##### 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 March 31, 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)   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  ☐ 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 As of May 2, 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 INFORMATIONItem 1.

Financial Statements and Supplementary Data


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


1Consolidated Statements of Operations for the Three Months Ended March 
31, 2019 and 2018 (Unaudited)


2Consolidated Statements of Changes in Net Assets for the Three Months Ended March 31,
2019 and 2018 (Unaudited)


3Consolidated Statements of Cash Flows for the Three Months Ended March 
31, 2019 and 2018 (Unaudited)


4Consolidated Schedule of Portfolio Investments as of March 
31, 2019 (Unaudited)


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


13Notes to the Consolidated Financial Statements (Unaudited)


21Item 2.

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


34Item 3.

Quantitative and Qualitative Disclosures about Market Risk


40Item 4.

Controls and Procedures


40PART II.  OTHER INFORMATIONItem 1.

Legal Proceedings


42Item 1A.

Risk Factors


42Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds


42Item 3.

Defaults upon Senior Securities


42Item 4.

Mine Safety Disclosures


42Item 5.

Other Information


42Item 6.

Exhibits


43




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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  March 31,2019(Unaudited)


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

$



$
99,500Affiliate investments (cost of $21,442,998 and $20,708,659, respectively)


18,804,026



17,026,091Non-Control/Non-Affiliate
investments (cost of $14,151,246 and $17,483,984, respectively)


13,687,175



17,541,213Total investments, at fair value (cost of $35,594,244 and $38,292,143, respectively)


32,491,201



34,666,804Cash and cash equivalents


8,694,705



4,033,792Interest receivable (net of allowance: $161,000)


137,214



145,532Deferred tax asset


425,461



525,198Prepaid income taxes


846,120



1,138,708Other assets


338,507



11,690Total assets

$
42,933,208


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

$
10,758,657


$
8,554,443Profit sharing and bonus payable






125,000Accounts payable and accrued expenses


154,082



245,758Deferred revenue


40,867



72,336Total liabilities


10,953,606



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 3/31/19 and 12/31/18


686,304



686,304Capital in excess of par value


10,581,789



10,581,789Accumulated net investment loss


(1,642,785
)


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


26,252,574



26,221,443Net unrealized depreciation on investments


(2,429,175
)


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


(1,469,105
)


(1,469,105
)Total stockholders equity (net assets) (per share- 3/31/19: $5.06,12/31/18: $4.99)


31,979,602



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

$
42,933,208


$
40,521,724 See accompanying notes  1




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##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)  Three monthsendedMarch 31, 2019


Three monthsendedMarch 31, 2018Investment income:Interest from portfolio companies:Affiliate investments

$
208,715


$
147,036Non-Control/Non-Affiliate
investments


197,250



150,312Total interest from portfolio companies


405,965



297,348Interest from other investments:Non-Control/Non-Affiliate
investments


17,811



5,110Total interest from other investments


17,811



5,110Dividend and other investment income:Affiliate investments


34,625



50,783Non-Control/Non-Affiliate
investments






3,382Total dividend and other investment income


34,625



54,165Fee income:Affiliate investments


4,247



3,167Non-Control/Non-Affiliate
investments


256,722



3,019Total fee income


260,969



6,186Total investment income


719,370



362,809Expenses:Salaries


181,500



169,874Employee benefits


62,932



63,745Directors fees


28,624



34,875Professional fees


226,655



101,687Stockholders and office operating


61,255



64,439Insurance


9,601



11,988Corporate development


18,460



15,796Other operating


1,584



2,691590,611



465,095Interest on SBA obligations


99,124



77,569Bad debt expense






45,900Total expenses


689,735



588,564Net investment gain (loss) before income taxes


29,635



(225,755
)Income tax expense (benefit)


6,868



(52,426
)Net investment gain (loss)


22,767



(173,329
)Net realized gain on sales and dispositions of investments:Control investments


40,500



Income tax expense


9,369



Net realized gain on sales and dispositions of investments


31,131



Net change in unrealized depreciation on investments:Affiliate investments


1,043,595



(250,000
)Non-Control/Non-Affiliate
investments


(521,300
)


(201,489
)Change in unrealized depreciation before income taxes


522,296



(451,489
)Deferred income tax expense (benefit)


120,779



(104,405
)Net change in unrealized depreciation on investments


401,517



(347,084
)Net realized and unrealized gain (loss) on investments


432,648



(347,084
)Net increase (decrease) in net assets from operations

$
455,415


($
520,413
)Weighted average shares outstanding


6,321,988



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

$
0.07


($
0.08
) See accompanying notes  2




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##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)  Three monthsendedMarch 31, 2019


Three monthsendedMarch 31, 2018Net assets at beginning of period

$
31,524,187


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


22,767



(173,329
)Net realized gain on sales and dispositions of investments


31,131



Net change in unrealized depreciation on investments


401,517



(347,084
)Net increase (decrease) in net assets from operations


455,415



(520,413
)Net assets at end of period

$
31,979,602


$
31,398,272Accumulated net investment loss

($
1,642,785
)

($
1,770,475
) See accompanying notes  3




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##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)  Three monthsendedMarch 31, 2019


Three monthsendedMarch 31, 2018Cash flows from operating activities:Net increase (decrease) in net assets from operations

$
455,415


($
520,413
)Adjustments to reconcile net increase (decrease) in net assets to net cash provided by (used in)
operating activities:Investments in portfolio companies


(650,012
)


(450,000
)Proceeds from loan repayments


3,500,000



70,131Net realized gain on portfolio investments


(40,500
)


Change in unrealized depreciation on investments before income taxes


(522,296
)


451,489Deferred income tax expense (benefit)


99,737



(104,405
)Depreciation and amortization


8,842



7,400Original issue discount amortization


(10,191
)


(9,080
)Non-cash conversion of debenture interest


(101,398
)


(8,701
)Change in interest receivable allowance






45,900Changes in operating assets and liabilities:Decrease in interest receivable


8,318



17,019Increase in other assets


(326,882
)


(39,943
)Decrease (increase) in prepaid income taxes


292,588



(35,375
)Decrease in accounts payable and accrued expenses


(91,676
)


(70,609
)Decrease in profit sharing and bonus payable


(125,000
)


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


(31,469
)


15,814Total adjustments


2,010,061



(242,360
)Net cash provided by (used in) operating activities


2,465,476



(762,773
)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


4,660,913



(762,773
)Cash and cash equivalents:Beginning of period


4,033,792



6,262,039End of period

$
8,694,705


$
5,499,266 See accompanying notes  4




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##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS March 31, 2019 (Unaudited)  Company, Geographic Location, Business
Description,(Industry) and Website

(a)
Type of Investment

(b)DateAcquired


(c)Equity


Cost


(d)(f)FairValue


Percentof NetAssetsNon-Control/Non-Affiliate Investments  42.8% of net assets: (j)ACV Auctions, Inc. (e)(g) Buffalo, NY.
Live mobile wholesale auctions for new and used car dealers. (Software) www.acvauctions.com

1,181,160 Series A Preferred.


8/12/16



<1
%

$
163,000


$
2,776,907



8.7
%Advantage 24/7 LLC (g)

$140,000 Term Note at 13% due


12/30/10



0
%










0.4
%Williamsville, NY. Marketing program for wine and spirits dealers. (Marketing Company)
www.advantage24-7.com

January 1, 2022










140,000



140,000Centivo Corporation (e)(g) New York, NY.
Tech-enabled health solutions company that helps self-insured employers and their employees save money and have a better experience. (Health Care)
www.centivo.com

190,967 Series A-1 Preferred.
337,808 Series A-2 Preferred.
Total Centivo


7/5/17



<1
%


200,000101,342
301,342



200,000101,342
301,342



0.9
%Empire Genomics, LLC (g)(l)
Buffalo, NY. Molecular diagnostics company that offers a comprehensive menu of assay services for diagnosing and guiding patient
therapeutic treatments. (Health Care)
www.empiregenomics.com

$1,209,014 Senior Secured Convertible Term Notes at 10% (8% PIK through September 30, 2019) due


6/13/14



0
%










2.5
%December 31, 2020.










