Rheonix, Inc. (Rheonix), Outmatch (formerly Chequed Holdings, LLC) (Outmatch) and Social Flow, Inc. (Social Flow) represented 13%, 11%, 10%, 7% and 7%, respectively, of the fair value of the Corporations
investment portfolio.

Note 3. INVESTMENTS

The Corporations investments are carried at fair value in accordance with 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.



27



---

##### Table of Contents

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 the price the security would command given the rate and 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.

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.

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 as Net
change in unrealized depreciation or appreciation on investments.

Under the valuation policy, the Corporation values unrestricted
publicly traded companies, categorized as Level 1 investments, at the average closing bid price for the last three trading days of the reporting period. There were no such Level 1 investments as of September 30, 2017. The Corporation
did have one portfolio company, Athenex, that completed an initial public offering during the second quarter of 2017 and the shares of the common stock of Athenex were categorized as a Level 2 investment because these shares were subject to
restriction on sale as of the end of the period. The Corporation valued the common stock of Athenex stock that it owns using the average closing bid price for the last three trading days of the reporting period, and applied a discount to that value
to address the sale restriction.

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;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



28



---

##### Table of Contents

| |  |  | 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 by the Corporations management 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.

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, the Corporation generally relies on the
cost basis, which is deemed to represent the fair value, unless other fair market 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 debt securities. Fair value may also be determined based on other criteria where appropriate.



29



---

##### Table of Contents

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 market 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, 2017:



|                                 |  |                              |                 |  |                                    |   |             |                               |  |   |                                  |  |  |                          |                   |  |                                |   |                |        |  |   |                |  |  |   |            | 
|-------------------------------- |  | ---------------------------- | --------------- |  | ---------------------------------- | - | ----------- | ----------------------------- |  | - | -------------------------------- |  |  | ------------------------ | ----------------- |  | ------------------------------ | - | -------------- | ------ |  | - | -------------- |  |  | - | ---------- | 
|Investment
Type                  |  | MarketApproachEBITDAMultiple |                 |  | MarketApproachLiquidationSeniority |   |             | MarketApproachRevenueMultiple |  |   | MarketApproachTransactionPricing |  |  | BlackScholesPricingModel |                   |  | AssetApproachLiquidationMethod |   |                | Totals | 
|Non-Control/Non-Affiliate
Equity |  | $                            |                |  |                                    | $ |            |                               |  | $ | 2,071,325                        |  |  | $                        | 5,866,583         |  |                                | $ |               |        |  | $ |               |  |  | $ | 7,937,908  | 
|                                 |  |                              |                 |  |                                    |   |             |                               |  |   |                                  |  |  |                          |                   |  |                                |   |                |        |  |   |                |  |  |   |            | 
|Non-Control/Non-Affiliate
Debt   |  | $                            | 948,187         |  |                                    |   |            |                               |  |   | 5,878,252                        |  |  |                          |                  |  |                                |   |               |        |  |   | 400,000        |  |  |   | 7,226,439  | 
|                                 |  |                              |                 |  |                                    |   |             |                               |  |   |                                  |  |  |                          |                   |  |                                |   |                |        |  |   |                |  |  |   |            | 
|Total
Non-Control/Non-Affiliate  |  |                              | 948,187         |  |                                    |   |            |                               |  |   | 7,949,577                        |  |  |                          | 5,866,583         |  |                                |   |               |        |  |   | 400,000        |  |  |   | 15,164,347 | 
|                                 |  |                              |                 |  |                                    |   |             |                               |  |   |                                  |  |  |                          |                   |  |                                |   |                |        |  |   |                |  |  |   |            | 
|Affiliate Equity                 |  |                              | 1,628,348       |  |                                    |   | 22,841      |                               |  |   | 3,078,440                        |  |  |                          | 3,405,791         |  |                                |   | 120,000        |        |  |   | 800,000        |  |  |   | 9,055,420  | 
|                                 |  |                              |                 |  |                                    |   |             |                               |  |   |                                  |  |  |                          |                   |  |                                |   |                |        |  |   |                |  |  |   |            | 
|Affiliate Debt                   |  |                              | 1,909,367       |  |                                    |   |            |                               |  |   | 648,466                          |  |  |                          | 2,893,588         |  |                                |   |               |        |  |   | 200,000        |  |  |   | 5,651,421  | 
|                                 |  |                              |                 |  |                                    |   |             |                               |  |   |                                  |  |  |                          |                   |  |                                |   |                |        |  |   |                |  |  |   |            | 
|Total Affiliate                  |  |                              | 3,537,715       |  |                                    |   | 22,841      |                               |  |   | 3,726,906                        |  |  |                          | 6,299,379         |  |                                |   | 120,000        |        |  |   | 1,000,000      |  |  |   | 14,706,841 | 
|                                 |  |                              |                 |  |                                    |   |             |                               |  |   |                                  |  |  |                          |                   |  |                                |   |                |        |  |   |                |  |  |   |            | 
|Control Equity                   |  |                              |                |  |                                    |   |            |                               |  |   | 99,500                           |  |  |                          |                  |  |                                |   |               |        |  |   |               |  |  |   | 99,500     | 
|                                 |  |                              |                 |  |                                    |   |             |                               |  |   |                                  |  |  |                          |                   |  |                                |   |                |        |  |   |                |  |  |   |            | 
|Control Debt                     |  |                              |                |  |                                    |   |            |                               |  |   |                                 |  |  |                          |                  |  |                                |   |               |        |  |   |               |  |  |   |           | 
|                                 |  |                              |                 |  |                                    |   |             |                               |  |   |                                  |  |  |                          |                   |  |                                |   |                |        |  |   |                |  |  |   |            | 
|Total Control                    |  |                              |                |  |                                    |   |            |                               |  |   | 99,500                           |  |  |                          |                  |  |                                |   |               |        |  |   |               |  |  |   | 99,500     | 
|                                 |  |                              |                 |  |                                    |   |             |                               |  |   |                                  |  |  |                          |                   |  |                                |   |                |        |  |   |                |  |  |   |            | 
|Total Level 3 Investments        |  | $                            | 4,485,902       |  |                                    | $ | 22,841      |                               |  | $ | 11,775,983                       |  |  | $                        | 12,165,962        |  |                                | $ | 120,000        |        |  | $ | 1,400,000      |  |  | $ | 29,970,688 | 
|                                 |  |                              |                 |  |                                    |   |             |                               |  |   |                                  |  |  |                          |                   |  |                                |   |                |        |  |   |                |  |  |   |            | 
|Range                            |  |                              | 4.8X-6.7X       |  |                                    |   | 1X          |                               |  |   | 0.5X-10.3X                       |  |  |                          | Not Applicable    |  |                                |   | Not Applicable |        |  |   | Not Applicable |  |  |   |            | 
|                                 |  |                              |                 |  |                                    |   |            
|Unobservable Input               |  |                              | EBITDA Multiple |  |                                    |   | Asset Value |                               |  |   | RevenueMultiple                  |  |  |                          | Transaction Price |  |                                |   | Exercise Price |        |  |   | Asset Value    |  |  |   |            | 
|                                 |  |                              |                 |  |                                    |   |            
|Weighted Average                 |  |                              | 5.9X            |  |                                    |   | 1X          |                               |  |   | 3.1X                             |  |  |                          | Not Applicable    |  |                                |   | Not Applicable |        |  |   | Not Applicable |  |  |   |            | 

