UNITED
STATES

SECURITIES
AND EXCHANGE COMMISSION

Washington,
D.C. 20549



FORM
10-Q



[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For
the quarterly period ended March 31, 2020



[  ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For
the Transition Period from _____ to _______



Commission
File Number: 814-00235



Rand
Capital Corporation

(Exact
Name of Registrant as specified in its Charter)



|New
    York                                 |  | 16-0961359             
|-------------------------------------------- |  | -----------------------
|(State
    or Other Jurisdiction             |  | (IRS
    Employer      
|of
    Incorporation or Organization)        |  | Identification
    No.)
|                                             |  |                        
|2200
    Rand Building, Buffalo, NY          |  | 14203                  
|(Address
    of Principal executive offices) |  | (Zip
    Code)         



(716)
853-0802

(Registrant’s
telephone number, including area code)



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



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



Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.

Yes
☒ No ☐



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



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



| | Large
    accelerated filer ☐ | Accelerated
    filer ☐        
| | ----------------------------- | -------------------------------
| | Non-accelerated
    filer ☒   | 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 May 8, 2020, there were 14,655,321 shares of the registrant’s common stock outstanding.


















RAND
CAPITAL CORPORATION

TABLE
OF CONTENTS FOR FORM 10-Q



|             | PART I. – FINANCIAL INFORMATION                                                                                 |   
|------------ | --------------------------------------------------------------------------------------------------------------- | --
|             |                                                                                                                 |   
|Item
    1.  | Financial Statements and Supplementary Data                                                                     | 1 
|             |                                                                                                                 |   
|             | Consolidated Statements of Financial Position as of March 31, 2020 (Unaudited) and December 31, 2019            | 1 
|             |                                                                                                                 |   
|             | Consolidated Statements of Operations for the Three Months Ended March 31, 2020 and 2019 (Unaudited)            | 2 
|             |                                                                                                                 |   
|             | Consolidated Statements of Changes in Net Assets for the Three Months Ended March 31, 2020 and 2019 (Unaudited) | 3 
|             |                                                                                                                 |   
|             | Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019 (Unaudited)            | 4 
|             |                                                                                                                 |   
|             | Consolidated Schedule of Portfolio Investments as of March 31, 2020 (Unaudited)                                 | 5 
|             |                                                                                                                 |   
|             | Consolidated Schedule of Portfolio Investments as of December 31, 2019                                          | 13
|             |                                                                                                                 |   
|             | Notes to the Consolidated Financial Statements (Unaudited)                                                      | 9 
|             |                                                                                                                 |   
|Item
    2.  | Management’s Discussion and Analysis of Financial Condition and Results of Operations                           | 37
|             |                                                                                                                 |   
|Item
    3.  | Quantitative and Qualitative Disclosures about Market Risk                                                      | 45
|             |                                                                                                                 |   
|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                                                     | 47
|             |                                                                                                                 |   
|Item
    3.  | Defaults upon Senior Securities                                                                                 | 47
|             |                                                                                                                 |   
|Item
    4.  | Mine Safety Disclosures                                                                                         | 47
|             |                                                                                                                 |   
|Item
    5.  | Other Information                                                                                               | 47
|             |                                                                                                                 |   
|Item
    6.  | Exhibits                                                                                                        | 48











PART
I. FINANCIAL INFORMATION



Item
1. Financial Statements and Supplementary Data



RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION



|                                                                                                                |  | March 31, 2020 (Unaudited) |            |   | December 31, 2019 |  
|--------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ---------- | - | ----------------- | -
|ASSETS                                                                                                          |  |                            |            |   |                   |  
|Investments at fair value:                                                                                      |  |                            |            |   |                   |  
|Affiliate investments (cost of $20,562,778 and $19,035,446, respectively)                                       |  | $                          | 13,168,576 |   |                   | $
|Non- Control/Non-Affiliate investments (cost of $23,738,493 and $25,584,017, respectively)                      |  |                            | 22,805,701 |   |                   |  
|Total investments, at fair value (cost of $44,301,271 and $44,619,463, respectively)                            |  |                            | 35,974,277 |   |                   |  
|Cash and cash equivalents                                                                                       |  |                            | 29,100,903 |   |                   |  
|Interest receivable (net of allowance of $166,413)                                                              |  |                            | 138,589    |   |                   |  
|Deferred tax asset                                                                                              |  |                            | -          |   |                   |  
|Prepaid income taxes                                                                                            |  |                            | 39,716     |   |                   |  
|Other assets                                                                                                    |  |                            | 129,271    |   |                   |  
|                                                                                                                |  |                            |            |   |                   |  
|Total assets                                                                                                    |  | $                          | 65,382,756 |   |                   | $
|                                                                                                                |  |                            |            |   |                   |  
|LIABILITIES AND STOCKHOLDERS’ EQUITY (NET ASSETS)                                                               |  |                            |            |   |                   |  
|Liabilities:                                                                                                    |  |                            |            |   |                   |  
|Debentures guaranteed by the SBA (net of debt issuance costs)                                                   |  | $                          | 10,796,332 |   |                   | $
|Accounts payable and accrued expenses                                                                           |  |                            | 266,316    |   |                   |  
|Deferred tax payable                                                                                            |  |                            | 227,622    |   |                   |  
|Profit sharing and bonus payable                                                                                |  |                            | -          |   |                   |  
|Deferred revenue                                                                                                |  |                            | 33,833     |   |                   |  
|Total liabilities                                                                                               |  |                            | 11,324,103 |   |                   |  
|Commitments and contingencies (See Note 5)                                                                      |  |                            |            |   |                   |  
|                                                                                                                |  |                            |            |   |                   |  
|Stockholders’ equity (net assets):                                                                              |  |                            |            |   |                   |  
|Common stock, $0.10 par; shares authorized 100,000,000; shares issued 15,196,367; shares outstanding 14,655,321 |  |                            | 1,519,637  |   |                   |  
|Capital in excess of par value                                                                                  |  |                            | 34,142,455 |   |                   |  
|Accumulated net investment loss                                                                                 |  |                            | (1,212,828 | ) |                   |  
|Undistributed net realized gain on investments                                                                  |  |                            | 29,476,732 |   |                   |  
|Net unrealized depreciation on investments                                                                      |  |                            | (8,398,238 | ) |                   |  
|Treasury stock, at cost: 541,046 shares                                                                         |  |                            | (1,469,105 | ) |                   |  
|Total stockholders’ equity (net assets) (per share – 3/31/20: $3.69, 12/31/19: $3.66)                           |  |                            | 54,058,653 |   |                   |  
|Total liabilities and stockholders’ equity (net assets)                                                         |  | $                          | 65,382,756 |   |                   | $



See
accompanying notes



1







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
STATEMENTS OF OPERATIONS

(Unaudited)



|                                                                           |  | Three
months ended
March 31, 2020 |            |   | Three
months ended
March 31, 2019 |  
|-------------------------------------------------------------------------- |  | --------------------------------- | ---------- | - | --------------------------------- | -
|Investment
    income:                                                     |  |                                   |            |   |                                   |  
|Interest
    from portfolio companies:                                     |  |                                   |            |   |                                   |  
|Affiliate
    investments                                                  |  | $                                 | 138,846    |   |                                   | $
|Non-Control/Non-Affiliate
    investments                                  |  |                                   | 396,855    |   |                                   |  
|Total
    interest from portfolio companies                                |  |                                   | 535,701    |   |                                   |  
|                                                                           |  |                                   |            |   |                                   |  
|Interest
    from other investments:                                       |  |                                   |            |   |                                   |  
|Non-Control/Non-Affiliate
    investments                                  |  |                                   | 83,250     |   |                                   |  
|Total
    interest from other investments                                  |  |                                   | 83,250     |   |                                   |  
|                                                                           |  |                                   |            |   |                                   |  
|Dividend
    and other investment income:                                  |  |                                   |            |   |                                   |  
|Affiliate
    investments                                                  |  |                                   | 13,125     |   |                                   |  
|Total
    dividend and other investment income                             |  |                                   | 13,125     |   |                                   |  
|                                                                           |  |                                   |            |   |                                   |  
|Fee
    income:                                                            |  |                                   |            |   |                                   |  
|Affiliate
    investments                                                  |  |                                   | 1,250      |   |                                   |  
|Non-Control/Non-Affiliate
    investments                                  |  |                                   | 2,500      |   |                                   |  
|Total
    fee income                                                       |  |                                   | 3,750      |   |                                   |  
|Total
    investment income                                                |  |                                   | 635,826    |   |                                   |  
|Expenses:                                                                  |  |                                   |            |   |                                   |  
|Base
    management fee (see Note 8)                                       |  |                                   | 140,377    |   |                                   |  
|Interest
    on SBA obligations                                            |  |                                   | 104,190    |   |                                   |  
|Professional
    fees                                                      |  |                                   | 179,119    |   |                                   |  
|Stockholders
    and office operating                                      |  |                                   | 51,545     |   |                                   |  
|Directors’
    fees                                                        |  |                                   | 28,375     |   |                                   |  
|Insurance                                                                  |  |                                   | 10,668     |   |                                   |  
|Corporate
    development                                                  |  |                                   | 1,874      |   |                                   |  
|Other
    operating                                                        |  |                                   | 358        |   |                                   |  
|Salaries                                                                   |  |                                   | -          |   |                                   |  
|Employee
    benefits                                                      |  |                                   | -          |   |                                   |  
|Total
    expenses                                                         |  |                                   | 516,506    |   |                                   |  
|Net
    investment gain before income taxes                                |  |                                   | 119,320    |   |                                   |  
|Income
    tax (benefit) expense                                           |  |                                   | (419,101   | ) |                                   |  
|Net
    investment gain                                                    |  |                                   | 538,421    |   |                                   |  
|                                                                           |  |                                   |            |   |                                   |  
|Net
    realized gain on sales and dispositions of investments:            |  |                                   |            |   |                                   |  
|Control
    investments                                                    |  |                                   | -          |   |                                   |  
|Non-Control/Non-Affiliate
    investments                                  |  |                                   | 2,393,451  |   |                                   |  
|Income
    tax expense                                                     |  |                                   | -          |   |                                   |  
|Net
    realized gain on sales and dispositions of investments             |  |                                   | 2,393,451  |   |                                   |  
|Net
    change in unrealized depreciation on investments:                  |  |                                   |            |   |                                   |  
|Affiliate
    investments                                                  |  |                                   | (510,191   | ) |                                   |  
|Non-Control/Non-Affiliate
    investments                                  |  |                                   | (218,132   | ) |                                   |  
|                                                                           |  |                                   |            |   |                                   |  
|Change
    in unrealized depreciation before income taxes                  |  |                                   | (728,323   | ) |                                   |  
|Deferred
    income tax expense                                            |  |                                   | 1,773,412  |   |                                   |  
|Net
    change in unrealized depreciation on investments                   |  |                                   | (2,501,735 | ) |                                   |  
|                                                                           |  |                                   |            |   |                                   |  
|Net
    realized and unrealized (loss) gain on investments                 |  |                                   | (108,284   | ) |                                   |  
|Net
    increase in net assets from operations                             |  | $                                 | 430,137    |   |                                   | $
|Weighted
    average shares outstanding                                    |  |                                   | 14,655,321 |   |                                   |  
|Basic
    and diluted net increase in net assets from operations per share |  | $                                 | 0.03       |   |                                   | $



See
accompanying notes



2







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
STATEMENTS OF CHANGES IN NET ASSETS

(Unaudited)



|                                                           |  | Three months ended March 31, 2020 |            |   | Three months ended March 31, 2019 |  
|---------------------------------------------------------- |  | --------------------------------- | ---------- | - | --------------------------------- | -
|                                                           |  |                                   |            |   |                                   |  
|Net assets at beginning of period                          |  | $                                 | 53,628,516 |   |                                   | $
|                                                           |  |                                   |            |   |                                   |  
|Net investment gain                                        |  |                                   | 538,421    |   |                                   |  
|Net realized gain on sales and dispositions of investments |  |                                   | 2,393,451  |   |                                   |  
|Net change in unrealized depreciation on investments       |  |                                   | (2,501,735 | ) |                                   |  
|Net increase in net assets from operations                 |  |                                   | 430,137    |   |                                   |  
|Net assets at end of period                                |  | $                                 | 54,058,653 |   |                                   | $
|Accumulated net investment loss                            |  | $                                 | (1,212,828 | ) |                                   | $



See
accompanying notes



3







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                                  |  | Three months ended March 31, 2020 |            |   | Three months ended March 31, 2019 |  
|------------------------------------------------------------------------------------------------- |  | --------------------------------- | ---------- | - | --------------------------------- | -
|Cash flows from operating activities:                                                             |  |                                   |            |   |                                   |  
|Net increase in net assets from operations                                                        |  | $                                 | 430,137    |   |                                   | $
|Adjustments to reconcile net increase in net assets to net cash provided by operating activities: |  |                                   |            |   |                                   |  
|Investments in portfolio companies                                                                |  |                                   | (1,740,188 | ) |                                   |  
|Proceeds from sale of portfolio investments                                                       |  |                                   | 4,538,947  |   |                                   |  
|Proceeds from loan repayments                                                                     |  |                                   | -          |   |                                   |  
|Net realized gain on portfolio investments                                                        |  |                                   | (2,393,451 | ) |                                   |  
|Change in unrealized depreciation on investments before income taxes                              |  |                                   | 728,323    |   |                                   |  
|Deferred income tax expense                                                                       |  |                                   | 1,431,820  |   |                                   |  
|Depreciation and amortization                                                                     |  |                                   | 9,418      |   |                                   |  
|Original issue discount amortization                                                              |  |                                   | (15,691    | ) |                                   |  
|Non-cash conversion of debenture interest                                                         |  |                                   | (71,425    | ) |                                   |  
|Changes in operating assets and liabilities:                                                      |  |                                   |            |   |                                   |  
|Decrease in interest receivable                                                                   |  |                                   | 3,676      |   |                                   |  
|Decrease (increase) in other assets                                                               |  |                                   | 136,104    |   |                                   |  
|Decrease in prepaid income taxes                                                                  |  |                                   | 303,380    |   |                                   |  
|Increase (decrease) in accounts payable and accrued expenses                                      |  |                                   | 7,879      |   |                                   |  
|Decrease in profit sharing and bonus payable                                                      |  |                                   | (80,000    | ) |                                   |  
|Decrease in deferred revenue                                                                      |  |                                   | (3,746     | ) |                                   |  
|Total adjustments                                                                                 |  |                                   | 2,855,046  |   |                                   |  
|Net cash provided by operating activities                                                         |  |                                   | 3,285,183  |   |                                   |  
|                                                                                                  |  |                                   |            |   |                                   |  
|Cash flows from financing activities:                                                             |  |                                   |            |   |                                   |  
|Proceeds from SBA debentures                                                                      |  |                                   | -          |   |                                   |  
|Origination costs to SBA                                                                          |  |                                   | -          |   |                                   |  
|Net cash provided by financing activities                                                         |  |                                   | -          |   |                                   |  
|                                                                                                  |  |                                   |            |   |                                   |  
|Net increase in cash and cash equivalents                                                         |  |                                   | 3,285,183  |   |                                   |  
|Cash and cash equivalents:                                                                        |  |                                   |            |   |                                   |  
|Beginning of period                                                                               |  |                                   | 25,815,720 |   |                                   |  
|End of period                                                                                     |  | $                                 | 29,100,903 |   |                                   | $



