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SVVC Firsthand Technology Value Fund

Filed: 15 Nov 21, 4:16pm

 

 

 

U.S. 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 of September 30, 2021 or

 

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

 

Commission File Number 333-168195

 

FIRSTHAND TECHNOLOGY VALUE FUND, INC.

(Exact Name of Registrant as Specified in Charter)

 

MARYLAND
(State or Other Jurisdiction of
Incorporation or Organization)

27-3008946
(I.R.S. Employer
Identification No)

  

150 Almaden Boulevard, Suite 1250
San Jose, California
(Address of Principal Executive Offices)

95113
(Zip Code)

 

Registrant’s Telephone Number, Including Area Code: (408) 886-7096

 

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 is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

☐ Large Accelerated Filer

 

☑ Non-accelerated Filer
(Do not check if smaller reporting company)

☐ Accelerated Filer

 

☐ Smaller Reporting Company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐Yes         ☑ No

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

Outstanding at September 30, 2021

Common Stock, $0.001 par value per share

6,893,056

 

 

 

 

 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

2

Item 1. Financial Statements

2

Consolidated Statements of Assets and Liabilities as of September 30, 2021 (Unaudited) and December 31, 2020

3

Consolidated Statements of Operations (Unaudited) for the Three Months Ended September 30, 2021, and September 30, 2020, and for the Nine Months Ended September 30, 2021, and September 30, 2020

4

Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended September 30, 2021, and September 30, 2020, and for the Nine Months Ended September 30, 2021, and September 30, 2020

5

Consolidated Statements of Changes in Net Assets (Unaudited) for the Three Months Ended September 30, 2021, and September 30, 2020, and for the Nine Months Ended September 30, 2021, and September 30, 2020

6

Selected Per Share Data and Ratios for the Nine Months Ended September 30, 2021 (Unaudited) (Consolidated), for the Year Ended December 31, 2020 (Consolidated), for the Year Ended December 31, 2019 (Consolidated), for the Year Ended December 31, 2018 (Consolidated), for the Year Ended December 31, 2017 (Consolidated), and for the Year Ended December 31, 2016 (Consolidated)

7

Consolidated Schedule of Investments as of September 30, 2021 (Unaudited) and for the Year Ended December 31, 2020

9

Consolidated Notes To Financial Statements (Unaudited)

22

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

42

Item 3. Quantitative and Qualitative Disclosures About Market Risk

49

Item 4. Controls and Procedures

51

PART II. OTHER INFORMATION

52

Item 1. Legal Proceedings

53

Item 1A. Risk Factors

53

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

53

Item 3. Defaults Upon Senior Securities

53

Item 4. Mine Safety Disclosures

53

Item 5. Other Information

53

Item 6. Exhibits

53

SIGNATURES

54

 

1

 

 

PART I. FINANCIAL INFORMATION

 

Item 1.    Financial Statements

 

 

See accompanying notes to financial statements

2

 

 

Firsthand Technology Value Fund, Inc.

 

Consolidated Statements of Assets and Liabilities

 

  

AS OF
SEPTEMBER 30,
2021
(UNAUDITED)

  

AS OF
DECEMBER 31,
2020

 

ASSETS

        

Investment securities:

        

Unaffiliated investments at acquisition cost

 $1,302,137* $3,468,393*

Affiliated investments at acquisition cost

  4,744,427   4,744,427 

Controlled investments at acquisition cost

  132,027,927   125,755,796 

Total acquisition cost

 $138,074,491  $133,968,616 

Unaffiliated investments at market value

 $632,745* $3,299,827*

Affiliated investments at market value

  1,114,650   6,451,878 

Controlled investments at market value

  94,728,335   92,321,114 

Total market value ** (Note 6)

  96,475,730   102,072,819 

Foreign currency at value (cost $0 and $703)

     729 

Receivable from dividends and interest

  9,680,660   5,728,598 

Other assets

  12,976   25,715 

Total Assets

  106,169,366   107,827,861 

LIABILITIES

        

Due to Custodian

  13,151    

Payable to affiliates (Note 4)

  7,143,644   5,450,699 

Consulting fee payable

  26,000   26,000 

Accrued expenses and other payables

  218,239   208,794 

Total Liabilities

  7,401,034   5,685,493 

NET ASSETS

 $98,768,332  $102,142,368 
         

Net Assets consist of:

        

Common Stock, par value $0.001 per share 100,000,000 shares authorized

 $6,893  $6,893 

Paid-in-capital

  176,770,722   176,770,722 

Total distributable earnings (loss)

  (78,009,283)  (74,635,247)

NET ASSETS

 $98,768,332  $102,142,368 
         

Shares of Common Stock outstanding

  7,016,432   7,016,432 

Shares of Treasury Stock outstanding

  (123,376)  (123,376)

Total Shares of Common Stock outstanding

  6,893,056   6,893,056 

Net asset value per share (Note 2)

 $14.33  $14.82 

 

*

Includes Fidelity Investment Money Market Treasury Portfolio - Class I, which invests primarily in U.S. Treasury securities. The yields as of 09/30/21 and 12/31/20 were 0.01% and 0.01%, respectively. Please see https://fundresearch.fidelity.com/ mutual-funds/summary/316175504 for additional information.

 

**

Includes warrants whose primary risk exposure is equity contracts.

 

 

 

See accompanying notes to financial statements

3

 

 

Firsthand Technology Value Fund, Inc.

 

Consolidated Statements of Operations (Unaudited)

 

  

FOR THE THREE MONTHS ENDED

  

FOR THE NINE MONTHS ENDED

 
  

SEPTEMBER 30,
2021

  

SEPTEMBER 30,
2020

  

SEPTEMBER 30,
2021

  

SEPTEMBER 30,
2020

 

INVESTMENT INCOME

                

Unaffiliated interest

 $2,559  $9,201  $28,297  $13,048 

Affiliated/controlled interest

  1,546,351   1,059,453   4,213,345   2,749,657 

TOTAL INVESTMENT INCOME

  1,548,910   1,068,654   4,241,642   2,762,705 

EXPENSES

                

Investment advisory fees (Note 4)

  555,311   518,983   1,694,468   1,493,418 

Administration fees

  30,622   24,892   91,190   88,792 

Custody fees

  7,585   2,962   20,681   9,763 

Transfer agent fees

  13,005   7,761   30,225   23,872 

Registration and filing fees

  8,242   7,968   24,458   23,732 

Professional fees

  101,564   128,497   271,083   298,262 

Printing fees

  18,541   26,452   53,997   78,780 

Trustees fees

  50,000   50,000   150,000   150,000 

Compliance fees

  30,355   29,857   87,559   88,923 

Other fees

  15,098   9,243   37,651   32,132 

TOTAL GROSS EXPENSES

  830,323   806,615   2,461,312   2,287,674 

NET INVESTMENT INCOME

  718,587   262,039   1,780,330   475,031 

Net Realized and Unrealized Gain (Loss) on Investments:

                

Net realized gains (losses) from security transactions on:

                

Affiliated/Controlled

     835,463   4,548,597   835,463 

Non-affiliated/controlled and other assets

     5,262      (1,386,804)

Foreign currency

        27    

Deferred tax benefit/expenses

           (5,816,064)

Net realized gains (losses), net of deferred taxes

     840,725   4,548,624   (6,367,405)

Net change in unrealized appreciation (depreciation) on:

                

Non-affiliated investments

  (201,009)  1,105   (500,826)  3,815,325 

Affiliated/controlled investments and foreign currency

  (9,086,301)  (6,994,528)  (9,721,304)  (22,569,950)

Affiliated/controlled warrants investments (1)

  (5,840)  (217,622)  519,140   (3,209,067)

Deferred tax benefit/expenses

           (2,026,517)

Net change in unrealized appreciation (depreciation), net of deferred taxes

  (9,293,150)  (7,211,045)  (9,702,990)  (23,990,209)

Net Realized and Unrealized Gains (Losses) on Investments, Net of Deferred Taxes

  (9,293,150)  (6,370,320)  (5,154,366)  (30,357,614)

Net Increase (Decrease) In Net Assets Resulting From Operations, Net of Deferred Taxes

 $(8,574,563) $(6,108,281) $(3,374,036) $(29,882,583)

Net Increase (Decrease) In Net Assets Per Share Resulting From Operations (2)

 $(1.24) $(0.89) $(0.49) $(4.30)

 

(1)

Primary risk exposure is equity contracts.

 

(2)

Per share results are calculated based on weighted average shares outstanding for each period.

 

 

See accompanying notes to financial statements

4

 

 

Firsthand Technology Value Fund, Inc.

 

Consolidated Statements of Cash Flows (Unaudited)

 

  

FOR THE
THREE MONTHS
ENDED
SEPTEMBER 30,
2021

  

FOR THE
THREE MONTHS
ENDED
SEPTEMBER 30,
2020

  

FOR THE
NINE MONTHS
ENDED
SEPTEMBER 30,
2021

  

FOR THE
NINE MONTHS
ENDED
SEPTEMBER 30,
2020

 

CASH FLOWS FROM OPERATING ACTIVITIES

                

Net increase (decrease) in Net Assets resulting from operations

 $(8,574,563) $(6,108,281) $(3,374,036) $(29,882,583)

Adjustments to reconcile net increase (decrease) in Net Assets derived from operations to net cash provided by (used in) operating activities

                

Purchases of investments

     (9,978,559)  (13,512,264)  (13,618,559)

Proceeds from disposition of investments

  500,000   15,145,494   22,338,729   18,969,294 

Net purchases / sales from short-term investments

  (359,338)  (5,006,357)  (8,383,742)  (2,781,671)

Increase (decrease) in dividends, interest, and reclaims receivable

  (1,448,015)  (965,167)  (3,952,062)  (2,449,143)

Increase (decrease) in due to custodian

  1   (13,151)  13,151    

Increase (decrease) in payable to affiliates

  496,584   548,840   1,692,945   1,582,340 

Increase (decrease) in other assets

  12,019   13,946   9,445   9,835 

Increase (decrease) in accrued expenses and other payables

  80,162   12,641   12,739   (167,405)

Increase (decrease) in deferred tax benefit

           7,842,583 

Net realized gain (loss) from investments

     (840,725)  (4,548,624)  551,341 

Net unrealized appreciation (depreciation) from investments, other assets, and warrants transactions

  9,293,150   7,211,045   9,702,990   21,963,692 

Net cash provided by (used in) operating activities

     19,726   (729)  2,019,724 
                 

CASH FLOWS FROM FINANCING ACTIVITIES

                

Cost of shares repurchased

           (1,999,998)

Net cash provided by (used in) operating activities

           (1,999,998)
                 

Net increase (decrease) in cash

     19,726   (729)  19,726 

Cash - beginning of period

        729    

Cash - end of period

 $  $19,726  $  $19,726 

 

 

See accompanying notes to financial statements

5

 

 

Firsthand Technology Value Fund, Inc.

 

Consolidated Statements of Changes in Net Assets (Unaudited)

 

  

FOR THE
THREE MONTHS
ENDED
SEPTEMBER 30,
2021

  

FOR THE
THREE MONTHS
ENDED
SEPTEMBER 30,
2020

  

FOR THE
NINE MONTHS
ENDED
SEPTEMBER 30,
2021

  

FOR THE
NINE MONTHS
ENDED
SEPTEMBER 30,
2020

 

FROM OPERATIONS:

                

Net investment income (loss), net of deferred taxes

 $718,587  $262,039  $1,780,330  $475,031 

Net realized gain (loss) from security transactions and warrants transactions, net of deferred taxes

     840,725   4,548,624   (6,367,405)

Net change in unrealized appreciation (depreciation) on investments and warrants transactions, net of deferred taxes

  (9,293,150)  (7,211,045)  (9,702,990)  (23,990,209)

Net increase (decrease) in net assets from operations

  (8,574,563)  (6,108,281)  (3,374,036)  (29,882,583)
                 

FROM CAPITAL SHARE TRANSACTIONS:

                

Value for shares repurchased

           (1,999,998)

TOTAL INCREASE/(DECREASE) IN NET ASSETS

  (8,574,563)  (6,108,281)  (3,374,036)  (31,882,581)
                 

NET ASSETS:

                

Beginning of period

  107,342,895   101,315,091   102,142,368   127,089,391 

End of period

 $98,768,332  $95,206,810  $98,768,332  $95,206,810 
                 

COMMON STOCK ACTIVITY:

                

Shares repurchased

           (285,714)

Net decrease in shares outstanding

           (285,714)

Shares outstanding, beginning of period

  6,893,056   6,893,056   6,893,056   7,178,770 

Shares outstanding, end of period

  6,893,056   6,893,056   6,893,056   6,893,056 

 

See accompanying notes to financial statements

6

 

 

Firsthand Technology Value Fund, Inc.

 

Consolidated Financial Highlights
Selected per share data and ratios for a share outstanding throughout each period

 

  

FOR THE
NINE MONTHS
ENDED
SEPTEMBER 30,
2021
(UNAUDITED)

  

FOR THE
YEAR ENDED
DECEMBER 31,
2020

  

FOR THE
YEAR ENDED
DECEMBER 31,
2019

  

FOR THE
YEAR ENDED
DECEMBER 31,
2018

  

FOR THE
YEAR ENDED
DECEMBER 31,
2017

  

FOR THE
YEAR ENDED
DECEMBER 31,
2016

 

Net asset value at beginning of period

 $14.82  $17.70  $26.69  $23.83  $20.04  $22.79 

Income from investment operations:

                        

Net investment income (loss), before deferred taxes

  0.26(1)   0.09(1)   0.90(1)   (1.29)(1)  (0.62)  (0.52)

Deferred tax benefit

        (0.08)  0.07       

Net investment gain (losses)

  0.26   0.09   0.82   (1.22)  (0.62)  (0.52)

Net realized and unrealized gains (losses) on investments, before deferred taxes

  (0.75)  (2.30)  (12.15)  5.13   4.21   (2.76)

Deferred tax expense

     (1.13)  2.34   (1.23)      

Net realized and unrealized gains (losses) on investments, after deferred taxes

  (0.75)  (3.43)  (9.81)  3.90   4.21   (2.76)

Total from investment operations

  (0.49)  (3.34)  (8.99)  2.68   3.59   (3.28)
                         

Distributions from:

                        

Realized capital gains

           (0.03)      

Anti-dilutive effect from capital share transactions

     0.46      0.21   0.20   0.53 

Net asset value at end of period

 $14.33  $14.82  $17.70  $26.69  $23.83  $20.04 
                         

Market value at end of period

 $4.73  $4.47  $6.43  $11.20  $8.96  $7.67 
                         

Total return

                        

Based on Net Asset Value

  (3.31)%(A)  (16.27)%  (33.68)%  12.39%  18.91%  (12.07)%

Based on Market Value

  5.82%(A)  (30.48)%  (42.59)%  25.43%  16.82%  (6.12)%

Net assets at end of period (millions)

 $98.8  $102.1  $127.1  $191.6  $174.0  $148.9 

 

See accompanying notes to financial statements

7

 

 

Firsthand Technology Value Fund, Inc.