1,257,858



498,844$444,915 Promissory Note at 9%(4% PIK) due December 31, 2020.
Total Empire










444,9151,702,773



302,569801,413GiveGab, Inc. (e)(g) Ithaca, NY. Online
fundraising, day of giving supporter engagement software for non-profit organizations. (Software)
www.givegab.com

5,084,329 Series Seed Preferred.


3/13/13



4
%


616,221



616,221



1.9
%GoNoodle, Inc. (g)(l)

$1,000,000 Secured Note at 12% due


2/6/15



<1
%










3.2
%Nashville, TN. Student engagement education software

January 31, 2020, (1% PIK).










1,042,262



1,042,262providing core aligned physical activity breaks. (Software)

Warrant for 47,324 Series C Preferred.










25



25www.gonoodle.com

Total GoNoodle










1,042,287



1,042,287Mercantile Adjustment Bureau, LLC (g)
Williamsville, NY. Full service accounts receivable

$1,199,039 Subordinated Secured Note at 13% (3% for the calendar


10/22/12



4
%










1.5
%management and collections company. (Contact Center) www.mercantilesolutions.com

year 2018) due January 31, 2019. (e)
$150,000 Subordinated Debenture at










1,199,040



500,0008% due June 30, 2018. Warrant for 3.29%
Membership Interests.










150,000



Option for 1.5% Membership Interests.
Total Mercantile










97,6251,446,665



500,000Outmatch Holdings, LLC (e)(g) (Chequed
Holdings, LLC) Dallas, TX. Web based predictive employee selection and reference checking. (Software)
www.outmatch.com

2,908,686.55 Class P1 Units. 109,788
Class C1 Units.
Total Outmatch


11/18/10



4
%


2,140,0075,489
2,145,496



2,140,0075,489
2,145,496



6.7
%PostProcess Technologies LLC (e)(g)

$300,000 Convertible Promissory


7/25/16



0
%










0.9
%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  5




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##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS March 31, 2019 (Continued) (Unaudited)  Company, Geographic Location, BusinessDescription,
(Industry) and Website

(a)
Type of Investment

(b)DateAcquired


(c)Equity


Cost


(d)(f)FairValue


Percentof NetAssetsRheonix, Inc. (e) Ithaca, NY. Developer of
fully automated microfluidic based molecular assay and diagnostic testing devices. (Health Care) www.rheonix.com

9,676 Common. (g)1,839,422 Series A
Preferred. (g) 50,593 Common. (g) 589,420 Series
B Preferred.
Total Rheonix


10/29/09



4
%


  2,099,999

702,732
2,802,731



  1,500,000

702,732
2,202,732



6.9
%SocialFlow, Inc. (e)(g) New York, NY.
Provides instant analysis of social networks using a proprietary, predictive analytic algorithm to optimize advertising and publishing. (Software)
www.socialflow.com

1,049,538 Series B Preferred. 1,204,819 Series B-1 Preferred. 717,772 Series C Preferred.
Total Social Flow


4/5/13



4
%


500,000750,000
500,000
1,750,000



500,000750,000
500,000
1,750,000



5.5
%Somerset Gas Transmission Company, LLC (e)
Columbus, OH. Natural gas transportation. (Oil and Gas)
www.somersetgas.com

26.5337 Units.


7/10/02



3
%


719,097



500,000



1.6
%Tech 2000, Inc. (g)

$600,000 Term Note at 14% due


11/16/18



0
%










1.9
%Herndon, VA. Develops and delivers IT training. (Software)
www.t2000inc.com

November 15, 2021.










610,777



610,777Other 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











$
14,151,246


$
13,687,175Affiliate Investments  58.8% of net assets (k)BeetNPath, LLC (Grainful) (e)(g)

1,119,024 Series A-2 Preferred


10/20/14



9
%










0.4
%Ithaca, NY. Frozen entrées made from 100% whole grain steel cut oats under Grainful brand name. (Consumer Product)

Membership Units. 1,032,918 Series B
Preferred









$
359,000


$
www.grainful.com

Membership Units. $262,626.64 Convertible
Secured










261,277



Notes at 8% due December 21, 2019.
Total BeetNPath










262,627882,904



130,000130,000Carolina Skiff LLC (g)

6.0825% Class A Common


1/30/04



7
%










5.5
%Waycross, GA. Manufacturer of ocean fishing and pleasure boats. (Manufacturing)
www.carolinaskiff.com

Membership Interest.










15,000



1,750,000ClearView Social, Inc. (e)(g) Buffalo, NY.
Social media publishing tool for law, CPA and professional firms. (Software) www.clearviewsocial.com

312,500 Series Seed Plus Preferred.


1/4/16



6
%


200,000



200,000



0.6
%First Wave Technologies, Inc. (e)(g)
Batavia, NY. Sells First Crush automated pill crusher that crushes and grinds pills for nursing homes and medical institutions. (Health Care)
www.firstwavetechnologies.com

670,443.2 Class A Common.


4/19/12



5
%


661,563



33,000



0.1
%  6




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##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS March 31, 2019 (Continued) (Unaudited)  Company, Geographic Location, Business
Description,(Industry) and Website

(a)
Type of Investment

(b)DateAcquired


(c)Equity


Cost


(d)(f)FairValue


Percentof NetAssetsGenicon, Inc. (g)(l) Winter Park, FL.
Designs, produces and distributes patented surgical instrumentation. (Health Care)

1,586,902 Series B Preferred.
$3,250,000 Promissory Notes at 10% due May 1, 2020, (8%
PIK). Warrants for 500,000 Common.
Total
Genicon


4/10/15



6
%


1,000,000
3,465,080
120,000
4,585,080



1,000,000
3,465,080

4,465,080



14.0
%www.geniconendo.comKnoa Software, Inc. (e)(g) New York, NY.
End user experience management and performance (EMP) solutions utilizing enterprise applications. (Software) www.knoa.com

973,533 Series A-1 Convertible Preferred.
1,876,922 Series B Preferred.
Total
Knoa


11/20/12



7
%


750,000479,155
1,229,155



750,000479,155
1,229,155



3.9
%KnowledgeVision Systems, Inc. (g) Lincoln,
MA. Online presentation and training software. (Software) www.knowledgevision.com

200,000 Series A-1 Preferred.
214,285 Series A-2 Preferred.
129,033 Series A-3 Preferred.
Warrant for 46,743 Series A-3.


11/13/13



7
%


250,000300,000
165,001 35,000



  
165,001 35,000



3.7
%(e) $75,000 Subordinated Promissory Notes at 8% payable on demand of majority of holders after August 31, 2019.










75,000



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










900,0001,725,001



900,0001,175,001Mezmeriz, Inc. (e)(g) Ithaca, NY.
Technology company developing novel reality capture tools for 3D mapping, reality modeling, object tracking and classification. (Electronics Developer)
www.mezmeriz.com

1,554,565 Series Seed Preferred.


