<PAGE>
                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 quarter ended September 30, 2003

[ ] 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: 811-1825



                            RAND CAPITAL CORPORATION
             (Exact Name of Registrant as specified in its Charter)

             NEW YORK                                          16-0961359
(State or Other Jurisdiction of Incorporation                (IRS Employer
          Or organization)                                Identification No.)

    2200 RAND BUILDING, BUFFALO, NY                             14203
(Address of Principal executive offices)                      (Zip Code)

                                 (716) 853-0802
                (Registrant's Telephone No. Including Area Code)




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 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days
Yes:  X           No
     ---             ---

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12B-2 of the Exchange Act)
Yes:                 No  X
      ----              ---

Number of shares outstanding of each of the issuer's classes of common stock, as
of the latest practicable date (November 10, 2003): 5,718,934


<PAGE>




RAND CAPITAL CORPORATION
TABLE OF CONTENTS FOR FORM 10-Q

PART I. - FINANCIAL INFORMATION

<TABLE>


<S>      <C>                                                                                                         <C>


         ITEM 1.  FINANCIAL STATEMENTS

                  Condensed Consolidated Statements of Financial Position as of September 30, 2003 and December
                  31, 2002

                  Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended
                  September 30, 2003 and 2002

                  Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2003
                  and 2002

                  Condensed Consolidated Statements of Changes in Net Assets for the Three Months and Nine Months
                  Ended September 30, 2003 and 2002

                  Consolidated Schedule of Portfolio Investments as of September 30, 2003

                  Notes to Condensed Consolidated Financial Statements

         ITEM 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

         ITEM 3.  Quantitative and Qualitative Disclosures about Market Risk

         ITEM 4.  Controls and Procedures


PART II - OTHER INFORMATION

         ITEM 1.  Legal Proceedings

         ITEM 2.  Changes in Securities and Use of Proceeds

         ITEM 3.  Defaults Upon Senior Securities

         ITEM 4.  Submission of Matters To a Vote of Security Holders

         ITEM 5.  Other Information

         ITEM 6.  Exhibits and Reports on Form 8-K

</TABLE>



<PAGE>


                                     PART I.
                              FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                            RAND CAPITAL CORPORATION
             CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
                 AS OF SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
                                   (UNAUDITED)


<TABLE>
<CAPTION>

                                                                                SEPTEMBER 30,        DECEMBER 31,
                                                                                    2003                2002
                                                                               ---------------     ---------------

<S>                                                                            <C>                 <C>
ASSETS
Investments at fair value (identified cost:
     at 9/30/2003 - $7,597,881, at 12/31/2002 - $6,225,453)                    $     7,251,518     $     6,076,187
Cash and cash equivalents                                                            1,299,601           3,092,189
Interest receivable (net of allowance of $130,080
     at 9/30/2003 and $13,167 at 12/31/2002)                                           347,055             275,672
Deferred tax asset                                                                     305,000             112,000
Promissory notes receivable                                                             82,610             113,470
Other assets                                                                            80,634              16,155
                                                                               ---------------     ---------------
TOTAL ASSETS                                                                   $     9,366,418     $     9,685,673
                                                                               ===============     ===============

LIABILITIES AND STOCKHOLDERS' EQUITY (NET ASSETS)

LIABILITIES:
Accounts payable and accrued expenses                                          $        40,908     $        42,384
Income taxes payable                                                                        --               1,989
Deferred revenue                                                                        49,362              36,666
                                                                               ---------------     ---------------

              Total liabilities                                                         90,270              81,039
                                                                               ---------------     ---------------

STOCKHOLDERS' EQUITY (NET ASSETS)

Common stock, $.10 par - shares authorized 10,000,000;
     shares issued 5,763,034                                                           576,304             576,304
Capital in excess of par value                                                       6,973,454           6,973,454
Accumulated net investment (loss)                                                   (4,598,692)         (4,354,719)
Undistributed net realized gain on investments                                       6,627,001           6,574,710
Net unrealized (depreciation) on investments                                          (254,712)           (139,411)
Treasury stock at cost, 44,100 and 24,400 shares at 9/30/2003
        and 12/31/2002                                                                 (47,207)            (25,704)
                                                                               ---------------     ---------------

              Net assets (per share 9/30/2003-$1.62, 12/31/2002-$1.67)               9,276,148           9,604,634
                                                                               ---------------     ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                     $     9,366,418     $     9,685,673
                                                                               ===============     ===============
</TABLE>


See notes to the condensed consolidated financial statements.


<PAGE>


                            RAND CAPITAL CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
        FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND
                               SEPTEMBER 30, 2002
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                             THREE MONTHS       THREE MONTHS       NINE MONTHS        NINE MONTHS
                                                                ENDED              ENDED              ENDED              ENDED
                                                             SEPTEMBER 30,      SEPTEMBER 30,      SEPTEMBER 30,      SEPTEMBER 30,
                                                                 2003               2002              2003               2002
                                                            --------------     --------------     --------------     --------------

<S>                                                         <C>                <C>                <C>                <C>
INVESTMENT INCOME:
       Interest from portfolio companies                    $       92,708     $       23,913     $      295,671     $       83,419
       Interest from other investments                               3,376             23,408             17,550             82,359
       Dividend Income                                              47,668                 --             47,668                 --
       Other income                                                  2,359             10,000              6,975             15,540
                                                            --------------     --------------     --------------     --------------
                                                                   146,111             57,321            367,864            181,318
                                                            --------------     --------------     --------------     --------------
EXPENSES:

       Salaries                                                     71,793             68,575            260,177            248,538
       Employee benefits                                            14,570             13,814             55,740             62,698
       Directors' fees                                               7,550              4,500             28,050             20,750
       Professional fees                                            26,117             15,890             89,219             55,093
       Shareholders and office                                      29,961             21,468             84,043             82,799
       Insurance                                                    10,800             11,250             32,400             33,750
       Corporate development                                         7,897             10,795             26,059             31,121
       Other operating expenses                                      5,381              6,021             11,944             16,737
                                                            --------------     --------------     --------------     --------------
                                                                   174,069            152,313            587,632            551,486
       Organizational costs                                             --             13,918                 --            130,029
       Bad Debt expense                                            122,914                 --            122,914                 --
                                                            --------------     --------------     --------------     --------------
       Total expenses                                              296,983            166,231            710,546            681,515
                                                            --------------     --------------     --------------     --------------
INVESTMENT (LOSS) BEFORE INCOME TAXES                             (150,872)          (108,910)          (342,682)          (500,197)
       Income tax expense (benefit)                                  4,201            (40,280)            12,496             (9,280)
       Deferred income tax (benefit) expense                       (44,071)          (248,147)          (111,204)           (36,503)
                                                            --------------     --------------     --------------     --------------
NET INVESTMENT (LOSS)                                             (111,002)           179,517           (243,974)          (454,413)
                                                            --------------     --------------     --------------     --------------

REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
       Net gain (loss) on sales and dispositions                    43,726                 --             52,291            938,399
                                                            --------------     --------------     --------------     --------------
Unrealized appreciation (depreciation) on investments:
       Beginning of period                                        (151,355)           288,696           (149,266)           853,874
       End of period                                              (346,363)          (317,831)          (346,363)          (317,831)
                                                            --------------     --------------     --------------     --------------
       Change in unrealized (depreciation)                        (195,008)          (606,527)          (197,097)        (1,171,705)
       appreciation before income taxes

       Deferred income tax expense (benefit)                       (80,929)            (4,853)           (81,796)          (246,497)
                                                            --------------     --------------     --------------     --------------
NET INCREASE (DECREASE) IN UNREALIZED
APPRECIATION                                                      (114,079)          (601,674)          (115,301)          (925,208)
                                                            --------------     --------------     --------------     --------------

NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
                                                                   (70,353)          (601,674)           (63,010)            13,191
                                                            --------------     --------------     --------------     --------------
NET (DECREASE) IN NET ASSETS FROM OPERATIONS                $     (181,355)    $     (422,157)    $     (306,984)    $     (441,222)
                                                            ==============     ==============     ==============     ==============

WEIGHTED AVERAGE SHARES OUTSTANDING                              5,725,333          5,760,523          5,724,071          5,762,191
BASIC AND DILUTED NET (DECREASE) IN NET ASSETS
FROM OPERATIONS PER SHARE                                   $        (0.03)    $        (0.07)    $        (0.05)    $        (0.08)
</TABLE>


See notes to the condensed consolidated financial statements.


<PAGE>


                            RAND CAPITAL CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                NINE MONTHS             NINE MONTHS
                                                                    ENDED                   ENDED
                                                               SEPTEMBER 30, 2003       SEPTEMBER 30, 2002
                                                              --------------------     --------------------

<S>                                                           <C>                      <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (decrease) in net assets from operations                  $           (306,984)    $           (441,222)
                                                              --------------------     --------------------
Adjustments to reconcile net (decrease) in net assets
 to net cash used in operating activities:
     Depreciation and amortization                                           4,500                   10,400
     Change in unrealized appreciation
         of investments                                                    197,097                  925,208
     Change in deferred taxes                                             (193,000)                 (36,503)
     Increase in deferred revenue                                           12,696                       --
     Net realized gain on portfolio investments                            (52,291)                (938,399)
     Non cash conversion of debentures                                     (24,811)                 (16,766)
Changes in operating assets and liabilities:
     (Increase) in interest receivable                                     (71,383)                 (57,652)
     (Increase) in other assets                                            (18,658)                 (24,649)
     Increase in accounts payable and other
       accrued liabilities                                                  (3,464)                 (53,450)
                                                              --------------------     --------------------

         Total adjustments                                                (149,314)                (191,811)
                                                              --------------------     --------------------

         Net cash (used in) operating activities                          (456,298)                (633,033)
                                                              --------------------     --------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Proceeds from sale of portfolio investments                            63,352                1,086,730
     Proceeds from loan repayments                                          30,860                   29,055
     New portfolio investments                                          (1,359,000)              (1,250,000)
     Capital Expenditures                                                       --                  (13,250)
                                                              --------------------     --------------------

         Net cash (used in) investing activities                        (1,264,788)                (147,465)
                                                              --------------------     --------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Purchase of SBA Commitment                                            (50,000)                      --
     Purchase of treasury shares                                           (21,502)                  (5,895)
                                                              --------------------     --------------------
             Net cash (used in) financing activities                       (71,502)                  (5,895)
                                                              --------------------     --------------------

NET (DECREASE) IN CASH AND CASH
     EQUIVALENTS                                                        (1,792,588)                (786,393)

CASH AND CASH EQUIVALENTS,
     BEGINNING OF PERIOD                                                 3,092,189                5,941,517
                                                              --------------------     --------------------

CASH AND CASH EQUIVALENTS,
     END OF PERIOD                                            $          1,299,601     $          5,155,124
                                                              ====================     ====================
</TABLE>


See notes to condensed consolidated financial statements.


<PAGE>


                            RAND CAPITAL CORPORATION
           CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
     FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                      THREE MONTHS        THREE MONTHS        NINE MONTHS          NINE MONTHS
                                                          ENDED               ENDED               ENDED               ENDED
                                                       SEPTEMBER 30,       SEPTEMBER 30,        SEPTEMBER 30,      SEPTEMBER 30,
                                                           2003                2002                2003                2002
                                                      ---------------     ---------------     ---------------     ---------------

<S>                                                   <C>                 <C>                 <C>                 <C>
NET ASSETS AT BEGINNING OF PERIOD                     $     9,459,243     $    10,039,219     $     9,604,634     $    10,058,284
                                                      ---------------     ---------------     ---------------     ---------------

Operations:
      Net investment (loss) gain                             (111,002)            179,517            (243,974)           (454,413)

      Net realized gain on investments                         43,726                  --              52,291             938,399

      Net (decrease) in unrealized
               appreciation of investments                   (114,079)           (601,674)           (115,301)           (925,208)
                                                      ---------------     ---------------     ---------------     ---------------

Net (decrease) in net assets
    from operations                                          (181,355)           (422,157)           (306,984)           (441,222)

Purchase of treasury shares                                    (1,740)             (5,895)            (21,502)             (5,895)
                                                      ---------------     ---------------     ---------------     ---------------

NET ASSETS AT END OF PERIOD                           $     9,276,148     $     9,611,167     $     9,276,148     $     9,611,167
                                                      ===============     ===============     ===============     ===============
</TABLE>



See notes to condensed consolidated financial statements


<PAGE>


RAND CAPITAL CORPORATION
Schedule of Portfolio Investments September 30, 2003 (unaudited)

<TABLE>
<CAPTION>

                                                   (e)                                  (a)           (b)                  (c)
                                                                                       DATE
COMPANY AND BUSINESS                        TYPE OF INVESTMENT                        ACQUIRED       EQUITY    COST       VALUE
--------------------                        -----------------------------------  ---------------   --------- --------  ------------

<S>                                         <C>                                  <C>               <C>       <C>       <C>
CONTRACT STAFFING                           Series A 8% Cumulative                     11/8/99         10%   $100,000     $100,000
Buffalo, NY. PEO providing human resource   preferred stock - 10,000 shares
administration for small businesses.
www.contract-staffing.com


DATAVIEW, LLC                               5% Membership interest                     10/1/98          5%    310,357      155,179
Mt. Kisco, NY. Designs, develops and
markets browser based software for
investment professionals.
www.marketgauge.com

G-TEC NATURAL GAS SYSTEMS                   41.67% Class A Membership                  8/31/99         42%    300,000      300,000
Buffalo, NY. Manufactures and distributes   interest. 8% cumulative dividend
systems that allow natural gas to be
used as an alternative fuel to gases.
www.gas-tec.com

INRAD, INC. (OTC:  INRD.OB) *               Series B Preferred Stock -                10/31/00          2%    115,000      102,760
Northvale, NJ.  Develops and manufactures   100 shares. 10% dividend.
products for laser photonics industry.      Common stock - 6,000 shares
www.inrad.com

**KIONIX, INC.                              Series A Preferred Stock,                  5/17/02          2%  1,000,000    1,000,000
Ithaca, NY.  Develops innovative MEMS       2,142,791 shares.  $250,000
based technology applications.              Convertible Promissory Note
www.kionix.com                              due June 30, 2004.