 

Consolidated Financial Highlights - continued
Selected per share data and ratios for a share outstanding throughout each period

 

  

FOR THE
NINE MONTHS
ENDED
SEPTEMBER 30,
2021
(UNAUDITED)

  

FOR THE
YEAR ENDED
DECEMBER 31,
2020

  

FOR THE
YEAR ENDED
DECEMBER 31,
2019

  

FOR THE
YEAR ENDED
DECEMBER 31,
2018

  

FOR THE
YEAR ENDED
DECEMBER 31,
2017

  

FOR THE
YEAR ENDED
DECEMBER 31,
2016

 

Ratio of total expenses to average net assets:

                        

Before tax (benefit)/expense

  3.08%(B)  3.10%  (2.84)%(2)  6.75%(2)  4.13%(2)  2.90%

Deferred tax (benefit)/expense (3)(4)

     8.02%(6)  (9.91)%  4.43%      

Total expenses

  3.08%(B)  11.12%  (12.75)%(2)  11.18%(2)  4.13%  2.90%

Total expenses, excluding incentive fees and deferred tax expense

  3.08%(B)  3.10%  2.80%  2.77%  2.98%  2.90%

Ratio of net investment income (loss) to average net assets:

                        

Before tax benefit

  2.23%(B)  0.64%  3.93%(2)  (4.93)%(2)  (3.07)%  (2.36)%

Deferred tax benefit (4)(5)

        (0.33)%  0.28%      

Net investment income (loss)

  2.23%(B)  0.64%  3.60%  (4.65)%  (3.07)%  (2.36)%

Portfolio turnover rate

  0%(A)  13%  18%  44%  22%  49%

 

(1)

Calculated using average shares outstanding.

 

(2)

Amount includes the incentive fee. For the years ended December 31, 2019, December 31, 2018 and December 31, 2017 the ratio of the incentive fee to average net assets was (5.64)%, 3.98% and 1.15%, respectively.

 

(3)

Deferred tax expense estimate is derived from net investment income (loss), and realized and unrealized gains (losses).

 

(4)

The deferred tax expense and tax benefit are allocated based on average net assets.

 

(5)

Deferred tax benefit estimate for the ratio calculation is derived from net investment income (loss) only.

 

(6)As restated to reflect the removal of parenthetical notation to appropriately present ratio as deferred tax expense.

 

(A)

Not Annualized.

 

(B)

Annualized.

 

See accompanying notes to financial statements

8

 

 

Firsthand Technology Value Fund, Inc.

 

Consolidated Schedule of Investments

 

SEPTEMBER 30, 2021 (UNAUDITED)

 

PORTFOLIO
COMPANY
(% OF NET
ASSETS)
AND INDUSTRY

TYPE OF INVESTMENT

 

ACQUISITION DATE

  

SHARES/PAR
VALUE ($)

  

COST BASIS

  

VALUE

 

EQX CAPITAL, INC.

Common Stock *(1)(2)(4)

  6/10/2016   100,000  $20,000  $28,540 

(1.9%) Equipment Leasing

Preferred Stock - Series A *(1)(2)(4)

  6/10/16 - 11/7/16   2,300,000   2,300,000   1,806,420 
                1,834,960 
                  

HERA SYSTEMS, INC. (5.7%) Aerospace

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  5/31/2018   500,000   500,000   500,000 
 

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  1/19/2018   500,000   500,000   500,000 
 

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  3/23/2020   250,000   250,000   250,000 
 

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  6/26/2020   200,000   200,000   200,000 
 

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  4/29/2020   40,000   40,000   40,000 
 

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  5/29/2020   20,000   20,000   20,000 
 

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  8/6/2020   220,000   220,000   220,000 
 

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  9/10/2020   150,000   150,000   150,000 
 

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  10/8/2020   250,000   250,000   250,000 
 

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  11/17/2020   250,000   250,000   250,000 
 

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  12/21/2020   250,000   250,000   250,000 

 

See accompanying notes to financial statements

9

 

 

Firsthand Technology Value Fund, Inc.

 

Consolidated Schedule of Investments - continued

 

SEPTEMBER 30, 2021 (UNAUDITED)

 

PORTFOLIO
COMPANY
(% OF NET
ASSETS)
AND INDUSTRY

TYPE OF INVESTMENT

 

ACQUISITION DATE

  

SHARES/PAR
VALUE ($)

  

COST BASIS

  

VALUE

 

HERA SYSTEMS, INC. (continued)

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  1/26/2021   50,000  $50,000  $50,000 
 

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  2/16/2021   150,000   150,000   150,000 
 

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  3/25/2021   150,000   150,000   150,000 
 

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  4/27/2021   150,000   150,000   150,000 
 

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  5/24/2021   150,000   150,000   150,000 
 

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  6/29/2021   200,000   200,000   200,000 
 

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  7/26/2021   150,000   150,000   150,000 
 

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  8/26/2021   150,000   150,000   150,000 
 

Preferred Stock - Series A *(1)(2)(4)

  9/18/2015   3,642,324   2,000,000   27,317 
 

Preferred Stock - Series B *(1)(2)(4)

  8/7/17 - 2/1/19   7,039,203   6,587,102   368,854 
 

Preferred Stock - Series C *(1)(2)(4)

  8/7/2019-2/12/20   2,650,000   2,650,000   138,860 
 

Preferred Stock Warrants - Series B *(1)(2)(4)

  7/9/18 - 9/4/18   12,250,000   0   641,533 
 

Preferred Stock Warrants - Series B *(1)(2)(4)

  2/1/2019   5,250,000   0   274,943 
 

Preferred Stock Warrants - Series B *(1)(2)(4)

  8/7/2017   6,214,922   0   325,475 
 

Preferred Stock Warrants - Series B *(1)(2)(4)

  9/28/2017   700,000   0   36,659 
                5,593,641 

 

See accompanying notes to financial statements

10

 

 

Firsthand Technology Value Fund, Inc.

 

Consolidated Schedule of Investments - continued

 

SEPTEMBER 30, 2021 (UNAUDITED)

 

PORTFOLIO
COMPANY
(% OF NET
ASSETS)
AND INDUSTRY

TYPE OF INVESTMENT

 

ACQUISITION DATE

  

SHARES/PAR
VALUE ($)

  

COST BASIS

  

VALUE

 

INTRAOP MEDICAL CORP. (29.9%)

Medical Devices

Convertible Note Matures December 2021 Interest Rate 15% (1)(2)(4)

  12/31/2018   10,961,129  $10,961,129  $10,961,129 
 

Convertible Note Matures December 2021 Interest Rate 15% (1)(2)(4)

  7/12/2019   1,300,000   1,300,000   1,300,000 
 

Convertible Note Matures December 2021 Interest Rate 15% (1)(2)(4)

  10/11/2019   500,000   500,000   500,000 
 

Convertible Note Matures December 2021 Interest Rate 15% (1)(2)(4)

  10/29/2019   500,000   500,000   500,000 
 

Convertible Note Matures December 2021 Interest Rate 15% (1)(2)(4)

  2/27/2020   1,000,000   1,000,000   1,000,000 
 

Convertible Note Matures December 2021 Interest Rate 15% (1)(2)(4)

  3/25/2020   500,000   500,000   500,000 
 

Convertible Note Matures December 2021 Interest Rate 15% (1)(2)(4)

  5/8/2020   400,000   400,000   400,000 
 

Convertible Note Matures December 2021 Interest Rate 15% (1)(2)(4)

  7/30/2020   500,000   500,000   500,000 
 

Convertible Note Matures December 2021 Interest Rate 15% (1)(2)(4)

  8/28/2020   750,000   750,000   750,000 
 

Convertible Note Matures December 2021 Interest Rate 15% (1)(2)(4)

  4/20/2021   1,000,000   1,000,000   1,000,000 
 

Convertible Note Matures December 2021 Interest Rate 15% (1)(2)(4)

  6/10/2021   500,000   500,000   500,000 
 

Convertible Note Matures December 2021 Interest Rate 15% (1)(2)(4)

  7/16/2021   500,000   500,000   500,000 
 

Convertible Note Matures December 2021 Interest Rate 15% (1)(2)(4)

  9/22/2021   500,000   500,000   500,000 

 

See accompanying notes to financial statements

11

 

 

Firsthand Technology Value Fund, Inc.

 

Consolidated Schedule of Investments - continued

 

SEPTEMBER 30, 2021 (UNAUDITED)

 

PORTFOLIO
COMPANY
(% OF NET
ASSETS)
AND INDUSTRY

TYPE OF INVESTMENT

 

ACQUISITION DATE

  

SHARES/PAR
VALUE ($)

  

COST BASIS

  

VALUE

 

INTRAOP MEDICAL CORP. (continued)

Preferred Stock - Series C *(1)(2)(4)

  7/12/2013   26,856,187  $26,299,938  $5,662,358 
 

Term Note Matures December 2021 Interest Rate 8% (1)(2)(4)

  2/28/2014   3,000,000   3,000,000   3,000,000 
 

Term Note Matures December 2021 Interest Rate 8% (1)(2)(4)

  2/10/2017   2,000,000   2,000,000   2,000,000 
                29,573,487 
                  

KYMA, INC. (0.1%) Advanced Materials

Convertible Note Matures March 2022 Interest Rate 10% (1)(4)

  3/11/2019   100,000   100,000   100,000 
                  

LYNCEAN TECHNOLOGIES, INC. (0.3%)

Preferred Stock - Series B *(1)(4)

  7/3/2018   869,792   1,000,000   330,608 

Semiconductor Equipment

                 
                  

PIVOTAL SYSTEMS CORP. (19.4%)

CDIs *(2)

  4/30/14 - 6/28/18   23,089,506   83,321   19,196,442 

Semiconductor Equipment

                 
                  

REVASUM, INC. (14.6%)

CDIs *(2)

  11/14/16 - 11/30/18   46,834,340   13,512,263   14,390,027 

Semiconductor Equipment

                 
                  

SILICON GENESIS CORP. (1.1%)

Preferred Stock - Series 1-E *(1)(2)(4)

  4/18/2011   5,704,480   2,372,403   464,345 

Intellectual Property

Preferred Stock - Series 1-C *(1)(2)(4)

  4/18/2011   82,914   109,518   2,040 
 

Preferred Stock - Series 1-D *(1)(2)(4)

  4/18/2011   850,830   431,901   5,360 
 

Common Stock *(1)(2)(4)

  4/18/11 - 6/12/12   921,892   169,045   277 

 

See accompanying notes to financial statements

12

 

 

Firsthand Technology Value Fund, Inc.

 

Consolidated Schedule of Investments - continued

 

SEPTEMBER 30, 2021 (UNAUDITED)

 

PORTFOLIO
COMPANY
(% OF NET
ASSETS)
AND INDUSTRY

TYPE OF INVESTMENT

 

ACQUISITION DATE

  

SHARES/PAR
VALUE ($)

  

COST BASIS

  

VALUE

 

SILICON GENESIS CORP. (continued)

Common Stock Warrants *(1)(2)(4)

  4/18/2011   37,982  $6,678  $3 
 

Preferred Stock - Series 1-F *(1)(2)(4)

  4/18/2011   912,453   456,389   102,560 
 

Preferred Stock - Series 1-G *(1)(2)(4)

  3/10/2016   48,370,793   3,880,592   453,573 
 

Preferred Stock - Series 1-H *(1)(2)(4)

  3/10/2016   837,942   936,895   51,198 
                1,079,356 
                  

SVXR, INC. (0.0%)

Preferred Stock - Series A *(1)(3)(4)

  1/11/17 - 8/29/18   8,219,454   4,082,192   0 

Semiconductor Equipment

                 
                  

UCT COATINGS, INC. (1.1%)

Common Stock *(1)(3)(4)

  4/18/2011   1,500,000   662,235   1,114,650 

Advanced Materials

                 
                  

WRIGHTSPEED, INC. (23.4%)

Common Stock *(1)(2)(4)

  4/11/13 - 5/6/19   69,102   7,460,851   3,372 

Automotive

Convertible Note Matures December 2021 Interest Rate 12% (1)(2)(4)

  6/7/2019   4,929,015   4,929,015   4,929,015 
 

Convertible Note Matures December 2021 Interest Rate 12% (1)(2)(4)

  8/12/2020   750,000   750,000   750,000 
 

Convertible Note Matures December 2021 Interest Rate 12% (1)(2)(4)

  9/10/2020   900,000   900,000   900,000 
 

Convertible Note Matures December 2021 Interest Rate 12% (1)(2)(4)

  10/13/2020   1,050,000   1,050,000   1,050,000 
 

Convertible Note Matures December 2021 Interest Rate 12% (1)(2)(4)

  11/11/2020   400,000   400,000   400,000 

 

See accompanying notes to financial statements

13

 

 

Firsthand Technology Value Fund, Inc.

