10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

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

For the fiscal year ended December 31, 2018

or

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

For the transition period from ______ to ______

Commission file number: 814-00830

Firsthand Technology Value Fund, Inc.

(Exact name of registrant as specified in its charter)

Maryland	27-3008946
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

150 Almaden Boulevard, Suite 1250
San Jose, California 95113

(Address and zip code of principal executive offices)

(408) 886-7096

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $0.001 par value	The NASDAQ Global Market

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes  o   No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.   Yes  o   No  x

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  x   No  o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes  x   No  o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act). (check one):

Large accelerated filer o Accelerated filer x Non-accelerated filer o Smaller reporting company oEmerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   o

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

The aggregate market value of the Common Stock held by non-affiliates of the registrant as of December 31, 2018 was approximately $72 million (computed using the closing price of $11.20 per share of Common Stock on December 31, 2018, as reported by the NASDAQ Global Market).

As of March 1, 2019, the registrant had 7,178,770 shares of common stock, par value $0.001 per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement prepared in connection with the Annual Meeting of Stockholders to be held in 2019 are incorporated by reference in Part III of this Form 10-K.

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TABLE OF CONTENTS

PART I.
Item 1.	Business	4
Item 1A.	Risk Factors	17
Item 1B.	Unresolved Staff Comments.	24
Item 2.	Properties	24
Item 3.	Legal Proceedings	24
Item 4	Mine Safety Disclosures	24
PART II.
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	24
Item 6.	Selected Financial Data	26
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	29
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.	39
Item 8.	Financial Statements and Supplementary Data	43
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	95
Item 9A.	Controls and Procedures	95
Item 9B.	Other Information	95
PART III.
Item 10.	Directors, Executive Officers and Corporate Governance	96
Item 11.	Executive Compensation	96
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	96
Item 13.	Certain Relationships and Related Transactions, and Director Independence	96
Item 14.	Principal Accountant Fees and Services	96
PART IV.
Item 15.	Exhibits, Financial Statements Schedules	97
Item 16.	Form 10-K Summary	98

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PART I

Item 1. Business

FORWARD LOOKING STATEMENTS

This report, and other statements that we may make, may contain forward-looking statements, which relate to future events or our future performance or financial condition. We use words such as "anticipates," "believes," "expects," "plans," "will," "may," "continues," "seeks," "likely," "intends," and similar expressions to identify forward-looking statements. The forward-looking statements contained in this Annual Report on Form 10-K involve risks and uncertainties, including forward-looking 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,

•  our contractual arrangements and relationships with third parties,

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

•  the ability of our prospective portfolio companies to achieve their objectives,

•  our expected financings and investments,

•  the adequacy of our cash resources and working capital, and

•  the timing of cash flows, if any, from the operations of our prospective portfolio companies.

Our actual results could differ materially from those projected in the forward-looking statements for any reason, including the factors set forth in "Risk Factors" and elsewhere in this Annual Report on Form 10-K. In addition, several factors that could materially affect our actual results are the ability of the portfolio companies in which we invest to achieve their objectives; our ability to source favorable private investments; changes in the securities markets, especially the markets for technology companies including those that may be early stage or micro-cap companies; the dependence of our future success of the general economy and its impact on the industries in which we invest and other factors discussed in our periodic filings with the Securities and Exchange Commission (the "SEC").

Unpredictable or unknown factors could also have material adverse effects on us. Since our actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements, we cannot give any assurance that any of the events anticipated by the forward-looking statements will occur, or, if any of them do, what impact they will have on our results of operations and financial condition. All forward-looking statements included in this Annual Report on Form 10-K are expressly qualified in their entirety by the foregoing cautionary statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We do not undertake any obligation to update, amend or clarify these forward-looking statements or the risk factors contained in this Annual Report on Form 10-K, whether as a result of new information, future events or otherwise, except as may be required under the federal securities laws. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC.

GENERAL

Firsthand Technology Value Fund, Inc. ("we," "us," "our," the "Company", the "Fund," or "SVVC") is an externally managed, closed-end, non-diversified management investment company organized as a Maryland corporation that has elected to be treated as a business development company ("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act"). As such, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70 percent of our total assets in "qualifying assets," 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 since the inception of the Fund, we have elected to be treated as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code of 1986, as amended, which we refer to as the "Code." Starting in 2018, however, we are no longer a RIC and will be taxed as a C corporation for tax purposes. Firsthand Capital Management, Inc. (the "Investment Adviser", the "Adviser", or "FCM") serves as our investment adviser and manages the investment process on a daily basis.

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We were incorporated under the Maryland General Corporation Law in April 2010 and acquired our initial portfolio of securities through the reorganization (the "Reorganization") into us of Firsthand Technology Value Fund ("TVF"), an open-end mutual fund and a series of Firsthand Funds, which is a Delaware statutory trust. The reorganization was completed on April 15, 2011 and we commenced operations on April 18, 2011.

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 percent of our total assets for investment purposes in technology companies. We consider technology companies to be those companies that derive at least 50 percent of their revenues from products and/or services within the information technology sector and 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 percent of our assets in privately held companies and 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 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 may also invest in micro-cap publicly traded companies. In addition, we may invest up to 30% 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. 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.

Neither our investments nor an investment in us are intended to constitute a balanced investment program. We expect to be risk-seeking rather than risk-averse in our investment approach. There is no assurance that our investment objective will be achieved.

We invest a substantial portion of our assets in securities that we consider to be private venture capital equity investments. These private venture capital equity investments usually do not pay interest or dividends and usually are subject to legal or contractual restrictions on resale that may adversely affect the liquidity and marketability of such securities. We expect to make speculative venture capital investments with limited marketability and a greater risk of investment loss than less-speculative investments. We are not limited by the diversification requirements applicable to a regulated investment company ("RIC"), which means that we may commit all of our assets to only a few investments.

Subject to continuing to meet the compliance tests applicable to BDCs, there are no limitations on the types of securities or other assets in which we may invest. Investments may include the following:

•  Venture capital investments, whether in corporate, partnership, or other form, including development-stage or start-up entities;

•  Equity, equity-related securities (including options and warrants), and debt with equity features from either private or public issuers;

•  Debt obligations of all types having varying terms with respect to security or credit support, subordination, purchase price, interest payments, and maturity;

•  Foreign securities;

•  Intellectual property or patents or research and development in technology or product development that may lead to patents or other marketable technology; and

•  Miscellaneous investments.

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The table below provides a summary of our investments as of December 31, 2018.

INVESTMENT	BUSINESS DESCRIPTION	FAIR VALUE1
EQX Capital, Inc.	Equipment Leasing	$	3,528,070
Fidelity Investments Money Market Treasury Portfolio - Class I 2	Investment Company		438,442
Hera Systems, Inc.	Aerospace		6,697,788
IntraOp Medical Corp.	Medical Devices		29,526,457
Lyncean Technologies, Inc.	Semiconductor Equipment		1,000,000
Phunware, Inc. 2	Mobile Computing		19,121,150
Pivotal Systems Corp. 2	Semiconductor Equipment		53,825,978
QMAT, Inc.	Advanced Materials		13,402,530
QuickLogic Corp. 2	Semiconductors		734,000
Revasum, Inc. 2	Semiconductor Equipment		58,608,601
Roku, Inc. 2	Consumer Electronics		3,523,600
Silicon Genesis Corp.	Intellectual Property		3,187,745
SVXR, Inc.	Semiconductor Equipment		4,923,206
Telepathy Investors, Inc.	Consumer Electronics		1,314,502
UCT Coatings, Inc.	Advanced Materials		748,950
Vufine, Inc.	Consumer Electronics		20,746
Wrightspeed, Inc.	Automotive		9,251,805

¹  Fair value for our private company holdings was determined in good faith by our Board of Directors (the "Board" or "Board of Directors") on December 31, 2018. For public companies, the figure represents the market value of our securities on December 31, 2018, less any discount due to resale restriction on the security.

²  Public company.

INVESTMENTS AND STRATEGIES

The following is a summary description of the types of assets in which we may invest, the investment strategies we may use, and the attendant risks associated with our investments and strategies.

VENTURE CAPITAL INVESTMENTS

We define venture capital as the money and resources made available to privately held start-up firms and privately held and publicly traded small businesses with exceptional growth potential. These businesses can range in stage from pre-revenue to generating positive cash flow. Most of our long-term venture capital investments are in thinly capitalized, unproven, small companies focused on commercializing risky technologies. These businesses also tend to lack management depth, have limited or no history of operations, and have not attained profitability. Because of the speculative nature of these investments, these securities have a significantly greater risk of loss than traditional investment securities. Some of our venture capital investments will never realize their potential, and some will be unprofitable or result in the complete loss of our investment.

We acquire our investments through direct investments in private companies, negotiations with selling shareholders, and in organized secondary marketplaces for private securities. Our current focus is on investing in late-stage private companies, particularly those with potential for near-term realizations by way of initial public offering ("IPO") or acquisition.

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In connection with our venture capital investments, we may participate in providing a variety of services to our portfolio companies, including the following:

•  Recruiting management,

•  Formulating operating strategies,

•  Formulating intellectual property strategies,

•  Assisting in financial planning,

•  Providing management in the initial start-up stages, and

•  Establishing corporate goals.

We may assist in raising additional capital for these companies from other potential investors and may subordinate our own investment to that of other investors. We typically find it necessary or appropriate to provide additional capital of our own. We may introduce these companies to potential joint venture partners, suppliers, and customers. In addition, we may assist in establishing relationships with investment bankers and other professionals. We may also assist with mergers and acquisitions ("M&As"). We do not currently derive income from these companies for the performance of any of the above services.

We may control, be represented on, or have observer rights on the board of directors of a portfolio company through one or more of our officers or directors, who may also serve as officers of the portfolio company. We indemnify our officers and directors for serving on the board of directors or as officers of portfolio companies, which exposes us to additional risks. Particularly during the early stages of an investment, we may, in rare instances, in effect be conducting the operations of the portfolio company. Our goal is to assist each company in establishing its own independent capitalization, management, and board of directors. As a venture capital-backed company emerges from the developmental stage with greater management depth and experience, we expect that our role in the portfolio company's operations will diminish.

EQUITY, EQUITY-RELATED SECURITIES AND DEBT WITH EQUITY FEATURES

We may invest in equity, equity-related securities, and debt with equity features. These securities include common stock, preferred stock, debt instruments convertible into common or preferred stock, limited partnership interests, other beneficial ownership interests and warrants, options, or other rights to acquire any of the foregoing.

We may make investments in companies with operating histories that are unprofitable or marginally profitable, that have negative net worth, or that are involved in bankruptcy or reorganization proceedings. These investments would involve businesses that management believes have potential through the infusion of additional capital and management assistance. In addition, we may make investments in connection with the acquisition or divestiture of companies or divisions of companies. There is a significantly greater risk of loss with these types of securities than is the case with traditional investment securities.

Warrants, options, and convertible or exchangeable securities generally give the investor the right to acquire specified equity securities of an issuer at a specified price during a specified period or on a specified date. Warrants and options fluctuate in value in relation to the value of the underlying security and the remaining life of the warrant or option, while convertible or exchangeable securities fluctuate in value both in relation to the intrinsic value of the security without the conversion or exchange feature and in relation to the value of the conversion or exchange feature, which is like a warrant or an option. When we invest in these securities, we incur the risk that the option feature will expire worthless, thereby either eliminating or diminishing the value of our investment.

Most of our current portfolio company investments are in the equity securities of private companies. Investments in equity securities of private companies often involve securities that are restricted as to sale and cannot be sold in the open market without registration under the Securities Act of 1933, as amended or pursuant to a specific exemption from these registrations. Opportunities for sale are more limited than in the case of marketable securities, although these investments may be purchased at more advantageous prices and may offer attractive investment opportunities. Even if one of our portfolio companies completes an IPO, we are typically subject to a lock-up agreement for 180 days, and the stock price may decline substantially before we are free to sell.

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We may also invest in publicly traded securities of whatever nature, including relatively small, emerging growth companies that management believes have long-term growth potential. These investments may be through open-market transactions or through private investments in public equity ("PIPE transactions"). Securities purchased in PIPE transactions are typically subject to a lock-up agreement for 180 days, or are issued as unregistered securities that are not freely available for six months.

Even if we have registration rights to make our investments in privately held and publicly traded companies more marketable, a considerable amount of time may elapse between a decision to sell or register the securities for sale and the time when we are able to sell the securities. The prices obtainable upon sale may be adversely affected by market conditions or negative conditions affecting the issuer during the intervening time. We may elect to hold formerly restricted securities after they have become freely marketable, either because they remain relatively illiquid or because we believe that they may appreciate in value, during which holding period they may decline in value and be especially volatile as unseasoned securities. If we need funds for investment or working capital purposes, we might need to sell marketable securities at disadvantageous times or prices.

DEBT OBLIGATIONS

We may hold debt securities, including in privately held and thinly traded public companies, for income and as a reserve pending more speculative investments. Debt obligations may include U.S. government and agency securities, commercial paper, bankers' acceptances, receivables or other asset-based financing, notes, bonds, debentures, or other debt obligations of any nature and repurchase agreements related to these securities. These obligations may have varying terms with respect to security or credit support; subordination; purchase price; interest payments; and maturity from private, public, or governmental issuers of any type located anywhere in the world. We may invest in debt obligations of companies with operating histories that are unprofitable or marginally profitable, that have negative net worth or are involved in bankruptcy or reorganization proceedings, or that are start-up or development-stage entities. In addition, we may participate in the acquisition or divestiture of companies or divisions of companies through issuance or receipt of debt obligations. As of December 31, 2018, the debt obligations held in our portfolio consisted of convertible bridge notes and term notes. The convertible bridge notes generally do not generate cash payments to us, nor are they held for that purpose. Our convertible bridge notes and the interest accrued thereon are held for the purpose of potential conversion into equity at a future date. The term notes we hold are income generating.

Our investments in debt obligations may be of varying quality, including non-rated, unsecured, highly speculative debt investments with limited marketability. Investments in lower-rated and non-rated securities, commonly referred to as "junk bonds," including our venture debt investments, are subject to special risks, including a greater risk of loss of principal and non-payment of interest. Generally, lower-rated securities offer a higher return potential than higher-rated securities, but involve greater volatility of price and greater risk of loss of income and principal, including the possibility of default or bankruptcy of the issuers of these securities. Lower-rated securities and comparable non-rated securities will likely have large uncertainties or major risk exposure to adverse conditions and are predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligation. The occurrence of adverse conditions and uncertainties to issuers of lower-rated securities would likely reduce the value of lower-rated securities held by us, with a commensurate effect on the value of our shares.

The markets in which lower-rated securities or comparable non-rated securities are traded generally are more limited than those in which higher-rated securities are traded. The existence of limited markets for these securities may restrict our ability to obtain accurate market quotations for the purposes of valuing lower-rated or non-rated securities and calculating net asset value or to sell securities at their fair value. Any economic downturn could adversely affect the ability of issuers' lower-rated securities to repay principal and pay interest thereon. The market values of lower-rated and non-rated securities also tend to be more sensitive to individual corporate developments and changes in economic conditions than higher-rated securities. In addition, lower-rated securities and comparable non- rated securities generally present a higher degree of credit risk. Issuers of lower-rated securities and comparable non-rated securities are often highly leveraged and may not have more traditional methods of financing available to them, so that their ability to service their debt obligations during an economic downturn or during sustained periods of rising interest rates may be impaired. The risk of loss owing to default by these issuers is significantly greater because lower-rated securities and comparable non-rated securities generally are unsecured and frequently are subordinated to the prior payment of senior indebtedness. We may incur additional expenses to the extent that we are required to seek recovery upon a default in the payment of principal or interest on our portfolio holdings.

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The market value of investments in debt securities that carry no equity participation usually reflects yields generally available on securities of similar quality and type at the time purchased. When interest rates decline, the market value of a debt portfolio already invested at higher yields can be expected to rise if the securities are protected against early call. Similarly, when interest rates increase, the market value of a debt portfolio already invested at lower yields can be expected to decline. Deterioration in credit quality also generally causes a decline in market value of the security, while an improvement in credit quality generally leads to increased value.

FOREIGN SECURITIES

We may make investments in securities of issuers whose principal operations are conducted outside the United States, and whose earnings and securities are stated in foreign currency. In order to maintain our status as a BDC, our investments in non-qualifying assets, including the securities of companies organized outside the U.S., would be limited to 30 percent of our assets.

Compared to otherwise comparable investments in securities of U.S. issuers, currency exchange risk of securities of foreign issuers is a significant variable. The value of these investments to us will vary with the relation of the currency in which they are denominated to the U.S. dollar, as well as with intrinsic elements of value such as credit risk, interest rates, and performance of the issuer. Investments in foreign securities also involve risks relating to economic and political developments, including nationalization, expropriation of assets, currency exchange freezes, and local recession. Securities of many foreign issuers are less liquid and more volatile than those of comparable U.S. issuers. Interest and dividend income and capital gains on our foreign securities may be subject to withholding and other taxes that may not be recoverable by us. We may seek to hedge all or part of the currency risk of our investments in foreign securities through the use of futures, options, and forward currency purchases or sales.

INTELLECTUAL PROPERTY

We believe there is a role for organizations that can assist in technology transfer. Scientists and institutions that develop and patent intellectual property perceive the need for and rewards of entrepreneurial commercialization of their inventions. Our form of investment may be:

•  Funding research and development in the development of a technology,

•  Obtaining licensing rights to intellectual property or patents,

•  Acquiring intellectual property or patents, or

•  Forming and funding companies or joint ventures to commercialize further intellectual property.

Income from our investments in intellectual property or its development may take the form of participation in licensing or royalty income, fee income, or some other form of remuneration. Investment in developmental intellectual property rights involves a high degree of risk that can result in the loss of our entire investment as well as additional risks, including uncertainties as to the valuation of an investment and potential difficulty in liquidating an investment. Further, investments in intellectual property generally require investor patience, as investment return may be realized only after or over a long period. At some point during the commercialization of a technology, our investment may be transformed into ownership of securities of a development-stage or start-up company, as discussed under "Venture Capital Investments" above.

REPURCHASE OF SHARES

Our shareholders do not have the right to compel us to redeem our shares. We may, however, purchase outstanding shares of our common stock from time to time, subject to approval of our Board of Directors and in compliance with applicable corporate and securities laws. The Board of Directors may authorize public open-market purchases or privately negotiated transactions from time to time when deemed to be in the best interest of our shareholders. Public purchases would be conducted only after notification to shareholders through a press release or other means. The Board of Directors may or may not decide to undertake any purchases of our common stock.

Our repurchases of our common shares would decrease our total assets and would therefore likely have the effect of increasing our expense ratio. Subject to our investment restrictions, we may borrow money to finance the repurchase of our common stock in the open market pursuant to any tender offer. Interest on any borrowings to finance share repurchase

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transactions would reduce our net assets. If, because of market fluctuations or other reasons, the value of our assets falls below the required 1940 Act coverage requirements, we may have to reduce our borrowed debt to the extent necessary to comply with the requirement. To achieve a reduction, it is possible that we may be required to sell portfolio securities at inopportune times when it may be disadvantageous to do so.

PORTFOLIO COMPANY TURNOVER

Changes with respect to portfolio companies will be made as our management considers necessary in seeking to achieve our investment objective. The rate of portfolio turnover will not be treated as a limiting or relevant factor when circumstances exist that are considered by management to make portfolio changes advisable.

Although we expect that many of our investments will be relatively long term in nature, we may make changes in particular portfolio holdings whenever it is considered that an investment no longer has substantial growth potential or has reached its anticipated level of performance, or (especially when cash is not otherwise available) that another investment appears to have a relatively greater opportunity for capital appreciation. We may also make general portfolio changes to increase our cash to position us in a defensive posture. We may make portfolio changes without regard to the length of time we have held an investment, or whether a sale results in profit or loss, or whether a purchase results in the reacquisition of an investment that we may have only recently sold. Our investments in privately held companies are illiquid, which limits portfolio turnover. The portfolio turnover rate may vary greatly during a year as well as from year to year and may also be affected by cash requirements.

COMPETITION

We compete for investments with a number of BDCs and other investment funds (including private equity funds and venture capital funds), reverse merger and special purpose acquisition company ("SPACs") sponsors, investment bankers that underwrite initial public offerings, hedge funds that invest in PIPEs, traditional financial services companies such as commercial banks, and other sources of financing. Many of these entities have greater financial and managerial resources than we do. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act will impose on us as a BDC. We believe we compete with these entities primarily on the basis of our willingness to make smaller, non-controlling investments, the experience and contacts of our investment professionals within our targeted industries, our responsive and efficient investment analysis and decision-making processes, and the investment terms that we offer. We do not seek to compete primarily on the deal terms we offer to potential portfolio companies. We use the industry information available to FCM to assess investment risks and determine appropriate pricing for our investments in portfolio companies. In addition, we believe that the relationships of Kevin Landis (FCM's President and Chief Investment Officer), and the other senior investment professionals FCM retains, enable us to learn about, and compete effectively for, financing opportunities with attractive companies in the industries in which we seek to invest. For additional information concerning the competitive risks we face, see "Risk Factors—Risks relating to our business and structure—We operate in a highly competitive market for investment opportunities."

REGULATION

The Small Business Investment Incentive Act of 1980 added the provisions of the 1940 Act applicable only to BDCs. BDCs are a special type of investment company. After a company files its election to be treated as a BDC, it may not withdraw its election without first obtaining the approval of holders of a majority of its outstanding voting securities. The following is a brief description of the 1940 Act provisions applicable to BDCs, qualified in its entirety by reference to the full text of the 1940 Act and the rules issued thereunder by the Securities and Exchange Commission ("SEC").

Generally, to be eligible to elect BDC status, a company must primarily engage in the business of furnishing capital and making significant managerial assistance available to companies that do not have ready access to capital through conventional financial channels. Such companies that satisfy certain additional criteria described below are termed "eligible portfolio companies." In general, in order to qualify as a BDC, a company must: (i) be a domestic company; (ii) have registered a class of its securities pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); (iii) operate for the purpose of investing in the securities of certain types of portfolio companies, including early-stage or

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emerging companies and businesses suffering or just recovering from financial distress (see following paragraph); (iv) make available significant managerial assistance to such portfolio companies; and (v) file a proper notice of election with the SEC.

An eligible portfolio company generally is a domestic company that is not an investment company or a company excluded from investment company status pursuant to exclusions for certain types of financial companies (such as brokerage firms, banks, insurance companies, and investment banking firms) and that: (i) has a fully diluted market capitalization of less than $250 million and has a class of equity securities listed on a national securities exchange, (ii) does not have a class of securities listed on a national securities exchange, or (iii) is controlled by the BDC by itself or together with others (control under the 1940 Act is presumed to exist where a person owns at least 25 percent of the outstanding voting securities of the portfolio company) and the BDC has a representative on the Board of Directors of such company.

We may be examined periodically by the SEC for compliance with the 1940 Act.

As with other companies regulated by the 1940 Act, a BDC must adhere to certain substantive regulatory requirements. A majority of our directors must be persons who are not "interested persons", as that term is defined in the 1940 Act. Additionally, we are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect the BDC. Furthermore, as a BDC, we are prohibited from protecting any director or officer against any liability to us or our shareholders arising from willful malfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of such person's office.

The 1940 Act provides that we may not make an investment in non-qualifying assets unless at the time at least 70 percent of the value of our total assets (measured as of the date of our most recently filed financial statements) consists of qualifying assets. Qualifying assets include: (i) securities of eligible portfolio companies; (ii) securities of certain companies that were eligible portfolio companies at the time we initially acquired their securities and in which we retain a substantial interest; (iii) securities of certain controlled companies; (iv) securities of certain bankrupt, insolvent, or distressed companies; (v) securities received in exchange for or distributed in or with respect to any of the foregoing; and (vi) cash items, U.S. government securities, and high quality short-term debt. The SEC has adopted a rule permitting a BDC to invest its cash in certain money market funds. The 1940 Act also places restrictions on the nature of the transactions in which, and the persons from whom, securities can be purchased in some instances in order for the securities to be considered qualifying assets.

We are permitted by the 1940 Act, under specified conditions, to issue multiple classes of debt and a single class of preferred stock if our asset coverage, as defined in the 1940 Act, is at least 200 percent after the issuance of the debt or the preferred stock (i.e., such senior securities may not be in excess of our net assets). Under specific conditions, we are also permitted by the 1940 Act to issue warrants.

Except under certain conditions, we may sell our securities at a price that is below the prevailing net asset value per share only during the 12-month period after (i) a majority of our directors and our disinterested directors have determined that such sale would be in the best interest of us and our stockholders, and (ii) the holders of a majority of our outstanding voting securities and the holders of a majority of our voting securities held by persons who are not affiliated persons of ours approve our ability to make such issuances. A majority of the disinterested directors must determine in good faith that the price of the securities being sold is not less than a price that closely approximates the market value of the securities, less any distribution discount or commission.

Certain transactions involving certain closely related persons of the Company, including its directors, officers, and employees, may require the prior approval of the SEC. However, the 1940 Act ordinarily does not restrict transactions between us and our portfolio companies.

TAX STATUS

We are subject to corporate income tax under state and federal law, including under Subchapter C of the Code. This is the same tax status as applies to ordinary operating corporations with publicly traded stock.

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INVESTMENT OPPORTUNITY

SVVC invests primarily in equity securities of private technology companies in the United States. We believe that the growth potential exhibited by private technology companies, including cleantech companies, creates an attractive investment environment for SVVC.

The last 15 years has been marked by dramatic changes in the initial public offering ("IPO") market. Since the dot-com bubble burst in 2000, emerging technology companies have often chosen to stay private longer. The combination of volatile equity markets, increased regulatory requirements (such as the Sarbanes-Oxley Act of 2002), and a lack of investment research coverage has made it less attractive for companies to access the public markets through an IPO. We believe the result is an environment with more opportunities to invest in relatively mature private companies, either directly via primary investments or by purchasing shares in the growing secondary market.

At the same time we believe there are a number of powerful trends creating opportunities for innovative companies and investors alike. The dramatic growth of social networking, cloud computing, and powerful, connected mobile computing devices has enabled new ways of communicating, doing business, and accessing information anytime, anywhere. The Company was established to benefit from convergence of exciting technologies and the growth of private investment opportunities.

COMPETITIVE ADVANTAGES

We believe that we have the following competitive advantages over other capital providers in technology and cleantech companies:

MANAGEMENT EXPERTISE

Kevin Landis, our Chief Executive Officer and Chief Financial Officer, has principal management responsibility for Firsthand Capital Management, Inc. as its owner, President and Chief Investment Officer. Mr. Landis has more than 20 years of experience in technology sector investing, and he intends to dedicate a substantial portion of his time to managing the Company. Mr. Landis controls FCM and is a trustee of Firsthand Funds and a director of the Company.

DISCIPLINED INVESTMENT APPROACH

The Investment Adviser employs a disciplined approach in selecting investments. The Investment Adviser's investment philosophy focuses on ensuring that our investments have an appropriate return profile relative to risk. When market conditions make it difficult for us to invest according to our criteria, the Investment Adviser intends to be highly selective in deploying our capital. We believe this approach enables us to build an attractive investment portfolio that meets our return and value criteria over the long term.

We believe it is critical to conduct extensive due diligence on investment targets. In evaluating new investments we, through the Investment Adviser, conduct a rigorous due diligence process that draws from the Investment Adviser's investment experience, industry expertise, and network of contacts.

FOCUSING ON INVESTMENTS THAT CAN GENERATE POSITIVE RISK-ADJUSTED RETURNS

The Investment Adviser seeks to maximize the potential for capital appreciation. In making investment decisions the Investment Adviser seeks to pursue and invest in companies that meet several of the following criteria:

•  outstanding technology,

•  barriers to entry (i.e., patents and other intellectual property rights),

•  experienced management team,

•  established financial sponsors that have a history of creating value with portfolio companies,

•  strong and competitive industry position, and

•  viable exit strategy.

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Assuming a potential investment meets most or all of our investment criteria, the Investment Adviser intends to be flexible in adopting transaction structures that address the needs of prospective portfolio companies and their owners. Our investment philosophy is focused on internal rates of return over the life of an investment. Given our investment criteria and due diligence process, we structure our investments so they correlate closely with the success of our portfolio companies.

ABILITY TO SOURCE AND EVALUATE TRANSACTIONS THROUGH THE INVESTMENT ADVISER'S RESEARCH CAPABILITY AND ESTABLISHED NETWORK

FCM's investment management team has overseen investments in dozens of private companies across various industries while employed by FCM and its affiliates since 1994. We believe the expertise of the Investment Adviser's management team enables FCM to identify, assess, and structure investments successfully across all levels of a company's capital structure and to manage potential risk and return at all stages of the economic cycle.

We seek to identify potential investments both through active origination and through dialogue with numerous management teams, members of the financial community, and corporate partners with whom Mr. Landis has long-standing relationships. We believe that the team's broad network of contacts within the investment, commercial banking, private equity and investment management communities in combination with their strong reputation in investment management, enables us to attract well-positioned prospective portfolio companies.

LONGER INVESTMENT HORIZON WITH ATTRACTIVE PUBLICLY TRADED MODEL

Unlike private equity and venture capital funds, we are not subject to standard periodic capital return requirements. Such requirements typically stipulate that funds raised by a private equity or venture capital fund, together with any capital gains on such invested funds, must be returned to investors after a pre-agreed time period. These provisions often force private equity and venture capital funds to seek returns on their investments through mergers, public equity offerings, or other liquidity events more quickly than they otherwise might, potentially resulting in both a lower overall return to investors and an adverse impact on their portfolio companies. While we are required to distribute substantially all realized gains, we believe that with our dividend reinvestment plan and our flexibility to make investments with a long-term view and without the capital return requirements of traditional private investment vehicles provide us with the opportunity to generate returns on invested capital and at the same time enable us to be a better long-term partner for our portfolio companies.

INVESTMENTS

FCM seeks to create a diversified portfolio of equity securities by making initial investments of approximately $1 million to $10 million of capital, on average, in the securities of micro-cap public and private companies.

Our portfolio consists primarily of equity securities of private companies and cash and we expect that our portfolio will continue to consist primarily of, equity positions in private companies and cash. These investments include holdings in several private technology and cleantech companies. Moreover, we may acquire investments in the secondary market and, in analyzing such investments, we will employ the same analytical process as we use for our primary investments. For description of our current investments, see "Portfolio Investments."

We generally seek to invest in companies from the broad variety of industries in which the Investment Adviser has expertise. The following is a representative list of the industries in which we may elect to invest.

•  Advanced Materials

•  Advertising Technology

•  Automotive

•  Biofuels

•  Cloud Computing

•  Computer Hardware

•  Computer Peripherals

•  Computer Software

•  Electronic Components

•  Energy Efficiency

•  Fuel Cells

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•  Medical Devices

•  Mobile Computing

•  Semiconductors

•  Social Networking

•  Solar Photovoltaics

•  Solid-state Lighting

•  Telecommunications

•  Water Purification

•  Wearable Technology

•  Wind-Generated Electricity

We may invest in other industries if we are presented with attractive opportunities.

We may on a limited basis purchase or sell options on indexes or securities. We may engage in these transactions to manage risks or otherwise protect the value of the portfolio, and to use these strategies to a limited extent on an opportunistic basis.

INVESTMENT SELECTION

The Investment Adviser seeks to maximize the potential for capital appreciation.