1/9/08



12
%


742,850



351,477



1.1
%Microcision LLC (g)(l)

$1,500,000 Subordinated Promissory Note


9/24/09



15
%










8.0
%Pennsauken Township, NJ. Manufacturer of precision

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










1,938,186



1,938,186machined medical implants, components and assemblies. (Manufacturing)
www.microcision.com

15% Class A Common Membership Interest.
Total
Microcision










1,938,186



610,0002,548,186New Monarch Machine Tool, Inc. (g)
Cortland, NY. Manufactures and services vertical/horizontal machining centers. (Manufacturing)
www.monarchmt.com

22.84 Common.


9/24/03



15
%


22,841



22,841



0.1
%OnCore Golf Technology, Inc. (e)(g)
Buffalo, NY. Patented and Proprietary Golf Balls utilizing breakthrough technology and innovation, inspiring golfers at all skill levels and abilities.
(Consumer Product) www.oncoregolf.com

300,483 Preferred AA.


12/31/14



8
%


752,712



300,000



1.0
%SciAps, Inc. (e)(g) Woburn, MA.
Instrumentation company producing portable analytical devices using XRF, LIBS and RAMAN spectroscopy to identify compounds, minerals, and elements. (Manufacturing)
www.sciaps.com

187,500 Series A Preferred. 274,299 Series A-1 Convertible Preferred. 117,371 Series B Convertible Preferred.
113,636 Series C Convertible Preferred. 369,698 Series C-1 Convertible Preferred. 147,059 Series D Convertible Preferred.
Total SciAps


7/12/13



6
%


1,500,000504,710
250,000 175,000
399,274
250,000
3,078,984



423,000142,000
250,000 175,000
399,274
250,000
1,639,274



5.1
%  7




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##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS March 31, 2019 (Continued) (Unaudited)  Company, Geographic Location, BusinessDescription,
(Industry) and Website

(a)
Type of Investment

(b)DateAcquired


(c)Equity


Cost


(d)(f)FairValue


Percentof NetAssetsTeleservices Solutions Holdings, LLC (e) (g)(l)
Montvale, NJ. Customer contact center specializing in customer acquisition and retention for selected industries. (Contact Center)
www.ipacesetters.com

250,000 Class B Preferred Units.
1,000,000 Class C Preferred Units. 80,000 Class D
Preferred Units. 104,198 Class E Preferred Units. PIK
dividend for Series C and D at 12% and 14%, respectively.


5/30/14



6
%


250,0001,190,680
91,200
104,198



  





0.0
%Total Teleservices










1,636,078



Tilson Technology Management, Inc. (g)

120,000 Series B Preferred.


1/20/15



11
%


600,000



1,950,000



15.5
%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)

$800,000 Subordinated Promissory Notes at 8% due December 1, 2022.










800,000



800,000www.tilsontech.com

$200,000 Subordinated Promissory Note at 8% due September 28, 2021.










200,000



200,000Total Tilson










3,100,012



4,960,012Other 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











$
21,442,998


$
18,804,026TOTAL INVESTMENTS  101.6%











$
35,594,244


$
32,491,201LIABILITIES IN EXCESS OF OTHER ASSETS  (1.6%)
















(511,599
)NET ASSETS  100%















$
31,979,602  8




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##### Table of Contents

RAND CAPITAL CORPORATION AND SUBSIDIARY CONSOLIDATED SCHEDULE OF PORTFOLIO INVESTMENTS March 31, 2019 (Continued) (Unaudited)  Notes to the Consolidated Schedule of Portfolio Investments (a) At March 31, 2019, restricted securities represented 100% of the fair value of the investment portfolio. Restricted securities are subject to one or
more restrictions on resale and are not freely marketable. Type of investment for equity position is in form of shares unless otherwise noted as units or interests, i.e., preferred shares, common shares. (b) The Date Acquired column indicates the date 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 March 31, 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 March 31, 2019, the total cost of investment securities was approximately $35.6 million. Net unrealized depreciation was approximately
($3.1) million, which was comprised of $6.8 million of unrealized appreciation of investment securities and ($9.9) million of unrealized depreciation of investment securities. At March 31, 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 ($6.7) million. The net unrealized loss for federal income tax purposes was ($0.2) million based on a tax cost of
$32.5 million. (g) Rand Capital SBIC, Inc. investment. (h) Reduction in cost and value from previously reported balances reflects current principal repayment. There were no principal reductions during the first
quarter of 2019. (i) Represents interest due (amounts over $50,000) from investments included as interest receivable on the Corporations
Consolidated Statements of Financial Position. (None at March 31, 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 March 31, 2019 (Continued) (Unaudited)  Investments in and Advances to Affiliates  Company

Type of Investment

December 31,2018Fair Value


GrossAdditions (1)


GrossReductions(2)


March 31,2019Fair Value


NetRealizedGains


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

$140,000 Term Note at 13%.

$
99,500


$



($
99,500
)

$



$
40,500


$
Total Control Investments

$
99,500


$



($
99,500
)

$



$
40,500


$
Affiliate Investments:BeetNPath, LLC

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

$



$



$



$



$



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


261,277







(261,277
)










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


262,627







(132,627
)


130,000







5,552Total BeetNPath


523,904







(393,904
)


130,000







5,552Carolina Skiff LLC

6.0825% Class A Common Membership interest.


1,750,000











1,750,000







24,043ClearView 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 8%.


3,385,586



79,494







3,465,080







98,709Warrant for 500,000 Common.


37,500







(37,500
)










Total Genicon


4,423,086



79,494



(37,500
)


4,465,080







98,709G-TEC Natural Gas Systems

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






















Knoa Software, Inc.

973,533 Series A-1 Convertible Preferred.


750,000











750,000







1,876,922 Series B Preferred.


479,155











479,155







Total Knoa


1,229,155











1,229,155







KnowledgeVision

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







1,479$900,000 Term Note at 13%.


750,000



150,000







900,000







29,506Warrant for 46,743 Series A-3.


35,000











35,000







Total KnowledgeVision


1,025,001



150,000







1,175,001







30,985Mezmeriz, 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



4,833







1,938,186







58,00115% Class A Common Membership Interest.


610,000











610,000







Total Microcision


2,543,353



4,833







2,548,186







58,001New 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 March 31, 2019 (Continued) (Unaudited)  Investments in and Advances to Affiliates  Company

Type of Investment

December 31,2018Fair Value


GrossAdditions (1)


GrossReductions(2)


March 31,2019Fair Value


NetRealizedGains


Amount ofInterest/Dividend/FeeIncome (3)SciAps, Inc.

187,500 Series A Convertible Preferred.


700,000







(277,000
)


423,000







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







(385,000
)


1,639,274







SOMS Technologies, LLC

5,959,490 Series B membership Interests.






















Teleservices Solutions Holdings, LLC

250,000 Class B Preferred Units.






















1,000,000 Class C Preferred Units.






















80,000 Class D Preferred Units.






















104,198 Class E Preferred Units.






















Total Teleservices






















Tilson Technology Management, Inc.

120,000 Series B Preferred.


600,000



1,350,000







1,950,000







10,58221,391 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







3,945$800,000 Subordinated Promissory Note at 8%.


800,000











800,000







15,770Total Tilson


2,600,000



2,360,012







4,960,012







30,297Total Affiliate Investments

$
17,026,091


$
2,594,339


($
816,404
)

$
18,804,026


$



$
247,587Total Control and Affiliate Investments

$
17,125,591


$
2,594,339


($
915,904
)

$
18,804,026


$
40,500


$
247,587 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 March 31, 2019 (Continued) (Unaudited)   Industry Classification

Percentage of TotalInvestments (at fair value)as of March 31, 2019Software


35.5
%Healthcare


24.0Manufacturing


19.3Professional Services


15.3Contact Center


1.6Oil and Gas


1.5Consumer Product


1.3Electronics


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, Business
Description, (Industry) and Website

(a)
Type of Investment

(b)
Date
Acquired

(c)
Equity

Cost


(d)(f)
Fair
Value


Percentof
NetAssetsNon-Control/Non-Affiliate Investments  55.7% of net assets: (j)ACV Auctions, Inc. (e)(g) Buffalo, NY.
Live mobile wholesale auctions for new and used car dealers. (Software) www.acvauctions.com

1,181,160 Series A Preferred.