MINRAD, INC.                                608,193 Common shares.                      8/4/97          5%    919,422      508,500
Buffalo, NY. Developer of laser             56,020 Preferred Series A shares.
guided medical devices.                     13,767 Preferred Series B
www.minrad.com                              Stock Option - 10,000 shares
                                            Common

**NEW MONARCH MACHINE TOOL, INC.            Term Note - $500,000 at 12%.               9/24/03         11%    500,000      500,000
Cortland, NY.  Manufactures, services       Payable monthly through
repairs and retrofits machining centers.    September 24, 2006.  Warrant
www.monarchmt.com                           for 11.59 shares of Common
                                            Stock.

**RAMSCO(d)                                 Promissory Note $750,000 at               11/19/02          6%    750,000      750,000
Albany, NY. Distributor of water,           13% due November 18, 2007.
sanitary and storm sewer materials          Warrant to purchase common shares.
to the contractor, highway and municipal
construction markets.
www.ramsco.com

SOMERSET GAS TRANSMISSION COMPANY, LLC      Convertible Promissory Note                7/10/02         <1%    900,000      900,000
Buffalo, NY.  Natural gas transportation    $900,000 at 14%. due on demand
company.                                    after January 15, 2003
                                            .89 Membership Units

**SYNACOR, INC.                             Convertible Promissory Note               11/18/02          4%    350,000      350,000
Buffalo, NY.  Develops provisioning         $350,000 at 10% due
platforms for aggregation and               November 18, 2007.  Warrant
delivery of content for broadband           149,573 common shares.
access providers. www.synacor.com

**TOPPS MEAT COMPANY, LLC                    Preferred A and Class A                    4/3/03          3%    259,000      259,000
Elizabeth, NJ - Producer and supplier of    Common Membership
premium branded frozen hamburgers           Interest
and other portion controlled
meat products.
</TABLE>


<PAGE>

<TABLE>

<S>                                         <C>                                       <C>               <C>   <C>        <C>
ULTRA - SCAN CORPORATION                    504,596 Common shares,                    12/11/92          3%    734,164    1,072,174
Amherst, NY.  Biometrics application        107,104 Series A-1 Preferred
developer of ultrasonic fingerprint         shares, 142,276 warrants for
technology.                                 Common shares.
www.ultra-scan.com

USTEC, INC. (d)                             $100,000 Promissory Note at               12/17/98         <1%    300,500      325,000
Victor, NY. Markets digital wiring          5% due February 1, 2006
systems for new home construction.          50,000 Common Shares.
www.ustecnet.com                            139,395 Warrants for Common Shares
                                            ** $200,000 Senior Subordinated
                                               Convertible Debenture at 6% due
                                               February 2, 2008.

VANGUARD MODULAR BUILDING SYSTEMS           Preferred Units - 2,673 Units             12/16/99         <1%    270,000      270,000
Philadelphia, PA. Leases and sells          with warrants for 771 common
high-end modular space solutions.           units, 14% interest rate
www.vanguardmodular.com


**WINEISIT.COM, CORP.                       Senior Subordinated Promissory           1 2/18/02          2%    500,000      500,000
Amherst, NY.  Marketing company             Note $500,000 at 10%. due
specializing in customer loyalty            December 17, 2009.  Warrant
programs supporting the wine                to purchase 100,000 shares
and spirit industry.                        Class B common stock.
www.wineisit.com


Other Investments                           Other                                      Various                289,438      158,905
(Includes:  ADIC *, American Tactile,                                                                      ----------   ----------
BioWorks, Inc., Clearview Cable, Smart
Pill  (f))

                                            Total portfolio investments                                    $7,597,881   $7,251,518
                                                                                                           ==========   ==========
</TABLE>


<PAGE>


NOTES TO SCHEDULE OF PORTFOLIO INVESTMENTS

(a)      The date acquired column indicates the year in which the Corporation
         acquired its first investment in the company or a predecessor company.

(b)      The equity percentages estimate the Corporation's ownership interest in
         the 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 its warrants or conversion of debentures;
         or other available data. The symbol "<1%" indicates that the
         Corporation holds equity interest of less than one percent.

(c)      Under the valuation policy of the Corporation, unrestricted securities
         are valued at the closing price for publicly held securities for the
         last three days of the month. Restricted securities, including
         securities of publicly-owned companies, which are subject to
         restrictions on resale, are valued at fair value as determined by the
         Board of Directors. Fair value is considered to be the amount which the
         Corporation may reasonably expect to receive for portfolio securities
         if such securities were 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 by the
         Board of Directors 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.

(d)      These investments are income producing. All other investments are
         non-income producing.

(e)      Approximately 98% of the portfolio represents investments in private
         businesses. Therefore the securities are restricted and are subject to
         one or more restrictions on resale and are not freely marketable.

(f)      One of the Corporation's investments categorized in "Other Investments"
         had a name change from Appro to Smart Pill during the third quarter
         2003.

 *       Publicly-owned Company

** Rand Capital SBIC, L.P. Investment, all other investments are held by the
Parent, Rand Capital Corporation.

See notes to condensed consolidated financial statements.

<PAGE>



                            RAND CAPITAL CORPORATION
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
                                   (UNAUDITED)

NOTE 1.           ORGANIZATION

         Rand Capital Corporation ("Rand") was incorporated under the laws of
the state of New York on February 24, 1969. From 1971 to August 16, 2001, Rand
operated as a publicly traded, closed-end, diversified management company that
was registered under Section 8(b) of the Investment Company Act of 1940 (the
"1940 Act"). On August 16, 2001, Rand filed an election to be treated as a
business development company ("BDC") under the 1940 Act, which became effective
on the date of filing. A BDC is a specialized type of investment company that is
primarily engaged in the business of furnishing capital and managerial expertise
to companies that do not have ready access to capital through conventional
finance channels. There was no impact on the corporate structure as a result of
the change to a BDC. Rand continues to operate as a publicly held venture
capital company, listed on the NASDAQ Small Cap Market under the symbol "RAND."

