[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 2002

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _____ to _______

Rand Capital Corporation and Subsidiary
(Exact Name of Registrant as specified in its Charter)

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

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

Yes: X No ___

Number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date (April 30, 2002) : 5,763,034

            Item 1. FINANCIAL STATEMENTS

                        Condensed Consolidated Statements of Financial Position as of
                        March 31, 2002 and December 31, 2001

                        Condensed Consolidated Statements of Operation for the Three-Months Ended
                        March 31, 2002 and 2001

                        Condensed Consolidated Statements of Cash Flows for the Three-Months Ended
                        March 31, 2002 and 2001

                        Condensed Consolidated Statements of Changes in Net Assets for the Three-Months Ended
                        March 31, 2002  and 2001

                        Schedule of Portfolio Investments as of March 31, 2002

                        Notes to Financial Statements

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

            Item 3. Quantitative and Qualitative Disclosures about Market Risk

            Item 1. Legal Proceedings

            Item 2. Changes in Securities and Use of Proceeds

            Item 3. Defaults upon Senior Securities

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

            Item 5. Other Information

            Item 6. Exhibits and Reports on Form 8-K

See notes to the condensed consolidated financial statements.

See notes to the condensed consolidated financial statements.

See notes to condensed consolidated financial statements.

See notes the condensed consolidated financial statements.

See notes to condensed consolidated financial statements.

In Management's opinion, the accompanying condensed consolidated financial statements include all adjustments necessary for a fair presentation of the consolidated financial position, results of operations, and cash flows for the interim periods presented. Certain information and note disclosures normally included in audited annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been omitted; however, the Corporation believes that the disclosures made are adequate to make the information presented not misleading. The interim results for the three-months ended March 31, 2002 are not necessarily indicative of the results for the full year.

These statements should be read in conjunction with the financial statements and the notes included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2001. Information contained in this filing should also be reviewed in conjunction with Rand Capital Corporation's related filings with the Securities & Exchange Commission ("SEC") during the period of time covered by this filing. These filings include, but are not limited to the following:

Basis of Consolidation - The condensed consolidated Financial Statements include the accounts of Rand Capital Corporation ("Rand") and Rand Capital SBIC, L.P. ("Rand SBIC")(collectively, "The Corporation"). All significant intercompany balances and transactions have been eliminated in consolidation.

Nature of the Business - Effective August 16, 2001 Rand made an election, following an authorized vote of the shareholders to become a Business Development Company, or "BDC." Generally, a BDC is a specialized type of investment company that is primarily engaged in the business of furnishing capital and managerial expertise to companies that do not have ready access to capital through conventional finance channels. There was no impact on the corporate structure as a result of the change to a BDC. Prior to this election, Rand operated as a diversified closed-end management investment company registered under the Investment Company Act of 1940. Rand continues to operate as a publicly held venture capital company, listed on the NASDAQ Small Cap Market under the symbol "RAND." Rand was founded in 1969 and is headquartered in Buffalo, New York. Its investment strategy is to seek capital appreciation through venture capital investments in small, unseasoned, developing companies, primarily in Upstate New York.

During the first quarter of 2002, Rand formed a wholly-owned subsidiary, Rand Capital SBIC, L.P., (Rand SBIC) for the purpose of operating it as a small business investment company. On January 25, 2002, Rand transferred $5 million in cash to this subsidiary to serve as "regulatory capital." On February 1, 2002, Rand received notification that its Small Business Investment Company (SBIC) application for the subsidiary had been received by the Small Business Administration. The licensing process is expected to take from six to nine months. Once approved and licensed by the SBA, this new subsidiary will be able to obtain up to two times its initial $5,000,000 of "regulatory capital" from the SBA for purposes of new investment. There has been no investment activity by Rand Capital SBIC, L.P. in the first quarter of 2002.

Investments - Investments are stated at fair value as determined in good faith by the Board of Directors. Certain investment valuations have been determined by the Board of Directors in the absence of readily ascertainable fair values. The estimated valuations are not necessarily indicative of amounts which may ultimately be realized as a result of future sales or other dispositions of securities, and these favorable or unfavorable differences could be material. Amounts reported as realized gains and losses are measured by the difference between the proceeds of sale or exchange and the cost basis of the investment without regard to unrealized gains or losses reported in prior periods. The cost of securities that have, in the Board of Directors' judgment, become worthless, are written off and reported as realized losses.