The following table provides a summary of the components of Level 1, 2 and 3 Assets Measured at Fair
Value at September 30, 2017:



|                   |  |                   |                                                |  |                                                             |   |   |                                       |  |   |                                              |  |  |   |            | 
|------------------ |  | ----------------- | ---------------------------------------------- |  | ----------------------------------------------------------- | - | - | ------------------------------------- |  | - | -------------------------------------------- |  |  | - | ---------- | 
|                   |  |                   | Fair Value Measurements at Reported Date Using | 
|Description        |  | September 30,2017 |                                                |  | Quoted Prices inActive Markets forIdentical Assets(Level 1) |   |   | SignificantObservable Inputs(Level 2) |  |   | Other SignificantUnobservableInputs(Level 3) | 
|Loan investments   |  | $                 | 3,550,000                                      |  |                                                             | $ |  |                                       |  | $ |                                             |  |  | $ | 3,550,000  | 
|Debt investments   |  |                   | 9,327,860                                      |  |                                                             |   |  |                                       |  |   |                                             |  |  |   | 9,327,860  | 
|Equity investments |  |                   | 17,817,828                                     |  |                                                             |   |  |                                       |  |   | 725,000                                      |  |  |   | 17,092,828 | 
|                   |  |                   |                                                |  |                                                             |   |   |                                       |  |   |                                              |  |  |   |            | 
|Total              |  | $                 | 30,695,688                                     |  |                                                             | $ |  |                                       |  | $ | 725,000                                      |  |  | $ | 29,970,688 | 
|                   |  |                   |                                                |  |                                                             |   |   |                                       |  |   |                                              |  |  |   |            | 



30



---

##### Table of Contents

The following table provides a summary of the components of Level 1, 2 and 3 Assets Measured
at Fair Value at December 31, 2016:



|                   |  |                  |                                                |  |                                                             |   |   |                                       |  |   |                                              |  |  |   |            | 
|------------------ |  | ---------------- | ---------------------------------------------- |  | ----------------------------------------------------------- | - | - | ------------------------------------- |  | - | -------------------------------------------- |  |  | - | ---------- | 
|                   |  |                  | Fair Value Measurements at Reported Date Using | 
|Description        |  | December 31,2016 |                                                |  | Quoted Prices inActive Markets forIdentical Assets(Level 1) |   |   | SignificantObservable Inputs(Level 2) |  |   | Other SignificantUnobservableInputs(Level 3) | 
|Loan investments   |  | $                | 3,200,000                                      |  |                                                             | $ |  |                                       |  | $ |                                             |  |  | $ | 3,200,000  | 
|Debt investments   |  |                  | 6,700,221                                      |  |                                                             |   |  |                                       |  |   |                                             |  |  |   | 6,700,221  | 
|Equity investments |  |                  | 17,600,260                                     |  |                                                             |   |  |                                       |  |   |                                             |  |  |   | 17,600,260 | 
|                   |  |                  |                                                |  |                                                             |   |   |                                       |  |   |                                              |  |  |   |            | 
|Total              |  | $                | 27,500,481                                     |  |                                                             | $ |  |                                       |  | $ |                                             |  |  | $ | 27,500,481 | 
|                   |  |                  |                                                |  |                                                             |   |   |                                       |  |   |                                              |  |  |   |            | 

The following table provides a summary of changes in Assets Measured at Fair Value Using Significant
Unobservable Inputs (Level 3) for the quarter ended September 30, 2017:



|                                                                                                  |  |                                                                                                   |            |         |                 |   |           |                   |  |   |            |   |  |   |            |  
|------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------- | ---------- | ------- | --------------- | - | --------- | ----------------- |  | - | ---------- | - |  | - | ---------- | -
|                                                                                                  |  | Fair Value Measurements Using SignificantUnobservable Inputs (Level 3)Venture Capital Investments |           
|Description                                                                                       |  | LoanInvestments                                                                                   |            |         | DebtInvestments |   |           | EquityInvestments |  |   | Total      |  
|Ending Balance, December 31, 2016, of Level 3 Assets                                              |  | $                                                                                                 | 3,200,000  |         |                 | $ | 6,700,221 |                   |  | $ | 17,600,260 |   |  | $ | 27,500,481 |  
|                                                                                                  |  |                                                                                                   |            |        
|Unrealized Gains and Losses included in net change in net assets from
operations:                 |  |                                                                                                   |            |         |                 |   |           |                   |  |   |            |   |  |   |            |  
|ACV Auctions, Inc. (ACV Auctions)                                                                 |  |                                                                                                   |           |         |                 |   |          |                   |  |   | 119,356    |   |  |   | 119,356    |  
|Athenex, Inc. (Athenex)                                                                           |  |                                                                                                   |           |         |                 |   |          |                   |  |   | 308,336    |   |  |   | 308,336    |  
|BeetNPath, LLC (Beetnpath)                                                                        |  |                                                                                                   |           |         |                 |   |          |                   |  |   | 29,723     |   |  |   | 29,723     |  
|City Dining Cards, Inc. (Loupe)                                                                   |  |                                                                                                   |           |         |                 |   |          |                   |  |   | (500,000   | ) |  |   | (500,000   | )
|Mercantile Adjustment Bureau, LLC (Mercantile)                                                    |  |                                                                                                   |           |         |                 |   | (250,000  | )                 |  |   |           |   |  |   | (250,000   | )
|SciAps, Inc. (Sciaps)                                                                             |  |                                                                                                   |           |         |                 |   |           |                   |  |   | (300,000   | ) |  |   | (300,000   | )
|Teleservices Solutions Holdings, LLC (Teleservices)                                               |  |                                                                                                   |           |         |                 |   |           |                   |  |   | (395,398   | ) |  |   | (395,398   | )
|                                                                                                  |  |                                                                                                   |            |         |                 |   |           |                   |  |   |            |   |  |   |            |  
|Total Unrealized Gains and Losses                                                                 |  |                                                                                                   |           |         |                 |   | (250,000  | )                 |  |   | (737,983   | ) |  |   | (987,983   | )
|                                                                                                  |  |                                                                                                   |            |        
|Purchases of Securities/Changes to
Securities/Non-cash conversions:                               |  |                                                                                                   |            |         |                 |   |           |                   |  |   |            |   |  |   |            |  
|Beetnpath                                                                                         |  |                                                                                                   |           |         |                 |   | 100,000   |                   |  |   | 11,277     |   |  |   | 111,277    |  
|Centivo Corporation (Centivo)                                                                     |  |                                                                                                   |           |         |                 |   | 100,000   |                   |  |   |           |   |  |   | 100,000    |  
|eHealth Global Technologies, Inc. (eHealth)                                                       |  |                                                                                                   | 2,000,000  |         |                 |   |          |                   |  |   |           |   |  |   | 2,000,000  |  
|Empire Genomics, LLC (Empire Genomics)                                                            |  |                                                                                                   |           |         |                 |   | 201,489   |                   |  |   |           |   |  |   | 201,489    |  
|Genicon, Inc. (Genicon)                                                                           |  |                                                                                                   | 300,000    |         |                 |   | 893,588   |                   |  |   | 120,000    |   |  |   | 1,313,588  |  
|GoNoodle, Inc. (GoNoodle)                                                                         |  |                                                                                                   |           |         |                 |   | 7,662     |                   |  |   |           |   |  |   | 7,662      |  
|KnowledgeVision Systems, Inc. (Knowledge Vision)                                                  |  |                                                                                                   | 50,000     |         |                 |   |          |                   |  |   |           |   |  |   | 50,000     |  
|Mercantile                                                                                        |  |                                                                                                   |           |         |                 |   | 107,497   |                   |  |   |           |   |  |   | 107,497    |  
|Microcision LLC (Microcision)                                                                     |  |                                                                                                   |           |         |                 |   | 17,403    |                   |  |   |           |   |  |   | 17,403     |  
|Sciaps                                                                                            |  |                                                                                                   |           |         |                 |   |          |                   |  |   | 274,274    |   |  |   | 274,274    |  
|                                                                                                  |  |                                                                                                   |            |         |                 |   |           |                   |  |   |            |   |  |   |            |  
|Total Purchases of Securities/Changes to
Securities/Non-cash conversions                          |  |                                                                                                   | 2,350,000  |         |                 |   | 1,427,639 |                   |  |   | 405,551    |   |  |   | 4,183,190  |  
|                                                                                                  |  |                                                                                                   |            |         |                 |   |           |                   |  |   |            |   |  |   |            |  
|Transfers within Level 3                                                                          |  |                                                                                                   | (2,000,000 | )       |                 |   | 1,450,000 |                   |  |   | 550,000    |   |  |   |           |  
|Transfers out of Level 3                                                                          |  |                                                                                                   |           |         |                 |   |          |                   |  |   | (725,000   | ) |  |   | (725,000   | )
|                                                                                                  |  |                                                                                                   |            |         |                 |   |           |                   |  |   |            |   |  |   |            |  
|Ending Balance, September 30, 2017, of Level 3 Assets                                             |  | $                                                                                                 | 3,550,000  |         |                 | $ | 9,327,860 |                   |  | $ | 17,092,828 |   |  | $ | 29,970,688 |  
|                                                                                                  |  |                                                                                                   |            |         |                 |   |           |                   |  |   |            |   |  |   |            |  
|Change in unrealized depreciation on investments for the period included in changes
in net assets |  |                                                                                                   | ($         | 987,983 | )              
|                                                                                                  | 
|Net realized gain on investments for the period included in changes in net
assets                 |  |                                                                                                   | $          |        |                