PROSPECTIVE PORTFOLIO COMPANY CHARACTERISTICS

We have identified several criteria that we believe are important in identifying and investing in prospective portfolio companies. These criteria provide general guidelines for our investment decisions; however, we caution you that no single portfolio company (or prospective portfolio company) will meet all of these criteria. Generally, we use our experience and access to market information generated to identify investment candidates and to structure investments quickly and effectively.

Outstanding Technology

Our investment philosophy places a premium on identifying companies that have developed disruptive technologies, that is, technologies with the potential to dramatically alter the economics or performance of a particular type of product or service.

Barriers to Entry

We believe having defensible barriers to entry, in the form of patents or other intellectual property rights, is critically important in technology industries, in which change happens very rapidly. We seek out companies that have secured protection of key technologies through patents, trademarks, or other means.

Experienced management and established financial sponsor relationship

We generally require that our portfolio companies have an experienced management team. We also require the portfolio companies to have in place proper incentives to induce management to succeed and to act in concert with our interests as investors, including having significant equity interests. In addition, we focus our investments in companies backed by strong financial sponsors that have a history of creating value and with whom members of our investment adviser have an established relationship.

Strong and defensible competitive market position in industry

We seek to invest in target companies that have developed leading market positions within their respective markets and are well positioned to capitalize on growth opportunities. We seek companies that demonstrate significant competitive advantages versus their competitors, which should help to protect their market position and profitability.

Viable exit strategy

We seek to invest in companies that we believe will provide a steady stream of cash flow to reinvest in their respective businesses. In addition, we also seek to invest in companies whose business models and expected future cash flows offer attractive exit possibilities. These companies include candidates for strategic acquisition by other industry participants and companies that may repay our investments through an initial public offering of common stock or another capital market transaction. In today's market environment, we believe that a strategic sale is more likely than an IPO for many of our

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portfolio companies, although IPOs cannot be ruled out. We believe that an acquisition by a strategic buyer is possible at any time for any of our companies.

DUE DILIGENCE

We believe it is critical to conduct extensive due diligence on investment targets. In evaluating new investments, we, through the Investment Adviser, conduct a rigorous due diligence process that draws from the Investment Adviser's investment experience, industry expertise, and network of contacts. The Investment Adviser conducts extensive due diligence investigations in their investment activities. In conducting due diligence, the Investment Adviser uses publicly available information as well as information from its relationships with former and current management teams, consultants, competitors, and investment bankers.

Our due diligence typically includes:

•  review of historical and prospective financial information;

•  review of technology, product, and business plan;

•  on-site visits;

•  interviews with management, employees, customers, and vendors of the potential portfolio company;

•  background checks; and

•  research relating to the company's management, industry, markets, products and services, and competitors.

Upon the completion of due diligence, the Investment Adviser's investment committee determines whether to pursue the potential investment. Additional due diligence with respect to any investment may be conducted on our behalf by attorneys and accountants prior to the closing of the investment, as well as other outside consultants, experts, and/or advisers, as appropriate. To the extent unaffiliated, third-party consultants, experts, and/or advisers are used, we will be responsible for those expenses.

INVESTMENT STRUCTURE

Once we have determined that a prospective portfolio company is suitable for investment, we work with the management of that company and its other capital providers to structure an investment. We negotiate among these parties to agree on how our investment is expected to perform relative to the other capital in the portfolio company's capital structure.

MANAGERIAL ASSISTANCE

As a BDC, we offer, and must provide upon request, managerial assistance to certain of our portfolio companies. This assistance could involve, among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies, and providing other organizational and financial guidance. We may receive fees for these services. FCM will provide such managerial assistance on our behalf to portfolio companies that request this assistance. For a description of relationships between us and our portfolio companies, please see "Portfolio Companies."

ONGOING RELATIONSHIPS WITH PORTFOLIO COMPANIES

Monitoring

FCM monitors our portfolio companies on an ongoing basis. Specifically, FCM monitors the financial trends of each portfolio company to determine if they are meeting their respective business plans and to assess the appropriate course of action for each company.

FCM has several methods of evaluating and monitoring the performance and fair value of our investments, which may include the following:

•  Assessment of success in adhering to portfolio company's technology development, business plan and compliance with covenants;

•  Periodic and regular contact with portfolio company management and, if appropriate, the financial or strategic sponsor, to discuss financial position, requirements, and accomplishments;

•  Comparisons to other portfolio companies in the industry, if any;

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•  Attendance at and participation in board meetings; and

•  Review of monthly and quarterly financial statements and financial projections for portfolio companies.

Valuation Process

The following is a description of the steps we take each quarter to determine the value of our portfolio. Investments for which market quotations are readily available are recorded in our financial statements at such market quotations. With respect to investments for which market quotations are not readily available, our Board of Directors undertakes a multi-step valuation process each quarter, as described below under "Determination of Net Asset Value." Currently, our Board of Directors solicits valuation recommendations from a third-party valuation firm on a quarterly basis.

We expect that all of our portfolio investments will be recorded at fair value as determined under the valuation process discussed above. As a result, there will be uncertainty with respect to the value of our portfolio investments.

INVESTMENT MANAGEMENT AGREEMENT

MANAGEMENT SERVICES

FCM has entered into an Investment Management Agreement (the "Investment Management Agreement") with us whereby FCM provides investment management services. Subject to the overall supervision of our Board of Directors, the Investment Adviser manages the day-to-day operations of, provides investment management services to, and serves as portfolio manager for us. Mr. Landis, FCM's President and Chief Investment Officer, has been primarily responsible for our portfolio management since our inception. Under the terms of the Investment Management Agreement, FCM will:

•  determine the composition of our portfolio, the nature and timing of the changes to our portfolio, and the manner of implementing such changes;

•  identify, evaluate and negotiate the structure of the investments we make (including performing due diligence on our prospective portfolio companies); and

•  close and monitor the investments we make.

FCM's services under the Investment Management Agreement are not exclusive, and it is free to furnish similar services to other entities so long as its services to us are not impaired. FCM currently serves as investment manager to Firsthand Funds, a family of open-end mutual funds.

INVESTMENT MANAGEMENT FEE

Pursuant to the Investment Management Agreement, we pay FCM a fee for 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 our gross assets at the end of the preceding calendar quarter; and 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), and equals 20% of our 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.

Mathematically, the formula for computing the annual incentive fee can be written as:

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For the purposes of calculating realized capital gains, the cost basis of each security acquired in the Reorganization shall be equal to the greater of the original purchase price of that security by Firsthand Funds or the fair market value of the security at the time of the Reorganization.

EXAMPLE INCENTIVE FEE CALCULATION

EXAMPLE: INCENTIVE FEE ON CAPITAL GAINS:

Assumptions

Year 1 = no net realized capital gains or losses
Year 2 = $50,000 realized capital gains and $20,000 realized capital losses and unrealized capital depreciation. Capital gain incentive fee = 20% x (realized capital gains for year computed net of all realized capital losses and unrealized capital depreciation at year end)

Calculation of Incentive Fee

Year 1 incentive fee
Year 2 incentive fee
= 20% x (0)
= 0 (no incentive fee)
= 20% x ($50,000 - $20,000) - 0
= 20% x $30,000
= $6,000

AVAILABLE INFORMATION

Additional information about us, including quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, are available free of charge on our website at www.firsthandtvf.com. Information on our website is not part of this Annual Report on Form 10-K.

EMPLOYEES

We do not currently have any direct employees. Mr. Landis, our Chief Executive Officer, is the majority owner and Chief Investment Officer of the Investment Adviser. The Investment Adviser currently employs a staff of 12, including investment, legal, and administrative professionals.

Item 1A. Risk Factors

Investing in the Company involves a number of significant risks relating to our business and investment objective. As a result, there can be no assurance that we will achieve our investment objective.

RISKS RELATING TO OUR BUSINESS AND STRUCTURE

WE HAVE A LIMITED OPERATING HISTORY.

We were incorporated in April 2010 and commenced operations on April 15, 2011. We are subject to all of the business risks and uncertainties associated with any business, including the risk that we will not achieve our investment objective and that the value of your investment could decline substantially. The net assets of SVVC, as of December 31, 2018, were approximately $191.6 million.

WE ARE DEPENDENT UPON FCM'S KEY PERSONNEL FOR OUR FUTURE SUCCESS.

If the Investment Adviser is unable to hire and retain qualified personnel, or if it loses any key member of its management team, our ability to achieve our investment objective could be significantly impaired.

We depend on the diligence, skill, and access to the network of business contacts of the management of FCM, including Mr. Landis, the owner, President and Chief Executive Officer of FCM. We also depend, to a significant extent, on FCM's access to the investment information and deal flow generated by Mr. Landis and any other investment professionals of

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FCM. Mr. Landis and other management personnel of FCM evaluate, negotiate, structure, close, and monitor our investments. Our future success depends on the continued service of Mr. Landis and other management personnel of FCM. The resignation of FCM, or the departure of Mr. Landis or any other key managers hired by FCM could have a material adverse effect on our ability to achieve our investment objective. In addition, we can offer no assurance that FCM will remain the Investment Adviser.

THE INVESTMENT ADVISER AND ITS MANAGEMENT HAS LIMITED EXPERIENCE MANAGING A BDC.

The 1940 Act imposes numerous constraints on the operations of BDC. For example, BDC are required to invest at least 70% of their total assets primarily in securities of private or micro-cap U.S. public companies, cash, cash equivalents, U.S. government securities, and other high quality debt investments that mature in one year or less. These constraints may hinder the Investment Adviser's ability to take advantage of attractive investment opportunities and to achieve our investment objective. Under the 1940 Act, our ability to own publicly-traded securities with market capitalizations in excess of $250 million is limited. While Mr. Landis has more than 20 years of experience managing technology stock mutual funds investments and more than 15 years of experience managing private equity investments, Mr. Landis and FCM have only managed a BDC since April 2011, when they began managing SVVC. The investment philosophy and techniques used by Mr. Landis and FCM may differ from those of other funds. Accordingly, we can offer no assurance that SVVC will replicate the historical performance of other investment companies with which Mr. Landis has been affiliated, and we caution you that our investment returns could be substantially lower than the returns achieved by such other companies.

THE INVESTMENT ADVISER AND ITS MANAGEMENT MANAGE OTHER FUNDS.

In addition to managing SVVC, FCM is also the investment adviser to two open-end mutual funds in the Firsthand Funds family: Firsthand Technology Opportunities Fund and Firsthand Alternative Energy Fund. Mr. Landis, who has primary responsibility for SVVC, also serves as portfolio manager of Firsthand Alternative Energy Fund and Firsthand Technology Opportunities Fund. This may reduce the time FCM and its investment management team have to devote to the affairs of SVVC. The other funds managed by FCM have stated investment objectives which differ from our own. Accordingly, there may be times when the interests of FCM's management team differ from our interests.

THE INVESTMENT ADVISER MAY NOT BE ABLE TO ACHIEVE THE SAME OR SIMILAR RETURNS TO THOSE ACHIEVED BY ITS INVESTMENT PROFESSIONALS WHILE THEY WERE EMPLOYED AT PRIOR JOBS.

Although Mr. Landis has been a portfolio manager of a number of open-end mutual funds in the Firsthand Funds family, Mr. Landis's track record and achievements are not necessarily indicative of future results that will be achieved by FCM on our behalf. FCM and its investment professionals' skills and expertise may not be as well suited to our objectives, strategies and requirements as they are for certain other funds. FCM and many of its investment professionals are relatively inexperienced in managing closed end funds and our investment objectives, policies and regulatory limitations differ substantially from the other funds FCM and its investment professionals have managed. Similarly, while the research and operational professionals that support Mr. Landis in his management of Firsthand Funds are substantially the same individuals that will be supporting us, there is no assurance that they will be able to provide the same level of services to us as they did (or currently do) for Firsthand Funds.

OUR FINANCIAL CONDITION AND RESULTS OF OPERATION WILL DEPEND ON OUR ABILITY TO MANAGE FUTURE GROWTH EFFECTIVELY.

Our ability to achieve our investment objective will depend on our ability to grow, which will depend, in turn, on FCM's ability to identify, invest in, and monitor companies that meet our investment criteria.

Accomplishing this result on a cost-effective basis will be largely a function of FCM's structuring of the investment process, its ability to provide competent, attentive, and efficient services to us and our access to financing on acceptable terms. The management team of FCM will have substantial responsibilities under the Investment Management Agreement. In addition, the employees of FCM may also be called upon to provide managerial assistance to our portfolio companies as the principals of our administrator. Such demands on their time may distract them or slow our rate of investment. Any failure to manage our future growth effectively could have a material adverse effect on our business, financial condition, and results of operations.

WE OPERATE IN A HIGHLY COMPETITIVE MARKET FOR INVESTMENT OPPORTUNITIES.

A number of entities will compete with us to make the types of investments that we plan to make. We will compete with other venture capital firms and venture capital funds, various public and private investment funds, including hedge funds,

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other BDC, commercial and investment banks, commercial financing companies, and various technology and alternative energy companies' internal venture capital arms. Many of our potential competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a stronger network of contacts and better connections for deal flows or have access to funding sources that are not available to us. In addition, some of our competitors have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act will impose on us as a BDC. We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations. Also, as a result of this competition, we may not be able to take advantage of attractive investment opportunities from time to time, and we can offer no assurance that we will be able to identify and make investments that are consistent with our investment objective.

REGULATIONS GOVERNING OUR OPERATION AS A BUSINESS DEVELOPMENT COMPANY WILL AFFECT OUR ABILITY TO, AND THE WAY IN WHICH WE, RAISE ADDITIONAL CAPITAL.

We are not generally able to issue and sell our common stock at a price below net asset value per share. We may, however, sell our common stock at a price below the current net asset value of the common stock, or sell warrants, options, or rights to acquire such common stock, at a price below the current net asset value of the common stock if our Board of Directors determines that such sale is in the best interests SVVC, and our stockholders approve SVVC's policy and practice of making such sales. Our stockholders have not approved a policy or practice of selling our common stock below our net asset value per share. However, our Board of Directors may ask our stockholders to vote on such a policy and practice at upcoming stockholders meetings. In any such case, the price at which our securities are to be issued and sold may not be less than a price which, in the determination of our Board of Directors, closely approximates the market value of such securities (less any distributing commission or discount).

ANY FAILURE ON OUR PART TO MAINTAIN OUR STATUS AS A BUSINESS DEVELOPMENT COMPANY WOULD REDUCE OUR OPERATING FLEXIBILITY.

If we do not remain a BDC, we might be regulated as a closed-end investment company under the 1940 Act, which would subject us to substantially more regulatory restrictions under the 1940 Act and correspondingly decrease our operating flexibility and increase our cost of doing business. Furthermore, any failure to comply with the requirements imposed on BDCs by the 1940 Act could cause the SEC to bring an enforcement action against us or expose us to claims of private litigants.

IF WE DO NOT INVEST A SUFFICIENT PORTION OF OUR ASSETS IN QUALIFYING ASSETS, WE COULD FAIL TO QUALIFY AS A BUSINESS DEVELOPMENT COMPANY OR BE PRECLUDED FROM INVESTING ACCORDING TO OUR CURRENT BUSINESS STRATEGY.

As a BDC, we may not acquire any assets other than "qualifying assets" unless, at the time of and after giving effect to such acquisition, at least 70% of our total assets are qualifying assets. See "Regulation" above.

We may be precluded from investing in what we believe are attractive investments if such investments are not qualifying assets for purposes of the 1940 Act. If we do not invest a sufficient portion of our assets in qualifying assets, we could lose our status as a BDC, which would have a material adverse effect on our business, financial condition, and results of operations. Similarly, these rules could prevent us from making follow-on investments in existing portfolio companies (which could result in the dilution of our position) or could require us to dispose of investments at inappropriate times in order to comply with the 1940 Act. If we need to dispose of such investments quickly, it would be difficult to dispose of such investments on favorable terms. For example, we may have difficulty in finding a buyer and, even if we do find a buyer, we may have to sell the investments at a substantial loss.

WE ARE A NON-DIVERSIFIED INVESTMENT COMPANY WITHIN THE MEANING OF THE 1940 ACT, AND THEREFORE WE ARE NOT LIMITED WITH RESPECT TO THE PROPORTION OF OUR ASSETS THAT MAY BE INVESTED IN SECURITIES OF A SINGLE ISSUER.

We are classified as a non-diversified investment company within the meaning of the 1940 Act, which means that we are not limited by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer. To the extent that we assume large positions in the securities of a small number of issuers, our net asset value may fluctuate to a greater extent than that of a diversified investment company as a result of changes in the financial condition or the market's assessment of the issuer. We may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company. Beyond our income tax diversification requirements, we do not have fixed guidelines for diversification, and our investments could be concentrated in relatively few portfolio companies.

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WE WILL NEED TO RAISE ADDITIONAL CAPITAL TO GROW.

We will need additional capital to fund growth in our investments once we have fully invested the cash (and other liquid assets, if any) received, we may issue equity securities in order to obtain this additional capital. A reduction in the availability of new capital could limit our ability to grow or pursue business opportunities. During the years that we have elected and maintained our status as a RIC, we will be required to distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, to our stockholders to maintain our RIC status. As a result, if stockholders opt out of reinvesting those distributions back into SVVC, these earnings will not be available to fund new investments. If we fail to obtain additional capital to fund our investments, this could limit our ability to grow, which may have an adverse effect on the value of our securities.

MANY OF OUR PORTFOLIO INVESTMENTS WILL BE RECORDED AT FAIR VALUE AS DETERMINED IN GOOD FAITH BY OUR BOARD OF DIRECTORS. AS A RESULT, THERE WILL BE UNCERTAINTY AS TO THE VALUE OF OUR PORTFOLIO INVESTMENTS.

A large percentage of our portfolio investments will be 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 will value these securities quarterly at fair value according to our written valuation procedures and 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.

THE LACK OF LIQUIDITY IN OUR INVESTMENTS MAY ADVERSELY AFFECT OUR BUSINESS.

We primarily make investments in private companies. Substantially all of these securities will be subject to legal and other restrictions on resale or will otherwise be less liquid than publicly traded securities. The illiquidity of our investments may make it difficult for us to sell such investments if the need arises. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we have previously recorded our investments. In addition, we may face other restrictions on our ability to liquidate an investment in a portfolio company to the extent that we have material non-public information regarding such portfolio company.

WE MAY EXPERIENCE FLUCTUATIONS IN OUR QUARTERLY RESULTS.

We could experience fluctuations in our quarterly operating results due to a number of factors, including the performance of the portfolio securities we hold; the level of our expenses; variations in, and the timing of the recognition of, realized and unrealized gains or losses; the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.

THERE ARE SIGNIFICANT POTENTIAL CONFLICTS OF INTEREST THAT COULD IMPACT OUR INVESTMENT RETURNS.

Our executive officers and directors may serve as officers, directors or principals of entities that operate in the same or a related line of business as we do or of investment funds managed by affiliates of FCM that may be formed in the future. Accordingly, if this occurs, they may have obligations to investors in those entities, the fulfillment of which might not be in the best interests of us or our stockholders.

In the course of our investing activities, we will pay investment management and incentive fees to FCM, and will reimburse FCM for certain expenses it incurs. As a result, investors in our common stock will invest on a "gross" basis and receive distributions on a "net" basis after expenses, resulting in a lower rate of return than an investor might achieve through direct investments. Accordingly, there may be times when the management team of FCM has interests that differ from those of our stockholders, giving rise to a conflict.

Several members of our Board of Directors are also trustees of the Board of Trustees of Firsthand Funds. Of the five directors of the Company, Messrs. Landis, Burglin, and Lee all serve as both directors for the Company and trustees for Firsthand

20

Funds. Messrs. Petredis and Yee are the only directors of the Company who are not also trustees of Firsthand Funds. We believe such a commonality of the board brings continuity of oversight and allows our Board to maintain the institutional knowledge and experience of overseeing illiquid securities and their pricing methods.

OUR INCENTIVE FEE MAY INDUCE FCM TO MAKE SPECULATIVE INVESTMENTS AND THESE FEES WILL, IN EFFECT, BE BORNE BY OUR COMMON STOCKHOLDERS.

The incentive fee payable by us to FCM may create an incentive for FCM to make investments on our behalf that are risky or more speculative than would be the case in the absence of such compensation arrangement. The incentive fee payable to the Investment Adviser is calculated based on a percentage of our return on invested capital. This may encourage the Investment Adviser to invest in higher risk investments in the hope of securing higher returns.

We may invest, to the extent permitted by law, in the securities and instruments of other investment companies, including private funds, as well as other special purpose vehicles set up by third parties for investment in a particular private company. To the extent we so invest, we will bear our ratable share of any such investment company's expenses, including management and incentive fees. We will also remain obligated to pay investment advisory fees, consisting of a base management fee and incentive fees, to FCM with respect to the assets invested in the securities and instruments of other investment companies under the Investment Management Agreement. With respect to any such investments, each of our stockholders will bear his or her share of the investment advisory fees of FCM as well as indirectly bearing the investment advisory fees and other expenses of any investment companies in which we invest.

CHANGES IN LAWS OR REGULATIONS GOVERNING OUR OPERATIONS MAY ADVERSELY AFFECT OUR BUSINESS.

We and our portfolio companies will be subject to regulation by laws at the local, state, and federal levels. These laws and regulations, as well as their interpretation, may be changed from time to time. Accordingly, any change in these laws or regulations could materially and adversely affect our business.

PROVISIONS OF THE MARYLAND GENERAL CORPORATION LAW AND OF OUR CHARTER AND BYLAWS COULD DETER TAKEOVER ATTEMPTS AND HAVE AN ADVERSE IMPACT ON THE PRICE OF OUR COMMON STOCK.

The Maryland General Corporation Law, our charter, and our bylaws contain provisions that may discourage, delay or make more difficult a change in control of the Company or the removal of the Company's directors. We are subject to the Maryland Business Combination Act, the application of which is subject to any requirements of the 1940 Act. Our Board of Directors has adopted a resolution exempting from the Maryland Business Combination Act any business combination between us and any other person, subject to prior approval of such business combination by our Board, including approval by a majority of our disinterested directors. If the resolution exempting business combinations is repealed or our Board does not approve a business combination, the Maryland Business Combination Act may discourage third parties from trying to acquire control of us and increase the difficulty of consummating such an offer. Our bylaws exempt from the Maryland Control Share Acquisition Act acquisitions of our common stock by any person. If we amend our bylaws to repeal the exemption from the Maryland Control Share Acquisition Act, the Maryland Control Share Acquisition Act also may make it more difficult for a third party to obtain control of us and increase the difficulty of consummating such an offer.

We have also adopted other measures that may make it difficult for a third party to obtain control of us, including provisions of our charter classifying our Board of Directors in three classes serving staggered three-year terms and until their successors are duly elected and qualify, and provisions of our charter authorizing our Board of Directors (all without stockholder approval) to classify or reclassify shares of our stock in one or more classes or series, to cause the issuance of additional shares of our stock, and to amend our charter to increase or decrease the number of shares of stock that we have authority to issue. These provisions, as well as other provisions of our charter and bylaws, may delay, defer, or prevent a transaction or a change in control that might otherwise be in the best interests of our stockholders.

OUR BOARD OF DIRECTORS MAY CHANGE OUR INVESTMENT OBJECTIVE, OPERATING POLICIES, AND STRATEGIES WITHOUT PRIOR NOTICE OR STOCKHOLDER APPROVAL.

Our Board of Directors has the authority to modify or waive certain of our operating policies and strategies without prior notice and without stockholder approval (except as required by the 1940 Act). However, absent stockholder approval, we may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC. We cannot predict the effect any changes to our current operating policies and strategies would have on our business, operating results, and value of our stock. Nevertheless, the effects may adversely affect our business and impact our ability to make distributions.

21

RISKS RELATED TO OUR INVESTMENTS

OUR INVESTMENTS IN PROSPECTIVE PORTFOLIO COMPANIES MAY BE RISKY, AND YOU COULD LOSE ALL OR PART OF YOUR INVESTMENT.

Equity Investments. We make equity investments primarily in equity securities and equity derivatives (such as options, warrants, rights, etc.) of privately placed venture capital stage technology and alternative energy companies as well as publicly traded micro-cap companies (those with market capitalizations of less than $250 million). Our goal is ultimately to dispose of these equity interests and realize gains upon our disposition of such interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value or lose all value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience.

In addition, investing in privately placed technology and clean tech companies involves a number of significant risks, including that private companies generally have limited operating history and are not as well capitalized as public companies. In addition, private company valuations may fluctuate more dramatically than those of public companies and they frequently have less diverse product lines and smaller market presence than larger competitors. These factors could adversely affect our investment returns as compared to companies investing primarily in the securities of public companies.

WE MAY INVEST IN MICRO-CAP PUBLIC COMPANIES AND COMPANIES WE MAY HOPE WILL HAVE SUCCESSFUL INITIAL PUBLIC OFFERINGS.

Although micro-cap companies may have potential for rapid growth, they are subject to wider price fluctuations due to factors inherent in their size, such as lack of management experience and financial resources and limited trade volume and frequency. To make a large sale of securities of micro-cap companies that trade in limited volumes, SVVC may need to sell portfolio holdings at a discount or make a series of small sales over an extended period of time.

We have invested in, and we expect to continue to invest in, companies that we believe are likely to issue securities in initial public offerings ("IPOs"). Although there is a potential the pre-IPO securities that we buy may increase in value if the company does issue securities in an IPO, IPOs are risky and volatile and may cause the value of our securities to fall dramatically. Also, because securities of pre-IPO companies are generally not freely or publicly tradeable, we may not have access to purchase securities in these companies in the amounts or at the prices we desire. Securities issued by these privately-held companies have no trading history, and information about such companies may be available for very limited periods. The companies that we anticipate holding successful IPOs may not ever issues shares in an IPO and a liquid market for their securities may never develop, which may negatively affect the price at which we can sell any such securities and make it more difficult to sell such securities, which could also adversely affect our liquidity.

WE EXPECT TO PURCHASE SECURITIES IN IPOS, WHICH INVOLVE SIGNIFICANT RISKS FOR US, AND WE MAY NOT BE ABLE TO PARTICIPATE IN OFFERINGS TO THE EXTENT DESIRED OR AT ALL.

Securities purchased in IPOs are often subject to the general risk associated with investments in companies with smaller market capitalizations, and typically to a heightened degree. Securities issued in IPOs have no trading history, and information about companies may be available for very limited periods. In addition, under certain market conditions, a relatively small number of companies may issue securities in IPOs. Our investment performance during periods when we are unable to invest significantly or at all in IPOs may be lower than during periods when we are able to do so.

IPO securities may be volatile, and we cannot predict whether investments in IPOs will be successful. If the Company grows in size, the possible positive effects of IPO investments on the Company may decrease.

WE HAVE NOT YET IDENTIFIED ALL OF THE PORTFOLIO COMPANY INVESTMENTS WE INTEND TO ACQUIRE.

The Investment Adviser will select our investments, and our stockholders will have no input with respect to such investment decisions. These factors increase the uncertainty, and thus the risk, of investing in our shares.

ECONOMIC RECESSIONS OR DOWNTURNS COULD IMPAIR OUR PORTFOLIO COMPANIES AND HARM OUR OPERATING RESULTS.

Many of our portfolio companies are susceptible to economic slowdowns or recessions and may fail or require additional capital investments from us during those periods. Therefore, our non-performing assets are likely to increase and the value of our portfolio is likely to decrease during these periods. These events could harm our operating results.

22

OUR FAILURE TO MAKE FOLLOW-ON INVESTMENTS IN OUR PORTFOLIO COMPANIES COULD IMPAIR THE VALUE OF OUR PORTFOLIO.

Following an initial investment in a portfolio company, we may make additional investments in that portfolio company as "follow-on" investments, in order to:

•  increase or maintain in whole or in part our equity ownership percentage; or

•  exercise warrants, options, or convertible securities that were acquired in the original or subsequent financing.

We have the discretion to make any follow-on investments, subject to the availability of capital resources and the availability of securities in the applicable public company. We may elect not to make follow-on investments in a portfolio company and we may lack sufficient funds to make those investments. The failure to make follow-on investments may, in some circumstances, jeopardize the continued viability of a portfolio company and our initial investment, or may result in a missed opportunity for us to increase our participation in a successful operation. Even if we have sufficient capital to make a desired follow-on investment, we may elect not to make a follow-on investment because we may not want to increase our concentration of risk, because we prefer other opportunities, or because we are inhibited by compliance with BDC requirements or the desire to maintain our tax status.

WE SOMETIMES DO NOT HOLD CONTROLLING EQUITY INTERESTS IN OUR PORTFOLIO COMPANIES AND WE MAY NOT BE IN A POSITION TO EXERCISE CONTROL OVER OUR PORTFOLIO COMPANIES OR TO PREVENT DECISIONS BY MANAGEMENT OF OUR PORTFOLIO COMPANIES THAT COULD DECREASE THE VALUE OF OUR INVESTMENTS.

Although we have held control and will continue to do so for some instruments, we do not anticipate always taking controlling equity positions in our portfolio companies. As a result, we will be subject to the risk that a portfolio company may make business decisions with which we disagree, and the stockholders and management of a portfolio company may take risks or otherwise act in ways that are adverse to our interests. Due to the lack of liquidity for the equity investments that we will typically hold in our portfolio companies, we may not be able to dispose of our investments in the event we disagree with the actions of a portfolio company, and may therefore suffer a decrease in the value of our investments.

AN INVESTMENT STRATEGY FOCUSED PRIMARILY ON PRIVATELY HELD COMPANIES PRESENTS CERTAIN CHALLENGES, INCLUDING THE LACK OF AVAILABLE INFORMATION ABOUT THESE COMPANIES, A DEPENDENCE ON THE TALENTS AND EFFORTS OF ONLY A FEW KEY PORTFOLIO COMPANY PERSONNEL, AND A GREATER VULNERABILITY TO ECONOMIC DOWNTURNS.

We invest primarily in privately held companies. Generally, little public information exists about these companies, and we will be required to rely on the ability of FCM's investment professionals to obtain adequate information to evaluate the potential returns from investing in these companies. If we are unable to uncover all material information about these companies, we may not make a fully informed investment decision, and we may lose money on our investments. Also, privately held companies frequently have less diverse product lines and a smaller market presence than larger competitors. These factors could adversely affect our investment returns as compared to companies investing primarily in the securities of public companies.

OUR PORTFOLIO COMPANIES MAY ISSUE ADDITIONAL SECURITIES OR INCUR DEBT THAT RANKS EQUAL OR SENIOR TO OUR INVESTMENTS IN SUCH COMPANIES.

We also invest primarily in equity securities issued by our portfolio companies. The portfolio companies may be permitted to issue additional securities or incur other debt that ranks equally with, or senior to, the equity securities in which we invest. By their terms, such other securities (especially if they are debt securities) may provide that the holders are entitled to receive payment of interest or principal before we are entitled to receive any distribution from the portfolio companies. Also, in the event of insolvency, liquidation, dissolution, reorganization, or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our equity investment in that portfolio company would typically be entitled to receive payment in full before equity investors like us may receive any distribution in respect of our investment. After repaying such senior creditors, the portfolio company may not have any remaining assets to distribute to us.

WE MAY PURCHASE OR SELL OPTIONS ON SECURITIES AND INDEXES, WHICH MAY EXPOSE US, AND YOUR INVESTMENT IN OUR COMMON STOCK, TO CERTAIN RISKS.

