##### Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549   FORM 10-Q    ☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019  ☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from
 to Commission File Number: 814-00235   Rand Capital Corporation (Exact Name of Registrant as specified in its Charter)    New York

16-0961359(State or Other Jurisdiction of
Incorporation or Organization)

(IRS Employer
Identification No.)2200 Rand Building, Buffalo, NY

14203(Address of Principal executive offices)

(Zip Code) (716) 853-0802 (Registrants telephone number, including area code)   Securities registered pursuant to Section 12(b) of the Act:  Title of each class

Trading
Symbol(s)

Name of each exchange
on which registeredCommon 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  ☒ Indicate by check mark whether the registrant has filed
all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.    Yes  ☐    No  ☐ As of November 7, 2019, there were 6,321,988
shares of the registrants common stock outstanding.




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##### Table of Contents

RAND CAPITAL CORPORATION TABLE OF CONTENTS FOR FORM 10-Q  PART I.  FINANCIAL INFORMATION


1Item 1.

Financial Statements and Supplementary Data


1Consolidated Statements of Financial Position as of September 
30, 2019 (Unaudited) and December 31, 2018


1Consolidated Statements of Operations for the Three Months and Nine Months Ended
 September 30, 2019 and 2018 (Unaudited)


2Consolidated Statements of Changes in Net Assets for the Three Months and Nine
 Months Ended September 30, 2019 and 2018 (Unaudited)


3Consolidated Statements of Cash Flows for the Nine Months Ended September 30,
 2019 and 2018 (Unaudited)


4Consolidated Schedule of Portfolio Investments as of September 
30, 2019 (Unaudited)


5Consolidated Schedule of Portfolio Investments as of December 31,
2018


13Notes to the Consolidated Financial Statements (Unaudited)


17Item 2.

Managements Discussion and Analysis of Financial Condition and Results of
 Operations


35Item 3.

Quantitative and Qualitative Disclosures about Market Risk


44Item 4.

Controls and Procedures


44PART II.  OTHER INFORMATION


45Item 1.

Legal Proceedings


45Item 1A.

Risk Factors


45Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds


45Item 3.

Defaults upon Senior Securities


45Item 4.

Mine Safety Disclosures


45Item 5.

Other Information


45Item 6.

Exhibits


46




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##### Table of Contents

PART I. FINANCIAL INFORMATION Item 1. Financial Statements and Supplementary Data RAND CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF FINANCIAL POSITION  September 30,2019(Unaudited)


December 31,2018ASSETSInvestments at fair value:Control investments (cost of $0 and $99,500, respectively)

$



$
99,500Affiliate investments (cost of $20,427,536 and $20,708,659, respectively)


15,568,648



17,026,091Non-
Control/Non-Affiliate investments (cost of $14,182,282 and $17,483,984, respectively)


11,218,550



17,541,213Total investments, at fair value (cost of $34,609,818 and $38,292,143, respectively)


26,787,198



34,666,804Cash and cash equivalents


9,288,502



4,033,792Interest receivable (net of allowance of $166,413 and $161,000, respectively)


125,808



145,532Deferred tax asset


1,653,395



525,198Prepaid income taxes


488,768



1,138,708Other assets


317,668



11,690Total assets

$
38,661,339


$
40,521,724LIABILITIES AND STOCKHOLDERS EQUITY (NET ASSETS)Liabilities:Debentures guaranteed by the SBA (net of debt issuance costs)

$
10,777,493


$
8,554,443Profit sharing and bonus payable






125,000Accounts payable and accrued expenses


102,733



245,758Deferred revenue


27,948



72,336Total liabilities


10,908,174



8,997,537Commitments and contingencies (See Note 5)Stockholders equity (net assets):Common stock, $0.10 par; shares authorized 10,000,000; shares issued 6,863,034; shares outstanding
of 6,321,988 as of 9/30/19 and 12/31/18


686,304



686,304Capital in excess of par value


10,581,789



10,581,789Accumulated net investment loss


(1,851,634
)


(1,665,552
)Undistributed net realized gain on investments


25,920,065



26,221,443Net unrealized depreciation on investments


(6,114,254
)


(2,830,692
)Treasury stock, at cost: 541,046 shares


(1,469,105
)


(1,469,105
)Total stockholders equity (net assets) (per share- 9/30/19: $4.39,12/31/18: $4.99)


27,753,165



31,524,187Total liabilities and stockholders equity (net assets)

$
38,661,339


$
40,521,724 See accompanying notes  1




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##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)  Three monthsendedSeptember 30,2019


Three monthsendedSeptember 30,2018


Nine monthsendedSeptember 30,2019


Nine monthsendedSeptember 30,2018Investment income:Interest from portfolio companies:Affiliate investments

$
217,953


$
192,758


$
632,705


$
515,784Non-Control/Non-Affiliate
investments


110,150



257,531



416,852



547,553Total interest from portfolio companies


328,103



450,289



1,049,557



1,063,337Interest from other investments:Non-Control/Non-Affiliate
investments


36,797



7,872



108,146



20,717Total interest from other investments


36,797



7,872



108,146



20,717Dividend and other investment income:Affiliate investments


65,996



48,856



307,681



175,905Non-Control/Non-Affiliate
investments














6,058Total dividend and other investment income


65,996



48,856



307,681



181,963Fee income:Affiliate investments


3,607



4,042



11,460



11,625Non-Control/Non-Affiliate
investments


2,852



151,243



262,927



160,987Total fee income


6,459



155,285



274,387



172,612Total investment income


437,355



662,302



1,739,771



1,438,629Expenses:Salaries


181,500



169,875



544,500



509,624Employee benefits


40,606



39,845



143,705



148,841Directors fees


30,124



28,624



87,372



92,123Professional fees


68,931



81,745



406,859



220,773Stockholders and office operating


85,782



47,839



466,543



176,877Insurance


10,500



8,700



31,070



27,588Corporate development


18,301



15,028



51,627



41,470Other operating


604



4,875



3,413



9,990436,348



396,531



1,735,089



1,227,286Interest on SBA obligations


94,191



77,568



303,849



232,406Bad debt (recovery) expense






(26,299
)


5,413



50,342Total expenses


530,539



447,800



2,044,351



1,510,034Net investment (loss) gain before income taxes


(93,184
)


214,502



(304,580
)


(71,405
)Income tax (benefit) expense


(27,635
)


50,003



(118,498
)


(24,807
)Net investment (loss) gain


(65,549
)


164,499



(186,082
)


(46,598
)Net realized (loss) gain on sales and dispositions of investments:Control investments










80,393



Affiliate investments






(1,125,673
)


(472,632
)


(1,125,673
)Net realized loss on sales and dispositions, before income taxes






(1,125,673
)


(392,239
)


(1,125,673
)Income tax (benefit)






(406,739
)


(90,861
)


(406,739
)Net realized loss on sales and dispositions of investments






(718,934
)


(301,378
)


(718,934
)Net change in unrealized depreciation on investments:Affiliate investments


(1,847,468
)


725,673



(1,176,320
)


169,232Non-Control/Non-Affiliate
investments


(1,749,661
)


(249,871
)


(3,020,961
)


(901,360
)Change in unrealized depreciation before income tax benefit


(3,597,129
)


475,802



(4,197,281
)


(732,128
)Deferred income tax (benefit) expense


(783,790
)


100,669



(913,719
)


(166,651
)Net change in unrealized depreciation on investments


(2,813,339
)


375,133



(3,283,562
)


(565,477
)Net realized and unrealized loss on investments


(2,813,339
)


(343,801
)


(3,584,940
)


(1,284,411
)Net decrease in net assets from operations

($
2,878,888
)

($
179,302
)

($
3,771,022
)

($
1,331,009
)Weighted average shares outstanding


6,321,988



6,321,988



6,321,988



6,321,988Basic and diluted net decrease in net assets from operations per share

($
0.46
)

($
0.03
)

($
0.60
)

($
0.21
) See accompanying notes  2




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##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)  Three monthsendedSeptember 30,2019


Three monthsendedSeptember 30,2018


Nine monthsendedSeptember 30,2019


Nine monthsendedSeptember 30,2018Net assets at beginning of period

$
30,632,053


$
30,766,978


$
31,524,187


$
31,918,685Net investment (loss) gain


(65,549
)


164,499



(186,082
)


(46,598
)Net realized loss on sales and dispositions of investments






(718,934
)


(301,378
)


(718,934
)Net change in unrealized depreciation on investments


(2,813,339
)


375,133



(3,283,562
)


(565,477
)Net decrease in net assets from operations


(2,878,888
)


(179,302
)


(3,771,022
)


(1,331,009
)Net assets at end of period

$
27,753,165


$
30,587,676


$
27,753,165


$
30,587,676Accumulated net investment loss

($
1,851,634
)

($
1,643,744
)

($
1,851,634
)

($
1,643,744
) See accompanying notes  3




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##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)  Nine monthsendedSeptember 30,2019


Nine monthsendedSeptember 30,2018Cash flows from operating activities:Net decrease in net assets from operations

($
3,771,022
)

($
1,331,009
)Adjustments to reconcile net decrease in net assets to net cash provided by (used in) operating
activities:Investments in portfolio companies


(900,012
)


(1,365,000
)Proceeds from sale of portfolio investments


39,893



Proceeds from loan repayments


4,525,000



70,131Net realized loss on portfolio investments


392,239



1,125,673Change in unrealized depreciation on investments before income taxes


4,197,281



732,128Deferred tax benefit


(1,128,197
)


(220,412
)Depreciation and amortization


27,809



22,200Original issue discount amortization


(30,573
)


(29,462
)Non-cash conversion of debenture interest


(344,222
)


(421,665
)Change in interest receivable allowance


5,413



50,342Changes in operating assets and liabilities:Decrease in interest receivable


14,311



32,772(Increase) decrease in other assets


(306,174
)


2,844Decrease (increase) in prepaid income taxes


649,940



(360,779
)Decrease in accounts payable and accrued expenses


(143,025
)


(69,462
)Decrease in profit sharing and bonus payable


(125,000
)


(132,000
)(Decrease) increase in deferred revenue


(44,388
)


36,234Total adjustments


6,830,295



(526,456
)Net cash provided by (used in) operating activities


3,059,273



(1,857,465
)Cash flows from financing activities:Proceeds from SBA debentures


2,250,000



Origination costs to SBA


(54,563
)


Net cash provided by financing activities


2,195,437



Net increase (decrease) in cash and cash equivalents


5,254,710



(1,857,465
)Cash and cash equivalents:Beginning of period


4,033,792



6,262,039End of period

$
9,288,502


$
4,404,574 See accompanying notes  4




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##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS September 30, 2019 (Unaudited)  (b)


(c)




(d)(f)


PercentCompany, Geographic Location, Business

(a)

Date







Fair


of NetDescription, (Industry) and Website

Type of Investment

Acquired


Equity

Cost


Value


AssetsNon-Control/Non-Affiliate
Investments  40.4% of net assets: (j)ACV Auctions, Inc. (e)(g)

1,181,160 Series A Preferred.


8/12/16


<1%


$163,000



$2,776,907



10.0%Buffalo, NY. Live mobile wholesale auctions for new and used car dealers. (Software)
www.acvauctions.comAdvantage 24/7 LLC (g)(h)

$140,000 Term Note at 7% due


12/30/10


0%










0.4%Williamsville, NY. Marketing program for wine and

January 1, 2022








115,000



115,000spirits dealers. (Marketing Company) www.advantage24-7.comCentivo Corporation (e)(g)

190,967 Series A-1 Preferred.


7/5/17


<1%


200,000



200,000



1.1%New York, NY. Tech-enabled health solutions

337,808 Series A-2 Preferred.








101,342



101,342company that helps self-insured employers and theiremployees save money and have a better experience.(Health Care)
www.centivo.comTotal Centivo








301,342



301,342Empire Genomics, LLC (g)(l)

$1,209,014 Senior Secured


6/13/14


0%










2.1%Buffalo, NY. Molecular diagnostics company that

Convertible Term Notes at 10%offers a comprehensive menu of assay services for

(8% PIK through September 30,diagnosing and guiding patient therapeutic treatments.

2019) due December 31, 2020.








1,308,675



300,000(Health Care)

$444,915 Promissory Note at 9%www.empiregenomics.com

(4% PIK) due December 31, 2020.








444,915



302,569Total Empire








1,753,590



602,569GiveGab, Inc. (e)(g)

5,084,329 Series Seed Preferred.


3/13/13


4%


616,221



616,221



2.2%Ithaca, NY. Online fundraising, day of giving supporter engagement software for non-profit
organizations. (Software) www.givegab.comGoNoodle, Inc. (g)(l)

$1,000,000 Secured Note at 12%


2/6/15


<1%










3.8%Nashville, TN. Student engagement education

due January 31, 2020, (1% PIK).








1,047,481



1,047,481software providing core aligned physical activity

Warrant for 47,324 Series Cbreaks. (Software)

Preferred.








25



25www.gonoodle.comTotal GoNoodle








1,047,506



1,047,506Mercantile Adjustment Bureau, LLC (g)

$1,199,039 Subordinated Secured


10/22/12


4%










1.8%Williamsville, NY. Full service accounts receivable

Note at 13% (3% for the calendarmanagement and collections company. (Contact

year 2019) due January 31, 2022.








1,199,040



500,000Center)
www.mercantilesolutions.com

(e)$150,000 SubordinatedDebenture at 8% due January 31,2022.








150,000



Warrant for 3.29% MembershipInterests. Option for 1.5%Membership Interests.








197,625



Total Mercantile








1,446,665



500,000Outmatch Holdings, LLC (e)(g)

3,022,799 Class P1 Units.