31



---

##### Table of Contents

The following table provides a summary of changes in Assets Measured at Fair Value on a Recurring
Basis Using Significant Unobservable Inputs (Level 3) for the nine months ended September 30, 2016:



|                                                                                                  |  |                                                                                                   |           |            |                 |   |           |                   |  |   |             |   |  |   |             |  
|------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------- | --------- | ---------- | --------------- | - | --------- | ----------------- |  | - | ----------- | - |  | - | ----------- | -
|                                                                                                  |  | Fair Value Measurements Using SignificantUnobservable Inputs (Level 3)Venture Capital Investments |          
|Description                                                                                       |  | LoanInvestments                                                                                   |           |            | DebtInvestments |   |           | EquityInvestments |  |   | Total       |  
|Ending Balance, December 31, 2015, of Level 3 Assets                                              |  | $                                                                                                 | 416,972   |            |                 | $ | 5,076,632 |                   |  | $ | 31,338,796  |   |  | $ | 36,832,400  |  
|                                                                                                  |  |                                                                                                   |           |           
|Realized Gains included in net change in net assets from operations:                              |  |                                                                                                   |           |            |                 |   |           |                   |  |   |             |   |  |   |             |  
|Gemcor II, LLC (Gemcor)                                                                           |  |                                                                                                   |          |            |                 |   |          |                   |  |   | 14,588,813  |   |  |   | 14,588,813  |  
|                                                                                                  |  |                                                                                                   |           |            |                 |   |           |                   |  |   |             |   |  |   |             |  
|Total Realized Gains                                                                              |  |                                                                                                   |          |            |                 |   |          |                   |  |   | 14,588,813  |   |  |   | 14,588,813  |  
|                                                                                                  |  |                                                                                                   |           |           
|Unrealized Gains and Losses included in net change in net assets from
operations:                 |  |                                                                                                   |           |            |                 |   |           |                   |  |   |             |   |  |   |             |  
|Athenex, Inc. (Athenex)                                                                           |  |                                                                                                   |          |            |                 |   |          |                   |  |   | 69,444      |   |  |   | 69,444      |  
|Gemcor II, LLC (Gemcor)                                                                           |  |                                                                                                   |          |            |                 |   |          |                   |  |   | (12,775,000 | ) |  |   | (12,775,000 | )
|Intrinsiq Material, Inc. (Intrinsiq)                                                              |  |                                                                                                   |          |            |                 |   |          |                   |  |   | 254,329     |   |  |   | 254,329     |  
|Knoa Software, Inc. (Knoa)                                                                        |  |                                                                                                   |          |            |                 |   |          |                   |  |   | (422,800    | ) |  |   | (422,800    | )
|Statisfy, Inc. (Statisfy)                                                                         |  |                                                                                                   |          |            |                 |   |          |                   |  |   | (650,000    | ) |  |   | (650,000    | )
|Teleservices Solutions Holdings, LLC (Teleservices)                                               |  |                                                                                                   |          |            |                 |   |          |                   |  |   | (595,340    | ) |  |   | (595,340    | )
|                                                                                                  |  |                                                                                                   |           |            |                 |   |           |                   |  |   |             |   |  |   |             |  
|Total Unrealized Gains and Losses                                                                 |  |                                                                                                   |          |            |                 |   |          |                   |  |   | (14,119,367 | ) |  |   | (14,119,367 | )
|                                                                                                  |  |                                                                                                   |           |           
|Purchases of Securities/Changes to
Securities/Non-cash conversions:                               |  |                                                                                                   |           |            |                 |   |           |                   |  |   |             |   |  |   |             |  
|ACV Auctions, Inc. (ACV Auctions)                                                                 |  |                                                                                                   |          |            |                 |   |          |                   |  |   | 163,000     |   |  |   | 163,000     |  
|BeetNPath, LLC (Beetnpath)                                                                        |  |                                                                                                   |          |            |                 |   | 150,000   |                   |  |   |            |   |  |   | 150,000     |  
|ClearView Social, Inc. (Clearview Social)                                                         |  |                                                                                                   |          |            |                 |   |          |                   |  |   | 200,000     |   |  |   | 200,000     |  
|eHealth Global Technologies, Inc. (eHealth)                                                       |  |                                                                                                   | 1,500,000 |            |                 |   |          |                   |  |   |            |   |  |   | 1,500,000   |  
|Empire Genomics, LLC (Empire Genomics)                                                            |  |                                                                                                   |          |            |                 |   | 550,000   |                   |  |   |            |   |  |   | 550,000     |  
|Genicon, Inc. (Genicon)                                                                           |  |                                                                                                   | 1,700,000 |            |                 |   |          |                   |  |   |            |   |  |   | 1,700,000   |  
|GoNoodle, Inc. (GoNoodle)                                                                         |  |                                                                                                   |          |            |                 |   | 7,586     |                   |  |   |            |   |  |   | 7,586       |  
|Intrinsiq                                                                                         |  |                                                                                                   |          |            |                 |   |          |                   |  |   | 430,671     |   |  |   | 430,671     |  
|Knoa Software, Inc. (Knoa)                                                                        |  |                                                                                                   |          |            |                 |   | 48,466    |                   |  |   |            |   |  |   | 48,466      |  
|Mercantile Adjustment Bureau, LLC (Mercantile)                                                    |  |                                                                                                   |          |            |                 |   | 7,497     |                   |  |   |            |   |  |   | 7,497       |  
|OnCore Golf Technology, Inc. (Oncore Golf)                                                        |  |                                                                                                   |          |            |                 |   | 150,000   |                   |  |   |            |   |  |   | 150,000     |  
|PostProcess Technologies, Inc. (Post Process)                                                     |  |                                                                                                   |          |            |                 |   | 300,000   |                   |  |   |            |   |  |   | 300,000     |  
|SciAps, Inc. (Sciaps)                                                                             |  |                                                                                                   |          |            |                 |   | 300,000   |                   |  |   |            |   |  |   | 300,000     |  
|Tilson Technology Management, Inc. (Tilson)                                                       |  |                                                                                                   |          |            |                 |   | 200,000   |                   |  |   | 200,000     |   |  |   | 400,000     |  
|                                                                                                  |  |                                                                                                   |           |            |                 |   |           |                   |  |   |             |   |  |   |             |  
|Total Purchases of Securities/Changes to
Securities/Non-cash conversions                          |  |                                                                                                   | 3,200,000 |            |                 |   | 1,713,549 |                   |  |   | 993,671     |   |  |   | 5,907,220   |  
|                                                                                                  |  |                                                                                                   |           |           
|Repayments and Sale of Securities:                                                                |  |                                                                                                   |           |            |                 |   |           |                   |  |   |             |   |  |   |             |  
|Gemcor                                                                                            |  |                                                                                                   | (416,972  | )          |                 |   |          |                   |  |   | (15,213,813 | ) |  |   | (15,630,785 | )
|                                                                                                  |  |                                                                                                   |           |            |                 |   |           |                   |  |   |             |   |  |   |             |  
|Total Repayments and Sale of Securities                                                           |  |                                                                                                   | (416,972  | )          |                 |   |          |                   |  |   | (15,213,813 | ) |  |   | (15,630,785 | )
|                                                                                                  |  |                                                                                                   |           |            |                 |   |           |                   |  |   |             |   |  |   |             |  
|Transfers within Level 3                                                                          |  |                                                                                                   |          |            |                 |   | (95,000   | )                 |  |   | 95,000      |   |  |   |            |  
|                                                                                                  |  |                                                                                                   |           |            |                 |   |           |                   |  |   |             |   |  |   |             |  
|Ending Balance, September 30, 2016, of Level 3 Assets                                             |  | $                                                                                                 | 3,200,000 |            |                 | $ | 6,695,181 |                   |  | $ | 17,683,100  |   |  | $ | 27,578,281  |  
|                                                                                                  |  |                                                                                                   |           |            |                 |   |           |                   |  |   |             |   |  |   |             |  
|Change in unrealized appreciation on investments for the period included in changes
in net assets |  |                                                                                                   | ($        | 14,119,367 | )              
|                                                                                                  | 
|Net realized gain on investments for the period included in changes in net
assets                 |  |                                                                                                   | $         | 14,756,953 |                