 

Consolidated Schedule of Investments - continued

 

SEPTEMBER 30, 2021 (UNAUDITED)

 

PORTFOLIO
COMPANY
(% OF NET
ASSETS)
AND INDUSTRY

TYPE OF INVESTMENT

 

ACQUISITION DATE

  

SHARES/PAR
VALUE ($)

  

COST BASIS

  

VALUE

 

WRIGHTSPEED, INC. (continued)

Convertible Note Matures December 2021 Interest Rate 12% (1)(2)(4)

  11/24/2020   375,000  $375,000  $375,000 
 

Convertible Note Matures December 2021 Interest Rate 12% (1)(2)(4)

  12/11/2020   400,000   400,000   400,000 
 

Convertible Note Matures December 2021 Interest Rate 12% (1)(2)(4)

  12/23/2020   2,000,000   2,000,000   2,000,000 
 

Convertible Note Matures December 2021 Interest Rate 12% (1)(2)(4)

  2/23/2021   1,400,000   1,400,000   1,400,000 
 

Convertible Note Matures December 2021 Interest Rate 12% (1)(2)(4)

  4/12/2021   1,200,000   1,200,000   1,200,000 
 

Convertible Note Matures December 2021 Interest Rate 12% (1)(2)(4)

  5/18/2021   1,000,000   1,000,000   1,000,000 
 

Convertible Note Matures December 2021 Interest Rate 12% (1)(2)(4)

  6/22/2021   1,000,000   1,000,000   1,000,000 
 

Convertible Note Matures December 2021 Interest Rate 12% (1)(2)(4)

  7/26/2021   1,000,000   1,000,000   1,000,000 
 

Convertible Note Matures December 2021 Interest Rate 12% (1)(2)(4)

  8/19/2021   1,000,000   1,000,000   1,000,000 
 

Convertible Note Matures December 2021 Interest Rate 12% (1)(2)(4)

  9/22/2021   300,000   300,000   300,000 
 

Preferred Stock - Series AA *(1)(2)(4)

  7/10/15 -
7/20/2020
   60,733,693   17,355,887   5,330,596 
 

Preferred Stock Warrants - Series AA *(1)(2)(4)

  6/7/2019   609,756   0   22,439 
                23,060,422 

 

See accompanying notes to financial statements

14

 

 

Firsthand Technology Value Fund, Inc.

 

Consolidated Schedule of Investments - continued

 

SEPTEMBER 30, 2021 (UNAUDITED)

 

PORTFOLIO
COMPANY
(% OF NET
ASSETS)
AND INDUSTRY

TYPE OF INVESTMENT

 

ACQUISITION DATE

  

SHARES/PAR
VALUE ($)

  

COST BASIS

  

VALUE

 

INVESTMENT COMPANY (0.2%)

Fidelity Investments Money Market Treasury Portfolio - Class I (5)

  Various   202,137  $202,137  $202,137 
                  

TOTAL INVESTMENTS

(Cost $138,074,491) — 97.7%

              $96,475,730 
                  

OTHER ASSETS IN EXCESS OF LIABILITIES — 2.3%

               2,292,602 
                  

NET ASSETS — 100.0%

              $98,768,332 

 

*

Non-income producing security.

CDI

CHESS Depositary Interests

(1)

Restricted security. Fair Value is determined by or under the direction of the Company’s Board of Directors (See note 3). At September 30, 2021, we held $62,687,124 (or 63.5% of net assets) in restricted securities (see Note 2).

(2)

Controlled investments.

(3)

Affiliated issuer.

(4)

Fair Value Level 3 security.

(5)

The Fidelity Investments Money Market Portfolio invests primarily in U.S. Treasury securities.

 

See accompanying notes to financial statements

15

 

 

Firsthand Technology Value Fund, Inc.

 

Consolidated Schedule of Investments

 

DECEMBER 31, 2020

 

PORTFOLIO
COMPANY
(% OF NET
ASSETS)
AND INDUSTRY

TYPE OF INVESTMENT

 

ACQUISITION DATE

  

SHARES/PAR
VALUE ($)

  

COST BASIS

  

VALUE

 

EQX CAPITAL, INC.

Common Stock *(1)(2)(4)

  6/10/2016   100,000  $20,000  $27,440 

(2.2%)

Equipment Leasing

Preferred Stock - Series A *(1)(2)(4)

  6/10/2016   2,800,000   2,800,000   2,177,560 
                2,205,000 
                  

HERA SYSTEMS, INC.

(3.5%)

Aerospace

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  5/31/2018   500,000   500,000   500,000 
 

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  1/19/2018   500,000   500,000   500,000 
 

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  3/23/2020   250,000   250,000   250,000 
 

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  6/26/2020   200,000   200,000   200,000 
 

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  4/29/2020   40,000   40,000   40,000 
 

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  5/29/2020   20,000   20,000   20,000 
 

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  8/6/2020   220,000   220,000   220,000 
 

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  9/10/2020   150,000   150,000   150,000 
 

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  10/8/2020   250,000   250,000   250,000 
 

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  11/17/2020   250,000   250,000   250,000 
 

Convertible Promissory Note Matures December 2021 Interest Rate 10% (1)(2)(4)

  12/21/2020   250,000   250,000   250,000 

 

See accompanying notes to financial statements

16

 

 

Firsthand Technology Value Fund, Inc.

 

Consolidated Schedule of Investments - continued

 

DECEMBER 31, 2020

 

PORTFOLIO
COMPANY
(% OF NET
ASSETS)
AND INDUSTRY

TYPE OF INVESTMENT

 

ACQUISITION DATE

  

SHARES/PAR
VALUE ($)

  

COST BASIS

  

VALUE

 

HERA SYSTEMS, INC.

(continued)

Preferred Stock - Series A *(1)(2)(4)

  9/18/2015   3,642,324  $2,000,000  $11,291 
 

Preferred Stock - Series B *(1)(2)(4)

  8/07/17 - 2/1/19   7,039,203   6,587,102   199,913 
 

Preferred Stock - Series C *(1)(2)(4)

  8/7/2019-2/12/20   2,650,000   2,650,000   75,260 
 

Preferred Stock Warrants - Series B *(1)(2)(4)

  7/9/18 - 9/4/18   12,250,000   0   346,307 
 

Preferred Stock Warrants - Series B *(1)(2)(4)

  2/1/2019   5,250,000   0   148,418 
 

Preferred Stock Warrants - Series B *(1)(2)(4)

  8/7/2017   6,214,922   0   175,696 
 

Preferred Stock Warrants - Series B *(1)(2)(4)

  9/28/2017   700,000   0   19,789 
                3,606,674 
                  

INTRAOP MEDICAL CORP.

(25.8%)

Medical Devices

Convertible Note Matures December 2021

Interest Rate 15% (1)(2)(4)

  12/31/2018   10,961,129   10,961,129   10,961,129 
 

Convertible Note Matures December 2021

Interest Rate 15% (1)(2)(4)

  7/12/2019   1,300,000   1,300,000   1,300,000 
 

Convertible Note Matures December 2021

Interest Rate 15% (1)(2)(4)

  10/11/2019   500,000   500,000   500,000 
 

Convertible Note Matures December 2021

Interest Rate 15% (1)(2)(4)

  10/29/2019   500,000   500,000   500,000 
 

Convertible Note Matures December 2021

Interest Rate 15% (1)(2)(4)

  2/27/2020   1,000,000   1,000,000   1,000,000 
 

Convertible Note Matures December 2021

Interest Rate 15% (1)(2)(4)

  3/25/2020   500,000   500,000   500,000 
 

Convertible Note Matures December 2021

Interest Rate 15% (1)(2)(4)

  5/8/2020   400,000   400,000   400,000 

 

See accompanying notes to financial statements

17

 

 

Firsthand Technology Value Fund, Inc.

 

Consolidated Schedule of Investments - continued

 

DECEMBER 31, 2020

 

PORTFOLIO
COMPANY
(% OF NET
ASSETS)
AND INDUSTRY

TYPE OF INVESTMENT

 

ACQUISITION DATE

  

SHARES/PAR
VALUE ($)

  

COST BASIS

  

VALUE

 

INTRAOP MEDICAL CORP.

(continued)

Convertible Note Matures December 2021 Interest Rate 15% (1)(2)(4)

  7/31/2020   500,000  $500,000  $500,000 
 

Convertible Note Matures December 2021 Interest Rate 15% (1)(2)(4)

  8/28/2020   750,000   750,000   750,000 
 

Preferred Stock - Series C *(1)(2)(4)

  7/12/2013   26,856,187   26,299,938   4,976,452 
 

Term Note Matures December 2021 Interest Rate 8% (1)(2)(4)

  2/28/2014   3,000,000   3,000,000   3,000,000 
 

Term Note Matures December 2021 Interest Rate 8% (1)(2)(4)

  2/10/2017   2,000,000   2,000,000   2,000,000 
                26,387,581 
                  

KYMA, INC. (0.1%) Advanced Materials

Convertible Note Matures March 2021 Interest Rate 10% (1)(4)

  3/11/2019   100,000   100,000   100,000 
                  

LYNCEAN TECHNOLOGIES, INC. (0.8%)

Preferred Stock - Series B *(1)(4)

  7/3/2018   869,792   1,000,000   831,434 

Semiconductor Equipment

                 
                  

PIVOTAL SYSTEMS CORP. (22.1%)

CDIs *(2)

  11/28/12 - 9/2/16   31,089,506   3,861,189   22,530,347 

Semiconductor Equipment

                 
                  

REVASUM, INC. (12.4%)

CDIs *(2)

  11/14/16 - 11/30/18   46,834,340   13,512,264   12,637,451 

Semiconductor Equipment

                 

 

See accompanying notes to financial statements

18

 

 

Firsthand Technology Value Fund, Inc.

 

Consolidated Schedule of Investments - continued

 

DECEMBER 31, 2020

 

PORTFOLIO
COMPANY
(% OF NET
ASSETS)
AND INDUSTRY

TYPE OF INVESTMENT

 

ACQUISITION DATE

  

SHARES/PAR
VALUE ($)

  

COST BASIS

  

VALUE

 

SILICON GENESIS CORP. (1.3%)

Preferred Stock - Series 1-E *(1)(2)(4)

  4/18/2011   5,704,480  $2,372,403  $567,596 

Intellectual Property

Preferred Stock - Series 1-C *(1)(2)(4)

  4/18/2011   82,914   109,518   3,325 
 

Preferred Stock - Series 1-D *(1)(2)(4)

  4/18/2011   850,830   431,901   8,763 
 

Common Stock *(1)(2)(4)

  4/18/2011   921,892   169,045   369 
 

Common Stock Warrants *(1)(2)(4)

  4/18/2011   37,982   6,678   6 
 

Preferred Stock - Series 1-F *(1)(2)(4)

  4/18/2011   912,453   456,389   125,462 
 

Common Stock Warrants *(1)(2)(4)

  10/13/2011   5,000,000   0   100 
 

Common Stock Warrants *(1)(2)(4)

  2/6/2012   3,000,000   0   60 
 

Preferred Stock - Series 1-G *(1)(2)(4)

  3/10/2016   48,370,793   3,880,592   562,359 
 

Preferred Stock - Series 1-H *(1)(2)(4)

  3/10/2016   837,942   936,895   62,762 
                1,330,802 
                  

SVXR, INC. (5.3%)

Preferred Stock - Series A *(1)(3)(4)

  1/11/17 - 8/29/18   8,219,454   4,082,192   5,377,578 

Semiconductor Equipment

                 
                  

UCT COATINGS, INC. (1.0%)

Common Stock *(1)(3)(4)

  4/18/2011   1,500,000   662,235   1,074,300 

Advanced Materials

                 

 

See accompanying notes to financial statements

19

 

 

Firsthand Technology Value Fund, Inc.

 

Consolidated Schedule of Investments - continued

 

DECEMBER 31, 2020

 

PORTFOLIO
COMPANY
(% OF NET
ASSETS)
AND INDUSTRY

TYPE OF INVESTMENT

 

ACQUISITION DATE

  

SHARES/PAR
VALUE ($)

  

COST BASIS

  

VALUE

 

WRIGHTSPEED, INC. (23.1%)

Common Stock *(1)(2)(4)

  6/7/2019   69,102  $7,460,851  $7,643 

Automotive

Common Stock Warrants *(1)(2)(4)

  6/7/2019   181   0   12 
 

Convertible Note Matures December 2021 Interest Rate 12% (1)(2)(4)

  6/7/2019   4,929,015   4,929,015   4,929,015 
 

Convertible Note Matures December 2021 Interest Rate 12% (1)(2)(4)

  8/12/2020   750,000   750,000   750,000 
 

Convertible Note Matures December 2021 Interest Rate 12% (1)(2)(4)

  9/10/2020   900,000   900,000   900,000 
 

Convertible Note Matures December 2021 Interest Rate 12% (1)(2)(4)

  10/13/2020   1,050,000   1,050,000   1,050,000 
 

Convertible Note Matures December 2021 Interest Rate 12% (1)(2)(4)

  11/11/2020   400,000   400,000   400,000 
 

Convertible Note Matures December 2021 Interest Rate 12% (1)(2)(4)

  11/24/2020   375,000   375,000   375,000 
 

Convertible Note Matures December 2021 Interest Rate 12% (1)(2)(4)

  12/11/2020   400,000   400,000   400,000 
 

Convertible Note Matures December 2021 Interest Rate 12% (1)(2)(4)

  12/23/2020   2,000,000   2,000,000   2,000,000 
 

Preferred Stock - Series AA *(1)(2)(4)

  6/7/2019 - 7/20/2020   60,733,693   17,355,887   12,720,065 
 

Preferred Stock Warrants - Series AA *(1)(2)(4)

  6/7/2019   609,756   0   91,524 
                23,623,259 

 

See accompanying notes to financial statements

20

 

 

Firsthand Technology Value Fund, Inc.

 

Consolidated Schedule of Investments - continued

 

DECEMBER 31, 2020

 

PORTFOLIO
COMPANY
(% OF NET
ASSETS)
AND INDUSTRY

TYPE OF INVESTMENT

 

ACQUISITION DATE

  

SHARES/PAR
VALUE ($)

  

COST BASIS

  

VALUE

 

INVESTMENT COMPANY (2.3%)

Fidelity Investments Money Market Treasury Portfolio - Class I (5)

  Various   2,368,393  $2,368,393  $2,368,393 
                  

TOTAL INVESTMENTS

(Cost $133,968,616) — 99.9%

              $102,072,819 
                  

OTHER ASSETS IN EXCESS OF LIABILITIES — 0.1%

               69,549 
                  

NET ASSETS — 100.0%

              $102,142,368 

 

*

Non-income producing security.

CDI

CHESS Depositary Interests

(1)

Restricted security. Fair Value is determined by or under the direction of the Company’s Board of Directors (See note 3). At December 31, 2020, we held $64,536,628 (or 63.2% of net assets) in restricted securities (see Note 2).

(2)

Controlled investments.

(3)

Affiliated issuer.

(4)

Fair Value Level 3 security.

(5)

The Fidelity Investments Money Market Portfolio invests primarily in U.S. Treasury securities.

 

See accompanying notes to financial statements

21

 

 

Firsthand Technology Value Fund, Inc.