FORMATION OF SBIC SUBSIDIARY

         On January 16, 2002, Rand formed a wholly owned subsidiary, Rand
Capital SBIC, L.P., ("Rand SBIC") for the purpose of operating it as a small
business investment company. At the same time, Rand organized another wholly
owned subsidiary, Rand Capital Management, LLC ("Rand Management"), as a
Delaware limited liability company, to act as the general partner of Rand SBIC.
Rand transferred $5 million in cash to Rand SBIC to serve as "regulatory
capital" in January 2002 and on August 16, 2002, Rand received notification that
its Small Business Investment Company (SBIC) application had been approved and
licensed by the Small Business Administration (SBA). The approval allows Rand
SBIC to obtain loans up to two times its initial $5 million of "regulatory
capital" from the SBA for purposes of making new investments in portfolio
companies. As of September 30, 2003 Rand SBIC had not drawn any leverage from
the SBA.

         The condensed consolidated financial statements include the accounts of
Rand, Rand SBIC and Rand Management (collectively, the "Corporation").

         The Company formed Rand SBIC as a subsidiary for the purpose of causing
it to be licensed as a SBIC under the Small Business Investment Act of 1958 (the
"SBA Act") by the SBA, in order to have access to various forms of leverage
provided by the SBA to SBIC's. On May 28, 2002, the Corporation filed an
Exemption Application with the Securities and Exchange Commission ("SEC")
seeking an order under Sections 6(c), 12(d)(1)(J), 57(c), and 57(i) of, and Rule
17d-1 under, the 1940 Act for exemptions from the application of Sections
2(a)(3), 2(a)(19), 12(d)(1), 18(a), 21(b), 57(a)(1), (2), (3), and (4), and
61(a) of the 1940 Act to certain aspects of its operations. The application also
seeks an order under Section 12(h) of the Securities Exchange Act of 1934 Act
(the "Exchange Act") for an exemption from separate reporting requirements under
Section 13(a) of the Exchange Act. In general, the Corporation applications seek
orders that would permit:


<PAGE>



         o     A BDC (Rand) to operate a BDC/small business investment company
               (Rand SBIC) as its wholly owned subsidiary in limited partnership
               form;

         o     Rand, Rand Management and Rand SBIC to engage in certain
               transactions that the Corporation would otherwise be permitted to
               engage in as a BDC if its component parts were organized as a
               single corporation;

         o     Rand, as a BDC, and Rand SBIC, as its BDC/SBIC subsidiary, to
               meet asset coverage requirements for senior securities on a
               consolidated basis and;

         o     Rand SBIC, as a BDC/SBIC subsidiary of Rand , as a BDC, to file
               Exchange Act reports on a consolidated basis as part of Rand's
               reports.

         The Corporation has not identified from among the similar exemption
applications on file with the SEC an example of a specific grouping of all of
the exemptions requested by the Corporation in its application, but the SEC has
commonly granted applications to other companies for orders applicable to each
of the exemptions requested and for orders applicable to various combinations of
those exemptions, and the Corporation's applications do not appear to raise any
specific policy issues that have not also been raised by applications for which
exemptions have been granted.

         Rand operates Rand SBIC through Rand Management for the same investment
purposes, and with investments in similar kinds of securities, as Rand. Rand
SBIC's operations are consolidated with those of Rand for both financial
reporting and tax purposes.

NOTE 2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

         In Management's opinion, the accompanying condensed consolidated
financial statements include all adjustments necessary for a fair presentation
of the consolidated financial position, results of operations, and cash flows
for the interim periods presented. Certain information and note disclosures
normally included in audited annual financial statements prepared in accordance
with accounting principles generally accepted in the United States of America,
have been omitted; however, the Corporation believes that the disclosures made
are adequate to make the information presented not misleading. The interim
results for the period ending September 30, 2003 are not necessarily indicative
of the results for the full year.

         These statements should be read in conjunction with the financial
  statements and the notes included in the Corporation's Annual Report on Form
  10-K for the year ended December 31, 2002. Information contained in this
  filing should also be reviewed in conjunction with the Corporation's related
  filings with the SEC during the period of time prior to the date of this
  report. Those filings include, but are not limited to the following:

         N-30-B2/ARS   Quarterly & Annual Reports to Shareholders

         N-54A         Election to Adopt Business Development Company status

         DEF-14A       Definitive Proxy Statement submitted to shareholders

         Form 10-K     Annual Report on Form 10-K for the year ended
                       December 31, 2002

         Form 10-Q     Quarterly Report on Form 10-Q for the quarters ended
                       September 30, 2002 and March 31, 2003, June 30, 2003

         Form N-23C-1  Reports by closed-end investment companies of purchases
                       of their own securities


<PAGE>


BASIS OF CONSOLIDATION - The condensed consolidated financial statements include
the accounts of the Rand, Rand SBIC, and Rand Management. All significant
intercompany balances and transactions have been eliminated in consolidation.
Prior to the formation of Rand SBIC and Rand Management, Rand was a stand-alone
entity.

INVESTMENTS - Investments are stated at fair value as determined in good faith
by the Corporation's management and both reviewed and approved on a quarterly
basis by the Board of Directors. In 2002, Rand SBIC adopted a model valuation
policy as established by the SBA. At the same time the Board of Directors of
Rand also adopted a new valuation policy that mirrored the Rand SBIC policy and
is not materially different from the prior Rand valuation policy.
In accordance with its valuation policy, the Board of Directors has determined
certain investment valuations in the absence of readily ascertainable fair
values. The estimated valuations 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.
Amounts reported as realized gains and losses are measured by the difference
between the proceeds of sale or exchange and the cost basis of the investment
without regard to unrealized gains or losses reported in prior periods. The cost
of securities that have, in the Board of Directors' judgment, become worthless,
are written off and reported as realized losses.

CASH AND CASH EQUIVALENTS - Temporary cash investments having a maturity of
three months or less when purchased are considered to be cash equivalents.

INTEREST INCOME - Interest income generally is recorded on the accrual basis
except where the investment is valued at less than cost to reflect risk of loss.
In such cases, interest is recorded at the time of receipt. Interest income
cannot be recognized if collection is doubtful. A reserve for possible losses on
an interest receivable is maintained when collection is in doubt.

The Rand SBIC interest accrual is regulated by the SBA's "Accounting Standards
and Financial Reporting Requirements for Small Business Investments 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 the loan is in default more
than 120 days.

NET ASSETS PER SHARE - Net assets per share are based on the number of shares of
common stock outstanding.

USE OF ESTIMATES - The preparation of the financial statements in conformity
with accounting principles generally accepted in the United States of America
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.

INCOME TAXES - Rand has not elected pass-through tax treatment as a regulated
investment company under Subchapter M of the Internal Revenue Code for Income
tax purposes. Therefore, Rand is taxed as a corporation under regulation C.