We may on a limited basis purchase or sell options on indexes or securities. The use of options has risks and our ability to successfully use these techniques depends on our ability to predict pertinent market movements, which cannot be assured. The use of options may result in losses greater than if they had not been used, may require us to sell or purchase portfolio

23

securities at inopportune times or for prices other than current market values, may limit the amount of appreciation we can realize on an investment or may cause us to hold a security we might otherwise sell.

OUR INVESTMENTS IN FOREIGN SECURITIES MAY INVOLVE SIGNIFICANT RISKS IN ADDITION TO THE RISKS INHERENT IN U.S. INVESTMENTS.

Our investment strategy involves potential investments in equity securities of foreign companies. Investing in foreign companies may expose us to additional risks not typically associated with investing in U.S. companies. These risks include changes in exchange control regulations; political and social instability; expropriation; imposition of foreign taxes; less liquid markets and less available information than is generally the case in the United States; higher transaction costs; less government supervision of exchanges, brokers and issuers; less developed bankruptcy laws; difficulty in enforcing contractual obligations; lack of uniform accounting and auditing standards; and greater price volatility.

Although most of our investments will be U.S. dollar-denominated, any investments denominated in a foreign currency will be subject to the risk that the value of a particular currency will change in relation to one or more other currencies. Among the factors that may affect currency values are trade balances, the level of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation, and political developments. We may employ hedging techniques to minimize these risks, but we can offer no assurance that we will, in fact, hedge currency risk, or, if we do, that such strategies will be effective.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Under the terms of the Investment Management Agreement, Firsthand Capital Management, Inc. is responsible for providing office space to the Company and for the costs associated with providing such space. Our offices are located at 150 Almaden Blvd., Suite 1250, San Jose, CA 95113.

Item 3. Legal Proceedings

We are not currently subject to any material pending legal proceedings.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and
Issuer Purchases of Equity Securities

MARKET INFORMATION

Our common stock is traded on the Nasdaq Global Market under the symbol "SVVC." The following table sets forth the range of the high and low closing sales prices of the Company's shares during each quarter during the last fiscal year, as reported by Nasdaq Global Market. The quarterly stock prices quoted represent interdealer quotations and do not include markups, markdowns, or commissions.

2018 Quarter Ending	Low		High
March 31	$	9.09	$	12.53
June 30	$	10.46	$	15.36
September 30	$	12.75	$	16.94
December 31	$	9.86	$	17.50

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SHAREHOLDERS

As of February 28, 2018, there were approximately 1,400 shareholders of record and approximately 12,800 beneficial owners of the Company's common stock.

DIVIDENDS

During 2018, we paid cash distributions of $245,701 or $0.034226 per share of common stock, comprised entirely of long term capital gains.

RECENT SALES OF UNREGISTERED SECURITIES

The Company did not issue any unregistered securities during the year ended December 31, 2018.

PERFORMANCE GRAPH

The graph and table below compares the cumulative total return of holders of our common stock with the cumulative total returns of the S&P 500 Index and the NASDAQ Composite Index. The comparison assumes that the value of the investment in our common stock and in the index (including reinvestment of dividends) was $10,000 on April 18, 2011 (our inception date), and tracks it through December 31, 2018.

We, however, do not believe either the S&P 500 Index or the NASDAQ Composite Index to be appropriate comparable indices of the Company's benchmark results. The Company is a publicly traded venture capital fund that invests primarily in private and micro cap technology companies. The S&P 500 Index and the NASDAQ Composite Index are both indices of publicly traded large capitalization companies, with performance predominantly driven by the largest companies in the index. Nevertheless, we do not believe there is currently a widely accessible and generally accepted index that tracks publicly traded venture capital funds. When compared to the S&P 500 Index and the NASDAQ Composite Index, we have underperformed those broad market indices because equity securities of the private companies in our portfolio have not appreciated substantially during the recent bull market for publicly traded stocks.

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STOCK TRANSFER AGENT

BNY Mellon Shareowner Services, 301 Bellevue Parkway, Wilmington, Delaware 19809 (1.800.331.1710) serves as our transfer agent.

Item 6. Selected Financial Data

The information below was derived from the audited Consolidated Financial Statements included in this report. This information should be read in conjunction with those Consolidated Financial Statements and Supplementary Data and the notes thereto. These historical results are not necessarily indicative of the results to be expected in the future.

26

Firsthand Technology Value Fund, Inc.

Consolidated Statements of Assets and Liabilities

	AS OF DECEMBER 31, 2018			AS OF DECEMBER 31, 2017
ASSETS
Investment securities:
Unaffiliated investments at acquisition cost	$	3,961,467	*	$	33,014,039	*
Affiliated investments at acquisition cost		31,002,275			24,035,159
Controlled investments at acquisition cost		132,313,596			117,890,661
Total acquisition cost	$	167,277,338		$	174,939,859
Unaffiliated investments at market value	$	5,696,042	*	$	40,191,055	*
Affiliated investments at market value		34,045,111			24,656,252
Controlled investments at market value		170,112,417			109,992,218
Total market value ** (Note 6)		209,853,570			174,839,525
Cash		—			110,077
Receivable for securities sold		1,005			—
Receivable from dividends and interest		2,308,366			1,794,003
Other assets		18,713			27,985
Total Assets		212,181,654			176,771,590
LIABILITIES
Payable for securities purchased		365,783			—
Incentive fees payable (Note 4)		9,261,847			1,691,040
Payable to affiliates (Note 4)		2,334,727			879,085
Deferred tax liability		8,432,559			—
Consulting fee payable		19,500			21,000
Accrued expenses and other payables		149,279			186,876
Total Liabilities		20,563,695			2,778,001
NET ASSETS	$	191,617,959		$	173,993,589
Net Assets consist of:
Common Stock, par value $0.001 per share 100,000,000 shares authorized	$	7,179		$	7,302
Paid-in-capital		178,770,434			180,772,769
Total distributable earnings (loss) ***		12,840,346			(6,786,482	)
NET ASSETS	$	191,617,959		$	173,993,589
Shares of Common Stock outstanding		7,302,146			7,302,146
Shares of Treasury Stock outstanding		(123,376	)		—
Total Shares of Common Stock outstanding		7,178,770			7,302,146
Net asset value per share (Note 2)	$	26.69		$	23.83

*  Includes Fidelity Investment Money Market Treasury Portfolio—Class I, which invests primarily in U.S. Treasury securities. The yields as of 12/31/18 and 12/31/17 were 2.24% and 1.14%, respectively. Please see https://fundresearch.fidelity.com/mutual-funds/summary/316175504 for additional information.

**  Includes warrants whose primary exposure is equity risk.

***  The SEC eliminated the requirement to disclose the components of distributable earnings on the Statement of Assets and Liabilities in September 2018. Accumulated net investment loss, accumulated net realized loss from security transactions and net unrealized depreciation on investments and warrants transactions in 2017 were $(1,691,040), $(4,995,108) and $(100,334), respectively.

See accompanying notes to financial statements
27

Firsthand Technology Value Fund, Inc.

Consolidated Statements of Operations

	FOR THE YEAR ENDED DECEMBER 31, 2018			FOR THE YEAR ENDED DECEMBER 31, 2017			FOR THE YEAR ENDED DECEMBER 31, 2016
INVESTMENT INCOME
Affiliated/Controlled loan origination income	$	21,000		$	24,180		$	28,213
Unaffiliated interest		6,228			1,522			19,133
Affiliated/controlled interest		3,440,610			1,540,089			830,677
TOTAL INVESTMENT INCOME		3,467,838			1,565,791			878,023
EXPENSES
Investment advisory fees (Note 4)		4,128,311			2,975,982			3,281,617
Administration fees		207,292			187,846			165,024
Custody fees		32,123			22,152			11,334
Transfer agent fees		35,176			33,017			27,283
Registration and filing fees		30,600			23,100			23,100
Professional fees		375,496			535,293			779,689
Printing fees		62,376			195,892			40,835
Trustees fees		200,000			137,500			100,000
Compliance fees		114,648			107,640			188,569
Miscellaneous fees		87,830			174,670			96,075
TOTAL GROSS EXPENSES		5,273,852			4,393,092			4,713,526
Incentive fee adjustments (Note 4)		7,570,807			1,691,040			—
TOTAL NET EXPENSES		12,844,659			6,084,132			4,713,526
NET INVESTMENT LOSS, BEFORE TAXES		(9,376,821	)		(4,518,341	)		(3,835,503	)
Deferred tax benefit		538,915			—			—
Net investment loss, net of deferred taxes		(8,837,906	)		(4,518,341	)		(3,835,503	)
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gains (losses) from security transactions on:
Affiliated/Controlled		(10,658,458	)		5,058,105			(3,035,229	)
Non-affiliated/controlled and other assets		5,432,378			(1,516,161	)		(3,132,110	)
Net realized gain from written option transactions (1)		231,422			—			—
Deferred tax benefit		1,192,325			—			—
Net realized gains (losses), net of deferred taxes		(3,802,333	)		3,541,944			(6,167,339	)
Net change in unrealized appreciation (depreciation) on:
Non-affiliated investments		(5,442,441	)		19,408,570			1,088,815
Affiliated/controlled investments and foreign currency		47,667,121			1,138,114			(20,524,969	)
Affiliated/controlled warrants investments (1)		451,886			6,609,282			4,777,442
Deferred tax expense		(10,163,798	)		—			—
Net change in unrealized appreciation (depreciation), net of deferred taxes		32,512,768			27,155,966			(14,658,712	)
Net Realized and Unrealized Gains (Losses) on Investments, Net of Deferred Taxes		28,710,435			30,697,910			(20,826,051	)
Net Increase (Decrease) In Net Assets Resulting From Operations, Net of Deferred Taxes	$	19,872,529		$	26,179,569		$	(24,661,554	)
Net Increase/(Decrease) In Net Assets Per Share Resulting From Operations (2)	$	2.73		$	3.59		$	(3.26	)

(1)  Primary exposure is equity risk.

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

See accompanying notes to financial statements
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The information contained in this section should be read in conjunction with our 2018 Consolidated Financial Statements and notes thereto.

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," 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 subject to corporate income tax under Subchapter C of the Code. 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.

The following table summarizes the fair value of our investment portfolio by industry sector as of December 31, 2018 and December 31, 2017.

	December 31, 2018			December 31, 2017
Semiconductor Equipment		61.8	%		29.6	%
Medical Devices		15.4	%		12.1	%
Mobile Computing		10.0	%		6.9	%
Advanced Materials		7.4	%		13.9	%
Automotive		4.8	%		6.2	%
Aerospace		3.5	%		1.2	%
Consumer Electronics		2.5	%		8.4	%
Equipment Leasing		1.8	%		2.3	%
Intellectual Property		1.7	%		3.5	%

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continued	December 31, 2018			December 31, 2017
Semiconductor		0.4	%		1.2	%
Water Purification		0.0	%		0.0	%
Cloud Computing		0.0	%		4.9	%
Networking		0.0	%		9.3	%
Exchange-Traded/Money Market Funds		0.2	%		1.0	%
(Liabilities)/Other Assets		(9.5	%)		(0.5	%)
Net Assets		100.0	%		100.0	%

Certain trends in the technology industry may have an impact on the portfolio in coming quarters. In particular, the semiconductor industry, which has historically been a highly cyclical industry, has enjoyed a period of strong growth over the past several years. Given the substantial weighting of semiconductor investments in the current portfolio, the Fund will be sensitive to changes in this industry. Fund performance may also be impacted by the speed of adoption of certain new technologies, including, but not limited to: electric drivetrains for trucks, electron intra-operative radiation for cancer treatment, micro-LEDs, semiconductor manufacturing equipment, and streaming video.

MATURITY OF PRIVATE COMPANIES IN THE CURRENT PORTFOLIO

The Fund invests in private companies at various stages of maturity. As our portfolio companies mature, they move from the "early (development) stage" to the "middle (revenue) stage" and then to the "late stage." We expect that this continuous progression may create a pipeline of potential exit opportunities through initial public offerings (IPOs) or acquisitions. Of course, some companies do not progress.

The illustration below describes typical characteristics of companies at each stage of maturity and where we believe our current portfolio companies fit within these categories. We expect some of our portfolio companies to transition between stages of maturity over time. The transition may be forward if the company is maturing and is successfully executing its business plan or may be backward if the company is not successfully executing its business plan or decides to change its business plan substantially from its original plan.

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EARLY STAGE Developing product or service for market, high level of research and development, little or no revenue.	MIDDLE STAGE Established product, customers, business model; limited revenues.	LATE STAGE Appreciable revenue; may be break-even or profitable; IPO or acquisition candidate.

RESULTS OF OPERATIONS

The following information is a comparison for the year ended December 31, 2018, December 31, 2017, and December 31, 2016.

INVESTMENT INCOME

For the year ended December 31, 2018, we had investment income of $3,467,838 primarily attributable to interest accrued on convertible/term note investments with IntraOp Medical Corp, Wrightspeed, QMAT, and Telepathy Investors.

For the year ended December 31, 2017, we had investment income of $1,565,791 primarily attributable to interest accrued on convertible/term note investments with IntraOp Medical Corp, QMAT, and Telepathy Investors.

For the year ended December 31, 2016, we had investment income of $878,023 primarily attributable to interest accrued on convertible/term note investments with Telepathy Investors, Pivotal Systems, Vufine, and IntraOp Medical Corp.

The higher level of investment income in the year ended December 31, 2018 compared to the year ended December 31, 2017 was due to increasing principal amounts on notes issued by IntraOp, QMAT and Wrightspeed.

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The higher level of investment income in the year ended December 31, 2017 compared to the year ended December 31, 2016 was due to increasing principal amounts on notes issued by IntraOp, QMAT, Revasum and SVXR.

OPERATING EXPENSES

Operating expenses totaled approximately $12,844,659 during the year ended December 31, 2018, $6,084,132 during the year ended December 31, 2017 and $4,713,526 during the year ended December 31, 2016.

Significant components of operating expenses for the year ended December 31, 2018, were a management fee expense of $4,128,311, professional fees (audit, legal, accounting, and consulting) of $375,496, and incentive fees (which were accrued but are not payable until gains in the portfolio are realized) of $7,570,807. Significant components of operating expenses for the year ended December 31, 2017, were a management fee expense of $2,975,982, professional fees (audit, legal, accounting, and consulting) of $535,293, and incentive fees (which were accrued but are not payable until gains in the portfolio are realized) of $1,691,040. Significant components of operating expenses for the year ended December 31, 2016, were a management fee expense of $3,281,617 and professional fees (audit, legal, accounting, and consulting) of $779,689.

The higher level of operating expenses for the year ended December 31, 2018 compared to the year ended December 31, 2017 is primarily attributable to the incentive fee accrual in 2018, which is a quarterly accrual based on what the incentive fee would be if the entire portfolio were liquidated at fair market value.

The higher level of operating expenses for the year ended December 31, 2017 compared to the year ended December 31, 2016 is primarily attributable to the incentive fee accrual in 2017, which is a quarterly accrual based on what the incentive fee would be if the entire portfolio were liquidated at fair market value.

NET INVESTMENT LOSS

The net investment loss before taxes was $9,376,821 for the year ended December 31, 2018, $4,518,341 for the year ended December 31, 2017 and $3,835,503 for the year ended December 31, 2016.

The greater net investment loss before taxes in the year ended December 31, 2018 compared to the year ended December 31, 2017 is primarily due to the accrual of an incentive fee in 2018 which was accrued but is not payable until gains in the portfolio are realized.

The greater net investment loss in the year ended December 31, 2017 compared to the year ended December 31, 2016 is primarily due to the accrual of an incentive fee in 2017 which was accrued but is not payable until gains in the portfolio are realized.

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 years ended December 31, 2018, December 31, 2017, and December 31, 2016, is shown below.

	Year Ended December 31, 2018
Realized losses	$	(4,994,658	)
Net change in unrealized appreciation on investments	$	42,676,566
Deferred tax expense	$	(8,971,473	)
Net realized and unrealized gain on investments	$	28,710,435
	As of December 31, 2018
Gross unrealized appreciation on portfolio investments	$	99,485,489
Gross unrealized depreciation on portfolio investments	$	(56,909,257	)
Net unrealized appreciation on portfolio investments, warrants, and other assets	$	42,576,232

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	Year Ended December 31, 2017
Realized gains	$	3,541,944
Net change in unrealized depreciation on investments	$	27,155,966
Net realized and unrealized gain on investments	$	30,697,910
	As of December 31, 2017
Gross unrealized appreciation on portfolio investments	$	44,878,771
Gross unrealized depreciation on portfolio investments	$	(44,979,105	)
Net unrealized depreciation on portfolio investments, warrants, and other assets	$	(100,334	)
	Year Ended December 31, 2016
Realized losses	$	(6,167,339	)
Net change in unrealized depreciation on investments	$	(14,658,712	)
Net realized and unrealized loss on investments	$	(20,826,051	)
	As of December 31, 2016
Gross unrealized appreciation on portfolio investments	$	13,265,628
Gross unrealized depreciation on portfolio investments	$	(40,521,928	)
Net unrealized depreciation on portfolio investments, warrants, and other assets	$	(27,256,300	)

During the year ended December 31, 2018, we recognized net realized losses of approximately $4,994,658 from the sale/write-off of investments. Realized losses were higher compared to the Fund's realized gains in 2017 due to the write-off of our Aliphcom position and the transfer of securities from our controlled foreign corporations (CFCs) to the Fund.

During the year ended December 31, 2018, net unrealized appreciation on total investments increased by $42,676,566. 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. The increase in unrealized appreciation on total investments during the year is due primarily to the increase in value of our investments, most notably, Pivotal and Revasum.

During the year ended December 31, 2017, we recognized net realized gains of approximately $3,541,944 from the sale of investments. Realized gains were higher compared to the Fund's net realized losses in 2016 due to the buyout of our Gilt Groupe position and the sale of our Invensense common stock in 2016 which created realized losses in 2016.

During the year ended December 31, 2017, net unrealized depreciation on total investments decreased by $27,155,966. 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. The decrease in unrealized depreciation on total investments during the year is due primarily to the increase in value of our investments, most notably, Pivotal, QMAT, Revasum, Nutanix, Roku and Phunware.

During the year ended December 31, 2016, we recognized net realized losses of approximately $6,167,339 from the sale of investments. Realized losses were substantially higher compared to the Fund's realized losses in 2015 due to the buyout of our Gilt Groupe position and the sale of our Invensense common stock in 2016.

During the year ended December 31, 2016, net unrealized depreciation on total investments increased by $14,658,712. 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. The increase in unrealized depreciation on total investments during the year is due primarily to the decline in value of our investments, most notably, Turn, Aliphcom, Sunrun, QMAT and Telepathy Investors.

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INCOME AND EXCISE TAXES

Beginning on June 30, 2018, we were no longer able to qualify as a RIC under Subchapter M of the Code. This change in tax status resulted from the increase in the value of a single holding, Pivotal Systems Corp., which meant that we were no longer able to satisfy the diversification requirements for qualification as a RIC. As a result of this change, we will be 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.

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

For the year ended December 31, 2018, the net increase in net assets resulting from operations (net of deferred taxes) totaled $19,872,529 and the basic and fully diluted net change in net assets per share for the year ended December 31, 2018 was $2.73.

For the year ended December 31, 2017, the net increase in net assets resulting from operations totaled $26,179,569 and the basic and fully diluted net change in net assets per share for the year ended December 31, 2018 was $3.59.

For the year ended December 31, 2016, the net decrease in net assets resulting from operations totaled $24,661,554 and the basic and fully diluted net change in net assets per share for the year ended December 31, 2017 was $(3.26).

The lesser increase in net assets resulting from operations (net of deferred taxes) for the year ended December 31, 2018 as compared to the year ended December 31, 2017, is due primarily due to an increase in the incentive fee expense accrual in 2018 and an accrual for deferred taxes since the Fund is now classified as a C-Corp.

The greater increase in net assets resulting from operations for the year ended December 31, 2017 as compared to the year ended December 31, 2016, is due primarily to increases in security valuations, most notably, Pivotal, QMAT, Revasum, Nutanix, Roku and Phunware.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Our liquidity and capital resources are generated primarily from sales or liquidation proceeds of our investments. In management's view, we have sufficient liquidity and capital resources to pay our operating expenses and conduct investment activities over the next twelve months.

Our primary uses of cash are to make investments, pay our operating expenses, and make distributions to our stockholders. For the years ended December 31, 2018, 2017, and 2016, our operating expenses were $5,273,852, $4,393,092, and $4,713,526, respectively.

For the year ended December 31, 2018, our total cash reserves and liquid securities decreased approximately 77%, primarily due to the purchase of portfolio investments, payment of operating expenses and the stock buyback we initiated in October 2018. We believe that our current liquid assets are sufficient to meet the Company's short-term financing needs.

During the year ended December 31, 2018, cash and cash equivalents decreased to $438,442 at the end of the year, from $1,815,452 at the beginning of the year. The decrease in cash and cash equivalents primarily resulted from our operating expenses and the stock buyback we initiated in October 2018.

At December 31, 2018, we had investments in public and private securities totaling approximately $209.9 million. Also, at December 31, 2018, we had approximately $0.0 million in cash. We primarily invest cash on hand in money market treasury portfolios. We expect the portion of our portfolio consisting of cash and cash equivalents to decrease as we become fully invested.

As of December 31, 2018, net assets totaled approximately $191.6 million, with an NAV per share of $26.69. Our primary use of funds will be investments in portfolio companies and payments of fees and other operating expenses we incur.

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Additionally, we expect to raise additional capital to support our future growth through future equity offerings. To the extent we determine to raise additional equity through an offering of our common stock at a price below NAV, existing investors will experience dilution.

PORTFOLIO INVESTMENTS

PRIVATE INVESTMENTS

We make investments in securities of both public and private companies. December 31, 2018, we had investments in the following private companies:

EQX Capital, Inc.

EQX Capital, Inc. ("EQX"), San Francisco, California, is an equipment leasing company.

At December 31, 2018, our investment in EQX consisted of 4,000,000 shares of Series A preferred stock and 100,000 shares of common stock with an aggregate fair value of approximately $3.5 million.

Hera Systems, Inc.

Hera Systems, Inc. ("Hera"), San Jose, CA, is currently developing a constellation of micro satellites to launch into low Earth orbit with imaging and communications capabilities.

At December 31, 2018, our investment in Hera consisted of 3,642,324 shares of Series A preferred stock, 5,539,203 shares of Series B preferred stock, $500,000 par value convertible note, $500,000 par value convertible note and 19,164,922 shares of Series B warrants with an aggregate fair value of approximately $6.7 million.

IntraOp Medical Corp.

IntraOp Medical Corporation ("IntraOp"), Sunnyvale, California, manufactures and markets the Mobetron, a medical device for delivering Intra Operative Electron Radiation Therapy to cancer patients.

At December 31, 2018, our investment in IntraOp consisted of 26,856,187 shares of Series C preferred stock, $3,000,000 par value term note, $2,000,000 par value term note and a $10,961,129 par value convertible note with a combined aggregate fair value of approximately $29.5 million.

Lyncean Technologies, Inc.

Lyncean Technologies, Inc. ("Lyncean"), Fremont, CA, is a developer X-ray and extreme ultraviolet (EUV) light sources for laboratory and commercial use.

At December 31, 2018, our investment in Lyncean consisted of 869,792 shares of Series B preferred stock with a combined fair value of approximately $1.0 million.

QMAT, Inc.

QMAT, Inc. ("QMAT"), Santa Clara, California, is developing advanced materials technologies for applications in the electronics industry.

At December 31, 2018, our investment in QMAT consisted of 16,000,240 shares of Series A preferred stock, 2,000,000 shares of Series B preferred stock, warrants to purchase up to 2,000,000 shares of Series A preferred stock, a $7,002,600 par value convertible note and warrants to purchase up to 4,932,208 shares of Series C preferred stock with a combined fair value of approximately $13.4 million.

Silicon Genesis Corp.

Silicon Genesis Corporation ("SiGen"), San Jose, CA, provides engineered substrate process technology for the semiconductor, display, optoelectronics, and solar markets.

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At December 31, 2018, our investments in SiGen consisted of 82,914 shares of Series 1-C preferred stock, 850,830 shares of Series 1-D preferred stock, 5,704,480 shares of Series 1-E preferred stock, 912,453 shares of Series 1-F preferred stock, 48,370,793 shares of Series 1-G preferred stock, 837,942 shares of Series 1-H preferred stock, 921,892 shares of common stock, and warrants for 8,037,982 shares of common stock with a combined fair value of approximately $3.2 million.

SVXR, Inc.

SVXR, Inc. ("SVXR"), San Jose, California, is an X-ray inspection tool manufacturer whose products are used for inline product monitoring, defect detection, and metrology.

At December 31, 2018, our investment in SVXR consisted of 8,219,454 shares of Series A preferred stock with a combined fair value of approximately $4.9 million.

Telepathy Investors, Inc.

Telepathy Investors, Inc. ("Telepathy"), Sunnyvale, California, is developing wearable consumer electronics products.

At December 31, 2018, our investment in Telepathy consisted of 15,238,000 shares of Series A preferred stock, a $2,000,000 par value convertible note, a $500,000 par value convertible note, a $500,000 par value convertible note, a $300,000 par value convertible note, a $300,000 par value convertible note, a $200,000 par value convertible note and a $150,000 par value convertible note with a combined fair value of approximately $1.3 million.

UCT Coatings, Inc.

UCT Coatings, Inc. ("UCT"), Stuart, Florida, is a leader in the development of metal coatings that reduce friction and improve efficiency in mechanical systems.

At December 31, 2018, our investments in UCT consisted of 1,500,000 shares of common stock with a combined fair value of approximately $749 thousand.

Vufine, Inc.

Vufine, Inc. ("Vufine"), Sunnyvale, CA, is developing a wearable high-definition display that clips on to existing eyewear.

At December 31, 2018, our investment in Vufine consisted of 22,500,000 shares of Series A preferred stock, 750,000 shares of common stock, a $250,000 par value convertible note, a $350,000 par value convertible note, a $300,000 par value convertible note, a $100,000 par value convertible note, a $200,000 par value convertible note and a $1,500,000 par value convertible note with a combined aggregate fair value of approximately $21 thousand.

Wrightspeed, Inc.

Wrightspeed, Inc. ("Wrightspeed"), San Jose, California, is a supplier of electric drivetrains for medium-duty trucks.

At December 31, 2018, our investments in Wrightspeed consisted of 2,267,659 shares of Series C preferred stock, 1,100,978 shares of Series D preferred stock, 450,814 shares of Series E preferred stock, 90,707 shares of Series F preferred stock, an $8,800,000 par value convertible note, and warrants to purchase 35,249,888 shares of Series F preferred stock with a combined fair value of approximately $9.3 million.

PUBLIC INVESTMENTS

At December 31, 2018, we had investments in the following public securities:

Phunware, Inc.

Phunware, Inc. ("Phunware"), Austin, Texas, is a software company that develops tools and services to enable mobile computing applications.

At December 31, 2018, our investments in Phunware consisted of 1,495,113 shares of restricted common stock with an aggregate fair value of approximately $19.1 million.

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Pivotal Systems Corp.

Pivotal Systems, Corporation ("Pivotal Systems"), Fremont, California, provides monitoring and process control technologies for the semiconductor manufacturing industry.

At December 31, 2018, our investment in Pivotal Systems consisted of 53,758,441 shares of restricted common stock with a combined fair value of approximately $53.8 million.

Quicklogic Corp.

QuickLogic Corp. ("QuickLogic") (NASDAQ: QUIK), Sunnyvale, CA, designs and markets system-on-a-chip ("SOC") semiconductor solutions for smartphones, wearable and "Internet-of-things" devices, and other applications.

At December 31, 2018, our investment in Quicklogic consisted of 1,000,000 shares of common stock with a market value of approximately $734 thousand.

Revasum, Inc.

Revasum, ("Revasum"), San Luis Obispo, California, designs CMP and grinding technology for the semiconductor equipment industry.

At December 31, 2018, our investment in Revasum consisted of 53,834,340 shares of restricted common stock with an aggregate fair value of approximately $58.6 million

Roku, Inc.

Roku, Inc. ("Roku"), Saratoga, CA, makes Internet streaming devices and software that enable consumers to access streaming content on their televisions.

At December 31, 2018, our investment in Roku consisted of 115,000 shares of common stock with an aggregate fair value of approximately $3.5 million.

Fidelity Investments Money Market Treasury Portfolio—Class I

Fidelity Investments Money Market Treasury Portfolio—Class I ("Money Market") is a money market portfolio that invests primarily in U.S. treasury securities.

At December 31, 2018, our investment in Money Market consisted of 438,442 shares of the money market fund with a market value of approximately $438 thousand.

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.

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Valuation of Portfolio Investments

As a BDC, 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 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 income on an accrual basis and dividend income on the ex-dividend date 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 year on December 31, 2018, and through the date of the issuance of the financial statements included herein, a number of material events related to our portfolio of investments occurred, consisting primarily of purchased and sold securities. Since that date, we have purchased private securities with an aggregate cost of approximately $3.6 million. Since that date, we have sold public securities with an aggregate value of approximately $3.8 million.

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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Fund'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 Fund invests in small companies, and its investments in these companies are considered speculative in nature. The Fund'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 Fund is subject to risk of loss which may prevent our shareholders from achieving price appreciation, dividend distributions and return of capital.

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WE MAY HOLD A PORTION OF OUR ASSETS IN CASH

As of December 31, 2018, we do not have a significant portion of the Fund's assets invested in cash and/or cash equivalents. We may, however, from time to time hold a substantial portion of our assets 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 Fund, the Fund 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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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE SHAREHOLDERS AND BOARD OF DIRECTORS

Firsthand Technology Value Fund, Inc.
San Jose, California

OPINION ON THE FINANCIAL STATEMENTS

We have audited the accompanying consolidated statements of assets and liabilities of Firsthand Technology Value Fund, Inc. (the "Company"), including the consolidated schedules of investments, as of December 31, 2018 and 2017, and the related consolidated statements of operations, changes in net assets, and cash flows for each of the years in the three-year period ended December 31, 2018, and the financial highlights (consolidated for the years ended December 31, 2018, 2017, 2016, and 2015) for each of the years in the five-year period ended December 31, 2018, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, the results of its operations, the changes in its net assets, and its cash flows for each of the years in the three-year period ended December 31, 2018, and the financial highlights for each of the years in the five-year period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2018, based on the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 14, 2019 expressed an unqualified opinion.

EMPHASIS OF MATTER

As explained in Note 6, the financial statements include investments valued at $205,157,528 (107.07% of net assets), whose fair values have been estimated under procedures established by the Board of Directors in the absence of readily ascertainable fair values. These estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material. Our opinion is not modified with respect to this matter.

BASIS FOR OPINION

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We have served as the Company's auditor since 1997.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian, portfolio companies and brokers; when replies were not received from brokers, we performed other auditing procedures. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

TAIT, WELLER & BAKER LLPPhiladelphia, Pennsylvania
March 14, 2019

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE SHAREHOLDERS AND BOARD OF DIRECTORS

Firsthand Technology Value Fund, Inc.
San Jose, California

OPINION ON INTERNAL CONTROL OVER FINANCIAL REPORTING

We have audited the internal control over financial reporting of Firsthand Technology Value Fund, Inc. (the "Company") as of December 31, 2018, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on the criteria established in Internal Control—Integrated Framework (2013) issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of assets and liabilities, including the consolidated schedules of investments, as of December 31, 2018 and 2017, and the related consolidated statements of operations, changes in net assets, and cash flows for each of the years in the three-year period ended December 31, 2018, and the financial highlights (consolidated for the years ended December 31, 2018, 2017, 2016 and 2015) for each of the years in the five-year period ended December 31, 2018, and the related notes (collectively referred to as the consolidated financial statements) of the Company, and our report dated March 14, 2019 expressed an unqualified opinion.