 

Notes to Consolidated Financial Statements

 

SEPTEMBER 30, 2021 (UNAUDITED)

 

NOTE 1. THE COMPANY

 

Firsthand Technology Value Fund, Inc. (the “Company,” the “Fund,” “us,” “our,” and “we”), is a Maryland corporation and an externally managed, non-diversified, closed-end management investment company that has elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company acquired its initial portfolio of securities through the reorganization of Firsthand Technology Value Fund, a series of Firsthand Funds, into the Company. The reorganization was completed on April 15, 2011. The Company commenced operations on April 18th, 2011. Under normal circumstances, the Company will invest at least 80% of its assets for investment purposes in technology companies, which are considered to be those companies that derive at least 50% of their revenues from products and/ or services within the information technology sector or the “cleantech” sector. Information technology companies include, but are not limited to, those focused on computer hardware, software, telecommunications, networking, Internet, and consumer electronics. While there is no standard definition of cleantech, it is generally regarded as including goods and services designed to harness renewable energy and materials, eliminate emissions and waste, and reduce the use of natural resources. In addition, under normal circumstances we will invest at least 70% of our assets in privately held companies and in public companies with market capitalizations less than $250 million. Our portfolio is primarily composed of equity and equity derivative securities of technology and cleantech companies (as defined above). These investments generally range between $1 million and $10 million each, although the investment size will vary proportionately with the size of the Company’s capital base. The Company’s shares are listed on the NASDAQ Global Market under the symbol “SVVC.” Firsthand Capital Management, Inc., which was previously known as SiVest Group, Inc. (“FCM” or the “Advisor”), serves as the investment adviser to the Company.

 

The Company is an investment company and follows accounting and reporting guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946.

 

CONSOLIDATION OF SUBSIDIARIES. On May 8, 2015, the Board of Directors of the Company approved the formation of a fully owned and controlled subsidiary (as defined by the 1940 Act) of the Company named Firsthand Venture Investors (“FVI”), a California general partnership formed on March 30, 2015. After the close of business on June 30, 2015, the Company contributed substantially all of its assets to FVI in return for a controlling general partner ownership interest in FVI. The transaction was completed on July 1, 2015. Under this structure, we have all or substantially all of our investment activities conducted through our fully owned subsidiary, FVI.

 

During the fiscal years ended December 31, 2016 and 2017, with the approval of its Board of Directors, the Company organized three separate fully owned and controlled subsidiaries (as defined by the 1940 Act). Each subsidiary was a Cayman Islands corporation and the financial statements of each subsidiary were reported on a consolidated basis with the Company. Each subsidiary was formed for the purpose of holding one or more investments made by the Company, and was treated as a controlled foreign corporation under the Internal Revenue Code not separately subject to U.S. federal income tax. FVI was treated as the sole U.S. shareholder of each subsidiary.

 

The Board of Directors of the Company approved the liquidation of those three Cayman subsidiaries on November 2, 2018. That liquidation was completed on December 27, 2018.

 

22

 

 

Firsthand Technology Value Fund, Inc.

 

Notes to Consolidated Financial Statements - continued

 

SEPTEMBER 30, 2021 (UNAUDITED)

 

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The following is a summary of significant accounting policies followed in the preparation of the Company’s financial statements included in this report:

 

BASIS OF PRESENTATION. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) pursuant to the requirements on Form 10-K. ASC 946, Financial Services—Investment Companies (“ASC 946”), and Articles 6, 10 and 12 of Regulation S-X. In the opinion of management, all adjustments, which are of a normal recurring nature, considered necessary for the fair presentation of the financial statements for the periods presented, have been included.

 

Under the 1940 Act, ASC 946, and the regulations pursuant to Article 6 of Regulation S-X, we are precluded from consolidating any entity other than another investment company or an operating company which provides substantially all of its services to benefit us. Consequentially, as of December 31, 2018, the Company consolidated some special purpose entities. These special purpose entities only hold investments of the Company and have no other significant asset and liabilities. All significant intercompany transactions and balances have been eliminated in consolidation.

 

USE OF ESTIMATES. The preparation of 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 at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

 

PORTFOLIO INVESTMENT VALUATIONS. Investments are stated at “value” as defined in the 1940 Act and in the applicable regulations of the Securities and Exchange Commission and in accordance with GAAP. Value, as defined in Section 2(a)(41) of the 1940 Act, is (i) the market value of those securities for which a market quotation is readily available and (ii) the fair value as determined in good faith by, or under the direction of, the Board of Directors for all other securities and assets. On June 30, 2021, our financial statements include venture capital investments valued at approximately $65.6 million. The fair values of our venture capital investments were determined in good faith by, or under the direction of, the Board. Upon sale of these investments, the values that are ultimately realized may be different from what is presently estimated. The difference could be material. Also see note 6 regarding the fair value of the company’s investments.

 

CASH AND CASH EQUIVALENTS. The Company considers liquid assets deposited with a bank, investments in money market funds, and certain short-term debt instruments with maturities of three months or less to be cash equivalents. These investments represent amounts held with financial institutions that are readily accessible to pay our expenses or purchase investments. Cash and cash equivalents are valued at cost plus accrued interest, which approximates market value.

 

RESTRICTED SECURITIES. At September 30, 2021, we held $62,687,124 in restricted securities. At December 31, 2020, we held $64,536,628 in restricted securities.

 

INCOME RECOGNITION. Dividend income is recorded on the ex-dividend date. Interest income is accrued as earned. Discounts and premiums on securities purchased are amortized over the lives of the respective securities. Other non-cash dividends are recognized as investment income at the fair value of the property received. When debt securities are determined to be non-income producing, the Company ceases accruing interest and writes off any previously accrued interest. These write-offs are recorded as a debit to interest income.

 

SHARE VALUATION. The net asset value (“NAV”) per share of the Fund is calculated by dividing the sum of the value of the securities held by the Fund, plus cash or other assets, minus all liabilities (including estimated accrued expenses) by the total number of shares outstanding of the Fund, rounded to the nearest cent.

 

23

 

 

Firsthand Technology Value Fund, Inc.

 

Notes to Consolidated Financial Statements - continued

 

SEPTEMBER 30, 2021 (UNAUDITED)

 

REALIZED GAIN OR LOSS AND UNREALIZED APPRECIATION OR DEPRECIATION OF PORTFOLIO INVESTMENTS. A realized gain or loss is recognized when an investment is disposed of and is computed as the difference between the Company’s cost basis in the investment at the disposition date and the net proceeds received from such disposition. Realized gains and losses are calculated on a specific identification basis. Unrealized appreciation or depreciation is computed as the difference between the fair value of the investment and the cost basis of such investment.

 

INCOME TAXES. The Company provides for state and federal corporate income tax, as appropriate, because it is regarded as a corporation under Subchapter C of the Code. The Company recognizes interest and penalties in income tax expense.

 

FOREIGN CURRENCY TRANSLATION. The accounting records of the Company are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the foreign exchange rate on the date of valuation. The Company does not isolate that portion of the results of operation resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. The Company’s investments in foreign securities may involve certain risks, including without limitation: foreign exchange restrictions, expropriation, taxation or other political, social, or economic risks, all of which could affect the market and/or credit risk of the investment. In addition, changes in the relationship of foreign currencies to the U.S. dollar can significantly affect the value of these investments and therefore the earnings of the Company.

 

SECURITIES TRANSACTIONS. Securities transactions are accounted for on the date the transaction for the purchase or sale of the securities is entered into by the Company (i.e., trade date).

 

CONCENTRATION OF CREDIT RISK. The Company places its cash and cash equivalents with financial institutions and, at times, cash held in checking accounts may exceed the Federal Deposit Insurance Corporation insured limit.

 

OPTIONS. The Company is subject to equity price risk in the normal course of pursuing its investment objectives and may enter into options written to hedge against changes in the value of equities. The Company may purchase put and call options to attempt to provide protection against adverse price effects from anticipated changes in prevailing prices of securities or stock indices. The Company may also write put and call options. When the Company writes an option, an amount equal to the premium received by the Company is recorded as a liability and is subsequently adjusted to the current fair value of the option written.

 

Premiums received from writing options that expire unexercised are treated by the Company on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or, if the premium is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security or currency in determining whether the Company has realized a gain or loss. The Company as writer of an option bears the market risk of an unfavorable change in the price of the security underlying the written option.

 

The average quarterly volume of the Company’s derivatives during the nine months ended September 30, 2021 is as follows:

 

 

PURCHASED OPTIONS
(CONTRACTS)

WARRANTS
(NOTIONAL VALUE)

WRITTEN OPTIONS
(CONTRACTS)

Firsthand Technology Value Fund, Inc.

940,700

 

24

 

 

Firsthand Technology Value Fund, Inc.

 

Notes to Consolidated Financial Statements - continued

 

SEPTEMBER 30, 2021 (UNAUDITED)

 

NOTE 3. BUSINESS RISKS AND UNCERTAINTIES

 

We invest a substantial portion of our assets in privately-held companies, the securities of which are inherently illiquid. We also seek to invest in small publicly-traded companies that we believe have exceptional growth potential and to make opportunistic investments in publicly-traded companies, both large and small. In the case of investments in small publicly-traded companies, although these companies are publicly traded, their stock may not trade at high volumes, and prices can be volatile, which may restrict our ability to sell our positions. We may also be subject to contractual restrictions or securities law limits on our ability to sell portfolio holdings because of, for example, our affiliation with a portfolio company or the relative size of our holding in a company. These privately held and publicly traded businesses tend to lack management depth, have limited or no history of operations and typically have not attained profitability. Because of the speculative nature of our investments and the lack of public markets for privately held investments, there is greater risk of loss than is the case with traditional investment securities.

 

We do not choose investments based on a strategy of diversification. We also do not rebalance the portfolio should one of our portfolio companies increase in value substantially relative to the rest of the portfolio. Therefore, the value of our portfolio may be more vulnerable to events affecting a single sector, industry or portfolio company and, therefore, may be subject to greater volatility than a company that follows a diversification strategy.

 

Because there is typically no public or readily-ascertainable market for our interests in the small privately-held companies in which we invest, the valuation of those securities is determined in good faith by the Valuation Committee, comprised of all members of the Board who are not “interested persons” of the Company, as such term is defined in Section 2(a)(19) of the 1940 Act, in accordance with our Valuation Procedures and is subject to significant estimates and judgments. The determined value of the securities in our portfolio may differ significantly from the values that would be placed on these securities if a ready market for the securities existed. Any changes in valuation are recorded in our Statement of Operations as “Net increase (decrease) in unrealized appreciation on investments.” Changes in valuation of any of our investments in privately-held companies from one period to another may be volatile.

 

The Board has engaged an independent valuation firm to provide it with valuation assistance with respect to certain of our portfolio investments. The Company intends to continue to engage an independent valuation firm to provide us with assistance regarding our determination of the fair value of select portfolio investments each quarter unless directed by the Board to cancel such valuation services. The scope of the services rendered by an independent valuation firm is at the discretion of the Board. The Board is ultimately and solely responsible for determining the fair value of the Company’s investments in good faith.

 

With respect to investments for which market quotations are not readily available or when such market quotations are deemed not to represent fair value, the Board has approved a multi-step valuation process to be followed each quarter, as described below:

 

 

(1)

each quarter the valuation process begins with each portfolio company or investment being initially valued by the Adviser Valuation Committee or the independent valuation firm;

 

 

(2)

the Valuation Committee of the Board on a quarterly basis reviews the preliminary valuation of the Adviser Valuation Committee and that of the independent valuation firms and makes the fair value determination, in good faith, based on the valuation recommendations of the Adviser Valuation Committee and the independent valuation firms; and

 

25

 

 

Firsthand Technology Value Fund, Inc.

 

Notes to Consolidated Financial Statements - continued

 

SEPTEMBER 30, 2021 (UNAUDITED)

 

 

(3)

at each quarterly Board meeting, the Board considers the valuations recommended by the Adviser Valuation Committee and the independent valuation firms that were previously submitted to the Valuation Committee of the Board and ratifies the fair value determinations made by the Valuation Committee of the Board.

 

NOTE 4. INVESTMENT MANAGEMENT FEE

 

The Company has entered into an investment management agreement (the “Investment Management Agreement”) with FCM pursuant to which the Company will pay FCM a fee for providing investment management services consisting of two components—a base management fee and an incentive fee.

 

The base management fee will be calculated at an annual rate of 2.00% of our gross assets. For services rendered under the Investment Management Agreement, the base management fee will be payable quarterly in arrears. The base management fee will be calculated based on the average of (1) the value of our gross assets at the end of the current calendar quarter and (2) the value of the Company’s gross assets at the end of the preceding calendar quarter; and will be appropriately adjusted for any share issuances or repurchases during the current calendar quarter. Base management fees for any partial month or quarter will be pro-rated.

 

The incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Management Agreement, as of the termination date), commencing on April 15, 2011, and equals 20% of the Company’s realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fees, provided that the incentive fee determined as of December 31, 2020, will be calculated for a period of shorter than twelve calendar months to take into account any realized gains computed net of all realized capital losses and unrealized capital depreciation from inception. For the three months ended September 30, 2021, there were no incentive fee adjustments. For the three months ended September 30, 2020, there were no incentive fee adjustments.

 

NOTE 5. DEBT

 

The Company currently has no plan to use leverage and does not have any significant outstanding debt obligations (other than normal operating expense accruals).

 

NOTE 6. FAIR VALUE

 

Securities traded on stock exchanges, or quoted by NASDAQ, are valued according to the NASDAQ Stock Market, Inc. (“NASDAQ”) official closing price, if applicable, or at their last reported sale price as of the close of trading on the New York Stock Exchange (“NYSE”) (normally 4:00 P.M. Eastern Time). If a security is not traded that day, the security will be valued at its most recent bid price.

 

Securities traded in the over-the-counter market, but not quoted by NASDAQ, are valued at the last sale price (or, if the last sale price is not readily available, at the most recent closing bid price as quoted by brokers that make markets in the securities) at the close of trading on the NYSE.

 

Securities traded both in the over-the-counter market and on a stock exchange are valued according to the broadest and most representative market.

 

26

 

 

Firsthand Technology Value Fund, Inc.

 

Notes to Consolidated Financial Statements - continued

 

SEPTEMBER 30, 2021 (UNAUDITED)

 

Securities and other assets that do not have market quotations readily available are valued at their fair value as determined in good faith by the Board in accordance with the Valuation Procedures adopted by the Valuation Committee of the Board.