8/12/16

<1%

$
163,000


$
2,776,907


8.8%Centivo Corporation (e)(g) New York, NY.
Tech-enabled health solutions company that helps self-insured employers and their employees save money and have a better experience. (Health Care)
www.centivo.com

190,967 Series A-1 Preferred.
337,808 Series A-2 Preferred.
Total Centivo

7/5/17

<1%


200,000101,342
301,342



200,000101,342
301,342


1.0%eHealth Global Technologies, Inc. (g)
Henrietta, NY. eHealth Connect® improves health care delivery through intelligently aggregated clinical
record and images for patient referrals. (Health Care) www.ehealthtechnologies.com

$3,500,000 Term Note at 13% due December 31, 2020.

6/28/16

0%


3,500,000



3,500,000


11.1%Empire Genomics, LLC (g)(m) Buffalo, NY.
Molecular diagnostics company that offers a comprehensive menu of assay services for diagnosing and guiding patient therapeutic treatments. (Health Care)
www.empiregenomics.com

$1,209,014 Senior Secured Convertible Term Notes at 10% (8% PIK through September 30, 2019) due December 31, 2020.
$444,915 Promissory Note at 9% (4% PIK) due December 31, 2020.
Total Empire

6/13/14

0%


1,233,195
 444,915
1,678,110



474,181
 302,569
776,750


2.4%GiveGab, Inc. (e)(g) Ithaca, NY. Online
fundraising, day of giving supporter engagement software for non-profit organizations. (Software)
www.givegab.com

5,084,329 Series Seed Preferred.

3/13/13

4%


616,221



616,221


2.0%GoNoodle, Inc. (g)(m) Nashville, TN.
Student engagement education software providing core aligned physical activity breaks. (Software) www.gonoodle.com

$1,000,000 Secured Note at 12% due January 31, 2020, (1% PIK).
Warrant for 47,324 Series C Preferred.
Total GoNoodle

2/6/15

<1%


1,039,663
25
1,039,688



1,039,663
25
1,039,688


3.3%Mercantile Adjustment Bureau, LLC (g)
Williamsville, NY. Full service accounts receivable management and collections company. (Contact Center) www.mercantilesolutions.com

$1,199,039 Subordinated Secured Note at 13% (3% for the calendar year 2018) due January 31, 2019.
(e)$150,000 Subordinated Debenture at 8% due June 30, 2018.
Warrant for 3.29% Membership Interests. Option for 1.5% Membership Interests.
(i) Interest receivable $50,254.
Total Mercantile

10/22/12

4%


1,199,040
 150,000
 97,625
1,446,665



700,000
 


700,000


2.2%Outmatch Holdings, LLC (e)(g) (Chequed
Holdings, LLC) Dallas, TX. Web based predictive employee selection and reference checking. (Software)
www.outmatch.com

2,798,883 Class P1 Units. 109,788
Class C1 Units.
Total Outmatch

11/18/10

4%


2,140,0075,489
2,145,496



2,140,0075,489
2,145,496


6.8%PostProcess Technologies LLC (e)(g)
Buffalo, NY. Provides innovative solutions for the post-processing of additive manufactured 3D parts. (Manufacturing)
www.postprocess.com

$300,000 Convertible Promissory Note at 5% due July 28, 2020.

7/25/16

0%


300,000



300,000


1.0%  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, Business
Description, (Industry) and Website

(a)
Type of Investment

(b)
Date
Acquired

(c)
Equity

Cost


(d)(f)
Fair
Value


Percentof
NetAssetsRheonix, Inc. (e) Ithaca, NY. Developer of
fully automated microfluidic based molecular assay and diagnostic testing devices. (Health Care) www.rheonix.com

9,676 Common. (g)1,839,422 Series A
Preferred. (g) 50,593 Common. (g) 589,420 Series
B Preferred.
Total Rheonix

10/29/09

4%


  2,099,999

702,732
2,802,731



  1,500,000

702,732
2,202,732


7.0%SocialFlow, Inc. (e)(g) New York, NY.
Provides instant analysis of social networks using a proprietary, predictive analytic algorithm to optimize advertising and publishing. (Software)
www.socialflow.com

1,049,538 Series B Preferred. 1,204,819 Series B-1 Preferred. 717,772 Series C Preferred.
Total Social Flow

4/5/13

4%


500,000750,000
500,000
1,750,000



731,431839,648
500,221
2,071,300


6.6%Somerset Gas Transmission Company, LLC (e)
Columbus, OH. Natural gas transportation. (Oil and Gas)
www.somersetgas.com

26.5337 Units.

7/10/02

3%


719,097



500,000


1.6%Tech 2000, Inc. (g)(m) Herndon, VA.
Develops and delivers IT training. (Software)
www.t2000inc.com

$600,000 Term Note at 14% (PIK through December 31, 2018) due November 15, 2021.

11/16/18

0%


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) Ithaca,
NY. Frozen entrées made from 100% whole grain steel cut oats under Grainful brand name. (Consumer Product) www.grainful.com

1,119,024 Series A-2 Preferred Membership Units.
1,032,918 Series B Preferred Membership Units. $262,626.64
Convertible Secured Notes at 8% due December 21, 2019.
Total BeetNPath

10/20/14

9%


$359,000
 261,277
 262,627
882,904



$              
 261,277
 262,627
523,904


1.7%Carolina Skiff LLC (g) Waycross, GA.
Manufacturer of ocean fishing and pleasure boats. (Manufacturing) www.carolinaskiff.com

6.0825% Class A Common Membership Interest.

1/30/04

7%


15,000



1,750,000


5.6%ClearView Social, Inc. (e)(g) Buffalo, NY.
Social media publishing tool for law, CPA and professional firms. (Software) www.clearviewsocial.com

312,500 Series Seed Plus Preferred.

1/4/16

6%


200,000



200,000


0.6%First Wave Technologies, Inc. (e)(g)
Batavia, NY. Sells First Crush automated pill crusher that crushes and grinds pills for nursing homes and medical institutions. (Health Care)
www.firstwaveproducts.com

670,443.2 Class A Common.