See
accompanying notes



4







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

March
31, 2020

(Unaudited)



|Company,
    Geographic Location, Business Description, (Industry) and Website                                                                                                                                                                                                                                |  | (a) Type
                                         of Investment |  | (b) Date Acquired |  | (c)  Equity |    |   | Cost |   |           | (d)(f) Fair Value |  |   | Percent
    
    of Net
    Assets | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------- |  | ----------------- |  | ----------- | -- | - | ---- | - | --------- | ----------------- |  | - | ---------------------------------- | 
|Non-Control/Non-Affiliate
    Investments – 42.1% of net assets: (j)                                                                                                                                                                                                                                          |  |                                                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|                                                                                                                                                                                                                                                                                                              |  |                                                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|ACV
    Auctions, Inc. (e)(g)                                                                                                                                                                                                                                                                                 |  | 1,181,160
    Series A Preferred.                               |  | 8/12/16           |  |             | <1 | % |      | $ | 163,000   |                   |  | $ | 6,531,815                          | 
|Buffalo,
    NY. Live mobile wholesale auctions for new and used car dealers. (Software)                                                                                                                                                                                                                      |  |                                                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|www.acvauctions.com                                                                                                                                                                                                                                                                                           |  |                                                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|                                                                                                                                                                                                                                                                                                              |  |                                                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|Advantage
    24/7 LLC (g)                                                                                                                                                                                                                                                                                    |  | $140,000
    Term Note at 7%                                    |  | 12/30/10          |  |             | 0  | % |      |   |           |                   |  |   |                                    | 
|Williamsville,
    NY. Marketing program for wine and                                                                                                                                                                                                                                                         |  | due
    January 1, 2022                                         |  |                   |  |             |    |   |      |   | 65,000    |                   |  |   | 65,000                             | 
|spirits dealers.
    (Marketing Company)                                                                                                                                                                                                                                                                      |  |                                                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|www.advantage24-7.com                                                                                                                                                                                                                                                                                         |  |                                                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|                                                                                                                                                                                                                                                                                                              |  |                                                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|AIKG
    LLC (Andretti) (e)(l)                                                                                                                                                                                                                                                                                |  | $4,250,000
    Term Notes at                                    |  | 11/8/19           |  |             | 0  | % |      |   |           |                   |  |   |                                    | 
|Marietta,
    GA. Entertainment company engaged in                                                                                                                                                                                                                                                            |  | 12%
    (+4% PIK) due December 28,                              |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|indoor
    karting, games and food. (Entertainment)                                                                                                                                                                                                                                                           |  | 2023.                                                           |  |                   |  |             |    |   |      |   | 4,442,595 |                   |  |   | 4,442,595                          | 
|www.andrettikarting.com                                                                                                                                                                                                                                                                                       |  |                                                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|                                                                                                                                                                                                                                                                                                              |  |                                                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|Apollo
    Investment Corporation                                                                                                                                                                                                                                                                             |  | 35,000
    shares                                               |  | 3/16/20           |  |             | <1 | % |      |   | 364,084   |                   |  |   | 253,633                            | 
|NASDAQ:
    AINV (n)                                                                                                                                                                                                                                                                                          |  |                                                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|New
    York, NY.                                                                                                                                                                                                                                                                                             |  |                                                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|                                                                                                                                                                                                                                                                                                              |  |                                                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|Ares
    Capital Corporation NASDAQ: ARCC (n)                                                                                                                                                                                                                                                                 |  | 27,000
    shares                                               |  | 3/16/20           |  |             | <1 | % |      |   | 343,460   |                   |  |   | 294,390                            | 
|New
    York, NY.                                                                                                                                                                                                                                                                                             |  |                                                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|                                                                                                                                                                                                                                                                                                              |  |                                                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|Centivo
    Corporation (e)(g)                                                                                                                                                                                                                                                                                |  | 190,967
    Series A-1 Preferred.                               |  | 7/5/17            |  |             | <1 | % |      |   | 200,000   |                   |  |   | 200,000                            | 
|New
    York, NY. Tech-enabled health solutions                                                                                                                                                                                                                                                               |  | 337,808
    Series A-2 Preferred.                               |  |                   |  |             |    |   |      |   | 101,342   |                   |  |   | 101,342                            | 
|company
    that helps self-insured employers                                                                                                                                                                                                                                                                 |  | Total
    Centivo                                               |  |                   |  |             |    |   |      |   | 301,342   |                   |  |   | 301,342                            | 
|and
    employees save money and have a better experience their. (Health Care)                                                                                                                                                                                                                                |  |                                                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|www.centivo.com                                                                                                                                                                                                                                                                                               |  |                                                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|                                                                                                                                                                                                                                                                                                              |  |                                                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|Empire
                                         Genomics, LLC (g)                                                                                                                                                                                                                                             |  | $1,209,014
    Senior Secured                                   |  | 6/13/14           |  |             | 0  | % |      |   |           |                   |  |   |                                    | 
|Buffalo,
    NY. Molecular diagnostics company that                                                                                                                                                                                                                                                           |  | Convertible
    Term Notes at 10%                               |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|offers
    a comprehensive menu of assay services for                                                                                                                                                                                                                                                         |  | due
    December 31, 2020.                                      |  |                   |  |             |    |   |      |   | 1,308,675 |                   |  |   | 157,654                            | 
|diagnosing
    and guiding patient therapeutic treatments.                                                                                                                                                                                                                                                    |  | $444,915
    Promissory Note at 9%                              |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|(Health
    Care)                                                                                                                                                                                                                                                                                             |  | (5%
    deferred) due December 31,                              |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|www.empiregenomics.com                                                                                                                                                                                                                                                                                        |  | 2020.                                                           |  |                   |  |             |    |   |      |   | 444,915   |                   |  |   | 444,915                            | 
|                                                                                                                                                                                                                                                                                                              |  | Total
    Empire                                                |  |                   |  |             |    |   |      |   | 1,753,590 |                   |  |   | 602,569                            | 
|                                                                                                                                                                                                                                                                                                              |  |                                                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|First
                                         Wave Technologies, Inc. (e)(g) Batavia,
                                         NY. Sells First Crush automated pill crusher that crushes and grinds pills for nursing
                                         homes and medical institutions. (Health Care) |  | 670,443.2
    Class A Common.                                   |  | 4/19/12           |  |             | 4  | % |      |   | 661,563   |                   |  |   | 33,000                             | 
|www.firstwavetechnologies.com                                                                                                                                                                                                                                                                                 |  |                                                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|                                                                                                                                                                                                                                                                                                              |  |                                                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|FS
                                         KKR Capital Corp. NYSE: FSK (n) Philadelphia,
                                         PA.                                                                                                                                                                        |  | 100,000
    shares                                              |  | 3/16/20           |  |             | <1 | % |      |   | 338,980   |                   |  |   | 312,333                            | 
|                                                                                                                                                                                                                                                                                                              |  |                                                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|GiveGab,
                                         Inc. (e)(g)                                                                                                                                                                                                                                                 |  | 5,084,329
    Series Seed Preferred.                            |  | 3/13/13           |  |             | 4  | % |      |   | 616,221   |                   |  |   | 616,221                            | 
|Ithaca,
    NY. Nonprofit giving platform that provides an easy and effective way for fundraising professionals to raise money online.
    (Software)                                                                                                                                                         |  |                                                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|www.givegab.com                                                                                                                                                                                                                                                                                               |  |                                                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|                                                                                                                                                                                                                                                                                                              |  |                                                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|Golub
    Capital BDC, Inc. NASDAQ: GBDC (n)                                                                                                                                                                                                                                                                  |  | 25,000
    shares                                               |  | 3/16/20           |  |             | <1 | % |      |   | 346,597   |                   |  |   | 316,000                            | 
|New
    York, NY.                                                                                                                                                                                                                                                                                             |  |                                                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|                                                                                                                                                                                                                                                                                                              |  |                                                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|GoNoodle,
    Inc. (g)(l)                                                                                                                                                                                                                                                                                     |  | $1,500,000
    Secured Note at 12%                              |  | 2/6/15            |  |             | <1 | % |      |   |           |                   |  |   |                                    | 
|Nashville,
    TN. Student engagement education                                                                                                                                                                                                                                                               |  | (1%
    PIK) due September 30, 2024.                            |  |                   |  |             |    |   |      |   | 1,506,21  |                   |  |   | 1,506,214                          | 
|software
    providing core aligned physical activity                                                                                                                                                                                                                                                         |  | Warrant
    for 47,324 Series C                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|breaks.
    (Software)                                                                                                                                                                                                                                                                                        |  | Preferred.                                                      |  |                   |  |             |    |   |      |   | 25        |                   |  |   | 25                                 | 
|www.gonoodle.com                                                                                                                                                                                                                                                                                              |  | Warrant
    for 21,948 Series D                                 |  |                   |  |             |    |   |      |   |           |                   |  |   |                                    | 
|                                                                                                                                                                                                                                                                                                              |  | Preferred.                                                      |  |                   |  |             |    |   |      |   | 38        |                   |  |   | 38                                 | 
|                                                                                                                                                                                                                                                                                                              |  | Total
    GoNoodle                                              |  |                   |  |             |    |   |      |   | 1,506,277 |                   |  |   | 1,506,277                          | 



5







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

March
31, 2020 (Continued)

(Unaudited)