 

In pricing illiquid, privately placed securities, the Board of Directors is responsible for (1) determining overall valuation guidelines and (2) ensuring that the investments of the Company are valued within the prescribed guidelines.

 

The Valuation Committee, comprised of all of the independent Board members, is responsible for determining the valuation of the Company’s assets within the guidelines established by the Board of Directors. The Valuation Committee receives information and recommendations from the Adviser and an independent valuation firm.

 

The values assigned to these investments are based on available information and do not necessarily represent amounts that might ultimately be realized when that investment is sold, as such amounts depend on future circumstances and cannot reasonably be determined until the individual investments are actually liquidated or become readily marketable.

 

APPROACHES TO DETERMINING FAIR VALUE. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). In effect, GAAP applies fair value terminology to all valuations whereas the 1940 Act applies market value terminology to readily marketable assets and fair value terminology to other assets.

 

The main approaches to measuring fair value utilized are the market approach, the income approach, and the asset-based approach. The choice of which approach to use in a particular situation depends on the specific facts and circumstances associated with the company, as well as the purpose for which the valuation analysis is being conducted. Firsthand and the independent valuation firm rely primarily on the market approach. We also considered the income and asset-based approaches in our analysis because certain of the portfolio companies do not have substantial operating earnings relative to the value of their underlying assets.

 

 

-

Market Approach (M): The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. For example, the market approach often uses market multiples derived from a set of comparables. Multiples might lie in ranges with a different multiple for each comparable. The selection of where within the range each appropriate multiple falls requires the use of judgment in considering factors specific to the measurement (qualitative and quantitative).

 

 

-

Income Approach (I): The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present value amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. Those valuation techniques include present value techniques; option-pricing models, such as the Black-Scholes-Merton formula (a closed-form model) and a binomial model (a lattice model), which incorporate present value techniques; and the multi-period excess earnings method, which is used to measure the fair value of certain assets.

 

 

-

Asset-Based Approach (A): The asset-based approach examines the value of a company’s assets net of its liabilities to derive a value for the equity holders.

 

FAIR VALUE MEASUREMENT. In accordance with the guidance from the Financial Accounting Standards Board on fair value measurements and disclosures under GAAP, the Company discloses the fair value of its investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. The hierarchy gives the highest priority to

 

27

 

 

Firsthand Technology Value Fund, Inc.

 

Notes to Consolidated Financial Statements - continued

 

SEPTEMBER 30, 2021 (UNAUDITED)

 

valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements).

 

The guidance establishes three levels of the fair value hierarchy as follows:

 

 

Level 1 -

Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the date of measurement.

 

 

Level 2 -

Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument in an inactive market, prices for similar instruments in an active or inactive market, interest rates, prepayment speeds, credit risks, yield curves, default rates, and similar data.

 

 

Level 3 -

Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Company’s own assumptions about the assumptions a market participant would use in valuing the asset or liability based on the best information available.

 

The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.

 

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

 

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following is a summary of the inputs used to value the Company’s net assets as of September 30, 2021:

 

ASSETS

 

LEVEL 1
QUOTED PRICES

  

LEVEL 2 OTHER
SIGNIFICANT
OBSERVABLE INPUTS

  

LEVEL 3 SIGNIFICANT
UNOBSERVABLE INPUTS

 

Common Stocks

            

Advanced Materials

 $  $  $1,114,650 

Automotive

        3,372 

Equipment Leasing

        28,540 

Intellectual Property

        277 

Semiconductor Equipment

  33,586,469       

Total Common Stocks

  33,586,469      1,146,839 

 

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Firsthand Technology Value Fund, Inc.

 

Notes to Consolidated Financial Statements - continued

 

SEPTEMBER 30, 2021 (UNAUDITED)

 

ASSETS (continued)

 

LEVEL 1
QUOTED PRICES

  

LEVEL 2 OTHER
SIGNIFICANT
OBSERVABLE INPUTS

  

LEVEL 3 SIGNIFICANT
UNOBSERVABLE INPUTS

 

Preferred Stocks

            

Aerospace

 $  $  $535,031 

Automotive

        5,330,596 

Equipment Leasing

        1,806,420 

Intellectual Property

        1,079,076 

Medical Devices

        5,662,358 

Semiconductor Equipment

        330,608 

Total Preferred Stocks

        14,744,089 

Asset Derivatives *

            

Equity Contracts

        1,301,052 

Total Asset Derivatives

        1,301,052 

Convertible Notes

            

Advanced Materials

        100,000 

Aerospace

        3,780,000 

Automotive

        17,704,015 

Medical Devices

        23,911,129 

Total Convertible Notes

        45,495,144 

Mutual Funds

  202,137       

Total

 $33,788,606  $  $62,687,124 

 

*

Asset derivatives include warrants.

 

At the end of each calendar quarter, management evaluates the Level 2 and Level 3 assets and liabilities for changes in liquidity, including but not limited to: whether a broker is willing to execute at the quoted price, the depth and consistency of prices from third party services, and the existence of contemporaneous, observable trades in the market. Additionally, management evaluates the Level 1 and Level 2 assets and liabilities on a quarterly basis for changes in listings or delistings on national exchanges.

 

29

 

 

Firsthand Technology Value Fund, Inc.

 

Notes to Consolidated Financial Statements - continued

 

SEPTEMBER 30, 2021 (UNAUDITED)

 

Following is a reconciliation of Level 3 assets (at either the beginning or the ending of the period) for which significant unobservable inputs were used to determine fair value.

 

INVESTMENTS AT FAIR
VALUE USING SIGNIFICANT
UNOBSERVABLE INPUTS
(LEVEL 3)

 

BALANCE
AS OF
12/31/20

  

NET
PURCHASES/
CONVERSIONS

  

NET SALES/
CONVERSIONS

  

NET REALIZED
GAINS/
(LOSSES)

  

NET UNREALIZED
APPRECIATION
(DEPRECIATION)
(1)

  

TRANSFERS
IN (OUT) OF
LEVEL 3

  

BALANCE
AS OF
9/30/2021

 

Common Stocks

                            

Advanced Materials

 $1,074,300  $  $  $  $40,350  $  $1,114,650 

Automotive

  7,643            (4,271)      3,372 

Equipment Leasing

  27,440            1,100      28,540 

Intellectual Property

  369            (92)     277 

Total Common Stocks

  1,109,752            37,087      1,146,839 

Preferred Stocks

                            

Aerospace

  286,464            248,567      535,031 

Automotive

  12,720,065            (7,389,469)     5,330,596 

Equipment Leasing

  2,177,560      (500,000)     128,860      1,806,420 

Intellectual Property

  1,330,267            (251,191)     1,079,076 

Medical Devices

  4,976,452            685,906      5,662,358 

Semiconductor Equipment

  6,209,012            (5,878,404)     330,608 

Total Preferred Stocks

  27,699,820      (500,000)     (12,455,731)     14,744,089 

Asset Derivatives

                            

Equity Contracts

  781,912            519,140      1,301,052 

Total Asset Derivatives

  781,912            519,140      1,301,052 

Convertible Notes

                            

Advanced Materials

  100,000                  100,000 

Aerospace

  2,630,000   1,150,000               3,780,000 

Automotive

  10,804,015   6,900,000               17,704,015 

Medical Devices

  21,411,129   2,500,000               23,911,129 

Total Convertible Notes

  34,945,144   10,550,000               45,495,144 

Total

 $64,536,628  $10,550,000  $(500,000) $  $(11,899,504) $  $62,687,124 

 

(1)

The net change in unrealized appreciation (depreciation) from level 3 instruments held as of September 30, 2021 was $(11,899,331).

 

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Firsthand Technology Value Fund, Inc.

 

Notes to Consolidated Financial Statements - continued

 

SEPTEMBER 30, 2021 (UNAUDITED)

 

The table below represents quantitative disclosure about significant unobservable inputs for Level 3 fair value measurements at September 30, 2021:

 

 

FAIR VALUE
AT 9/30/21

VALUATION TECHNIQUES

UNOBSERVABLE INPUTS

RANGE
(WEIGHTED AVG.)

Direct venture capital investments: Advanced Materials

$1.2M

Market Comparable Companies

Discounted Cash Flow

Option Pricing Model

EBITDA Multiple

Revenue Multiple

Weighted Average Cost of Capital

Years to Maturity

Volatility

Risk-Free Rate

Discount for Lack of Marketability

8.2x - 10.8x (9.5x)

0.8x – 1.0x (0.9x)

19.5% (19.5%)

5 years (5 years)

50.0% (50.0%)

0.98% (0.98%)

22.7% (22.7%)

Direct venture capital investments: Aerospace

$5.6M

Prior Transaction Analysis

Option Pricing Model

Probability-Weighted Expected Return Method

Years to Maturity

Volatility

Risk-Free Rate

Going Concern Probability

5 years (5 years)

50.0% (50.0%)

0.98% (0.98%)

25% (25%)

Direct venture capital investments: Automotive

$23.1M

Prior Transaction Analysis

Option Pricing Model

Probability-Weighted Expected Return Method

Years to Maturity

Volatility

Risk-Free Rate

Discount for Lack of Marketability

Going Concern Probability

5 years (5 years)

50.0% (50.0%)

0.98% (0.98%)

0.0% - 22.7% (0.0%)

30% (30%)

Direct venture capital investments: Equipment Leasing

$1.8M

Market Comparable Companies

Discounted Cash Flow

Option Pricing Model

EBITDA Multiple

Weighted Average Cost of Capital

Years to Maturity

Volatility

Risk-Free Rate

4.0x - 8.1x (5.9x)

20.0% (20.0%)

5 years (5 years)

50.0% (50.0%)

0.98% (0.98%)

Direct venture capital investments: Intellectual Property

$1.1M

Discounted Cash Flow

Option Pricing Model

Weighted Average Cost of Capital

Years to Maturity

Volatility

Risk-Free Rate

Discount for Lack of Marketability

12.5% (12.5%)

5 years (5 years)

55.0% (55.0%)

0.98% (0.98%)

0.0% - 24.3% (0.0%)

Direct venture capital investments: Medical Devices

$29.6M

Market Comparable Companies

Option Pricing Model

Revenue Multiple

Years to Maturity

Volatility

Risk-Free Rate

3.4x – 4.0x (3.7x)

4 years (4 years)

55.0% (55.0%)

0.76% (0.76%)

 

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Firsthand Technology Value Fund, Inc.

 

Notes to Consolidated Financial Statements - continued

 

SEPTEMBER 30, 2021 (UNAUDITED)

 

 

FAIR VALUE
AT 9/30/21

VALUATION TECHNIQUES

UNOBSERVABLE INPUTS

RANGE
(WEIGHTED AVG.)

Direct venture capital investments: Semiconductor Equipment

$0.3M

Market Comparable Companies

Option Pricing Model

Revenue Multiple

Years to Maturity

Volatility

Risk-Free Rate

2.5x - 3.0x (2.8x)

5 years (5 years)

50.0% (50.0%)

0.98% (0.98%)

 

NOTE 7. FEDERAL INCOME TAXES

 

Beginning in 2018, we were no longer able to qualify as a RIC under Subchapter M of the Code. The increase in value that resulted from the initial public offerings (IPOs) of Pivotal Systems and Revasum meant that we were no longer able to satisfy the diversification requirements for qualification as a RIC. As a result of this change, we were taxed as a corporation for our fiscal year ended December 31, 2018, and will continue to be taxed in that manner for future fiscal years, paying federal and applicable state corporate taxes on our taxable income, unless and until we are able to once again qualify as a RIC, based on changes in the composition of our portfolio. Consequently, at the close of each fiscal quarter beginning with the quarter ended June 30, 2018, we will record a deferred tax liability for any net realized gains and net ordinary income for the year-to-date period plus net unrealized gains as of the end of the quarter.

 

The reorganization described in Note 1 (the formation of FVI as a fully owned subsidiary for investment activities) was structured to avoid any adverse tax consequences for the Company and its shareholders. For the fiscal years which the Company operates as a RIC, we believe Company’s engaging in investment activities through FVI did not, in our view, jeopardize the Company’s ability to continue to qualify as a RIC under the Code at that time when the Company was eligible to be treated as a RIC.

 

The following information is based upon the U.S. federal income tax cost of portfolio investments as of September 30, 2021.

 

  

FEDERAL INCOME
TAX COST:

 

Gross unrealized appreciation

 $21,752,888 

Gross unrealized depreciation

  (63,351,649)

Net unrealized (depreciation)

 $(41,598,761)

Federal income tax cost, Investments

 $138,074,491 

 

The Company did not qualify as a regulated investment company pursuant to Subchapter M of the Internal Revenue Code, therefore it is taxed as a corporation. As a corporation, the Company is obligated to pay federal and state income tax on taxable income. The Company’s net deferred tax asset balance has a full valuation allowance based on management’s estimate of future realization of such assets. The Company is currently using an estimated tax rate of 21% for Federal and 6.98% for state taxes.

 

32

 

 

Firsthand Technology Value Fund, Inc.

 

Notes to Consolidated Financial Statements - continued

 

SEPTEMBER 30, 2021 (UNAUDITED)

 

The Company’s income tax provision consists of the following as of December 31, 2020

 

Deferred tax (expense)/benefit

    

Federal

 $(5,777,983)

State

  (2,064,600)

Total deferred tax (expense)/benefit

 $(7,842,583)

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Such temporary differences are principally: (i) taxes on unrealized gains/(losses), which are attributable to the temporary difference between fair market value and tax basis, (ii) the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes, and (iii) the net tax benefit of accumulated net operating losses and capital loss carryforwards. Deferred tax assets and liabilities are measured using effective tax rates expected to apply to taxable income in the years such temporary differences are realized or otherwise settled.

 

Components of the Company’s deferred tax assets and liabilities as of December 31, 2020 are as follows:

 

  

AMOUNT

 

Deferred tax assets:

    

Net operating loss carryforward

 $1,118,888 

Capital loss carryforward

  9,373,239 

Net unrealized losses (gains) on investment securities

  8,924,444 

Incentive fee

   

Total deferred tax assets

  19,416,571 

Valuation allowance

  (19,416,571)

Net

 $ 

 

For the year ended December 31, 2020, the Company had an effective tax rate of (51.92%) and a statutory tax rate of 21% with the difference primarily being attributable to changes in the deferred tax asset valuation account.