11/18/10


4%


2,140,007



2,140,007



7.8%(Chequed Holdings, LLC)

109,788 Class C1 Units.








5,489



5,489Dallas, TX. Web based predictive employee selectionand reference checking. (Software)
www.outmatch.comTotal Outmatch








2,145,496



2,145,496PostProcess Technologies, Inc. (e)(g)

$300,000 Convertible Promissory


7/25/16


0%










1.1%Buffalo, NY. Provides innovative solutions for the

Note at 5% due July 28, 2020.








300,000



300,000post-processing of additive manufactured 3D parts.(Manufacturing)
www.postprocess.com  5




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##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS September 30, 2019 (Continued) (Unaudited)  (b)


(c)




(d)(f)


PercentCompany, Geographic Location, Business

(a)

Date







Fair


of NetDescription, (Industry) and Website

Type of Investment

Acquired


Equity

Cost


Value


AssetsRheonix, Inc. (e)

9,676 Common.


10/29/09


4%










2.5%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



702,732www.rheonix.comTotal Rheonix








2,802,731



702,732SocialFlow, Inc. (e)(g)

1,049,538 Series B Preferred.


4/5/13


4%


500,000



279,156



3.6%New York, NY. Provides instant analysis of social

1,204,819 Series B-1 Preferred.








750,000



433,735networks using a proprietary, predictive analytic

717,772 Series C Preferred.








500,000



287,109algorithm to optimize advertising and publishing.(Software) www.socialflow.comTotal Social Flow








1,750,000



1,000,000Somerset Gas Transmission Company, LLC (e)

26.5337 Units.


7/10/02


3%


719,097



500,000



1.8%Columbus, OH. Natural gas transportation.(Oil and Gas) www.somersetgas.comTech 2000, Inc. (g)

$600,000 Term Note at 14% due


11/16/18


0%










2.2%Herndon, VA. Develops and delivers IT training.

November 15, 2021.








610,777



610,777(Software) www.t2000inc.comOther
Non-Control/Non-Affiliate Investments:DataView, LLC (e)

Membership Interest.


10/1/98


5%


310,357







0.0%(Software)UStec/Wi3 (e)

Common stock.


12/17/98


<1%


100,500







0.0%(Manufacturing)Subtotal
Non-Control/Non-Affiliate Investments









$
14,182,282


$
11,218,550Affiliate Investments  56.1% of net assets (k)BeetNPath, LLC (Grainful) (e)(g)

1,119,024 Series A-2 Preferred


10/20/14


9%










0.0%Ithaca, NY. Frozen entrées made from 100%

Membership Units.







$
359,000


$
whole grain steel cut oats under Grainful brand

1,032,918 Series B Preferredname. (Consumer Product)

Membership Units.








261,277



www.grainful.com

$262,626.64 Convertible SecuredNotes at 8% due December 21, 2019.








262,627



Total BeetNPath








882,904



Carolina Skiff LLC (g)

6.0825% Class A Common


1/30/04


7%










6.3%Waycross, GA. Manufacturer of ocean fishing and

Membership Interest.








15,000



1,750,000pleasure boats. (Manufacturing) www.carolinaskiff.comClearView Social, Inc. (e)(g)

312,500 Series Seed Plus Preferred.


1/4/16


6%


200,000



200,000



0.7%Buffalo, NY. Social media publishing tool for law,CPA and professional firms. (Software) www.clearviewsocial.comFirst Wave Technologies, Inc. (e)(g)

670,443.2 Class A Common.


4/19/12


5%


661,563



33,000



0.1%Batavia, NY. Sells First Crush automated pill crusher that crushes and grinds pills for nursing homes and medical institutions. (Health Care) www.firstwavetechnologies.comGenicon, Inc. (e)(g)(l)

1,586,902 Series B Preferred.


4/10/15


6%


1,000,000







9.9%Winter Park, FL. Designs, produces and

$3,250,000 Promissory Notes at 10%distributes patented surgical instrumentation.

due June 12, 2022, (10% PIK).








3,654,750



2,500,000(Health Care)

$250,000 Promissory Note at 10% duewww.geniconendo.com

June 12, 2021 (10% PIK).








257,797



250,000Warrants for Common.








120,000



Total Genicon








5,032,547



2,750,000  6




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##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS September 30, 2019 (Continued) (Unaudited)  (b)


(c)




(d)(f)


PercentCompany, Geographic Location, Business

(a)

Date







Fair


of NetDescription, (Industry) and Website

Type of Investment

Acquired


Equity

Cost


Value


AssetsKnoa Software, Inc. (e)(g)

973,533 Series A-1 Convertible


11/20/12


7%










4.4%New York, NY. End user experience

Preferred.








750,000



750,000management and performance (EMP) solutions

1,876,922 Series B Preferred.








479,155



479,155utilizing enterprise applications. (Software)www.knoa.comTotal Knoa








1,229,155



1,229,155KnowledgeVision Systems, Inc. (g)

200,000 Series A-1 Preferred.


11/13/13


7%


250,000







3.5%Lincoln, MA. Online presentation and training

214,285 Series A-2 Preferred.








300,000



software. (Software)

129,033 Series A-3 Preferred.








165,001



www.knowledgevision.com

Warrant for 46,743 Series A-3.








35,000



(e)$75,000 Subordinated PromissoryNotes at 8% payable on demand ofmajority of holders after August 31, 2019.








75,000



75,000$900,000 Term Note at 13% due April 30, 2021.








900,000



900,000Total KnowledgeVision








1,725,001



975,000Mezmeriz, Inc. (e)(g)

1,554,565 Series Seed Preferred.


1/9/08


12%


742,850



351,477



1.3%Ithaca, NY. Technology company developing novel reality capture tools for 3D mapping, reality modeling, object tracking and classification.(Electronics Developer)
www.mezmeriz.comMicrocision LLC (g)(l)

$1,500,000 Subordinated Promissory


9/24/09


15%










9.2%Pennsauken Township, NJ. Manufacturer of

Note at 12% (1% PIK) due Decemberprecision machined medical implants,

31, 2024.








1,947,889



1,947,889components and assemblies. (Manufacturing)

15% Class A Common Membershipwww.microcision.com

Interest.












610,000Total Microcision








1,947,889



2,557,889New Monarch Machine Tool, Inc. (g)

22.84 Common.


9/24/03


15%


22,841



22,841



0.1%Cortland, NY. Manufactures and services vertical/horizontal machining centers.(Manufacturing)
www.monarchmt.comOnCore Golf Technology, Inc. (e)(g)

300,483 Preferred AA.


12/31/14


8%


752,712



300,000



1.1%Buffalo, NY. Patented and proprietary golf balls utilizing technology and innovation.(Consumer Product)
www.oncoregolf.comSciAps, Inc. (e)(g)

187,500 Series A Preferred.


7/12/13


6%


1,500,000



223,000



5.2%Woburn, MA. Instrumentation company

274,299 Series A-1 Convertibleproducing portable analytical devices using XRF,

Preferred.








504,710



142,000LIBS and RAMAN spectroscopy to identify

117,371 Series B Convertible Preferred.








250,000



250,000compounds, minerals, and elements.

113,636 Series C Convertible Preferred.








175,000



175,000(Manufacturing)

369,698 Series C-1 Convertiblewww.sciaps.com

Preferred.








399,274



399,274147,059 Series D Convertible Preferred.








250,000



250,000Total SciAps








3,078,984



1,439,274Teleservices Solutions Holdings, LLC (e) (g)(l)

250,000 Class B Preferred Units.


5/30/14


6%


250,000







0.0%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.








104,198



www.ipacesetters.com

PIK dividend for Series C and D at 12% and 14%, respectively.Total Teleservices








1,636,078



  7




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##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS September 30, 2019 (Continued) (Unaudited)  (b)


(c)




(d)(f)


PercentCompany, Geographic Location, Business

(a)

Date







Fair


of NetDescription, (Industry) and Website

Type of Investment

Acquired


Equity

Cost


Value


AssetsTilson Technology Management, Inc. (g)(h)

120,000 Series B Preferred.


1/20/15


9%


600,000



1,950,000



14.3%Portland, ME. Provides network deployment

21,391 Series C Preferred.








200,000



347,604construction and information system services

70,176 Series D Preferred.








800,000



1,140,360management for cellular, fiber optic and wireless

15,385 Series E Preferred.








500,012



500,012systems providers. Its affiliated entity, SQF, LLC

211,567 SQF Hold Co. Common.












22,036is a CLEC supporting small cell 5G deployment.(Professional Services)
www.tilsontech.comTotal Tilson








2,100,012



3,960,012Other Affiliate Investments:G-TEC Natural Gas Systems(e)

Membership Interest


8/31/99


17%


400,000







0.0%(Manufacturing)Subtotal Affiliate Investments










$20,427,536



$15,568,648TOTAL INVESTMENTS  96.5%










$34,609,818



$26,787,198OTHER ASSETS IN EXCESS OFLIABILITIES  3.5%














965,967NET ASSETS  100%














$27,753,165  8




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##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS September 30, 2019 (Continued) (Unaudited)  Notes to the Consolidated Schedule of Portfolio Investments (a) At September 30, 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 in which the Corporation first acquired an investment in the company or a predecessor company. (c) Each equity percentage estimates the Corporations ownership interest in the applicable portfolio investment. The estimated ownership is calculated
based on the percent of outstanding voting securities held by the Corporation or the potential percentage of voting securities held by the Corporation upon exercise of warrants or conversion of debentures, or other available data. If applicable, the
symbol <1% indicates that the Corporation holds an equity interest of less than one percent. (d) The Corporations investments are
carried at fair value in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820 Fair Value Measurements and Disclosures, which defines fair value and establishes guidelines for measuring
fair value. At September 30, 2019, ASC 820 designates 100% of the Corporations investments as Level 3 assets. Under the valuation policy of the Corporation, unrestricted publicly held securities are valued at the average
closing bid price for these securities for the last three trading days of the reporting period. Restricted securities are subject to restrictions on resale, and are valued at fair value as determined by the management of the Corporation and
submitted to the Board of Directors for approval. Fair value is considered to be the amount that the Corporation may reasonably expect to receive for portfolio securities when sold on the valuation date. Valuations as of any particular date,
however, are not necessarily indicative of amounts which may ultimately be realized as a result of future sales or other dispositions of securities and these favorable or unfavorable differences could be material. Among the factors considered in
determining the fair value of restricted securities are the financial condition and operating results, projected operations, and other analytical data relating to the investment. Also considered are the market prices for unrestricted securities of
the same class (if applicable) and other matters which may have an impact on the value of the portfolio company (see Note 3. Investments to the Consolidated Financial Statements). (e) These investments are non-income producing. All other investments are income producing. Non-income producing investments have not generated cash payments of interest or dividends including LLC tax-related distributions within the last twelve months, or are not
expected to do so going forward. 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 September 30, 2019, the total cost of investment securities was approximately $34.6 million. Net unrealized depreciation was approximately
($7.8) million, which was comprised of $6.8 million of unrealized appreciation of investment securities and ($14.6) million of unrealized depreciation of investment securities. At September 30, 2019, the aggregate gross unrealized gain for
federal income tax purposes was $6.5 million and the aggregate gross unrealized loss for federal income tax purposes was ($10.6) million. The net unrealized loss for federal income tax purposes was ($4.1) million based on a tax cost of
$31.9 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 September 30, 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.  9




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##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS September 30, 2019 (Continued) (Unaudited)  Investments in and Advances to Affiliates   Company

Type of Investment

December31, 2018Fair Value


GrossAdditions (1)


GrossReductions(2)


September30, 2019Fair Value


NetRealizedGains(Losses)


AmountofInterest/Dividend/FeeIncome(3)Control Investments:Advantage 24/7 LLC

$140,000 Term Note at 7%.

$
99,500


$



($
99,500
)

$



$
40,500


$
Gemcor II, LLC




















39,893



Total Control Investments

$
99,500


$



($
99,500
)

$



$
80,393


$
Affiliate Investments:BeetNPath, LLC

1,119,024 Series A-2 Preferred Membership Units.

$



$



$



$



$



$
1,032,918 Series B Preferred Membership Units.


261,277







(261,277
)










$262,626.64 Convertible Secured Notes at 8%.


262,627







(262,627
)










Total BeetNPath


523,904







(523,904
)










Carolina Skiff LLC

6.0825% Class A Common Membership interest.


1,750,000











1,750,000







76,914ClearView Social, Inc.

312,500 Series Seed Plus Preferred.


200,000











200,000







First Wave Technologies, Inc.

670,443.2 Class A Common.


33,000











33,000







Genicon, Inc.

1,586,902 Series B Preferred.


1,000,000







(1,000,000
)










$3,250,000 Promissory Notes at 10%.


3,385,586



269,164



(1,154,750
)


2,500,000







305,397$250,000 Promissory Note at 10%






257,797



(7,797
)


250,000







7,797Warrant for Common.


37,500







(37,500
)










Total Genicon


4,423,086



526,961



(2,200,047
)


2,750,000







313,194G-TEC Natural Gas Systems

16.639% Class A Membership Interest. 8% cumulative dividend.






















Knoa Software, Inc.

973,533 Series A-1 Convertible Preferred.


750,000











750,000







193,9341,876,922 Series B Preferred.


479,155











479,155







Total Knoa


1,229,155











1,229,155







193,934KnowledgeVision

200,000 Series A-1 Preferred.






















Systems, Inc.

214,285 Series A-2 Preferred.






















129,033 Series A-3 Preferred.