32



---

##### Table of Contents

NOTE 4. OTHER ASSETS

At September 30, 2017 and December 31, 2016, other assets was comprised of the following:



|                                              |  |                              |         |  |                  |   |           | 
|--------------------------------------------- |  | ---------------------------- | ------- |  | ---------------- | - | --------- | 
|                                              |  | September 30,2017(Unaudited) |         |  | December 31,2016 |  
|Escrow receivable from Gemcor II LLC (Gemcor) |  | $                            | 550,000 |  |                  | $ | 1,100,000 | 
|Prepaid expenses                              |  |                              | 26,208  |  |                  |   | 6,758     | 
|Dividend receivable                           |  |                              |        |  |                  |   | 34,101    | 
|Operating receivables                         |  |                              | 4,279   |  |                  |   | 1,126     | 
|Equipment (net)                               |  |                              | 3,523   |  |                  |   | 6,523     | 
|                                              |  |                              |         |  |                  |   |           | 
|Total other assets                            |  | $                            | 584,010 |  |                  | $ | 1,148,508 | 
|                                              |  |                              |         |  |                  |   |           | 

During the first quarter of 2016, Gemcor II, LLC sold its assets, and $1,100,000 of the proceeds were held in
escrow, subject to potential claims. During the first quarter of 2017, $550,000 of the Gemcor escrow receivable was released and the remainder was released in October 2017.

Note 5. COMMITMENTS AND CONTINGENCIES

The Corporation did not have any commitments to fund any investments as of September 30, 2017.

Note 6. SBA DEBENTURES

Pursuant to
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 30,2017(Unaudited) |           |   | December 31,2016 |  
|Debentures guaranteed by the SBA      |  | $                            | 8,000,000 |   |                  | $ | 8,000,000 |  
|Less unamortized issue costs          |  |                              | (151,677  | ) |                  |   | (172,227  | )
|                                      |  |                              |           |   |                  |   |           |  
|Debentures guaranteed by the SBA, net |  | $                            | 7,848,323 |   |                  | $ | 7,827,773 |  
|                                      |  |                              |           |   |                  |   |           |  



33



---

##### Table of Contents

The following schedule provides the financial highlights, calculated based on weighted average
shares outstanding, for the nine months ended September 30, 2017 and the year ended December 31, 2016:



|                                                                         |  |                                                |            |    |                            |   |            |   
|------------------------------------------------------------------------ |  | ---------------------------------------------- | ---------- | -- | -------------------------- | - | ---------- | --
|                                                                         |  | Nine months endedSeptember 30,2017 (Unaudited) |            |    | Year endedDecember 31,2016 |  
|Income from investment operations (1):                                   |  |                                                |            |    |                            |   |            |   
|Investment income                                                        |  | $                                              | 0.17       |    |                            | $ | 0.16       |   
|Operating expenses                                                       |  |                                                | 0.25       |    |                            |   | 0.54       |   
|                                                                         |  |                                                |            |    |                            |   |            |   
|Investment loss before income taxes                                      |  |                                                | (0.08      | )  |                            |   | (0.38      | ) 
|Income tax benefit                                                       |  |                                                | (0.03      | )  |                            |   | (0.13      | ) 
|                                                                         |  |                                                |            |    |                            |   |            |   
|Net investment loss                                                      |  |                                                | (0.05      | )  |                            |   | (0.25      | ) 
|Net realized and unrealized (loss) gain on investments                   |  |                                                | (0.10      | )  |                            |   | 0.06       |   
|                                                                         |  |                                                |            |    |                            |   |            |   
|Decrease in net asset value                                              |  |                                                | (0.15      | )  |                            |   | (0.19      | ) 
|Net asset value, beginning of period                                     |  |                                                | 5.16       |    |                            |   | 5.35       |   
|                                                                         |  |                                                |            |    |                            |   |            |   
|Net asset value, end of period                                           |  | $                                              | 5.01       |    |                            | $ | 5.16       |   
|                                                                         |  |                                                |            |    |                            |   |            |   
|Per share market price, end of period                                    |  | $                                              | 2.96       |    |                            | $ | 3.16       |   
|                                                                         |  |                                                |            |    |                            |   |            |   
|Total return based on market value                                       |  |                                                | (6.3       | %) |                            |   | (16.1      | %)
|Total return based on net asset value                                    |  |                                                | (2.87      | %) |                            |   | (3.62      | %)
|Supplemental data:                                                       |  |                                                |            |    |                            |   |            |   
|Ratio of operating expenses before income taxes to average net assets    |  |                                                | 4.86       | %  |                            |   | 10.23      | % 
|Ratio of operating expenses including income taxes to average net assets |  |                                                | 3.18       | %  |                            |   | 8.48       | % 
|Ratio of net investment loss to average net assets                       |  |                                                | (0.93      | %) |                            |   | (3.62      | %)
|Portfolio turnover                                                       |  |                                                | 13.4       | %  |                            |   | 18.4       | % 
|Net assets, end of period                                                |  | $                                              | 31,692,476 |    |                            | $ | 32,629,363 |   
|Weighted shares outstanding, end of period                               |  |                                                | 6,321,988  |    |                            |   | 6,325,792  |   



|(1) | Per share data are based on weighted average shares outstanding and the results are rounded to the nearest cent.
|--- | ----------------------------------------------------------------------------------------------------------------

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.



34



---

##### Table of Contents

|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 and are intended to be made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as believes,
forecasts, intends, possible, expects, estimates, anticipates, or plans and similar expressions are intended to identify forward-looking statements. Among the
important factors on which such statements are based are assumptions concerning the state of the 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, 2016.

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 internally managed
investment company that lends to and invests in small companies. 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 as provided for in the 1940 Act and the rules and regulations promulgated thereunder. We have historically made the majority of our investments through our wholly-owned subsidiary, Rand Capital
SBIC, Inc. (Rand SBIC), which is our initial small business investment company (SBIC) subsidiary and has been licensed by the U.S. Small Business Administration (SBA) since 2002.

Responding to our request submitted during 2016, the U.S. Small Business Administration (SBA) issued a green light or go
forth letter authorizing us to continue our application process to obtain a license to form and operate a second SBIC subsidiary and create a new SBIC fund, Rand Capital SBIC II, L.P. (Rand SBIC II). We filed an application for Rand SBIC II in
April 2017 and it is currently under review by the SBA. We funded Rand SBIC II with $7.5 million of cash from Rand Capital Corporation which, when combined with $15 million of expected SBA leverage, will create a new $22.5 million
SBIC fund. We also expect Rand SBIC II to continue our investment strategy of focusing on privately-held, early stage and emerging growth businesses with proven management teams.



35



---

##### Table of Contents

Our initial wholly-owned subsidiary, Rand SBIC, has historically been our primary investment vehicle since its
formation and, once approved by the SBA, we expect to continue this investment strategy through Rand SBIC II. Under the SBAs pre-licensing approval protocols, we have begun investing using Rand SBIC II.