 

The effective tax rate and statutory federal income tax rate for the three- and nine- month periods ended September 30, 2021 and 2020 were as follows:

 

  

THREE MONTHS ENDED
SEPTEMBER 30, 2021

  

THREE MONTHS ENDED
SEPTEMBER 30, 2020

  

NINE MONTHS ENDED
SEPTEMBER 30, 2021

  

NINE MONTHS ENDED
SEPTEMBER 30, 2020

 

Effective tax rate

  0%  0%  0%  (35.6)%

Statutory federal income tax rate

  21%  21%  21%  21%

 

The variance in the effective tax rate and statutory federal income tax rate for the three- and nine-month periods ending September 30, 2021 is the result of changes to the gross deferred tax assets and to the valuation allowance account. At September 30, 2021, the Company has continued to carry a full valuation allowance on its net deferred tax assets.

 

To the extent the Company has a deferred tax asset or if a portion of the deferred tax liability is offset by a tax asset resulting from net operating losses, consideration is given to whether or not a valuation allowance is required against the deferred tax asset amount. A valuation allowance is required if, based on the evaluation criterion provided by Accounting

 

33

 

 

Firsthand Technology Value Fund, Inc.

 

Notes to Consolidated Financial Statements - continued

 

SEPTEMBER 30, 2021 (UNAUDITED)

 

Standard Codification (“ASC”) 740, Income Taxes (ASC 740), it is more-likely-than-not that some portion or all of the deferred tax asset will not be realized. Among the factors considered in assessing the Company’s valuation allowance are: the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of the statutory carryforward periods, and the associated risks that operating and capital loss carryforwards may expire unused. Based on the Company’s assessment, it has determined that in the future it is more likely than not that the Company will not generate the necessary appropriate character of income within the carryforward periods to realize its deferred tax assets, and as such, has placed a full allowance on the deferred tax assets.

 

From time to time, and as new information becomes available, the Company will modify its forecasts, estimates or assumptions regarding its deferred tax liability or asset.

 

Modifications of the Company’s estimates or assumptions regarding its deferred tax liability and/or asset balances and any applicable valuation allowance, changes in generally accepted accounting principles or related guidance or interpretations thereof, limitations imposed on net operating losses (if any), and changes in applicable tax law could result in increases or decreases in the Company’s NAV, which could be material. Such changes could have a material impact on the Company’s NAV and results of operations with respect to the Company’s shareholders in the period it is recorded, even though the shareholders at such time might not have held shares in the Company at the time the deferred tax asset or liability had been established.

 

The Company’s policy is to classify interest and penalties associated with underpayment of federal and state income taxes, if any, as income tax expense on its Statement of Operations. As of December 31, 2020, the Company did not have any interest or penalties associated with the underpayment of any income taxes.

 

The Company files income tax returns in the U.S. federal jurisdiction and California. The Company has reviewed all major jurisdictions and concluded that there is no significant impact on the Company’s net assets and no tax liability resulting from unrecognized tax benefits relating to uncertain tax positions expected to be taken on its tax returns. Furthermore, management of the Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next 12 months.

 

As of December 31, 2020, the Company had net operating loss carryforwards for federal and state of income tax purposes of $3,998,886, which may be carried forward indefinitely.

 

As of December 31, 2020, the Company had net capital loss carryforwards for federal and state income tax purposes, which may be carried forward for 5 years, as follows:

 

EXPIRATION DATE

 

AMOUNT

 

12/31/23

 $4,994,658 

12/31/24

  20,988,480 

12/31/25

  7,516,642 

Total

 $33,499,780 

 

34

 

 

Firsthand Technology Value Fund, Inc.

 

Notes to Consolidated Financial Statements - continued

 

SEPTEMBER 30, 2021 (UNAUDITED)

 

NOTE 8. INVESTMENT TRANSACTIONS

 

Investment transactions (excluding short-term investments) were as follows for the quarter ended September 30, 2021.

 

PURCHASES AND SALES

    

Purchases of investment securities

 $0 

Proceeds from sales and maturities of investment securities

 $500,000 

 

NOTE 9. SHARE BUYBACKS

 

SHARE BUYBACKS. On April 26, 2016, the Board of Directors of the Fund approved a discretionary share repurchase plan (the “Plan”). Pursuant to the Plan, the Fund was authorized to purchase in the open market up to $2 million worth of its common stock. The Plan allowed the Fund to acquire its own shares at certain thresholds below its NAV per share, in accordance with the guidelines specified in Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The intent of the Plan was to increase NAV per share and thereby enhance shareholder value. The Fund completed the repurchase plan in September 2016, having repurchased and retired a total of 272,008 shares of stock, at a total cost of approximately $2 million.

 

On November 10, 2017, the Board of Directors of the Fund approved a discretionary share purchase plan (the “Plan”). Pursuant to the Plan, the Fund was authorized to purchase in the open market up to $2 million worth of its common stock. The Plan allowed the Fund to acquire its own shares in accordance with the guidelines specified in Rule 10b-18 of the Exchange Act. The intent of the Plan was to increase NAV per share and thereby enhance shareholder value. As of December 31, 2017, the Fund had repurchased and retired 128,551 shares of stock at a total cost of approximately $1.1 million. The Fund had 7,302,146 shares outstanding as of December 31, 2017.

 

On August 31, 2018, the Fund announced a plan to repurchase up to $2 million worth of SVVC stock in the open market by March 31, 2019. The Fund completed this open market repurchase plan on October 24, 2018. Through that date, the Fund repurchased 123,376 shares at an average price of $16.21 per share, for total consideration of $2.0 million. As of December 31, 2018, the Fund had 7,178,770 shares outstanding.

 

TENDER OFFERS. On December 22, 2014, pursuant to our agreement with a shareholder, the Fund commenced a tender offer to purchase up to $20 million of its issued and outstanding common shares for cash at a price per share equal to 95% of the Company’s NAV per share determined as of the close of ordinary trading on the NASDAQ Global Market on December 31, 2014 ($23.2702 per share). The tender offer, which expired on January 22, 2015 at 12:00 midnight, New York City time, was oversubscribed. Because the number of shares tendered exceeded the maximum amount of its offer, the Fund purchased shares from tendering shareholders on a pro-rata basis based on the number of shares properly tendered. Of the 5,044,728 shares properly tendered, the Fund purchased 859,468 shares of common stock pursuant to the tender offer.

 

On December 16, 2019, the Fund announced the commencement of a “modified Dutch auction” tender offer to purchase up to $2 million of its common stock at a price per share not less than $6.00 and not greater than $8.00, in $0.10 increments. The tender offer expired on February 14, 2020, and resulted in the purchase by the Fund of 285,714 shares of common stock at a price of $7.00 per share. As of March 31, 2020, the Fund had 6,893,056 shares outstanding.

 

35

 

 

Firsthand Technology Value Fund, Inc.

 

Notes to Consolidated Financial Statements - continued

 

SEPTEMBER 30, 2021 (UNAUDITED)

 

NOTE 10. INVESTMENTS IN AFFILIATES AND CONTROLLED INVESTMENTS

 

Under the 1940 Act, the Company is required to identify investments where it owns greater than 5% (but less than 25%) of the portfolio company’s outstanding voting shares as an affiliate of the Company. Also, under the 1940 Act, the Company is required to identify investments where it owns greater than 25% of the portfolio company’s outstanding voting shares as a controlled investment of the Company. A summary of the Company’s investments in affiliates and controlled investments for the period from December 31, 2020, through September 30, 2021, is noted below:

 

AFFILIATE/
CONTROLLED
INVESTMENTS*

 

VALUE AT
12/31/20

  

PURCHASES/
MERGER

  

INTEREST

  

SALES/
MATURITY/
EXPIRATION

  

REALIZED
GAIN (LOSS)

  

CHANGE IN
APPRECIATION/
(DEPRECIATION)

  

VALUE
9/30/21

  

SHARES
HELD AT
9/30/2021

 

EQX Capital, Inc. Common Stock*

 $27,440  $  $  $  $  $1,100  $28,540   100,000 

EQX, Inc. Preferred Stock - Series A*

  2,177,560         (500,000)     128,860   1,806,420   2,300,000 

Hera Systems, Inc. Series C Preferred*

  75,260               63,600   138,860   2,650,000 

Hera Systems, Inc. Series A Preferred*

  11,291               16,026   27,317   3,642,324 

Hera Systems, Inc. Convertible Note*

  500,000      37,917            500,000   500,000 

Hera Systems, Inc. Convertible Note*

  500,000      37,917            500,000   500,000 

Hera Systems, Inc. Convertible Note*

  250,000      18,958            250,000   250,000 

Hera Systems, Inc. Convertible Note*

  40,000      3,033            40,000   40,000 

Hera Systems, Inc. Convertible Note*

  20,000      1,517            20,000   20,000 

Hera Systems, Inc. Convertible Note*

  200,000      15,167            200,000   200,000 

Hera Systems, Inc. Convertible Note*

  220,000      16,683            220,000   220,000 

Hera Systems, Inc. Convertible Note*

  150,000      11,375            150,000   150,000 

Hera Systems, Inc. Convertible Note*

  250,000      18,958            250,000   250,000 

Hera Systems, Inc. Convertible Note*

  250,000      18,958            250,000   250,000 

Hera Systems, Inc. Convertible Note*

  250,000      18,958            250,000   250,000 

Hera Systems, Inc. Convertible Note*

     50,000   3,445            50,000   50,000 

Hera Systems, Inc. Convertible Note*

     150,000   9,458            150,000   150,000 

Hera Systems, Inc. Convertible Note*

     150,000   7,917            150,000   150,000 

 

36

 

 

Firsthand Technology Value Fund, Inc.

 

Notes to Consolidated Financial Statements - continued

 

SEPTEMBER 30, 2021 (UNAUDITED)

 

AFFILIATE/
CONTROLLED
INVESTMENTS*

 

VALUE AT
12/31/20

  

PURCHASES/
MERGER

  

INTEREST

  

SALES/
MATURITY/
EXPIRATION

  

REALIZED
GAIN (LOSS)

  

CHANGE IN
APPRECIATION/
(DEPRECIATION)

  

VALUE
9/30/21

  

SHARES
HELD AT
9/30/2021

 

Hera Systems, Inc. Convertible Note*

 $  $150,000  $6,542  $  $  $  $150,000   150,000 

Hera Systems, Inc. Convertible Note*

     150,000   5,417            150,000   150,000 

Hera Systems, Inc. Convertible Note*

     200,000   5,222            200,000   200,000 

Hera Systems, Inc. Convertible Note*

     150,000   2,792            150,000   150,000 

Hera Systems, Inc. Convertible Note*

     150,000   1,500            150,000   150,000 

Hera Systems, Inc. Series B Preferred*

  199,913               168,941   368,854   7,039,203 

Hera Systems, Inc. Series B Warrants*

  19,789               16,870   36,659   700,000 

Hera Systems, Inc. Series B Warrants*

  175,696               149,779   325,475   6,214,922 

Hera Systems, Inc. Series B Warrants*

  346,307               295,226   641,533   12,250,000 

Hera Systems, Inc. Series B Warrants*

  148,418               126,525   274,943   5,250,000 

IntraOp Medical Corp. Series C Preferred*

  4,976,452               685,906   5,662,358   26,856,187 

IntraOp Medical Corp. Convertible Note*

  1,300,000      175,254            1,300,000   1,300,000 

IntraOp Medical Corp. Convertible Note*

  500,000      64,533            500,000   500,000 

IntraOp Medical Corp. Convertible Note*

  500,000      64,533            500,000   500,000 

IntraOp Medical Corp. Convertible Note*

  1,000,000      126,393            1,000,000   1,000,000 

IntraOp Medical Corp. Convertible Note*

  500,000      62,574            500,000   500,000 

IntraOp Medical Corp. Convertible Note*

  400,000      49,248            400,000   400,000 

IntraOp Medical Corp. Convertible Note*

  500,000      58,007            500,000   500,000 

 

37

 

 

Firsthand Technology Value Fund, Inc.

 

Notes to Consolidated Financial Statements - continued

 

SEPTEMBER 30, 2021 (UNAUDITED)

 

AFFILIATE/
CONTROLLED
INVESTMENTS*

 

VALUE AT
12/31/20

  

PURCHASES/
MERGER

  

INTEREST

  

SALES/
MATURITY/
EXPIRATION

  

REALIZED
GAIN (LOSS)

  

CHANGE IN
APPRECIATION/
(DEPRECIATION)

  

VALUE
9/30/21

  

SHARES
HELD AT
9/30/2021

 

IntraOp Medical Corp. Convertible Note*

 $750,000  $  $88,466  $  $  $  $750,000   750,000 

IntraOp Medical Corp. Convertible Note*

     1,000,000   67,397            1,000,000   1,000,000 

IntraOp Medical Corp. Convertible Note*

     500,000   232            500,000   500,000 

IntraOp Medical Corp. Convertible Note*

     500,000   15,822            500,000   500,000 

IntraOp Medical Corp. Convertible Note*

     500,000   1,849            500,000   500,000 

IntraOp Medical Corp. Term Note*

  3,000,000      179,510            3,000,000   3,000,000 

IntraOp Medical Corp. Term Note*

  2,000,000      119,671            2,000,000   2,000,000 

IntraOp Medical Corp. Convertible Note*

  10,961,129      1,626,924            10,961,129   10,961,129 

Pivotal Systems CDI (1)*

  22,530,347         (8,326,466)  4,548,597   443,964   19,196,442   23,089,506 

Revasum, Inc. CDI (1)*

  12,637,451               1,752,576   14,390,027   46,834,340 

Silicon Genesis Corp., Common Stock *

  369               (92)  277   921,892 

Silicon Genesis Corp., Common Warrants*

  6               (3)  3   37,982 

Silicon Genesis Corp., Common Warrants*

  100               (100)      

Silicon Genesis Corp., Common Warrants*

  60               (60)      

Silicon Genesis Corp., Series 1-C Preferred*

  3,325               (1,285)  2,040   82,914 

Silicon Genesis Corp., Series 1-D Preferred*

  8,763               (3,403)  5,360   850,830 

 

38

 

 

Firsthand Technology Value Fund, Inc.