BASIS FOR OPINION

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We have served as the Company's auditor since 1997.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

DEFINITION AND LIMITATIONS OF INTERNAL CONTROL OVER FINANCIAL REPORTING

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

TAIT, WELLER & BAKER LLPPhiladelphia, Pennsylvania
March 14, 2019

42

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Firsthand Technology Value Fund, Inc.

Consolidated Statements of Assets and Liabilities

	AS OF DECEMBER 31, 2018			AS OF DECEMBER 31, 2017
ASSETS
Investment securities:
Unaffiliated investments at acquisition cost	$	3,961,467	*	$	33,014,039	*
Affiliated investments at acquisition cost		31,002,275			24,035,159
Controlled investments at acquisition cost		132,313,596			117,890,661
Total acquisition cost	$	167,277,338		$	174,939,859
Unaffiliated investments at market value	$	5,696,042	*	$	40,191,055	*
Affiliated investments at market value		34,045,111			24,656,252
Controlled investments at market value		170,112,417			109,992,218
Total market value ** (Note 6)		209,853,570			174,839,525
Cash		—			110,077
Receivable for securities sold		1,005			—
Receivable from dividends and interest		2,308,366			1,794,003
Other assets		18,713			27,985
Total Assets		212,181,654			176,771,590
LIABILITIES
Payable for securities purchased		365,783			—
Incentive fees payable (Note 4)		9,261,847			1,691,040
Payable to affiliates (Note 4)		2,334,727			879,085
Deferred tax liability		8,432,559			—
Consulting fee payable		19,500			21,000
Accrued expenses and other payables		149,279			186,876
Total Liabilities		20,563,695			2,778,001
NET ASSETS	$	191,617,959		$	173,993,589
Net Assets consist of:
Common Stock, par value $0.001 per share 100,000,000 shares authorized	$	7,179		$	7,302
Paid-in-capital		178,770,434			180,772,769
Total distributable earnings (loss) ***		12,840,346			(6,786,482	)
NET ASSETS	$	191,617,959		$	173,993,589
Shares of Common Stock outstanding		7,302,146			7,302,146
Shares of Treasury Stock outstanding		(123,376	)		—
Total Shares of Common Stock outstanding		7,178,770			7,302,146
Net asset value per share (Note 2)	$	26.69		$	23.83

*  Includes Fidelity Investment Money Market Treasury Portfolio—Class I, which invests primarily in U.S. Treasury securities. The yields as of 12/31/18 and 12/31/17 were 2.24% and 1.14%, respectively. Please see https://fundresearch.fidelity.com/mutual-funds/summary/316175504 for additional information.

**  Includes warrants whose primary exposure is equity risk.

***  The SEC eliminated the requirement to disclose the components of distributable earnings on the Statement of Assets and Liabilities in September 2018. Accumulated net investment loss, accumulated net realized loss from security transactions and net unrealized depreciation on investments and warrants transactions in 2017 were $(1,691,040), $(4,995,108) and $(100,334), respectively.

See accompanying notes to financial statements
43

Firsthand Technology Value Fund, Inc.

Consolidated Schedule of Investments

DECEMBER 31, 2018

PORTFOLIO COMPANY (% OF NET ASSETS) AND INDUSTRY	INVESTMENT TYPE	ACQUISITION DATE	SHARES/PAR VALUE ($)		COST BASIS		VALUE
EQX CAPITAL, INC (1.8%)	Common Stock *(1)(2)(4)	6/10/16		100,000	$	20,000	$	36,470
	Preferred Stock - Series A *(1)(2)(4)	6/10/16		4,000,000		4,000,000		3,491,600
Equipment Leasing								3,528,070
HERA SYSTEMS, INC. (3.5%)	Convertible Promissory Note Matures January 2019
Aerospace	Interest Rate 10% (1)(2)(4)	5/31/18		500,000		500,000		500,000
	Convertible Promissory Note
	Matures January 2019
	Interest Rate 10% (1)(2)(4)	1/19/18		500,000		500,000		500,000
	Preferred Stock - Series A *(1)(2)(4)	9/18/15		3,642,324		2,000,000		207,977
	Preferred Stock - Series B *(1)(2)(4)	8/07/17 - 9/4/18		5,539,203		5,087,102		1,231,365
	Preferred Stock Warrants - Series B *(1)(2)(4)	8/7/17		6,214,922		0		1,380,956
	Preferred Stock Warrants - Series B *(1)(2)(4)	9/28/17		700,000		0		155,540
	Preferred Stock Warrants - Series B *(1)(2)(4)	7/9/18 - 9/4/18		12,250,000		0		2,721,950
								6,697,788
INTRAOP MEDICAL CORP. (15.4%)	Convertible Note Matures June 2020
Medical Devices	Interest Rate 8% (1)(2)(4)	12/31/18		10,961,129		10,961,129		10,961,129
	Preferred Stock - Series C *(1)(2)(4)	7/12/13		26,856,187		26,299,938		13,565,328
	Term Note Matures February 2020 Interest Rate 8% (1)(2)(4)	2/10/17		2,000,000		2,000,000		2,000,000
	Term Note Matures February 2020 Interest Rate 8% (1)(2)(4)	2/28/14		3,000,000		3,000,000		3,000,000
								29,526,457
LYNCEAN TECHNOLOGIES, INC. (0.5%)	Preferred Stock - Series B *(1)(4)	7/3/18		869,792		1,000,000		1,000,000
Semiconductor Equipment

See accompanying notes to financial statements
44

Firsthand Technology Value Fund, Inc.

Consolidated Schedule of Investments - continued

DECEMBER 31, 2018

PORTFOLIO COMPANY (% OF NET ASSETS) AND INDUSTRY	INVESTMENT TYPE	ACQUISITION DATE	SHARES/PAR VALUE ($)		COST BASIS		VALUE
PHUNWARE, INC. (10.0%)	Common Stock *(1)(3)(4)	3/14/14		1,495,113	$	9,999,997	$	19,121,150
Mobile Computing
PIVOTAL SYSTEMS CORP. (28.1%)	Common Stock *(1)(2)(4)	11/28/12 - 09/02/16		53,758,441		19,446,197		53,825,978
Semiconductor Equipment
QMAT, INC. (7.0%)	Preferred Stock - Series A *(1)(2)(4)	12/14/12 - 04/28/16		16,000,240		9,680,305		4,612,549
Advanced Materials	Preferred Stock - Series B *(1)(2)(4)	9/28/16 - 11/7/16		2,000,000		2,000,000		1,594,000
	Convertible Note Matures December 2019 Interest Rate 8% (1)(2)(4)	12/14/18		7,002,600		7,002,600		7,002,600
Preferred Stock Warrants -	Series C *(1)(2)(4)	12/14/18		4,932,208		0		81,381
Preferred Stock Warrants -	Series A *(1)(2)(4)	12/14/12		2,000,000		0		112,000
								13,402,530
QUICKLOGIC CORP. (0.4%)	Common Stock *	12/27/16 - 11/09/17		1,000,000		1,488,025		734,000
Semiconductors
REVASUM, INC. (30.6%)	Common Stock *(1)(2)(4)	11/14/16 - 11/30/18		53,834,340		18,537,905		58,608,601
Semiconductor Equipment
ROKU, INC. (1.8%)	Common Stock *	05/26/15 - 08/06/15		115,000		1,035,000		3,523,600
Consumer Electronics

See accompanying notes to financial statements
45

Firsthand Technology Value Fund, Inc.

Consolidated Schedule of Investments - continued

DECEMBER 31, 2018

PORTFOLIO COMPANY (% OF NET ASSETS) AND INDUSTRY	INVESTMENT TYPE	ACQUISITION DATE	SHARES/PAR VALUE ($)		COST BASIS		VALUE
SILICON GENESIS CORP. (1.7%)	Preferred Stock - Series 1-E *(1)(2)(4)	4/18/11		5,704,480	$	2,372,403	$	1,233,879
	Preferred Stock - Series 1-C *(1)(2)(4)	4/18/11		82,914		109,518		25,463
Intellectual Property	Preferred Stock - Series 1-D *(1)(2)(4)	4/18/11		850,830		431,901		68,917
	Common Stock *(1)(2)(4)	4/18/11		921,892		169,045		4,517
	Common Stock Warrants *(1)(2)(4)	4/18/11		37,982		6,678		84
	Preferred Stock - Series 1-F *(1)(2)(4)	4/18/11		912,453		456,389		270,816
	Common Stock Warrants *(1)(2)(4)	10/13/11		5,000,000		0		2,000
	Common Stock Warrants *(1)(2)(4)	2/6/12		3,000,000		0		1,200
	Preferred Stock - Series 1-G *(1)(2)(4)	3/10/16		48,370,793		3,880,592		1,443,530
	Preferred Stock - Series 1-H *(1)(2)(4)	3/10/16		837,942		936,895		137,339
								3,187,745
SVXR, INC. (2.6%)	Preferred Stock - Series A *(1)(3)(4)	1/11/17 - 8/29/18		8,219,454		4,082,192		4,923,206
Semiconductor Equipment
TELEPATHY INVESTORS, INC. (0.7%)	Convertible Note
	Matures January 2019
Consumer Electronics	Interest Rate 10% (1)(2)(4)	6/21/16		150,000		150,000		14,678
	Convertible Note Matures January 2019 Interest Rate 10% (1)(2)(4)	9/7/18		200,000		200,000		19,570
	Convertible Note Matures January 2019 Interest Rate 10% (1)(2)(4)	4/20/16		500,000		500,000		48,925
	Convertible Note Matures January 2019 Interest Rate 10% (1)(2)(4)	6/23/15		2,000,000		2,000,000		195,700
	Convertible Note Matures January 2019 Interest Rate 10% (1)(2)(4)	5/3/17		300,000		300,000		29,355
	Preferred Stock - Series A *(1)(2)(4)	7/29/14		15,238,000		3,999,999		927,994
	Convertible Note Matures January 2019 Interest Rate 10% (1)(2)(4)	1/29/16		300,000		300,000		29,355
	Convertible Note Matures January 2019 Interest Rate 10% (1)(2)(4)	12/13/16		500,000		500,000		48,925
								1,314,502

See accompanying notes to financial statements
46

Firsthand Technology Value Fund, Inc.

Consolidated Schedule of Investments - continued

DECEMBER 31, 2018

PORTFOLIO COMPANY (% OF NET ASSETS) AND INDUSTRY	INVESTMENT TYPE	ACQUISITION DATE	SHARES/PAR VALUE ($)		COST BASIS		VALUE
UCT COATINGS, INC. (0.4%)	Common Stock *(1)(3)(4)	4/18/11		1,500,000	$	662,235	$	748,950
Advanced Materials
VUFINE, INC. (0.0%) Consumer Electronics	Convertible Note Matures July 2019 Interest Rate 12% (1)(2)(4)	10/31/18		200,000		200,000		1,537
	Convertible Note Matures July 2019 Interest Rate 12% (1)(2)(4)	7/10/17		1,500,000		1,500,000		11,526
	Convertible Note Matures July 2019 Interest Rate 12% (1)(2)(4)	9/13/18		100,000		100,000		768
	Convertible Note Matures October 2019 Interest Rate 12% (1)(2)(4)	10/16/17		250,000		250,000		1,921
	Convertible Note Matures July 2019 Interest Rate 12% (1)(2)(4)	1/31/18		350,000		350,000		2,689
	Convertible Note Matures July 2019 Interest Rate 12% (1)(2)(4)	6/19/18		300,000		300,000		2,305
	Common Stock *(1)(2)(4)	2/26/15		750,000		15,000		0
Preferred Stock -	Series A *(1)(2)(4)	03/04/15 - 02/18/16		22,500,000		2,250,000		0
								20,746

See accompanying notes to financial statements
47

Firsthand Technology Value Fund, Inc.

Consolidated Schedule of Investments - continued

DECEMBER 31, 2018

PORTFOLIO COMPANY (% OF NET ASSETS) AND INDUSTRY	INVESTMENT TYPE	ACQUISITION DATE	SHARES/PAR VALUE ($)		COST BASIS		VALUE
WRIGHTSPEED, INC. (4.8%)	Convertible Note
Matures December 2019  Automotive	Interest Rate 12% (1)(3)(4)	12/31/18		100,000	$	100,000	$	2,751
	Convertible Note Matures December 2019 Interest Rate 12% (1)(3)(4)	5/1/18		3,700,000		3,700,000		101,787
	Convertible Note Matures December 2019 Interest Rate 12% (1)(3)(4)	6/21/18		2,000,000		2,000,000		55,020
	Convertible Note Matures December 2019 Interest Rate 12% (1)(3)(4)	8/10/18		3,000,000		3,000,000		82,530
	Preferred Stock - Series C *(1)(3)(4)	4/11/13		2,267,659		1,922,975		494,803
	Preferred Stock - Series D *(1)(3)(4)	12/15/14		1,100,978		3,375,887		310,806
	Preferred Stock - Series E *(1)(3)(4)	7/10/15		450,814		1,658,996		136,732
	Preferred Stock - Series F *(1)(3)(4)	8/31/17		90,707		499,995		41,344
	Preferred Stock Warrants - Series F *(1)(3)(4)	12/31/18		200,000		0		90,980
	Preferred Stock Warrants - Series F *(1)(3)(4)	12/31/18		200,000		0		224
	Preferred Stock Warrants - Series F *(1)(3)(4)	4/9/18		13,606		0		22
	Preferred Stock Warrants - Series F *(1)(3)(4)	4/26/18		6,803		0		11
	Preferred Stock Warrants - Series F *(1)(3)(4)	8/10/18		6,000,000		0		2,729,400
	Preferred Stock Warrants - Series F *(1)(3)(4)	5/1/18		7,400,000		0		3,366,260
	Preferred Stock Warrants - Series F *(1)(3)(4)	6/21/18		4,000,000		0		1,819,600
	Preferred Stock Warrants - Series F *(1)(3)(4)	8/10/18		6,000,000		0		6,720
	Preferred Stock Warrants - Series F *(1)(3)(4)	5/1/18		7,400,000		0		8,288
	Preferred Stock Warrants - Series F *(1)(3)(4)	6/21/18		4,000,000		0		4,480
	Preferred Stock Warrants - Series F *(1)(3)(4)	8/31/17		18,141		0		29
	Preferred Stock Warrants - Series F *(1)(3)(4)	2/7/18		11,338		0		18
								9,251,805

See accompanying notes to financial statements
48

Firsthand Technology Value Fund, Inc.

Consolidated Schedule of Investments - continued

DECEMBER 31, 2018

PORTFOLIO COMPANY (% OF NET ASSETS) AND INDUSTRY	INVESTMENT TYPE	ACQUISITION DATE	SHARES/PAR VALUE ($)		COST BASIS		VALUE
INVESTMENT COMPANY (0.2%)	Fidelity Investments Money Market Treasury Portfolio - Class I (5)	Various		438,442	$	438,442	$	438,442
TOTAL INVESTMENTS (Cost $167,277,338) — 109.5%								209,853,570
LIABILITIES IN EXCESS OF OTHER ASSETS — (9.5)%								(18,235,611	)
NET ASSETS — 100%							$		191,617,959

*  Non-income producing security.

(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, 2018, we held $205,157,528 (or 107.07% 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
49

Firsthand Technology Value Fund, Inc.

Consolidated Schedule of Investments

DECEMBER 31, 2017

PORTFOLIO COMPANY (% OF NET ASSETS) AND INDUSTRY	TYPE OF INVESTMENT	ACQUISITION DATE	SHARES/PAR VALUE ($)		COST BASIS		VALUE
ALIPHCOM, INC. (0.0%)	Common Stock *(1)(7)	8/20/13		2,128,005	$	10,108,024	$	0
Consumer Electronics
EQX CAPITAL, INC. (2.3%)	Common Stock *(1)(2)(7)	6/10/16		100,000		20,000		44,810
	Preferred Stock - Series A *(1)(2)(7)	6/10/16		4,000,000		4,000,000		3,975,200
Equipment Leasing
								4,020,010
HERA SYSTEMS, INC. (1.2%)	Preferred Stock - Series A *(1)(2)(7)	9/18/15		3,642,324		2,000,000		154,799
	Preferred Stock - Series B *(1)(2)(7)	08/07/17 - 09/28/17		2,039,203		1,587,102		453,315
Aerospace	Preferred Stock Warrants - Series B *(1)(2)(7)	8/7/17		6,214,922		0		1,380,956
	Preferred Stock Warrants - Series B *(1)(2)(7)	9/28/17		700,000		0		155,540
								2,144,610
HIGHTAIL, INC. (4.9%)	Preferred Stock - Series E *(1)(4)(7)	3/27/14		2,268,602		9,620,188		8,561,704
Cloud Computing
INTRAOP MEDICAL CORP. (12.1%)	Convertible Note (1)(2)(7) Matures June 2020
Medical Devices	Interest Rate 15%	5/31/17		1,000,000		1,000,000		1,000,000
	Convertible Note (1)(2)(7) Matures June 2020 Interest Rate 15%	9/28/17		1,500,000		1,500,000		1,500,000
	Convertible Note (1)(2)(7) Matures June 2020 Interest Rate 15%	7/13/17		1,000,000		1,000,000		1,000,000
	Convertible Note (1)(2)(7) Matures June 2020 Interest Rate 15%	7/8/14		1,000,000		1,000,000		1,000,000
	Preferred Stock - Series C *(1)(2)(7)	7/12/13		26,856,187		26,299,938		11,479,677
	Term Note (1)(2) Matures February 2020 Interest Rate 8%	2/10/17		2,000,000		2,000,000		2,000,000
	Term Note (1)(2)(7) Matures February 2020 Interest Rate 8%	2/28/14		3,000,000		3,000,000		3,000,000
								20,979,677

See accompanying notes to financial statements
50

Firsthand Technology Value Fund, Inc.

Consolidated Schedule of Investments - continued

DECEMBER 31, 2017

PORTFOLIO COMPANY (% OF NET ASSETS) AND INDUSTRY	TYPE OF INVESTMENT	ACQUISITION DATE	SHARES/PAR VALUE ($)		COST BASIS		VALUE
NUTANIX, INC. (9.3%)	Common Stock *	05/15/15 - 08/23/16		458,772	$	7,358,112	$	16,185,476
Networking
PHUNWARE, INC. (6.9%)	Preferred Stock - Series E *(1)(3)(7)	3/14/14		3,257,328		9,999,997		12,018,563
Mobile Computing
PIVOTAL SYSTEMS CORP. (19.9%)	Common Stock Warrants - Class B *(1)(2)(7)	2/12/16		18,180,475		0		8,741,172
Semiconductor	Preferred Stock Warrants -
Equipment	Series D *(1)(2)(7)	9/2/16		4,158,654		0		618,392
	Preferred Stock - Series A *(1)(2)(7)	11/28/12 - 04/30/14		11,914,217		6,000,048		8,453,614
	Preferred Stock - Series B *(1)(2)(7)	4/30/14		13,065,236		6,321,482		9,270,308
	Preferred Stock - Series C *(1)(2)(7)	12/31/14		2,291,260		2,657,862		2,560,254
	Preferred Stock - Series D *(1)(2)(7)	9/2/16		6,237,978		3,975,801		5,009,720
								34,653,460
QMAT, INC. (13.4%) Advanced Materials	Preferred Stock - Series A *(1)(2)(7)	12/14/12 - 04/28/16		16,000,240		16,000,240		17,394,341
	Preferred Stock - Series B *(1)(2) (7)	09/28/16 - 11/07/16		2,000,000		2,000,000		2,132,600
	Preferred Stock Warrants - Series A *(1)(2)	12/14/12		2,000,000		0		1,086,600
	Convertible Note Matures March 2019 Interest Rate 8% (1)(2)(7)	12/29/17		2,745,485		2,745,485		2,745,485
								23,359,026
QUICKLOGIC CORP. (1.2%)	Common Stock *	12/27/16 - 11/09/17		1,200,000		1,859,835		2,088,000
Semiconductors

See accompanying notes to financial statements
51

Firsthand Technology Value Fund, Inc.

Consolidated Schedule of Investments - continued

DECEMBER 31, 2017

PORTFOLIO COMPANY (% OF NET ASSETS) AND INDUSTRY	TYPE OF INVESTMENT	ACQUISITION DATE	SHARES/PAR VALUE ($)		COST BASIS		VALUE
REVASUM, INC. (8.5%)	Preferred Stock - Series B (1)(2)(7)	10/27/17 - 12/20/17		313,719	$	2,550,033	$	2,550,033
Semiconductor	Common Stock *(1)(2)(7)	11/14/16		10,000		1,000		29,908
Equipment	Preferred Stock - Series A *(1)(2)(7)	3/1/17		441,998		1,999,997		2,256,355
	Term Note (1)(2)(7) Matures February 2020 Interest Rate 5%	3/1/17		1,000,000		1,000,000		1,000,000
	Preferred Stock - Series Seed *(1)(2)(7)(8)	11/14/16		2,200,000		7,284,145		8,966,760
								14,803,056
ROKU, INC. (6.7%)	Common Stock *(1)(7)	05/26/15 - 08/06/15		250,000		2,312,500		11,650,500
Consumer Electronics
RORUS, INC. (0.0%)	Convertible Note (1)(7)
Water Purification	Matures June 2021 Interest Rate 2%	10/4/16		50,000		50,000		0
SILICON GENESIS CORP. (3.5%)	Common Stock *(1)(2)(7)	4/18/11		921,892		169,045		16,871
	Common Stock Warrants *(1)(2)(7)	4/18/11		5,000,000		0		11,000
Intellectual Property	Common Stock Warrants *(1)(2)(7)	10/13/11		37,982		6,678		357
	Common Stock Warrants *(1)(2)(7)	2/6/12		3,000,000		0		6,600
	Preferred Stock - Series 1-C *(1)(2)(7)	4/18/11		82,914		109,518		74,258
	Preferred Stock - Series 1-D *(1)(2)(7)	4/18/11		850,830		431,901		205,646
	Preferred Stock - Series 1-E *(1)(2)(7)	4/18/11		5,704,480		2,459,808		2,063,310
	Preferred Stock - Series 1-F *(1)(2)(7)	4/18/11		912,453		475,674		456,318
	Preferred Stock - Series 1-G *(1)(2)(5)(7)	3/10/16		48,370,793		4,583,405		3,023,658
	Preferred Stock - Series 1-H *(1)(2)(7)	3/10/16		837,942		946,502		236,551
								6,094,569
SVXR, INC. (1.2%)	Preferred Stock - Series A *(1)(3)(7)	01/11/2017		2,013,491		1,000,000		1,000,000
Semiconductor	Convertible Note (1)(2)(7)
Equipment	Matures December 2018 Interest Rate 10% (1)(2)(7)	12/21/17		1,000,000		1,000,000		1,000,000
								2,000,000

See accompanying notes to financial statements
52

Firsthand Technology Value Fund, Inc.

Consolidated Schedule of Investments - continued

DECEMBER 31, 2017

PORTFOLIO COMPANY (% OF NET ASSETS) AND INDUSTRY	TYPE OF INVESTMENT	ACQUISITION DATE	SHARES/PAR VALUE ($)		COST BASIS		VALUE
TELEPATHY INVESTORS, INC. (0.9%)	Convertible Note (1)(2)(7)
	Matures January 2018
Consumer Electronics	Interest Rate 10%	1/29/16		300,000	$	300,000	$	45,321
	Convertible Note (1)(2)(7) Matures January 2018 Interest Rate 10%	4/20/16		500,000		500,000		75,535
	Convertible Note (1)(2)(7) Matures January 2018 Interest Rate 10%	6/21/16		150,000		150,000		22,661
	Convertible Note (1)(2)(7) Matures January 2018 Interest Rate 10%	12/13/16		500,000		500,000		75,535
	Convertible Note (1)(2)(7) Matures January 2018 Interest Rate 10%	6/23/15		2,000,000		2,000,000		302,140
	Convertible Note (1)(2)(7) Matures January 2018 Interest Rate 10%	5/3/17		300,000		300,000		45,321
	Preferred Stock - Series A *(1)(2)(7)	7/29/14		15,238,000		3,999,999		937,137
								1,503,650
UCT COATINGS, INC. (0.5%)	Common Stock *(1)(3)(7)	4/18/11		1,500,000		662,235		922,050
	Common Stock Warrants *(1)(3)(7)	4/18/11		2,283		67		4
Advanced Materials
								922,054
VUFINE, INC. (0.8%)	Common Stock *(1)(2)(7)	2/26/15		750,000		15,000		0
Consumer Electronics	Convertible Note (1)(2)(7) Matures July 2019 Interest Rate 6%	7/10/17		1,500,000		1,500,000		1,229,280
	Preferred Stock - Series A *(1)(2)(7)	03/04/15 - 02/18/16		22,500,000		2,250,000		0
	Convertible Note (1)(2)(7) Matures October 2019 Interest Rate 12%	10/16/17		250,000		250,000		204,880
								1,434,160

See accompanying notes to financial statements
53

Firsthand Technology Value Fund, Inc.

Consolidated Schedule of Investments - continued

DECEMBER 31, 2017

PORTFOLIO COMPANY (% OF NET ASSETS) AND INDUSTRY	TYPE OF INVESTMENT	ACQUISITION DATE	SHARES/PAR VALUE ($)		COST BASIS		VALUE
WRIGHTSPEED, INC. (6.2%)	Preferred Stock -
	Series C *(1)(3)(4)(7)	4/11/13		2,267,659	$	6,837,983	$	5,704,296
Automotive	Preferred Stock - Series D *(1)(3)(7)	12/15/14		1,100,978		3,375,887		3,161,018
	Preferred Stock - Series E *(1)(3)(7)	7/10/15		450,814		1,658,996		1,350,323
	Preferred Stock - Series F *(1)(3)(7)	8/31/17		90,707		499,995		471,295
	Preferred Stock Warrants - Series F *(1)(3)(7)	8/31/17		18,141		0		28,703
								10,715,635
INVESTMENT COMPANY (1.0%)	Fidelity Investments Money Market Treasury Portfolio - Class I (6)	Various		1,705,375		1,705,375		1,705,375
TOTAL INVESTMENTS (Cost $174,939,859) — 100.5%								174,839,525
OTHER ASSETS IN EXCESS OF LIABILITIES — 0.5%								(845,936	)
NET ASSETS — 100.0%							$	173,993,589

*  Non-income producing security.

(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, 2017, we held $154,860,674 (or 89.0% of net assets) in restricted securities (see Note 2).

(2)  Controlled investments.

(3)  Affiliated issuer.

(4)  A portion represents position held in Firsthand Holdings, Ltd. (See Note 1).

(5)  A portion represents position held in Firsthand Development, Ltd. (See Note 1).

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

(7)  Fair value level 3 security.

(8)  A portion represents position held in Firsthand Investments, Ltd. (See Note 1).

See accompanying notes to financial statements
54

Firsthand Technology Value Fund, Inc.

Consolidated Statements of Operations

	FOR THE YEAR ENDED DECEMBER 31, 2018			FOR THE YEAR ENDED DECEMBER 31, 2017			FOR THE YEAR ENDED DECEMBER 31, 2016
INVESTMENT INCOME
Affiliated/Controlled loan origination income	$	21,000		$	24,180		$	28,213
Unaffiliated interest		6,228			1,522			19,133
Affiliated/controlled interest		3,440,610			1,540,089			830,677
TOTAL INVESTMENT INCOME		3,467,838			1,565,791			878,023
EXPENSES
Investment advisory fees (Note 4)		4,128,311			2,975,982			3,281,617
Administration fees		207,292			187,846			165,024
Custody fees		32,123			22,152			11,334
Transfer agent fees		35,176			33,017			27,283
Registration and filing fees		30,600			23,100			23,100
Professional fees		375,496			535,293			779,689
Printing fees		62,376			195,892			40,835
Trustees fees		200,000			137,500			100,000
Compliance fees		114,648			107,640			188,569
Miscellaneous fees		87,830			174,670			96,075
TOTAL GROSS EXPENSES		5,273,852			4,393,092			4,713,526
Incentive fee adjustments (Note 4)		7,570,807			1,691,040			—
TOTAL NET EXPENSES		12,844,659			6,084,132			4,713,526
NET INVESTMENT LOSS, BEFORE TAXES		(9,376,821	)		(4,518,341	)		(3,835,503	)
Deferred tax benefit		538,915			—			—
Net investment loss, net of deferred taxes		(8,837,906	)		(4,518,341	)		(3,835,503	)
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gains (losses) from security transactions on:
Affiliated/Controlled		(10,658,458	)		5,058,105			(3,035,229	)
Non-affiliated/controlled and other assets		5,432,378			(1,516,161	)		(3,132,110	)
Net realized gain from written option transaction (1)		231,422			—			—
Deferred tax benefit		1,192,325			—			—
Net realized gains (losses), net of deferred taxes		(3,802,333	)		3,541,944			(6,167,339	)
Net change in unrealized appreciation (depreciation) on:
Non-affiliated investments		(5,442,441	)		19,408,570			1,088,815
Affiliated/controlled investments and foreign currency		47,667,121			1,138,114			(20,524,969	)
Affiliated/controlled warrants investments (1)		451,886			6,609,282			4,777,442
Deferred tax expense		(10,163,798	)		—			—
Net change in unrealized appreciation (depreciation), net of deferred taxes		32,512,768			27,155,966			(14,658,712	)
Net Realized and Unrealized Gains (Losses) on Investments, Net of Deferred Taxes		28,710,435			30,697,910			(20,826,051	)
Net Increase (Decrease) In Net Assets Resulting From Operations, Net of Deferred Taxes	$	19,872,529		$	26,179,569		$	(24,661,554	)
Net Increase/(Decrease) In Net Assets Per Share Resulting From Operations (2)	$	2.73		$	3.59		$	(3.26	)

(1)  Primary exposure is equity risk.

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

See accompanying notes to financial statements
55

Firsthand Technology Value Fund, Inc.