165,001







(165,001
)










$75,000 Subordinated Promissory Notes at 8%.


75,000











75,000







4,488$900,000 Term Note at 13%.


750,000



150,000







900,000







92,879Warrant for 46,743 Series A-3.


35,000







( 35,000
)










Total KnowledgeVision


1,025,001



150,000



(200,001
)


975,000







97,367Mezmeriz, Inc.

1,554,565 Series Seed Preferred.


351,477











351,477







Microcision LLC

$1,500,000 Subordinated Promissory Note at 12% (1% PIK).


1,933,353



14,536







1,947,889







174,43715% Class A Common Membership Interest.


610,000











610,000







Total Microcision


2,543,353



14,536







2,557,889







174,437New Monarch Machine Tool, Inc.

22.84 Common.


22,841











22,841



OnCore Golf Technology, Inc.

300,483 Series AA Preferred.


300,000











300,000







  10




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##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS September 30, 2019 (Continued) (Unaudited)  Investments in and Advances to Affiliates   Company

Type of Investment

December 31,2018 FairValue


GrossAdditions(1)


GrossReductions(2)


September30, 2019 FairValue


NetRealizedGains(Losses)


Amount ofInterest/Dividend/Fee Income(3)SciAps, Inc.

187,500 Series A Preferred.


700,000







(477,000
)


223,000







274,299 Series A-1 Convertible Preferred.


250,000







(108,000
)


142,000







117,371 Series B Convertible Preferred.


250,000











250,000







113,636 Series C Convertible Preferred.


175,000











175,000







369,698 Series C-1 Convertible Preferred.


399,274











399,274







147,059 Series D Convertible Preferred.


250,000











250,000







Total SciAps


2,024,274







(585,000
)


1,439,274







SOMS

5,959,490 Series B membership Interests.


















(472,632
)


Technologies, LLCTeleservices

250,000 Class B Preferred Units.






















Solutions

1,000,000 Class C Preferred Units.






















Holdings, LLC

80,000 Class D Preferred Units.






















104,198 Class E Preferred Units.






















Total Teleservices






















Tilson Technology

120,000 Series B Preferred.


600,000



1,350,000







1,950,000







36,833Management, Inc.

21,391 Series C Preferred.


200,000



147,604







347,604







70,176 Series D Preferred.


800,000



340,360







1,140,360







15,385 Series E Preferred.






500,012







500,012







211,567 SQF Hold Co. Common.






22,036







22,036



$200,000 Subordinated Promissory Note at 8%.


200,000







(200,000
)










11,835$800,000 Subordinated Promissory Note at 8%.


800,000







(800,000
)










47,332Total Tilson


2,600,000



2,360,012



(1,000,000
)


3,960,012







96,000Total Affiliate Investments

$
17,026,091


$
3,051,509


($
4,508,952
)

$
15,568,648


($
472,632
)

$
951,846Total Control and Affiliate Investments

$
17,125,591


$
3,051,509


($
4,608,452
)

$
15,568,648


($
392,239
)

$
951,846 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




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##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS September 30, 2019 (Continued) (Unaudited)  Industry Classification

Percentage of TotalInvestments (at fair value)as of September 30, 2019Software


39.6
%Manufacturing


22.6Healthcare


16.4Professional Services


14.8Contact Center


1.9Oil and Gas


1.9Electronics


1.3Consumer Product


1.1Marketing


0.4Total Investments


100
%   12




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##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS December 31, 2018  Company, Geographic Location, BusinessDescription, (Industry) and
Website

(a)
Type of Investment

(b)
DateAcquired


(c)

Equity


Cost


(d)(f)
FairValue


Percentof
NetAssetsNon-Control/Non-Affiliate Investments  55.7% of net assets: (j)ACV Auctions, Inc. (e)(g)

1,181,160 Series A Preferred.


8/12/16



<1
%

$
163,000


$
2,776,907



8.8
%Buffalo, NY. Live mobile wholesale auctions for new and used car dealers. (Software)
www.acvauctions.comCentivo Corporation (e)(g)

190,967 Series A-1 Preferred.


7/5/17



<1
%


200,000



200,000



1.0
%New York, NY. Tech-enabled health solutions

337,808 Series A-2 Preferred.










101,342



101,342company that helps self-insured employers and their employees save money and have a better experience. (Health Care)
www.centivo.comTotal Centivo










301,342



301,342eHealth Global Technologies, Inc. (g)

$3,500,000 Term Note at 13% due


6/28/16



0
%










11.1
%Henrietta, NY. eHealth Connect® improves health care delivery through intelligently
aggregated clinical record and images for patient referrals. (Health Care) www.ehealthtechnologies.com

December 31, 2020.










3,500,000



3,500,000Empire Genomics, LLC (g)(m)

$1,209,014 Senior Secured


6/13/14



0
%










2.4
%Buffalo, NY. Molecular diagnostics company that offers a comprehensive menu of assay services for diagnosing and guiding patient therapeutic treatments.

Convertible Term Notes at 10% (8% PIK through September 30, 2019) due December 31, 2020.










1,233,195



474,181(Health Care)

$444,915 Promissory Note at 9%www.empiregenomics.com

(4% PIK) due December 31, 2020.










444,915



302,569Total Empire










1,678,110



776,750GiveGab, Inc. (e)(g)

5,084,329 Series Seed Preferred.


3/13/13



4
%


616,221



616,221



2.0
%Ithaca, NY. Online fundraising, day of giving supporter engagement software for non-profit
organizations. (Software) www.givegab.comGoNoodle, Inc. (g)(m)

$1,000,000 Secured Note at 12%


2/6/15



<1
%










3.3
%Nashville, TN. Student engagement education

due January 31, 2020, (1% PIK).










1,039,663



1,039,663software providing core aligned physical activity breaks. (Software)
www.gonoodle.com

Warrant for 47,324 Series C Preferred.










25



25Total GoNoodle










1,039,688



1,039,688Mercantile Adjustment Bureau, LLC (g)

$1,199,039 Subordinated Secured


10/22/12



4
%










2.2
%Williamsville, NY. Full service accounts receivable

Note at 13% (3% for the calendarmanagement and collections company. (Contact

year 2018) due January 31, 2019.










1,199,040



700,000Center)
www.mercantilesolutions.com

(e)$150,000 Subordinated Debenture at 8% due June 30, 2018.










150,000



Warrant for 3.29% Membership Interests. Option for 1.5% Membership Interests. (i)Interest receivable $50,254.










97,625



Total Mercantile










1,446,665



700,000Outmatch Holdings, LLC (e)(g)

2,798,883 Class P1 Units.


11/18/10



4
%


2,140,007



2,140,007



6.8
%(Chequed Holdings, LLC) Dallas, TX. Web
based predictive employee selection and reference checking. (Software) www.outmatch.com

109,788 Class C1 Units.










5,489



5,489Total Outmatch










2,145,496



2,145,496PostProcess Technologies LLC (e)(g)

$300,000 Convertible Promissory


7/25/16



0
%










1.0
%Buffalo, NY. Provides innovative solutions for the post-processing of additive manufactured 3D parts. (Manufacturing)
www.postprocess.com

Note at 5% due July 28, 2020.










300,000



300,000  13




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##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS December 31, 2018 (Continued)  Company, Geographic Location, BusinessDescription, (Industry) and
Website

(a)
Type of Investment

(b)
DateAcquired


(c)

Equity


Cost


(d)(f)
Fair Value


Percentof
NetAssetsRheonix, Inc. (e)

9,676 Common.


10/29/09



4
%










7.0
%Ithaca, NY. Developer of fully automated

(g)1,839,422 Series A Preferred.










2,099,999



1,500,000microfluidic based molecular assay and diagnostic

(g)50,593 Common.














testing devices. (Health Care)
www.rheonix.com

(g)589,420 Series B Preferred.










702,732



702,732Total Rheonix










2,802,731



2,202,732SocialFlow, Inc. (e)(g)

1,049,538 Series B Preferred.


4/5/13



4
%


500,000



731,431



6.6
%New York, NY. Provides instant analysis of social

1,204,819 Series B-1 Preferred.










750,000



839,648networks using a proprietary, predictive analytic algorithm to optimize advertising and publishing. (Software)
www.socialflow.com

717,772 Series C Preferred.










500,000



500,221Total Social Flow










1,750,000



2,071,300Somerset Gas Transmission Company, LLC (e)

26.5337 Units.


7/10/02



3
%


719,097



500,000



1.6
%Columbus, OH. Natural gas transportation. (Oil and Gas) www.somersetgas.comTech 2000, Inc. (g)(m)

$600,000 Term Note at 14% (PIK


11/16/18



0
%Herndon, VA. Develops and delivers IT training. (Software)
www.t2000inc.com

through December 31, 2018) due November 15, 2021.










610,777



610,777



1.9
%Other
Non-Control/Non-Affiliate Investments:DataView, LLC (e)(Software)

Membership Interest.


10/1/98



5
%


310,357







0.0
%UStec/Wi3 (e)(Manufacturing)

Common stock.


12/17/98



<1
%


100,500







0.0
%Subtotal
Non-Control/Non-Affiliate Investments











$
17,483,984


$
17,541,213Affiliate Investments  54.0% of net assets (k)BeetNPath, LLC (Grainful) (e)(g)

1,119,024 Series A-2 Preferred


10/20/14



9
%










1.7
%Ithaca, NY. Frozen entrées made from 100%

Membership Units.









$
359,000


$
whole grain steel cut oats under Grainful brand name. (Consumer Product)

1,032,918 Series B Preferred Membership Units.










261,277



261,277www.grainful.com

$262,626.64 Convertible SecuredNotes at 8% due December 21, 2019.










262,627



262,627Total BeetNPath










882,904



523,904Carolina Skiff LLC (g)

6.0825% Class A Common


1/30/04



7
%










5.6
%Waycross, GA. Manufacturer of ocean fishing and

Membership Interest.










15,000



1,750,000pleasure boats. (Manufacturing)
www.carolinaskiff.comClearView Social, Inc. (e)(g)

312,500 Series Seed Plus Preferred.


1/4/16



6
%


200,000



200,000



0.6
%Buffalo, NY. Social media publishing tool for law, CPA and professional firms. (Software)
www.clearviewsocial.comFirst Wave Technologies, Inc. (e)(g)

670,443.2 Class A Common.


4/19/12



5
%


661,563



33,000



0.1
%Batavia, NY. Sells First Crush automated pill crusher that crushes and grinds pills for nursing homes and medical institutions. (Health
Care) www.firstwaveproducts.com  14




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##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS December 31, 2018 (Continued)  Company, Geographic Location, BusinessDescription, (Industry) and
Website

(a)
Type of Investment

(b)
DateAcquired


(c)

Equity


Cost


(d)(f)
FairValue


Percentof
NetAssetsGenicon, Inc. (g) (m)

1,586,902 Series B Preferred.


4/10/15



6
%


1,000,000



1,000,000



14.0
%Winter Park, FL. Designs, produces and distributes patented surgical instrumentation.

$3,250,000 Promissory Notes at 10% due May 1, 2020, (8% PIK).










3,385,586



3,385,586(Health Care) www.geniconendo.com

Warrants for 500,000 Common.










120,000



37,500Total Genicon










4,505,586



4,423,086Knoa Software, Inc. (e)(g)

973,533 Series A-1 Convertible


11/20/12



7
%










3.9
%New York, NY. End user experience

Preferred.










750,000



750,000management and performance (EMP) solutions utilizing enterprise applications. (Software) www.knoa.com

1,876,922 Series B Preferred.










479,155



479,155Total Knoa










1,229,155



1,229,155KnowledgeVision Systems, Inc. (g)

200,000 Series A-1 Preferred.


11/13/13



7
%


250,000







3.2
%Lincoln, MA. Online presentation and training

214,285 Series A-2 Preferred.










300,000



software. (Software)

129,033 Series A-3 Preferred.










165,001



165,001www.knowledgevision.com

Warrant for 46,743 Series A-3.










35,000



35,000$75,000 Subordinated Promissory Notes at 8% payable on demand of majority of holders after
August 31, 2019.(e)










75,000



75,000$750,000 Term Note at 11% due April 30, 2021.










750,000



750,000Total KnowledgeVision










1,575,001



1,025,001Mezmeriz, Inc. (e)(g)

1,554,565 Series Seed Preferred.


1/9/08



12
%


742,850



351,477



1.1
%Ithaca, NY. Technology company developing novel reality capture tools for 3D mapping, reality modeling, object tracking and classification. (Electronics Developer) www.mezmeriz.comMicrocision LLC (g)(m)

$1,500,000 Subordinated Promissory


9/24/09



15
%










8.1
%Pennsauken Township, NJ. Manufacturer of precision machined medical implants,

Note at 12% (1% PIK) due December 31, 2024.










1,933,353



1,933,353components and assemblies. (Manufacturing) www.microcision.com

15% Class A Common Membership Interest.














610,000Total Microcision










1,933,353



2,543,353New Monarch Machine Tool, Inc. (g)

22.84 Common.


9/24/03



15
%


22,841



22,841



0.1
%Cortland, NY. Manufactures and services vertical/horizontal machining centers. (Manufacturing) www.monarchmt.comOnCore Golf Technology, Inc. (e)(g)

300,483 Preferred AA.


12/31/14



8
%


752,712



300,000



1.0
%Buffalo, NY. Patented and Proprietary Golf Balls utilizing breakthrough technology and innovation, inspiring golfers at all skill levels and abilities. (Consumer Product) www.oncoregolf.comSciAps, Inc. (e)(g)

187,500 Series A Preferred.