|Company,
    Geographic Location, Business 
    Description, (Industry) and Website                                                                                                                                                                                                                        |  | (a)  Type
                                         of Investment |  | (b) Date Acquired |  | (c)  Equity |    |   | Cost |  |           | (d)(f) Fair Value |  |  | Percent
    of Net Assets | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------- |  | ----------------- |  | ----------- | -- | - | ---- |  | --------- | ----------------- |  |  | ------------------------- | 
|HDI
                                         Acquisition LLC (Hilton Displays) (l)                                                                                                                                                                                                                         |  | $1,245,119
    Term Loan at 12% (+2%                             |  | 11/8/19           |  |             | 0  | % |      |  |           |                   |  |  |                           | 
|Greenville,
    NC. HDI is engaged in manufacturing,                                                                                                                                                                                                                                                       |  | PIK)
    due June 20, 2023.                                      |  |                   |  |             |    |   |      |  | 1,255,856 |                   |  |  | 1,255,856                 | 
|installation and maintenance
    of signage and brands.                                                                                                                                                                                                                                                    |  |                                                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|(Manufacturing)                                                                                                                                                                                                                                                                                            |  |                                                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|www.hiltondisplays.com                                                                                                                                                                                                                                                                                     |  |                                                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|                                                                                                                                                                                                                                                                                                           |  |                                                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|Lumious
                                         (Tech 2000, Inc.) (g)                                                                                                                                                                                                                                     |  | $850,000
    Replacement Term Note at                            |  | 11/16/18          |  |             | 0  | % |      |  |           |                   |  |  |                           | 
|Herndon,
    VA. Develops and delivers IT training.                                                                                                                                                                                                                                                        |  | 14%
    due November 15, 2021.                                   |  |                   |  |             |    |   |      |  | 860,777   |                   |  |  | 860,777                   | 
|(Software)
    www.t2000inc.com                                                                                                                                                                                                                                                                            |  |                                                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|                                                                                                                                                                                                                                                                                                           |  |                                                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|Mattison
                                         Avenue Holdings LLC (e)(l)                                                                                                                                                                                                                               |  | $1,031,406
    Second Amended, Restated                          |  | 11/8/19           |  |             | 0  | % |      |  |           |                   |  |  |                           | 
|Dallas,
    TX. Provider of upscale salon spaces for                                                                                                                                                                                                                                                       |  | and Consolidated Promissory
    Note at                          |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|lease. (Professional Services)                                                                                                                                                                                                                                                                             |  | 14% (2% PIK) due June
    9, 2022.                               |  |                   |  |             |    |   |      |  | 1,041,919 |                   |  |  | 1,041,919                 | 
|www.mattisonsalonsuites.com                                                                                                                                                                                                                                                                                |  |                                                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|                                                                                                                                                                                                                                                                                                           |  |                                                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|Mercantile
                                         Adjustment Bureau, LLC (g)                                                                                                                                                                                                                             |  | $1,199,039
    Subordinated Secured Note at                      |  | 10/22/12          |  |             | 4  | % |      |  |           |                   |  |  |                           | 
|Williamsville,
    NY. Full service accounts receivable                                                                                                                                                                                                                                                    |  | 13%
    (3% for the calendar year 2020) due                      |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|management and collections
    company. (Contact Center)                                                                                                                                                                                                                                                   |  | January
    31, 2022.                                            |  |                   |  |             |    |   |      |  | 1,199,040 |                   |  |  | 500,000                   | 
|www.mercantilesolutions.com                                                                                                                                                                                                                                                                                |  | (e)
    $150,000 Subordinated Debenture                          |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|                                                                                                                                                                                                                                                                                                           |  | at
    8% due January 31, 2022.                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|                                                                                                                                                                                                                                                                                                           |  | Warrant
    for 3.29% Membership Interests.                      |  |                   |  |             |    |   |      |  | 150,000   |                   |  |  | -                         | 
|                                                                                                                                                                                                                                                                                                           |  | Option
    for 1.5% Membership Interests.                        |  |                   |  |             |    |   |      |  | 97,625    |                   |  |  | -                         | 
|                                                                                                                                                                                                                                                                                                           |  | Total
                                         Mercantile        |  |                   |  |             |    |   |      |  | 1,446,665 |                   |  |  | 500,000                   | 
|                                                                                                                                                                                                                                                                                                           |  |                                                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|Open
                                         Exchange, Inc. (g)                                                                                                                                                                                                                                           |  | 397,899
    Series C Preferred                                   |  | 11/13/13          |  |             | 4  | % |      |  | 1,193,697 |                   |  |  | 543,283                   | 
|(Formerly
    KnowledgeVision Systems, Inc.)                                                                                                                                                                                                                                                               |  | 397,899
    Common.                                              |  |                   |  |             |    |   |      |  | 208,243   |                   |  |  | 108,656                   | 
|Lincoln,
    MA. Online presentation and training                                                                                                                                                                                                                                                          |  | $450,000
    Replacement Term Note at 9%                         |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|software. (Software)                                                                                                                                                                                                                                                                                       |  | due
    September 30, 2022.                                      |  |                   |  |             |    |   |      |  | 450,000   |                   |  |  | 450,000                   | 
|www.openexc.com                                                                                                                                                                                                                                                                                            |  | Total
    Open Exchange                                          |  |                   |  |             |    |   |      |  | 1,851,940 |                   |  |  | 1,101,939                 | 
|                                                                                                                                                                                                                                                                                                           |  |                                                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|Owl
                                         Rock Capital Corporation NYSE: ORRC (n) New
                                         York, NY.                                                                                                                                                                |  | 30,000
    shares                                                |  | 3/16/20           |  |             | <1 | % |      |  | 347,067   |                   |  |  | 345,700                   | 
|                                                                                                                                                                                                                                                                                                           |  |                                                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|PostProcess
                                         Technologies, Inc. (e)(g) Buffalo,
                                         NY. Provides innovative solutions for the post-processing of additive manufactured 3D
                                         parts. (Manufacturing) www.postprocess.com |  | 360,002
    Series A1 Preferred.                                 |  | 7/25/16           |  |             | <1 | % |      |  | 348,875   |                   |  |  | 471,603                   | 
|                                                                                                                                                                                                                                                                                                           |  |                                                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|Rheonix,
                                         Inc. (e)                                                                                                                                                                                                                                                 |  | 9,676
    Common.                                                |  | 10/29/09          |  |             | 4  | % |      |  | -         |                   |  |  | -                         | 
|Ithaca,
    NY. Developer of fully automated microfluidic                                                                                                                                                                                                                                                  |  | (g)
    1,839,422 Series A Preferred.                            |  |                   |  |             |    |   |      |  | 2,099,999 |                   |  |  | -                         | 
|based
    molecular assay and diagnostic testing devices.                                                                                                                                                                                                                                                  |  | (g)
    50,593 Common.                                           |  |                   |  |             |    |   |      |  | -         |                   |  |  | -                         | 
|(Health
    Care) www.rheonix.com                                                                                                                                                                                                                                                                          |  | (g)
    589,420 Series B Preferred.                              |  |                   |  |             |    |   |      |  | 702,732   |                   |  |  | 702,732                   | 
|                                                                                                                                                                                                                                                                                                           |  | Total
    Rheonix                                                |  |                   |  |             |    |   |      |  | 2,802,731 |                   |  |  | 702,732                   | 
|                                                                                                                                                                                                                                                                                                           |  |                                                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|SocialFlow,
                                         Inc. (e)(g)                                                                                                                                                                                                                                           |  | 1,049,538
    Series B Preferred.                                |  | 4/5/13            |  |             | 4  | % |      |  | 500,000   |                   |  |  | 209,908                   | 
|New
    York, NY. Provides instant analysis of social                                                                                                                                                                                                                                                      |  | 1,204,819
    Series B-1 Preferred.                              |  |                   |  |             |    |   |      |  | 750,000   |                   |  |  | 324,761                   | 
|networks
    using a proprietary, predictive analytic                                                                                                                                                                                                                                                      |  | 717,772
    Series C Preferred.                                  |  |                   |  |             |    |   |      |  | 500,000   |                   |  |  | 215,332                   | 
|algorithm
    to optimize advertising and publishing.                                                                                                                                                                                                                                                      |  | Total
    Social Flow                                            |  |                   |  |             |    |   |      |  | 1,750,000 |                   |  |  | 750,000                   | 
|(Software)
    www.socialflow.com                                                                                                                                                                                                                                                                          |  |                                                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|                                                                                                                                                                                                                                                                                                           |  |                                                                  |  |                   |  |             |    |   |      |  |           |                   |  |  |                           | 
|Somerset
                                         Gas Transmission Company, LLC (e)(m) Columbus,
                                         OH. Natural gas transportation. (Oil
                                         and Gas) www.somersetgas.com                                                       |  | 26.5337
    Units.                                               |  | 7/10/02           |  |             | 3  | % |      |  | 719,097   |                   |  |  | 500,000                   | 



6







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

March
31, 2020 (Continued)

(Unaudited)





|Company,
    Geographic Location, Business 
    Description, (Industry) and Website                                                                                                                                                                                                                                                          |                                                                        | (a)
        Type
        of Investment          |          | (b)
        Date
        Acquired |  | (c)
        Equity |    |   | Cost |           |            | (d)(f)
        Fair
        Value |   |           | Percent
    of Net Assets | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------- | ----------------------------------------------- | -------- | --------------------------------- |  | ------------------ | -- | - | ---- | --------- | ---------- | --------------------------------- | - | --------- | ------------------------- | 
|Other
                                         Non-Control/Non-Affiliate Investments:                                                                                                                                                                                                                                                        |                                                                        |                                                 |          |                                   |  |                    |    |   |      |           |            |                                   |   |           |                           | 
|DataView,
    LLC (e)                                                                                                                                                                                                                                                                                                                        |                                                                        | Membership
    Interest.                        |          | 10/1/98                           |  |                    | 5  | % |      |           | 310,357    |                                   |   |           | -                         | 
|(Software)                                                                                                                                                                                                                                                                                                                                   |                                                                        |                                                 |          |                                   |  |                    |    |   |      |           |            |                                   |   |           |                           | 
|                                                                                                                                                                                                                                                                                                                                             |                                                                        |                                                 |          |                                   |  |                    |    |   |      |           |            |                                   |   |           |                           | 
|UStec/Wi3
                                         (e)                                                                                                                                                                                                                                                                                       |                                                                        | Common
    stock.                               |          | 12/17/98                          |  |                    | <1 | % |      |           | 100,500    |                                   |   |           | -                         | 
|(Manufacturing)
                                                                                Subtotal
                                         Non-Control/Non-Affiliate Investments                                                                                                                                                      |                                                                        |                                                 |          |                                   |  |                    |    |   |      | $         | 23,738,493 |                                   |   | $         | 22,805,701                | 
|                                                                                                                                                                                                                                                                                                                                             |                                                                        |                                                 |          |                                   |  |                    |    |   |      |           |            |                                   |   |           |                           | 
|Affiliate
                                         Investments – 24.4% of net assets (k)
        BeetNPath,
        LLC (Grainful) (e)(g)(m)
        Ithaca,
        NY. Frozen entrées made from 100% whole grain steel cut oats under                                                                                                      |                                                                        |                                                 |          |                                   |  |                    |    |   |      |           |            |                                   |   |           |                           | 
|                                                                                                                                                                                                                                                                                                                                             | 1,119,024
    Series A-2 Preferred Membership Units.                   |                                                 | 10/20/14 |                                   |  | 9                  | %  |   | $    | 359,000   |            |                                   | $ | -         |                           | 
|                                                                                                                                                                                                                                                                                                                                             | 1,032,918
    Series B Preferred Membership Units.                     |                                                 |          |                                   |  |                    |    |   |      | 261,277   |            |                                   |   | -         |                           | 
|                                                                                                                                                                                                                                                                                                                                             | $262,626.64
    Convertible Secured Notes at 8% due December 21, 2019. |                                                 |          |                                   |  |                    |    |   |      | 262,627   |            |                                   |   | -         |                           | 
|                                                                                                                                                                                                                                                                                                                                             | Total
    BeetNPath                                                    |                                                 |          |                                   |  |                    |    |   |      | 882,904   |            |                                   |   | -         |                           | 
|                                                                                                                                                                                                                                                                                                                                             |                                                                        |                                                 |          |                                   |  |                    |    |   |      |           |            |                                   |   |           |                           | 
|Carolina
                                         Skiff LLC (e)(g)(m)
        Waycross,
        GA. Manufacturer of ocean fishing and pleasure boats. (Manufacturing)
        www.carolinaskiff.com                                                                                                                                          |                                                                        | 6.0825%
    Class A Common Membership Interest. |          | 1/30/04                           |  |                    | 7  | % |      |           | 15,000     |                                   |   |           | 1,750,000                 | 
|                                                                                                                                                                                                                                                                                                                                             |                                                                        |                                                 |          |                                   |  |                    |    |   |      |           |            |                                   |   |           |                           | 
|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.         |          | 1/4/16                            |  |                    | 6  | % |      |           | 200,000    |                                   |   |           | 200,000                   | 
|                                                                                                                                                                                                                                                                                                                                             |                                                                        |                                                 |          |                                   |  |                    |    |   |      |           |            |                                   |   |           |                           | 
|Filterworks
                                         Acquisition USA, LLC (l)(m)                                                                                                                                                                                                                                                             |                                                                        | $2,283,702
    Term Note at 12% (+2%            |          | 11/8/19                           |  |                    | 9  | % |      |           |            |                                   |   |           |                           | 
|Deerfield
    Beach, FL. Provides spray booth                                                                                                                                                                                                                                                                                                |                                                                        | PIK)
    due December 4, 2023.                  |          |                                   |  |                    |    |   |      |           | 2,314,294  |                                   |   |           | 2,314,294                 | 
|equipment,
    frame repair machines and paint booth                                                                                                                                                                                                                                                                                         |                                                                        | 562.5
    Class A Units                         |          |                                   |  |                    |    |   |      |           | 562,500    |                                   |   |           | 562,500                   | 
|filter
    services for collision shops. (Automotive)                                                                                                                                                                                                                                                                                        |                                                                        | Total
    Filterworks                           |          |                                   |  |                    |    |   |      |           | 2,876,794  |                                   |   |           | 2,876,794                 | 
|www.filterworksusa.com                                                                                                                                                                                                                                                                                                                       |                                                                        |                                                 |          |                                   |  |                    |    |   |      |           |            |                                   |   |           |                           | 
|                                                                                                                                                                                                                                                                                                                                             |                                                                        |                                                 |          |                                   |  |                    |    |   |      |           |            |                                   |   |           |                           | 
|Genicon,
                                         Inc. (e)(g)(l)
                                         Winter Park, FL. Designs, produces and distributes patented surgical instrumentation.
                                         (Health Care)
        www.geniconendo.com                                                           |                                                                        | 1,586,902
    Series B Preferred.               |          | 4/10/15                           |  |                    | 6  | % |      |           | 1,000,000  |                                   |   |           | -                         | 
|                                                                                                                                                                                                                                                                                                                                             | $3,250,000
    Promissory Notes at 10% due June 12, 2022, (10% PIK).   |                                                 |          |                                   |  |                    |    |   |      | 3,737,764 |            |                                   |   | -         |                           | 
|                                                                                                                                                                                                                                                                                                                                             | $250,000
    Promissory Note at 10% due June 12, 2021 (10% PIK).       |                                                 |          |                                   |  |                    |    |   |      | 262,184   |            |                                   |   | 250,000   |                           | 
|                                                                                                                                                                                                                                                                                                                                             | Warrants
    for Common.                                               |                                                 |          |                                   |  |                    |    |   |      | 120,000   |            |                                   |   | -         |                           | 
|                                                                                                                                                                                                                                                                                                                                             | Total
    Genicon                                                      |                                                 |          |                                   |  |                    |    |   |      | 5,119,948 |            |                                   |   | 250,000   |                           | 
|                                                                                                                                                                                                                                                                                                                                             |                                                                        |                                                 |          |                                   |  |                    |    |   |      |           |            |                                   |   |           |                           | 
|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.   |          | 11/20/12                          |  |                    | 7  | % |      |           | 750,000    |                                   |   |           | 750,000                   | 
|                                                                                                                                                                                                                                                                                                                                             | 1,876,922
    Series B Preferred.                                      |                                                 |          |                                   |  |                    |    |   |      | 479,155   |            |                                   |   | 479,155   |                           | 
|                                                                                                                                                                                                                                                                                                                                             | Total
    Knoa                                                         |                                                 |          |                                   |  |                    |    |   |      | 1,229,155 |            |                                   |   | 1,229,155 |                           | 
|                                                                                                                                                                                                                                                                                                                                             |                                                                        |                                                 |          |                                   |  |                    |    |   |      |           |            |                                   |   |           |                           | 
|Mezmeriz,
                                         Inc. (e)(g)
        Ithaca,
        NY. Technology company developing novel reality capture tools for 3D mapping, reality modeling, object tracking and classification.
        (Electronics Developer)
        www.mezmeriz.com                                                          |                                                                        | 1,554,565
    Series Seed Preferred.            |          | 1/9/08                            |  |                    | 12 | % |      |           | 742,850    |                                   |   |           | -                         | 
|                                                                                                                                                                                                                                                                                                                                             |                                                                        |                                                 |          |                                   |  |                    |    |   |      |           |            |                                   |   |           |                           | 
|Microcision
                                         LLC (g)                                                                                                                                                                                                                                                                                 |                                                                        | $1,500,000
    Subordinated                     |          | 9/24/09                           |  |                    | 5  | % |      |           |            |                                   |   |           |                           | 
|                                                                                                                                                                                                                                                                                                                                             | Promissory
    Note at 11% due January 10, 2025.                       |                                                 |          |                                   |  |                    |    |   |      | 1,395,500 |            |                                   |   | 1,395,500 |                           | 
|                                                                                                                                                                                                                                                                                                                                             | Membership
    Interest Purchase Warrant for 5%.                       |                                                 |          |                                   |  |                    |    |   |      | 110,000   |            |                                   |   | 110,000   |                           | 
|                                                                                                                                                                                                                                                                                                                                             | Total
    Microcision                                                  |                                                 |          |                                   |  |                    |    |   |      | 1,505,500 |            |                                   |   | 1,505,500 |                           | 