Outlook

We believe the combination
of cash on hand, proceeds from portfolio exits, potential future SBA leverage, and prospective investment income provide sufficient capital for us to continue to add new investments to our portfolio while reinvesting in existing portfolio companies
that demonstrate continued growth potential. The following short and long-term trends provide us confidence in our ability to grow Rand:



| |  |  | We expect that well run businesses will require capital to grow and should be able to compete effectively given the low cost of capital, strong business and consumer spending, and eager reception of new technologies and
service concepts.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We are able to invest larger amounts in companies, which will provide an opportunity to accelerate our rate of growth.
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | We continue to manage risk by investing with other investors, when possible.
| | - |  | ----------------------------------------------------------------------------



| |  |  | We are actively involved with the governance and management of our portfolio companies, which enables us to support their operating and marketing efforts and facilitate their growth.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | As our portfolio continues to expand, we are able to better leverage our infrastructure.
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | We have sufficient cash to invest in new opportunities and to repurchase shares for the treasury. At quarter end, we had authorization to repurchase an additional 458,954 shares of our common stock. However, our
preferred use of cash continues to be growing our portfolio.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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, 2016 under Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations.



36



---

##### Table of Contents

Financial Condition



|                  |  |                    |            |  |                   |   |            |          |  |    |            |   |  |  |       |   
|----------------- |  | ------------------ | ---------- |  | ----------------- | - | ---------- | -------- |  | -- | ---------- | - |  |  | ----- | --
|                  |  | September 30, 2017 |            |  | December 31, 2016 |   |            | Decrease |  |    | % Decrease |  
|Overview:         |  |                    |            |  |                   |   |            |          |  |    |            |   |  |  |       |   
|Total assets      |  | $                  | 39,830,404 |  |                   | $ | 42,418,530 |          |  | ($ | 2,588,126  | ) |  |  | (6.1  | %)
|Total liabilities |  |                    | 8,137,928  |  |                   |   | 9,789,167  |          |  |    | (1,651,239 | ) |  |  | (16.9 | %)
|                  |  |                    |            |  |                   |   |            |          |  |    |            |   |  |  |       |   
|Net assets        |  | $                  | 31,692,476 |  |                   | $ | 32,629,363 |          |  | ($ | 936,887    | ) |  |  | (2.9  | %)
|                  |  |                    |            |  |                   |   |            |          |  |    |            |   |  |  |       |   

Net asset value per share (NAV) was $5.01 at September 30, 2017 and $5.16 at December 31, 2016.

Our gross outstanding SBA debentures at September 30, 2017 were $8,000,000 and will mature from 2022 through 2025. Cash approximated 20%
of net assets at September 30, 2017 as compared to 38% at December 31, 2016.

Composition of Our Investment Portfolio

Our financial condition is dependent on the success of our portfolio holdings. We have invested substantially all of our assets in small to medium-sized companies. The following summarizes our investment portfolio at the dates indicated.



|                             |  |                    |            |   |                   |   |            |                    |  |   |                      |   |  |  |       |   
|---------------------------- |  | ------------------ | ---------- | - | ----------------- | - | ---------- | ------------------ |  | - | -------------------- | - |  |  | ----- | --
|                             |  | September 30, 2017 |            |   | December 31, 2016 |   |            | Increase(Decrease) |  |   | % Increase(Decrease) |  
|Investments, at cost         |  | $                  | 35,814,220 |   |                   | $ | 31,631,030 |                    |  | $ | 4,183,190            |   |  |  | 13.2  | % 
|Unrealized depreciation, net |  |                    | (5,118,532 | ) |                   |   | (4,130,549 | )                  |  |   | (987,983             | ) |  |  | (23.9 | %)
|                             |  |                    |            |   |                   |   |            |                    |  |   |                      |   |  |  |       |   
|Investments at fair value    |  | $                  | 30,695,688 |   |                   | $ | 27,500,481 |                    |  | $ | 3,195,207            |   |  |  | 11.6  | % 
|                             |  |                    |            |   |                   |   |            |                    |  |   |                      |   |  |  |       |   

Our total investments at fair value, as estimated by management and approved by our Board of Directors,
approximated 97% of net assets at September 30, 2017 versus 84% of net assets at December 31, 2016.

The change in investments
during the nine months ended September 30, 2017, at cost, is comprised of the following:



|                                                           |  |                        |           | 
|---------------------------------------------------------- |  | ---------------------- | --------- | 
|                                                           |  | CostIncrease(Decrease) |          
|New investments:                                           |  |                        |           | 
|eHealth Global Technologies, Inc. (eHealth)                |  | $                      | 2,000,000 | 
|Genicon, Inc. (Genicon)                                    |  |                        | 1,300,000 | 
|SciAps, Inc. (Sciaps)                                      |  |                        | 250,000   | 
|Mercantile Adjustment Bureau, LLC (Mercantile)             |  |                        | 100,000   | 
|BeetNPath, LLC (Beetnpath)                                 |  |                        | 100,000   | 
|Centivo Corporation (Centivo)                              |  |                        | 100,000   | 
|KnowledgeVision Systems, Inc. (Knowledge Vision)           |  |                        | 50,000    | 
|                                                           |  |                        |           | 
|Total of new investments                                   |  |                        | 3,900,000 | 
|                                                           | 
|Other changes to investments:                              |  |                        |           | 
|Empire Genomics, LLC (Empire Genomics) interest conversion |  |                        | 201,489   | 
|Sciaps interest conversion                                 |  |                        | 24,274    | 
|Microcision LLC (Microcision) interest conversion          |  |                        | 17,403    | 
|Genicon OID amortization                                   |  |                        | 13,588    | 
|Beetnpath interest conversion                              |  |                        | 11,277    | 
|GoNoodle, Inc. (GoNoodle) interest conversion              |  |                        | 7,662     | 
|Mercantile OID amortization                                |  |                        | 7,497     | 
|                                                           |  |                        |           | 
|Total of other changes to investments                      |  |                        | 283,190   | 
|                                                           |  |                        |           | 
|Net change in investments, at cost                         |  | $                      | 4,183,190 | 
|                                                           |  |                        |           | 



37



---

##### Table of Contents

Results of Operations

Our principal investment objective is to achieve long-term capital appreciation on our equity investments while maintaining a current cash flow
from our debenture and pass-through equity instruments to fund expenses. Therefore, we invest in a variety of financial instruments to provide a current return on a portion of the investment portfolio.

Comparison of the three months ended September 30, 2017 to the three months ended September 30, 2016

Investment Income



|                                     |  |                                    |         |  |                                    |   |         |                    |  |   |                      |   |  |  |       |   
|------------------------------------ |  | ---------------------------------- | ------- |  | ---------------------------------- | - | ------- | ------------------ |  | - | -------------------- | - |  |  | ----- | --
|                                     |  | Three monthsEndedSeptember 30,2017 |         |  | Three monthsendedSeptember 30,2016 |   |         | Increase(Decrease) |  |   | % Increase(Decrease) |  
|Interest from portfolio companies    |  | $                                  | 309,922 |  |                                    | $ | 224,038 |                    |  | $ | 85,884               |   |  |  | 38.3  | % 
|Interest from other investments      |  |                                    | 6,348   |  |                                    |   | 11,974  |                    |  |   | (5,626               | ) |  |  | (47.0 | %)
|Dividend and other investment income |  |                                    | 76,813  |  |                                    |   | 72,021  |                    |  |   | 4,792                |   |  |  | 6.7   | % 
|Fee income                           |  |                                    | 3,936   |  |                                    |   | 7,853   |                    |  |   | (3,917               | ) |  |  | (49.9 | %)
|                                     |  |                                    |         |  |                                    |   |         |                    |  |   |                      |   |  |  |       |   
|Total investment income              |  | $                                  | 397,019 |  |                                    | $ | 315,886 |                    |  | $ | 81,133               |   |  |  | 25.7  | % 
|                                     |  |                                    |         |  |                                    |   |         |                    |  |   |                      |   |  |  |       |   

Interest from portfolio companies  Interest from portfolio companies was 38% higher during the three months ended
September 30, 2017 versus the same period in 2016 due to the fact that we have originated more income-producing debt investments in the last year. These new debt instruments were originated from Genicon Inc. (Genicon), eHealth Global
Technologies, Inc. (eHealth), Empire Genomics, LLC (Empire Genomics) and several other portfolio companies.