Consolidated Statements of Cash Flows

	FOR THE YEAR ENDED DECEMBER 31, 2018			FOR THE YEAR ENDED DECEMBER 31, 2017			FOR THE YEAR ENDED DECEMBER 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase (decrease) in Net Assets resulting from operations	$	19,872,529		$	26,179,569		$	(24,661,554	)
Adjustments to reconcile net increase (decrease) in Net Assets derived from operations to net cash provided by (used in) operating activities:
Purchases of investments		(83,779,495	)		(30,958,618	)		(76,522,603	)
Proceeds from disposition of investments		85,549,002			34,282,019			80,015,681
Net purchases/sales from short-term investments		898,356			65,833			(1,171,203	)
Deferred tax expense		—			—			—
Increase (decrease) in dividends, interest, and reclaims receivable		(514,363	)		(973,179	)		2,615,902
(Decrease) in receivable in restricted cash		—			—			1,000,000
Increase (decrease) in receivable in investment sold		(1,005	)		—			—
Increase (decrease) in payable for investment purchased		365,783			(395,532	)		395,532
Increase (decrease) in payable to affiliates		1,455,642			82,552			(98,839	)
Increase (decrease) in incentive fees payable		7,570,807			1,691,040			—
(Decrease) in other assets		9,272			528			757,955
Increase (decrease) in accrued expenses and other payables		(39,096	)		(2,101	)		15,473
Increase (decrease) in deferred tax benefit		8,432,558			—			—
Net realized gain (loss) from investments		5,226,080			(3,541,944	)		6,167,339
Net realized gain from written options		(231,422	)		—			—
Net unrealized appreciation (depreciation) from investments, other assets, and warrants transactions		(42,676,566	)		(27,155,966	)		14,658,712
Net cash (used in) operating activities		2,138,082			(725,799	)		3,172,395
CASH FLOWS FROM FINANCING ACTIVITIES
Cost of shares repurchased		(2,002,458	)		(1,098,371	)		(2,005,434	)
Distributions paid from net realized gains		(245,701	)		—			—
Net cash (used in) financing activities		(2,248,159	)		(1,098,371	)		(2,005,434	)
Net increase (decrease) in cash		(110,077	)		(1,824,170	)		1,166,961
Cash - beginning of year		110,077			1,934,247			767,286
Cash - end of year	$	—		$	110,077		$	1,934,247

See accompanying notes to financial statements
56

Firsthand Technology Value Fund, Inc.

Consolidated Statements of Changes in Net Assets

	FOR THE YEAR ENDED DECEMBER 31, 2018			FOR THE YEAR ENDED DECEMBER 31, 2017			FOR THE YEAR ENDED DECEMBER 31, 2016
FROM OPERATIONS:
Net investment loss, net of deferred taxes	$	(8,837,906	)	$	(4,518,341	)	$	(3,835,503	)
Net realized gain (loss) from security transactions, written options and warrants transactions, net of deferred taxes		(3,802,333	)		3,541,944			(6,167,339	)
Net change in unrealized appreciation (depreciation) on investments and warrants transactions, net of deferred taxes		32,512,768			27,155,966			(14,658,712	)
Net increase (decrease) in net assets from operations		19,872,529			26,179,569			(24,661,554	)
DISTRIBUTIONS TO SHAREHOLDERS:		(245,701	)		—			—
FROM CAPITAL SHARE TRANSACTIONS:
Value for shares repurchased		(2,002,458	)		(1,098,371	)		(2,005,434	)
Net decrease in net assets from capital share transactions		(2,002,458	)		(1,098,371	)		(2,005,434	)
TOTAL INCREASE/(DECREASE) IN NET ASSETS		17,624,370			25,081,198			(26,666,988	)
NET ASSETS:
Beginning of year		173,993,589			148,912,391			175,579,379
End of year	$	191,617,959		$	173,993,589		$	148,912,391
COMMON STOCK ACTIVITY:
Shares repurchased		(123,376	)		(128,551	)		(272,008	)
Net decrease in shares outstanding		(123,376	)		(128,551	)		(272,008	)
Shares outstanding, beginning of year		7,302,146			7,430,697			7,702,705
Shares outstanding, end of year		7,178,770			7,302,146			7,430,697

See accompanying notes to financial statements
57

Firsthand Technology Value Fund, Inc.

Financial Highlights

Selected per share data and ratios for a share outstanding throughout each year

	FOR THE YEAR ENDED DECEMBER 31, 2018*			FOR THE YEAR ENDED DECEMBER 31, 2017*			FOR THE YEAR ENDED DECEMBER 31, 2016*			FOR THE YEAR ENDED DECEMBER 31, 2015*			FOR THE YEAR ENDED DECEMBER 31, 2014
Net asset value at beginning of period	$	23.83		$	20.04		$	22.79		$	24.49		$	28.32
Income from investment operations:
Net investment loss, before deferred taxes		(1.29	) (1)		(0.62	)		(0.52	)		(0.06	) (1)		(1.26	)
Deferred tax benefit		0.07			—			—			—			—
Net investment loss		(1.22	)		(0.62	)		(0.52	)		(0.06	)		(1.26	)
Net realized and unrealized gains (losses) on investments, before deferred taxes		5.13			4.21			(2.76	)		(1.78	)		3.04
Deferred tax expense		(1.23	)		—			—			—			—
Net realized and unrealized gains (losses) on investments		3.90			4.21			(2.76	)		(1.78	)		3.04
Total from investment operations		2.68			3.59			(3.28	)		(1.84	)		1.78
Distributions from:
Realized capital gains		(0.03	)		—			—			—			(5.86	)
Anti-dilutive effect from capital share transactions		0.21			0.20			0.53			0.14			0.25
Net asset value at end of year	$	26.69		$	23.83		$	20.04		$	22.79		$	24.49
Market value at end of year	$	11.20		$	8.96		$	7.67		$	8.17		$	18.65
Total return
Based on Net Asset Value		12.39	%		18.91	%		(12.07	)%		(6.94	)%		12.54	%
Based on Market Value		25.43	%		16.82	%		(6.12	)%		(56.19	)%		4.76	%
Net assets at end of period (millions)	$	191.6		$	174.0		$	148.9		$	175.6		$	209.7

See accompanying notes to financial statements
58

Firsthand Technology Value Fund, Inc.

Financial Highlights

Selected per share data and ratios for a share outstanding throughout each year - continued

	FOR THE YEAR ENDED DECEMBER 31, 2018*			FOR THE YEAR ENDED DECEMBER 31, 2017*			FOR THE YEAR ENDED DECEMBER 31, 2016*			FOR THE YEAR ENDED DECEMBER 31, 2015*			FOR THE YEAR ENDED DECEMBER 31, 2014
Ratio of total expenses to average net assets:
Before tax benefit		6.75	% (2)		4.13	% (2)		2.90	%		1.36	% (2)		5.29	% (2)
Deferred tax expense (3)(4)		4.43	%		—			—			—			—
Total expenses		11.18	% (2)		4.13	%		2.90	%		1.36	%		5.29	%
Total expenses, excluding incentive fees and deferred tax expense		2.77	%		2.98	%		2.90	%		2.68	%		3.12	%
Ratio of net investment loss to average net assets:
Before tax benefit		(4.93	)% (2)		(3.07	)%		(2.36	)%		(0.24	)%		(4.31	)%
Deferred tax benefit (4)(5)		0.28	%		—			—			—			—
Net investment loss		(4.65	)%		(3.07	)%		(2.36	)%		(0.24	)%		(4.31	)%
Portfolio turnover rate		44	%		22	%		49	%		22	%		95	%

*  Consolidated

(1)  Calculated using average shares outstanding.

(2)  Amount includes the incentive fee. For the years ended December 31, 2018, December 31, 2017, December 31, 2016, December 31, 2015, and December 31, 2014, the ratio of the incentive fee to average net assets was 3.98%, 1.15%, (1.32)%, 2.17% and 3.85%, 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.

See accompanying notes to financial statements
59

Firsthand Technology Value Fund, Inc.

Notes to Financial Statements

DECEMBER 31, 2018

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 corporations 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.

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,

60

Firsthand Technology Value Fund, Inc.

Notes to Financial Statements - continued

DECEMBER 31, 2018

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 December 31, 2018, our financial statements include venture capital investments valued at approximately $73.6 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 December 31, 2018, we held $205,157,528 in restricted securities. At December 31, 2017, we held $154,860,674 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.

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.

61

Firsthand Technology Value Fund, Inc.

Notes to Financial Statements - continued

DECEMBER 31, 2018

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 Company had no option transactions for the year ended December 31, 2017.

The average quarterly volume of the Company's derivatives during the year ended December 31, 2018 is as follows:

	PURCHASED OPTIONS (CONTRACTS)		WARRANTS (NOTIONAL VALUE)		WRITTEN OPTIONS (CONTRACTS)
Firsthand Technology Value Fund, Inc.		—		12,674,248		77

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The average quarterly volume of the Company's derivatives during the year ended December 31, 2017 is as follows:

	PURCHASED OPTIONS (CONTRACTS)		WARRANTS (NOTIONAL VALUE)		WRITTEN OPTIONS (CONTRACTS)
Firsthand Technology Value Fund, Inc.		—		7,060,230		—

NOTE 3. BUSINESS RISKS AND UNCERTAINTIES

We plan to 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. 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 may, from time to time, engage 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;

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(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

(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, 2018, 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. As of December 31, 2018, there was an incentive fee expensed for $7,570,807. As of December 31, 2017, there was an incentive fee expensed for $1,691,040. As of December 31, 2016, there was an incentive fee expensed for $0.

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.

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

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

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the inputs to valuation techniques used to measure the fair value. The hierarchy gives the highest priority to 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 December 31, 2018:

ASSETS	LEVEL 1 QUOTED PRICES		LEVEL 2 OTHER SIGNIFICANT OBSERVABLE INPUTS		LEVEL 3 SIGNIFICANT UNOBSERVABLE INPUTS
Common Stocks
Advanced Materials	$	—	$	—	$	748,950
Computer Storage		—		—		—
Consumer Electronics		3,523,600		—		—
Equipment Leasing		—		—		36,470
Intellectual Property		—		—		4,517
Networking		—		—		—
Renewable Energy		—		—		—
Semiconductors		734,000		—		—
Semiconductors Equipment		—		—		112,434,579
Software		—		—		—
Total Common Stocks		4,257,600		—		113,224,516
Preferred Stocks
Advanced Materials		—		—		6,206,549
Aerospace		—		—		1,439,342
Automotive		—		—		983,685

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ASSETS	LEVEL 1 QUOTED PRICES		LEVEL 2 OTHER SIGNIFICANT OBSERVABLE INPUTS		LEVEL 3 SIGNIFICANT UNOBSERVABLE INPUTS
Consumer Electronics	$	—	$	—	$	927,994
Equipment Leasing		—		—		3,491,600
Intellectual Property		—		—		3,179,944
Medical Devices		—		—		13,565,328
Mobile Computing		—		—		19,121,150
Networking		—		—		—
Semiconductor Equipment		—		—		5,923,206
Total Preferred Stocks		—		—		54,838,798
Asset Derivatives *
Equity Contracts		—		—		12,481,143
Total Asset Derivatives		—		—		12,481,143
Convertible Notes
Advanced Materials		—		—		7,002,600
Aerospace		—		—		1,000,000
Automotive		—		—		242,088
Consumer Electronics		—		—		407,254
Medical Devices		—		—		15,961,129
Semiconductor Equipment		—		—		—
Total Convertible Notes		—		—		24,613,071
Mutual Funds		438,442		—		—
Total	$	4,696,042	$	—	$	205,157,528

*  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. Transfers in and out of the levels are recognized at the value at the end of the period. There were no transfers between Levels 1 and 2 as of December 31, 2018.

The following is a summary of the inputs used to value the Company's net assets as of December 31, 2017:

ASSETS	LEVEL 1 QUOTED PRICES		LEVEL 2 OTHER SIGNIFICANT OBSERVABLE INPUTS		LEVEL 3 SIGNIFICANT UNOBSERVABLE INPUTS
Common Stocks
Advanced Materials	$	—	$	—	$	922,050
Consumer Electronics		—		—		11,650,500
Equipment Leasing		—		—		44,810
Intellectual Property		—		—		16,871
Networking		16,185,476		—		—
Semiconductors		2,088,000		—		—
Semiconductor Equipment		—		—		29,908
Total Common Stocks		18,273,476		—		12,664,139
Preferred Stocks
Advanced Materials		—		—		19,526,941
Aerospace		—		—		608,114

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ASSETS	LEVEL 1 QUOTED PRICES		LEVEL 2 OTHER SIGNIFICANT OBSERVABLE INPUTS		LEVEL 3 SIGNIFICANT UNOBSERVABLE INPUTS
Automotive	$	—	$	—	$	10,686,932
Cloud Computing		—		—		8,561,704
Consumer Electronics		—		—		937,137
Equipment Leasing		—		—		3,975,200
Intellectual Property		—		—		6,059,741
Medical Devices		—		—		11,479,677
Mobile Computing		—		—		12,018,563
Semiconductor Equipment		—		—		40,067,044
Total Preferred Stocks		—		—		113,921,053
Asset Derivatives *
Equity Contracts		—		—		12,029,324
Total Asset Derivatives		—		—		12,029,324
Convertible Notes
Advanced Materials		—		—		2,745,485
Consumer Electronics		—		—		2,000,673
Medical Devices		—		—		9,500,000
Semiconductor Equipment		—		—		2,000,000
Total Convertible Notes		—		—		16,246,158
Mutual Funds		1,705,375		—		—
Total	$	19,978,851	$	—	$	154,860,674

*  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. Transfers in and out of the levels are recognized at the value at the end of the period. There were no transfers between Levels 1 and 2 as of December 31, 2017.

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 12/31/17		NET PURCHASES/ CONVERSIONS		NET SALES/ CONVERSIONS			NET REALIZED GAINS /(LOSSES)			NET UNREALIZED APPRECIATION (DEPRECIATION) (1)			TRANSFERS IN (OUT) OF LEVEL 3		BALANCE AS OF 12/31/18
Common Stocks
Advanced Materials	$	922,050	$	—	$	—		$	—		$	(173,100	)	$	—	$	748,950
Consumer Electronics		11,650,500		—		(2,312,500	)		(10,108,024	)		770,024			—		—
Equipment Leasing		44,810		—		—			—			(8,340	)		—		36,470
Intellectual Property		16,871		—		—			—			(12,354	)		—		4,517

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INVESTMENTS AT FAIR VALUE USING SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)	BALANCE AS OF 12/31/17		NET PURCHASES/ CONVERSIONS		NET SALES/ CONVERSIONS			NET REALIZED GAINS /(LOSSES)			NET UNREALIZED APPRECIATION (DEPRECIATION) (1)			TRANSFERS IN (OUT) OF LEVEL 3		BALANCE AS OF 12/31/18
Semiconductor Equipment	$	29,908	$	42,941,781	$	(6,164,686	)	$	1,206,006		$	74,421,570		$	—	$	112,434,579
Preferred Stocks
Advanced Materials		19,526,941		24,290,124		(24,290,124	)		(6,319,935	)		(7,000,457	)		—		6,206,549
Aerospace		608,114		3,500,000		—			—			(2,668,772	)		—		1,439,342
Automotive		10,686,932		368,088		(368,088	)		(4,915,008	)		(4,788,239	)		—		983,685
Cloud Computing		8,561,704		—		(5,462,741	)		(4,157,447	)		1,058,484			—		—
Consumer Electronics		937,137		—		—			—			(9,143	)		—		927,994
Equipment Leasing		3,975,200		—		—			—			(483,600	)		—		3,491,600
Intellectual Property		6,059,741		1,658,300		(1,857,030	)		(620,377	)		(2,060,690	)		—		3,179,944
Medical Devices		11,479,677		—		—			—			2,085,651			—		13,565,328
Mobile Computing		12,018,563		9,999,997		(9,999,997	)		(1	)		7,102,588			—		19,121,150
Semiconductor Equipment		40,067,044		11,307,262		(37,505,362	)		(9,075	)		(7,936,663	)		—		5,923,206
Asset Derivatives
Equity Contracts		12,029,324		—		—			(67	)		451,886			—		12,481,143
Convertible Notes
Advanced Materials		2,745,485		9,052,600		(4,795,485	)		—			—			—		7,002,600
Aerospace		—		1,000,000		—			—			—			—		1,000,000
Automotive		—		9,050,000		(250,000	)		—			(8,557,912	)		—		242,088
Consumer Electronics		2,000,673		1,150,000		—			—			(2,743,419	)		—		407,254
Medical Devices		9,500,000		14,461,129		(8,000,000	)		—			—			—		15,961,129
Semiconductor Equipment		2,000,000		3,846,397		(5,846,397	)		—			—			—		—
Water Purification		—		—		(1,000	)		(49,000	)		50,000			—		—
Total	$	154,860,674	$	132,625,678	$	(106,853,410	)	$	(24,972,928	)	$	49,497,514		$	—	$	205,157,528

(1)  The net change in unrealized appreciation from Level 3 instruments held as of December 31, 2018 was $67,774,754.  

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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 12/31/16		NET PURCHASES/ CONVERSION		NET SALES/ CONVERSION			NET REALIZED GAINS /(LOSSES)			NET UNREALIZED APPRECIATION (DEPRECIATION) (1)			TRANSFERS IN (OUT) OF LEVEL 3			BALANCE AS OF 12/31/17
Common Stocks
Advanced Materials	$	394,200	$	—	$	—		$	—		$	527,850		$	—		$	922,050
Consumer Electronics		3,037,441		—		—			—			8,613,059			—			11,650,500
Equipment Leasing		44,430		—		—			—			380			—			44,810
Intellectual Property		14,750		—		—			—			2,121			—			16,871
Networking		10,990,390		—		—			—			(696,095	)		(10,294,295	)		—
Semiconductor Equipment		7,524		—		—			—			22,384			—			29,908
Software		245,466		—		(315,561	)		(264,439	)		334,534			—			—
Preferred Stocks
Advanced Materials		12,724,961		—		—			—			6,801,980			—			19,526,941
Advertising Technology		9,757,918		—		(12,355,330	)		1,015,419			1,581,993			—			—
Aerospace		445,456		1,587,102		—			—			(1,424,444	)		—			608,114
Automotive		10,410,045		1,029,175		(529,180	)		—			(223,108	)		—			10,686,932
Cloud Computing		8,550,361		—		—			—			11,343			—			8,561,704
Consumer Electronics		3,752,749		—		—			—			(2,815,612	)		—			937,137
Equipment Leasing		3,975,600		—		—			—			(400	)		—			3,975,200
Intellectual Property		6,137,917		—		(1,112,885	)		—			1,034,709			—			6,059,741
Medical Devices		24,511,642		—		—			—			(13,031,965	)		—			11,479,677
Mobile Computing		7,365,796		—		—			—			4,652,767			—			12,018,563
Semiconductor Equipment		21,883,997		12,284,175		(6,734,146	)		5,084,145			7,548,873			—			40,067,044
Asset Derivatives
Equity Contracts		5,420,042		—		—			—			6,609,282			—			12,029,324

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INVESTMENTS AT FAIR VALUE USING SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)	BALANCE AS OF 12/31/16		NET PURCHASES/ CONVERSION		NET SALES/ CONVERSION			NET REALIZED GAINS /(LOSSES)		NET UNREALIZED APPRECIATION (DEPRECIATION) (1)			TRANSFERS IN (OUT) OF LEVEL 3			BALANCE AS OF 12/31/17
Convertible Notes
Advanced Materials	$	—	$	4,595,485	$	(1,850,000	)	$	—	$	—		$	—		$	2,745,485
Advertising Technology		559,360		—		(1,118,720	)		559,360		—			—			—
Aerospace		71,208		405,000		(476,208	)		—		—			—			—
Automotive		—		200,000		(200,000	)		—		—			—			—
Consumer Electronics		2,913,612		2,550,000		(1,500,000	)		—		(1,962,939	)		—			2,000,673
Medical Devices		4,000,000		5,500,000		—			—		—			—			9,500,000
Semiconductor Equipment		—		2,000,000		—			—		—			—			2,000,000
Water Purification		50,000		—		—			—		(50,000	)		—			—
Total	$	137,264,865	$	30,150,937	$	(26,192,030	)	$	6,394,485	$	17,536,712		$	(10,294,295	)	$	154,860,674

(1)  The net change in unrealized depreciation from Level 3 instruments held as of December 31, 2017, was $17,425,619.

The below chart represents quantitative disclosure about significant unobservable inputs for Level 3 fair value measurements for 2018:

	FAIR VALUE AT 12/31/18	VALUATION TECHNIQUES (1)	UNOBSERVABLE INPUTS	RANGE (WEIGHTED AVG.)
Direct venture capital investments: Advanced Materials	$14.2M	Market Comparable Companies Prior Transaction Analysis Probability-Weighted Expected Return Option Pricing Model	EBITDA Multiple Years to Maturity Volatility Risk-Free Rate Going Concern Probability Discount for Lack of Marketability	7.8% - 8.7% (8.3%) 5 years (5 years) 50.0% (50.0%) 2.51% 43% 0.0% - 22.7% (1.2%)
Direct venture capital investments: Aerospace	$6.7M	Prior Transaction Analysis Option Pricing Model	Years to Maturity Volatility Risk-Free Rate	5 years (5 years) 60.0% (60.0%) 2.51% (2.51%)
Direct venture capital investments: Automotive	$9.3M	Prior Transaction Analysis Option Pricing Model	Years to Maturity Volatility Risk-Free Rate	3 years (3 years) 55.0% (55.0%) 2.46% (2.46%)

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continued	FAIR VALUE AT 12/31/18	VALUATION TECHNIQUES (1)	UNOBSERVABLE INPUTS	RANGE (WEIGHTED AVG.)
Direct venture capital investments: Consumer Electronics	$1.3M	Market Comparable Companies Probability-Weighted Expected Return Invested Capital (Cost) Option Pricing Model	Revenue Multiple Going Concern Probability Years to Maturity Volatility Risk-Free Rate	0.9x - 1.6x (1.3x) 30% (30%) 1 year (1 year) 70.0% (70.0%) 2.63% (2.63%)
Direct venture capital investments: Equipment Leasing	$3.5M	Prior Transaction Analysis Option Pricing Model Discounted Cash Flow	Years to Maturity Volatility Risk-Free Rate Weighted Average Cost of Capital Perpetual Growth Rate	5 years (5 years) 50.0% (50.0%) 2.51% (2.51%) 20% (20%) 3% (3%)
Direct venture capital investments: Intellectual Property	$3.2M	Prior Transaction Analysis Discounted Cash Flow Option Pricing Model	Years to Maturity Volatility Risk-Free Rate Discount for Lack of Marketability Adjustment for Market Movement Weighted Average Cost of Capital Long Term Growth Rate High Growth Rate	5 years (5 years) 55.0% (55.0%) 2.51% (2.51%) 0.0% - 24.3% (0.1%) -61.5% (-61.5%) 100% (100%) 3% (3%) 98.3% (98.3%)
Direct venture capital investments: Medical Devices	$29.5M	Market Comparable Companies Option Pricing Model	Revenue Multiple Years to Maturity Volatility Risk-Free Rate	3.1x - 3.5x (3.2x) 4 years (4 years) 50.0% (50.0%) 2.49% (2.49%)
Direct venture capital investments: Mobile Computing	$19.1M	Prior Transaction Analysis	Years to Maturity Volatility Discount for Lack of Marketability	0.5 years (0.5 years) 65.0% (65.0%) 10.3% (10.3%)
Direct venture capital investments: Semiconductor Equipment	$118.4M	Prior Transaction Analysis Option Pricing Model	Years to Maturity Volatility Risk-Free Rate Discount for Lack of Marketability	0 years - 5 years (1.4 years) 40.0% - 50.0% (47.2%) 2.51% (2.51%) 0.0% - 15.2% (12.0%)

(1)  As of December 31, 2017, the Fund used Market Comparable Companies, Probability-Weighted Expected Return, and Option Pricing Model approaches to value certain common stock and preferred stock investments. As of December 31, 2018, the Fund discontinued the use of these approaches in certain cases in which equity securities of the issuers had become publicly traded. As of December 31, 2018, the Fund also added a Discounted Cash Flow approach to the valuation of certain preferred stock and common stock investments in order to utilize multiple valuation approaches to provide additional indications of value.

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The below chart represents quantitative disclosure about significant unobservable inputs for Level 3 fair value measurements for 2017:

	FAIR VALUE AT 12/31/17	VALUATION TECHNIQUES	UNOBSERVABLE INPUTS	RANGE (WEIGHTED AVG.)
Direct venture capital investments: Advanced Materials	$24.3M	Market Comparable Companies Prior Transaction Analysis Probability-Weighted Expected Return Option Pricing Model	EBITDA Multiple Years to Maturity Volatility Risk-Free Rate Going Concern Probability Discount for Lack of Marketability	9.7x - 10.7x (10.1x) 5 years (5 years) 50.0% (50%) 2.20% (2.20%) 90% - 100% (90%) 22.7% (22.7%)
Direct venture capital investments: Aerospace	$2.1M	Prior Transaction Analysis Option Pricing Model	Years to Maturity Volatility Risk-Free Rate	5 years (5 years) 60.0% (60.0%) 2.20% (2.20%)
Direct venture capital investments: Automotive	$10.7M	Prior Transaction Analysis Option Pricing Model	Years to Maturity Volatility Risk-Free Rate	3 years (3 years) 55.0% (55.0%) 1.98% (1.98%)
Direct venture capital investments: Cloud Computing	$8.6M	Market Comparable Companies Option Pricing Model	Revenue Multiple Years to Maturity Volatility Risk-Free Rate	1.8x - 2.2x (2.0x) 2 years (2 years) 40.0% (40.0%) 1.89% (1.89%)
Direct venture capital investments: Consumer Electronics	$14.6M	Market Comparable Companies Probability-Weighted Expected Return Invested Capital(Cost) Option Pricing Model	Revenue Mulitple Going Concern Probability Years to Maturity Volatility Risk-Free Rate Discount for Lack of Marketability	0.9x - 1.8x (1.4x) 30% - 100% (64%) 1 year - 5 years (3.0 years) 60.0% - 70.0% (65.1%) 1.75% - 2.2% (1.97%) 0.0% - 10.0% (8.0%)
Direct venture capital investments: Equipment Leasing	$4.0M	Prior Transaction Analysis Option Pricing Model	Years to Maturity Volatility Risk-Free Rate	5 years (5 years) 50.0% (50.0%) 2.2% (2.2%)
Direct venture capital investments: Intellectual Property	$6.1M	Prior Transaction Analysis Option Pricing Model	Years to Maturity Volatility Risk-Free Rate Discount for Lack of Marketability Adjustment for Market Movement	5 years (5 years) 55% (55%) 2.2% (2.2%) 24.3% (24.3%) (-21.2%)

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continued	FAIR VALUE AT 12/31/17	VALUATION TECHNIQUES	UNOBSERVABLE INPUTS	RANGE (WEIGHTED AVG.)
Direct venture capital investments: Medical Devices	$21.0M	Market Comparable Companies Option Pricing Model	Revenue Multiple Years to Maturity Volatility Risk-Free Rate	2.6x - 3.0x (2.8x) 4 years (4 years) 50.0% (50.0%) 2.09% (2.09%)
Direct venture capital investments: Mobile Computing	$12.0M	Prior Transaction Analysis Probability-Weighted Expected Return Option Pricing Model	Years to Maturity Volatility Risk-Free Rate Transaction Completion Probability	2 years (2 years) 60.0% (60.0%) 1.89% (1.89%) 50.0% (50.0%)
Direct venture capital investments: Semiconductor Equipment	$51.5M	Market Comparable Companies Prior Transaction Analysis Option Pricing Model	Revenue Multiple Years to Maturity Volatility Risk-Free Rate Discount for Lack of Marketability	2.9x - 3.4x (3.2x) 2 years - 5 years (3.0 years) 40.0% - 60.0% (52.5%) 1.89% - 2.20% (1.99%) 0.0% - 15.5% (2.8%)

NOTE 7. FEDERAL INCOME TAXES

Beginning on June 30, 2018, we were no longer able to qualify as a RIC under Subchapter M of the Code. This change in tax status resulted from the increase in the value of a single holding, Pivotal Systems Corp., which meant that we were no longer able to satisfy the diversification requirements for qualification as a RIC. As a result of this change, we will be 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 December 31, 2018.

	FEDERAL INCOME TAX COST:
Gross unrealized appreciation	$	99,485,489
Gross unrealized depreciation		(56,909,257	)
Net unrealized appreciation	$	42,576,232
Federal income tax cost, Investments	$	167,277,338

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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 was reduced, and continued to be completely offset, by the deferred tax liability. The Company is currently using an estimated tax rate of 21% for Federal and 6.98% for state taxes.

The Company's income tax provision consists of the following as of December 31, 2018

Deferred tax expense (benefit)

Federal	5,922,998
State	1,969,708
Total deferred tax expense	7,892,706

The reconciliation between the federal statutory income tax rate of 21% and the effective tax rate on net investment income (loss) and realized and unrealized gain (loss) follows:

	AMOUNT		RATE
Application of statutory income tax rate		5,922,998		21.00	%
State income taxes net of federal benefit		1,969,708		6.98	%
Total income tax expense		7,892,706		27.98	%

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, 2018 are as follows:

	AMOUNT
Deferred tax assets:
Net operating loss carryforward (tax basis)		505,388
Capital loss carryforward (tax basis)		1,397,685
Incentive fee adjustment (tax basis)		2,118,584
Total deferred tax assets		4,021,657
Deferred tax liabilities
Net unrealized gains on investment securities (tax basis)		(11,914,362	)
Total net deferred tax liability		(7,892,705	)

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 Standard Codification ("ASC") 740, Income Taxes (ASC 740), it is more-likely-than-not that some portion or all of the deferred tax

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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 generate the necessary appropriate character of income within the carryforward periods to realize its 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, 2018, 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, 2018, the Company had net operating loss carryforwards for federal and state of income tax purposes of $1,806,014, which may be carried forward indefinitely:

As of December 31, 2018, 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
Total		4,994,658

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NOTE 8. INVESTMENT TRANSACTIONS

Investment transactions (excluding short-term investments) were as follows for the year ended December 31, 2018.

PURCHASES AND SALES

Purchases of investment securities	$	83,779,495
Proceeds from sales and maturities of investment securities	$	85,549,002

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 OFFER. 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.