7







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

March
31, 2020 (Continued)

(Unaudited)



|Company,
    Geographic Location, Business 
    Description, (Industry) and Website                                                                                                                                              |  | (a)
        Type
        of Investment       |  | (b)
        Date
        Acquired |  | (c)
        Equity |    |   | Cost |   |            | (d)(f)
        Fair
        Value |  |   | Percent
    of Net Assets | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------- |  | --------------------------------- |  | ------------------ | -- | - | ---- | - | ---------- | --------------------------------- |  | - | ------------------------- | 
|New
                                         Monarch Machine Tool, Inc. (e)(g)
        Cortland,
        NY. Manufactures and services vertical/horizontal machining centers. (Manufacturing)
        www.monarchmt.com          |  | 22.84
    Common.                            |  | 9/24/03                           |  |                    | 15 | % |      |   | 22,841     |                                   |  |   | 22,841                    | 
|                                                                                                                                                                                                                                 |  |                                              |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|OnCore
                                         Golf Technology, Inc. (e)(g)
        Buffalo,
        NY. Patented and proprietary golf balls utilizing technology and innovation. (Consumer Product)
        www.oncoregolf.com |  | 300,483
    Preferred AA.                    |  | 12/31/14                          |  |                    | 8  | % |      |   | 752,712    |                                   |  |   | 300,000                   | 
|                                                                                                                                                                                                                                 |  |                                              |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|SciAps,
    Inc. (e)(g)                                                                                                                                                                                                          |  | 187,500
    Series A Preferred.              |  | 7/12/13                           |  |                    | 6  | % |      |   | 1,500,000  |                                   |  |   | -                         | 
|Woburn,
    MA. Instrumentation company                                                                                                                                                                                          |  | 274,299
    Series A1 Convertible Preferred. |  |                                   |  |                    |    |   |      |   | 504,710    |                                   |  |   | -                         | 
|producingportable
    analytical devices using XRF,                                                                                                                                                                              |  | 117,371
    Series B Convertible Preferred.  |  |                                   |  |                    |    |   |      |   | 250,000    |                                   |  |   | 250,000                   | 
|LIBS
    and RAMAN spectroscopy to identify                                                                                                                                                                                      |  | 113,636
    Series C Convertible Preferred.  |  |                                   |  |                    |    |   |      |   | 175,000    |                                   |  |   | 175,000                   | 
|compounds,
    minerals, and elements.                                                                                                                                                                                           |  | 369,698
    Series C1 Convertible Preferred. |  |                                   |  |                    |    |   |      |   | 399,274    |                                   |  |   | 399,274                   | 
|(Manufacturing)                                                                                                                                                                                                                  |  | 147,059
    Series D Convertible Preferred.  |  |                                   |  |                    |    |   |      |   | 250,000    |                                   |  |   | 250,000                   | 
|www.sciaps.com                                                                                                                                                                                                                   |  | Total
    SciAps                             |  |                                   |  |                    |    |   |      |   | 3,078,984  |                                   |  |   | 1,074,274                 | 
|                                                                                                                                                                                                                                 |  |                                              |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|Teleservices
    Solutions Holdings, LLC (e)(g)(l)                                                                                                                                                                               |  | 250,000
    Class B Preferred Units.         |  | 5/30/14                           |  |                    | 6  | % |      |   | 250,000    |                                   |  |   | -                         | 
|Montvale,
    NJ. Customer contact center                                                                                                                                                                                        |  | 1,000,000
    Class C Preferred Units.       |  |                                   |  |                    |    |   |      |   | 1,190,680  |                                   |  |   | -                         | 
|specializing
    in customer acquisition and retention                                                                                                                                                                           |  | 80,000
    Class D Preferred Units.          |  |                                   |  |                    |    |   |      |   | 91,200     |                                   |  |   | -                         | 
|for
    selected industries. (Contact Center)                                                                                                                                                                                    |  | 104,198
    Class E Preferred Units.         |  |                                   |  |                    |    |   |      |   | -          |                                   |  |   | -                         | 
|www.ipacesetters.com                                                                                                                                                                                                             |  | PIK
    dividend for Series C and D at 12%   |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|                                                                                                                                                                                                                                 |  | and
    14%, respectively.                   |  |                                   |  |                    |    |   |      |   | 104,198    |                                   |  |   | -                         | 
|                                                                                                                                                                                                                                 |  | Total
    Teleservices                       |  |                                   |  |                    |    |   |      |   | 1,636,078  |                                   |  |   | -                         | 
|                                                                                                                                                                                                                                 |  |                                              |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|Tilson
    Technology Management, Inc. (g)                                                                                                                                                                                       |  | 120,000
    Series B Preferred.              |  | 1/20/15                           |  |                    | 9  | % |      |   | 600,000    |                                   |  |   | 1,950,000                 | 
|Portland,
    ME. Provides network deployment                                                                                                                                                                                    |  | 21,391
    Series C Preferred.               |  |                                   |  |                    |    |   |      |   | 200,000    |                                   |  |   | 347,604                   | 
|construction
    and information system services                                                                                                                                                                                 |  | 70,176
    Series D Preferred.               |  |                                   |  |                    |    |   |      |   | 800,000    |                                   |  |   | 1,140,360                 | 
|management
    for cellular, fiber optic and wireless                                                                                                                                                                            |  | 15,385
    Series E Preferred.               |  |                                   |  |                    |    |   |      |   | 500,012    |                                   |  |   | 500,012                   | 
|systems
    providers. Its affiliated entity, SQF, LLC is                                                                                                                                                                        |  | 211,567
    SQF Hold Co. Common.             |  |                                   |  |                    |    |   |      |   | -          |                                   |  |   | 22,036                    | 
|a
    CLEC supporting small cell 5G deployment.                                                                                                                                                                                  |  | Total
    Tilson                             |  |                                   |  |                    |    |   |      |   | 2,100,012  |                                   |  |   | 3,960,012                 | 
|(Professional
                                         Services)
        www.tilsontech.com                                                                                                                                      |  |                                              |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|                                                                                                                                                                                                                                 |  |                                              |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|Other
    Affiliate Investments:                                                                                                                                                                                                 |  |                                              |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|G-TEC
    Natural Gas Systems (e)(m)                                                                                                                                                                                             |  | Membership
    Interest                      |  | 8/31/99                           |  |                    | 17 | % |      |   | 400,000    |                                   |  |   | -                         | 
|(Manufacturing)                                                                                                                                                                                                                  |  |                                              |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|                                                                                                                                                                                                                                 |  |                                              |  |                                   |  |                    |    |   |      |   |            |                                   |  |   |                           | 
|Subtotal
    Affiliate Investments                                                                                                                                                                                               |  |                                              |  |                                   |  |                    |    |   |      | $ | 20,562,778 |                                   |  | $ | 13,168,576                | 
|Total
    investments – 66.5%                                                                                                                                                                                                    |  |                                              |  |                                   |  |                    |    |   |      | $ | 44,301,271 |                                   |  | $ | 35,974,277                | 
|Other
    Assets in excess of liabilities – 33.5%                                                                                                                                                                                |  |                                              |  |                                   |  |                    |    |   |      |   |            |                                   |  |   | 18,084,376                | 
|Net
    Assets – 100%                                                                                                                                                                                                            |  |                                              |  |                                   |  |                    |    |   |      |   |            |                                   |  | $ | 54,058,653                | 



8







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

March
31, 2020 (Continued)

(Unaudited)



Notes
to the Consolidated Schedule of Portfolio Investments



(a)
At March 31, 2020, restricted securities represented 96% of the fair value of the investment portfolio. Restricted securities
are subject to one or more restrictions on resale and are not freely marketable. Type of investment for equity position is in
form of shares unless otherwise noted as units or interests, i.e., preferred shares, common shares.



(b)
The Date Acquired column indicates the date on which the Corporation first acquired an investment 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 Financial Accounting Standards Board (FASB) Accounting
Standards Codification (ASC) 820 “Fair Value Measurements and Disclosures,” which defines fair value and establishes
guidelines for measuring fair value. At March 31, 2020, ASC 820 designates 96% of the Corporation’s investments as “Level
3” assets. Under the valuation policy of the Corporation, unrestricted publicly traded securities are valued at the average
closing bid price for these securities for the last three trading days of the reporting period. Restricted securities are subject
to restrictions on resale, and are valued at fair value as determined by our external investment advisor Rand Capital Management,
LLC (“RCM”) and submitted to the Board of Directors for approval. Fair value is considered to be the amount that the
Corporation may reasonably expect to receive for portfolio securities when sold on the valuation date. Valuations as of any particular
date, however, are not necessarily indicative of amounts which may ultimately be realized as a result of future sales or other
dispositions of securities and these favorable or unfavorable differences could be material. Among the factors considered in determining
the fair value of restricted securities are the financial condition and operating results, projected operations, and other analytical
data relating to the investment. Also considered are the market prices for unrestricted securities of the same class (if applicable)
and other matters which may have an impact on the value of the portfolio company (see Note 3. “Investments” to the
Consolidated Financial Statements).



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



(f)
As of March 31, 2020, the total cost of investment securities was approximately $44.3 million. Net unrealized depreciation was
approximately ($8.3) million, which was comprised of $10.1 million of unrealized appreciation of investment securities and ($18.4)
million of unrealized depreciation of investment securities. At March 31, 2020, the aggregate gross unrealized gain for federal
income tax purposes was $10.1 million and the aggregate gross unrealized loss for federal income tax purposes was ($17.2) million.
The net unrealized loss for federal income tax purposes was ($7.1) million based on a tax cost of $43.1 million.



(g)
Rand Capital SBIC, Inc. investment.



(h)
Reduction in cost and value from previously reported balances reflects current principal repayment. None at March 31, 2020.



(i)
Represents interest due (amounts over $50,000) from investments included as interest receivable on the Corporation’s Consolidated
Statements of Financial Position. (None at March 31, 2020.)



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



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



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



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



(n)
Publicly traded company.



9







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

March
31, 2020 (Continued)

(Unaudited)



|Investments
    in and Advances to Affiliates
|---------------------------------------------
|Company                                      
|Control
    Investments:                     
|                                             
|                                             
|Affiliate
    Investments:                   
|BeetNPath,
    LLC                           
|                                             
|                                             
|                                             
|                                             
|Carolina
    Skiff LLC                       
|                                             
|ClearView
    Social, Inc.                   
|                                             
|Filterworks                                  
|Acquisition
    USA, LLC                     
|                                             
|                                             
|Genicon,
    Inc.                            
|                                             
|                                             
|                                             
|                                             
|                                             
|G-TEC
    Natural Gas Systems                
|                                             
|Knoa
    Software, Inc.                      
|                                             
|                                             
|                                             
|Mezmeriz,
    Inc.                           
|                                             
|Microcision                                  
|                                             
|                                             
|New
    Monarch Machine Tool, Inc.           
|                                             
|OnCore
    Golf Technology, Inc.             
|                                             
|SciAps,
    Inc.                             
|                                             
|                                             
|                                             
|                                             
|                                             
|                                             
|                                             
|Teleservices Solutions                       
|Holdings,
LLC                                
|                                             
|                                             
|                                             



10







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

March
31, 2020 (Continued)

(Unaudited)





|Investments
    in and Advances to Affiliates
|---------------------------------------------
|Company                                      
|Tilson
    Technology                        
|Management,
    Inc.                         
|                                             
|                                             
|                                             
|                                             
|                                             
|                                             
|                                             
|                                             
|                                             



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.



11







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

March
31, 2020 (Continued)

(Unaudited)



|Industry Classification |  | Percentage of Total Investments (at fair value) as of March 31, 2020 |     
|----------------------- |  | -------------------------------------------------------------------- | ----
|Software                |  |                                                                      | 35.6
|Manufacturing           |  |                                                                      | 16.9
|Professional Services   |  |                                                                      | 13.9
|Entertainment           |  |                                                                      | 12.3
|Automotive              |  |                                                                      | 8.0 
|Healthcare              |  |                                                                      | 5.3 
|BDC Investment Fund     |  |                                                                      | 4.2 
|Contact Center          |  |                                                                      | 1.4 
|Oil and Gas             |  |                                                                      | 1.4 
|Consumer Product        |  |                                                                      | 0.8 
|Marketing               |  |                                                                      | 0.2 
|Total Investments       |  |                                                                      | 100 



12









RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

December
31, 2019



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



13







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

December
31, 2019 (Continued)



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



14







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

December
31, 2019 (Continued)



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



15







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

December
31, 2019 (Continued)



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



16







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

December
31, 2019 (Continued)



Notes
to the Consolidated Schedule of Portfolio Investments



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



(b)
The Date Acquired column indicates the date on which the Corporation first acquired an investment 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 Financial Accounting Standards Board (FASB) Accounting
Standards Codification (ASC) 820 “Fair Value Measurements and Disclosures,” which defines fair value and establishes
guidelines for measuring fair value. At December 31, 2019, ASC 820 designates 100% of the Corporation’s investments as “Level
3” assets. Under the valuation policy of the Corporation, unrestricted publicly traded securities are valued at the average
closing bid price for these securities for the last three trading days of the reporting period. Restricted securities are subject
to restrictions on resale, and are valued at fair value as determined by RCM and submitted to the Board of Directors for approval.
Fair value is considered to be the amount that the Corporation may reasonably expect to receive for portfolio securities when
sold on the valuation date. Valuations as of any particular date, however, are not necessarily indicative of amounts which may
ultimately be realized as a result of future sales or other dispositions of securities and these favorable or unfavorable differences
could be material. Among the factors considered in determining the fair value of restricted securities are the financial condition
and operating results, projected operations, and other analytical data relating to the investment. Also considered are the market
prices for unrestricted securities of the same class (if applicable) and other matters which may have an impact on the value of
the portfolio company (see Note 3. “Investments” to the Consolidated Financial Statements).



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



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



(g)
Rand Capital SBIC, Inc. investment.