7/12/13



6
%


1,500,000



700,000



6.4
%Woburn, MA. Instrumentation company producing portable analytical devices using XRF,

274,299 Series A-1 Convertible Preferred.










504,710



250,000LIBS and RAMAN spectroscopy to identify

117,371 Series B Convertible Preferred.










250,000



250,000compounds, minerals, and elements.

113,636 Series C Convertible Preferred.










175,000



175,000(Manufacturing) www.sciaps.com

369,698 Series C-1 Convertible Preferred.










399,274



399,274147,059 Series D Convertible Preferred.










250,000



250,000Total SciAps










3,078,984



2,024,274  15




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##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS December 31, 2018 (Continued)  Company, Geographic Location, BusinessDescription, (Industry) and
Website

(a)
Type of Investment

(b)
DateAcquired


(c)

Equity


Cost


(d)(f)
Fair Value


Percentof
NetAssetsTeleservices Solutions Holdings, LLC (e)

250,000 Class B Preferred Units.


5/30/14



6
%


250,000







0.0
%(g)(m)

1,000,000 Class C Preferred Units.










1,190,680



Montvale, NJ. Customer contact center

80,000 Class D Preferred Units.










91,200



specializing in customer acquisition and retention

104,198 Class E Preferred Units.










104,198



for selected industries. (Contact Center) www.ipacesetters.com

PIK dividend for Series C and D at 12% and 14%, respectively.Total Teleservices










1,636,078



Tilson Technology Management, Inc. (g)

120,000 Series B Preferred.


1/20/15



11
%


600,000



600,000



8.2
%Portland, ME. Cellular, fiber optic and wireless

21,391 Series C Preferred.










200,000



200,000information systems, construction, and management. (Professional Services)

70,176 Series D Preferred. $800,000 Subordinated Promissory










800,000



800,000www.tilsontech.com

Notes at 8% due December 1, 2022. $200,000 Subordinated Promissory










800,000



800,000Note at 8% due September 28, 2021.










200,000



200,000Total Tilson










2,600,000



2,600,000Other Affiliate Investments:G-TEC Natural Gas Systems(e)
(Manufacturing)

Membership Interest


8/31/99



17
%


400,000







0.0
%SOMS Technologies, LLC (e)(g)
(Consumer Products)

Membership Interest


12/2/08



9
%


472,632







0.0
%Subtotal Affiliate Investments











$
20,708,659


$
17,026,091Control Investments  0.3% of net assets (l)Advantage 24/7 LLC (g)

45% Membership Interest.


12/30/10



45
%

$
99,500


$
99,500



0.3
%Williamsville, NY. Marketing program for wine and spirits dealers. (Marketing Company) www.advantage24-7.comSubtotal Control Investments











$
99,500


$
99,500TOTAL INVESTMENTS  110%











$
38,292,143


$
34,666,804LIABILITIES IN EXCESS OF OTHERASSETS  (10%)
















(3,142,617
)NET ASSETS  100%















$
31,524,187  16




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##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS December 31, 2018 (Continued)  Notes to the Consolidated Schedule of Portfolio Investments (a) At December 31, 2018, 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 in which the Corporation first acquired an investment in the company or a predecessor company. (c) Each equity percentage estimates the Corporations ownership interest in the applicable portfolio investment. The estimated ownership is calculated
based on the percent of outstanding voting securities held by the Corporation or the potential percentage of voting securities held by the Corporation upon exercise of warrants or conversion of debentures, or other available data. If applicable, the
symbol <1% indicates that the Corporation holds an equity interest of less than one percent. (d) The Corporations investments are
carried at fair value in accordance with 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, 2018,
ASC 820 designates 100% of the Corporations investments as Level 3 assets. Under the valuation policy of the Corporation, unrestricted publicly held securities are valued at the average closing bid price for these securities
for the last three trading days of the reporting period. Restricted securities are subject to restrictions on resale, and are valued at fair value as determined by the management of the Corporation and submitted to the Board of Directors for
approval. Fair value is considered to be the amount that the Corporation may reasonably expect to receive for portfolio securities when sold on the valuation date. Valuations as of any particular date, however, are not necessarily indicative of
amounts which may ultimately be realized as a result of future sales or other dispositions of securities and these favorable or unfavorable differences could be material. Among the factors considered in determining the fair value of restricted
securities are the financial condition and operating results, projected operations, and other analytical data relating to the investment. Also considered are the market prices for unrestricted securities of the same class (if applicable) and other
matters which may have an impact on the value of the portfolio company (see Note 3 Investments to the Consolidated Financial Statements). (e)
These investments are non-income producing. All other investments are income producing. Non-income producing investments have not generated cash payments of interest or
dividends including LLC tax-related distributions within the last twelve months, or are not expected to do so going forward. 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, 2018, the total cost
of investment securities was approximately $38.3 million. Net unrealized depreciation was approximately ($3.6) million, which was comprised of $5.3 million of unrealized appreciation of investment securities and ($8.9) million of
unrealized depreciation of investment securities. At December 31, 2018, the aggregate gross unrealized gain for federal income tax purposes was $5.2 million and the aggregate gross unrealized loss for federal income tax purposes was ($5.9)
million. The net unrealized loss for federal income tax purposes was ($0.7) million based on a tax cost of $35.4 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. (j) Non-Control/Non-Affiliate Investments are
investments that are neither Control Investments nor Affiliate Investments. (k) Affiliate Investments are defined by the Investment Company Act of 1940,
as amended (1940 Act), as those Non-Control investments in companies in which between 5% and 25% of the voting securities are owned by the Corporation. (l) Control Investments are defined by the 1940 Act as investments in companies in which more than 25% of the voting securities are owned by the Corporation or
where greater than 50% of the board representation is maintained. (m) Payment in kind (PIK) represents earned interest that is added to the cost basis of
the investment.  17




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##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS December 31, 2018 (Continued)  Investments in and Advances to Affiliates   Company

Type of Investment

December31, 2017Fair Value


GrossAdditions (1)


GrossReductions(2)


December31, 2018Fair Value


NetRealized(Losses)


Amount ofInterest/Dividend/FeeIncome (3)Control Investments:Advantage 24/7 LLC

45% Membership Interest.

$
99,500


$



$



$
99,500


$



$
60,000Total Control Investments

$
99,500


$



$



$
99,500


$



$
60,000Affiliate Investments:BeetNPath, LLC

1,119,024 Series A-2 Preferred Membership Units.

$
359,000


$



($
359,000
)

$



$



$
1,032,918 Series B Preferred Membership Units.


291,000







(29,723
)


261,277







$262,626.64 Convertible Secured Note at 8%






262,627







262,627







5,413Total BeetNPath


650,000



262,627



(388,723
)


523,904







5,413Carolina Skiff LLC

6.0825% Class A Common Membership interest.


1,750,000











1,750,000







251,913ClearView Social, Inc.

312,500 Series Seed Plus Preferred.


200,000











200,000







First Wave Technologies, Inc.

$500,000 senior term notes at 10%.


250,000







(250,000
)






(316,469
)


$280,000 junior term notes at 10%.






















Warrant for 41,619 capital securities.


















(22,000
)


670,443.2 Class A Common.






33,000







33,000







Total First Wave


250,000



33,000



(250,000
)


33,000



(338,469
)


Genicon, Inc.

1,586,902 Series B Preferred.


1,000,000











1,000,000







$3,250,000 Promissory Notes at 8%.


2,903,779



481,807







3,385,586







348,512Warrant for 250,000 Common.


120,000







(82,500
)


37,500







Total Genicon


4,023,779



481,807



(82,500
)


4,423,086







348,512GiveGab, Inc.

5,084,329 Series Seed Preferred.


424,314



191,907



(616,221
)










G-TEC Natural Gas Systems

16.639% Class A Membership Interest. 8% cumulative dividend.


100,000







(100,000
)






(1,125,673
)


Intrinsiq Materials, Inc.

4,161,747 Series A Preferred.


400,000







(400,000
)










Knoa Software, Inc.

973,533 Series A-1 Convertible Preferred.


750,000











750,000







1,876,922 Series B Preferred.


479,155











479,155







$48,466 Convertible Promissory Note at 8%.


48,466







(48,466
)










773Total Knoa


1,277,621







(48,466
)


1,229,155







773KnowledgeVision Systems, Inc.

200,000 Series A-1 Preferred.






















214,285 Series A-2 Preferred.


300,000







(300,000
)










129,033 Series A-3 Preferred.


165,001











165,001







$75,000 Subordinated Promissory Notes at 8%.


50,000



25,000







75,000







5,408$750,000 term note at 11%






750,000







750,000







60,241Warrant for 46,743 Series A-3.


35,000











35,000







Total KnowledgeVision


550,001



775,000



(300,000
)


1,025,001







65,649Mezmeriz, Inc.

1,554,565 Series Seed Preferred.


351,477











351,477







Microcision LLC

$1,500,000 Subordinated Promissory Note at12% (1% PIK) due December 31, 2024.


1,914,140



19,213







1,933,353







230,55915% Class A Common Membership Interest.






610,000







610,000







Total Microcision


1,914,140



629,213







2,543,353







230,559New Monarch Machine Tool, Inc.

22.84 Common.


22,841











22,841







29,409  18




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##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS December 31, 2018 (Continued)  Investments in and Advances to Affiliates   Company

Type of Investment

December 31,2017 FairValue


GrossAdditions(1)


GrossReductions(2)


December 31,2018 FairValue


NetRealized(Losses)


Amount ofInterest/Dividend/Fee Income(3)OnCore Golf

150,000 Series AA Preferred.






300,000







300,000







Technology, Inc.

$300,000 Subordinated Convertible Promissory notes at 6%.


300,000







(300,000
)










27,370Total OnCore


300,000



300,000



(300,000
)


300,000







27,370SciAps, Inc.

187,500 Series A Convertible Preferred.


700,000











700,000







274,299 Series A-1 Convertible Preferred.


250,000











250,000







117,371 Series B Convertible Preferred.


250,000











250,000







113,636 Series C Preferred.


175,000











175,000







369,698 Series C-1 Preferred.


399,274











399,274







147,059 Series D Convertible Preferred






250,000







250,000







Total SciAps


1,774,274



250,000







2,024,274







SOMS Technologies, LLC

5,959,490 Series B membership Interests.


528,348







(528,348
)










Teleservices Solutions Holdings, LLC

250,000 Class B Preferred Units.






















1,000,000 Class C Preferred Units.






















80,000 Class D Preferred Units.






















104,198 Class E Preferred Units.






















Total Teleservices






















Tilson Technology Management, Inc.

120,000 Series B Preferred.


600,000











600,000







20,00021,391 Series C Convertible Preferred.


200,000











200,000







70,176 Series D Preferred.


750,000



50,000







800,000







19,003$200,000 Subordinated Promissory Note at 8%.


200,000











200,000







16,000$800,000 Subordinated Promissory Note at 8%.


750,000



50,000







800,000







60,822Total Tilson


2,500,000



100,000







2,600,000







115,825Total Affiliate Investments

$
17,016,795


$
3,023,554


($
3,014,258
)

$
17,026,091


($
1,464,142
)

$
1,075,423Total Control and Affiliate Investments

$
17,116,295


$
3,023,554


($
3,014,258
)

$
17,125,591


($
1,464,142
)

$
1,135,423 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




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##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS December 31, 2018 (Continued)     Industry Classification

Percentage of TotalInvestments (at fair value)as of December 31, 2018Software


33.8
%Healthcare


32.4Manufacturing


19.2Professional Services


7.5Consumer Product


2.4Contact Center


2.0Oil and Gas


1.4Electronics


1.0Marketing


0.3Total Investments


100
%   20




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##### Table of Contents

Rand Capital Corporation and Subsidiary 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  Regulation, Regulation as a Business Development Company in our Annual Report on Form 10-K for the year ended December 31, 2018. Throughout our history, our principal business has been
to make venture capital investments in early or expansion stage companies, often in upstate New York and regions in close proximity. In accordance with our strategic growth plan, we look for companies with strong leadership that are bringing to
market new or unique products, technologies or services and have a high potential for growth. We invest in a mixture of debt and equity instruments. The debt securities typically have an equity component in the form of warrants or options to acquire
stock or the right to convert the debt securities into equity securities. We established our first small business investment company
(SBIC) in 2002, Rand Capital SBIC, Inc. (Rand SBIC), whereby we utilized funds borrowed from the Small Business Administration (SBA) combined with our capital to invest in our portfolio companies. We historically
made the majority of our venture capital investments through Rand SBIC. Rand SBICs predecessor was organized as a Delaware limited partnership and was converted into a New York corporation on December 31, 2008, at which time our
operations as a licensed SBIC were continued. Although Rand SBIC was operated as if it were a BDC, it was registered as an investment company under the 1940 Act. In 2012, the SEC granted an Order of Exemption for Rand with respect to the operations
of Rand SBIC, and then Rand SBIC filed an election to be regulated as a BDC under the 1940 Act. Rand SBICs board of directors is comprised of the directors of Rand, a majority of whom are not interested persons of Rand or Rand
SBIC. During 2017 we established a second SBIC subsidiary, Rand Capital SBIC II, L.P. (Rand SBIC II), and began making
investments through this SBIC subsidiary. During 2018, together with the SBA, we determined that the optimal structure was to revert back to investing in small businesses through our original SBIC, Rand SBIC, and the assets of Rand SBIC II were
transferred to Rand SBIC. We currently operate as an internally managed investment company whereby our officers and employees conduct the
business of the Corporation under the general supervision of our Board of Directors. We have not currently elected to qualify to be taxed as a regulated investment company as defined under Subchapter M of the Internal Revenue Code. See Recent
Developments for a discussion of our pending Transaction. In this Quarterly Report on Form 10-Q,
unless the context otherwise requires, we, the Corporation, us, and our refer to Rand Capital Corporation and Rand SBIC. 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.  21