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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, 2017, through December 31, 2018, is noted below:

AFFILIATE/ CONTROLLED INVESTMENTS*	VALUE AT 12/31/17		PURCHASES/ MERGER		INTEREST		SALES/ MATURITY/ EXPIRATION		REALIZED GAIN (LOSS)		CHANGE IN APPRECIATION/ DEPRECIATION			VALUE 12/31/18		SHARES HELD AT 12/31/18
EQX Capital, Inc. Common Stock*	$	44,810	$	—	$	—	$	—	$	—	$	(8,340	)	$	36,470		100,000
EQX, Inc. Preferred Stock - Series A*		3,975,200		—		—		—		—		(483,600	)		3,491,600		4,000,000
Hera Systems, Inc. Series A Preferred*		154,799		—		—		—		—		53,178			207,977		3,642,324
Hera Systems, Inc. Convertible Note*		—		500,000		48,194		—		—		—			500,000		500,000
Hera Systems, Inc. Convertible Note*		—		500,000		29,861		—		—		—			500,000		500,000
Hera Systems, Inc. Series B Preferred*		453,315		3,500,000		—		—		—		(2,721,950	)		1,231,365		5,539,203
Hera Systems, Inc. Series B Warrants*		155,540		—		—		—		—		—			155,540		700,000
Hera Systems, Inc. Series B Warrants*		1,380,956		—		—		—		—		—			1,380,956		6,214,922
Hera Systems, Inc. Series B Warrants*		—		—		—		—		—		2,721,950			2,721,950		12,250,000
IntraOp Medical Corp. Series C Preferred*		11,479,677		—		—		—		—		2,085,651			13,565,328		26,856,187

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AFFILIATE/ CONTROLLED INVESTMENTS*	VALUE AT 12/31/17		PURCHASES/ MERGER		INTEREST		SALES/ MATURITY/ EXPIRATION			REALIZED GAIN (LOSS)		CHANGE IN APPRECIATION/ DEPRECIATION		VALUE 12/31/18		SHARES HELD AT 12/31/18
IntraOp Medical Corp. Convertible Note*	$	1,000,000	$	—	$	244,142	$	(1,000,000	)	$	—	$	—	$	—		—
IntraOp Medical Corp. Convertible Note*		1,000,000		—		163,253		(1,000,000	)		—		—		—		—
IntraOp Medical Corp. Convertible Note*		1,500,000		—		233,784		(1,500,000	)		—		—		—		—
IntraOp Medical Corp. Convertible Note*		1,000,000		—		160,603		(1,000,000	)		—		—		—		—
IntraOp Medical Corp. Convertible Note*		—		2,000,000		235,068		(2,000,000	)		—		—		—		—
IntraOp Medical Corp. Convertible Note*		—		1,500,000		67,192		(1,500,000	)		—		—		—		—
IntraOp Medical Corp. Convertible Note*		—		1,000,000		7,397		(1,000,000	)		—		—		—		—
IntraOp Medical Corp. Term Note*		3,000,000		—		240,000		—			—		—		3,000,000		3,000,000

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AFFILIATE/ CONTROLLED INVESTMENTS*	VALUE AT 12/31/17		PURCHASES/ MERGER		INTEREST		SALES/ MATURITY/ EXPIRATION			REALIZED GAIN (LOSS)			CHANGE IN APPRECIATION/ DEPRECIATION			VALUE 12/31/18		SHARES HELD AT 12/31/18
IntraOp Medical Corp. Term Note*	$	2,000,000	$	—	$	160,000	$	—		$	—		$	—		$	2,000,000		2,000,000
IntraOp Medical Corp. Convertible Note*		—		10,961,129		4,505		—			—			—			10,961,129		10,961,129
Phunware, Inc. Common Stock		—		9,999,997		—		—			(2	)		9,121,155			19,121,150		1,495,113
Phunware, Inc. Preferred Stock - Series E		12,018,563		—		—		(9,999,997	)		—			(2,018,566	)		—		—
Pivotal Systems, Series A Preferred*		8,453,614		—		—		(6,000,047	)		—			(2,453,567	)		—		—
Pivotal Systems, Series B Preferred*		9,270,308		—		—		(6,321,483	)		—			(2,948,825	)		—		—
Pivotal Systems, Series C Preferred*		2,560,254		—		—		(2,657,862	)		—			97,608			—		—
Pivotal Systems, Series D Preferred*		5,009,720		—		—		(3,975,801	)		—			(1,033,919	)		—		—
Pivotal Systems, Series D Warrants*		618,392		—		—		—			—			(618,392	)		—		—
Pivotal Systems, Common Stocks Warrants - Class B*		8,741,172		—		—		—			—			(8,741,172	)		—		—
Pivotal Systems Common Stock*		—		21,869,876		—		(2,914,684	)		491,004			34,379,782			53,825,978		53,758,441

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AFFILIATE/ CONTROLLED INVESTMENTS*	VALUE AT 12/31/17		PURCHASES/ MERGER		INTEREST		SALES/ MATURITY/ EXPIRATION			REALIZED GAIN (LOSS)			CHANGE IN APPRECIATION/ DEPRECIATION			VALUE 12/31/18		SHARES HELD AT 12/31/18
QMAT, Preferred Stock Series A*	$	17,394,341	$	24,290,124	$	—	$	(24,290,124	)	$	(6,319,935	)	$	(6,461,857	)	$	4,612,549		16,000,240
QMAT, Preferred Stock Series B*		2,132,600		—		—		—			—			(538,600	)		1,594,000		2,000,000
QMAT, Series A Warrant*		1,086,600		—		—		—			—			(974,600	)		112,000		2,000,000
QMAT, Preferred Stock Warrants - Series C*		—		—		—		—			—			81,381			81,381		4,932,208
QMAT, Convertible Note*		—		350,000		3,474		(350,000	)		—			—			—		—
QMAT, Convertible Note*		—		100,000		153		(100,000	)		—			—			—		—
QMAT, Convertible Note*		—		350,000		21,249		(350,000	)		—			—			—		—
QMAT, Convertible Note*		—		3,482,208		225,914		(3,482,208	)		—			—			—		—
QMAT, Convertible Note*		2,745,485		—		31,291		(2,745,485	)		—			—			—		—
QMAT, Convertible Note*		—		7,002,600		27,627		—			—			—			7,002,600		7,002,600
QMAT, Convertible Note*		—		1,000,000		47,781		(1,000,000	)		—			—			—		—
QMAT, Convertible Note*		—		100,000		3,090		(100,000	)		—			—			—		—
QMAT, Convertible Note*		—		100,000		2,696		(100,000	)		—			—			—		—
QMAT, Convertible Note*		—		200,000		4,690		(200,000	)		—			—			—		—
QMAT, Convertible Note*		—		300,000		6,115		(300,000	)		—			—			—		—

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AFFILIATE/ CONTROLLED INVESTMENTS*	VALUE AT 12/31/17		PURCHASES/ MERGER		INTEREST		SALES/ MATURITY/ EXPIRATION			REALIZED GAIN (LOSS)			CHANGE IN APPRECIATION/ DEPRECIATION			VALUE 12/31/18		SHARES HELD AT 12/31/18
QMAT, Convertible Note*	$	—	$	350,000	$	4,910	$	(350,000	)	$	—		$	—		$	—		—
QMAT, Convertible Note*		—		400,000		3,945		(400,000	)		—			—			—		—
Revasum, Preferred Stock, Series B*		2,550,033		—		—		(2,550,033	)		—			—			—		—
Revasum, Term Note*		1,000,000		—		30,383		(1,000,000	)		—			—			—		—
Revasum, Common Stock*		29,908		21,071,905		—		(3,250,002	)		715,002			40,041,788			58,608,601		53,834,340
Revasum, Common Stock Warrants*		—		500,000		—		(500,000	)		—			—			—		—
Revasum, Convertible Note*		—		1,846,397		30,036		(1,846,397	)		—			—			—		—
Revasum, Convertible Note*		—		365,783		4,590		(365,783	)		—			—			—		—
Revasum, Preferred Stock - Series Seed*		8,966,760		6,725,070		—		(14,000,140	)		(9,075	)		(1,682,615	)		—		—
Revasum, Preferred Stock Series A*		2,256,355		—		—		(1,999,996	)		—			(256,359	)		—		—
Silicon Genesis Corp., Common Stock *		16,871		—		—		—			—			(12,354	)		4,517		921,892
Silicon Genesis Corp., Common Warrants*		357		—		—		—			—			(273	)		84		37,982
Silicon Genesis Corp., Common Warrants*		11,000		—		—		—			—			(9,000	)		2,000		5,000,000

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AFFILIATE/ CONTROLLED INVESTMENTS*	VALUE AT 12/31/17		PURCHASES/ MERGER		INTEREST		SALES/ MATURITY/ EXPIRATION			REALIZED GAIN (LOSS)			CHANGE IN APPRECIATION/ DEPRECIATION			VALUE 12/31/18		SHARES HELD AT 12/31/18
Silicon Genesis Corp., Common Warrants*	$	6,600	$	—	$	—	$	—		$	—		$	(5,400	)	$	1,200		3,000,000
Silicon Genesis Corp., Series 1-C Preferred*		74,258		—		—		—			—			(48,795	)		25,463		82,914
Silicon Genesis Corp., Series 1-D Preferred*		205,646		—		—		—			—			(136,728	)		68,918		850,830
Silicon Genesis Corp., Series 1-E Preferred*		2,063,310		—		—		(87,402	)		—			(742,030	)		1,233,878		5,704,480
Silicon Genesis Corp., Series 1-F Preferred*		456,318		—		—		(19,285	)		—			(166,217	)		270,816		912,453
Silicon Genesis Corp., Series 1-G Preferred*		3,023,658		1,658,300		—		(1,740,736	)		(620,377	)		(877,315	)		1,443,530		48,370,793
Silicon Genesis Corp., Series 1-H Preferred*		236,551		—		—		(9,607	)		—			(89,605	)		137,339		837,942
SVXR, Inc. Convertible Note		1,000,000		1,000,000		54,521		(2,000,000	)		—			—			—		—
SVXR, Inc., Preferred Stock Series A		1,000,000		3,082,192		—		—			—			841,014			4,923,206		8,219,454
SVXR, Inc. Convertible Note		—		1,000,000		24,658		(1,000,000	)		—			—			—		—
Telepathy Investors, Inc. Convertible Note*		302,140		—		254,793		—			—			(106,440	)		195,700		2,000,000

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AFFILIATE/ CONTROLLED INVESTMENTS*	VALUE AT 12/31/17		PURCHASES/ MERGER		INTEREST		SALES/ MATURITY/ EXPIRATION		REALIZED GAIN (LOSS)			CHANGE IN APPRECIATION/ DEPRECIATION			VALUE 12/31/18		SHARES HELD AT 12/31/18
Telepathy Investors, Inc. Convertible Note*	$	45,321	$	—	$	30,417	$	—	$	—		$	(15,966	)	$	29,355		300,000
Telepathy Investors, Inc. Convertible Note*		22,661		—		17,377		—		—			(7,983	)		14,678		150,000
Telepathy Investors, Inc. Convertible Note*		75,535		—		55,286		—		—			(26,610	)		48,925		500,000
Telepathy Investors, Inc. Convertible Note*		45,321		—		36,056		—		—			(15,966	)		29,355		300,000
Telepathy Investors, Inc. Convertible Note*		75,535		—		58,858		—		—			(26,610	)		48,925		500,000
Telepathy Investors, Inc. Convertible Note*		—		200,000		6,356		—		—			(180,430	)		19,570		200,000
Telepathy Investors, Inc. Series A Preferred*		937,137		—		—		—		—			(9,143	)		927,994		15,238,000
UCT Coatings, Inc. Common Stock		922,050		—		—		—		—			(173,100	)		748,950		1,500,000
UCT Coatings, Inc. Common Stock Warrants		4		—		—		—		(67	)		63			—		—
Vufine, Inc., Convertible Note*		1,229,280		—		180,000		—		—			(1,217,754	)		11,526		1,500,000

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AFFILIATE/ CONTROLLED INVESTMENTS*	VALUE AT 12/31/17		PURCHASES/ MERGER		INTEREST		SALES/ MATURITY/ EXPIRATION			REALIZED GAIN (LOSS)			CHANGE IN APPRECIATION/ DEPRECIATION			VALUE 12/31/18		SHARES HELD AT 12/31/18
Vufine, Inc., Convertible Note*	$	204,880	$	—	$	30,000	$	—		$	—		$	(202,959	)	$	1,921		250,000
Vufine, Inc. Convertible Note*		—		300,000		19,332		—			—			(297,695	)		2,305		300,000
Vufine, Inc. Convertible Note*		—		100,000		3,616		—			—			(99,232	)		768		100,000
Vufine, Inc. Convertible Note*		—		200,000		4,077		—			—			(198,463	)		1,537		200,000
Vufine, Inc., Convertible Note*		—		350,000		38,548		—			—			(347,311	)		2,689		350,000
Vufine, Inc., Common Stock*		—		—		—		—			—			—			—		750,000
Vufine, Inc., Series A Preferred Stock*		—		—		—		—			—			—			—		22,500,000
Wrightspeed, Inc., Series C Preferred Stock		5,704,296		368,088		—		(368,088	)		(4,915,008	)		(294,485	)		494,803		2,267,659
Wrightspeed, Inc., Series D Preferred Stock		3,161,018		—		—		—			—			(2,850,212	)		310,806		1,100,978
Wrightspeed, Inc., Series E Preferred Stock		1,350,323		—		—		—			—			(1,213,591	)		136,732		450,814
Wrightspeed, Inc., Series F Preferred Stock		471,295		—		—		—			—			(429,951	)		41,344		90,707
Wrightspeed, Inc. Series F Warrants		28,703		—		—		—			—			(28,674	)		29		18,141
Wrightspeed, Inc. Convertible Note		—		3,700,000		302,167		—			—			(3,598,213	)		101,787		3,700,000
Wrightspeed, Inc. Convertible Note		—		2,000,000		129,333		—			—			(1,944,980	)		55,020		2,000,000

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AFFILIATE/ CONTROLLED INVESTMENTS*	VALUE AT 12/31/17		PURCHASES/ MERGER		INTEREST		SALES/ MATURITY/ EXPIRATION			REALIZED GAIN (LOSS)		CHANGE IN APPRECIATION/ DEPRECIATION			VALUE 12/31/18		SHARES HELD AT 12/31/18
Wrightspeed, Inc. Convertible Note	$	—	$	3,000,000	$	144,000	$	—		$	—	$	(2,917,470	)	$	82,530		3,000,000
Wrightspeed Convertible Note		—		250,000		6,822		(250,000	)		—		—			—		—
Wrightspeed, Inc. Convertible Note		—		100,000		33		—			—		(97,249	)		2,751		100,000
Wrightspeed, Inc. Convertible Note		—		300,000		2,170		(300,000	)		—		—			—		—
Wrightspeed, Inc. Convertible Note		—		150,000		247		(150,000	)		—		—			—		—
Wrightspeed, Inc. Preferred Stock Warrants - Series F		—		—		—		—			—		90,980			90,980		200,000
Wrightspeed, Inc. Preferred Stock Warrants - Series F		—		—		—		—			—		224			224		200,000
Wrightspeed, Inc. Preferred Stock Warrants - Series F		—		—		—		—			—		22			22		13,606
Wrightspeed, Inc. Preferred Stock Warrants - Series F		—		—		—		—			—		11			11		6,803
Wrightspeed, Inc. Preferred Stock Warrants - Series F		—		—		—		—			—		3,366,260			3,366,260		7,400,000

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AFFILIATE/ CONTROLLED INVESTMENTS*	VALUE AT 12/31/17		PURCHASES/ MERGER		INTEREST		SALES/ MATURITY/ EXPIRATION		REALIZED GAIN (LOSS)			CHANGE IN APPRECIATION/ DEPRECIATION		VALUE 12/31/18		SHARES HELD AT 12/31/18
Wrightspeed, Inc. Preferred Stock Warrants - Series F	$	—	$	—	$	—	$	—	$	—		$	1,819,600	$	1,819,600		4,000,000
Wrightspeed, Inc. Preferred Stock Warrants - Series F		—		—		—		—		—			2,729,400		2,729,400		6,000,000
Wrightspeed, Inc. Preferred Stock Warrants - Series F		—		—		—		—		—			8,288		8,288		7,400,000
Wrightspeed, Inc. Preferred Stock Warrants - Series F		—		—		—		—		—			4,480		4,480		4,000,000
Wrightspeed, Inc. Preferred Stock Warrants - Series F		—		—		—		—		—			6,720		6,720		6,000,000
Wrightspeed, Inc. Preferred Stock Warrants - Series F		—		—		—		—		—			18		18		11,338
Total Affiliates and Controlled Investments	$	134,648,470			$	3,440,610			$	(10,658,458	)	$	48,119,007	$	204,157,528
Total Affiliates	$	24,656,252			$	663,951			$	(4,915,077	)	$	2,421,744	$	34,045,111
Total Controlled Investments	$	109,992,218			$	2,776,659			$	(5,743,381	)	$	45,697,263	$	170,112,417

*  Controlled investments.

As of December 31, 2018, Kevin Landis represented the Company and sat on the board of directors of Hera Systems, Inc.; IntraOp Medical, Inc.; Pivotal Systems, Inc.; QMAT, Inc.; Revasum, Inc.; Silicon Genesis Corp.; Telepathy Investors, Inc.;

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Vufine, Inc.; 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.

Unconsolidated Significant Subsidiaries

Our investments are generally in small companies in a variety of industries. In accordance with Rules 3-09 and 4-08(g) of Regulation S-X ("Rule 3-09" and "Rule 4-08(g)," respectively), we must determine which of our unconsolidated controlled portfolio companies are considered "significant subsidiaries," if any. In evaluating these investments, there are three tests utilized to determine if any of our controlled investments are considered significant subsidiaries: the investment test, the asset test, and the income test. Rule 3-09 requires separate audited financial statements of an unconsolidated majority-owned subsidiary in an annual report if any of the three tests exceeds 20%. Rule 4-08(g) requires summarized financial information in an annual report if any of the three tests exceeds 10% and summarized financial information in a quarterly report if any of the three tests exceeds 20%.

As of December 31, 2018, our investment in Pivotal Systems Corp. ("Pivotal") and Revasum, Inc. ("Revasum") exceeded the 20% threshold in at least one of the tests under Rule 3-09. Accordingly, we are attaching the audited financial statements of Pivotal and Revasum to Form 10-K.

As of December 31, 2018, our investment in IntraOp Medical Corp. exceeded the 10% threshold in at least one of the three tests under Rule 4-08(g). Accordingly, summarized financial information is presented below for the unconsolidated significant subsidiary.

INTRAOP MEDICAL CORP.

BALANCE SHEET DATA AS OF:	12/31/18			12/31/17
Total Current Assets		5,923,004			6,577,186
Total Non-Current Assets		12,036,870			12,028,987
Total Current Liabilities		1,915,698			2,156,406
Total Non-Current Liabilities		18,031,273			11,105,575
Non-controlling interest		-			-
INCOME STATEMENT DATA FOR THE YEARS ENDED:	12/31/18			12/31/17			12/31/16
Revenue		5,060,554			4,943,909			7,885,977
Gross Profit		2,016,814			2,617,202			3,728,062
Income/(loss) from operations		(7,259,972	)		(7,029,910	)		(6,651,640	)
Total net income/(loss) including net income/(loss) attributable to non-controlling interest		(7,292,016	)		(7,043,169	)		(6,700,567	)
Net Income/(loss) attributable to non-controlling interest		-			-			-

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A summary of the Company's investments in affiliates and controlled investments for the period from December 31, 2016, through December 31, 2017, is noted below:

AFFILIATE/ CONTROLLED INVESTMENT*	VALUE AT 12/31/16		PURCHASES/ MERGER		INTEREST		SALES/ MATURITY/ EXPIRATION		REALIZED GAIN (LOSS)		CHANGE IN APPRECIATION/ (DEPRECIATION)			VALUE 12/31/17		SHARES HELD AT 12/31/17
EQX, Inc. Common Stock*	$	44,430	$	-	$	-	$	-	$	-	$	380		$	44,810		100,000
EQX, Inc. Preferred Stock - Series A*		3,975,600		-		-		-		-		(400	)		3,975,200		4,000,000
Hera Systems, Inc. Term Note*		41,208		-		70		41,208		-		-			-		-
Hera Systems, Inc. Series A Preferred*		445,456		-		-		-		-		(290,657	)		154,799		3,642,324
Hera Systems, Inc. Convertible Note*		30,000		-		1,080		30,000		-		-			-		-
Hera Systems, Inc. Series B Preferred*		-		1,587,102		-		-		-		(1,133,787	)		453,315		2,039,203
Hera Systems, Inc. Series B Warrants*		-		-		-		-		-		155,540			155,540		700,000
Hera Systems, Inc. Series B Warrants*		-		-		-		-		-		1,380,956			1,380,956		6,214,922
IntraOp Medical Corp. Series C Preferred*		24,511,642		-		-		-		-		(13,031,965	)		11,479,677		26,856,187
IntraOp Medical Corp. Convertible Note*		1,000,000		-		258,935		-		-		-			1,000,000		1,000,000
IntraOp Medical Corp. Convertible Note*		-		1,000,000		88,356		-		-		-			1,000,000		1,000,000
IntraOp Medical Corp. Convertible Note*		-		1,500,000		58,562		-		-		-			1,500,000		1,500,000
IntraOp Medical Corp. Convertible Note*		-		1,000,000		70,685		-		-		-			1,000,000		1,000,000
IntraOp Medical Corp. Term Note*		3,000,000		-		240,000		-		-		-			3,000,000		3,000,000

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AFFILIATE/ CONTROLLED INVESTMENT*	VALUE AT 12/31/16		PURCHASES/ MERGER		INTEREST		SALES/ MATURITY/ EXPIRATION		REALIZED GAIN (LOSS)		CHANGE IN APPRECIATION/ (DEPRECIATION)		VALUE 12/31/17		SHARES HELD AT 12/31/17
IntraOp Medical Corp. Term Note*	$	-	$	2,000,000	$	142,466	$	-	$	-	$	-	$	2,000,000		2,000,000
Phunware, Inc., Preferred Stock Series E		7,365,796		-		-		-		-		4,652,767		12,018,563		3,257,328
Pivotal Systems, Series A Preferred*		6,370,532		-		-		-		-		2,083,082		8,453,614		11,914,217
Pivotal Systems, Series B Preferred*		6,985,982		-		-		-		-		2,284,326		9,270,308		13,065,236
Pivotal Systems, Series C Preferred*		2,273,159		-		-		-		-		287,095		2,560,254		2,291,260
Pivotal Systems, Series D Preferred*		4,060,924		-		-		-		-		948,796		5,009,720		6,237,978
Pivotal Systems, Series D Warrants*		284,036		-		-		-		-		334,356		618,392		4,158,654
Pivotal Systems, Common Stocks Warrants - Class B*		4,743,286		-		-		-		-		3,997,886		8,741,172		18,180,475
QMAT, Preferred Stock Series A*		10,724,961		-		-		-		-		6,669,380		17,394,341		16,000,240
QMAT, Preferred Stock Series B*		2,000,000		-		-		-		-		132,600		2,132,600		2,000,000
QMAT, Series A Warrant*		376,400		-		-		-		-		710,200		1,086,600		2,000,000
QMAT, Convertible Note*		-		2,745,485		1,805		-		-		-		2,745,485		2,745,485
Revasum, Term Note*		-		1,000,000		41,667		-		-		-		1,000,000		1,000,000
Revasum, Common Stock*		7,524		-		-		-		-		22,384		29,908		10,000
Revasum, Preferred Stock - Series Seed*		2,193,400		6,734,145		-		6,734,145		5,084,145		1,689,215		8,966,760		2,200,000
Revasum, Preferred Stock Series A*		-		1,999,996		-		-		-		256,359		2,256,355		441,998
Revasum, Preferred Stock Series B*		-		2,550,033		-		-		-		-		2,550,033		313,719

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AFFILIATE/ CONTROLLED INVESTMENT*	VALUE AT 12/31/16		PURCHASES/ MERGER		INTEREST		SALES/ MATURITY/ EXPIRATION		REALIZED GAIN (LOSS)		CHANGE IN APPRECIATION/ (DEPRECIATION)			VALUE 12/31/17		SHARES HELD AT 12/31/17
Silicon Genesis Corp., Common*	$	14,750	$	-	$	-	$	-	$	-	$	2,121		$	16,871		921,892
Silicon Genesis Corp., Common Warrants*		319		-		-		-		-		38			357		37,982
Silicon Genesis Corp., Common Warrants*		10,000		-		-		-		-		1,000			11,000		5,000,000
Silicon Genesis Corp., Common Warrants*		6,000		-		-		-		-		600			6,600		3,000,000
Silicon Genesis Corp., Series 1-C Preferred*		70,444		-		-		-		-		3,814			74,258		82,914
Silicon Genesis Corp., Series 1-D Preferred*		195,606		-		-		-		-		10,040			205,646		850,830
Silicon Genesis Corp., Series 1-E Preferred*		2,134,616		-		-		486,730		-		415,424			2,063,310		5,704,480
Silicon Genesis Corp., Series 1-F Preferred*		464,165		-		-		107,386		-		99,539			456,318		912,453
Silicon Genesis Corp., Series 1-G Preferred*		3,032,848		-		-		459,073		-		449,883			3,023,658		48,370,793
Silicon Genesis Corp., Series 1-H Preferred*		240,238		-		-		53,499		-		49,812			236,551		837,942
SVXR, Inc. Preferred Stock - Series A		-		1,000,000		-		-		-		-			1,000,000		2,013,491
SVXR, Inc., Convertible Note*		-		1,000,000		3,014		-		-		-			1,000,000		1,000,000
Telepathy Investors, Inc. Convertible Note*		1,109,340		-		237,933		-		-		(807,200	)		302,140		2,000,000

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AFFILIATE/ CONTROLLED INVESTMENT*	VALUE AT 12/31/16		PURCHASES/ MERGER		INTEREST		SALES/ MATURITY/ EXPIRATION		REALIZED GAIN (LOSS)			CHANGE IN APPRECIATION/ (DEPRECIATION)			VALUE 12/31/17		SHARES HELD AT 12/31/17
Telepathy Investors, Inc. Convertible Note*	$	83,201	$	-	$	15,797	$	-	$	-		$	(60,540	)	$	22,661		150,000
Telepathy Investors, Inc. Convertible Note*		277,335		-		50,260		-		-			(201,800	)		75,535		500,000
Telepathy Investors, Inc. Convertible Note*		166,401		-		32,777		-		-			(121,080	)		45,321		300,000
Telepathy Investors, Inc. Convertible Note*		-		300,000		20,250		-		-			(254,679	)		45,321		300,000
Telepathy Investors, Inc. Convertible Note*		277,335		-		53,507		-		-			(201,800	)		75,535		500,000
Telepathy Investors, Inc. Series A Preferred*		2,096,749		-		-		-		-			(1,159,612	)		937,137		15,238,000
UCT Coatings, Inc. Common Stock		394,200		-		-		-		-			527,850			922,050		1,500,000
UCT Coatings, Inc. Common Stock Warrants		1		-		-		-		-			3			4		2,283
Vufine, Inc., Series A Preferred Stock*		1,656,000		-		-		-		-			(1,656,000	)		-		22,500,000
Vufine, Inc., Convertible Note*		-		1,500,000		86,301		-		-			(270,720	)		1,229,280		1,500,000
Vufine, Inc., Common Stock*		14,325		-		-		-		-			(14,325	)		-		750,000
Vufine, Inc., Convertible Note*		1,000,000		-		31,726		1,000,000		-			-			-		-
Vufine, Inc., Convertible Note*		-		250,000		6,329		-		-			(45,120	)		204,880		250,000
Wrightspeed, Inc., Series C Preferred Stock		5,811,783		503,140		-		503,140		(26,040	)		(81,447	)		5,704,296		2,267,659

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AFFILIATE/ CONTROLLED INVESTMENT*	VALUE AT 12/31/16		PURCHASES/ MERGER		INTEREST		SALES/ MATURITY/ EXPIRATION		REALIZED GAIN (LOSS)			CHANGE IN APPRECIATION/ (DEPRECIATION)			VALUE 12/31/17		SHARES HELD AT 12/31/17
Wrightspeed, Inc., Series D Preferred Stock	$	3,221,792	$	-	$	-	$	-	$	-		$	(60,774	)	$	3,161,018		1,100,978
Wrightspeed, Inc., Series E Preferred Stock		1,376,470		-		-		-		-			(26,147	)		1,350,323		450,814
Wrightspeed, Inc., Series F Preferred Stock		-		499,994		-		-		-			(28,699	)		471,295		90,707
Wrightspeed, Inc. Series F Warrants		-		-		-		-		-			28,703			28,703		18,141
Total Affiliates and Controlled Investments	$	104,088,254			$	1,441,520			$	5,058,105		$	7,747,397		$	134,648,470
Total Affiliates	$	18,170,042			$	3,014			$	(26,040	)	$	5,012,256		$	24,656,252
Total Controlled Investments	$	85,918,212			$	1,438,506			$	5,084,145		$	2,735,141		$	109,992,218

*  Controlled investment.

As of December 31, 2016, Kevin Landis represents the Company and sits on the board of directors of Hera Systems, Inc.; IntraOp Medical, Inc.; Phunware, Inc.; Pivotal Systems, Inc.; QMAT, Inc.; Revasum, Inc.; Silicon Genesis Corp.; Telepathy Investors, Inc.; Vufine, Inc.; 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. Recent Accounting Pronouncements

New Rule Issuances—In August 2018, the Securities and Exchange Commission issued Final Rule Release No. 33 10532, Disclosure Update and Simplification, which in part amends certain financial statement disclosure requirements of Regulation S-X that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other Commission disclosure requirements, GAAP, or changes in the information environment. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. The amendments to Rule 6-04.17 of Regulation S-X (balance sheet) were amended to require presentation of the total, rather than the components of net assets, of distributable earnings on the balance sheet. Consistent with GAAP, funds will be required to disclose to distributable earnings. The amendments to Rule 6-09 of Regulation S-X (statement of changes in net assets) omit the requirement to separately state the sources of distributions paid as well as omit the requirement to parenthetically state the book basis amount of undistributed net investment income. Instead, consistent with GAAP, funds will be required to disclose the total amount of distributions paid, except that any tax return of capital must be separately disclosed. The requirements of the Final Rule Release are effective November 5, 2018 and the Fund's statement of Assets and Liabilities and the Statement of Changes in Net Assets for the current and prior reporting period have been modified accordingly.

93

Firsthand Technology Value Fund, Inc.

Notes to Financial Statements - continued

DECEMBER 31, 2018

New Accounting Pronouncements—In August 2018, the FASB issued Accounting Standards Update No. 2018-13 "Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement" ("ASU 2018-13"). ASU 2018-13 eliminates the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the timing of transfers between levels of the fair value hierarchy, and the valuation process for Level 3 fair value measurements. ASU 2018-13 does not eliminate the requirement to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements, and the changes in unrealized gains and losses for recurring Level 3 fair value measurements. ASU 2018-13 requires that information is provided about the measurement uncertainty of Level 3 fair value measurements as of the reporting date. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Management has evaluated the impact of this change in guidance, and due to the permissibility of early adoption, modified the Funds' fair value disclosures for the current reporting period

NOTE 12. SUBSEQUENT EVENTS

Managent 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 recognititon or disclosure in the financial statements.

94

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

Item 9A. CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

Our Chief Executive Officer and Chief Financial Officer performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of December 31, 2018, and, based on that evaluation, have concluded that the disclosure controls and procedures are effective.

REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Internal control over financial reporting is a process designed by, or under the supervision of, our principal executive and financial officer, or persons performing similar functions, and effected by our Board of Directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.

Our management evaluated as of December 31, 2018, the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2018. Our independent registered public accounting firm, Tait, Weller & Baker LLP, issued a report on the effectiveness of our internal control over financial reporting as of December 31, 2018, which appears on page 42 herein.

INHERENT LIMITATIONS OF EFFECTIVENESS OF CONTROLS

Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There have been no changes in our internal control over financial reporting that occurred during our fourth quarter ended December 31, 2018, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. OTHER INFORMATION

None

95

Part III

Item 10. DIRECTORS, EXECUTIVES OFFICERS AND CORPORATE GOVERNANCE

Information required by this item will be contained in the Company's proxy statement to be filed with the SEC, in connection with the Company's annual meeting of shareholders to be held in 2019 (the "2019 Proxy Statement"), which information is incorporated herein by reference.

The Company has adopted a code of ethics that applies to the Company's chief executive officer, a copy of which is posted on our website http://www.firsthandtvf.com.

Our CEO certifies the accuracy of the financial statements contained in our periodic reports, and so certified in this Form 10-K through the filing of Section 302 certifications as exhibits to this Form 10-K.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, to file with the Securities and Exchange Commission and the Nasdaq Stock Market reports of ownership of the Company's securities and changes in reported ownership. Officers, directors and greater than ten percent shareholders are required by SEC rules to furnish the Company with copies of all Section 16(a) reports they file.

Based solely on a review of the reports furnished to the Company, or written representations from reporting persons that all reportable transaction were reported, the Company believes that during the fiscal year ended December 31, 2018, the Company's officers, directors and greater than ten percent owners timely filed all reports they were required to file under Section 16(a).