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



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



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



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



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



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



17







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

December
31, 2019 (Continued)



|Investments
    in and Advances to Affiliates
|---------------------------------------------
|Company                                      
|Control Investments:                         
|Advantage
    24/7 LLC                       
|Gemcor
    II, LLC                           
|                                             
|                                             
|Affiliate Investments:                       
|BeetNPath,
    LLC                           
|                                             
|                                             
|                                             
|                                             
|Carolina
    Skiff LLC                       
|                                             
|ClearView Social,
    Inc.                   
|                                             
|Filterworks                                  
|Acquisition
    USA, LLC                     
|                                             
|                                             
|First Wave Technologies,
    Inc.            
|                                             
|Genicon,
    Inc.                            
|                                             
|                                             
|                                             
|                                             
|                                             
|G-TEC Natural Gas
    Systems                
|                                             
|Knoa
    Software, Inc.                      
|                                             
|                                             
|                                             
|KnowledgeVision                              
|Systems,
    Inc.                            
|                                             
|                                             
|                                             
|                                             
|                                             
|                                             
|Mezmeriz,
    Inc.                           
|                                             
|Microcision
    LLC                          
|                                             
|                                             
|                                             
|                                             
|New Monarch Machine
    Tool, Inc.           
|                                             
|OnCore Golf Technology,
    Inc.             



18







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

December
31, 2019 (Continued)



|Investments
    in and Advances to Affiliates
|---------------------------------------------
|Company                                      
|SciAps,
    Inc.                             
|                                             
|                                             
|                                             
|                                             
|                                             
|                                             
|                                             
|SOMS Technologies,
    LLC                   
|                                             
|Teleservices                                 
|Solutions                                    
|Holdings, LLC                                
|                                             
|                                             
|                                             
|Tilson
    nt,                               
|Technology                                   
|Manageme                                     
|Inc.                                         
|                                             
|                                             
|                                             
|                                             
|                                             
|                                             
|                                             



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.



19







RAND
CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED
SCHEDULE OF PORTFOLIO INVESTMENTS

December
31, 2019 (Continued)



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



20







Rand
Capital Corporation and Subsidiaries

Notes
to the Consolidated Financial Statements

(Unaudited)



Note
1. ORGANIZATION



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



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



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



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



21







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



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



Recent
Developments



On
April 22, 2020, the Board of Directors approved a 1-for-9 reverse stock split, such that every holder of Common Stock shall receive
one (1) share of Common Stock for every nine (9) shares of Common Stock held (the “Reverse Stock Split”) and an amendment
to the Certificate of Incorporation to effect the Reverse Stock Split. The reverse split will be effective at 5:00 p.m. Eastern
Time on May 21, 2020



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 three months ended March
31, 2020 are not necessarily indicative of the results to be expected for the full year.



These
statements should be read in conjunction with the consolidated financial statements and the notes included in our Annual Report
on Form 10-K for the year ended December 31, 2019. Information contained in this filing should also be reviewed in conjunction
with our related filings with the SEC prior to the date of this report. Those filings include, but are not limited to, the following:



N-54A	Election
to Adopt Business Development Company status



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



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



Fair
Value of SBA Debentures -In March 2020, the SBIC Funding Corporation completed a pooling of SBA debentures that have
a coupon rate of 2.078%, excluding a mandatory SBA annual charge estimated to be 0.275%, resulting in a total estimated fixed
rate for ten years of 2.353%. 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.



22







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



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



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



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



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



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



The
Corporation holds debt securities in its investment portfolio that contain payment-in-kind (“PIK”) interest provisions.
PIK interest, computed at the contractual rate specified in each debt agreement, is 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 recognized into income and added to the
balance of the preferred equity investment. The actual collection of these dividends in arrears may be deferred until such time
as the preferred equity is redeemed.



23







Revenue
Recognition - Fee Income- Consists of the revenue associated with the amortization of financing fees charged to the portfolio
companies upon successful closing of SBIC financings and income associated with portfolio company board attendance fees. The income
associated with the amortization of financing fees was $3,750 and $35,969 for the three months ended March 31, 2020 and 2019,
respectively. During the three months ended March 31, 2019, the Corporation recognized a one-time fee of $225,000 in conjunction
with the repayment of the eHealth loan instrument.



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 $15,691 and $10,191 in OID income for the three months ended March 31, 2020 and 2019, respectively. OID income is estimated
to be approximately $22,000 for the remainder of 2020.



Deferred
Debenture Costs - SBA debenture origination and commitment costs, which are netted against the debenture obligation (See
Note 6 “SBA Debentures”), will be amortized ratably over the terms of the SBA debentures. Amortization expense was
$9,418 and $8,777 for the three months ended March 31, 2020 and 2019, respectively. Amortization expense on currently outstanding
debentures for the next five years is estimated to average approximately $27,000 per year.



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



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 refunded during the three months ended March 31, 2020 and 2019 were $380,890 and
$255,308, respectively. Interest paid during each of the three months ended March 31, 2020 and 2019 was $189,023 and $153,513,
respectively. The Corporation converted $71,425 and $101,398 of interest receivable into investments during the three months ended
March 31, 2020 and 2019, respectively.



Accounting
Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.



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



24







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



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



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



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



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 March 31, 2020 or December
31, 2019.



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



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



It
is the Corporation’s policy to include interest and penalties related to income tax liabilities in income tax expense. There
were no amounts recognized for interest or penalties for the three months ended March 31, 2020 or 2019.



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



25







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



|                                               |  | March 31, 2020 |   
|---------------------------------------------- |  | -------------- | --
|ACV Auctions, Inc. (ACV)                       |  |                | 18
|AIKG, LLC (Andretti)                           |  |                | 12
|Tilson Technology Management, Inc. (Tilson)    |  |                | 11
|Filterworks Acquisition USA, LLC (Filterworks) |  |                | 8 
|Carolina Skiff LLC (Carolina Skiff)            |  |                | 5 



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



Note
3. INVESTMENTS



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



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



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



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



26







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



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



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



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



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.



There
were 96% of assets that were Level 3 at March 31, 2020 and 100% that were Level 3 at December 31, 2019.



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



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



| | ● | Audited
                                         and unaudited statements of operations, balance sheets and operating budgets;
| | - | ------------------------------------------------------------------------------------------------------------------------------

| | ● | Current
                                         and projected financial, operational and technological developments of the portfolio
                                         company;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | ● | Current
                                         and projected ability of the portfolio company to service its debt obligations;
| | - | --------------------------------------------------------------------------------------------------------------------------------

| | ● | The
                                         current capital structure of the business and the seniority of the various classes of
                                         equity if a deemed liquidation event were to occur;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | ● | Pending
                                         debt or capital restructuring of the portfolio company;
| | - | --------------------------------------------------------------------------------------------------------

| | ● | Current
                                         information regarding any offers to purchase the investment, or recent fundraising transactions;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------

| | ● | Current
                                         ability of the portfolio company to raise additional financing if needed;
| | - | --------------------------------------------------------------------------------------------------------------------------

| | ● | Changes
                                         in the economic environment which may have a material impact on the operating results
                                         of the portfolio company;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | ● | Internal
                                         circumstances and events that may have an impact (both positive and negative) on the
                                         operating performance of the portfolio company;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | ● | Qualitative
                                         assessment of key management;
| | - | ----------------------------------------------------------------------------------

| | ● | Contractual
                                         rights, obligations or restrictions associated with the investment; and
| | - | ----------------------------------------------------------------------------------------------------------------------------

| | ● | Other
                                         factors deemed relevant to assess valuation.
| | - | -------------------------------------------------------------------------------------------



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



Equity
Securities



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



27







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



Loan
and Debt Securities



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



The
following table provides a summary of the significant unobservable inputs used to determine the fair value of the Corporation’s
Level 3 portfolio investments as of March 31, 2020:



|Investment
    Type                     |  | Market
                                         Approach EBITDA
                                         Multiple |                                                          |  | Market
                                         Approach Liquidation
                                         Seniority |   |                                                      | Market
                                         Approach Revenue
                                         Multiple |  |   | Market
    Approach Transaction Pricing                   |  |  | Totals |                                                           
|--------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------- | - | ---------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------ |  | - | --------------------------------------------------------- |  |  | ------ | ----------------------------------------------------------
|                                        |  |                                                                                                                   |                                                          |  |                                                                                                                         |   |                                                      |                                                                                                                    |  |   |                                                           |  |  |        |                                                           
|Non-Control/Non-Affiliate Equity        |  | $                                                                                                                 | -                                                        |  |                                                                                                                         | $ | 1,452,732                                            |                                                                                                                    |  | $ | 500,000                                                   |  |  | $      | 8,605,983                                                 
|Non-Control/Non-Affiliate Loan and Debt |  |                                                                                                                   | 500,000                                                  |  |                                                                                                                         |   | 2,366,991                                            |                                                                                                                    |  |   | 602,569                                                   |  |  |        | 7,255,370                                                 
|Total Non-Control/Non-Affiliate         |  | $                                                                                                                 | 500,000                                                  |  |                                                                                                                         | $ | 3,819,723                                            |                                                                                                                    |  | $ | 1,102,569                                                 |  |  | $      | 15,861,353                                                
|                                        |  |                                                                                                                   |                                                          |  |                                                                                                                         |   |                                                      |                                                                                                                    |  |   |                                                           |  |  |        |                                                           
|Affiliate Equity                        |  | $                                                                                                                 | 1,750,000                                                |  |                                                                                                                         | $ | 22,841                                               |                                                                                                                    |  | $ | 2,503,429                                                 |  |  | $      | 4,932,512                                                 
|Affiliate Loan and Debt                 |  |                                                                                                                   | -                                                        |  |                                                                                                                         |   | 250,000                                              |                                                                                                                    |  |   | -                                                         |  |  |        | 3,709,794                                                 
|Total Affiliate                         |  | $                                                                                                                 | 1,750,000                                                |  |                                                                                                                         | $ | 272,841                                              |                                                                                                                    |  | $ | 2,503,429                                                 |  |  | $      | 8,642,306                                                 
|                                        |  |                                                                                                                   |                                                          |  |                                                                                                                         |   |                                                      |                                                                                                                    |  |   |                                                           |  |  |        |                                                           
|Total Level 3 Investments               |  | $                                                                                                                 | 2,250,000                                                |  |                                                                                                                         | $ | 4,092,564                                            |                                                                                                                    |  | $ | 3,605,998                                                 |  |  | $      | 24,503,659                                                
|                                        |  |                                                                                                                   |                                                          |  |                                                                                                                         |   |                                                      |                                                                                                                    |  |   |                                                           |  |  |        |                                                           
|Range                                   |  |                                                                                                                   | 4.5-5X                                                   |  |                                                                                                                         |   | 1X                                                   |                                                                                                                    |  |   | 1X-3X                                                     |  |  |        | Not
                                         Applicable   
|                                        |  |                                                                                                                   |                                                          |  |                                                                                                                         |   |                                                      |                                                                                                                    |  |   |                                                           |  |  |        |                                                           
|Unobservable Input                      |  |                                                                                                                   | EBITDA
                                         Multiple |  |                                                                                                                         |   | Asset
                                         Value |                                                                                                                    |  |   | Revenue
                                         Multiple |  |  |        | Transaction
                                         Price
|                                        |  |                                                                                                                   |                                                          |  |                                                                                                                         |   |                                                      |                                                                                                                    |  |   |                                                           |  |  |        |                                                           
|Weighted Average                        |  |                                                                                                                   | 4.6X                                                     |  |                                                                                                                         |   | 1X                                                   |                                                                                                                    |  |   | 2.5X                                                      |  |  |        | Not
                                         Applicable   



28







The
following table provides a summary of the components of Level 1, 2 and 3 Assets Measured at Fair Value at March 31, 2020:



|                   |  | Fair Value Measurements at Reported Date Using |           
|------------------ |  | ---------------------------------------------- | ----------
|Description        |  | March 31, 2020                                 |           
|Loan investments   |  | $                                              | 1,678,346 
|Debt investments   |  |                                                | 13,006,378
|Equity investments |  |                                                | 21,289,553
|Total              |  | $                                              | 35,974,277



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



|                   |  | Fair Value Measurements at Reported Date Using |           
|------------------ |  | ---------------------------------------------- | ----------
|Description        |  | December 31, 2019                              |           
|Loan investments   |  | $                                              | 1,570,692 
|Debt investments   |  |                                                | 13,647,107
|Equity investments |  |                                                | 21,802,993
|Total              |  | $                                              | 37,020,792



29







The
following table provides a summary of changes in Assets Measured at Fair Value Using Significant Unobservable Inputs (Level 3)
for the three months ended March 31, 2020:



|                                                                                  |  | Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Venture Capital Investments |          
|--------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------- | ---------
|Description                                                                       |  | Loan Investments                                                                                    |          
|Ending Balance, December 31, 2019, of Level 3 Assets                              |  | $                                                                                                   | 1,570,692
|                                                                                  |  |                                                                                                     |          
|Realized gain included in net change in net assets from operations:               |  |                                                                                                     |          
|Advantage 24/7 LLC (Advantage 24/7)                                               |  |                                                                                                     | 39,000   
|Microcision LLC (Microcision)                                                     |  |                                                                                                     | -        
|Outmatch Holdings, LLC (Outmatch)                                                 |  |                                                                                                     | -        
|Total Realized
Gains and Losses                                                   |  |                                                                                                     | 39,000   
|                                                                                  |  |                                                                                                     |          
|Unrealized Gains and Losses included in net change in net assets from operations: |  |                                                                                                     |          
|                                                                                  |  |                                                                                                     |          
|Genicon, Inc. (Genicon)                                                           |  |                                                                                                     | -        
|Total Unrealized
Gains and Losses                                                 |  |                                                                                                     | -        
|                                                                                  |  |                                                                                                     |          
|Purchases of Securities/Changes to Securities/Non-cash conversions:               |  |                                                                                                     |          
|AIKG LLC (Andretti)                                                               |  |                                                                                                     | -        
|Filterworks Acquisition USA, LLC                                                  |  |                                                                                                     | -        
|Genicon                                                                           |  |                                                                                                     | -        
|GoNoodle, Inc. (GoNoodle)                                                         |  |                                                                                                     | -        
|HDI Acquisition LLC (Hilton Displays)                                             |  |                                                                                                     | -        
|Mattison Avenue Holdings LLC (Mattison)                                           |  |                                                                                                     | -        
|Microcision                                                                       |  |                                                                                                     | -        
|Total Purchases of Securities/Changes to Securities/Non-cash conversions          |  |                                                                                                     | -        
|                                                                                  |  |                                                                                                     |          
|Repayments and Sale of Securities:                                                |  |                                                                                                     |          
|Advantage 24/7                                                                    |  |                                                                                                     | (39,000  
|Microcision LLC (Microcision)                                                     |  |                                                                                                     | -        
|Outmatch Holdings, LLC (Outmatch)                                                 |  |                                                                                                     | -        
|Total Repayments and Sale of Securities                                           |  |                                                                                                     | (39,000  
|Transfers within Level 3                                                          |  |                                                                                                     | 107,654  
|Ending Balance, March 31, 2020, of Level 3 Assets                                 |  | $                                                                                                   | 1,678,346





|Change in unrealized depreciation on investments for the period included in changes in net assets |  | $ | (728,323  | )
|------------------------------------------------------------------------------------------------- |  | - | --------- | -
|Net realized gain on investments for the period included in changes in net assets                 |  | $ | 2,393,451 |  