The following investments
remain on non-accrual status: G-TEC Natural Gas Systems (G-Tec), First Wave Products Group, LLC (First Wave) and a portion of the
Mercantile Adjustment Bureau, LLC (Mercantile) outstanding loan balance.

Interest from other investments - The decrease in interest from other
investments is primarily due to lower average cash balances during the three months ended September 30, 2017 versus the same period in 2016.

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 or the impact of new investments or divestitures. The dividend distributions for
the respective periods were:



|                                            |  |                                     |        |  |                                     |   |        | 
|------------------------------------------- |  | ----------------------------------- | ------ |  | ----------------------------------- | - | ------ | 
|                                            |  | Three monthsended September 30,2017 |        |  | Three monthsended September 30,2016 |  
|Carolina Skiff LLC (Carolina Skiff)         |  | $                                   | 41,999 |  |                                     | $ | 34,101 | 
|New Monarch Machine Tool LLC (Monarch)      |  |                                     | 27,409 |  |                                     |   | 27,409 | 
|Tilson Technology Management, Inc. (Tilson) |  |                                     | 5,000  |  |                                     |   | 7,500  | 
|Empire Genomics LLC (Empire Genomics)       |  |                                     | 2,405  |  |                                     |   | 3,011  | 
|                                            |  |                                     |        |  |                                     |   |        | 
|Total dividend and other investment income  |  | $                                   | 76,813 |  |                                     | $ | 72,021 | 
|                                            |  |                                     |        |  |                                     |   |        | 



38



---

##### Table of Contents

Fee income - 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 from portfolio company board attendance 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 $3,936 and $6,851 for the three months ended September 30, 2017 and 2016, respectively. The income from board fees was $0 and $1,000 for the three months ended September 30, 2017 and 2016, respectively.

Expenses



|               |  |                                      |         |  |                                      |   |         |          |  |    |            |   |  |  |      |   
|-------------- |  | ------------------------------------ | ------- |  | ------------------------------------ | - | ------- | -------- |  | -- | ---------- | - |  |  | ---- | --
|               |  | Three months endedSeptember 30, 2017 |         |  | Three months endedSeptember 30, 2016 |   |         | Decrease |  |    | % Decrease |  
|Total expenses |  | $                                    | 439,048 |  |                                      | $ | 486,548 |          |  | ($ | 47,500     | ) |  |  | (9.8 | %)

Expenses predominately consist of interest expense on outstanding SBA borrowings, compensation expense, and
general and administrative expenses, including stockholder and office operating expenses and professional fees.

The decrease in expenses
during the three months ended September 30, 2017 versus the same period in 2016 was primarily caused by a 44% decrease in professional fees. Professional fees were higher during the three months ended September 30, 2016 versus the same
period in 2017 because we incurred additional expenses in connection with implementing our long-term growth strategy. These expenses included external legal, tax consulting and other advisory expenses to support refinement of our strategy,
which involved assessing options relative to the complex regulatory environment in which we operate.

Realized Gains and Losses on Investments



|                                                 |  |                                      |   |  |                                      |   |           |          |  |    |           |  
|------------------------------------------------ |  | ------------------------------------ | - |  | ------------------------------------ | - | --------- | -------- |  | -- | --------- | -
|                                                 |  | Three months endedSeptember 30, 2017 |   |  | Three months endedSeptember 30, 2016 |   |           | Decrease | 
|Realized gain on investments before income taxes |  | $                                    |  |  |                                      | $ | 1,412,500 |          |  | ($ | 1,412,500 | )

There were no realized gains or losses during the three months ended September 30, 2017.

During the three months ended September 30, 2016, we recognized a gain on the escrow receivable related to the sale of Gemcor.

Change in Unrealized Depreciation or Appreciation of Investments



|                                                                      |  |                                      |         |  |                                      |    |           |          |  |   |           | 
|--------------------------------------------------------------------- |  | ------------------------------------ | ------- |  | ------------------------------------ | -- | --------- | -------- |  | - | --------- | 
|                                                                      |  | Three months endedSeptember 30, 2017 |         |  | Three months endedSeptember 30, 2016 |    |           | Increase | 
|Change in unrealized depreciation or appreciation before income taxes |  | $                                    | 111,000 |  |                                      | ($ | 2,078,511 | )        |  | $ | 2,189,511 | 

The change in unrealized depreciation, before income taxes, for the three months ended September 30, 2017
was comprised of the following:



|                                                                                                                                |  |                                     |         | 
|------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------- | ------- | 
|                                                                                                                                |  | Three monthsended September 30,2017 |        
|Athenex, Inc. (Athenex)                                                                                                         |  |                                     | 111,000 | 
|                                                                                                                                |  |                                     |         | 
|Total change in net unrealized depreciation of investments before income taxes during the three
months ended September 30, 2017 |  | $                                   | 111,000 | 
|                                                                                                                                |  |                                     |         | 



39



---

##### Table of Contents

Athenex completed an initial public offering (IPO) during the second quarter of 2017 and its
shares of common stock are now publicly traded on the NASDAQ Global Select Market under the symbol ATNX. We hold 46,296 shares of the common stock of Athenex and valued these shares using the average bid price for the last three trading
days of the reporting period, which was then discounted 10% due to restrictions on the sale of the shares. Subsequent to quarter end, the sale restrictions on our shares in Athenex common stock were removed and its shares were freely tradable.

The decrease in unrealized depreciation or appreciation before income taxes for the three months ended September 30, 2016 was comprised
of the following:



|                                                                                                                                |  |                                     |           |  
|------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------- | --------- | -
|                                                                                                                                |  | Three monthsended September 30,2016 |          
|Reclassify Gemcor II, LLC (Gemcor) to a realized gain                                                                           |  | ($                                  | 1,412,500 | )
|Statisfy, Inc. (Statisfy)                                                                                                       |  |                                     | (325,000  | )
|Teleservices Solutions Holdings, LLC (Teleservices)                                                                             |  |                                     | (595,340  | )
|Intrinsiq Materials, Inc. (Intrinsiq)                                                                                           |  |                                     | 254,329   |  
|                                                                                                                                |  |                                     |           |  
|Total change in net unrealized depreciation of investments before income taxes during the three
months ended September 30, 2016 |  | ($                                  | 2,078,511 | )
|                                                                                                                                |  |                                     |           |  

During the first quarter of 2016, Gemcor sold its assets and we received gross cash proceeds of approximately
$14.1 million. The realized gain from the sale, before income taxes, was $14,588,813 and included $1,068,750 that was held in escrow at September 30, 2016. The escrow holdback is recorded in Other Assets on the accompanying
consolidated statement of financial position.

The valuation of our investment in Statisfy was decreased after we reviewed the portfolio
company and its financial condition and determined that a valuation adjustment was necessary.

Our investment in Teleservices was revalued
after we reviewed their operations and their current and past financial performance. This review indicated that a further deterioration of their business had occurred. If the factors that led to this reduction in valuation are overcome, the value
may be restored. The portfolio company remains in operation and is developing new business strategies.

Intrinsiqs value was
increased based on a financial analysis of the portfolio company, completed by management, indicating continued improved performance and the completion of an equity refinancing in the third quarter of 2016.

All of these value adjustments resulted from a review by our management 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 three months ended September 30, 2017 and 2016, the net increase (decrease) in net assets from operations was $57,931 and ($571,300),
respectively.