Item 11. EXECUTIVE COMPENSATION

Information required by this item will be contained in the 2019 Proxy Statement, which information is incorporated herein by reference.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information required by this item will be contained in the 2019 Proxy Statement, which information is incorporated herein by reference.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information required by this item will be contained in the 2019 Proxy Statement, which information is incorporated herein by reference.

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information required by this item will be contained in the 2019 Proxy Statement, which information is incorporated herein by reference.

96

Part IV

Item 15. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES

1. Financial Statements

The following financial statements of the Company are filed as part of this report:

AUDITED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	41
Statement of Assets and Liabilities as of December 31, 2018	43
Schedule of Investments as of December 31, 2018	44
Statement of Operations as of December 31, 2018	55
Statement of Cash Flows as of December 31, 2018	56
Statement of Changes in Net Assets as of December 31, 2018	57
Financial Highlights	58
Notes to Financial Statements	60

97

3. Exhibits required to be filed by Item 601 of Regulation S-K.

Exhibit Number	Descriptions
3.1	Registrant’s Articles of Amendment and Restatement are incorporated by reference to Exhibit (a)(2) of Pre-Effective Amendment No. 1 to the Registrant’s Registration Statement on Form N-2 (File No. 333-168195) as filed with the Securities and Exchange Commission on September 24, 2010.
3.2	Certificate of Correction to Registrant’s Articles of Amendment and Restatement is incorporated by reference to Exhibit (a)(2) of the Registrant’s Registration Statement on Form N-2 (File No. 333-179606) as filed with the Securities and Exchange Commission on February 21, 2012.
3.3	Registrant’s Amended and Restated Bylaws are incorporated by reference to Exhibit 3.3 to the Registrant’s Form 10-K a filed with the Securities and Exchange Commission on March 16, 2018.
10.1	Registrant’s Dividend Reinvestment Plan is incorporated by reference to Exhibit (e) of Pre-Effective Amendment to the Registrant’s Registration Statement on Form N-2 (File No. 333-168195) as filed with the Securities and Exchange Commission on September 24, 2010.
10.2	Form of Investment Management Agreement between Registrant and SiVest Group, Inc. (now known as Firsthand Capital Management, Inc.) is incorporated by reference to Exhibit (g) of Pre-Effective Amendment to the Registrant’s Registration Statement on Form N-2 (File No. 333-168195) as filed with the Securities and Exchange Commission on September 24, 2010.
10.3	Form of Custodian Services Agreement between Registrant and PFPC Trust Company is incorporated by reference to Exhibit (j) of Pre-Effective Amendment to the Registrant’s Registration Statement on Form N-2 (File No. 333-168195) as filed with the Securities and Exchange Commission on September 24, 2010.
10.4	Form of Administration and Accounting Agreement between Registrant and BNY Mellon Investment Servicing (US), Inc. is incorporated by reference to Exhibit (k)(1) of Pre-Effective Amendment to the Registrant’s Registration Statement on Form N-2 (File No. 333-168195) as filed with the Securities and Exchange Commission on September 24, 2010.
10.4.1	Form of Amendment to Administration and Accounting Agreement between Registrant and BNY Mellon Investment Servicing (US), Inc.—filed herewith.
10.5	Notice of Assignment dated February 9, 2011 by PFPC Trust Company assigning Custodian Services Agreement is incorporated by reference to Exhibit (j)(2) of the Registrant’s Registration Statement on Form N-2 (File No. 333-179606) as filed with the Securities and Exchange Commission on February 21, 2012.
10.6	Form of Transfer Agency Services Agreement between Registrant and BNY Mellon Investment Servicing (US), Inc. is incorporated by reference to Exhibit (k)(2) of Pre-Effective Amendment to the Registrant’s Registration Statement on Form N-2 (File No. 333-168195) as filed with the Securities and Exchange Commission on September 24, 2010.
14.1	Registrant’s Code of Ethics for Principal Executive and Senior Financial Officers is incorporated by reference to Exhibit 14 to the Registrant’s Form 10-K as filed with the Securities and Exchange Commission on March 21, 2012.
14.2	Registrant’s Code of Ethics—filed herewith
24.1	Power of Attorney is incorporated by reference to Exhibit 24 to the Registrant’s Form 10-K as filed with the Securities and Exchange Commission on March 21, 2012.
31.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.—filed herewith
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.—filed herewith
99.1	Separate financial statements of Pivotal Systems Corp. filed pursuant to Rule 3-09 and 4-08(g) of regulation S-X—filed herewith
99.2	Separate financial statements of Revasum, Inc. filed pursuant to Rule 3-09 and 4-08(g) of regulation S-X—filed herewith

Item 16. FORM 10-K SUMMARY

None.

98

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		FIRSTHAND TECHNOLOGY VALUE FUND, INC.
Date: March 18, 2019
	By:
		Kevin Landis
		President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signatures	Title	Date
/s/ Kevin Landis	Chairman of the Board, Chief Executive Officer,	March 18, 2019
Kevin Landis	and Chief Financial Officer
*	Director	March 18, 2019
Greg Burglin
*	Director	March 18, 2019
Rodney Yee
*	Director	March 18, 2019
Kimun Lee

* Signed by Kevin Landis pursuant to powers of attorney.

Privacy Notice

FIRSTHAND TECHNOLOGY VALUE FUND, INC.

FACTS	WHAT DOES FIRSTHAND TECHNOLOGY VALUE FUND, INC. DO WITH YOUR PERSONAL INFORMATION?
Why?	Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.
What?	The types of personal information we collect and share depend on the product or service you have with us. This information can include:   Social Security number   Banking information   Account transactions   Retirement assets
How?	All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons Firsthand Capital management, Inc. chooses to share; and whether you can limit this sharing.

Reasons we can share your personal information	Does Firsthand Technology Value Fund, Inc. share?	Can you limit this sharing?
For our everyday business purposes—such as to process your transactions, maintain your account(s), respond to court orders and legal investigations	Yes	No
For our marketing purposes—to offer our products and services to you	No	N/A
For joint marketing with other financial companies	No	N/A
For our affiliates’ everyday business purposes—information about your transactions and experiences	No	N/A
For our affiliates’ everyday business purposes—information about your creditworthiness	No	N/A
For our affiliates to market to you	No	N/A
For nonaffiliates to market to you	No	N/A

Who we are
Who is providing this notice?	Firsthand Technology Value Fund, Inc. is a publically traded venture capital fund, listed on NASDAQ, that is a business development company under the Investment Company Act of 1940

What we do
How does Firsthand Technology Value Fund, Inc. protect my personal information?	To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings.
How does Firsthand Technology Value Fund, Inc. collect my personal information?	We collect your personal information, for example, when you   open an account or deposit money
Why can’t I limit all sharing?	Federal law gives you the right to limit only   sharing for affiliates’ everyday business purposes—information about your creditworthiness   affiliates from using your information to market to you   sharing for nonaffiliates to market to you State laws and individual companies may give you additional rights to limit sharing.

Definitions
Affiliates	Companies related by common ownership or control. They can be financial and nonfinancial companies.   Firsthand Capital Management, Inc. and Firsthand Funds
Nonaffiliates	Companies not related by common ownership or control. They can be financial and nonfinancial companies.   BNY Mellon Investment Servicing (U.S.) Inc. (Transfer Agent for Firsthand Technology Value Fund, Inc. and Firsthand Funds)
Joint marketing	A formal agreement between nonaffiliated financial companies that together market financial products or services to you.

Other important information

This notice applies to individual consumers who are customers or former customers. This notice replaces all previous notices of our consumer privacy policy, and may be amended at any time. We will keep you informed of changes or amendments as required by law.

EXHIBIT INDEX

Exhibit Number		Descriptions
	10.4.1	Form of Amendment to Administration and Accounting Agreement between BNY Mellon Investment Servicing (US), Inc.
	14.2	Registrant's Code of Ethics last amended November 2, 2018.
	31.1	Certification by Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32.1	Certification by Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	99.1	Separate financial statements of Pivotal Systems Corp. filed pursuant to Rule 3-09 and 4-08(g) of regulation S-X
	99.2	Separate financial statements of Revasum, Inc. filed pursuant to Rule 3-09 and 4-08(g) of regulation S-X

100

EX-10.4.1

Exhibit 10.4.1

EXECUTION

AMENDMENT

This Amendment is an amendment to the Administration and Accounting Services Agreement between Firsthand Technology Value Fund, Inc. (the “Fund”) and The Bank of New York Mellon (“BNY Mellon”) dated September 17, 2010 (the “Agreement”).

The effective date of this Amendment is January 16, 2019.

WHEREAS, this Fund and BNY Mellon wish to amend the Agreement as set forth below.

NOW, THEREFORE, intending to be legally bound, and each acknowledging receipt of sufficient consideration with respect to the terms of this Amendment, the Fund and BNY Mellon hereby agree as follows:

1.A new Section 12(xv) is added to Section 12 of the Agreement as follows and existing Sections 12(xv) and (xvi) are renumbered accordingly:

“Calculate an estimate of the changes in the Fund’s Federal and state tax accruals from the prior calculation of the Fund’s net asset value and provide such estimate to the Adviser, the Adviser will either confirm that estimate to the Administrator and the Administrator will then use such amounts in the calculation of the Fund’s net asset value or the Adviser will provide different Federal and/or state tax accruals to the Administrator which the Administrator will then use in the calculation of the Fund’s net asset value.”

2.Section 13(iv) of the Agreement is deleted and replaced with the following:

“Prepare me Fund’s Schedule of Investments and the Fund’s financial statements using the data contained in the accounting platform, which the Fund will then use in connection with the Fund’s preparation of its annual and semi-annual shareholder reports;”

3.Section 13(v) of the Agreement is deleted and replaced with the following:

“Provide normal and customary quantitative information contained in the accounting platform, which the Fund will then use in connection with the Fund’s preparation of its Notes to Financial Statements;”

4.Section 13(vi) of the Agreement is deleted and replaced with the following:

“Provide normal and customary quantitative information contained in the accounting platform, which the Fund will then use in connection with the Fund’s preparation of its 10K and 10Q;”

5.Sections 13 (vii), (ix) and (x) of the Agreement are deleted and the remaining sub-sections are renumbered accordingly.

Agreed:

Firsthand Technology		The Bank of New York
Value Fund, Inc.		York Mellon
By:	/s/ Kevin Landis	By:	/s/ Dorothy R Mckown
Name:	Kevin Landis	Name:	Dorothy R Mckown
Title:	President	Title:	Director

EX-14.2

Exhibit 14.2

Firsthand Capital Management, Incorporated, Firsthand Funds

& Firsthand Technology Value Fund, Inc.

Code of Ethics

Adopted:

Adopted: July 30, 2009

Last Amended: November 2, 2018

Revision 4

Code of Ethics

TABLE OF CONTENTS

A.	Introduction to the Code of Ethics
	1.	Fiduciary Duty
	2.	Fraud and Deceit; Inside Information
	3.	Manipulation
	4.	Penalties
B.	Persons Subject to the Code of Ethics
	1.	Definitions
	2.	General Restrictions
	3.	Restrictions on Personal Securities Transactions
	4.	Pre-Approval Requirements
	5.	Reporting Requirements
	6.	Other Rules
	7.	Sanctions
	8.	Special Rules governing trading of Restricted Mutual Funds
Exhibit A	Rule 16a — Definition of Terms
Exhibit B	Quarterly Security Transaction Report for Access Persons
Exhibit C	Quarterly Security Transaction Report for Disinterested Trustees
Exhibit D	Initial and Annual Securities Holdings Report
Exhibit E	Certification of Receipt of Code of Ethics
Exhibit F	List of Restricted Mutual Funds

2

A.Introduction to the Code of Ethics

This Code of Ethics (the “Code”) has been established for Firsthand Capital Management, Incorporated (the “Adviser”), Firsthand Funds (“the Trust”) and Firsthand Technology Value Fund, Inc. (“the Company”) primarily for the purpose of establishing rules for the Adviser’s, Trust’s and Company’s employees, officers and directors/trustees with respect to their personal securities transactions.  The Adviser under Rule 204A-1 under the Investment Advisers Act of 1940 (the “Advisers Act”) and both the Adviser, the Trust and the Company under Rule 17j-1 under the Investment Company Act of 1940 (the “Company Act”) are required to adopt a Code of Ethics.

The investment company industry is closely regulated under the provisions of the Company Act, and by the regulations and interpretations of the Securities and Exchange Commission (“SEC”) under those statutes.  Transactions in securities are also governed by the provisions of the Securities Act of 1933 (the “Securities Act”), the Securities Exchange Act of 1934 (the “Exchange Act”), the Advisers Act, the Company Act, the Sarbanes-Oxley Act of 2002, Title V of the Gramm-Leach-Bliley Act and the Bank Secrecy Act, as well as by state laws.  The rules of conduct set forth in the Code are based in large part on rules of law and legal concepts developed under those statutes.  These legal concepts do not remain static, and further developments of the law in these areas may be expected.  We believe that it is our job to conduct our business, and for you to conduct yourself, so as to avoid not only any violation of law but also any appearance of violation or grounds for criticism.

For your guidance, some of the most important legal concepts within which we operate are mentioned below.

1Fiduciary Duty

Employees, officers and directors/trustees of an investment company and its investment adviser owe a fiduciary duty to fund shareholders.  This means a duty of loyalty, fairness and good faith toward the shareholders, and a corresponding duty not to do anything prejudicial to or in conflict with the interests of the shareholders.  This is a higher standard than that applicable to ordinary arm’s-length business transactions between persons who do not owe a fiduciary duty to the other parties.

2Fraud and Deceit; Inside Information

The various laws administered by the SEC contain very broad provisions prohibiting fraud or deceit or “any manipulative or deceptive device or contrivance” in connection with securities transactions and the giving of investment advice.  It is under these broad general provisions that the SEC and private individuals have successfully brought many of the important cases in the securities field that have received so much publicity in recent years, including cases on improper use of material non-public “inside” information.

3Manipulation

Care must always be taken to avoid market manipulation of securities, which is strictly prohibited by law.

1

4Penalties

Under the various federal and state securities statutes, penalties that may be imposed for violations include civil liability for damages, temporary suspension or permanent prohibition from engaging in various aspects of the securities or investment advisory businesses and criminal penalties.

The Code covers two general topic areas.  The first portion of the Code includes some broad prohibitions against fraudulent conduct in connection with activities by the Adviser or Trust.  Because fraudulent conduct can take many forms, as noted above, the Code cannot reasonably include an all-inclusive list of actions or omissions.  Further, these general prohibitions are basically the same as those in the federal securities laws, and are intended to reflect the expansive and flexible nature of the restrictions that are applicable to our activities.

The second portion of the Code includes specific rules and restrictions with respect to personal securities transactions.  These restrictions have been adopted with the goal of avoiding any conflicts of interest, or any appearances of conflicts of interest, between the securities trading that the Trust undertakes on its own behalf and personal securities trading by the employees, officers and trustees of the Trust.  The rules are intended to better assure that trading on behalf of clients is given priority over trading for personal accounts, and that trades for personal accounts do not adversely affect trades for clients.

In addition to the reporting and reviews required under the Advisers Act, most persons covered by the Code are also required to file with the Trust and the Company quarterly and annual reports of their personal securities transactions under the Company Act.  These reports will be reviewed by the Chief Compliance Officers of the Trust and the Company and Chief Compliance Officer of the Adviser to determine whether the information suggests any possible violation of the Code.  These reports also are reviewed by the staff of the SEC when the SEC undertakes compliance examinations of the Trust, the Company or the Adviser.  In addition to better ensuring compliance with the Code, the reporting requirements serve to create greater consciousness of possible conflicts and, at the same time, provide a means to detect and correct possible problems.  The reporting system is an essential part of the Code and must be strictly adhered to, without exception.

2

B.Persons Subject to the Code of Ethics

The Code covers all persons who fit within the definition of “Access Person”, as defined below.

The enforcement of these rules and procedures is the responsibility of the Chief Compliance Officer of the Adviser and, when appropriate, the Chief Compliance Officer of the Trust and the Chief Compliance Officer of the Company.  All references to “Chief Compliance Officer” mean the Adviser’s Chief Compliance Officer.  References to the Trust’s or the Company’s Chief Compliance Officer will be specifically designated as such. As the Code emphasizes, personal trading must always be carried on in good judgment and good faith.  It is obvious that all possible situations cannot be covered by the Code and that under special circumstances exceptions may occasionally be appropriate.  Any Access Person contemplating a transaction as to which he or she has any doubt, or anyone who has any other question as to any part of the Code or our policy, should consult with the Chief Compliance Officer.  If the Chief Compliance Officer is absent or unavailable, his office will be able to refer you to a senior officer of the Trust, the Company or the Adviser for assistance in this regard.

To the extent a Trust or Company uses a sub-adviser, that sub-adviser is required to adopt specific trading procedures appropriate to its organization consistent with Rule 17j-1 under the Company Act.  Access persons of that entity are specifically excluded from the coverage of this Code.  However, that entity is required to provide the Trust with its code of ethics and any material amendments thereto.

The access persons of the Trust’s and the Company’s administrator, principal underwriter, custodian or transfer agent, to the extent that entity is not affiliated with the Adviser, is required to comply with the reporting and other requirements of that organization’s code of ethics and those persons are excluded from the coverage of this Code.

1Definitions

1.1Access Person

any director, trustee, officer or Advisory Person of the Trust, the Company, or the Adviser.

1.2Advisory Person

(a)any employee of the Trust, the Company, or of the Adviser (or of any company in a control relationship to the Trust, Company or the Adviser), other than an Excluded Person;

(b)any natural person in a control relationship with the Trust, the Company or the Adviser (such as a director or trustee) who obtains information concerning recommendations made to the Trust or the Company with regard to the purchase or sale of a security; and

3

(c)any of the following persons who obtain information concerning securities recommendations being made to the Trust or the Company by the Adviser before the effective dissemination of such recommendations:

(i)any person controlling, controlled by or under common control with the Adviser, the Company or the Trust,

(ii)any affiliated person of such person, and

(iii)any affiliated person of such affiliated person.

1.3Affiliated Person of another person

(a)any person directly or indirectly owning, controlling, or holding with power to vote, 5% or more of the outstanding voting securities of such other person;

(b)any person 5% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by such other person;

(c)any person directly or indirectly controlling, controlled by, or under common control with such other person; and

(d)any officer, director, partner, co-partner or employee of such other person.

1.4Beneficial Ownership

interpreted in the same manner as it would be under Rule 16a-1(a)(2) under the Exchange Act in determining whether a person is the beneficial owner of a security for the purposes of Section 16 of the Exchange Act and the rules and regulations thereunder.  As of the date this Code was adopted, “beneficial ownership” includes accounts of an Access Person’s immediate family, as well as accounts of another person if by reason of any contract, understanding, relationship, agreement or other arrangement the Access Person obtains therefrom a direct or indirect pecuniary interest.  A copy of Rule 16a-1(a)(2) is attached hereto as Exhibit A.  Access Persons should refer to it to determine whether or not they would be deemed beneficial owners of certain securities.

1.5Control

the meaning set forth in Section 2(a)(9) of the Company Act.  As of the time this Code was adopted, “control” means the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company.  Any person who owns beneficially, either directly or through one or more controlled companies, more than 25% of the voting securities of a company is presumed to control such company.

4

1.6Covered Security

a security as defined in Section 2(a)(36) of the Company Act, except that it does not include:

(a)U.S.  Government securities;

(b)Short-term money market instruments such as bankers’ acceptances, repurchase agreements and commercial paper;

(c)Bank certificates of deposit and bank deposit accounts;

(d)Shares of open-end investment companies registered under the Company Act, other than shares of Exchange Traded Funds (regardless of the form of organization); and

(e)Shares of any pooled investment vehicle registered with a foreign governmental securities agency or traded primarily on a foreign exchange so long as an unaffiliated third party makes the investment decisions with respect to such investment pool.

(f)Cryptocurrencies (such as Bitcoin) are not regarded as securities and, therefore, are not intended to be covered by this Code of Ethics or otherwise restricted.

1.7Disinterested Trustee

a trustee of the Trust or a director of the Company who is not an “interested person” of the Trust or the Company within the meaning of Section 2(a)(19) of the Company Act and who would not be required to make a report under Section 5 of this Code solely by reason of being a trustee of the Trust or a director of the Company.

1.8Eligible Security

any of the following types of securities or instruments:

(a)a security issued by a company with a total market valuation of $1.5 billion or more or a security having total market value owned by non-affiliates of the company (“public float”) of at least $1 billion;

(b)futures contracts (or related options on those contracts) traded on an exchange that relate to interest rates, currencies, or recognized stock or bond indexes; or

(c)shares of an ETF.

1.9Excluded Person

an employee of the Adviser (or of any company in a control relationship to the Trust, Company or the Adviser) who (1) does not perform job functions relating

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to the investment advisory business of the Adviser, (2) does not work on the premises of the Adviser and (3) does not otherwise constitute an Access Person or constitute an Advisory Person under Sections 1.2(b) and 1.2(c).

1.10Exchange-Traded Fund

An investment company that offers and redeems its shares both directly on a limited basis in creation units and primarily in the secondary market on a securities exchange, e.g., SPY, QQQ and iShares and that is designed to track the performance of a securities or financial index or market.

1.11Initial Public Offering

An offering of securities registered under the Securities Act, the issuer of which, immediately before the registration, was not subject to the reporting requirements of Sections 13 and 15(d) of the Exchange Act.

1.12Limited Offering

An offering that is exempt from registration under the Securities Act pursuant to Section 4(2) or Section 4(6) or pursuant to Rule 504, 505 or 506 under the Securities Act.

1.13Purchase or Sale of a Covered Security

includes, among other acts, the writing or acquisition of an option to purchase or sell a Covered Security.

1.14Restricted Mutual Fund

includes any registered investment company or series thereof to which the Adviser provides advisory or sub-advisory services.

2General Restrictions

2.1No Access Person may:

(a)employ any device, scheme or artifice to defraud the Adviser, Company or Trust;

(b)make to the Adviser, Company or Trust any untrue statement of a material fact or omit to state to such client a material fact necessary in order to make the statements made in light of the circumstances under which they are made, not misleading;

(c)engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon the Adviser, Company or Trust; or

(d)engage in any manipulative practice with respect to the Adviser, Company or Trust.

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2.2Personal Trading Prohibitions

The following rules are intended to prevent any suggestion or implication that Access Persons are using their relationship with the Adviser, Company or Trust to obtain advantageous treatment to the detriment of the interests of the Company or Trust.

(a)Initial Public Offerings

Advisory Persons may not purchase any security in any Initial Public Offering.

(b)Limited Offerings

Advisory Persons may not directly or indirectly purchase any securities in a Limited Offering except with the prior permission of the Chief Compliance Officer.  In all such instances, Advisory Persons shall provide the Chief Compliance Officer with full details of the proposed transactions (including written certification that the investment opportunities did not arise by virtue of the relevant person’s activities on behalf of the Adviser, its clients, or the Company or Trust).  The Chief Compliance Officer may not approve any such transaction unless, after consultation with other investment advisory personnel of the Adviser such as its Chief Investment Officer, he or she determines that the series of the Trust (each a “Fund”, collectively the “Funds”), the Company or other advisory clients have no reasonably foreseeable interest in purchasing such securities.  Advisory Persons who have been authorized to acquire and have acquired securities in Limited Offerings must disclose those investments to the Chief Compliance Officer prior to, and explain that the disclosure is being made in connection with, the Advisory Person’s subsequent consideration of investments in the issuers by the Trust, the Company or other advisory clients.

(c)Dealings With the Trust and the Company

No Access Person may knowingly sell any portfolio security to the Trust or the Company or knowingly purchase any portfolio security from the Trust or the Company.

3Restrictions on Personal Securities Transactions

3.1Access Person Rules

An Access Person may not knowingly purchase or sell a Covered Security (including any derivative thereof) on the same day the Trust, the Company or any other advisory client trades in that same Covered Security (including any derivative thereof).

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An Access Person may not knowingly purchase or sell a Covered Security that is under active buy or sell consideration by the Trust, the Company or for any other advisory client.

Exceptions are granted in the following circumstances:

(a)An Access Person may trade in the same security on the same day as the Trust, the Company or other advisory clients (collectively “Advisory Clients”) under the following conditions:

(i)the Access Person and Advisory Clients trade in the same security on the same day through the same brokerage getting the same average execution for all trades in that security.

(ii)contrary trades are not allowed on the same day (i.e., Trust security purchases may not be blocked with Access Person sales and vice versa).

(iii)the brokerage must have the capability to maintain a holding account which enables Access Persons and Advisory Clients to get the exact same average execution for all trades in a specific security on a specific day.

(iv)for agency trades through brokerages where the Access Person’s commission rate is higher than Advisory Clients’, if the brokerage’s systems are able to support it, the Access Person should pay the higher commission rate for his or her trades.

(v)when the Advisory Client trades in the same security through multiple brokerages on a given day, the Access Person will get the average execution through the single brokerage where both he or she and the Advisory Client traded, which will not necessarily be equal to the  Advisory Client average execution across all brokerages for that security.

(vi)the Advisory Client activity is automatic rebalancing on a sub-advised client account caused by an increased or decreased allocation to the account by the adviser to the account.

(b)Upon written approval from the Chief Compliance Officer, the Chief Investment Officer or the Chief Operating Officer it would not constitute a violation of the Code if an Access Person were to trade knowingly in a security on the same day as the Advisory Client if there is significant new market information for that security not previously known by that Access Person or significant shareholder redemptions make it necessary.

(c)Upon written approval from the Chief Compliance Officer, the Chief Investment Officer or the Chief Operating Officer, an Access Person may sell a security on the same day as an Advisory Client effects a transaction in the same security in order to meet margin calls.  Note that involuntary sales due to margin calls do not require pre-approval.

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(d)Personal trades in Eligible Securities are not subject to these restrictions.

3.2Special Rule for Disinterested Trustees and Directors

Notwithstanding subsection 3.1 above, transactions in securities by Disinterested Trustees of the Trust (or Disinterested Director of the Company) are not subject to the requirements of Sections 3 and 4 hereof if the Disinterested Trustee or Director is an Access Person solely by reason of his or her trusteeship with the Trust (or directorship with the Company), except where at the time of such transactions such Disinterested Trustee knew, or in the ordinary course of fulfilling his or her official duties as a Disinterested Trustee or Director should have known, that such a transaction would violate the rules described in this Section 3 or received information about a securities transaction by the Trust within 15 days of its occurrence.  Most of such transactions are also subject to the reporting requirements of Section 5 hereof.

3.3Exempted Transactions

The following transactions are exempted from the requirements of Sections 3 and 4 hereof:

(a)Purchases or sales effected in any account over which the Access Person has no direct or indirect influence or control.  Employer-sponsored automatic investment programs fall in this category.

(b)Purchases or sales of securities which are not eligible for purchase or sale by the Advisory Client.

(c)Purchases or sales which are nonvolitional on the part of the Access Person.

(d)Purchases which are part of an automatic dividend reinvestment plan.

(e)Purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired.

(f)Purchases or sales which receive the prior approval of the Chief Compliance Officer, the Chief Investment Officer or the Chief Operating Officer on the basis that the potential for harm to Advisory Clients is remote, because the transactions would be very unlikely to affect market price or liquidity, or because they clearly are not related economically to the securities to be purchased, sold or held by Advisory Clients.

(g)Purchases or sales in accounts managed by nonaffiliated investment advisors shall be subject to the conditions of this paragraph (g).  Each calendar quarter the nonaffiliated investment advisors must provide a complete set of instructions from the Advisory Person to the advisor regarding how the account should be managed and must also certify, in writing, that no other instructions were provided by the Advisory Person.

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Transactions in such accounts that are directed by an Advisory Person are not exempted transactions.  (e.g., if an Advisory Person were to direct that 10% of the account be invested in stock XYZ, the Advisory Person would be required to comply with this Code with respect to the investment in stock XYZ.)

(h)Purchases or sales of shares of ETFs.

3.4Other Transactions

(a)Short Sales

Short sales are permitted by Access Persons provided the requirements of this Section 3 are met.

(b)Convertible Securities

The foregoing restrictions in this Section 3 also apply to any purchase or sale of a security that is convertible into or exchangeable or exercisable for a security that is being purchased or sold, or that is actively being considered for, purchase or sale, for the account of the Trust.

4.Preapproval Requirements

Information with respect to the Purchase or Sale of a Covered Security other than an Eligible Security by an Advisory Person must be entered into the Adviser’s Personal Trading System (the “System”) prior to effecting such transaction.  Advisory Persons must use their best efforts to enter information with respect to purchases and sales of Eligible Securities into the System within ten days after the end of the calendar quarter in which such transactions were effected.  The System automatically notifies the Chief Compliance Officer, the Chief Investment Officer and the Chief Operating officer of proposed trades.

The Purchase or Sale of a Covered Security (other than an Eligible Security) by an Advisory Person requires preapproval by the Chief Compliance Officer, Chief Investment Officer or Chief Operating Officer, unless otherwise exempted under this Code.  The Chief Compliance Officer, Chief Investment Officer or Chief Operating Officer shall confirm that the security is not subject to a pending buy or sell order and is not under consideration for trading on such day and determine whether the transaction in question would or would not be consistent with this Code.  Such conclusion shall be promptly communicated electronically to the person making the request.  Pre-clearance approval under this paragraph will expire at the close of business 14 days after preapproval is given, unless sooner terminated by the commencement of a black-out period as provided under this Code of Ethics or by the Chief Compliance Officer, Chief Investment Officer or the Chief Operating Officer.  Preapproval of an option transaction shall be deemed to also include preapproval of the exercise of that option and disposal of any security acquired upon exercise if those transactions occur on the trading day before expiration of the option and/or the trading day after the expiration of the option.

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The Purchase or Sale of securities of the Company requires pre-approval. Pre-approval may be granted for trading only on days that there is no black-out period in effect.  A no-trade “black-out” will be in place between one week before the end of a calendar quarter (seven full calendar days including the last day of the calendar quarter) through the publication of a preliminary NAV.  Also, even if you have permission to buy, it does not mean you will get permission to sell at a future date when you request it. Preclearance should not be construed as an assurance that a personal securities transaction complies with all provisions of this Code.

5Reporting Requirements

5.1Personal Trading Reports

Every Advisory Person must arrange for the Chief Compliance Officer (or his or her designee) to receive directly from any broker, dealer or bank that effects any securities transaction, monthly statements for each brokerage account in which such Advisory Person has a Beneficial Ownership interest.  Except as noted in Section 8 below, brokerage account statements are not required to include any information relating to any security that is not a Covered Security or a transaction specified in Section 3.3(a), (c), (d), (e) (where it is an involuntary exercise) and (g) (where the Access Person retains no influence or control).  To the extent an Advisory Person is unable to provide the monthly brokerage account statements required by this paragraph on a timely basis, or such monthly brokerage account statements do not include information about a transaction by which the Advisory Person acquired any direct or indirect Beneficial Ownership of a Covered Security, he or she shall, on a quarterly basis, provide to the Chief Compliance Officer (or his or her designee) a report in the form attached hereto as Exhibit B about each such previously unreported transaction.  An Advisory Person is not required to submit a quarterly transaction report if all reportable transactions were included in the monthly brokerage account statements delivered to the Chief Compliance Officer (or his or her designee).  An Advisory Person must submit any report required by this paragraph to the Chief Compliance Officer (or his or her designee) no later than 30 days after the end of the calendar quarter in which the transaction to which the report relates was effected.