<PAGE>

         The tax effect of the major temporary difference and carry-forwards
that give rise to the Corporation's net deferred tax assets (liabilities) as of
September 30, 2003 and December 31, 2002 are as follows:


<TABLE>
<CAPTION>

                                               September 30, 2003      December 31, 2002
                                              -------------------     -------------------

<S>                                           <C>                     <C>
Operations                                    $           (28,741)    $           (79,194)
Investments                                               143,741                  61,945
Net operating loss carry-forwards                         190,000                      --
Capital loss carryforwards                                     --                 129,249
                                              -------------------     -------------------
Deferred tax assets (liabilities), net        $           305,000     $           112,000
                                              ===================     ===================
</TABLE>

         As of June 30, 2003, the Corporation had federal and state net
operating loss carry-forwards of approximately $ 520,000 and $ 175,000 which
expires commencing in 2019.

         The deferred tax asset at September 30, 2003 was $ 305,000 and
represented a $ 193,000 increase in this account from December 31, 2002.

         The Corporation has filed its Federal and New York State tax returns
for the Year ended December 31, 2002.

         The Corporation is also required to file multi-state tax and
information returns due to the operations of one its portfolio holdings,
Vanguard Modular Building Systems (Vanguard) which is a limited liability
corporation (LLC). Rand has requested filing extensions for the 2002 year and
has paid the required state filing fees, totaling less than $2,700. The Vanguard
related multi-state filings for 2001 and 2000 have not yet been filed by the
Corporation, pending further research into Vanguard operational structure, and
are expected to be completed within three months.

STOCKHOLDERS EQUITY (NET ASSETS)

         At September 30, 2003 and December 31, 2002, there were 500,000 shares
of $10.00 par value preferred stock authorized and unissued.

         On October 18, 2001, the Board of Directors authorized the repurchase
of up to 5% of Rand's outstanding stock through purchases on the open market
during the one-year period ending October 18, 2002. This buy-back was extended
through October 16, 2004 by the Board of Directors. During the nine month period
ending September 30, 2003 19,700 shares of treasury stock were repurchased.
During the three months ended September 30, 2003, 1,500 shares were repurchased
for the treasury. During the period October 1, 2003 through November 10, 2003,
no shares were repurchased on the open market.

STOCK OPTION PLAN

         In July 2001, the shareholders of the Corporation authorized the
establishment of an Employee Stock Option Plan (the "Plan"). The Plan provides
for an award of options to purchase up to 200,000 common shares to eligible
employees. In 2002, the Corporation placed the Plan on inactive status as it
developed a new profit sharing plan for the Corporation's employees in
connection with the establishment of its SBIC subsidiary. As of September 30,
2003, no stock options had been awarded under the Plan. Because Section 57(n) of
the 1940 Act prohibits maintenance of a profit sharing plan for the officers and
employees of a BDC where any option, warrant or right is outstanding under an
executive compensation plan, no options will be granted under the Plan while any
profit sharing plan is in effect with respect to the Corporation.


<PAGE>

         In September 2003, Rand withdrew its application to the SEC regarding
its exemption application for the Non-Employee Director Plan under these same
requirements of Section 57(n). No shares had been issued under the plan.

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 our financial statements
and related notes included elsewhere in this report.

FORWARD LOOKING STATEMENTS

         Statements included in this Management's Discussion and Analysis of
Financial Condition and Results of Operations and elsewhere in this document
that do not relate to present or historical conditions are "forward-looking
statements" within the meaning of that term in Section 27A of the Securities Act
of 1933, and in Section 21F of the Securities Exchange Act of 1934. Additional
oral or written forward-looking statements may be made by the Corporation from
time to time, and those statements may be included in documents that are filed
with the Securities and Exchange Commission. Such forward-looking statements
involve risks and uncertainties that could cause results or outcomes to differ
materially from those expressed in the forward-looking statements.
Forward-looking statements may include, without limitation, statements relating
to the Corporation's plans, strategies, objectives, expectations and intentions
and are intended to be made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Words such as "believes,"
"forecasts," "intends," "possible," "expects," "estimates," "anticipates," or
"plans" and similar expressions are intended to identify forward-looking
statements. Among the important factors on which such statements are based are
assumptions concerning the state of the national economy and the local markets
in which the Corporation's portfolio companies operate, the state of the
securities markets in which the securities of the Corporation's portfolio
company trade or could be traded, liquidity within the national financial
markets, and inflation. Forward-looking statements are also subject to the risks
and uncertainties described under the caption "Risk Factors and Other
considerations" below.

OVERVIEW

FINANCIAL CONDITION

         The following discussion will include Rand Capital Corporation
("Rand"), Rand Capital SBIC, L.P., (Rand SBIC), and Rand Capital Management, LLC
("Rand Management"), (collectively, the "Corporation") financial position and
results of operations.

         The Corporation's total assets decreased by ($319,255) or (3.3%) to
$9,366,418 and its net assets decreased by ($328,485) or (3.4%) to $9,276,148 at
September 30, 2003, versus $9,685,673 and $9,604,634 at December 31, 2002,
respectively. The decrease in net assets can be attributed to operating losses,
revaluation of our investment and accrued interest receivable in Somerset Gas
Transmission Company LLC (Somerset) and the repurchase of treasury shares during
the nine months ended September 30, 2003.

         The Corporation's financial condition is dependent on the success of
its holdings. The Corporation has invested a substantial portion of its assets
in early stage or start-up companies. These private businesses tend to be thinly
capitalized small companies that may lack experienced management. The following
summarizes the Corporation's investment portfolio at the periods indicated.


<PAGE>


<TABLE>
<CAPTION>

                                       SEPTEMBER 30, 2003     DECEMBER 31, 2002
                                       ------------------     ------------------

<S>                                    <C>                    <C>
Investments at cost                    $        7,597,881     $        6,225,453
Unrealized (depreciation), net                   (346,363)              (149,266)
                                       ------------------     ------------------
Investments at fair value              $        7,251,518     $        6,076,187
                                       ==================     ==================
</TABLE>

         The increase in investments is due to the effect of Rand SBIC's
investment in New Monarch Machine Tool, Inc (Monarch) of $500,000, Kionix Inc.
(Kionix) of $250,000, UStec, Inc. (UStec) of $200,000, an additional investment
in Rexford Albany Municipal Supply Company Inc. (RAMSCO) of $150,000 and an
investment in Topps Meat Company, LLC (Topps) of $259,000.

         The Corporation has been approved by the SBA for $10,000,000 in
leverage or two times its regulatory capital of $5,000,000. In July of 2003 the
Corporation paid a $50,000 commitment fee to the SBA to reserve and guarantee
$5,000,000 of this approved leverage through September 30, 2007. As of September
30, 2003 the Corporation has not drawn any leverage from the SBA.