Subsequent Event - In April 2002, Rand SBIC adopted a model valuation policy as established by the United States Small Business Administration (SBA). At the same time the Board of Directors of Rand also adopted a new valuation policy that mirrored the Rand SBIC policy and is not materially different from the prior Rand valuation policy.  Reference is made to the following Exhibits to this Form 10-Q Report, which are incorporated herein by reference: 

        Exhibit 99.1 -- Rand Capital SBIC, L.P. Investment Valuation Policy; and
        Exhibit 99.2 -- Rand Capital Corporation Investment Valuation Policy.

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

Interest Income - Interest income generally is recorded on the accrual basis except where the investment is valued at less than cost to reflect risk of loss. In such cases, interest is recorded at the time of receipt. A reserve for possible losses on interest receivable is maintained when appropriate.

Net Assets per Share - Net assets per share are based on the number of shares of common stock outstanding.

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

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

The tax effect of the major temporary difference and carry-forwards that give rise to the Corporation's net deferred tax liabilities (assets) at March 31, 2002 and December 31, 2001 are as follows:

At March 31, 2002 and December 31, 2001, Rand had a federal and state net operating loss carry-forward of approximately $1,000 and $781,000, respectively, which expire commencing in 2012.

Deferred tax assets and liabilities are recorded for temporary differences between the financial statement and tax bases of assets and liabilities using the currently enacted tax rate expected to be in effect when the taxes are actually paid or recovered.

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

        On January 18, 2001, January 21, 2000 and October 2, 2000, Rand sold 15,000, 15,000 and 25,000 shares of common stock through a private stock offering at $2.125, $1.33 and $1.51 per share, respectively. There was no common stock issued in 2002.

        On October 18, 2001, the Board of Directors authorized the repurchase of up to 5% of Rand's outstanding stock through purchases on the open market during the one-year period ending October 18, 2002. As of March 31, 2002 no stock repurchases had occurred.

        In July 2001, the shareholders of Rand authorized the establishment of two stock option plans - the Employee Plan and the Director Plan. The Plans provide for an aggregate of 200,000 and 100,000 shares, respectively, to be awarded to eligible employees and non-officer directors. As of March 31, 2002, no stock options have been awarded from either plan. The Director Plan will not take effect, if at all, until an SEC exemption is obtained from restrictions under the Investment Company Act of 1940.

        You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our financial statements and related notes included elsewhere in this report.

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

        On January 14, 2002, Rand formed a wholly-owned subsidiary, Rand Capital SBIC, L.P., for the purpose of operating it as a small business investment company (SBIC). On January 25, 2002, Rand transferred $5 million in cash to Rand SBIC to serve a "regulatory capital" for purposes of Small Business Administration (SBA) regulation. On February 1, 2002, Rand SBIC's application for a license to operate as an SBIC was submitted to the SBA. The SBA licensing process is expected to take six to nine months to complete. Rand intends to operate Rand SBIC for the same purposes, with investments in the same kinds of securities, as Rand. Rand SBIC's operations will be consolidated with those of Rand for both financial reporting and tax purposes. Rand intends to file an application with the SEC for exemptions from certain restrictions under the Investment Company Act of 1940 on the operation of subsidiaries that the SEC has commonly granted to Business Development Companies with wholly-owned SBIC subsidiaries.

        The following financial discussion will include Rand and Rand SBIC's financial position and results of operations. The only financial activity that occurred in the first quarter of 2002 with respect to Rand SBIC was the transfer of $5,000,000 from Rand to a Rand SBIC bank account and the resulting earned interest revenue. Due to the minimal financial activity of Rand SBIC the financial discussions that follow will include the results only from Rand, unless otherwise specified.

        Rand's total assets increased by $25,547 or 0.2% to $10,308,040 and its net assets increased by $47,360 or 0.5% to $10,105,644 at March 31, 2002, versus $10,282,493 and $10,058,284 at December 31, 2001, respectively.