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##### Table of Contents

Recent Developments As previously announced, on January 24, 2019, Rand entered into a Stock Purchase Agreement (the Stock Purchase Agreement) by
and among Rand, East Asset Management, LLC (East), and, solely for purposes of being bound by Sections 7.10 and 10.9(a) and (b) thereof, Rand Capital Management LLC (RCM). Pursuant to the terms of the Stock Purchase
Agreement, at the closing of the transaction (the Closing), East will purchase 8,333,333.33 shares (the Shares) of Rands common stock, par value $0.10 per share, at a purchase price of $3.00 per Share for an aggregate
purchase price of $25,000,000 (the Stock Purchase), which consideration is to be paid to Rand partially in cash and partially through the contribution of existing loans and other securities (the Contributed Assets). As a
condition to Closing, Rand will enter into a Shareholder Agreement with East (the Shareholder Agreement), which provides East with the right to designate two or three persons, depending upon the size of Rands board of directors
(the Board), but in no case a majority, for nomination for election to Rands board of directors. The Stock Purchase
Agreement also contemplates that, at the Closing, Rand will enter into an investment advisory and management agreement (the Advisory Agreement) with RCM pursuant to which RCM will serve as Rands external investment adviser.
Pursuant to the terms of the Advisory Agreement, Rand will pay RCM a base management fee and an incentive fee, provided certain performance measures are met. At the Closing, Rand will also enter into an administration agreement (the
Administration Agreement) with RCM pursuant to which RCM will serve as Rands administrator. The transactions
contemplated by the Stock Purchase Agreement, including the entry into the Advisory Agreement with RCM (which we refer to as the Transactions), required receipt of shareholder approval. Rands shareholders approved all proposals
related to the Transactions at a special meeting of shareholders that was held on May 16, 2019. In connection with the completion of
the Transactions, Rand intends to accelerate its shift to an investment strategy focused on higher yielding debt investments, to elect tax treatment as a regulated investment company (RIC), and, in connection with such RIC election,
intends to pay a special dividend to shareholders, and intends to adopt a new dividend policy going forward, that may include regular cash dividends to shareholders. Rands wholly-owned subsidiary, Rand Capital SBIC, Inc., received approval from the SBA in October 2019 for Rand to proceed with the
pending Transaction with East. Rand expects the Transaction to close during November 2019. Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation It is our opinion that the accompanying consolidated financial statements include all adjustments of
a normal recurring nature necessary for a fair presentation in accordance with United States generally accepted accounting principles (GAAP) of the consolidated financial position, results of operations, cash flows and statement of
changes in net assets for the interim periods presented. Certain information and note disclosures normally included in audited annual consolidated financial statements prepared in accordance with GAAP have been omitted; however, we believe that the
disclosures made are adequate to make the information presented herein not misleading. Our interim results for the nine months ended September 30, 2019 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, 2018. 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  10-Q
Quarterly Report on Form 10-Q for the quarters ended June 30, 2019
and March 31, 2019  22




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##### Table of Contents

Principles of Consolidation - The consolidated financial statements include
the accounts of Rand and its wholly-owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation. Fair Value of Financial Instruments  The carrying amounts reported in the consolidated statement of financial position of
cash, interest receivable, accounts payable and accrued expenses approximate fair value because of the immediate or short-term nature of these financial instruments. Fair Value of SBA Debentures -In September 2019, the SBIC Funding Corporation completed a pooling of SBA debentures that have a
coupon rate of 2.283%, excluding a mandatory SBA annual charge estimated to be 0.094%, resulting in a total estimated fixed rate for ten years of 2.377%. The carrying value of Rands SBA debentures is a reasonable estimate of fair value because
their stated interest rates approximate current interest rates that are available for debt with similar terms. Investment
Classification -In accordance with the provisions of the 1940 Act, the Corporation classifies its investments by level of control. Under the 1940 Act, Control Investments are investments in companies that the Corporation is
deemed to Control because it owns more than 25% of the voting securities of the company or has greater than 50% representation on the companys board. Affiliate Investments are companies in which the Corporation owns
between 5% and 25% of the voting securities. Non-Control/Non-Affiliate Investments are those companies that are neither Control Investments nor Affiliate
Investments. Investments - Investments are valued at fair value as determined in good faith by the management of the
Corporation and approved by the Board of Directors. The Corporation invests in loan instruments, debt instruments, and equity instruments. There is no single standard for determining fair value in good faith. As a result, determining fair value
requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistent valuation process. The Corporation analyzes and values each investment quarterly, and records unrealized depreciation
for an investment that it believes has become impaired, including where collection of a loan or debt security or realization of the recorded value of an equity security is doubtful. Conversely, the Corporation will record unrealized appreciation if
it believes that an underlying portfolio company has appreciated in value and, therefore, its equity securities have also appreciated in value. These estimated fair values may differ from the values that would have been used had a ready market for
the investments existed and these differences could be material if the Corporations assumptions and judgments differ from results of actual liquidation events. Qualifying Assets- All of the Corporations investments were made in privately held small business enterprises, that were
not investment companies, were principally based in the United States, and represent qualifying assets as defined by Section 55(a) of the 1940 Act. Cash and Cash Equivalents - Temporary cash investments having a maturity of less than a year when purchased are considered to be
cash equivalents. Revenue Recognition - Interest Income - Interest income is recognized on the accrual basis
except where the investment is in default or otherwise presumed to be in doubt. In such cases, interest is recognized at the time of receipt. A reserve for possible losses on interest receivable is maintained when appropriate. Rand SBICs interest accrual is also regulated by the SBAs Accounting Standards and Financial Reporting Requirements for
Small Business Investment Companies. Under these rules, interest income cannot be recognized if collection is doubtful, and a 100% reserve must be established. The collection of interest is presumed to be in doubt when there is substantial
doubt about a portfolio companys ability to continue as a going concern or a loan is in default for more than 120 days. Management also uses other qualitative and quantitative measures to determine the value of a portfolio investment and the
collectability of any accrued interest.  23




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##### Table of Contents

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. 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
$48,887 and $28,266 for the nine months ended September 30, 2019 and 2018, respectively. During the nine months ended September 30, 2019, the Corporation recognized a one-time fee of $225,000 in
conjunction with the repayment of the eHealth loan instrument. During the nine months ended September 30, 2018 the Corporation recorded a one-time debt modification fee of approximately $142,000 in
connection with the Empire Genomics debt modification. The board fees were $500 and $2,000 for the nine months ended September 30, 2019 and 2018, respectively. Realized Gain or Loss and Unrealized Appreciation or Depreciation of Investments -Amounts reported as realized gains and losses
are measured by the difference between the proceeds from the sale or exchange and the cost basis of the investment without regard to unrealized gains or losses recorded in prior periods. The cost of securities that have, in managements
judgment, become worthless are written off and reported as realized losses when appropriate. Unrealized appreciation or depreciation reflects the difference between the fair value of the investments and the cost basis of the investments. Original Issue Discount - Investments may include original issue discount or OID income. This occurs when the
Corporation purchases a warrant and a note from a portfolio company simultaneously, which requires an allocation of a portion of the purchase price to the warrant and reduces the note or debt instrument by an equal amount in the form of a note
discount or OID. The note is reported net of the OID and the OID is accreted into interest income over the life of the loan. The Corporation recognized $30,573 and $29,462 in OID income for the nine months ended September 30, 2019 and 2018,
respectively. OID income is estimated to be approximately $10,000 for the remainder of 2019. 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 $27,614 and $20,550 for
the nine months ended September 30, 2019 and 2018, respectively. Amortization expense on currently outstanding debentures for the next five years is estimated to average approximately $30,000 per year.  24




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##### Table of Contents

SBA Debentures -The Corporation had $11,000,000 and $8,750,000 in outstanding
SBA debentures at September 30, 2019 and December 31, 2018, respectively, with a weighted average interest rate, including the SBA annual fee, of 3.45% at September 30, 2019. 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
nine months ended September 30, 2019 and 2018 were $644,821 and $17,006, respectively. Interest paid during each of the nine months ended September 30, 2019 and 2018 was $339,605 and $282,875, respectively. The Corporation converted
$344,222 and $279,319 of interest receivable into investments during the nine months ended September 30, 2019 and 2018, respectively. In addition, a debt modification fee of $142,346 was capitalized during the nine months ended
September 30, 2018. Accounting Estimates - The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates. Stockholders Equity (Net Assets) -At
September 30, 2019 and December 31, 2018, there were 500,000 shares of $10.00 par value preferred stock authorized and unissued. On October 24, 2019, the Board of Directors extended the repurchase authorization for up to an aggregate of 1,541,056 shares of the
Corporations outstanding common stock on the open market through October 25, 2020 at prices no greater than the then current net asset value. No shares were repurchased during the nine months ended September 30, 2019. At
September 30, 2019 and 2018, respectively, the total treasury shares held was 541,046 shares with a total cost of $1,469,105. Profit Sharing and Stock Option Plan-In 2001, the shareholders of the Corporation authorized the establishment of an
Employee Stock Option Plan (the Option Plan), that provides for the award of stock options to purchase up to 200,000 common shares to eligible employees. In 2002, the Corporation placed the Option Plan on inactive status as it developed
a new profit sharing plan for the Corporations employees in connection with the formation of its SBIC subsidiary. As of September 30, 2019, no stock options had been awarded under the Option Plan. Because Section 57(n) of the 1940
Act prohibits maintenance of a profit sharing plan for the officers and employees of a BDC where any option, warrant or right is outstanding under an executive compensation plan, no stock options will be granted under the Option Plan while any
profit sharing plan is in effect with respect to the Corporation. In 2002, the Corporation established a Profit Sharing Plan (the
Plan) for its executive officers in accordance with Section 57(n) of the 1940 Act. Under the Plan, the Corporation will pay its executive officers aggregate profit sharing payments equal to 12% of the net realized capital gains of
its SBIC subsidiary, net of all realized capital losses and unrealized depreciation of the SBIC subsidiary, for the fiscal year, computed in accordance with the Plan and the Corporations interpretation of the Plan. Any profit sharing paid or
accrued cannot exceed 20% of the Corporations net income, as defined in the Plan. For purposes of the 20% profit sharing test, the Corporation interprets net income to be the total of the Corporations net investment gain (loss) and its
net realized gain (loss) on investments, prior to inclusion of the estimated profit sharing obligation. The profit sharing payments are split equally between the Corporations two executive officers, each of whom is fully vested in the Plan.  25




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##### Table of Contents

The Corporation did not record any expense pursuant to the Plan for the nine months ended
September 30, 2019 and 2018. Income Taxes -The Corporation reviews the tax positions it has taken to determine if
they meet a more likely than not threshold for the benefit of the tax position to be recognized in the consolidated financial statements. A tax position that fails to meet the more likely than not recognition threshold will result in
either a reduction of a current or deferred tax asset or receivable, or the recording of a current or deferred tax liability. There were no uncertain tax positions recorded at September 30, 2019 or December 31, 2018. It is the Corporations policy to include interest and penalties related to income tax liabilities in income tax expense. There were no
amounts recognized for interest or penalties for the nine months ended September 30, 2019 or 2018. Concentration of Credit and
Market Risk  The Corporations financial instruments potentially subject it to concentrations of credit risk. Cash is invested with banks in amounts which, at times, exceed insurable limits. Management does not anticipate non-performance by such banks. The following are the concentrations of the top five portfolio company
values to the fair value of the Corporations total investment portfolio:  As of September 30,2019Tilson Technology Management, Inc. (Tilson)


15
%ACV Auctions, Inc. (ACV)


10
%Genicon, Inc. (Genicon)


10
%Microcision, LLC. (Microcision)


10
%Outmatch Holdings, LLC (Outmatch)


8
%  As of December 31, 2018Genicon, Inc. (Genicon)


13
%eHealth Global Technologies, Inc. (eHealth)


10
%ACV Auctions, Inc. (ACV)


8
%Tilson Technology Management, Inc. (Tilson)


7
%Microcision, LLC. (Microcision)


7
% 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.  26




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##### Table of Contents

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

Loan and debt securities are valued at cost when it is representative of the fair value of the investment
or sufficient assets or liquidation proceeds are expected to exist from a sale of a portfolio company at its estimated fair value. However, they may be valued at an amount other than cost given the carrying interest rate versus the related inherent
portfolio risk of the investment. A loan or debt instrument may be reduced in value if it is judged to be of poor quality, collection is in doubt or insufficient liquidation proceeds exist.  