         The decrease in unrealized (depreciation) of the investments is
primarily attributable the write down of the Somerset membership interest for
($183,333). This adjustment was done in accordance with the Corporation's
established valuation policies.

         During the first quarter of 2003, the Corporation revalued its equity
holdings in UStec, form $50,000 to $25,000, in accordance with the established
valuation policies and based on the fact that UStec received a new round of
financing from an unrelated SBIC lead investor at a lower valuation.

         The Corporation's total investments at fair value approximated 78% of
net assets at September 30, 2003 and 63% of net assets at December 31, 2002.

RESULTS OF OPERATIONS

INVESTMENT INCOME AND EXPENSES

         The Corporation's primary investment objective is to achieve long-term
capital appreciation on its portfolio investments. Therefore, a considerable
portion of the investment portfolio is structured to realize capital
appreciation over the long-term and not necessarily generate income in the form
of dividends or interest. This interest often contains a deferred component, and
may not be payable on a current basis. The Corporation does earn interest income
from investing its idle funds in money market instruments.

         Total investment income for the three months ended September 30, 2003
and 2002 was $146,111 and $57,321 respectively, of which $92,708 (63%) and
$23,913 (42%) consisted of interest from portfolio companies during the quarter.
For the nine months ended September 30, 2003 and 2002, the total investment
income was $367,864 and $181,318, respectively, of which $295,671 (80%) and
$83,419 (46%) consisted of interest from portfolio companies. This income
includes investments that have interest accruals and often do not pay a current
yield.

The portfolio interest income for the nine months ending September 30, 2003
includes $122,914 in accrued interest on a $900,000 convertible note from
Somerset. The Somerset note matured on January 15, 2003, and accrues interest at
a 14% rate subsequent to that date. The Corporation has issued a demand letter
to Somerset regarding its repayment, however, as the note is in technical
default and is more that 120 days due to non-payment, the Corporation's
accounting policies require a 100% reserve to be established for the unpaid
interest. In September 2003, the Corporation established a reserve for the
accrued interest of $122,914 and has ceased further accrual of interest under
the note. The Corporation has had continuing communications with Somerset, and
has been active with its management team throughout the time of the investment,




<PAGE>

and believes that Somerset will successfully obtain additional financing
resulting in the repayment or conversion of the note into a more favorable debt
or equity investment. Somerset has advised Rand that its pipeline operations
have begun to generate cash flows and that projected short supplies and higher
prices for natural gas should continue to improve its financial outlook. The
Corporation has also filed the necessary UCC security filings to help protect
its investment interest in Somerset.

         The remaining investment income is comprised of dividend income (LLC
related tax distributions) and interest on idle cash balances. The dividend
income for the three and nine months ended September 30, 2003 was $47,668 and
zero for the same periods in 2002. The interest income for the three months
ending September 30, 2003 was $3,376 versus $23,408 for the same period in 2002.
The interest income on idle cash balances for the nine month period ending
September 30, 2003 and 2002 is $17,550 and $82,359 respectively. This interest
income is lower for the three month and nine month ended September 30, 2003 due
to lower idle cash balance during 2003.

         Operating expenses for the three months ended September 30, 2003 and
2002 were $296,983 and $166,231, respectively. The operating expenses
predominately consist of employee compensation and benefits, shareholder related
costs, office expenses, expenses related to identifying and reviewing investment
opportunities and professional fees and bad debt expense. The bad debt expense
for the three and nine month period ending September 30, 2003 was $122,914 and
represents the establishment of an interest receivable reserve. The expense for
the three months ended September 30, 2002 included $13,918 of professional costs
(consulting and advisory fees) incurred for preparing an application for the
Small Business Administration (SBA) for participation in the SBIC program. Total
operating expenses for the nine months ended September 30, 2003 and 2002 were
$710,546 and $681,515 respectively. The nine month period ended September 30,
2002 included $130,029 of Rand SBIC organizational fees.

         Net investment (losses) income from operations for the three months
ended September 30, 2003 and 2002 were ($111,002) and 179,517, respectively. Net
investment losses from operations for the nine months ended September 30, 2003
and 2002 were ($243,974) and ($454,413), respectively. The fluctuations from
year to year are due, in part, to the fluctuation in the deferred income tax and
current tax expense and the increased portfolio interest revenue in 2003. For
the nine months ending September 30, 2003 there was a deferred tax (benefit) of
($111,204) whereas there was a deferred income tax (benefit) of ($36,503) for
the nine months ended September 30, 2002. In addition, the investment income for
the nine months ending September 30, 2003 is higher than the same period in 2002
due to the higher portfolio interest income yield on the new 2003 Rand SBIC
investments.

NET REALIZED GAINS AND LOSSES ON INVESTMENTS:

         During the three months ended September 30, 2003 the Corporation
realized a $43,726 gain on the sale of ADIC stock. During the same three months
in 2002 the Corporation did not have any realized gain or loss.

         For the nine months ended September 30, 2003 the Corporation realized a
$52,291 gain on the sale of ADIC stock. During the nine month period ending
September 30, 2002 the Corporation realized a $938,399 net gain on the sale of
ADIC stock.

NET (DECREASE) IN NET ASSETS FROM OPERATIONS:

         The Corporation accounts for its operations under accounting principles
generally accepted in the United States of America for investment companies. The
principal measure of its financial performance is "net (decrease) increase in
net assets from operations" on its consolidated statements of operations. For
the three months ended September 30, 2003, the net



<PAGE>

(decrease) in net assets from operations was ($181,355) as compared to a net
(decrease) in net assets from operations of ($422,157) for the same period in
2002.

         The net (decrease) in net assets from operations for the nine months
ended September 30, 2003 was ($306,984) and ($441,222) for the nine months ended
September 30, 2002. The (decrease) in net assets from operations for the nine
months ended September 30, 2003 was primarily attributable to the net investment
loss of ($243,974) and the net realized and unrealized (loss) on investments of
($63,010). The realized gain of $52,291 is attributable to the sale of ADIC
stock during 2003. The unrealized depreciation change for the nine month period
ending September 30, 2003 was ($197,097). The largest components of the decrease
were: Somerset ($183,333), UStec ($25,000), American Tactile ($5,000) the net
effect of ADIC stock sales and valuation of $9,300. The net (decrease) in net
assets from operations for the period ended September 30, 2002 was primarily
attributable to the unrealized loss write down of approximately ($690,000). This
unrealized write down consisted of a devaluation of Minrad for ($652,000) and
ADIC for ($35,000).


LIQUIDITY AND CAPITAL RESOURCES

         The Corporation's principal objective is to achieve capital
appreciation. Therefore, a significant portion of the investment portfolio is
structured to maximize the potential for capital appreciation and certain
portfolio investments may be structured to provide little or no current yield in
the form of dividends or interest payments. The Corporation does earn interest
income on idle cash balances. It has historically relied on and continues to
rely to a large extent upon proceeds from sales of investments rather than
investment income to defray a significant portion of its operating expenses.
Because such sales cannot be predicted with certainty, the Corporation attempts
to maintain adequate working capital necessary for short-term needs.