30







The
following table provides a summary of changes in Assets Measured at Fair Value Using Significant Unobservable Inputs (Level 3)
for the three months ended March 31, 2019:



|                                                                                  |  | Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Venture Capital Investments |           
|--------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------- | ----------
|Description                                                                       |  | Loan Investments                                                                                    |           
|Ending Balance, December 31, 2018, of Level 3 Assets                              |  | $                                                                                                   | 4,935,777 
|                                                                                  |  |                                                                                                     |           
|Realized gain included in net change in net assets from operations:               |  |                                                                                                     |           
|Advantage 24/7 LLC (Advantage 24/7)                                               |  |                                                                                                     | -         
|Total Realized
Gains and Losses                                                   |  |                                                                                                     |           
|                                                                                  |  |                                                                                                     |           
|Unrealized Gains and Losses included in net change in net assets from operations: |  |                                                                                                     |           
|BeetNPath, LLC (Beetnpath)                                                        |  |                                                                                                     | -         
|Genicon, Inc. (Genicon)                                                           |  |                                                                                                     | -         
|Mercantile Adjustment Bureau, LLC (Mercantile)                                    |  |                                                                                                     | -         
|SciAps, Inc. (Sciaps)                                                             |  |                                                                                                     | -         
|SocialFlow, Inc. (Socialflow)                                                     |  |                                                                                                     | -         
|Tilson Technology Management, Inc. (Tilson)                                       |  |                                                                                                     | -         
|Total Unrealized
Gains and Losses                                                 |  |                                                                                                     | -         
|                                                                                  |  |                                                                                                     |           
|Purchases of Securities/Changes to Securities/Non-cash conversions:               |  |                                                                                                     |           
|Advantage 24/7                                                                    |  |                                                                                                     | 140,000   
|Empire Genomics, LLC (Empire Genomics)                                            |  |                                                                                                     | -         
|Genicon                                                                           |  |                                                                                                     | -         
|GoNoodle, Inc. (GoNoodle)                                                         |  |                                                                                                     | -         
|KnowledgeVision Systems, Inc. (Knowledge Vision)                                  |  |                                                                                                     | 150,000   
|Microcision LLC (Microcision)                                                     |  |                                                                                                     | -         
|Tilson                                                                            |  |                                                                                                     | -         
|Total Purchases of Securities/Changes to Securities/Non-cash conversions          |  |                                                                                                     | 290,000   
|                                                                                  |  |                                                                                                     |           
|Repayments and Sale of Securities:                                                |  |                                                                                                     |           
|eHealth Global Technologies, Inc. (eHealth)                                       |  |                                                                                                     | (3,500,000
|Total Repayments and Sale of Securities                                           |  |                                                                                                     | (3,500,000
|Transfers within Level 3                                                          |  |                                                                                                     | 444,915   
|Ending Balance, March 31, 2019, of Level 3 Assets                                 |  | $                                                                                                   | 2,170,692 





|Change in unrealized depreciation on investments for the period included in changes in net assets |  | $ | 522,296 | 
|------------------------------------------------------------------------------------------------- |  | - | ------- | 
|                                                                                                  |  |   |         | 
|Net realized gain on investments for the period included in changes in net assets                 |  | $ | 40,500  | 



31







Note
4. OTHER ASSETS



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



|                      |  | March 31, 2020 |         |  | December 31, 2019 |  
|--------------------- |  | -------------- | ------- |  | ----------------- | -
|Operating receivables |  | $              | 95,916  |  |                   | $
|Prepaid expenses      |  |                | 33,355  |  |                   |  
|Dividend receivable   |  |                | -       |  |                   |  
|Total other assets    |  | $              | 129,271 |  |                   | $



Note
5. COMMITMENTS AND CONTINGENCIES



The
Corporation had no commitments at March 31, 2020.



Note
6. SBA DEBENTURES



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



|                                      |  | March 31, 2020 |            |   | December 31, 2019 |  
|------------------------------------- |  | -------------- | ---------- | - | ----------------- | -
|Debentures guaranteed by the SBA      |  | $              | 11,000,000 |   |                   | $
|Less unamortized issue costs          |  |                | (203,668   | ) |                   |  
|Debentures guaranteed by the SBA, net |  | $              | 10,796,332 |   |                   | $



The
weighted average interest rate, including the SBA annual fee, at March 31, 2020 was 3.45%.



32







The
debenture terms require semiannual payments of interest at annual interest rates ranging from 2.245% to 3.644%, plus an annual
charge ranging from 0.804% to 0.94%. The debentures have fixed interest rates and a 10 year maturity date. As of March 31, 2020,
the Corporation had $3,000,000 in additional leverage available from the SBA.



The
debentures outstanding at March 31, 2020 will mature as follows:



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



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



The
following schedule analyzes the changes in stockholders’ equity (net assets) section of the Consolidated Statement of Financial
Position for the three months ended March 31, 2020 and 2019, respectively:



|                                                           |  | Common
    Stock |           |  | Capital
    in excess of par value |   |            | Accumulated Net
                                         Investment Loss |  |   | Undistributed
                                         Net Realized Gain on Investments |   |  | Net
    Unrealized Depreciation on Investments |            |  | Treasury
    Stock, at cost |   |            | Total
                                         Stockholders’ Equity
                                         (Net Assets) | 
|---------------------------------------------------------- |  | ---------------- | --------- |  | ---------------------------------- | - | ---------- | ------------------------------------------------------------------------ |  | - | --------------------------------------------------------------------------------------- | - |  | ---------------------------------------------- | ---------- |  | --------------------------- | - | ---------- | ------------------------------------------------------------------------------------------------------------------------- | 
|January 1, 2020                                            |  | $                | 1,519,637 |  |                                    | $ | 34,142,455 |                                                                          |  | $ | (1,751,249                                                                              | ) |  | $                                              | 27,083,281 |  |                             | $ | (5,896,503 | )                                                                                                                         | 
|Net investment gain                                        |  |                  | -         |  |                                    |   | -          |                                                                          |  |   | 538,421                                                                                 |   |  |                                                |            |  |                             |   | -          |                                                                                                                           | 
|Net realized gain on sales and dispositions of investments |  |                  | -         |  |                                    |   | -          |                                                                          |  |   | -                                                                                       |   |  |                                                | 2,393,451  |  |                             |   | -          |                                                                                                                           | 
|Net change in unrealized depreciation on
    investments   |  |                  | -         |  |                                    |   | -          |                                                                          |  |   | -                                                                                       |   |  |                                                | -          |  |                             |   | (2,501,735 | )                                                                                                                         | 
|March 31, 2020                                             |  | $                | 1,519,637 |  |                                    | $ | 34,142,455 |                                                                          |  | $ | (1,212,828                                                                              | ) |  | $                                              | 29,476,732 |  |                             | $ | (8,398,238 | )                                                                                                                         | 





|                                                           |  | Common
    Stock |         |  | Capital
    in excess of par value |   |            | Accumulated Net
                                         Investment Loss |  |   | Undistributed
                                         Net Realized Gain on Investments |   |  | Net
    Unrealized Depreciation on Investments |            |  | Treasury
    Stock, at cost |   |            | Total
                                         Stockholders’ Equity
                                         (Net Assets) | 
|---------------------------------------------------------- |  | ---------------- | ------- |  | ---------------------------------- | - | ---------- | ------------------------------------------------------------------------ |  | - | --------------------------------------------------------------------------------------- | - |  | ---------------------------------------------- | ---------- |  | --------------------------- | - | ---------- | ------------------------------------------------------------------------------------------------------------------------- | 
|January 1, 2019                                            |  | $                | 686,304 |  |                                    | $ | 10,581,789 |                                                                          |  | $ | (1,665,552                                                                              | ) |  | $                                              | 26,221,443 |  |                             | $ | (2,830,692 | )                                                                                                                         | 
|Net investment gain                                        |  |                  | -       |  |                                    |   | -          |                                                                          |  |   | 22,767                                                                                  |   |  |                                                | -          |  |                             |   | -          |                                                                                                                           | 
|Net realized gain on sales and dispositions of investments |  |                  | -       |  |                                    |   | -          |                                                                          |  |   | -                                                                                       |   |  |                                                | 31,131     |  |                             |   | -          |                                                                                                                           | 
|Change in unrealized depreciation on investments           |  |                  | -       |  |                                    |   | -          |                                                                          |  |   | -                                                                                       |   |  |                                                | -          |  |                             |   | 401,517    |                                                                                                                           | 
|March 31, 2019                                             |  | $                | 686,304 |  |                                    | $ | 10,581,789 |                                                                          |  | $ | (1,642,785                                                                              | ) |  | $                                              | 26,252,574 |  |                             | $ | (2,429,175 | )                                                                                                                         | 



33







Note
8. RELATED PARTY TRANSACTIONS



Investment
Management Agreement



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



The
“Base Management Fee” is calculated at an annual rate of 1.50% of the Corporation’s total assets (other than
cash or cash equivalents but including assets purchased with borrowed funds). For the three months ended March 31, 2020, the Base
Management Fee was $140,377. For the year ended December 31, 2019, $85,483 in Base Management Fees was earned by RCM. As of March
31, 2020 and December 31, 2019, the Corporation had $140,377 and $49,359 payable, respectively, for the Base Management Fees on
its Consolidated Statement of Financial Position. In addition, the Corporation had $25 payable to RCM at March 31, 2020 and $1,205
payable at December 31, 2019 to RCM for the expenses associated with the Administration Agreement.



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



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



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



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



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



34







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



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



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



For
the three months ended March 31, 2020 there were no Income Based Fees earned under the Investment Management Agreement.



The
second part of the Incentive Fee is the “Capital Gains Fee”. This fee will be determined and payable in arrears as
of the end of each calendar year, commencing with the calendar year ended on December 31, 2019. Under the terms of the Investment
Management Agreement, the Capital Gains Fee is calculated at the end of each applicable year by subtracting (1) the sum of the
cumulative aggregate realized capital losses and aggregate unrealized capital depreciation from (2) the cumulative aggregate realized
capital gains, in each case calculated from the effective date of the Investment Management Agreement. If this amount is positive
at the end of any calendar year, then the Capital Gains Fee for such year is equal to 20.0% of such amount, less the cumulative
aggregate amount of Capital Gains Fees paid in all prior years. If such amount is negative, then there is no Capital Gains Fee
payable for that calendar year. If the Investment Management Agreement is terminated as of a date that is not a calendar year
end, the termination date shall be treated as though it were a calendar year end for purposes of calculating and paying the Capital
Gains Fee.



For
purposes of the Capital Gains Fee:



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



35







As
of March 31, 2020, there were no Capital Gains Fees earned or payable to RCM under the Investment Management Agreement because
unrealized losses on the portfolio exceed realized gains. If the entire portfolio were to be liquidated as of March 31, 2020,
there would be a capital gains incentive fee liability of approximately $740,000 based on those values. However, given the unlikely
and remote nature of such a transaction, the amount has not been recorded.



Administration
Agreement



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



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



As
of March 31, 2020 and December 31, 2019, the Corporation recorded $25 and $1,205, respectively, in accrued expenses and other
liabilities on its Consolidated Statement of Financial Position for reimbursement of expenses owed to RCM under the Administration
Agreement.



Note
9. FINANCIAL HIGHLIGHTS



The
following schedule provides the financial highlights, calculated based on weighted average shares outstanding, for the three months
ended March 31, 2020 and 2019:



|                                                                         |  | Three months ended March 31, 2020 (Unaudited) |            |    | Three months ended March 31, 2019 (Unaudited) |  
|------------------------------------------------------------------------ |  | --------------------------------------------- | ---------- | -- | --------------------------------------------- | -
|Income from investment operations (1):                                   |  |                                               |            |    |                                               |  
|Investment income                                                        |  | $                                             | 0.04       |    |                                               | $
|Operating expenses                                                       |  |                                               | 0.03       |    |                                               |  
|Investment gain before income taxes                                      |  |                                               | 0.01       |    |                                               |  
|Income tax benefit                                                       |  |                                               | (0.03      | )  |                                               |  
|Net investment gain                                                      |  |                                               | 0.04       |    |                                               |  
|Net realized and unrealized (loss) gain on investments                   |  |                                               | (0.01      | )  |                                               |  
|Increase in net asset value                                              |  |                                               | 0.03       |    |                                               |  
|Net asset value, beginning of period                                     |  |                                               | 3.66       |    |                                               |  
|Net asset value, end of period                                           |  | $                                             | 3.69       |    |                                               | $
|Per share market price, end of period                                    |  | $                                             | 2.24       |    |                                               | $
|Total return based on market value                                       |  |                                               | (16.42     | )% |                                               |  
|Total return based on net asset value                                    |  |                                               | 0.80       | %  |                                               |  
|Supplemental data:                                                       |  |                                               |            |    |                                               |  
|Ratio of operating expenses before income taxes to average net assets    |  |                                               | 0.96       | %  |                                               |  
|Ratio of operating expenses including income taxes to average net assets |  |                                               | 3.47       | %  |                                               |  
|Ratio of net investment loss to average net assets                       |  |                                               | 1.00       | %  |                                               |  
|Portfolio turnover                                                       |  |                                               | 4.8        | %  |                                               |  
|Net assets, end of period                                                |  | $                                             | 54,058,653 |    |                                               | $
|Weighted shares outstanding, end of period                               |  |                                               | 14,655,321 |    |                                               |  





| | (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.