Equity securities may be valued using the asset approach, market approach or
income approach. The asset approach involves estimating the liquidation value of the portfolio companys assets. To the extent the value exceeds the remaining principal amount of the debt or loan securities of the portfolio company,
the fair value of such securities is generally estimated to be their cost. However, where value is less than the remaining principal amount of the loan and debt securities, the Corporation may discount the value of an equity security. The market
approach uses observable prices and other relevant information generated by similar market transactions. It may include the use of market multiples derived from a set of comparables to assist in pricing the investment. Additionally, the Corporation
adjusts valuations if a subsequent significant equity financing has occurred that includes a meaningful portion of the financing by a sophisticated, unrelated new investor. The income approach employs a cash flow and discounting methodology to value
an investment. ASC 820 classifies the inputs used to measure fair value into the following hierarchy: Level 1: Quoted prices in active markets for identical assets or liabilities, used in the Corporations valuation at the measurement
date. Under the valuation policy, the Corporation values unrestricted publicly traded companies, categorized as Level 1 investments, at the average closing 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 no
Level 1 or 2 investments as of September 30, 2019 or December 31, 2018. 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;  27




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##### Table of Contents



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

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

Qualitative assessment of key management;  

Contractual rights, obligations or restrictions associated with the investment; and  

Other factors deemed relevant by the Corporations management to assess valuation. The valuation may be reduced if a portfolio companys performance and potential have deteriorated significantly. If the factors that led
to a reduction in valuation are overcome, the valuation may be readjusted. Equity Securities Equity securities may include preferred stock, common stock, warrants and limited liability company membership interests. The significant unobservable inputs used in the fair value measurement of the Corporations equity investments are earnings before
interest, tax and depreciation and amortization (EBITDA) and revenue multiples, where applicable, the financial and operational performance of the business, and the debt and senior equity preferences that may exist in a deemed liquidation event.
Standard industry multiples may be used when available; however, the Corporations portfolio companies are typically small and in early stages of development and these industry standards may be adjusted to more closely match the specific
financial and operational performance of the portfolio company. Due to the nature of certain investments, fair value measurements may be based on other criteria, which may include third party appraisals. Significant changes in any of these
unobservable inputs may result in a significantly higher or lower fair value estimate. Another key factor used in valuing equity
investments is a significant recent arms-length equity transaction entered into by the portfolio company with a sophisticated, non-strategic, unrelated, new investor. The terms of these equity transactions may
not be identical to the equity transactions between the portfolio company and the Corporation, and the impact of the difference in transaction terms on the market value of the portfolio company may be difficult or impossible to quantify. When appropriate the Black-Scholes pricing model is used to estimate the fair value of warrants for accounting purposes. This model requires
the use of highly subjective inputs including expected volatility and expected life, in addition to variables for the valuation of minority equity positions in small private and early stage companies. Significant changes in any of these unobservable
inputs may result in a significantly higher or lower fair value estimate. For recent investments 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.  28




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##### Table of Contents

The following table provides a summary of the significant unobservable inputs used to
determine the fair value of the Corporations Level 3 portfolio investments as of September 30, 2019:  Investment Type

Market ApproachEBITDA Multiple


MarketApproachLiquidationSeniority


Market ApproachRevenue Multiple


Market ApproachTransaction Pricing


Asset ValueLiquidationSeniority


TotalsNon-Control/Non-Affiliate
Equity

$



$
1,702,757


$
2,645,496


$
3,694,470


$



$
8,042,723Non-Control/Non-Affiliate Loan and
Debt


500,000



1,650,050







1,025,777







3,175,827Total
Non-Control/Non-Affiliate

$
500,000


$
3,352,807


$
2,645,496


$
4,720,247






$
11,218,550Affiliate Equity

$



$
22,841


$
2,868,429


$
7,004,489


$



$
9,895,759Affiliate Loan and Debt






975,000



2,750,000







1,947,889



5,672,889Total Affiliate

$



$
997,841


$
5,518,429


$
7,004,489


$
1,947,889


$
15,568,648Total Level 3 Investments

$
500,000


$
4,350,648


$
8,263,925


$
11,724,736


$
1,947,889


$
26,787,198Range


6.0X



1X



1X-4X



Not Applicable



Not ApplicableUnobservable Input


EBITDA Multiple



Asset Value



Revenue Multiple



Transaction Price



Asset ValueWeighted Average


6.0X



1X



2.7X



Not Applicable



Not Applicable The following table provides a summary of the components of Level 1, 2 and 3 Assets Measured at Fair
Value at September 30, 2019:  Fair Value Measurements at Reported Date UsingDescription

September 30,2019


Quoted Prices inActive Markets forIdentical Assets(Level 1)


SignificantObservable Inputs(Level 2)


Other SignificantUnobservableInputs(Level 3)Loan investments

$
2,145,692


$



$



$
2,145,692Debt investments


6,703,024











6,703,024Equity investments


17,938,482











17,938,482Total

$
26,787,198


$



$



$
26,787,198 The following table provides a summary of the components of Level 1, 2 and 3 Assets Measured at Fair
Value at December 31, 2018:  Fair Value Measurements at Reported Date UsingDescription

December 31,2018


Quoted Prices inActive Markets forIdentical Assets(Level 1)


SignificantObservable Inputs(Level 2)


Other SignificantUnobservableInputs(Level 3)Loan investments

$
4,935,777


$



$



$
4,935,777Debt investments


9,397,979











9,397,979Equity investments


20,330,048











20,330,048Total

$
34,666,804


$



$



$
34,666,804  29




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##### Table of Contents

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

LoanInvestments


DebtInvestments


EquityInvestments


TotalEnding Balance, December 31, 2018, of Level 3 Assets

$
4,935,777


$
9,397,979


$
20,333,048


$
34,666,804Realized gain included in net change in net assets from operations:Advantage 24/7 LLC (Advantage 24/7)










(40,500
)


(40,500
)Gemcor II LLC (Gemcor)










39,893



39,893SOMS Technologies, LLC (SOMS)










(472,632
)


(472,632
)Total Realized Gains and Losses










(392,239
)


(392,239
)Unrealized Gains and Losses included in net change in net assets from
operations:BeetNPath, LLC (Beetnpath)






(262,627
)


(261,277
)


(523,904
)Empire Genomics, LLC (Empire Genomics)






(249,661
)






(249,661
)Genicon, Inc. (Genicon)






(1,162,547
)


(1,037,500
)


(2,200,047
)KnowledgeVision Systems, Inc. (Knowledge Vision)










(200,001
)


(200,001
)Mercantile Adjustment Bureau, LLC (Mercantile)






(200,000
)






(200,000
)Rheonix, Inc. (Rheonix)










(1,500,000
)


(1,500,000
)SciAps, Inc. (Sciaps)










(585,000
)


(585,000
)SocialFlow, Inc. (Socialflow)










(1,071,300
)


(1,071,300
)SOMS










472,632



472,632Tilson Technology Management, Inc. (Tilson)










1,860,000



1,860,000Total Unrealized Gains and Losses






(1,874,835
)


(2,322,446
)


(4,197,281
)Purchases of Securities/Changes to
Securities/Non-cash conversions:Advantage 24/7


140,000











140,000Empire Genomics






75,481







75,481Genicon






526,961







526,961GoNoodle, Inc. (GoNoodle)






7,817







7,817Knowledge Vision


150,000











150,000Microcision LLC (Microcision)






14,536







14,536Tilson










500,012



500,012Total Purchases of Securities/Changes to
Securities/Non-cash conversions


290,000



624,795



500,012



1,414,807Repayments and Sale of
Securities:Advantage 24/7


(25,000
)






(140,000
)


(165,000
)eHealth Global Technologies, Inc. (eHealth)


(3,500,000
)










(3,500,000
)Gemcor










(39,893
)


(39,893
)Tilson






(1,000,000
)






(1,000,000
)Total Repayments and Sale of Securities


(3,525,000
)


(1,000,000
)


(179,893
)


(4,704,893
)Transfers within Level 3


444,915



(444,915
)






Ending Balance, September 30, 2019, of Level 3 Assets

$
2,145,692


$
6,703,024


$
17,938,482


$
26,787,198Change in unrealized depreciation on investments for the period included in changes in net
assets













($
4,197,281
)Net realized loss on investments for the period included in changes in net assets













($
392,239
)  30




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##### Table of Contents

The following table provides a summary of changes in Assets Measured at Fair Value Using
Significant Unobservable Inputs (Level 3) for the nine months ended September 30, 2018:  Fair Value Measurements Using SignificantUnobservable Inputs (Level 3)Venture Capital InvestmentsDescription

LoanInvestments


DebtInvestments


EquityInvestments


TotalEnding Balance, December 31, 2017, of Level 3 Assets

$
3,550,000


$
10,096,244


$
18,637,818


$
32,284,062Realized loss included in net change in net assets from operations:Intrinsiq Material, Inc. (Intrinsiq)










(1,125,673
)


(1,125,673
)Total Realized Losses










(1,125,673
)


(1,125,673
)Unrealized Losses included in net change in net assets from operations:Empire Genomics, LLC (Empire Genomics)






(901,360
)






(901,360
)First Wave Products Group, LLC (First Wave)






(250,000
)






(250,000
)GiveGab, Inc. (Givegab)










191,907



191,907Intrinsiq










725,673



725,673SOMS Technologies, LLC (SOMS)










(498,348
)


(498,348
)Total Unrealized Losses






(1,151,360
)


419,232



(732,128
)Purchases of Securities/Changes to
Securities/Non-cash conversions:BeetNPath, LLC (Beetnpath)






140,000







140,000Centivo Corporation (Centivo)










201,342



201,342Empire Genomics






274,106







274,106Genicon, Inc. (Genicon)






153,548







153,548GoNoodle, Inc. (GoNoodle)






7,739







7,739KnowledgeVision Systems, Inc. (KnowledgeVision)


775,000











775,000Microcision LLC (Microcision)






14,392







14,392SciAps, Inc. (Sciaps)










250,000



250,000Total Purchases of Securities/Changes to
Securities/Non-cash conversions


775,000



589,785



451,342



1,816,127Repayments and Sale of Securities:Empire Genomics






(21,665
)






(21,665
)Knoa Software, Inc. (Knoa)






(48,466
)






(48,466
)Total Repayments and Sale of Securities






(70,131
)






(70,131
)Transfers within Level 3






(100,000
)


100,000



Ending Balance, September 30, 2018, of Level 3 Assets

$
4,325,000


$
9,364,538


$
18,482,719


$
32,172,257Change in unrealized depreciation on investments for the period included in changes in net
assets













($
732,128
)Net realized loss on investments for the period included in changes in net assets













($
1,125,673
)  31




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##### Table of Contents

Note 4. OTHER ASSETS At September 30, 2019 and December 31, 2018, other assets was comprised of the following:  September 30,2019


December 31,2018Prepaid expenses

$
311,940


$
Operating receivables


5,660



11,428Equipment (net)


68



262Total other assets

$
317,668


$
11,690 Included in other assets at September 30, 2019 is $266,000 in stock issuance costs attributable to the
Transactions. These expenses were deferred and will be offset against the equity capital raise when the Transactions close, or expensed if the Transactions are not completed. Note 5. COMMITMENTS AND CONTINGENCIES The Corporation had no commitments at September 30, 2019. In addition, the Corporation analyzed the new Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 842
standard, Leases, and deemed the effect on the Corporations consolidated financial statements to be immaterial. Note 6. SBA DEBENTURES Pursuant to FASB Accounting Standard Update (ASU) 2015-03, the debt origination costs associated with
the SBA debt obligations are presented as a direct deduction of the related debt obligation.  September 30, 2019


December 31, 2018Debentures guaranteed by the SBA

$
11,000,000


$
8,750,000Less unamortized issue costs


(222,507
)


(195,557
)Debentures guaranteed by the SBA, net

$
10,777,493


$
8,554,443 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 and nine months ended September 30, 2019 and 2018, respectively:  CommonStock


Capital inexcess ofpar value


AccumulatedNetInvestmentLoss


UndistributedNet RealizedGain onInvestments


NetUnrealizedDepreciationonInvestments


TreasuryStock, atcost


TotalStockholdersEquity (NetAssets)July 1, 2019

$
686,304


$
10,581,789


($
1,786,085
)

$
25,920,065


($
3,300,915
)

($
1,469,105
)

$
30,632,053Net investment loss










(65,549
)














(65,549
)Net realized loss on sales and dispositions of investments


























Net change in unrealized depreciation on investments


















(2,813,339
)






(2,813,339
)September 30, 2019

$
686,304


$
10,581,789


($
1,851,634
)

$
25,920,065


($
6,114,254
)

($
1,469,105
)

$
27,753,165  32




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##### Table of Contents

CommonStock


Capital inexcess ofpar value


AccumulatedNetInvestmentLoss


UndistributedNet RealizedGain onInvestments


NetUnrealizedDepreciationonInvestments


TreasuryStock, atcost


TotalStockholdersEquity (NetAssets)July 1, 2018

$
686,304


$
10,581,789


($
1,808,243
)

$
27,215,738


($
4,439,505
)

($
1,469,105
)

$
30,766,978Net investment gain










164,499















164,499Net realized loss on sales and dispositions of investments














(718,934
)










(718,934
)Net change in unrealized depreciation on investments


















375,133







375,133September 30, 2018

$
686,304


$
10,581,789


($
1,643,744
)

$
26,496,804


($
4,064,372
)

($
1,469,105
)

$
30,587,676  CommonStock


Capital inexcess ofpar value


AccumulatedNetInvestmentLoss


UndistributedNet RealizedGain onInvestments


Net UnrealizedDepreciationonInvestments


TreasuryStock, atcost


TotalStockholdersEquity (NetAssets)January 1, 2019

$
686,304


$
10,581,789


($
1,665,552
)

$
26,221,443


($
2,830,692
)

($
1,469,105
)

$
31,524,187Net investment loss










(186,082
)














(186,082
)Net realized loss on sales and dispositions of investments














(301,378
)










(301,378
)Net change in unrealized depreciation on investments


















(3,283,562
)






(3,283,562
)September 30, 2019

$
686,304


$
10,581,789


($
1,851,634
)

$
25,920,065


($
6,114,254
)

($
1,469,105
)

$
27,753,165  CommonStock


Capital inexcess ofpar value


AccumulatedNetInvestmentLoss


UndistributedNet RealizedGain onInvestments


NetUnrealizedDepreciationonInvestments


TreasuryStock, atcost


TotalStockholdersEquity (NetAssets)January 1, 2018

$
686,304


$
10,581,789


($
1,597,146
)