 

Notes to Consolidated Financial Statements - continued

 

SEPTEMBER 30, 2021 (UNAUDITED)

 

AFFILIATE/
CONTROLLED
INVESTMENTS*

 

VALUE AT
12/31/20

  

PURCHASES/
MERGER

  

INTEREST

  

SALES/
MATURITY/
EXPIRATION

  

REALIZED
GAIN (LOSS)

  

CHANGE IN
APPRECIATION/
(DEPRECIATION)

  

VALUE
9/30/21

  

SHARES
HELD AT
9/30/2021

 

Silicon Genesis Corp., Series 1-E Preferred*

 $567,596  $  $  $  $  $(103,251) $464,345   5,704,480 

Silicon Genesis Corp., Series 1-F Preferred*

  125,462               (22,902)  102,560   912,453 

Silicon Genesis Corp., Series 1-G Preferred*

  562,359               (108,786)  453,573   48,370,793 

Silicon Genesis Corp., Series 1-H Preferred*

  62,762               (11,564)  51,198   837,942 

SVXR, Inc., Preferred Stock Series A

  5,377,578               (5,377,578)     8,219,454 

UCT Coatings, Inc.Common Stock

  1,074,300               40,350   1,114,650   1,500,000 

Wrightspeed, Inc., Common Stock*

  7,643               (4,271)  3,372   69,102 

Wrightspeed, Inc., Common Stock Warrants*

  12               (12)      

Wrightspeed, Inc., Convertible Note*

  4,929,015      448,540            4,929,015   4,929,015 

Wrightspeed, Inc., Convertible Note*

  750,000      68,250            750,000   750,000 

Wrightspeed, Inc., Convertible Note*

  900,000      81,900            900,000   900,000 

Wrightspeed, Inc., Convertible Note*

  1,050,000      95,550            1,050,000   1,050,000 

Wrightspeed, Inc., Convertible Note*

  400,000      36,400            400,000   400,000 

Wrightspeed, Inc., Convertible Note*

  375,000      34,125            375,000   375,000 

Wrightspeed, Inc., Convertible Note*

  400,000      36,400            400,000   400,000 

Wrightspeed, Inc., Convertible Note*

  2,000,000      182,000            2,000,000   2,000,000 

Wrightspeed, Inc., Convertible Note*

     1,400,000   102,667            1,400,000   1,400,000 

Wrightspeed, Inc., Convertible Note*

     1,200,000   68,800            1,200,000   1,200,000 

Wrightspeed, Inc., Convertible Note*

     1,000,000   45,333            1,000,000   1,000,000 

 

39

 

 

Firsthand Technology Value Fund, Inc.

 

Notes to Consolidated Financial Statements - continued

 

SEPTEMBER 30, 2021 (UNAUDITED)

 

AFFILIATE/
CONTROLLED
INVESTMENTS*

 

VALUE AT
12/31/20

  

PURCHASES/
MERGER

  

INTEREST

  

SALES/
MATURITY/
EXPIRATION

  

REALIZED
GAIN (LOSS)

  

CHANGE IN
APPRECIATION/
(DEPRECIATION)

  

VALUE
9/30/21

  

SHARES
HELD AT
9/30/2021

 

Wrightspeed, Inc., Convertible Note*

 $  $1,000,000  $33,667  $  $  $  $1,000,000   1,000,000 

Wrightspeed, Inc., Convertible Note*

     1,000,000   22,333            1,000,000   1,000,000 

Wrightspeed, Inc., Convertible Note*

     1,000,000   14,333            1,000,000   1,000,000 

Wrightspeed, Inc., Convertible Note*

     300,000   900            300,000   300,000 

Wrightspeed, Inc., Preferred Stock- Series AA*

  12,720,065               (7,389,469)  5,330,596   60,733,693 

Wrightspeed, Inc., Preferred Stock Warrants- Series AA*

  91,524               (69,085)  22,439   609,756 
                                 

Total Affiliates and Controlled Investments

 $98,772,992      $4,213,345      $4,548,597  $(9,202,138) $95,842,985     

Total Affiliates

  6,451,878                 (5,337,228)  1,114,650     

Total Controlled Investments

 $92,321,114      $4,213,345      $4,548,597  $(3,864,910) $94,728,335     

 

*

Controlled Investments.

 

As of September 30, 2021, Kevin Landis represented the Company and sat on the board of directors of Hera Systems, Inc.; IntraOp Medical, Inc.; Pivotal Systems, Inc.; Revasum, Inc.; Silicon Genesis Corp.; and Wrightspeed, Inc. Serving on boards of directors of portfolio companies may cause conflicts of interest. The Adviser has adopted various procedures to ensure that the Company will not be unfavorably affected by these potential conflicts.

 

NOTE 11. COVID-19 RISKS

 

In early 2020, an outbreak of a novel strain of coronavirus (COVID-19) emerged globally. This coronavirus has resulted in closing international borders, enhanced health screenings, healthcare service preparation and delivery, quarantines, cancellations, disruptions to supply chains and customer activity, as well as general public concern and uncertainty. The impact of this outbreak has negatively affected the worldwide economy, as well as the economies of individual countries, the financial health of individual companies and the market in general in significant and unforeseen ways. The future impact of COVID-19 is currently unknown, and it may exacerbate other risks that apply to the Company, including political, social and economic risks. Any such impact could adversely affect the Company’s performance, the performance of the securities in which the Company invests and may lead to losses on your investment in the Company. The ultimate impact of COVID-19 on the financial performance of the Company’s investments is not reasonably estimable at this time.

 

40

 

 

Firsthand Technology Value Fund, Inc.

 

Notes to Consolidated Financial Statements - continued

 

SEPTEMBER 30, 2021 (UNAUDITED)

 

NOTE 12. SUBSEQUENT EVENTS

 

Management has evaluated the impact of all subsequent events on the Company through the date the financial statements were issued, and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements.

 

41

 

 

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

 

 

FORWARD-LOOKING STATEMENTS

 

The matters discussed in this report, as well as in future oral and written statements by management of the Company, include forward-looking statements based on current management expectations that involve substantial risks and uncertainties which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. Forward-looking statements related to future events or our future financial performance. We generally identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other similar words. Important assumptions include our ability to originate new investments and to achieve certain margins and levels of profitability and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this report should not be regarded as a representation by us that our plans or objectives will be achieved. The forward-looking statements contained in this report include, without limitations, statements as to:

 

our future operating results;

our business prospects and the prospects of our prospective portfolio companies;

the impact of investments that we expect to make;

the impact of a protracted decline in the liquidity of the credit markets on our business;

our informal relationships with third parties;

the expected market for venture capital investments and our addressable market;

the dependence of our future success on the general economy and its impact on the industries in which we invest;

our ability to access the equity market;

the ability of our portfolio companies to achieve their objectives;

our expected financings and investments;

our regulatory structure and tax status;

our ability to operate as a business development company and a regulated investment company;

the adequacy of our cash resources and working capital;

the timing of cash flows, if any, from the operation of our portfolio companies;

the timing, form, and amount of any dividend distributions;

impact of fluctuation of interest rates on our business;

valuation of any investments in portfolio companies particularly those having no liquid trading market; and

our ability to recover unrealized losses.

 

You should not place undue reliance on these forward-looking statements. The forward-looking statements made in this report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances occurring after the date of this report.

 

The following discussion should be read in conjunction with our consolidated financial statements and related notes and other financial information appearing elsewhere in this prospectus. In addition to historical information, the following discussion and other parts of this prospectus contain forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by such forward-looking information due to the factors discussed under “Risk Factors” and “Forward-Looking Statements” appearing elsewhere herein.

 

OVERVIEW

 

We are an externally managed, closed-end, non-diversified management investment company organized as a Maryland corporation that has elected to be treated as a BDC under the 1940 Act. As such, 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,”

 

42

 

 

including securities of private or micro-cap public U.S. companies, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. In addition, for tax purposes we are treated as a corporation and are subject to federal and state taxes on our income. FCM serves as our investment adviser and manages the investment process on a daily basis.

 

Our investment objective is to seek long-term growth of capital, principally by seeking capital gains on our equity and equity-related investments. There can be no assurance that we will achieve our investment objective. Under normal circumstances, we invest at least 80% of our net assets for investment purposes in technology companies. We consider technology companies to be those companies that derive at least 50% of their revenues from products and/or services within the information technology sector or in the “cleantech” sector. Information technology companies include, but are not limited to, those focused on computer hardware, software, telecommunications, networking, Internet, and consumer electronics. While there is no standard definition of cleantech, it is generally regarded as including goods and services designed to harness renewable energy and materials, eliminate emissions and waste, and reduce the use of natural resources. In addition, under normal circumstances we invest at least 70% of our total assets in privately held companies and public companies with market capitalizations of less than $250 million. Our portfolio is primarily composed of equity and equity derivative securities of technology and cleantech companies (as defined above). These investments generally range between $1 million and $10 million each, although the investment size will vary proportionately with the size of our capital base. We acquire our investments through direct investments in private companies, negotiations with selling shareholders, and in organized secondary marketplaces for private securities.

 

While our primary focus is to invest in illiquid private technology and cleantech companies, we also may invest in micro-cap publicly traded companies. In addition, we may invest up to 30 percent of the portfolio in opportunistic investments that do not constitute the private companies and micro-cap public companies described above. These other investments may include investments in securities of public companies that are actively traded or in actively traded derivative securities such as options on securities or security indices. These other investments may also include investments in high-yield bonds, distressed debt, or securities of public companies that are actively traded and securities of companies located outside of the United States. Our investment activities are managed by FCM.

 

PORTFOLIO COMPOSITION

 

We make investments in securities of both public and private companies. Our portfolio investments consist principally of equity and equity-like securities, including common and preferred stock, warrants for the purchase of common and preferred stock, and convertible and term notes. The fair value of our investment portfolio was approximately $95.5 million as of September 30, 2021, as compared to approximately $102.1 million as of December 31, 2020.

 

The following table summarizes the fair value of our investment portfolio by industry sector as of September 30, 2021, and December 31, 2020.

 

 

September 30, 2021

December 31, 2020

Semiconductor Equipment

34.3%

40.6%

Medical Devices

29.9%

25.8%

Automotive

23.4%

23.1%

Aerospace

5.7%

3.5%

Equipment Leasing

1.9%

2.2%

Advanced Materials

1.2%

1.1%

Intellectual Property

1.1%

1.3%

Exchange-Traded/Money Market Funds

0.2%

2.3%

Other Assets

2.3%

0.1%

Net Assets

100.0%

100.0%

 

 

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RESULTS OF OPERATIONS

 

Comparison of the three months ended September 30, 2021 to the three months ended September 30, 2020.

 

INVESTMENT INCOME

 

For the three months ended September 30, 2021, we had investment income of $1,548,910 primarily attributable to interest accrued on convertible/term note investments with IntraOp Medical, Hera Systems and Wrightspeed.

 

For the three months ended September 30, 2020, we had investment income of $1,068,654 primarily attributable to interest accrued on convertible/term note investments with IntraOp Medical, Hera Systems and Wrightspeed.

 

The higher level of interest income in the three months ended September 30, 2021 compared to the three months ended September 30, 2020 was due to increased investments in convertible notes with IntraOp Medical, Hera Systems and Wrightspeed.

 

OPERATING EXPENSES

 

Net operating expenses totaled approximately $830,323 during the three months ended September 30, 2021 and $806,615 during the three months ended September 30, 2020.

 

Significant components of net operating expenses for the three months ended September 30, 2021, were management fee expense of $555,311 and professional fees (audit, legal, accounting, and consulting) of $101,564. Significant components of net operating expenses for the three months ended September 30, 2020, were management fee expense of $518,983 and professional fees (audit, legal, accounting, and consulting) of $128,497.

 

The higher level of net operating expenses for the three months ended September 30, 2021, compared to the three months ended September 30, 2020, is primarily attributable to an increase in our total net assets, on which the investment advisory fees are based.

 

NET INVESTMENT INCOME/(LOSS)

 

Net investment income before taxes was $718,587 for the three months ended September 30, 2021 versus a net investment income before taxes of $262,039 for the three months ended September 30, 2020.

 

The higher net investment income before taxes in the three months ended September 30, 2021, compared to the three months ended September 30, 2020, is primarily attributable to increased investments in convertible notes with IntraOp Medical, Hera Systems and Wrightspeed on which we accrue income.

 

NET INVESTMENT REALIZED GAINS AND LOSSES AND UNREALIZED APPRECIATION AND DEPRECIATION

 

A summary of the net realized and unrealized gains and losses on investments for the three-month period ended September 30, 2021, and September 30, 2020, is shown below.

 

  

Three Months Ended
September 30, 2021

 

Realized gains

 $0 

Net change in unrealized depreciation on investments

  (9,293,150)

Deferred tax benefit

   

Net realized and unrealized losses on investments, net of deferred taxes

 $(9,293,150)

 

  

As of
September 30, 2021

 

Gross unrealized appreciation on portfolio investments

 $21,752,888 

Gross unrealized depreciation on portfolio investments

  (63,351,649)

Net unrealized depreciation on portfolio investments

 $(41,598,761)

 

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Three Months Ended
September 30, 2020

 

Realized gains

 $840,725 

Net change in unrealized depreciation on investments

  (7,211,045)

Deferred tax benefit

   

Net realized and unrealized losses on investments, net of deferred taxes

 $(6,370,320)

 

  

As of
September 30, 2020

 

Gross unrealized appreciation on portfolio investments

 $25,051,533 

Gross unrealized depreciation on portfolio investments

  (70,701,697)

Net unrealized depreciation on portfolio investments

 $(45,650,164)

 

During the three months ended September 30, 2021, we did not recognize any net realized gains.

 

During the three months ended September 30, 2021, net unrealized depreciation on total investments increased by $9,293,150. The change in net unrealized appreciation and depreciation of our private investments is based on portfolio asset valuations determined in good faith by our Board of Directors. This change in net unrealized depreciation was primarily caused by a decrease in the valuations of our investments, primarily IntraOp Medical, Wrightspeed and Pivotal investments.

 

During the three months ended September 30, 2020, we recognized net realized gains of approximately $840,725.

 

During the three months ended September 30, 2020, net unrealized depreciation on total investments increased by $7,211,045. The change in net unrealized appreciation and depreciation of our private investments is based on portfolio asset valuations determined in good faith by our Board of Directors. This change in net unrealized depreciation was primarily caused by a decrease in the valuations of our investments, primarily Revasum and Pivotal investments.