36







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



You
should read the following discussion and analysis of our financial condition and results of operations in conjunction with the
consolidated financial statements and related notes included elsewhere in this report. Historical results and percentage relationships
among any amounts in the consolidated financial statements are not necessarily indicative of trends in operating results for any
future periods.



FORWARD
LOOKING STATEMENTS



Statements
included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in
this report that do not relate to present or historical conditions are “forward-looking statements” within the meaning
of that term in Section 27A of the Securities Act of 1933, as amended, and in Section 21E of the Securities Exchange Act of 1934,
as amended. Additional oral or written forward-looking statements may be made by us from time to time, and forward-looking statements
may be included in documents that are filed with the Securities and Exchange Commission. Forward-looking statements involve risks
and uncertainties that could cause our results or outcomes to differ materially from those expressed in the forward-looking statements.
Forward-looking statements may include, without limitation, statements relating to our plans, strategies, objectives, expectations
and intentions and are intended to be made pursuant to the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. Words such as “believes,” “forecasts,” “intends,” “possible,” “expects,”
“estimates,” “anticipates,” or “plans” and similar expressions are intended to identify forward-looking
statements. Among the important factors on which such statements are based are assumptions concerning the scope of the impact
of the COVID-19 pandemic and its specific impact on our portfolio companies, the state of the United States economy and the local
markets in which our portfolio companies operate, the state of the securities markets in which the securities of our portfolio
companies could be traded, liquidity within the United States financial markets, and inflation. Forward-looking statements are
also subject to the risks and uncertainties described under the caption “Risk Factors” contained in Part II, Item
1A of this report and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019.



There
may be other factors not identified that affect the accuracy of our forward-looking statements. Further, any forward-looking statement
speaks only as of the date when it is made and, except as required by law, we undertake no obligation to update any forward-looking
statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or
unanticipated events or circumstances. New factors emerge from time to time that may cause our business not to develop as we expect,
and we cannot predict all of them.



Overview



We
are an externally managed investment company that lends to and invests in small to medium sized companies. We have elected to
be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940
Act”). As a BDC, we are required to comply with certain regulatory requirements. We have historically made the majority
of our investments through our wholly-owned subsidiary, Rand Capital SBIC, Inc. (“Rand SBIC”), which operates as a
small business investment company (“SBIC”) and has been licensed by the U.S. Small Business Administration (“SBA”)
since 2002.



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



37







With
the completion of the Transaction, we changed our investment objectives and strategy. We intend to elect U.S federal tax treatment
as a regulated investment company (“RIC”) under subchapter M of the Code. With the election, we generally will not
be subject to corporate-level U.S. federal income taxes on any net ordinary income or capital gains that we timely distribute
to our shareholders as dividends. Our new investment objective is to maximize total return to our shareholders with current income
combined with capital appreciation. As a result, our future investments will be made primarily in higher yielding debt investments
and may include public equity in other business development companies that provide income through dividends and relatively more
liquidity than our private company investments.



As
required for the RIC election, we will pay a special dividend to shareholders to distribute all accumulated earnings and profits,
and we intend to adopt a dividend policy that may provide regular cash dividends to shareholders. On March 3, 2020, the Board
of Directors of Rand declared a special dividend of $1.62 per share of the Corporation’s Common Stock, par value $0.10 per
shares (the “Common Stock”) to be paid in a combination of cash and shares of Common Stock to shareholders of record
at the close of business on April 2, 2020. The total amount of cash to be distributed to all shareholders will be limited to 20%
of the total special dividend to be paid, excluding any cash paid for fractional shares. The remaining 80% of the special dividend
will be paid in shares of Common Stock. The exact distribution of cash and stock to any given shareholder will depend upon their
election as well as elections of other shareholders, subject to the pro-rata limitation. We expect to complete the distribution
of the special dividend on May 11, 2020. To maintain our RIC status, we need to meet specified source-of-income and asset diversification
requirements and distribute annually to our shareholders at least 90% of our ordinary net income and realized net short-term capital
gains in excess of realized net long-term capital losses, if any. Accordingly, our Board of Directors has expressed its intent
to adopt a new dividend policy that may include regular cash dividends to shareholders going forward.



Outlook



At
the end of the first quarter of 2020, we had $29.1 million in cash and cash equivalents available for future investments and expenses,
an increase of $3.3 million from the end of 2019. The increase was primarily due to approximately $4.4 million received during
the quarter from a portfolio exit, partially offset by investments made during the quarter. With the intended RIC election, our
investment objective is to maximize total return to our shareholders. As a result, in contrast to our previous metric of net asset
value growth, we are now focused on growing investment income.



Since
the outbreak of the COVID-19 pandemic, we have engaged in active discussions with the management teams of many of the companies
within our portfolio regarding actions they have undertaken to limit the spread of COVID-19. We believe that our portfolio companies
are taking the necessary actions to ensure the safety of their employees, customers and suppliers by enacting such procedures
as work from home processes, staggered schedules, increased sanitation efforts and social distancing. Some companies have had
to shut down due to COVID-19. In addition, most of the portfolio companies that are qualified have applied for available federal
loans under the Paycheck Protection Program. The exact impact to our portfolio companies is unknown and some may suffer significant
negative impact to their business. RCM is activity monitoring the impact to the portfolio companies.





38









Trends
and Opportunities



We
believe the combination of cash on hand, proceeds from portfolio exits, SBA leverage, and prospective investment income provide
sufficient capital for us to manage through the potential economic impact of the COVID-19 pandemic and continue to add new investments
to our portfolio while reinvesting in existing portfolio companies that demonstrate continued growth potential. Despite the COVID-19
pandemic, we continue to have a pipeline of investment opportunities.



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 eager reception
    of new technologies and service concepts, regardless of the macroeconomic environment.                                                                                                                                                                                                                                                                                                                                                                            
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | ● | We
    continue to manage risk by investing with other investors, when possible.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ● | We
    are involved with the governance and management of a majority of our portfolio companies, which enables us to support their
    operating and marketing efforts and facilitate their growth.                                                                                                                                                                                                                                                                                                                                                                                                       
| | ● | As
    our portfolio expands, we are able to better leverage our infrastructure.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ● | We
    believe receipt of cash and portfolio assets as consideration in the Transaction with East, as well as the establishment of
    RCM as our external investment advisor, broadens our potential pipeline of investment opportunities in order to build our
    portfolio, facilitate growth and reduce operating expenses as a percentage of portfolio assets. Strategically, we expect to
    advance our efforts to increase our income-producing investments so as to support a regular cash dividend for shareholders
    and complement our equity investments that drive capital appreciation.
| | ● | We
    have sufficient cash to invest in new opportunities and to repurchase shares. Subsequent to quarter end, our Board of Directors
    approved a new share repurchase program which authorizes the purchase of up to $1.5 million of our Common Stock through April
    22, 2021 at prices per share of common stock of no greater than the then current net asset value.                                                                                                                                                                                                                            



Critical
Accounting Policies



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



39







Financial
Condition



Overview:

|                  |  | March 31, 2020 |            |  | December 31, 2019 |   |            | Increase |  |   | % Increase | 
|----------------- |  | -------------- | ---------- |  | ----------------- | - | ---------- | -------- |  | - | ---------- | 
|Total assets      |  | $              | 65,382,756 |  |                   | $ | 64,791,449 |          |  | $ | 591,307    | 
|Total liabilities |  |                | 11,324,103 |  |                   |   | 11,162,933 |          |  |   | 161,170    | 
|Net assets        |  | $              | 54,058,653 |  |                   | $ | 53,628,516 |          |  | $ | 430,137    | 



Net
asset value per share (NAV) was $3.69 at March 31, 2020 and $3.66 at December 31, 2019.



Our
gross outstanding SBA debentures at March 31, 2020 were $11,000,000 and they mature from 2022 through 2029. Cash and cash equivalents
approximated 54% of net assets at March 31, 2020, as compared to 48% at December 31, 2019.



Composition
of Our Investment Portfolio



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



|                             |  | March 31, 2020 |            |   | December 31, 2019 |   |            | (Decrease) Increase |  |   | % (Decrease) Increase |  
|---------------------------- |  | -------------- | ---------- | - | ----------------- | - | ---------- | ------------------- |  | - | --------------------- | -
|Investments, at cost         |  | $              | 44,301,271 |   |                   | $ | 44,619,463 |                     |  | $ | (318,192              | )
|Unrealized depreciation, net |  |                | (8,326,994 | ) |                   |   | (7,598,671 | )                   |  |   | 728,323               |  
|Investments at fair value    |  | $              | 35,974,277 |   |                   | $ | 37,020,792 |                     |  | $ | (1,046,515            | )



Our
total investments at fair value, as estimated by RCM and approved by our Board of Directors, approximated 67% of net assets at
March 31, 2020 versus 69% of net assets at December 31, 2019.



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



The
change in investments during the three months ended March 31, 2020, at cost, is comprised of the following:



|                                                                   |  | Cost Increase (Decrease) |           
|------------------------------------------------------------------ |  | ------------------------ | ----------
|New investments:                                                   |  |                          |           
|Apollo Investment Corporation (Apollo)                             |  | $                        | 364,084   
|Ares Capital Corporation (Ares)                                    |  |                          | 343,460   
|FS KKR Capital Corp. (FS KKR)                                      |  |                          | 338,980   
|Golub Capital BDC, Inc. (Golub)                                    |  |                          | 346,597   
|Owl Rock Capital Corporation (Owl Rock)                            |  |                          | 347,067   
|Total of new investments                                           |  |                          | 1,740,188 
|                                                                   |  |                          |           
|Other changes to investments:                                      |  |                          |           
|AIKG LLC (Andretti) interest conversion                            |  |                          | 44,470    
|Filterworks Acquisition USA, LLC (Filterworks) interest conversion |  |                          | 11,641    
|Genicon OID amortization                                           |  |                          | 10,191    
|HDI Acquisition LLC (Hilton Displays) interest conversion          |  |                          | 6,317     
|Microcision LLC (Microcision) OID amortization                     |  |                          | 5,500     
|Mattison Avenue Holdings LLC (Mattison) interest conversion        |  |                          | 5,241     
|GoNoodle, Inc. (GoNoodle) interest conversion                      |  |                          | 3,756     
|Total of other changes to investments                              |  |                          | 87,116    
|                                                                   |  |                          |           
|Investments repaid, sold, liquidated or converted:                 |  |                          |           
|Outmatch Holdings, LLC (Outmatch) stock sale                       |  |                          | (2,145,496
|Total of investments repaid, sold, liquidated or converted         |  |                          | (2,145,496
|                                                                   |  |                          |           
|Net change in investments, at cost                                 |  | $                        | (318,192  



40







Results
of Operations



Comparison
of the three months ended March 31, 2020 to the three months ended March 31, 2019



Investment
Income





|                                     |  | Three months ended March 31, 2020 |         |  | Three months ended March 31, 2019 |   |         | Increase (Decrease) |  |   | % Increase (Decrease) |  
|------------------------------------ |  | --------------------------------- | ------- |  | --------------------------------- | - | ------- | ------------------- |  | - | --------------------- | -
|Interest from portfolio companies    |  | $                                 | 535,701 |  |                                   | $ | 405,965 |                     |  | $ | 129,736               |  
|Interest from other investments      |  |                                   | 83,250  |  |                                   |   | 17,811  |                     |  |   | 65,439                |  
|Dividend and other investment income |  |                                   | 13,125  |  |                                   |   | 34,625  |                     |  |   | (21,500               | )
|Fee income                           |  |                                   | 3,750   |  |                                   |   | 260,969 |                     |  |   | (257,219              | )
|Total investment income              |  | $                                 | 635,826 |  |                                   | $ | 719,370 |                     |  | $ | (83,544               | )



The
total investment income that is received on a current basis for the three months ended March 31, 2020 is received from eleven
portfolio companies. This contrasts with the ten portfolio companies generating current income for the three months ended March
31, 2019.



Interest
from portfolio companies – Interest from portfolio companies was approximately 32% higher during the three months ended
March 31, 2020 versus the same period in 2019 due to the fact that we have more income-producing debt investments in current year.
As part of the contributed assets received from East at the completion of the Transaction in November 2019, we received debt instruments
from Andretti, Filterworks, Hilton Displays and Mattison.



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



Interest
from other investments - The increase in interest from other investments is due to higher average cash balances and higher
interest rates during the three months ended March 31, 2020 versus the same period in 2019.



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 months ended
                                                                                March 31, 2020 |        |  | Three months ended
                                                                                March 31, 2019 |  
|------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------- | ------ |  | ----------------------------------------------------------------------------------------------------------------- | -
|Tilson Technology Management, Inc. (Tilson) |  | $                                                                                                                 | 13,125 |  |                                                                                                                   | $
|Carolina Skiff LLC (Carolina Skiff)         |  |                                                                                                                   | -      |  |                                                                                                                   |  
|Total dividend and other investment income  |  | $                                                                                                                 | 13,125 |  |                                                                                                                   | $





41







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



The
income associated with the amortization of financing fees was $3,750 and $35,969 for the three months ended March 31, 2020 and
2019, respectively. During the three months ended March 31, 2019, we recognized a one-time fee of $225,000 in conjunction with
the repayment of the eHealth loan instrument.