$
27,215,738


($
3,498,895
)

($
1,469,105
)

$
31,918,685Net investment loss










(46,598
)














(46,598
)Net realized loss on sales and dispositions of investments














(718,934
)










(718,934
)Net change in unrealized depreciation on investments


















(565,477
)






(565,477
)September 30, 2018

$
686,304


$
10,581,789


($
1,643,744
)

$
26,496,804


($
4,064,372
)

($
1,469,105
)

$
30,587,676  33




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##### Table of Contents

Note 8. FINANCIAL HIGHLIGHTS The following schedule provides the financial highlights, calculated based on weighted average shares outstanding, for the nine months ended
September 30, 2019 and 2018:  Nine months endedSeptember 30, 2019(Unaudited)


Nine months endedSeptember 30, 2018(Unaudited)Income from investment operations (1):Investment income

$
0.27


$
0.23Operating expenses


0.32



0.24Investment loss before income taxes


(0.05
)


(0.01
)Income tax benefit


(0.02
)


0.00Net investment loss


(0.03
)


(0.01
)Net realized and unrealized loss on investments


(0.57
)


(0.20
)Decrease in net asset value


(0.60
)


(0.21
)Net asset value, beginning of period


4.99



5.05Net asset value, end of period

$
4.39


$
4.84Per share market price, end of period

$
2.50


$
2.40Total return based on market value


0.0
%


(20.5
%)Total return based on net asset value


(12.0
%)


(4.2
%)Supplemental data:Ratio of operating expenses before income taxes to average net assets


6.9
%


4.8
%Ratio of operating expenses including income taxes to average net assets


3.1
%


2.9
%Ratio of net investment loss to average net assets


(0.6
%)


(0.2
%)Portfolio turnover


3.4
%


4.2
%Net assets, end of period

$
27,753,165


$
30,587,676Weighted shares outstanding, end of period


6,321,988



6,321,988  (1)
Per share data are based on weighted average shares outstanding and the results are rounded to the nearest
cent. The Corporations interim period results could fluctuate as a result of a number of factors; therefore
results for any interim period should not be relied upon as being indicative of performance for the full year or in future periods.  34




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##### Table of Contents

Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations You should read the following discussion and analysis of our financial condition and results of operations
in conjunction with the consolidated financial statements and related notes included elsewhere in this report. Historical results and percentage relationships among any amounts in the consolidated financial statements are not necessarily indicative
of trends in operating results for any future periods. FORWARD LOOKING STATEMENTS Statements included in this Managements Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this
report that do not relate to present or historical conditions are forward-looking statements within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and in Section 21E of the Securities
Exchange Act of 1934, as amended. Additional oral or written forward-looking statements may be made by us from time to time, and forward-looking statements may be included in documents that are filed with the Securities and Exchange Commission.
Forward-looking statements involve risks and uncertainties that could cause our results or outcomes to differ materially from those expressed in the forward-looking statements. Forward-looking statements may include, without limitation, statements
relating to our plans, strategies, objectives, expectations and intentions and are intended to be made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as believes,
forecasts, intends, possible, expects, estimates, anticipates, or plans and similar expressions are intended to identify forward-looking statements. Among the
important factors on which such statements are based are assumptions concerning the state of the United States economy and the local markets in which our portfolio companies operate, the state of the securities markets in which the securities of our
portfolio companies could be traded, liquidity within the United States financial markets, and inflation. Forward-looking statements are also subject to the risks and uncertainties described under the caption Risk Factors contained in
Part II, Item 1A of this report and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2018. 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 currently an internally
managed investment company that lends to and invests in small companies, often concurrently with other investors. 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. 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. Rand SBIC was approved for an additional $6.0 million in new SBA leverage
commitments during 2018 and has drawn down $3.0 million of that leverage as of September 30, 2019. In January 2019, we entered into a stock
purchase agreement to sell approximately 8.3 million shares of our common stock to East Asset Management, LLC (East) for $25 million in cash and portfolio assets, which will be income-producing instruments. Additionally, upon
closing of the pending Transactions (the Transactions), a new entity, Rand Capital Management LLC (RCM) will be retained by Rand to be its investment advisor as an external management company. RCM will have the same
management team that is currently at Rand. Rands shareholders approved all proposals related to the Transactions at a special meeting of shareholders that was held on May 16, 2019. Rands wholly-owned subsidiary, Rand Capital SBIC,
Inc., received approval from the SBA for Rand to proceed with the pending Transaction with East. Rand expects the Transaction to close during November 2019.  35




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##### Table of Contents

Following the closing of the above-described Transactions and contingent upon meeting
certain tax-related conditions, we intend to elect to become a regulated investment company (RIC) for U.S. federal tax purposes. This will enable the pass through of capital gains and investment
income to shareholders without payment of corporate-level U.S. federal income tax by Rand. Outlook At the end of the third quarter of 2019, we had $9.3 million in cash and cash equivalents available for future investments and expenses,
an increase of $5.3 million as compared to the end of 2018. The increase was primarily due to $4.5 million in loans repaid by two portfolio companies and $2.25 million of additional SBA leverage drawn down during the nine months ended
September 30, 2019. We believe the combination of cash on hand, proceeds from portfolio exits, SBA leverage, and prospective
investment income provide sufficient capital for us to continue to add new investments to our portfolio while reinvesting in existing portfolio companies that demonstrate continued growth potential. Additionally, upon the anticipated closing of the
Transactions described above, we will have additional investments in our portfolio and additional cash to invest. 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 the anticipated receipt of cash and portfolio assets from East, as well as the establishment of RCM as
an external management company, will broaden our potential pipeline of investment opportunities in order to build our portfolio and grow further. Strategically, we expect to advance our efforts to increase our income-producing investments that can
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. At period end, we had
authorization to repurchase an additional 1,000,000 shares of our common stock. 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, 2018 under Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations.  36




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##### Table of Contents

Financial Condition  Overview:

September 30, 2019


December 31, 2018


(Decrease)Increase


% (Decrease)IncreaseTotal assets

$
38,661,339


$
40,521,724


($
1,860,385
)


(4.6
%)Total liabilities


10,908,174



8,997,537



1,910,637



21.2
%Net assets

$
27,753,165


$
31,524,187


($
3,771,022
)


(12.0
%) Net asset value per share (NAV) was $4.39 at September 30, 2019 and $4.99 at December 31, 2018. Our gross outstanding SBA debentures at September 30, 2019 were $11,000,000 and will mature from 2022 through 2029. Cash and cash
equivalents approximated 33% of net assets at September 30, 2019, as compared to 13% at December 31, 2018. Composition of Our Investment
Portfolio Our financial condition is dependent on the success of our portfolio holdings. We have invested substantially all of our
assets in small to medium-sized companies. The following summarizes our investment portfolio at the dates indicated.  September 30, 2019


December 31, 2018


(Decrease)


%DecreaseInvestments, at cost

$
34,609,818


$
38,292,143


($
3,682,325
)


(9.6
%)Unrealized depreciation, net


(7,822,620
)


(3,625,339
)


(4,197,281
)


115.8
%Investments at fair value

$
26,787,198


$
34,666,804


($
7,879,606
)


(22.7
%) Our total investments at fair value, as estimated by management and approved by our Board of Directors,
approximated 97% of net assets at September 30, 2019 versus 110% of net assets at December 31, 2018. The change in investments
during the nine months ended September 30, 2019, at cost, is comprised of the following:  CostIncrease (Decrease)New investments:Tilson Technology Management, Inc. (Tilson)

$
500,012Genicon Inc. (Genicon)


250,000KnowledgeVision Systems, Inc. (Knowledgevision)


150,000Advantage 24/7 LLC (Advantage 24/7)


140,000Total of new investments


1,040,012Other changes to investments:Genicon interest conversion and OID amortization


276,961Empire Genomics, LLC (Empire Genomics) capitalized fee income and interest conversion


75,481Microcision LLC (Microcision) interest conversion


14,536GoNoodle, Inc. (GoNoodle) interest conversion


7,817Total of other changes to investments


374,795Investments repaid, sold, liquidated or converted:eHealth Global Technologies, Inc. (eHealth) loan repayment


(3,500,000
)Tilson loan repayment


(1,000,000
)SOMS Technologies, LLC (SOMS) realized loss


(472,632
)Advantage 24/7 investment conversion and loan repayment


(124,500
)Total of investments repaid, sold, liquidated or converted


(5,097,132
)Net change in investments, at cost

($
3,682,325
)  37




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##### Table of Contents

Results of Operations Our principal investment objective is to achieve long-term capital appreciation on our equity investments while maintaining a current cash flow
from our debt instruments and pass-through equity instruments to fund expenses. Therefore, we invest in a variety of financial instruments to provide a current return on a portion of the investment portfolio. Comparison of the three months ended September 30, 2019 to the three months ended September 30, 2018 Investment Income  Three monthsendedSeptember 30,2019


Three monthsendedSeptember 30,2018


(Decrease)Increase


%(Decrease)IncreaseInterest from portfolio companies

$
328,103


$
450,289


($
122,186
)


(27.1
%)Interest from other investments


36,797



7,872



28,925



367.4
%Dividend and other investment income


65,996



48,856



17,140



35.1
%Fee income


6,459



155,285



(148,826
)


(95.8
%)Total investment income

$
437,355


$
662,302


($
224,947
)


(34.0
%) The total investment income that was received on a current basis for the three months ended September 30,
2019 and 2018 was received from ten portfolio companies. Interest from portfolio companies  Interest from portfolio companies decreased
during the three months ended September 30, 2019 versus the same period in 2018 due to the fact that the debt instrument from eHealth Global Technologies, Inc. (eHealth) was repaid during the first quarter of 2019. In addition, during the third
quarter of 2018, loans to Empire Genomics were modified and resulted in the recording of interest that had previously not been accrued of approximately $91,000. 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 primarily due to higher interest rates and higher average cash
balance during the three months ended September 30, 2019 versus the same period in 2018. 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 monthsendedSeptember 30, 2019


Three monthsendedSeptember 30, 2018Carolina Skiff LLC (Carolina Skiff)

$
52,871


$
39,169Tilson Technology Management, Inc. (Tilson)


13,125



9,687Total dividend and other investment income

$
65,996


$
48,856 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 Consolidated Statement of Financial Position in the line item Deferred revenue.  38




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##### Table of Contents

The income associated with the amortization of financing fees was $6,459 and $12,939 for the
three months ended September 30, 2019 and 2018, respectively. In addition, we recorded a one-time debt modification fee of approximately $142,000 during the three month ended September 30, 2018. We
charged the fee to Empire Genomics and the fee was capitalized into the Empire Genomics loan balances as part of the debt modification. Expenses  Three months endedSeptember 30, 2019


Three months endedSeptember 30, 2018


Increase


%IncreaseTotal expenses

$
530,539


$
447,800


$
82,739



18.5
% Expenses predominately consist of interest expense on outstanding SBA borrowings, compensation expense, and
general and administrative expenses, including stockholders and office operating expenses and professional fees. The increase in expenses
during the three months ended September 30, 2019 versus the same period in 2018 was primarily caused by a 79%, or $37,973, increase in stockholders expense and a 21%, or $16,623, increase in interest expense. We incurred additional stockholders
expense related to the aforementioned Transactions with East Asset Management and the regulatory procedures that are required to effect such Transactions. Our interest expense increased due to higher outstanding SBA debt. Net Realized Loss on Investments  Three months endedSeptember 30, 2019


Three months endedSeptember 30, 2018


ChangeRealized loss on investments before income taxes

$



($
1,125,673
)

($
1,125,673
) During the three months ended September 30, 2018, we recognized a loss on our investment in Intrinsiq
Material, Inc. (Intrinsiq) when the company was sold and we did not receive any proceeds. There were no realized gains or losses during the three months ended September 30, 2019. Change in Unrealized Depreciation of Investments  Three months endedSeptember 30, 2019


Three months endedSeptember 30, 2018


ChangeChange in unrealized depreciation of investments before income taxes

($
3,597,129
)

$
475,802


($
4,072,931
) The change in unrealized depreciation, before income taxes, for the three months ended September 30, 2019
was comprised of the following:  Three months endedSeptember 30, 2019Rheonix, Inc. (Rheonix)

($
1,500,000
)Genicon, Inc. (Genicon)


(1,447,467
)Empire Genomics, LLC (Empire Genomics)


(249,661
)KnowledgeVision Systems, Inc. (KnowledgeVision)


(200,001
)SciAps, Inc. (Sciaps)


(200,000
)Total change in net unrealized depreciation of investments, before income taxes

($
3,597,129
)  39




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##### Table of Contents

The valuations of our investments in Empire Genomics, Genicon, KnowledgeVision, Rheonix and
Sciaps were decreased after we reviewed each of the portfolio companys operations, commercial progress against their business plan, and past and projected financial condition and determined that a valuation adjustment was necessary. Some of
these decreases in value may be recoverable following the completion of their respective future financings. The change in unrealized
depreciation, before income taxes, for the three months ended September 30, 2018 was comprised of the following:  Three monthsended September30, 2018Empire Genomics, LLC (Empire Genomics)

($
249,871
)Intrinsiq Material, Inc. (Intrinsiq) realized loss


725,673Total change in net unrealized depreciation of investments, before income taxes