         At September 30, 2003, 14% of the Corporation's net assets are held in
cash and cash equivalents, which compares to 32% at December 31, 2002.

         As of September 30, 2003 and December 31, 2002, the Corporation's total
liquidity, consisting of cash and cash equivalents, was $1,299,586 and
$3,092,189, respectively. Included in the September 30, 2003 cash balance was
$1,014,590 of Rand SBIC cash. Management believes that these cash and cash
equivalents will provide the Corporation with the liquidity necessary to fund
operations over the next twelve (12) months; however, an increase in the size or
quantity of new investment opportunities during this time may require the
corporation to draw down leverage from the SBA in order to fund such
investments.



<PAGE>


RISK FACTORS AND OTHER CONSIDERATIONS

INVESTING IN THE CORPORATION'S STOCK IS HIGHLY SPECULATIVE AND AN INVESTOR COULD
LOSE SOME OR ALL OF THE AMOUNT INVESTED

         The value of the Corporation's common stock may decline and may be
affected by numerous market conditions, which could result in the loss of some
or the entire amount invested in the Corporation's shares. The securities
markets frequently experience extreme price and volume fluctuations, which
affect market prices for securities of companies generally, and technology and
very small capitalization companies in particular. General economic conditions,
and general conditions in the Internet and information technology, life
sciences, material sciences and other high technology industries, will also
affect the Corporation's stock price.

INVESTING IN THE CORPORATION'S SHARES MAY BE INAPPROPRIATE FOR THE INVESTOR'S
RISK TOLERANCE

         The Corporation's investments, in accordance with its investment
objective and principal strategies, result in a far above average amount of risk
and volatility and may well result in loss of principal. The Corporation's
investments in portfolio companies are highly speculative and aggressive and,
therefore, an investment in its shares may not be suitable for investors for
whom such risk is inappropriate.

COMPETITION

         The Corporation faces competition in its investing activities from
private venture capital funds, investment affiliates of large industrial,
technology, service and financial companies, small business investment
companies, wealthy individuals and foreign investors. As a regulated Business
Development Company ("BDC"), the Corporation is required to disclose quarterly
the name and business description of portfolio companies and value of any
portfolio securities. Most competitors are not subject to this disclosure
requirement and the Corporation's obligation to disclose this information could
hinder its ability to invest in certain portfolio companies. Additionally, other
regulations, current and future, may make the Corporation less attractive as a
potential investor to a given portfolio company than a private venture capital
fund.

THE CORPORATION IS SUBJECT TO RISKS CREATED BY ITS REGULATED ENVIRONMENT

         The Corporation is subject to regulation as BDC's, and Rand SBIC is
also subject to regulation as an SBIC. The loans and other investments that the
Corporation makes, or is expected to make, in small business concerns are
extremely speculative. Substantially all of these concerns are and will be
privately held. Even if a public market for their securities later develops, the
debt obligations and other securities purchased by the Corporation are likely to
be restricted from sale or other transfer for significant periods of time. These
securities will be very illiquid.

         The Corporation's capital may include large amounts of debt securities
issued to the SBA, and all of the debentures issued to the SBA will have fixed
interest rates. Until and unless Rand SBIC is able to invest substantially all
of the proceeds from debentures that it sells to the SBA at annualized interest
or other rates of return that substantially exceed annualized interest rates
that Rand SBIC must pay the SBA under debentures sold to it, the Corporation's
operating results will be adversely affected which may, in turn, depress the
market price of its common stock.

<PAGE>


THE CORPORATION IS DEPENDENT UPON KEY MANAGEMENT PERSONNEL FOR FUTURE SUCCESS

         The Corporation is dependent for the selection, structuring, closing
and monitoring of its investments on the diligence and skill of its two senior
officers, Allen F. Grum and Daniel P. Penberthy. The future success of the
Corporation depends to a significant extent on the continued service and
coordination of its senior management team. The departure of either of its
executive officers could materially adversely affect the Corporation's ability
to implement its business strategy. The Corporation does not maintain key man
life insurance on any of its officers or employees.

INVESTMENT IN SMALL, PRIVATE COMPANIES

         There are significant risks inherent in the venture capital business.
The Corporation typically invests a substantial portion of its assets in early
stage or start-up companies. These private businesses tend to be thinly
capitalized, small companies that may have higher risk attributes including
risky technologies; lack of management depth; lack of profitability; or short
history of operations. Because of the speculative nature and the lack of a
public market for these investments, there is a significantly greater risk of
loss than is the case with traditional investment securities. The Corporation
expects that some of its venture capital investments may be a complete loss, or
unprofitable, and that some which appear to be likely to become successful may
never realize their potential due to numerous operational and external market
factors. In addition, the accrued interest (if any) associated with the
Corporations portfolio investments may also become uncollectible, due to both
gradual shifts and sometimes sudden changes in the marketplace, affecting the
portfolio companies ability to execute on its business plan. The Corporation has
been risk seeking, rather than risk averse, in its approach to venture capital
and other investments. Neither the Corporation's investments nor an investment
in the Corporation is intended to constitute a balanced investment program. The
Corporation has in the past relied, and continues to rely to a large extent,
upon proceeds from sales of investments rather than investment income to defray
a significant portion of its operating expenses. Such sales are unpredictable
and may not occur.

ILLIQUIDITY OF PORTFOLIO INVESTMENTS

         Most of the investments of the Corporation's are or will be either
equity securities acquired directly from small companies or below investment
grade subordinated debt securities. The Corporation's portfolio of equity
securities is and will usually be subject to restrictions on resale or otherwise
have no established trading market. The illiquidity of most of the Corporation's
portfolio may adversely affect the ability of the Corporation to dispose of such
securities at times when it may be advantageous to liquidate such investments.

Even if the Corporation's portfolio companies are able to develop commercially
viable products, the market for new products and services is highly competitive
and rapidly changing. Commercial success is difficult to predict and the
marketing efforts of the portfolio companies may not be successful.

VALUATION OF PORTFOLIO INVESTMENTS

         There is typically no public market for equity securities of the small
privately held companies in which the Corporation invests. As a result, the
valuation of the equity securities in the portfolio are stated at fair value as
determined by the good faith estimate of the Board of Directors in accordance
with the Corporation's established valuation policies. In the absence of a
readily ascertainable market value, the estimated value of the portfolio of
securities may differ significantly, favorably or unfavorably, from the values
that would be placed on the portfolio if a ready market for the equity
securities existed Any changes in valuation are recorded in the



<PAGE>

Corporation's statement of operations as "Unrealized appreciation (depreciation)
on investments."