4/19/12

5%


661,563



33,000


0.1%  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, Business
Description, (Industry) and Website

(a)
Type of Investment

(b)
Date
Acquired

(c)
Equity

Cost


(d)(f)
Fair
Value


Percentof
NetAssetsGenicon, Inc. (g) (m) Winter Park, FL.
Designs, produces and distributes patented surgical instrumentation. (Health Care) www.geniconendo.com

1,586,902 Series B Preferred. $3,250,000
Promissory Notes at 10% due May 1, 2020, (8% PIK). Warrants for 500,000 Common.
Total Genicon

4/10/15

6%


1,000,000 3,385,586
120,000
4,505,586



1,000,000 3,385,586
37,500
4,423,086


14.0%Knoa Software, Inc. (e)(g) New York, NY.
End user experience management and performance (EMP) solutions utilizing enterprise applications. (Software) www.knoa.com

973,533 Series A-1 Convertible Preferred.
1,876,922 Series B Preferred.
Total Knoa

11/20/12

7%


750,000479,155
1,229,155



750,000479,155
1,229,155


3.9%KnowledgeVision Systems, Inc. (g) Lincoln,
MA. Online presentation and training software. (Software) www.knowledgevision.com

200,000 Series A-1 Preferred.
214,285 Series A-2 Preferred.
129,033 Series A-3 Preferred.
Warrant for 46,743 Series A-3.
$75,000 Subordinated Promissory Notes at 8% payable on demand of majority of holders after August 31, 2019.(e)
$750,000 Term Note at 11% due April 30, 2021.
Total KnowledgeVision

11/13/13

7%


250,000300,000
165,001 35,000
 75,000
750,000
1,575,001



  
165,001 35,000
 75,000
750,000
1,025,001


3.2%Mezmeriz, Inc. (e)(g) Ithaca, NY.
Technology company developing novel reality capture tools for 3D mapping, reality modeling, object tracking and classification. (Electronics Developer)
www.mezmeriz.com

1,554,565 Series Seed Preferred.

1/9/08

12%


742,850



351,477


1.1%Microcision LLC (g)(m) Pennsauken
Township, NJ. Manufacturer of precision machined medical implants, components and assemblies. (Manufacturing) www.microcision.com

$1,500,000 Subordinated Promissory Note at 12% (1% PIK) due December 31, 2024.
15% Class A Common Membership Interest.
Total Microcision

9/24/09

15%


1,933,353

1,933,353



1,933,353
610,000
2,543,353


8.1%New Monarch Machine Tool, Inc. (g)
Cortland, NY. Manufactures and services vertical/horizontal machining centers. (Manufacturing)
www.monarchmt.com

22.84 Common.

9/24/03

15%


22,841



22,841


0.1%OnCore Golf Technology, Inc. (e)(g)
Buffalo, NY. Patented and Proprietary Golf Balls utilizing breakthrough technology and innovation, inspiring golfers at all skill levels and abilities.
(Consumer Product) www.oncoregolf.com

300,483 Preferred AA.

12/31/14

8%


752,712



300,000


1.0%SciAps, Inc. (e)(g) Woburn, MA.
Instrumentation company producing portable analytical devices using XRF, LIBS and RAMAN spectroscopy to identify compounds, minerals, and elements. (Manufacturing)
www.sciaps.com

187,500 Series A Preferred. 274,299 Series A-1 Convertible Preferred. 117,371 Series B Convertible Preferred.
113,636 Series C Convertible Preferred. 369,698 Series C-1 Convertible Preferred. 147,059 Series D Convertible Preferred.
Total SciAps

7/12/13

6%


1,500,000504,710
250,000 175,000
399,274
250,000
3,078,984



700,000250,000
250,000 175,000
399,274
250,000
2,024,274


6.4%  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, Business
Description, (Industry) and Website

(a)
Type of Investment

(b)
Date
Acquired

(c)
Equity

Cost


(d)(f)
Fair
Value


Percentof
NetAssetsTeleservices Solutions Holdings, LLC (e) (g)(m)
Montvale, NJ. Customer contact center specializing in customer acquisition and retention for selected industries. (Contact Center)
www.ipacesetters.com

250,000 Class B Preferred Units. 1,000,000
Class C Preferred Units. 80,000 Class D Preferred Units.
104,198 Class E Preferred Units. PIK dividend for Series C and
D at 12% and 14%, respectively.
Total Teleservices

5/30/14

6%


250,0001,190,680
91,200
104,198 
1,636,078



  






0.0%Tilson Technology Management, Inc. (g)
Portland, ME. Cellular, fiber optic and wireless information systems, construction, and management. (Professional Services)
www.tilsontech.com

120,000 Series B Preferred. 21,391 Series C
Preferred. 70,176 Series D Preferred. $800,000 Subordinated
Promissory Notes at 8% due December 1, 2022. $200,000 Subordinated Promissory Note at 8% due September 28, 2021.
Total Tilson

1/20/15

11%


600,000200,000
800,000 
800,000 
200,000
2,600,000



600,000200,000
800,000 
800,000 
200,000
2,600,000


8.2%Other 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) Williamsville, NY.
Marketing program for wine and spirits dealers. (Marketing Company) www.advantage24-7.com

45% Membership Interest.

12/30/10

45%


$99,500



$99,500


0.3%Subtotal Control Investments








$99,500



$99,500TOTAL INVESTMENTS  110%







$
38,292,143


$
34,666,804LIABILITIES IN EXCESS OF OTHER ASSETS  (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

December 31,2017 FairValue


GrossAdditions (1)


GrossReductions (2)


December 31,2018 FairValue


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 at 12% (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/FeeIncome (3)OnCore Golf Technology, Inc.

150,000 Series AA Preferred.






300,000







300,000







$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

250,000 Class B Preferred Units.














Holdings, LLC

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, management investment company. We have elected to be treated as a business development
company (BDC) under the Investment Company Act of 1940, as amended (the 1940 Act). As a BDC, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70% of our total
assets in qualifying assets and provide managerial assistance to the portfolio companies in which we invest. See Item 1. Business  Regulation, Regulation as a Business Development Company in our Annual Report on Form 10-K for the year ended December 31, 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 operate as an internally managed investment company whereby our officers and employees conduct the business
of the Corporation under the general supervision of our Board of Directors. We have not elected to qualify to be taxed as a regulated investment company as defined under Subchapter M of the Internal Revenue Code. See Recent Developments. 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), 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. 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) are subject to shareholder approval. Rand has agreed to hold a special meeting of shareholders for purposes of obtaining these approvals, which will be held on May 16, 2019. Additional information regarding the Stock Purchase Agreement and the Transactions is available in Rands Definitive Proxy Statement
filed with the Securities and Exchange Commission on April 18, 2019. In the event the Transactions are completed, 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 that may include regular cash dividends to shareholders. Note 2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES Basis of Presentation It is our opinion that the accompanying consolidated financial
statements include all adjustments of a normal recurring nature necessary for a fair presentation in accordance with United States generally accepted accounting principles (GAAP) of the consolidated financial position, results of
operations, cash flows and statement of changes in net assets for the interim periods presented. Certain information and note disclosures normally included in audited annual consolidated financial statements prepared in accordance with GAAP have
been omitted; however, we believe that the disclosures made are adequate to make the information presented herein not misleading. Our interim results for the three months ended March 31, 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 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.  22




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##### Table of Contents

Fair Value of Financial Instruments  The carrying amounts reported in
the consolidated statement of financial position of cash, interest receivable, accounts payable and accrued expenses approximate fair value because of the immediate or short-term nature of these financial instruments. Fair Value of SBA Debentures In March 2019, the SBIC Funding Corporation completed a pooling of SBA debentures that have
a coupon rate of 3.113%, excluding a mandatory SBA annual charge estimated to be 0.094%, resulting in a total estimated fixed rate for ten years of 3.207%. 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. The following investments are on non-accrual status: G-TEC Natural Gas Systems (G-Tec) and a portion of the Mercantile Adjustment Bureau, LLC (Mercantile) outstanding loan balance.  23




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##### Table of Contents

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 $35,969 and $5,186 for the three months ended March 31, 2019 and 2018, respectively. In addition, the Corporation recognized a one-time fee of $225,000 in conjunction with the repayment of the eHealth
loan instrument. The board fees were $0 and $1,000 for the three months ended March 31, 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 $10,191 and $9,080 in OID income for the three months ended March 31, 2019 and 2018, respectively. OID income is estimated to be approximately $31,000 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 $8,777 and $6,850 for the three months ended March 31, 2019 and 2018, respectively. Amortization
expense on currently outstanding debentures for the next five years is estimated to average approximately $32,000 per year. SBA
Debentures The Corporation had $11,000,000 and $8,750,000 in outstanding SBA debentures at March 31, 2019 and December 31, 2018 with a weighted average interest rate, including the SBA annual fee, of 3.45% at March 31,
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.  24