Expenses



|               |  | Three months ended March 31, 2020 |         |  | Three months ended March 31, 2019 |   |         | Decrease |  |   | % Decrease |  
|-------------- |  | --------------------------------- | ------- |  | --------------------------------- | - | ------- | -------- |  | - | ---------- | -
|Total expenses |  | $                                 | 516,506 |  |                                   | $ | 689,735 |          |  | $ | (173,229   | )



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



| | (i)    | organization;                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (ii)   | costs
    of calculating our net asset value (including the cost and expenses of any independent valuation firm);                                                                                                                                                                                                                                                                                                                                               
| | (iii)  | expenses
    incurred by RCM payable to third parties, including agents, consultants or other advisors, in monitoring financial and legal
    affairs and in monitoring the our investments and performing due diligence on its prospective portfolio companies;                                                                                                                                                                                                
| | (iv)   | interest
    payable on debt, if any, incurred to finance our investments;                                                                                                                                                                                                                                                                                                                                                                                      
| | (v)    | offerings
    of our Common Stock and other securities;                                                                                                                                                                                                                                                                                                                                                                                                         
| | (vi)   | investment
    advisory and management fees payable under the Investment Management Agreement, but excluding any fees payable to any Sub-Adviser;                                                                                                                                                                                                                                                                                                               
| | (vii)  | administration
    fees payable under the Administration Agreement;                                                                                                                                                                                                                                                                                                                                                                                             
| | (viii) | transfer
    agent and custodial fees;                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (ix)   | federal
    and state registration fees;                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (x)    | all
    costs of registration and listing our shares on any securities exchange;                                                                                                                                                                                                                                                                                                                                                                                
| | (xi)   | federal,
    state and local taxes;                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (xii)  | independent
    directors’ fees and expenses;                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (xiii) | costs
    of preparing and filing reports or other documents required by governmental bodies (including the SEC);                                                                                                                                                                                                                                                                                                                                               
| | (xiv)  | costs
    of any reports, proxy statements or other notices to shareholders, including printing costs;                                                                                                                                                                                                                                                                                                                                                          
| | (xv)   | our
    allocable portion of the fidelity bond, directors and officers/errors and omissions liability insurance, and any other insurance
    premiums;                                                                                                                                                                                                                                                                                                          
| | (xvi)  | direct
    costs and expenses of administration, including independent auditors and outside legal costs; and                                                                                                                                                                                                                                                                                                                                                    
| | (xvii) | all
    other expenses incurred by us or RCM in connection with administering our business (including payments under the Administration
    Agreement based upon our allocable portion of the RCM’s overhead in performing its obligations under the Administration
    Agreement, including rent and the allocable portion of the cost of our chief financial officer and chief compliance officer
    and their respective staffs (including travel expenses))



Expenses
decreased approximately $173,000 or 25% during the three months ended March 31, 2020 compared to the three months ended March
31, 2019. The decrease in operating expenses was primarily due to lower professional fees of approximately $48,000 in the three
months ended March 31, 2020 compared to the three months ended March 31, 2019 as well as the absence of the salary and benefits
expense in the three months ended March 31, 2020. The salary and benefit expense for the three months ended March 31, 2019 was
approximately $244,000. In addition, corporate development expense decreased approximately $17,000 during the three months ended
March 31, 2020 versus the same period in 2019. These decreases were offset by the new base management fee payable to RCM during
the three months ended March 31, 2020 of $140,377. There were no incentive fees earned by RCM for the three months ended March
31, 2020.



42







Because
of our intention to elect RIC status as of January 1, 2020, a net deferred tax asset of $1,451,658 was eliminated in accordance
with GAAP, resulting in deferred tax expense for the three months ended March 31, 2020. In addition, certain portfolio investments,
that generate non-qualifying income for a RIC, were contributed to blocker corporations in December 2019. . These blocker corporations
will be subject to federal and state income taxes and as a result the deferred liability related to these investments of $247,460
was also contributed.



Realized
Gain on Investments



|                                                 |  | Three months ended March 31, 2020 |           |  | Three months ended March 31, 2019 |   |        | Change | 
|------------------------------------------------ |  | --------------------------------- | --------- |  | --------------------------------- | - | ------ | ------ | 
|Realized gain on investments before income taxes |  | $                                 | 2,393,451 |  |                                   | $ | 40,500 |        | 



During
the three months ended March 31, 2020, we realized a $2.3 million gain when we exited our investment in Outmatch as part of a
strategic majority investment from Rubicon Technology Partners. We also received additional proceeds of $56,916 from Microcision
LLC (Microcision) related to the 2019 sale of our equity interest in Microcision and $39,000 in additional gain from Advantage
24/7.



During
the three months ended March 31, 2019, we recognized a gain on our investment in Advantage 24/7 LLC. The company converted their
equity into a new debt instrument and resulted in the $40,500 gain.



Change
in Unrealized Depreciation of Investments



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



|                                                                     |  | Three months ended March 31, 2020 |          |   | Three months ended March 31, 2019 |   |         | Change | 
|-------------------------------------------------------------------- |  | --------------------------------- | -------- | - | --------------------------------- | - | ------- | ------ | 
|Change in unrealized depreciation of investments before income taxes |  | $                                 | (728,323 | ) |                                   | $ | 522,296 |        | 



The
change in unrealized depreciation, before income taxes, for the three months ended March 31, 2020 was comprised of the following:



|                                                                                                                            |  | Three months ended March 31, 2020 |         
|--------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------- | --------
|Genicon, Inc. (Genicon)                                                                                                     |  | $                                 | (510,191
|Apollo Investment Corporation (Apollo)                                                                                      |  |                                   | (110,451
|Ares Capital Corporation (Ares)                                                                                             |  |                                   | (49,070 
|FS KKR Capital Corp. (FS KKR)                                                                                               |  |                                   | (26,647 
|Golub Capital BDC, Inc. (Golub)                                                                                             |  |                                   | (30,597 
|Owl Rock Capital Corporation (Owl Rock)                                                                                     |  |                                   | (1,367  
|Total change in net unrealized depreciation of investments before income taxes during the three months ended March 31, 2020 |  | $                                 | (728,323





43







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



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



The
change in unrealized depreciation, before income taxes, for the three months ended March 31, 2019 was comprised of the following:



|                                                                                                                            |  | Three months ended March 31, 2019 |          
|--------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------- | ---------
|BeetNPath, LLC (Beetnpath)                                                                                                  |  | $                                 | (393,904 
|SciAps, Inc. (Sciaps)                                                                                                       |  |                                   | (385,000 
|SocialFlow, Inc. (Socialflow)                                                                                               |  |                                   | (321,300 
|Mercantile Adjustment Bureau, LLC (Mercantile)                                                                              |  |                                   | (200,000 
|Genicon, Inc. (Genicon)                                                                                                     |  |                                   | (37,500  
|Tilson Technology Management, Inc. (Tilson)                                                                                 |  |                                   | 1,860,000
|Total change in net unrealized depreciation of investments before income taxes during the three months ended March 31, 2019 |  | $                                 | 522,296  



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



Our
valuation of Genicon was decreased during the three months ended March 31, 2019 to revalue our holdings based upon the liquidation
preferences of our securities and as a result of a recent round of financing.



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



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 in Net Assets from Operations



We
account for our operations under GAAP for investment companies. The principal measure of our financial performance is “net
increase in net assets from operations” on our consolidated statements of operations. For the three months ended March 31,
2020 and 2019, the net increase in net assets from operations was $430,137 and $455,415, respectively.



Liquidity
and Capital Resources



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



44







As
of March 31, 2020, our total liquidity consisted of approximately $29,100,000 in cash and cash equivalents. In addition, we had
an outstanding SBA leverage commitment of $3,000,000 at March 31, 2020.



Net
cash provided by operating activities has averaged approximately $230,000 over the last three years. The cash used for investments
in portfolio companies has averaged approximately $2,600,000 over the last three years. Our cash flow will fluctuate based on
the timing of the receipt of dividend income and realized exits. We will generally use cash to fund our operating expenses and
to invest in companies as we build our portfolio. We anticipate that we will continue to exit investments. However, the timing
of liquidation events within the portfolio is difficult to project. Starting in 2022 (See Note 6 in the Notes to the Consolidated
Financial Statements), our outstanding SBA debt begins to mature and this will require us to identify sources of future funding
if liquidation of investments is not sufficient to fund operations and repay the SBA debt obligation.



We
believe that the cash on hand at March 31, 2020, the undrawn SBA leverage commitment and the scheduled interest payments on our
portfolio investments will be sufficient to meet our cash needs throughout 2020. We continue to pursue current returns from portfolio
companies to increase the liquidity available for new investments, operating activities and future SBA debenture obligations.



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



Item 3. Quantitative and Qualitative Disclosures about Market Risk



Our
investment activities contain elements of risk. Our investment portfolio consists of equity and debt securities in private companies
and is subject to valuation risk. Because there is typically no public market for the equity and debt securities in which we invest,
the valuation of the equity interests in the portfolio is stated at “fair value” as determined in good faith by RCM
and approved by our Board of Directors. This is in accordance with our investment valuation policy (see the discussion of valuation
policy contained in “Note 3. Investments” in the consolidated financial statements contained in Item 1 of this report,
which is hereby incorporated herein by reference.) In the absence of readily ascertainable market values, the estimated value
of 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 or on other stock markets.
In addition, there may be a portion of the portfolio for which no regular trading market exists. In order to realize the full
value of a security, the market must trade in an orderly fashion or a willing purchaser must be available when a sale is to be
made. Should an economic or other event occur that would not allow markets to trade in an orderly fashion, we may not be able
to realize the fair value of our marketable investments or other investments in a timely manner.



As
of March 31, 2020, we did not have any off-balance sheet arrangements or hedging or similar derivative financial instrument investments.



Item
4. Controls and Procedures



Disclosure
Controls and Procedures.The Corporation maintains disclosure controls and procedures that are designed to ensure that information
required to be disclosed in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized, and reported within the time periods specified in the SEC’s rules and forms, and that this information is accumulated
and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosure. The Chief Executive Officer and the Chief Financial Officer carried out an evaluation
of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures as of March 31,
2020. Based on the evaluation of these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer
concluded that the Corporation’s controls and procedures were effective as of March 31, 2020.



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



45







PART
II.

OTHER
INFORMATION



Item
1. Legal Proceedings



None



Item
1A. Risk Factors



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



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



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



As
a result, the business, operating results, financial condition and liquidity of our portfolio companies could be materially and
adversely affected. The impact to our portfolio companies’ results will depend to a large extent on the duration and severity
of coronavirus and the actions taken by authorities and other entities to contain coronavirus or treat its impact, all of which
are beyond our control. Certain of our portfolio companies have had their operations temporarily shut down or significantly curtailed,
which we expect will further exacerbate the impact of these events on those portfolio companies. In addition, even if our portfolio
companies avail themselves of loans from the Small Business Administration under the Paycheck Protection Program or the other
assistance provided by U.S. federal and state governmental entities to mitigate the impacts of coronavirus, certain of our portfolio
companies may experience significant liquidity issues, which, in turn, may increasingly have negative effects the ability of those
portfolio companies to repay principal and interests on outstanding loans and other debt instruments owed to the Corporation and
certain of those portfolio companies may not be able to continue as going concerns. A substantial negative impact to one or more
of our portfolio companies as a result of coronavirus could have a material adverse effects on our business, financial condition
and results of operations.



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



46







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



|Issuer Purchases of Equity Securities
|-------------------------------------
|Period                               
|1/1/2020 – 1/31/2020                 
|2/1/2020 – 2/29/2020                 
|3/1/2020 – 3/31/2020                 



| | (1) | There were no shares repurchased
    during the first quarter of 2020.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | The average price paid per share is calculated
    on a settlement basis and includes commission.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (3) | On April 22, 2020, the Board of Directors approved
    a new share repurchase plan, which authorizes the Corporation to repurchase shares of the Corporation’s outstanding
    common stock with an aggregate cost of up to $1,500,00 at prices per share of common stock of no greater than the then current
    net asset value. This new share repurchase authorization lasts for a period of 12 months from the authorization date, until
    April 22, 2021. This new share repurchase plan supplants and replaces the share repurchase authorization that was previously
    approved by the Board of Directors in October 2019.
| | (4) | Prior to the April 22, 2020 new share repurchase
    plan, in October 2019 the Board of Directors extended the repurchase authorization of up to 1,541,046 shares of the Common
    Stock on the open market at prices no greater than the then current net asset value.                                                                                                                                                                                                                                                                                                                                                              



Item
3. Defaults upon Senior Securities



None.



Item
4. Mine Safety Disclosures



Not
Applicable.



Item
5. Other Information



None.



47







Item 6. Exhibits



| | (a) | Exhibits
| | --- | --------



| |            | The following exhibits are
    filed with this report or are incorporated herein by reference to a prior filing, in accordance with Rule 12b-32 under the
    Securities Exchange Act of 1934.                                                                                                                     
| | ---------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |            |                                                                                                                                                                                                                                                                                                                    
| | (3.1)(i)   | Certificate of Incorporation of the Corporation, incorporated by reference to Exhibit (a)(1) of Form N-2 filed with the SEC on April 22, 1997. (File No. 333-25617).                                                                                                                                               
| |            |                                                                                                                                                                                                                                                                                                                    
| | (3.1)(ii)  | Certificate of Amendment to the Certificate of Incorporation, as amended, incorporated by reference to Exhibit 3.1 to the Corporation’s Current Report on Form 8-K filed with the SEC on November 12, 2019.                                                                                                        
| |            |                                                                                                                                                                                                                                                                                                                    
| | (3.1)(iii) | By-laws of the Corporation, incorporated by reference to Exhibit 3(ii) to the Corporation’s Quarterly Report on Form 10-Q for the period ended September 30, 2016 filed with the SEC on November 2, 2016. (File No. 814-00235).                                                                                    
| |            |                                                                                                                                                                                                                                                                                                                    
| | (3.2)(i)   | Certificate of Incorporation of Rand Merger Corporation as filed with the New York Department of State on December 18, 2008, incorporated by reference to Exhibit 1(a) to Registration Statement No. 811-22276 on Form N-5 of Rand Capital SBIC, Inc. filed with the SEC on February 6, 2009. (File No. 811-22276).
| |            |                                                                                                                                                                                                                                                                                                                    
| | (3.2)(ii)  | By-laws of Rand Capital SBIC, Inc., incorporated by reference to Exhibit 2 to Registration Statement No. 811-22276 on Form N-5 of Rand Capital SBIC, Inc. filed with the SEC on February 6, 2009. (File No. 811-22276).                                                                                            



| | (4)    | Specimen certificate of common stock certificate, incorporated by reference to Exhibit (b) of Form N-2 filed with the Securities Exchange Commission on April 22, 1997. (File No. 333-25617).
| | ------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |        |                                                                                                                                                                                              
| | (31.1) | Certification of Principal Executive Officer Pursuant to Rules 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended – filed herewith.                                   
| |        |                                                                                                                                                                                              
| | (31.2) | Certification of Principal Financial Officer Pursuant to Rules 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended – filed herewith.                                   
| |        |                                                                                                                                                                                              
| | (32.1) | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Rand Capital Corporation – filed herewith.                                                                         



48







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:
May 11, 2020



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



49