40



---

##### Table of Contents

Comparison of the nine months ended September 30, 2017 to the nine months ended September 30,
2016

Investment Income



|                                     |  |                                   |           |  |                                   |   |         |                    |  |   |                     |   |  |  |       |   
|------------------------------------ |  | --------------------------------- | --------- |  | --------------------------------- | - | ------- | ------------------ |  | - | ------------------- | - |  |  | ----- | --
|                                     |  | Nine monthsendedSeptember 30,2017 |           |  | Nine monthsendedSeptember 30,2016 |   |         | Increase(Decrease) |  |   | %Increase(Decrease) |  
|Interest from portfolio companies    |  | $                                 | 833,653   |  |                                   | $ | 525,073 |                    |  | $ | 308,580             |   |  |  | 58.8  | % 
|Interest from other investments      |  |                                   | 24,182    |  |                                   |   | 33,683  |                    |  |   | (9,501              | ) |  |  | (28.2 | %)
|Dividend and other investment income |  |                                   | 197,403   |  |                                   |   | 152,818 |                    |  |   | 44,585              |   |  |  | 29.2  | % 
|Fee income                           |  |                                   | 19,557    |  |                                   |   | 18,949  |                    |  |   | 608                 |   |  |  | 3.2   | % 
|                                     |  |                                   |           |  |                                   |   |         |                    |  |   |                     |   |  |  |       |   
|Total investment income              |  | $                                 | 1,074,795 |  |                                   | $ | 730,523 |                    |  | $ | 344,272             |   |  |  | 47.1  | % 
|                                     |  |                                   |           |  |                                   |   |         |                    |  |   |                     |   |  |  |       |   

Interest from portfolio companies  Interest from portfolio companies was 59% higher during the nine months ended
September 30, 2017 versus the same period in 2016 due to the fact that we have originated more income-producing debt investments in the last year. These new debt instruments were originated from Genicon Inc. (Genicon), eHealth Global
Technologies, Inc. (eHealth), Empire Genomics, LLC (Empire Genomics) and several other portfolio companies.

The following investments
remain on non-accrual status: G-TEC Natural Gas Systems (G-Tec), First Wave Products Group, LLC (First Wave) and a portion of the
Mercantile Adjustment Bureau, LLC (Mercantile) outstanding loan balance.

Interest from other investments - The decrease in interest from other
investments is primarily due to lower average cash balances during the nine months ended September 30, 2017 versus the same period in 2016.

Dividend and other investment income  The dividend distributions for the respective periods were:



|                                            |  |                                    |         |  |                                    |   |         | 
|------------------------------------------- |  | ---------------------------------- | ------- |  | ---------------------------------- | - | ------- | 
|                                            |  | Nine monthsended September 30,2017 |         |  | Nine monthsended September 30,2016 |  
|Carolina Skiff LLC (Carolina Skiff)         |  | $                                  | 141,372 |  |                                    | $ | 97,684  | 
|New Monarch Machine Tool LLC (Monarch)      |  |                                    | 27,409  |  |                                    |   | 27,409  | 
|Tilson Technology Management, Inc. (Tilson) |  |                                    | 15,000  |  |                                    |   | 11,250  | 
|Empire Genomics LLC (Empire Genomics)       |  |                                    | 7,598   |  |                                    |   | 3,011   | 
|SOMS Technologies, LLC (SOMS)               |  |                                    | 6,024   |  |                                    |   | 13,464  | 
|                                            |  |                                    |         |  |                                    |   |         | 
|Total dividend and other investment income  |  | $                                  | 197,403 |  |                                    | $ | 152,818 | 
|                                            |  |                                    |         |  |                                    |   |         | 

Fee income - The income associated with the amortization of financing fees was $18,557 and $15,949 for the nine months
ended September 30, 2017 and 2016, respectively. The income from board fees was $1,000 and $3,000 for the nine months ended September 30, 2017 and 2016, respectively.

Expenses



|               |  |                                     |           |  |                                     |   |           |          |  |    |            |   |  |  |       |   
|-------------- |  | ----------------------------------- | --------- |  | ----------------------------------- | - | --------- | -------- |  | -- | ---------- | - |  |  | ----- | --
|               |  | Nine months endedSeptember 30, 2017 |           |  | Nine months endedSeptember 30, 2016 |   |           | Decrease |  |    | % Decrease |  
|Total expenses |  | $                                   | 1,562,620 |  |                                     | $ | 2,915,300 |          |  | ($ | 1,352,680  | ) |  |  | (46.4 | %)

The decrease in expenses during the nine months ended September 30, 2017 versus the same period in 2016
was primarily caused by a decrease of $1,411,659 in bonus and profit sharing expense related to the Gemcor II, LLC (Gemcor) exit in early 2016. However, we incurred higher professional fees during the nine months ended September 30, 2017 that
were associated with the formation of our new SBIC fund.

Gemcor sold its assets in March 2016 and based on our ownership percentage, we
received gross cash proceeds of approximately $13.8 million, excluding an escrow receivable, and realized a gain, before income taxes, of approximately $13.2 million from the sale. Related to this sale, we expensed $1,411,659 under our
Profit Sharing Plan during the nine months ended September 30, 2016. There were no amounts earned pursuant to the Profit Sharing Plan for the nine months ended September 30, 2017.



41



---

##### Table of Contents

Realized Gains and Losses on Investments



|                                                 |  |                                     |   |  |                                     |   |            |          |  |    |            |  
|------------------------------------------------ |  | ----------------------------------- | - |  | ----------------------------------- | - | ---------- | -------- |  | -- | ---------- | -
|                                                 |  | Nine months endedSeptember 30, 2017 |   |  | Nine months endedSeptember 30, 2016 |   |            | Decrease | 
|Realized gain on investments before income taxes |  | $                                   |  |  |                                     | $ | 14,756,953 |          |  | ($ | 14,756,953 | )

There were no realized gains or losses during the nine months ended September 30, 2017.

During the nine months ended September 30, 2016, Gemcor sold its assets and we received gross cash proceeds of approximately
$13.8 million, excluding an escrow receivable, and recognized a realized gain, before income taxes, of $13.2 million from the sale. In addition, we recorded a realized gain of $168,140 during the second quarter of 2016 from an earn-out provision connected with the 2014 sale of QuaDPharma, LLC to Athenex, Inc.

Change in Unrealized
Depreciation or Appreciation of Investments



|                                                                      |  |                                     |         |   |                                     |    |            |          |  |   |            | 
|--------------------------------------------------------------------- |  | ----------------------------------- | ------- | - | ----------------------------------- | -- | ---------- | -------- |  | - | ---------- | 
|                                                                      |  | Nine months endedSeptember 30, 2017 |         |   | Nine months endedSeptember 30, 2016 |    |            | Increase | 
|Change in unrealized depreciation or appreciation before income taxes |  | ($                                  | 987,983 | ) |                                     | ($ | 14,119,367 | )        |  | $ | 13,131,384 | 

The change in unrealized depreciation, before income taxes, for the nine months ended September 30, 2017
was comprised of the following:



|                                                                                                                               |  |                                     |          |  
|------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------------- | -------- | -
|                                                                                                                               |  | Nine months endedSeptember 30, 2017 |         
|City Dining Cards, Inc. (Loupe)                                                                                                |  | ($                                  | 500,000  | )
|Teleservices Solutions Holdings, LLC (Teleservices)                                                                            |  |                                     | (395,398 | )
|SciAps, Inc. (Sciaps)                                                                                                          |  |                                     | (300,000 | )
|Mercantile Adjustment Bureau, LLC (Mercantile)                                                                                 |  |                                     | (250,000 | )
|Athenex, Inc. (Athenex)                                                                                                        |  |                                     | 308,336  |  
|ACV Auctions, Inc. (ACV)                                                                                                       |  |                                     | 119,356  |  
|BeetNPath, LLC (Beetnpath)                                                                                                     |  |                                     | 29,723   |  
|                                                                                                                               |  |                                     |          |  
|Total change in net unrealized depreciation of investments before income taxes during the nine
months ended September 30, 2017 |  | ($                                  | 987,983  | )
|                                                                                                                               |  |                                     |          |  

The valuations of our investments in Loupe, Mercantile and Teleservices were decreased after we reviewed each
portfolio company and its current and projected financial condition and determined that a valuation adjustment was necessary.

The
valuation of Sciaps was decreased to revalue our equity holdings based upon the liquidation preferences of our securities as compared to the most recent equity round of financing completed by Sciaps.

In accordance with our valuation policy, we increased the value of our investments in ACV and Beetnpath based on a significant equity
financing by a new non-strategic outside entity.

Athenex completed an initial public offering
(IPO) during the second quarter of 2017 and its shares of common stock are now publicly traded on the NASDAQ Global Select Market under the symbol ATNX. We hold 46,296 shares of the common stock of Athenex and valued these shares using
the average bid price for the last three trading days of the reporting period, which was then discounted due to restrictions on the sale of the shares.