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##### Table of Contents

Net Assets per Share  Net assets per share are based on the number of
shares of common stock outstanding. The Corporation does not have any common stock equivalents outstanding. Supplemental Cash Flow
Information  Income taxes refunded during the three months ended March 31, 2019 and 2018 were $255,308 and $17,051, respectively. Interest paid during each of the three months ended March 31, 2019 and 2018 was $153,513 and
$140,275. The Corporation converted $101,398 and $8,701 of interest receivable into investments during the three months ended March 31, 2019 and 2018, respectively. Accounting Estimates  The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Stockholders Equity (Net Assets) At March 31,
2019 and December 31, 2018, there were 500,000 shares of $10.00 par value preferred stock authorized and unissued. On
October 25, 2018, the Board of Directors extended the repurchase authorization for up to 1,000,000 shares of the Corporations outstanding common stock on the open market through October 25, 2019 at prices no greater than the then
current net asset value. No shares were repurchased during the three months ended March 31, 2019. At March 31, 2019, 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 March 31, 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. The Corporation did not record any expense pursuant to the Plan for the three months ended March 31, 2019 and 2018,
respectively. 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 March 31, 2019.  25




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##### Table of Contents

It is the Corporations policy to include interest and penalties related to income tax
liabilities in income tax expense. There were no amounts recognized for interest or penalties for the three months ended March 31, 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 ofMarch 31,2019Tilson Technology Management, Inc. (Tilson)


15
%Genicon, Inc. (Genicon)


14
%ACV Auctions, Inc. (ACV)


9
%Microcision, LLC. (Microcision)


8
%Rheonix, Inc. (Rheonix)


7
%As ofDecember 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. 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  26




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##### Table of Contents

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 March 31, 2019. In the valuation process, the Corporation values restricted securities, categorized as Level 3 investments, using information from
these portfolio companies, which may include:  

Audited and unaudited statements of operations, balance sheets and operating budgets;  

Current and projected financial, operational and technological developments of the portfolio company;  

Current and projected ability of the portfolio company to service its debt obligations;  

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

Pending debt or capital restructuring of the portfolio company;  

Current information regarding any offers to purchase the investment, or recent fundraising transactions;  

Current ability of the portfolio company to raise additional financing if needed;  

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

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

Qualitative assessment of key management;  

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

Other factors deemed relevant 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.  27




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##### Table of Contents

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 debt 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 March 31, 2019:  Investment Type

Market Approach
EBITDA Multiple


MarketApproach
LiquidationSeniority


Market Approach
Revenue Multiple


Market
ApproachTransaction Pricing


TotalsNon-Control/Non-Affiliate
Equity

$



$
1,750,025


$
2,645,496


$
5,897,202


$
10,292,723Non-Control/Non-Affiliate Loan and
Debt


500,000



1,843,675







1,050,777



3,394,454Total
Non-Control/Non-Affiliate

$
500,000


$
3,593,700


$
2,645,496


$
6,947,979


$
13,687,175Affiliate Equity

$
2,360,000


$
22,841


$
4,268,430


$
4,644,489


$
11,295,760Affiliate Loan and Debt


1,938,186



130,000



3,465,080



1,975,000



7,508,266Total Affiliate

$
4,298,186


$
152,841


$
7,733,510


$
6,619,489


$
18,804,026Total Level 3 Investments

$
4,798,186


$
3,746,541


$
10,379,006


$
13,567,468


$
32,491,201Range


3.9X-7X



1X



1X-4X



Not ApplicableUnobservable Input


EBITDA Multiple



Asset Value



Revenue Multiple



Transaction PriceWeighted Average


5.8X



1X



2.5X



Not Applicable The following table provides a summary of the components of Level 1, 2 and 3 Assets Measured at Fair
Value at March 31, 2019:  Fair Value Measurements at Reported Date UsingDescription

March 31,2019


Quoted Prices inActive Markets forIdentical Assets
(Level 1)


Significant
Observable Inputs
(Level 2)


Other Significant
Unobservable Inputs
(Level 3)Loan investments

$
2,170,692


$



$



$
2,170,692Debt investments


8,732,026











8,732,026Equity investments


21,588,483











21,588,483Total

$
32,491,201


$



$



$
32,491,201 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)


Significant
Observable Inputs
(Level 2)


Other Significant
Unobservable Inputs
(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 three months ended March 31, 2019:  Fair Value Measurements Using SignificantUnobservable Inputs (Level 3)Venture Capital InvestmentsDescription

LoanInvestments


Debt
Investments


Equity
Investments


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)










(99,500
)


(99,500
)Total Realized Gains and Losses










(99,500
)


(99,500
)Unrealized Gains and Losses included in net change in net assets from
operations:BeetNPath, LLC (Beetnpath)






(132,627
)


(261,277
)


(393,904
)Genicon, Inc. (Genicon)










(37,500
)


(37,500
)Mercantile Adjustment Bureau, LLC (Mercantile)






(200,000
)






(200,000
)SciAps, Inc. (Sciaps)










(385,000
)


(385,000
)SocialFlow, Inc. (Socialflow)










(321,300
)


(321,300
)Tilson Technology Management, Inc. (Tilson)










1,860,000



1,860,000Total Unrealized Gains and Losses






(332,627
)


854,923



522,296Purchases of Securities/Changes to
Securities/Non-cash conversions:Advantage 24/7


140,000











140,000Empire Genomics, LLC (Empire Genomics)






24,664







24,664Genicon






79,493







79,493GoNoodle, Inc. (GoNoodle)






2,599







2,599KnowledgeVision Systems, Inc. (Knowledge Vision)


150,000











150,000Microcision LLC (Microcision)






4,833







4,833Tilson










500,012



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


290,000



111,589



500,012



901,601Repayments and Sale of Securities:eHealth Global Technologies, Inc. (eHealth)


(3,500,000
)










(3,500,000
)Total Repayments and Sale of Securities


(3,500,000
)










(3,500,000
)Transfers within Level 3


444,915



(444,915
)






Ending Balance, March 31, 2019, of Level 3 Assets

$
2,170,692


$
8,732,026


$
21,588,483


$
32,491,201  Change in unrealized depreciation on investments for the period included in changes in net
assets

$
522,296Net realized gain on investments for the period included in changes in net assets

$
40,500  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 quarter ended March 31, 2018:  Fair Value Measurements Using SignificantUnobservable Inputs (Level 3)Venture Capital InvestmentsDescription

LoanInvestments


Debt
Investments


Equity
Investments


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

$
3,550,000


$
10,096,244


$
18,637,818


$
32,284,062Unrealized Losses included in net change in net assets from operations:Empire Genomics, LLC (Empire Genomics)






(201,489
)






(201,489
)First Wave Products Group, LLC (First Wave)






(250,000
)






(250,000
)Total Unrealized Losses






(451,489
)






(451,489
)Purchases of Securities/Changes to
Securities/Non-cash conversions:Centivo Corporation (Centivo)










201,342



201,342Genicon, Inc. (Genicon)






9,080







9,080GoNoodle, Inc. (GoNoodle)






2,573







2,573Microcision LLC (Microcision)






4,786







4,786SciAps, Inc. (Sciaps)










250,000



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






16,439



451,342



467,781Repayments 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, March 31, 2018, of Level 3 Assets