        These increases were primarily due to the realization of proceeds from the sale of ADIC stock in January 2002. The ADIC securities, with a cost basis of $138,841, were sold for net proceeds of $1,086,730.

        Rand's financial condition is dependent on the success of its holdings. Rand has invested a substantial portion of its assets in early stage or start-up companies. These private businesses generally tend to be unproven, thinly capitalized small companies that may lack experienced management and may have no history of operations. The following summarizes the Corporation's investment portfolio at the year-ends indicated.

        The decrease in investment cost is due to the sale of the ADIC stock during January 2002 with a cost basis of $138,841 and a value of $976,816 at December 31, 2001. In addition, during the quarter the corporation increased the valuation of its investment in Ultra-Scan by $239,805 and decreased the valuation of Memberware by ($50,000).

        Rand's total investments at fair value approximated 32% of net assets at March 31, 2002 and 40% of net assets at December 31, 2001.

        No investment activity in Rand or Rand SBIC occurred in the three-months ended March 31, 2002.

        Between January 3 and 4th, 2002 Rand sold a total of 61,051 shares of ADIC stock at a price range of $17.30 to $18.45 with gross proceeds of $1.1 million and a realized gain of approximately $948,000. Rand's average cost basis per share for the ADIC securities is $2.27.

        Rand's primary investment objective is to achieve long-term capital appreciation on its portfolio investments. Therefore, a considerable portion of the investment portfolio is structured to realize capital appreciation over the long-term and not necessarily generate income in the form of dividends or interest. The company does earn interest income from investing its idle funds in money market instruments.

        Total investment income for the three-months ended March 31, 2002 and 2001 was $66,676 and $45,137, respectively, of which $30,456 (46%) and $33,036 (73%) consisted of interest from portfolio companies during the quarter. This income includes investments that have high interest accruals and often do not pay a current yield. See the Schedule of Portfolio Investments footnote (e) to identify the investments that pay a current yield. The remaining investment income is comprised of interest on idle cash balances and other temporary short-term investments. The interest income for the three-months ending March 31, 2002 was $30,680 versus $4,014 for the same period in 2001. This interest income is higher at March 31, 2002 mainly due to higher idle cash balance of $6,712,310 at March 31, 2002 versus $240,951 at March 31, 2001.

        Operating expenses for the three-months ended March 31, 2002 and 2001 were $287,838 and $262,628, respectively. The operating expenses predominately consist of employee compensation and benefits, shareholder related costs, office expenses, expenses related to identifying and reviewing investment opportunities and professional fees. The increase in expense for the three-month period ended March 31, 2002 was due to $67,595 of professional costs (consulting and advisory fees) incurred for preparing an application for the Small Business Administration (SBA) for participation in the SBIC program. These professional costs were $16,994 for the same period in 2001.

        Net investment losses from operations for the three-month period ended March 31, 2002 and 2001 were ($528,735) and ($218,310), respectively. The fluctuations from year to year are partly due to the increase in interest revenue in 2002 generated by higher idle cash balances than the prior year and the deferred income tax expense of $254,376 for the three-months ended March 31, 2002. The deferred income tax expense in the three-months ended March 31, 2001 was $0.

        During the three-months ended March 31, 2002, Rand realized total net gains of $947,889 on the sale of 61,051 shares of its ADIC holdings. During the three-months ended March 31, 2001 Rand recognized a minor realized gain of $693 on the sale of preferred stock held in its portfolio of investments.

        Rand accounts for its operations under accounting principles generally accepted in the United States of America for investment companies. The principal measure of its financial performance is "net increase (decrease) in net assets from operations" on its statements of operations. For the three-month period ending March 31, 2002, the net increase in net assets from operations was $47,360 as compared to a net (decrease) in net assets from operations of ($393,955) for the same period in 2001. The increase in net realized and unrealized gain on investments during 2002 is primarily attributable to the sale of ADIC securities at a gain. The first quarter 2001 net decrease is due to the realized loss on BNKR, Inc. for ($400,000) in the first quarter of 2001.

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

        At March 31, 2002, 66% of Rand's net assets are held in cash and cash equivalents and compares to 59% at December 31, 2001.