42



---

##### Table of Contents

The decrease in unrealized depreciation or appreciation before income taxes for the nine months
ended September 30, 2016 was comprised of the following:



|                                                                                                                               |  |                                    |            |  
|------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------------- | ---------- | -
|                                                                                                                               |  | Nine monthsended September 30,2016 |           
|Reclassify Gemcor II, LLC (Gemcor) to a realized gain                                                                          |  | ($                                 | 12,775,000 | )
|Statisfy, Inc. (Statisfy)                                                                                                      |  |                                    | (650,000   | )
|Teleservices Solutions Holdings, LLC (Teleservices)                                                                            |  |                                    | (595,340   | )
|Knoa Software, Inc. (Knoa)                                                                                                     |  |                                    | (422,800   | )
|Athenex, Inc. (Athenex)                                                                                                        |  |                                    | 69,444     |  
|Intrinsiq Materials, Inc. (Intrinsiq)                                                                                          |  |                                    | 254,329    |  
|                                                                                                                               |  |                                    |            |  
|Total change in net unrealized depreciation of investments before income taxes during the nine
months ended September 30, 2016 |  | ($                                 | 14,119,367 | )
|                                                                                                                               |  |                                    |            |  

During the first quarter of 2016, Gemcor sold its assets and we received gross cash proceeds of approximately
$14.1 million. The realized gain from the sale, before income taxes, was $14,588,813 and included $1,068,750 that was held in escrow at September 30, 2016. The escrow holdback is recorded in Other Assets on the accompanying
consolidated statement of financial position.

The valuation of our investment in Statisfy was decreased after we reviewed the portfolio
company and its financial condition and determined that a valuation adjustment was necessary.

Our investment in Teleservices was revalued
after we reviewed their operations and their current and past financial performance. This review indicated that a further deterioration of their business had occurred. If the factors that led to this reduction in valuation are overcome, the value
may be restored. The portfolio company remains in operation and is developing new business strategies.

The valuation of our investment in
Knoa was decreased during the nine months ended September 30, 2016 to value our equity investment at a value consistent with the anticipated pricing for Knoas equity financing.

In accordance with our valuation policy, we increased the value of our investment in Athenex based on a significant equity financing by a new non-strategic outside entity. This new financing used a higher valuation for Athenex than had been used for its prior financing rounds.

Intrinsiqs value was increased based on a financial analysis of the portfolio company, completed by management, indicating continued
improved performance and the completion of an equity refinancing in the third quarter of 2016.

All of these value adjustments resulted
from a review by our management using the guidance set forth by ASC 820 and our established valuation policy.

Net 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 decrease in net assets from operations on our consolidated statements of operations. For the nine months ended September 30, 2017 and 2016, the net decrease in net assets from operations was ($936,887) and ($986,912),
respectively.



43



---

##### Table of Contents

Liquidity and Capital Resources

Our principal long-term objective is to achieve growth in net asset value per share through capital appreciation. Therefore, a significant
portion of our investment portfolio is structured to maximize the potential for capital appreciation, and certain portfolio investments may be structured to provide little or no current yield in the form of dividends or interest payments.

As of September 30, 2017, our total liquidity consisted of approximately $6.4 million in cash on hand.

Net cash used by operating activities has averaged approximately $2,800,000 over the last three years. The average cash used for investment in
portfolio companies over the last three years was $5,500,000. Our cash flow from operations may fluctuate based on the timing of the receipt of dividend income and realized gains and the associated income taxes paid. We will generally use cash to
fund our operating expenses and also to invest in companies, as we seek to build our portfolio utilizing our available cash and proceeds from liquidations of portfolio investments. We anticipate that we will continue to exit investments. However,
the timing of liquidation events within the portfolio is difficult to project with any certainty. As of September 30, 2017, we did not have any outstanding commitments to borrow funds from the SBA. Starting in 2022, our SBA debt begins to reach
maturity, 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 received authorization from the SBA during the fourth quarter of 2016 to file a formal application to form and operate our second SBIC
subsidiary and start a new SBIC fund. We capitalized Rand SBIC II with $7.5 million of cash from Rand Capital Corporation during April 2017 and, if our application is approved by the SBA, we anticipate a debt commitment from the SBA equal to
two times our equity capital investment, or $15 million, for a total fund size of $22.5 million.

We believe that the cash on
hand at September 30, 2017 and the scheduled interest payments on our portfolio investments will be sufficient to meet our cash needs for the next twelve months. We continue to seek potential exits from portfolio companies to increase the
amount of liquidity available for new investments, operating activities and future SBA debenture repayment obligations.



|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 our management 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 the portfolio may differ significantly from the values that would be placed on the 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.

At times, a portion of our portfolio may include
marketable securities traded in the over-the-counter market. 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, 2017, we did not have any off-balance sheet arrangements or hedging or similar derivative financial instrument investments.



44



---

##### Table of Contents

|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 September 30,
2017. 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, 2017.

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.



45



---

##### Table of Contents

PART II.

OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

None.



|Item 1A. | Risk Factors
|-------- | ------------

See Part I, Item 1A, Risk Factors, of the Annual
Report on Form 10-K for the year ended December 31, 2016.



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

Issuer Purchases of
Equity Securities



|                     |  |                                    |   |  |                                 |  |   |                                                                      |  |  |                                                                                    |  |  |  |         | 
|-------------------- |  | ---------------------------------- | - |  | ------------------------------- |  | - | -------------------------------------------------------------------- |  |  | ---------------------------------------------------------------------------------- |  |  |  | ------- | 
|Period               |  | Total number ofshares purchased(1) |   |  | Average price paidper share (2) |  |   | Total number of sharespurchased as part ofpubliclyannounced plan (3) |  |  | Maximum number ofshares that may yet bepurchased under the sharerepurchase program | 
|7/1/2017  7/31/2017 |  |                                    |  |  |                                 |  |  |                                                                      |  |  |                                                                                   |  |  |  | 458,954 | 
|8/1/2017 8/31/2017  |  |                                    |  |  |                                 |  |  |                                                                      |  |  |                                                                                   |  |  |  | 458,954 | 
|9/1/2017 9/30/2017  |  |                                    |  |  |                                 |  |  |                                                                      |  |  |                                                                                   |  |  |  | 458,954 | 



|(1) | There were no shares repurchased during the third quarter of 2017.
|--- | ------------------------------------------------------------------

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

|(3) | On October 26, 2017, the Board of Directors extended the repurchase authorization of up to 1,000,000 shares of the Corporations common stock on the open market at prices no greater than the then current net
asset value through October 26, 2018.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Item 3. | Defaults upon Senior Securities
|------- | -------------------------------

None.



|Item 4. | Mine Safety Disclosures
|------- | -----------------------

Not Applicable.



|Item 5. | Other Information
|------- | -----------------

None.



46



---

##### Table of Contents

|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)(i)  |  | Certificate of Incorporation of the Corporation, incorporated by reference to Exhibit (a) (1) and (a) (2) of Form N-2 filed with the Securities Exchange Commission on April 22, 1997 (File No. 333-25617).                                                   
|        | 
|(3)(ii) |  | 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 Securities and Exchange Commission on November 2, 2016 (File No. 814-00235).
|        | 
|(4)     |  | Specimen certificate of common stock certificate, incorporated by reference to Exhibit (d) 
(1) of Form N-2 filed with the Securities Exchange Commission on April 22, 1997 (File No. 333-25617).                                                             
|        | 
|(31.1)  |  | Certification of the Chief Executive Officer Pursuant to Rules 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as
 amended, filed herewith.                                                                                                    
|        | 
|(31.2)  |  | Certification of the Chief Financial Officer Pursuant to Rules 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as
 amended, filed herewith.                                                                                                    
|        | 
|(32.1)  |  | Section 1350 Certifications  Rand Capital Corporation  furnished herewith                                                                                                                                                                                   



---

##### Table of Contents

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

Dated: November 6, 2017



RAND CAPITAL CORPORATIONBy:

/s/ Allen F. GrumAllen F. Grum, PresidentBy:

/s/ Daniel P. PenberthyDaniel P. Penberthy, Treasurer