$
3,550,000


$
9,491,063


$
19,189,160


$
32,230,223  Change in unrealized depreciation on investments for the period included in changes in net
assets

($
451,489
)Net realized gain on investments for the period included in changes in net assets

$
 NOTE 4. OTHER ASSETS At March 31, 2019 and December 31, 2018, other assets was comprised of the following:  March 31,2019


December 31,2018Prepaid expenses

$
297,378


$
Operating receivables


16,889



11,428Equipment (net)


197



262Dividend receivable


24,043



Total other assets

$
338,507


$
11,690 Note 5. COMMITMENTS AND CONTINGENCIES The Corporation had no commitments at March 31, 2019. In addition, the Corporation analyzed the new Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 842
standard, Leases, and deemed the effect of the Corporations financial statements to be immaterial.  31




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##### Table of Contents

Note 6. SBA DEBENTURES Pursuant to FASB Accounting Standard Update (ASU) 2015-03, the debt origination costs associated with
the SBA debt obligations are presented as a direct deduction of the related debt obligation.  March 31,2019


December 31,2018Debentures guaranteed by the SBA

$
11,000,000


$
8,750,000Less unamortized issue costs


(241,343
)


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

$
10,758,657


$
8,554,443 Note 7. CHANGES IN STOCKHOLDERS EQUITY The following schedule analyzes the changes in stockholders equity section of the Consolidated Statement of Financial Position for the
periods indicated:  CommonStock


Capital inexcess of parvalue


AccumulatedNetInvestmentLoss


UndistributedNet RealizedGain onInvestments


NetUnrealizedDepreciationonInvestments


TreasuryStock, at cost


TotalStockholdersEquityJanuary 1, 2019

$
686,304


$
10,581,789


($
1,665,552
)

$
26,221,443


($
2,830,692
)

($
1,469,105
)

$
31,524,187Net investment gain










22,767















22,767Net realized gain on sales and dispositions of investments














31,131











31,131Change in unrealized depreciation on investments


















401,517







401,517March 31, 2019

$
686,304


$
10,581,789


($
1,642,785
)

$
26,252,574


($
2,429,175
)

($
1,469,105
)

$
31,979,602CommonStock


Capital inexcess of parvalue


AccumulatedNetInvestmentLoss


UndistributedNet RealizedGain onInvestments


NetUnrealizedDepreciationonInvestments


TreasuryStock, at cost


TotalStockholdersEquityJanuary 1, 2018

$
686,304


$
10,581,789


($
1,597,146
)

$
27,215,738


($
3,498,895
)

($
1,469,105
)

$
31,918,685Net investment (loss)










(173,329
)














(173,329
)Net realized gain on sales and dispositions of investments


























Change in unrealized depreciation on investments


















(347,084
)






(347,084
)March 31, 2018

$
686,304


$
10,581,789


($
1,770,475
)

$
27,215,738


($
3,845,979
)

($
1,469,105
)

$
31,398,272  32




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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 three months ended
March 31, 2019 and 2018:  Three months endedMarch 31, 2019(Unaudited)


Three months endedMarch 31, 2018(Unaudited)Income from investment operations (1):Investment income

$
0.11


$
0.05Operating expenses


0.11



0.09Investment loss before income taxes


0.00



(0.04
)Income tax benefit


0.00



(0.01
)Net investment gain (loss)


0.00



(0.03
)Net realized and unrealized gain (loss) on investments


0.07



(0.05
)Increase (decrease) in net asset value


0.07



(0.08
)Net asset value, beginning of period


4.99



5.05Net asset value, end of period

$
5.06


$
4.97Per share market price, end of period

$
2.84


$
2.69Total return based on market value


13.60
%


(10.93
%)Total return based on net asset value


1.44
%


(1.63
%)Supplemental data:Ratio of operating expenses before income taxes to average net assets


2.17
%


1.86
%Ratio of operating expenses including income taxes to average net assets


2.60
%


1.36
%Ratio of net investment loss to average net assets


0.07
%


(0.55
%)Portfolio turnover


2.4
%


1.4
%Net assets, end of period

$
31,979,602


$
31,398,272Weighted 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.  33




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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 Currently, we are 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 March 31, 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. The portfolio assets will be
income-producing instruments that were originated in the last 48 months. Additionally, a new entity, Rand Capital Management LLC (RCM), will be established, assuming receipt of necessary shareholder approval and the closing of the
transactions, and 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. The sale and issuance of common stock pursuant to the stock purchase
agreement as well as the externalization of the management structure are subject to shareholder and other regulatory approvals.  34




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##### Table of Contents

Following the closing of the above-described transactions (the 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 first quarter of 2019, we had $8.7 million in cash available for future investments and expenses, an increase of
$4.7 million as compared to the end of 2018. The increase was primarily due to proceeds from a $3.5 million loan payoff by a portfolio company and $2.25 million of additional SBA leverage drawn down during the first quarter of 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
the strong macroeconomic environment and eager reception of new technologies and service concepts.  

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 have sufficient cash to invest in new opportunities and to repurchase shares. At period end, we had
authorization to repurchase an additional 458,954 shares of our Common Stock. However, our prioritized use of cash continues to be growing our portfolio.  

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. 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.  35




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##### Table of Contents

Financial Condition  Overview:

March 31,2019


December 31,2018


Increase


% IncreaseTotal assets

$
42,933,208


$
40,521,724


$
2,411,484



6.0
%Total liabilities


10,953,606



8,997,537



1,956,069



21.7
%Net assets

$
31,979,602


$
31,524,187


$
455,415



1.4
% Net asset value per share (NAV) was $5.06 at March 31, 2019 and $4.99 at December 31, 2018. Our gross outstanding SBA debentures at March 31, 2019 were $11,000,000 and will mature from 2022 through 2029. Cash and cash equivalents
approximated 27% of net assets at March 31, 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.  March 31,2019


December 31,2018


Decrease


% DecreaseInvestments, at cost

$
35,594,244


$
38,292,143


($
2,697,899
)


(7.0
%)Unrealized depreciation, net


(3,103,043
)


(3,625,339
)


522,296



(14.4
%)Investments at fair value

$
32,491,201


$
34,666,804


($
2,175,603
)


(6.3
%) Our total investments at fair value, as estimated by management and approved by our Board of Directors,
approximated 102% of net assets at March 31, 2019 versus 110% of net assets at December 31, 2018. The change in investments
during the three months ended March 31, 2019, at cost, is comprised of the following:  New investments:

CostIncrease (Decrease)Tilson Technology Management, Inc. (Tilson)

$
500,012KnowledgeVision Systems, Inc. (Knowledgevision)


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


140,000Total of new investments


790,012Other changes to investments:Genicon Inc. (Genicon) interest conversion and OID amortization


79,493Empire Genomics, LLC (Empire Genomics) capitalized fee income and interest conversion


24,664Microcision LLC (Microcision) interest conversion


4,833GoNoodle, Inc. (GoNoodle) interest conversion


2,599Total of other changes to investments


111,589Investments repaid, sold, liquidated or converted:eHealth Global Technologies, Inc. (eHealth) loan repayment


(3,500,000
)Advantage 24/7


(99,500
)Total of investments repaid, sold or liquidated


(3,599,500
)Net change in investments, at cost

($
2,697,899
)  36




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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 March 31, 2019 to the three months ended March 31, 2018 Investment Income  Three monthsendedMarch 31, 2019


Three monthsendedMarch 31, 2018


Increase(Decrease)


%Increase(Decrease)Interest from portfolio companies

$
405,965


$
297,348


$
108,617



36.5
%Interest from other investments


17,811



5,110



12,701



248.6
%Dividend and other investment income


34,625



54,165



(19,540
)