FLUCTUATIONS OF QUARTERLY RESULTS

         The Corporation's quarterly operating results could fluctuate as a
result of a number of factors. These factors include, among others, variations
in and the timing of the recognition of realized and unrealized gains or losses,
the degree to which portfolio companies encounter competition in their markets
and general economic conditions. As a result of these factors, results for any
one-quarter should not be relied upon as being indicative of performance in
future quarters.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Corporation's investment activities contain elements of risk. The
portion of the investment portfolio consisting of equity and equity-linked debt
securities in private companies is subject to valuation risk. Because there is
typically no public market for the equity and equity-linked debt securities in
which the Corporation invests, the valuation of the equity interests in the
portfolio is stated at "fair value" as determined in good faith by the Board of
Directors in accordance with the Corporation's investment valuation policy. In
the absence of a readily ascertainable market value, the estimated value of the
Corporation's 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 in the Corporation's statement of operations
as "Unrealized appreciation (depreciation) on investments."

         At times a portion of the Corporation's portfolio may include
marketable securities traded in the over-the-counter market. In addition, there
may be a portion of the Corporation's 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 the
markets to trade in an orderly fashion, the Corporation may not be able to
realize the fair value of its marketable investments or other investments in a
timely manner.

         As of September 30, 2003, the Corporation did not have any off-balance
sheet investments or hedging investments.

ITEM 4.  EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures. The Corporation's chief
executive officer and chief financial officer, after evaluating the
effectiveness of the Corporation's "disclosure controls and procedures" (as
defined in rule 13a-14(c) under the Securities Exchange Act of 1934) as of the
end of the period covered by this report, concluded that as of the Evaluation
Date the Corporation's disclosure controls and procedures were effective to
ensure that material information relating to the Corporation was being made
known to them by others within the Corporation, particularly including during
the period when this quarterly report was being prepared.

(b) Changes in internal controls over financial reporting. There were no changes
in the Corporation's internal controls over financial reporting identified in
connection with the evaluation required by paragraph (d) of Rules 13a-15 or
15d-15 under the Securities Exchange Act of 1934 that occurred during the
Corporation's last fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the Corporation's internal control over financial
reporting.


<PAGE>



                                    PART II.
                                OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

           None

ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS

           None

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

           None

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

           None


ITEM 5.    OTHER INFORMATION

           None



<PAGE>



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

                (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.

                          (2)       N/A

                          (3)(i)    Certificate of Incorporation of the
                                    Corporation, incorporated by reference to
                                    Exhibit (a)(1) of Form N-2 filed with the
                                    Securities Exchange Commission on April 22,
                                    1997.

                          (3)(ii)   By-laws of the Corporation incorporated by
                                    reference to Exhibit (b) of Form N-2 filed
                                    with the Securities Exchange Commission on
                                    April 22, 1997.

                          (4)       Specimen certificate of common stock
                                    certificate, incorporated by reference to
                                    Exhibit (b) of Form N-2 filed with the
                                    Securities Exchange Commission on April 22,
                                    1997.

                          (10.1)    Employee Stock Option Plan - incorporated by
                                    reference to Appendix B to the Corporation's
                                    definitive Proxy Statement filed on June 1,
                                    2002.*

                          (10.3)    Agreement of Limited Partnership for Rand
                                    Capital SBIC, L.P. - incorporated by
                                    reference to Exhibit 10.3 to the
                                    Corporation's Form 10-K filed for the year
                                    ended December 31, 2001.

                          (10.4)    Certificate of Limited Partnership of Rand
                                    Capital SBIC, L.P. - incorporated by
                                    reference to Exhibit 10.4 to the
                                    Corporation's Form 10-K filed for the year
                                    ended December 31, 2001.

                           (10.5)   Limited Liability Corporation Agreement of
                                    Rand Capital Management, LLC - incorporated
                                    by reference to Exhibit 10.5 to the
                                    Corporation's Form 10-K Report filed for the
                                    year ended December 31, 2001.

                           (10.6)   Certificate of Formation of Rand Capital
                                    Management, LLC- incorporated by reference
                                    to Exhibit 10.6 to the Corporation's Form
                                    10-K Report filed for the year ended
                                    December 31, 2001.

                           (10.7)   N/A

                           (10.8)   Profit Sharing Plan - incorporated by
                                    reference to Exhibit 10.8 to the
                                    Corporation's Form 10-K Report filed for the
                                    year ended December 31, 2002.*

                           (15)     N/A

                           (18)     N/A

                           (19)     N/A

                           (20)     N/A

                           (21)     Subsidiaries of the Corporation -
                                    incorporated by reference to Exhibit 21 to
                                    the Corporation's Form 10-K Report filed for
                                    the year ended December 31, 2001.

                           (22)     N/A

                           (23)     N/A

                           (24)     N/A

                           (31.1)   Certification of Chief Executive Officer
                                    Pursuant to Rules 13a-14(a)/15d-14(a) under
                                    the Securities Exchange Act of 1934, as
                                    amended

                           (31.2)   Certification of Chief Financial Officer
                                    Pursuant to Rules 13a-14(a)/15d-14(a) under
                                    the Securities Exchange Act of 1934, as
                                    amended


<PAGE>

                           (32.1)   Certification Pursuant to Section 906 of
                                    the Sarbanes-Oxley Act of 2002 - Rand
                                    Capital Corporation - filed herewith

                           (32.2)   Certification Pursuant to Section 906 of
                                    the Sarbanes-Oxley Act of 2002 - Rand
                                    Capital SBIC, L.P. - filed herewith

                           *Management contract or compensatory plan.


                  (b)      REPORTS ON FORM 8-K

                           On July 22, 2003, we furnished a Current Report on
                           Form 8-K pursuant to Item 9. Regulation FD Disclosure
                           attaching our press release dated July 17, 2003
                           announcing our earnings results for the second
                           quarter of 2003.


<PAGE>




                                   SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF SECURITIES EXCHANGE ACT
OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT ON FORM 10-Q TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.

Dated: November 12, 2003

                                     RAND CAPITAL CORPORATION



                                     By: /s/ ALLEN F. GRUM
                                        ---------------------------------------
                                        Allen F. Grum, President



                                     By: /s/ DANIEL P. PENBERTHY
                                        ---------------------------------------
                                        Daniel P. Penberthy, Treasurer


                                     RAND CAPITAL SBIC, L.P.

                                     By:  RAND CAPITAL MANAGEMENT LLC
                                            General Partner

                                     By:  RAND CAPITAL CORPORATION
                                            Member


                                            By: /s/ ALLEN F. GRUM
                                               --------------------------------
                                               Allen F. Grum, President





                                            By: /s/ DANIEL P. PENBERTHY
                                               --------------------------------
                                               Daniel P. Penberthy, Treasurer