 

NET INCREASE/(DECREASE) IN ASSETS RESULTING FROM OPERATIONS AND CHANGE IN NET ASSETS PER SHARE

 

For the three months ended September 30, 2021, the net decrease in net assets resulting from operations (net of deferred taxes) totaled $(8,574,563) and the basic and fully diluted net change in net assets per share for the three months ended September 30, 2021 was $(1.24).

 

For the three months ended September 30, 2020, the net decrease in net assets resulting from operations (net of deferred taxes) totaled $(6,108,281) and the basic and fully diluted net change in net assets per share for the three months ended September 30, 2020 was $(0.89).

 

The greater decrease in net assets resulting from operations for the three months ended September 30, 2021, as compared to the three months ended September 30, 2020, is due primarily to a decrease in the valuation of certain of our investments, particularly IntraOp Medical, Wrightspeed and Pivotal.

 

Comparison of the nine months ended September 30, 2021 to the nine months ended September 30, 2020.

 

INVESTMENT INCOME

 

For the nine months ended September 30, 2021, we had investment income of $4,241,642 primarily attributable to interest accrued on convertible/term note investments with IntraOp Medical, Hera Systems and Wrightspeed.

 

For the nine months ended September 30, 2020, we had investment income of $2,762,705 primarily attributable to interest accrued on convertible/term note investments with IntraOp Medical, Hera Systems and Wrightspeed.

 

The higher level of interest income in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 was due to increased investments in convertible notes with IntraOp Medical, Hera Systems and Wrightspeed.

 

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OPERATING EXPENSES

 

Net operating expenses totaled approximately $2,461,312 during the nine months ended September 30, 2021 and $2,287,674 during the nine months ended September 30, 2020.

 

Significant components of net operating expenses for the nine months ended September 30, 2021, were management fee expense of $1,694,468 and professional fees (audit, legal, accounting, and consulting) of $271,083. Significant components of net operating expenses for the nine months ended September 30, 2020, were management fee expense of $1,493,418 and professional fees (audit, legal, accounting, and consulting) of $298,262.

 

The higher level of net operating expenses for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, is primarily attributable to an increase in our total net assets, on which the investment advisory fees are based.

 

NET INVESTMENT INCOME/(LOSS)

 

Net investment income before taxes was $1,780,330 for the nine months ended September 30, 2021 and $475,031 for the nine months ended September 30, 2020.

 

The higher net investment income in the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, is primarily attributable to increased investments in convertible notes with IntraOp Medical, Hera Systems and Wrightspeed on which investment income is accrued.

 

NET INVESTMENT REALIZED GAINS AND LOSSES AND UNREALIZED APPRECIATION AND DEPRECIATION

 

A summary of the gross and net realized and unrealized gains and losses on investments for the nine-month periods ended September 30, 2021, and September 30, 2020, is shown below.

 

  

Nine Months Ended
September 30, 2021

 

Realized gains

 $4,548,624 

Net change in unrealized depreciation on investments

  (9,702,990)

Net realized and unrealized losses on investments

 $(5,154,366)

 

  

As of
September 30, 2021

 

Gross unrealized appreciation on portfolio investments

 $21,752,888 

Gross unrealized depreciation on portfolio investments

  (63,351,649)

Net unrealized depreciation on portfolio investments

 $(41,598,761)

 

  

Nine Months Ended
September 30, 2020

 

Realized losses

 $(551,341)

Net change in unrealized depreciation on investments

  (21,963,692)

Deferred tax expense

  (7,842,581)

Net realized and unrealized losses on investments

 $(30,357,614)

 

  

As of
September 30, 2020

 

Gross unrealized appreciation on portfolio investments

 $25,051,533 

Gross unrealized depreciation on portfolio investments

  (70,701,697)

Net unrealized depreciation on portfolio investments

 $(45,650,164)

 

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During the nine months ended September 30, 2021, we recognized net realized gains of approximately $4,548,624 from the sale of securities.

 

During the nine months ended September 30, 2021, net unrealized depreciation on total investments increased by $9,702,990. The change in net unrealized appreciation and depreciation of our private investments is based on portfolio asset valuations determined in good faith by our Board of Directors. This increase in net unrealized depreciation was primarily caused by a decrease in the valuations of our Wrightspeed and SVXR investments.

 

During the nine months ended September 30, 2020, we recognized net realized losses of approximately $551,341 from the sale/transfer of securities.

 

During the nine months ended September 30, 2020, net unrealized depreciation on total investments increased by $21,963,692. The change in net unrealized appreciation and depreciation of our private investments is based on portfolio asset valuations determined in good faith by our Board of Directors. This increase in net unrealized depreciation was primarily caused by a decrease in the valuations of our Revasum and Pivotal investments.

 

NET INCREASE/(DECREASE) IN ASSETS RESULTING FROM OPERATIONS AND CHANGE IN NET ASSETS PER SHARE

 

For the nine months ended September 30, 2021, the net decrease in net assets resulting from operations totaled $3,374,036 and for the nine months ended September 30, 2020, the net decrease in net assets resulting from operations (net of deferred taxes) totaled $29,882,583. The basic and fully diluted net change in net assets per share for the nine months ended September 30, 2021 was $(0.49) and the basic and fully diluted net change in net assets per share for the nine months ended September 30, 2020 was $(4.34). The lesser decrease in net assets resulting from operations for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020, is due primarily to a greater decline in the valuation in the nine months ended September 30, 2020 of certain of our investments.

 

DISTRIBUTION POLICY

 

Our board of directors will determine the timing and amount, if any, of our distributions. We are not required to pay any minimum level of distributions of our income or capital gains.

 

CONTRACTUAL OBLIGATIONS

 

The Fund does not have any Contractual Obligations that meet the requirements for disclosure under Item 303 of Regulation S-K.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

The Fund does not have any Off-Balance Sheet Arrangements.

 

CRITICAL ACCOUNTING POLICIES

 

This discussion of our financial condition and results of operations is based upon our financial statements, which are prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of these financial statements will require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. Changes in the economic environment, financial markets, and any other parameters used in determining such estimates could cause actual results to differ. In addition to the discussion below, we will describe our critical accounting policies in the notes to our future financial statements.

 

Valuation of Portfolio Investments

 

As a business development company, we generally invest in illiquid equity and equity derivatives of securities of venture capital stage technology companies. Under written procedures established by our board of directors, securities traded on stock exchanges, or quoted by NASDAQ, are valued according to the NASDAQ Stock Market, Inc. (“NASDAQ”) official closing price, if applicable, or at their last reported sale price as of the close of trading on the New York Stock Exchange (“NYSE”) (normally 4:00 P.M. Eastern Time). If a security is not traded that day, the security will be valued at its most recent bid price. Securities traded in the over-the-counter market, but not quoted by NASDAQ, are valued at the last sale price (or, if the last sale price is not readily available, at the most recent closing bid price as quoted by

 

47

 

 

brokers that make markets in the securities) at the close of trading on the NYSE. Securities traded both in the over-the-counter market and on a stock exchange are valued according to the broadest and most representative market. We obtain these market values from an independent pricing service or at the mean between the bid and ask prices obtained from at least two brokers or dealers (if available, otherwise by a principal market maker or a primary market dealer). In addition, a large percentage of our portfolio investments are in the form of securities that are not publicly traded. The fair value of securities and other investments that are not publicly traded may not be readily determinable. We value these securities quarterly at fair value as determined in good faith by our board of directors. Our board of directors may use the services of a nationally recognized independent valuation firm to aid it in determining the fair value of these securities. The methods for valuing these securities may include: fundamental analysis (sales, income, or earnings multiples, etc.), discounts from market prices of similar securities, purchase price of securities, subsequent private transactions in the security or related securities, or discounts applied to the nature and duration of restrictions on the disposition of the securities, as well as a combination of these and other factors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, may fluctuate over short periods of time, and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. Our net asset value could be adversely affected if our determinations regarding the fair value of our investments were materially higher than the values that we ultimately realize upon the disposal of such securities.

 

Revenue Recognition

 

We record interest or dividend income on an accrual basis to the extent that we expect to collect such amounts. We do not accrue as a receivable interest on loans and debt securities if we have reason to doubt our ability to collect such interest. Loan origination fees, original issue discount, and market discount are capitalized, and we amortize any such amounts as interest income. Upon the prepayment of a loan or debt security, any unamortized loan origination is recorded as interest income. We will record prepayment premiums on loans and debt securities as interest income when we receive such amounts.

 

Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation

 

We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.

 

Recently Issued Accounting Standards

 

From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by us as of the specified effective date. We believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial statements upon effectiveness.

 

Inflation

 

Inflation has not had a significant effect on our results of operations in any of the reporting periods presented herein. However, our portfolio companies have experienced, and may in the future experience, the impacts of inflation on their operating results.

 

SUBSEQUENT EVENTS

 

Subsequent to the close of the fiscal quarter on September 30, 2021, and through the date of the issuance of the financial statements included herein, a number of events related to our portfolio of investments occurred, consisting primarily of purchases and sales of securities. Since that date, we have purchased private securities with an aggregate cost of approximately $3.5 million and sold public securities with proceeds of approximately $7.3 million.

 

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Item 3.    Quantitative and Qualitative Disclosures About Market Risk.

 

 

The Company’s business activities contain elements of risk. We consider the principal types of market risk to be valuation risk and small company investment risk.

 

VALUATION RISK

 

Value, as defined in Section 2(a)(41) of the 1940 Act, is (i) the market price for those securities for which market quotations are readily available and (ii) fair value as determined in good faith by, or under the direction of, the Board of Directors for all other assets.

 

Because there is typically no public market for our interests in the small privately-held companies in which we invest, the valuation of the securities in that portion of our portfolio is determined in good faith by our Board of Directors with the assistance of our Valuation Committee, comprised of the independent members of our Board of Directors, in accordance with our Valuation Procedures. In addition, the Board of Directors may use the services of a nationally recognized independent valuation firm to aid it in determining the fair value of some of these securities. In the absence of a readily ascertainable market value, the determined value of our portfolio of securities may differ significantly from the values that would be placed on the portfolio if a ready market for such securities existed. Determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment, although our valuation policy is intended to provide a consistent basis for determining fair value of the portfolio investments. The methods for valuing these securities may include: fundamental analysis (sales, income, or earnings multiples, etc.), discounts from market prices of similar securities, purchase price of securities, subsequent private transactions in the security or related securities, or discounts applied to the nature and duration of restrictions on the disposition of the securities, as well as a combination of these and other factors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, may fluctuate over short periods of time, and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed.

 

Furthermore, changes in valuation of any of our investments in privately-held companies from one period to another may be volatile.

 

Investments in privately held, immature companies are inherently more volatile than investments in more mature businesses. Such immature businesses are inherently fragile and easily affected by both internal and external forces.

 

Our portfolio companies can lose much or all of their value suddenly in response to an internal or external adverse event. Conversely, these immature businesses can gain suddenly in value in response to an internal or external positive development.

 

The values assigned to our assets are based on available information and do not necessarily represent amounts that might ultimately be realized, as these amounts depend on future circumstances and cannot be reasonably determined until the individual investments are actually liquidated or become readily marketable. Upon sale of investments, the values that are ultimately realized may be different from what is presently estimated. This difference could be material.

 

PRIVATELY PLACED SMALL COMPANIES RISK

 

The Company invests in small companies, and its investments in these companies are considered speculative in nature. The Company’s investments often include securities that are subject to legal or contractual restrictions on resale that adversely affect the liquidity and marketability of such securities. As a result, the Company is subject to risk of loss which may prevent our shareholders from achieving price appreciation, dividend distributions and return of capital.

 

49

 

 

WE CURRENTLY HOLD A PORTION OF OUR ASSETS IN CASH

 

As of September 30, 2021, a portion of the Company’s assets was invested in cash and/or cash equivalents, which are expected to earn low yields. Given the current low interest rate environment, to the extent the management fee and other operating expenses exceed interest income on the cash holdings of the Company, the Company may experience losses. Furthermore, the investment advisory fee payable by us will not be reduced while our assets are invested in cash-equivalent securities.

 

In some cases, particularly for primary transactions, it is to our advantage to hold sufficient cash reserve so that we can make additional subsequent investments in these companies in order to (a) avoid having our earlier investments become diluted in future dilutive financings, (b) invest additional capital into existing portfolio companies in case additional investments are necessary, and/or (c) exercise warrants, options, or convertible securities that were acquired as part of the earlier transactions. For this reason, in the case of primary transactions (as opposed to secondary transactions where we do not buy the securities from the issuing companies but instead from existing stockholders), we typically reserve cash in an amount at least equal to our initial investment for such follow-on opportunities. Cash reserves held with respect to a particular investment should, therefore, decline as it is held longer, and will typically not be needed once that portfolio company becomes public or we determine it is no longer in our best interest to make investments in such portfolio company.

 

We may from time to time liquidate various investments. We are required to distribute substantially all of our net realized gains to stockholders on an annual basis and, therefore, will generally hold the proceeds of liquidated investments in cash pending its distribution.

 

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Item 4.    Controls and Procedures.

 

 

(a) Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

 

(b) Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act, that occurred during the fiscal quarter ended September 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

51

 

 

PART II. OTHER INFORMATION

 

 

52

 

 

Item 1.    Legal Proceedings.

 

 

We are not a party to any material pending legal proceeding, and no such proceedings are known to be contemplated.

 

Item 1A.    Risk Factors.

 

 

There have been no material changes from risk factors as previously disclosed in our Form 10-K for the period ended December 31, 2020, in response to Item 1A of Part 1 of Form 10-K.

 

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

 

 

None.

 

Item 3.    Defaults Upon Senior Securities.

 

 

None.

 

Item 4.    Mine Safety Disclosures.

 

 

None.

 

Item 5.    Other Information.

 

 

None.

 

Item 6.    Exhibits.

 

 

EXHIBIT NUMBER

DESCRIPTION

31.1

Chief Executive Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

  

31.2

Chief Financial Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

  

32.

Chief Executive Officer and Chief Financial Officer Certification Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

SIGNATURES

 

 

Pursuant to the requirements of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  

FIRSTHAND TECHNOLOGY VALUE FUND, INC.

(Registrant)

Dated: November 15, 2021

 

  

Kevin Landis

Chief Executive Officer and Chief Financial Officer

 

EXHIBIT INDEX

 

EXHIBIT NUMBER

Description

31.1

Chief Executive Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

  

31.2

Chief Financial Officer Certification Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

  

32.

Chief Executive Officer and Chief Financial Officer Certification Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002