$
475,802 The valuation of our investment in Empire Genomics was decreased after we reviewed the portfolio
companys operations and current and projected financial condition, after the debt modification, and determined that a valuation adjustment was necessary. Intrinsiq was sold during the third quarter of 2018 and a realized loss was recorded. All of these value adjustments resulted from a review by our management using the guidance set forth by ASC 820 and our established valuation
policy. Net Increase (Decrease) in Net Assets from Operations We account for our operations under GAAP for investment companies. The principal measure of our financial performance is net increase
(decrease) in net assets from operations on our consolidated statements of operations. For the three months ended September 30, 2019 and 2018, the net decrease in net assets from operations was ($2,878,888) and ($179,302), respectively. Comparison of the nine months ended September 30, 2019 to the nine months ended September 30, 2018 Investment Income  Nine monthsendedSeptember 30,2019


Nine monthsendedSeptember 30,2018


(Decrease)Increase


%(Decrease)IncreaseInterest from portfolio companies

$
1,049,557


$
1,063,337


($
13,780
)


(1.3
%)Interest from other investments


108,146



20,717



87,429



422.0
%Dividend and other investment income


307,681



181,963



125,718



69.1
%Fee income


274,387



172,612



101,775



58.9
%Total investment income

$
1,739,771


$
1,438,629


$
301,142



20.9
% Interest from portfolio companies  Interest from portfolio companies was approximately the same during the nine
months ended September 30, 2019 when compared to the same nine month period in 2018.  40




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##### Table of Contents

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 primarily due to higher interest rates and higher average cash
balance during the nine months ended September 30, 2019 versus the same period in 2018. 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:  Nine months endedSeptember 30, 2019


Nine months endedSeptember 30, 2018Knoa Software, Inc. (Knoa)

$
193,934


$
Carolina Skiff LLC (Carolina Skiff)


76,914



119,433Tilson Technology Management, Inc. (Tilson)


36,833



29,063New Monarch Machine Tool, Inc. (New Monarch)






27,409Empire Genomics LLC (Empire Genomics)






6,058Total dividend and other investment income

$
307,681


$
181,963 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 $48,887 and $28,266 for the nine months ended September 30, 2019 and 2018, respectively. During the nine months ended September 30, 2019 we recognized a
one-time fee of $225,000 in conjunction with the repayment of the eHealth loan instrument. During the nine months ended September 30, 2018 we recorded a one-time
debt modification fee of approximately $142,000 that was charged to Empire Genomics and capitalized into the Empire Genomics loan balance. The board fees were $500 and $2,000 for the nine months ended September 30, 2019 and 2018, respectively. Expenses  Nine months endedSeptember 30, 2019


Nine months endedSeptember 30, 2018


Increase


% IncreaseTotal expenses

$
2,044,351


$
1,510,034


$
534,317



35.4
% Expenses predominately consist of interest expense on outstanding SBA borrowings, compensation expense, and
general and administrative expenses, including stockholder and office operating expenses and professional fees. The increase in expenses
during the nine months ended September 30, 2019 versus the same period in 2018 was primarily caused by a 164%, or $289,666, increase in shareholder expense and an 84%, or $186,086, increase in professional fees. Shareholder expense and
professional fees were higher during the nine months ended September 30, 2019 because we incurred expenses in connection with aforementioned Transactions with East Asset Management, the special shareholder meeting held in May 2019 and the
regulatory procedures that are required to effect such transactions. These expenses also included external shareholder, legal, tax consulting and other advisory expenses to support the complex regulatory environment in which we operate. In addition, we deferred $266,000 in stock issuance costs attributable to the Transactions. These expenses are intended to be offset against
the equity capital raise when the Transactions close, or expensed if the Transactions are not completed. The deferred expenses are included on our Consolidated Statement of Financial Position at September 30, 2019 in the line item Other
assets.  41




---

##### Table of Contents

Net Realized Loss on Investments  Nine months endedSeptember 30, 2019


Nine months endedSeptember 30, 2018


ChangeRealized loss on investments before income taxes

($
392,239
)

($
1,125,673
)

$
733,434 During the nine months ended September 30, 2019, we recognized a realized loss on our investment in SOMS
Technologies, LLC after the company ceased doing business and a $40,500 gain on our investment in Advantage 24/7 LLC after the company converted their equity into a debt instrument. In addition, we received a final proceeds distribution of $39,893
from Gemcor II, LLC, a portfolio company we exited in 2016. During the nine months ended September 30, 2018, we recognized a loss on
our investment in Intrinsiq Material, Inc. (Intrinsiq) when the company was sold and we did not receive any proceeds. Change in Unrealized
Depreciation of Investments  Nine months endedSeptember 30, 2019


Nine months endedSeptember 30, 2018


ChangeChange in unrealized depreciation of investments before income taxes

($
4,197,281
)

($
732,128
)

($
3,465,153
) The change in unrealized depreciation, before income taxes, for the nine months ended September 30, 2019
was comprised of the following:  Nine months endedSeptember 30, 2019Genicon

($
2,200,047
)Rheonix


(1,500,000
)SocialFlow, Inc. (Socialflow)


(1,071,300
)Sciaps


(585,000
)BeetNPath, LLC (Beetnpath)


(523,904
)Empire Genomics


(249,661
)KnowledgeVision


(200,001
)Mercantile Adjustment Bureau, LLC (Mercantile)


(200,000
)SOMS Technologies, LLC realized loss


472,632Tilson Technology Management, Inc. (Tilson)


1,860,000Total change in net unrealized depreciation of investments before income taxes

($
4,197,281
) The valuations of our investments in Beetnpath, Empire Genomics, KnowledgeVision, Mercantile, Rheonix, Sciaps,
and Socialflow were decreased after we reviewed each of the portfolio companys operations, commercial progress against their business plan, and past and projected financial condition and determined that a valuation adjustment was necessary. Our valuation of Genicon was decreased due to a recent round of financing and after a review of their financial condition. In accordance with our valuation policy, we increased the value of our holdings in Tilson based on a significant equity financing during the
first quarter of 2019 with a sophisticated new non-strategic outside investor at a higher valuation than their prior financing round valuation.  42




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##### Table of Contents

We recognized a realized loss on our investment in SOMS during the nine months ended
September 30, 2019. The change in unrealized depreciation, before income taxes, for the nine months ended September 30, 2018
was comprised of the following:  Nine months endedSeptember 30, 2018Empire Genomics, LLC (Empire Genomics)

($
901,360
)SOMS Technologies, LLC (SOMS)


(498,348
)First Wave Products Group (First Wave)


(250,000
)GiveGab, Inc. (Givegab)


191,907Intrinsiq Material, Inc. (Intrinsiq) realized loss


725,673Total change in net unrealized depreciation of investments before income taxes

($
732,128
) The valuations of our investments in Empire Genomics and SOMS were decreased after we reviewed each of the
portfolio companys operations and current and projected financial condition and determined that a valuation adjustment was necessary. Our valuation of First Wave was decreased to reflect an anticipated round of financing that was completed in the fourth quarter of 2018. Givegabs value was increased to the cost basis of the investment after a financial analysis of the portfolio company indicating
continued improved performance. Intrinsiq was sold during the third quarter of 2018 and a realized loss was recorded. All of these value
adjustments resulted from a review by our management using the guidance set forth by ASC 820 and our established valuation policy. Net Increase
(Decrease) in Net Assets from Operations We account for our operations under GAAP for investment companies. The principal measure of
our financial performance is net increase (decrease) in net assets from operations on our consolidated statements of operations. For the nine months ended September 30, 2019 and 2018, the net decrease in net assets from operations
was ($3,771,022) and ($1,331,009), respectively. Liquidity and Capital Resources Historically, our principal objective has been to achieve capital appreciation. Therefore, a significant portion of the investment portfolio is
structured to maximize the potential for capital appreciation and may provide little or no current yield in the form of dividends or interest payments. As discussed above, on closing of the Transactions contemplated by the stock purchase agreement
with East, we expect to receive interest bearing investments and subsequently to position the portfolio to earn a current yield. As of
September 30, 2019, our total liquidity consisted of approximately $9.3 million in cash and cash equivalents on hand and the availability of $3.0 million under our SBA leverage commitment. Net cash used by operating activities has averaged approximately $1.6 million over the last three years. The average cash used for
investment in portfolio companies over the last three years was approximately $2.1 million. Our cash flow from operations may fluctuate based on the timing of the receipt of dividend income and realized gains and the associated income taxes
paid. We will generally use cash to fund our operating expenses and also to invest in companies, as we seek to build our portfolio utilizing our available cash and proceeds from liquidations of portfolio investments. We anticipate that we will
continue to exit investments. However, the timing of liquidation events within the portfolio is difficult to project with any certainty. As of September 30, 2019, we had the availability to borrow an additional $3.0 million from the SBA.
Starting in 2022, our SBA debt begins to reach maturity, and this will require us to identify sources of future funding if liquidation of investments is not sufficient to fund operations and repay the SBA debt obligation.  43




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We believe that the cash on hand, the scheduled interest payments on our portfolio
investments and our SBA leverage commitment will be sufficient to meet our cash needs for the next twelve months. We continue to seek potential exits from portfolio companies to increase the amount of liquidity available for new investments,
operating activities and future SBA debenture repayment obligations. Item 3. Quantitative and Qualitative Disclosures
about Market Risk Our investment activities contain elements of risk. Our investment portfolio consists of equity and debt securities
in private companies and is subject to valuation risk. Because there is typically no public market for the equity and debt securities in which we invest, the valuation of the equity interests in the portfolio is stated at fair value as
determined in good faith by our management and approved by our Board of Directors. This is in accordance with our investment valuation policy (see the discussion of valuation policy contained in Note 3. Investments in the consolidated
financial statements contained in Item 1 of this report, which is hereby incorporated herein by reference.) In the absence of readily ascertainable market values, the estimated value of the portfolio may differ significantly from the values that
would be placed on the portfolio if a ready market for the investments existed. Any changes in valuation are recorded on the consolidated statement of operations as Net change in unrealized depreciation on investments. At times, a portion of our portfolio may include marketable securities traded in the over-the-counter market. In addition, there may be a portion of the portfolio for which no regular trading market exists. In order to realize the full value of a security, the market must trade in an orderly
fashion or a willing purchaser must be available when a sale is to be made. Should an economic or other event occur that would not allow markets to trade in an orderly fashion, we may not be able to realize the fair value of our marketable
investments or other investments in a timely manner. As of September 30, 2019, we did not have any
off-balance sheet arrangements or hedging or similar derivative financial instrument investments. Item 4. Controls and Procedures Disclosure Controls and Procedures.The Corporation maintains disclosure controls and
procedures that are designed to ensure that information required to be disclosed in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the
SECs rules and forms, and that this information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The
Chief Executive Officer and the Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of the Corporations disclosure controls and procedures as of September 30, 2019. Based on the evaluation of
these disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer concluded that the Corporations controls and procedures were effective as of September 30, 2019. 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.  44




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PART II. OTHER INFORMATION Item 1. Legal Proceedings None Item 1A. Risk Factors See Part I, Item 1A, Risk Factors, of the Annual Report on Form 10-K for the year ended
December 31, 2018. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds  Issuer Purchases of Equity SecuritiesPeriod

Total number ofshares purchased(1)


Average price paidper share (2)


Total number of sharespurchased as part ofpubliclyannounced plan (3)


Maximum number ofshares that may yet bepurchased under the sharerepurchase program7/1/2019  7/31/2019














1,000,0008/1/2019  8/31/19














1,000,0009/1/2019  9/30/2019














1,000,000  (1)
There were no shares repurchased during the three months ending September 30, 2019. (2)
The average price paid per share is calculated on a settlement basis and includes commission. (3)
On October 24, 2019, the Board of Directors extended the repurchase authorization of up to 1,541,056
shares of the Corporations common stock on the open market at prices no greater than the then current net asset value through October 25, 2020. Item 3. Defaults upon Senior Securities None. Item 4.
Mine Safety Disclosures Not Applicable. Item 5. Other Information The Corporation intends to hold its 2019 annual meeting of shareholders (the 2019 Annual Meeting) on Monday, December 30, 2019
at 10:30 a.m., Eastern Standard Time, at the Buffalo Club, the Millard Fillmore Room, 388 Delaware Avenue, Buffalo, NY 14202 (Business Attire Required). Because the 2019 Annual Meeting will be held more than 30 days from the
anniversary date of the annual meeting of shareholders for 2018, the Corporation is informing its shareholders of the revised deadlines for proposals and other related matters for consideration at the 2019 Annual Meeting. Shareholder proposals
intended to be presented at the 2019 Annual Meeting pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the Exchange Act), must be received by the Corporation not later than 5:00 p.m. Eastern Standard
Time on November 16, 2019, in order to be considered for inclusion in the Corporations proxy statement for the 2019 Annual Meeting. For a shareholder to bring business before the 2019 Annual Meeting outside of Rule 14a-8 or to
nominate a director, it must provide timely written notice to the Corporation in accordance with the advance notice provisions of the Corporations by-laws on or prior to November 16, 2019. All shareholder proposals, director nominations
and other related matters must comply, as applicable, with New York Business Corporation Law, the rules and regulations under the Exchange Act and the Corporations by-laws in order to be considered.  45




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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 Securities Exchange Commission on April 22, 1997. (File No. 333-25617).(3.1)(ii)

By-laws of the Corporation, incorporated by reference to Exhibit 3(ii) to the Corporations Quarterly
 Report on Form 10-Q for the period ended September 30, 2016 filed with the Securities Exchange Commission on November 2, 2016. (File No. 814-00235).(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.
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Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized. Dated: November 7, 2019  RAND CAPITAL CORPORATIONBy:

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

/s/ Daniel P. PenberthyDaniel P. Penberthy, Treasurer
  47