(36.1
%)Fee income


260,969



6,186



254,783



4,118.7
%Total investment income

$
719,370


$
362,809


$
356,561



98.3
% The total investment income that is received on a current basis for the three months ended March 31, 2019
is received from ten portfolio companies. This contrasts with the eleven portfolio companies generating current income for the three months ended March 31, 2018. Interest from portfolio companies  Interest from portfolio companies was approximately 37% higher during the three months ended March 31,
2019 versus the same period in 2018 due to the fact that we have originated more income-producing debt investments in the last year. The new debt instruments were originated from BeetNPath LLC, KnowledgeVision Systems, Inc., Tech 2000, Inc. and
several other portfolio companies. The following investments are on non-accrual status: 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 during the three
months ended March 31, 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 monthsendedMarch 31, 2019


Three monthsendedMarch 31, 2018Carolina Skiff LLC (Carolina Skiff)

$
24,043


$
41,095Tilson Technology Management, Inc. (Tilson)


10,582



9,688Empire Genomics LLC (Empire Genomics)






3,382Total dividend and other investment income

$
34,625


$
54,165 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.  37




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##### Table of Contents

The income associated with the amortization of financing fees was $35,969 and $5,186 for the
three months ended March 31, 2019 and 2018, respectively. In addition, the Corporation recognized a one-time fee of $225,000 in conjunction with the repayment of the eHealth loan instrument. The board
fees were $0 and $1,000 for the three months ended March 31, 2019 and 2018, respectively. Expenses  Three months endedMarch 31, 2019


Three months endedMarch 31, 2018


Increase


% IncreaseTotal expenses

$
689,735


$
588,564


$
101,171



17.2
% 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 three months ended March 31, 2019 versus the same period in 2018 was primarily caused by a 123%, or $124,968, increase in professional fees. Professional fees are higher during the first quarter of 2019 because we continue to incur
expenses in connection with aforementioned stock purchase agreement and the regulatory procedures that are required with such Transactions. These expenses included external legal, tax consulting and other advisory expenses to support the complex
regulatory environment in which we operate. In addition, we deferred $241,000 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 expenses are in the Other Assets line on the Balance Sheet. Realized Gain on Investments  Three months endedMarch 31, 2019


Three months endedMarch 31, 2018


ChangeRealized gain on investments before income taxes

$
40,500


$



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


Three months endedMarch 31, 2018


ChangeChange in unrealized depreciation of investments before income taxes

$
522,296


($
451,489
)

$
973,785 The change in unrealized depreciation, before income taxes, for the three months ended March 31, 2019 was
comprised of the following:  Three months endedMarch 31, 2019BeetNPath, LLC (Beetnpath)

($
393,904
)SciAps, Inc. (Sciaps)


(385,000
)SocialFlow, Inc. (Socialflow)


(321,300
)Mercantile Adjustment Bureau, LLC (Mercantile)


(200,000
)Genicon, Inc. (Genicon)


(37,500
)Tilson Technology Management, Inc. (Tilson)


1,860,000Total change in net unrealized depreciation of investments before income taxes during the three
months ended March 31, 2019

$
522,296  38




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##### Table of Contents

The valuations of our investments in Beetnpath, Sciaps, Socialflow and Mercantile were
decreased after we reviewed each of the portfolio companys operations, commercial progress against their business plan, and past and projected financial condition and determined that a valuation adjustment was necessary. Our valuation of Genicon was decreased during the three months ended March 31, 2019 to revalue our holdings based upon the liquidation
preferences of our securities and as a result of a recent round of financing. In accordance with our valuation policy, we increased the
value of our holdings in Tilson based on a significant equity financing during the first quarter of 2019 with a sophisticated new non-strategic outside investor at a higher valuation than their prior financing
round valuation. The change in unrealized depreciation, before income taxes, for the three months ended March 31, 2018 was comprised
of the following:  Three months endedMarch 31, 2018First Wave Products Group (First Wave)

($
250,000
)Empire Genomics, LLC (Empire Genomics)


(201,489
)Total change in net unrealized depreciation of investments before income taxes during the three
months ended March 31, 2018

($
451,489
) Our valuation of First Wave was decreased to reflect a round of financing that was completed by First Wave in
the second quarter of 2018. The valuation of our investment in Empire Genomics was decreased after we reviewed the portfolio
companys operations and current and projected financial condition and determined that a valuation adjustment reflecting prior capitalized interest was necessary. 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 March 31, 2019 and 2018, the net increase (decrease) in net assets from operations was $455,415 and ($520,413),
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.  39




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##### Table of Contents

As of March 31, 2019, our total liquidity consisted of approximately $8.7 million
in cash and cash equivalents on hand and the availability of $3.0 million SBA leverage commitment. Net cash used by operating
activities has averaged approximately $820,000 over the last three years. The average cash used for investment in portfolio companies over the last three years was approximately $4,600,000. Our cash flow from operations may fluctuate based on the
timing of the receipt of dividend income and realized gains and the associated income taxes paid. We will generally use cash to fund our operating expenses and also to invest in companies, as we seek to build our portfolio utilizing our available
cash and proceeds from liquidations of portfolio investments. We anticipate that we will continue to exit investments. However, the timing of liquidation events within the portfolio is difficult to project with any certainty. As of March 31,
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. We believe that the cash on hand, the scheduled interest payments on our
portfolio investments and the anticipated additional SBA leverage 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 March 31, 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 March 31, 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 March 31, 2019.  40




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##### Table of Contents

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.  41




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##### Table of Contents

PART II. OTHER INFORMATION Item 1.    Legal Proceedings We and each of our directors have been named as defendants in a complaint
that was filed in the United States District Court for the Western District of New York on April 29, 2019, captioned George Assad v. Rand Capital Corporation, et al., Case No.
1:19-cv-00557. The complaint alleges violations of Section 14(a) of the Securities Exchange Act of 1934, as amended and Rule
14a-9 promulgated under the Securities Exchange Act of 1934, as amended, in Rands definitive proxy statement prepared for purposes of seeking to obtain shareholder approval of the Transactions. The
plaintiff seeks, among other relief, to enjoin Rand from consummating the Transactions and an award to the plaintiff of costs of the action, including a reasonable allowance for plaintiffs attorneys and experts fees. We believe the
lawsuit is baseless and intend to defend the matter vigorously. 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 Securities  Period

Total number ofshares purchased(1)


Average price paidper share (2)


Total number of sharespurchased as part ofpubliclyannounced plan (3)


Maximum number ofshares that may yet bepurchased under the sharerepurchase program1/1/2019  1/31/2019














458,9542/1/2019  2/28/19














458,9543/1/2019  3/31/2019














458,954  (1)
There were no shares repurchased during the first quarter of 2019. (2)
The average price paid per share is calculated on a settlement basis and includes commission. (3)
On October 25, 2018, the Board of Directors extended the repurchase authorization of up to 1,000,000
shares of the Corporations common stock on the open market at prices no greater than the then current net asset value through October 25, 2019. Item 3.    Defaults upon Senior Securities None. Item 4.    Mine Safety Disclosures Not Applicable. Item 5.    Other Information None.  42




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##### Table of Contents

Item 6.    Exhibits  (a)
Exhibits The following exhibits are filed with this report or are incorporated herein by reference to a prior filing, in accordance with Rule 12b-32 under the Securities Exchange Act of 1934.  (3.1)(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.  43




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##### Table of Contents

Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized. Dated: May 2, 2019  RAND CAPITAL CORPORATIONBy:

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

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