        As of March 31, 2002 and December 31, 2001, Rand's total liquidity, consisting of cash and cash equivalents, was $6,712,310 and $5,941,517, respectively. Included in the March 31, 2002 cash balance of $6,712,310 was $5,016,172 ($5,000,000 initial investment plus interest revenue) in Rand SBIC, L.P. cash. Management believes that these cash and cash equivalents will provide Rand and Rand SBIC with the liquidity necessary to fund operations over the next twelve (12) months.

        The increase in liquidity in the first quarter 2002 was primarily due to the sale of ADIC stock in January 2002 with net proceeds of $1,086,730.

        The value of Rand's common stock may decline and may be affected by numerous market conditions, which could result in the loss of some or the entire amount invested in Rand's shares. The securities markets frequently experience extreme price and volume fluctuations which affect market prices for securities of companies generally, and technology and very small capitalization companies in particular. General economic conditions, and general conditions in the Internet and information technology, life sciences, material sciences and other high technology industries, will also affect Rand's stock price. The recent decimalization of the stock exchanges, particularly NASDAQ, is a new risk factor that may decrease liquidity of smaller capitalization issues such as the Corporation's own common stock and that of its publicly traded holdings.

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

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

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

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

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

        There are significant risks inherent in the venture capital business. The Corporation typically invests a substantial portion of its assets in early stage or start-up companies. These private businesses tend to be thinly capitalized, unproven small companies with risky technologies that lack management depth and have not attained profitability or have no history of operations. Because of the speculative nature and the lack of a public market for these investments, there is significantly greater risk of loss than is the case with traditional investment securities. The Corporation expects that some of its venture capital investments will be a complete loss or will be unprofitable and that some will appear to be likely to become successful but never realize their potential. The Corporation has been risk seeking rather than risk averse in its approach to venture capital and other investments. Neither the Corporation's investments nor an investment in the Corporation is intended to constitute a balanced investment program. The Corporation has in the past relied, and continues to rely to a large extent, upon proceeds from sales of investments rather than investment income to defray a significant portion of its operating expenses. Such sales are unpredictable and may not occur. The terrorist acts in the United States of September 11, 2001 are the type of events that could severely impact a small company that does not have as many resources to ride out market downturns and would need immediate investment capital that might be temporarily unavailable.

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

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

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

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

        Rand and Rand SBIC's investment activities contain elements of risk. The portion of the investment portfolio consisting of equity and equity-linked debt securities in private companies is subject to valuation risk. Because there is typically no public market for the equity and equity-linked debt securities in which the Corporation invests, the valuation of the equity interests in the portfolio is stated at "fair value" as determined in good faith by the Board of Directors in accordance with the Corporation's investment valuation policy (See Exhibits A and B). In the absence of a readily ascertainable market value, the estimated value of Rand and Rand SBIC's portfolio may differ significantly for the values that would be placed on the portfolio if a ready market for the investments existed. Any changes in valuation are recorded in the Corporation's statement of operations as "Net unrealized gain (loss) on investments."

        At times a portion of the Corporation's portfolio may include marketable securities traded in the over-the-counter market. In addition, there may be a portion of the Corporation's portfolio for which no regular trading market exists. In order to realize the full value of a security, the market must trade in an orderly fashion or a willing purchaser must be available when a sale is to be made. Should an economic or other event occur that would not allow the markets to trade in an orderly fashion, the Corporation may not be able to realize the fair value of its marketable investments or other investments in a timely manner.

        As of March 31, 2002, the Corporation did not have any off-balance sheet investments or hedging investments.

                        None

        Item 2. Changes in Securities and Use of Proceeds

                        None

                        None

                        Rand held its annual shareholder meeting on April 24, 2002. The following matters
                        were submitted to a vote of shareholders: Election of Directors and the approval of
                        independent auditors.

                        None

                        No Form 8-K reports were filed during the quarter ended March 31, 2002.

                        The following exhibits are filed with this report:

                                99.1    -    Rand Capital SBIC, L.P. Investment Valuation Policy
                                99.2    -    Rand Capital Corporation Investment Valuation Policy

Date: May 8, 2002