At least quarterly, the Chief Compliance Officer (or his or her designee) shall review and compare the brokerage account statements and quarterly transaction reports received with the written pre-clearance authorization provided. The Chief Compliance Officer’s are reviewed by the designated alternate. Such review shall include:

1.Whether the securities transactions listed thereon complied with this Code;

2.Whether the securities transactions listed thereon were authorized in advance of placement, if such authorization was required hereunder;

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3.Whether the securities transactions were executed before the expiration of any approval under the provisions of this Code; and

4.Whether any Advisory Client owned the securities at the time of the securities transactions.

Each Access Person who is not a Disinterested Trustee must, on a quarterly basis, provide to the Chief Compliance Officer (or his or her designee) a report in the form attached hereto as Exhibit B about each transaction effected during the quarter by which such person acquired any direct or indirect Beneficial Ownership of a Covered Security.  Such report shall be submitted no later than 30 days after the end of the calendar quarter in which the transaction to which the report relates was effected.  Reports are required even if the Access Person had no transactions during the quarter.

A Disinterested Trustee needs only to report a transaction in a Covered Security in a quarterly transaction report if such trustee, at the time of the transaction, knew or, in the course of fulfilling his or her official duties as a trustee, should have known, that during the 15-day period immediately before or after the date of the transaction by the trustee, such Covered Security was purchased or sold by a Fund or was being considered by a Fund or the Adviser for purchase or sale by a Fund.  In order to facilitate reporting by a Disinterested Trustee who did not effect any such transactions during a quarter, such Disinterested Trustee may, instead of filing a quarterly transaction report, file with the Chief Compliance Officer (or his or her designee) a report in the form attached hereto as Exhibit C.

Notwithstanding the foregoing, reporting obligations regarding Restricted Mutual Funds are governed by Section 8 below and not by this Section 5.

5.2Initial and Annual Reports

All Access Persons (other than Disinterested Trustees), within 10 days of first becoming an Access Person and thereafter on an annual basis (on such date as shall be set by the Chief Compliance Officer) shall submit to the Chief Compliance Officer a report in the form attached hereto as Exhibit D listing all securities with respect to which that Access Person has Beneficial Ownership.

5.3Disclaimers

At the option of the reporting person, the SEC allows such reports to contain a statement declaring that the reporting of any transaction is not to be construed as an admission by the reporting person that he or she has any direct or indirect Beneficial Ownership in the security.  Using that disclaimer language may be useful in an unclear situation to avoid a potential risk in not reporting a

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transaction while at the same time avoiding prejudicing any position the person may take or later seek to take with respect to ownership status.

5.4Exemptions from Reporting

Reports are not required with respect to any transactions over which the reporting person does not have any direct or indirect influence or control.  Please note that there are categories of securities and particular transactions which are not subject to the restrictions of Sections 3 and 4 but which are subject to the reporting requirements of this Section 5.

5.5Annual Certifications

Each Access Person is required to certify annually that he or she has read and understood this Code and recognizes that he or she is subject to it.  Further, each Access Person is required to certify annually that he or she has complied with all the requirements of the Code and that he or she has disclosed or reported all personal securities transactions required to be disclosed or reported pursuant to the requirements of the Code.  This requirement may be satisfied by providing to the Chief Compliance Officer (or his or her designee) a report in the form attached to this Code as Exhibit E.

5.6Reports to the Board of Trustees

Both the Advisor’s and the Trust’s Chief Compliance Officer (or his or her designee) shall prepare an annual report for the Board of Trustees regarding this Code (it may also be a joint report).  At a minimum, the report shall:  (a) summarize the existing Code procedures concerning personal investing and any changes in this Code and its procedures made during the year; (b) describe any issues arising under this Code since the last report to the Board, including, but not limited to, information about material violations of this Code or the procedures, and sanctions imposed in response to the material violations; (c) certify to the Board that the Trust and the Adviser have adopted procedures reasonably necessary to prevent Access Persons from violating this Code; and (d) identify any recommended material changes in existing restrictions or procedures.

5.7Continuing Reporting Requirement

Each Access Person must report promptly to the Chief Compliance Officer any violation by that Access Person of any provision of this Code.

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6Other Rules

6.1Inside Information

No Access Person may use any material non-public information, no matter how acquired, in his or her own transactions or in the discharge of his or her responsibilities to the Trust, the Company or the Adviser.

6.2Disclosure of Information; Confidentiality

Information about actual purchase or sale decisions, contemplated purchases or sales, or other transactions under consideration for the Trust or the Company, whether or not actually authorized, must be kept confidential.  Research information on portfolio companies must not be divulged to persons who do not have a need to know such information in connection with their employment by the Trust, the Company or the Adviser.  In addition, information about clients is confidential and must not be disclosed.  Access Persons must use care in keeping information confidential.  Please see also Adviser’s Privacy Policy and Trust’s Portfolio Holdings Disclosure Policy for additional information.

6.3Gifts and Other Preferential Treatment

An Access Person may not in relation to the business of the Adviser, the Company or the Trust seek or accept from any broker or dealer or other financial institution to the Adviser, Company or the Trust either:

(a)any gifts of material value (i.e., in excess of $100 per month excluding occasional dinners and other moderate entertainment or tickets to sporting events); or

(b)any sort of preferential treatment from, or special arrangements with, such person or entity.

6.4Finder’s Fees

Access Persons should not become involved in negotiations for corporate financings, acquisitions or other transactions for outside companies (whether or not held by any of the clients) without the prior permission of the Chief Compliance Officer.  Specifically, no finder’s or similar fee in connection with any such transactions may be negotiated or accepted without prior permission.

6.5Service as a Director

Advisory Persons may not serve on the boards of directors of publicly traded companies, absent the prior approval of the Chief Compliance Officer.

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7Sanctions

Careful adherence to this Code is one of the basis conditions of employment of every Access Person.  Any Access Person may be required to give up any profit or other benefit realized from any transaction in violation of this Code, or in appropriate cases the Adviser or Trust may impose other sanctions for conduct inconsistent with this Code.

In addition, as pointed out in the preamble to this Code, certain violations of this Code may also involve violation of laws, with the possibility of civil or criminal penalties.

Any person charged with a violation of this Code will have an opportunity to meet with the Chief Compliance Officer and present such oral or written information that may be necessary or appropriate to address any apparent violation of this Code.  If the violator is an employee of the Adviser, the Chief Investment Officer of the Adviser, after reviewing all the information submitted by the Chief Compliance Officer, and upon a determination that a violation of this Code has occurred, may impose such sanction as he deems appropriate, including but not limited to a memorandum in the violator’s personnel file, an appropriate fine, suspension or termination of employment or suspension or termination of the personal trading privilege.  If the violator is not an employee of the Adviser, the Board shall determine the appropriate sanctions.

8Special Rules governing trading of Restricted Mutual Funds

Notwithstanding the foregoing, trading in any mutual funds advised or sub-advised by the Adviser (“Restricted Mutual Funds”) are subject to the special provisions of this section.  A list of Restricted Mutual Funds are set forth in Exhibit F.

Account Reporting

Each Advisory Person who holds a Restricted Mutual Fund in an account must report such accounts.  This would, for example, require the disclosure of all Beneficial Interests in direct shareholder accounts of Firsthand Funds, Firsthand Technology Value Fund, Inc. as well as any Firsthand Capital Management, Inc. 401(k) Plan accounts.

8.2Transaction Reporting

Each Advisory Person must report, using the Personal Trading System or in a form otherwise promulgated by the Chief Compliance Officer, all purchases and sales of shares of any Restricted Mutual Fund in which such Advisory Person has a Beneficial Ownership interest.  Such report should be submitted no later than 30 days after the end of the calendar quarter in which the transaction to which the report relates was effected.  In the event any Restricted Mutual Fund (as listed in Exhibit F) transaction was made pursuant to an automatic investment plan or other forms of standing instruction, the report only needs to contain the standing instruction.  Subsequent to the initial report, if an Advisory Person changes or otherwise modifies that standing instruction, an updated report must be promptly provided.  For example, a participant in the Firsthand Capital Management,

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Incorporated 401(k) Plan who elects to defer 5% of her salary each pay period to purchase share of Firsthand Technology Leaders Fund need to disclose only such instruction and the period to which it applies.  In addition, the Chief Compliance Officer may, in his discretion, provides that to the extent a report is made available to the Compliance Department, the Access Person may not need to provide that report himself.

8.3Blackout Period for Short-Term Trading

No Advisory Person may purchase and sell shares of the same Restricted Mutual Fund within a 30 calendar day period without the prior written approval of the Chief Compliance Officer.  The Chief Compliance Officer, however, may only grant an approval in the case where (1) either the failure to grant a waiver would cause extreme financial hardship to the Advisory Person or one side of the transaction is part of a standing instruction for periodic transactions, and (2) granting a waiver does not negatively affect any advisory clients, including the Restricted Mutual Fund involved.

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EXHIBIT A

Rule 16a-1 Definition of Terms

(a)The term “beneficial owner” shall have the following applications:

(1) Solely for purposes of determining whether a person is a beneficial owner of more than ten percent of any class of equity securities registered pursuant to section 12 of the Securities Exchange Act of 1934, as amended (the “Act”), the term “beneficial owner” shall mean any person who is deemed a beneficial owner pursuant to section 13(d) of the Act and the rules thereunder; provided, however, that the following institutions or persons shall not be deemed the beneficial owner of securities of such class held for the benefit of third parties or in customer or fiduciary accounts in the ordinary course of business (or in the case of an employee benefit plan specified in paragraph (a)(1)(vi) of this section, of securities of such class allocated to plan participants where participants have voting power) as long as such shares are acquired by such institutions or persons without the purpose or effect of changing or influencing control of the issuer or engaging in any arrangement subject to Rule 13d-3(b) (240.13d-3(b)):

(i)A broker or dealer registered under section 15 of the Act (15 U.S.C.  78o);

(ii)A bank as defined in section 3(a)(6) of the Act (15 U.S.C.  78c);

(iii)An insurance company as defined in section 3(a)(19) of the Act (15 U.S.C.  78c);

(iv)An investment company registered under section 8 of the Investment Company Act of 1940 (15 U.S.C.  80a-8);

(v)Any person registered as an investment adviser under Section 203 of the Investment Advisers Act of 1940 (15 U.S.C.  80b-3) or under the laws of any state;

(vi)An employee benefit plan as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C.  1001 et seq.  (“ERISA”) that is subject to the provisions of ERISA, or any such plan that is not subject to ERISA that is maintained primarily for the benefit of the employees of a state or local government or instrumentality, or an endowment fund;

(vii)A parent holding company or control person, provided the aggregate amount held directly by the parent or control person, and directly and indirectly by their subsidiaries or affiliates that are not persons specified in paragraphs (a)(1)(i) through (ix), does not exceed one percent of the securities of the subject class;

(viii)A savings association as defined in Section 3(b) of the Federal Deposit Insurance Act (12 U.S.C.  1813);

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(ix)A church plan that is excluded from the definition of an investment company under section 3(c)(14) of the Investment Company Act of 1940 (15 U.S.C.  80a-3); and

(x)A group, provided that all the members are persons specified in Sec.  240.16a-1(a)(1)(i) through (ix).

(xi)A group, provided that all the members are persons specified in 240.16a-1(a)(1)(i) through (vii).

Note to paragraph (a).

Pursuant to this section, a person deemed a beneficial owner of more than ten percent of any class of equity securities registered under section 12 of the Act would file a Form 3 (249.103), but the securities holdings disclosed on Form 3, and changes in beneficial ownership reported on subsequent Forms 4 (249.104) or 5 (249.105), would be determined by the definition of “beneficial owner” in paragraph (a)(2) of this section.

(2) Other than for purposes of determining whether a person is a beneficial owner of more than ten percent of any class of equity securities registered under Section 12 of the Act, the term “beneficial owner” shall mean any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares a direct or indirect pecuniary interest in the equity securities, subject to the following:

(i) The term “pecuniary interest” in any class of equity securities shall mean the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the subject securities.

(ii) The term “indirect pecuniary interest” in any class of equity securities shall include, but not be limited to:

(A) Securities held by members of a person’s immediate family sharing the same household; provided, however, that the presumption of such beneficial ownership may be rebutted; see also 240.  16a-1(a)(4);

(B) A general partner’s proportionate interest in the portfolio securities held by a general or limited partnership.  The general partner’s proportionate interest, as evidenced by the partnership agreement in effect at the time of the transaction and the partnership’s most recent financial statements, shall be the greater of:

(1) The general partner’s share of the partnership’s profits, including profits attributed to any limited partnership interests held by the general partner and any other interests in profits that arise from the purchase and sale of the partnership’s portfolio securities; or

(2) The general partner’s share of the partnership capital account, including the share attributable to any limited partnership interest held by the general partner.

(C) A performance-related fee, other than an asset-based fee, received by any broker, dealer, bank, insurance company, investment company, investment adviser,

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investment manager, trustee or person or entity performing a similar function; provided, however, that no pecuniary interest shall be present where:

(1) The performance-related fee, regardless of when payable, is calculated based upon net capital gains and/or net capital appreciation generated from the portfolio or from the fiduciary’s overall performance over a period of one year or more; and

(2) Equity securities of the issuer do not account for more than ten percent of the market value of the portfolio.  A right to a nonperformance-related fee alone shall not represent a pecuniary interest in the securities;

(D) A person’s right to dividends that is separated or separable from the underlying securities.  Otherwise, a right to dividends alone shall not represent a pecuniary interest in the securities;

(E) A person’s interest in securities held by a trust, as specified in 240.16a-8(b); and

(F) A person’s right to acquire equity securities through the exercise or conversion of any derivative security, whether or not presently exercisable.

(iii) A shareholder shall not be deemed to have a pecuniary interest in the portfolio securities held by a corporation or similar entity in which the person owns securities if the shareholder is not a controlling shareholder of the entity and does not have or share investment control over the entity’s portfolio.

(3) Where more than one person subject to section 16 of the Act is deemed to be a beneficial owner of the same equity securities, all such persons must report as beneficial owners of the securities, either separately or jointly, as provided in Sec.  240.  16a-3(j).  In such cases, the amount of short-swing profit recoverable shall not be increased above the amount recoverable if there were only one beneficial owner.

(4) Any person filing a statement pursuant to section 16(a) of the Act may state that the filing shall not be deemed an admission that such person is, for purposes of section 16 of the Act or otherwise, the beneficial owner of any equity securities covered by the statement.

(5) The following interests are deemed not to confer beneficial ownership for purposes of section 16 of the Act:

(i) Interests in portfolio securities held by any holding company registered under the Public Utility Holding Company Act of 1935 (15 U.S.C.  79a et seq.);

(ii) Interests in portfolio securities held by any investment company registered under the Investment Company Act of 1940 (15 U.S.C.  80a-1 et seq.); and

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(iii) Interests in securities comprising part of a broad-based, publicly traded market basket or index of stocks, approved for trading by the appropriate federal governmental authority.

(b) The term “call equivalent position” shall mean a derivative security position that increases in value as the value of the underlying equity increases, including, but not limited to, a long convertible security, a long call option, and a short put option position.

(c) The term “derivative securities” shall mean any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege at a price related to an equity security, or similar securities with a value derived from the value of an equity security, but shall not include:

(1) Rights of a pledgee of securities to sell the pledged securities;

(2) Rights of all holders of a class of securities of an issuer to receive securities pro rata, or obligations to dispose of securities, as a result of a merger, exchange offer, or consolidation involving the issuer of the securities;

(3) Rights or obligations to surrender a security, or have a security withheld, upon the receipt or exercise of a derivative security or the receipt or vesting of equity securities, in order to satisfy the exercise price or the tax withholding consequences of receipt, exercise or vesting;

(4) Interests in broad-based index options, broad-based index futures, and broad-based publicly traded market baskets of stocks approved for trading by the appropriate federal governmental authority;

(5) Interests or rights to participate in employee benefit plans of the issuer;

(6) Rights with an exercise or conversion privilege at a price that is not fixed; or

(7) Options granted to an underwriter in a registered public offering for the purpose of satisfying over-allotments in such offering.

(d) The term “equity security of such issuer” shall mean any equity security or derivative security relating to an issuer, whether or not issued by that issuer.

(e) The term “immediate family” shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include adoptive relationships.

(f) The term “officer” shall mean an issuer’s president, principal financial officer, principal accounting officer (or, if there is no such accounting officer, the controller), any vice-president of the issuer in charge of a principal business unit, division or function (such as sales, administration or finance), any other officer who performs a policy-making function, or any

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other person who performs similar policy-making functions for the issuer.  Officers of the issuer’s parent(s) or subsidiaries shall be deemed officers of the issuer if they perform such policy-making functions for the issuer.  In addition, when the issuer is a limited partnership, officers or employees of the general partner(s) who perform policy-making functions for the limited partnership are deemed officers of the limited partnership.  When the issuer is a trust, officers or employees of the trustee(s) who perform policy-making functions for the trust are deemed officers of the trust.

Note: “Policy-making function” is not intended to include policy-making functions that are not significant.  If pursuant to Item 401(b) of Regulation S-K (229.401(b)) the issuer identifies a person as an “executive officer,” it is presumed that the Board of Directors has made that judgment and that the persons so identified are the officers for purposes of Section 16 of the Act, as are such other persons enumerated in this paragraph (f) but not in Item 401(b).

(g) The term “portfolio securities” shall mean all securities owned by an entity, other than securities issued by the entity.

(h) The term “put equivalent position” shall mean a derivative security position that increases in value as the value of the underlying equity decreases, including, but not limited to, a long put option and a short call option position.

[56 FR 7265, Feb.  21, 1991, as amended at 56 FR 19927, May 1, 1991; 61 FR 30392 June 14, 1996 effective August 15, 1996; 63 FR 2854 1/16/98 eff: 2/17/98.]

21

EXHIBIT B

QUARTERLY REPORT FOR PERIOD ENDING

This form must be returned to the Chief Compliance Officer no later than the 30th day of the month following the quarter end noted above.

Access Person:

Please check the appropriate box.

oI have no personal securities transactions to report for the most recent calendar quarter.

oI submit the following information concerning transactions during the most recent calendar quarter in securities in which I have or had direct or indirect Beneficial Ownership (other than exempt transactions effected in an account over which neither you nor I had any direct or indirect influence or control, if any).

Date of
Transaction CUSIP or
Ticker
Symbol Type of
Transaction Title of
Security Number of
Shares/Principal
Amount Price/Share Interest Rate/
Maturity
Date Broker, Dealer
or Bank

(Use additional pages if necessary)

I confirm that I have complied with the Code of Ethics of Firsthand Capital Management, Incorporated, Firsthand Funds and Firsthand Technology Value Fund, Inc. with respect to personal securities transactions, that all transactions required to be reported under such Code are listed above or on monthly brokerage account statements and that I have reported all reportable accounts established with a broker, dealer or bank during the quarter.

Date Signed

22

EXHIBIT C

Firsthand Funds

Firsthand Technology Value Fund, Inc.

FORM OF QUARTERLY SECURITY TRANSACTION REPORT

FOR DISINTERESTED TRUSTEES/DIRECTORS

Quarter Ending

During the above quarter, I did not engage in any securities transactions which, to my knowledge, involved securities that were being purchased or sold or considered for purchase or sale by any series of Firsthand Funds/Firsthand Technology Value Fund, Inc. during the 15-day period preceding or after the dates of my transactions.

During the above quarter, I did not provide any inside information to any employee or access person of Firsthand Funds, Firsthand Technology Value Find, Inc. or Firsthand Capital Management, Incorporated.

Trustee, Firsthand Funds or

Director, Firsthand Technology Value Fund, Inc.

Should you have any reportable transactions or any questions as to whether certain transactions are reportable, please contact Firsthand Funds’ Chief Compliance Officer or Firsthand Technology Value Fund, Inc.’s Chief Compliance Officer, to obtain the appropriate form.

23

EXHIBIT D

Initial and Annual Securities Holdings Report

[information to be current within 45 days of Report]

To the Chief Compliance Officer:

As of the date set forth below, I have direct or indirect Beneficial Ownership (as that term is defined in the Codes of Ethics of Firsthand Capital Management, Incorporated, Firsthand Funds and Firsthand Technology Value Fund, Inc. (the “Code”) in the following securities, which are required to be reported pursuant to the Code:

Type & Title of
Security Ticker Symbol
or CUSIP No. of Shares or
Principal Amount Dollar Amount
of Holdings Broker/
Dealer or Bank
Through Whom Held

Date:	Signature:
	Print Name:

24

EXHIBIT E

Annual Certification of Receipt of Code of Ethics

To the Chief Compliance Officer:

This is to certify that I have read and understand the Code of Ethics of Firsthand Capital Management, Incorporated, Firsthand Funds and Firsthand Technology Value Fund, Inc. and that I recognize that I am subject to the provisions thereof and will comply with the policy and procedures stated therein.

This is to further certify that I have complied with the requirements of such Code of Ethics during the past year and that I have reported all personal securities transactions required to be disclosed or reported pursuant to the requirements of such Code of Ethics during such period.

Date:	,	Signature:
		Print Name:

25

EXHIBIT F

List of Restricted Mutual Funds

(Updated September 10, 2010)

·Firsthand Funds — each series of Firsthand Funds, including:

·Firsthand Technology Opportunities Fund

·Firsthand Alternative Energy Fund

·Firsthand Technology Value Fund, Inc.

26

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Kevin Landis, Chief Executive Officer, certify that:

1. I have reviewed this annual report on Form 10-K of Firsthand Technology Value Find, Inc. (the “registrant”) for the fiscal year ended December 31, 2018;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 18, 2019	By:	/s/ Kevin Landis
	Kevin Landis Chief Executive Officer (Principal Executive Officer)

CERTIFICATION

I, Omar Billawala, Chief Financial Officer of the Company, certify that:

1. I have reviewed this annual report on Form 10-K of Firsthand Technology Value Find, Inc. (the “registrant”) for the fiscal year ended December 31, 2018;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 18, 2019	By:	/s/ Omar Billawala
	Omar Billawala Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Annual Report on Form 10-K of Firsthand Technology Value Fund, Inc. (the “Company”) for the fiscal year ended December 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kevin Landis, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 18, 2019	By:	/s/ Kevin Landis
	Kevin Landis Chief Executive Officer (Principal Executive Officer)

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Annual Report on Form 10-K of Firsthand Technology Value Fund, Inc. (the “Company”) for the fiscal year ended December 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Omar Billawala, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 18, 2019	By:	/s/ Omar Billawala
	Omar Billawala Chief Financial Officer (Principal Financial Officer)

EX-99.1

Exhibit 99.1

Appendix 4E and Annual Report

for the Year Ended 31 December 2018

1.Company Details

Name of entity: Pivotal Systems Corporation

ARBN: 626 346 325

Reporting period: Year ended 31 December 2018

Previous Corresponding Period: Year ended 31 December 2017

2.Results for Announcement to the Market

	2018		2017		Up/Down
	US$’000		US$’000		%
Revenue from ordinary activities	20,328		15,446		Up 32	%
Gross Profit	6,130		2,974		Up 106	%
Operating Loss	(4,051	)	(3,916	)	Up 3	%
Loss from ordinary activities after tax attributable to members of the parent entity	(66,103	)	(9,817	)	Up 573	%

3.Review of Operations and Financial Results

Refer to the accompanying Annual Report for the Consolidated Statement of Profit or Loss and Other Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flows and accompanying notes.

Also refer to the Directors’ Report in the accompanying Annual Report for further details and commentary on the results.

4.Dividends

No dividends have been paid or are proposed to be paid by Pivotal Systems Corporation for the financial year 2018 (2017: $Nil).

5.Net Tangible Assets per share:

	2018	2017
Net tangible assets/(liabilities) per share (US$ per share)	0.20	(2.55	)(1)

(1)Comparative calculated on pre-IPO equity which excludes the conversion of preferred stock and warrants treated as financial liabilities as at 31 December 2017.

6.Control Gained or Lost Over Entities

The Company incorporated two subsidiaries during the year ended 31 December 2018:

Pivotal SaleCo, Inc. - incorporated in the State of Delaware, USA; and

Pivotal Systems Korea, Limited - incorporated in the Republic of South Korea.

There were no changes in control over entities by Pivotal Systems Corporation or its subsidiaries (“Group”) during the financial year.

7.Details of Associates and Joint Venture Entities

The Group has no investments in associates or joint ventures during the reporting period.

8.Accounting Standards

The Annual Report has been compiled using Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (“AASB”).

9.Audit Status

The Pivotal Systems Corporation Annual Report for the year ended 31 December 2018 has been subject to audit by our external auditors, BDO East Coast Partnership. A copy of the independent audit report to the owners of Pivotal Systems Corporation is included within the Annual Report.

/s/ John Hoffman

John Hoffman (Director)

26 February 2019 (Fremont PST), 27 February 2019 (Sydney AEST)

PIVOTAL SYSTEMS CORPORATION

A DELAWARE CORPORATION

ARBN 626 346 325

ANNUAL FINANCIAL REPORT

FOR THE YEAR ENDED

31 DECEMBER 2018

Table of Contents

Corporate Directory	2
Chairman’s Letter	3
Directors’ Report	4
Consolidated Statement of Profit or Loss and Other Comprehensive Income	14
Consolidated Statement of Financial Position	15
Consolidated Statement of Changes in Equity	16
Consolidated Statement of Cash Flows	17
Notes to the Consolidated Financial Statements	18
Directors’ Declaration	60
Independent Auditor’s Report	61
Additional Shareholder’s Information	65

1

Corporate Directory

Company

Pivotal Systems Corporation

48389 Fremont Blvd, Suite 100

Fremont CA, 94538 USA

Phone: +1 (510) 770 9125

Fax: +1 (510) 770 9126

Website: www.pivotalsys.com

Directors

John Hoffman	Executive Chairman and Chief Executive Officer
Dr. Joseph Monkowski	Executive Director and Chief Technical Officer
Ryan Benton	Independent Non-Executive Director
Kevin Landis	Non-Executive Director
David Michael	Non-Executive Director
Peter McGregor	Independent Non-Executive Director

Australian Securities Exchange Representative

Naomi Dolmatoff

United States Registered Office

c/o Incorporating Services Ltd

3500 South Dupont Highway

Dover, Delaware 19901 USA

Australian Registered Office

c/o Company Matters Pty Limited

Level 12, 680 George Street

Sydney, NSW 2000 Australia

United States Legal Adviser

Fenwick & West LLP

801 California Street

Mountain View, California 94041 USA

Australian Legal Adviser

Maddocks

Angel Place Level 27

123 Pitt Street

Sydney, NSW 2000 Australia

Share Registry

Link Market Services		American Stock Transfer and Trust Company, LLC
Level 12, 680 George Street		6201, 15th Avenue
Sydney, NSW 2000 Australia		Brooklyn, NY 11219 USA
Telephone:	+61 1300 554 474	Telephone: +1 (718) 921 8386
Facsimile:	+61 2 9287 0303

Securities Exchange Listing

Pivotal Systems Corporation (ASX code: PVS).

Chess Depository Interests (“CDIs”) over shares of the Company’s common stock are quoted on the Australian Securities Exchange. One CDI represents one fully paid share in the Company.

2

Chairman’s Letter

Dear Fellow Shareholders,

On behalf of the Board of Directors, I am pleased to present our Annual Report for the year ended 31 December 2018, which was marked by significant growth and commercial achievements.

Pivotal Systems’ performance has resulted in notable growth in revenue, which was up 32% to US$20.33 million whilst Gross Profit was up 106% to US$6.82 million. This was fuelled by increasing market shares combined with a number of initiatives we have taken during the year to increase profitability. The Company ended the year with a cash position of US$17.5 million with no debt, and a backlog of confirmed orders awaiting shipment of $US14.3 million. Our strong research and development spending once again enabled the company to take advantage of new opportunities brought forward by our world class customers.

Our advanced flow control technology has enabled the doubling of our business with two strategic device manufacturers (IDMs), as well as the doubling of our market share with two of the leading American process equipment companies (OEMs). We have also begun an ongoing engagement with a leading Japanese OEM that has not only resulted in new orders, it has given a footing in the integration of our technology into the design of their next generation process equipment. The superior technology used on our flagship Gas Flow Controller (GFC) product has also enabled us to develop and introduce a revolutionary Flow Ratio Controller (FRC) product in partnership with a leading Korean IDM. In December, we completed a joint validation project with a renowned Japanese University and a leading Japanese IDM demonstrating the superior performance of the GFC product vs key Japanese competitors.

Simultaneously, the advancement of our new High Flow GFC during the year has been a significant achievement. Customers are realizing the benefits from the speed and accuracy of this product. In its second year, the High Flow GFC has been qualified by a leading American OEM and leading Taiwanese and Korean IDMs while gaining multiple repeat orders. The High Flow GFC also received note in winning Pivotal Systems’ third Red Herring Award for Global Innovation. The robust nature of the GFC hardware platform enables the High Flow GFC the same opportunities for rapid innovation and improvement as the standard GFC.

Pivotal Systems also achieved gross margin performance ahead of our prospectus targets, as we materially reduced costs and manufacturing labour in 2018. Our Korean subsidiary and the new Korea Integration Centre has boosted our capacity to 48,000 units per year with the capability of increasing to 100,000 units per year as we continue to grow our global business.

We are optimistic for our future as we continue to capitalise on opportunities to showcase our superior technology and value proposition. We continue to build on well-established relationships with the industry leaders as we work in unison to solve the exciting challenges the semiconductor industry faces. We constantly strive to improve our existing products while expanding our product portfolio to gain a greater foothold across a very large and constantly evolving global market. Our strategy has been and continues to be, to take market share at the leading edge and strong growth will follow.

On behalf of our Board of Directors, I would like to thank our team around the world who have worked diligently for the success we achieved into 2018 and importantly, for our ongoing success into the future. I would also particularly like to thank our shareholders for their outstanding support of the Company.

Sincerely,

John Hoffman

Executive Chairman and Chief Executive Officer

Pivotal Systems

3

Directors’ Report

The directors present their report for Pivotal Systems Corporation (“Pivotal” or “Group”) together with the financial statements on the Consolidated Entity (referred to hereafter as the “Consolidated Entity” or “Group”) consisting of the Company and its subsidiaries for the financial year ended 31 December 2018 and the auditor’s report thereon.

DIRECTORS

The following persons were directors of the Company during the whole of the financial year and up to the date of this report, unless otherwise stated:

John Hoffman	Executive Chairman and Chief Executive Officer
Dr. Joseph Monkowski	Executive Director and Chief Technical Officer
Ryan Benton	Independent Non-Executive Director
Kevin Landis	Non-Executive Director
David Michael	Non-Executive Director
Peter McGregor	Independent Non-Executive Director	Appointed 23 August 2018

PRINCIPAL ACTIVITIES

Pivotal designs, develops, manufactures and sells high-performance gas flow controllers. We provide high quality gas flow monitoring and control technology platform for the global semiconductor industry. The Group’s proprietary hardware and software utilizes advanced machine learning to enable preventative diagnostic capability resulting in an order of magnitude increase in fab productivity and capital efficiency for existing and future technology nodes.

The platform includes Pivotal’s Gas Flow Controller (GFC) product lines that offer high-accuracy, real-time monitoring and control of the most critical parameters difficult to control in wafer processing today: Gas Flow and Chamber Condition.

The principal activity of the Group consisted of the development and introduction of new lines of gas flow controllers and increasing sales of existing products for both device manufacturers and equipment companies in the semi-conductor manufacturing industry.

No significant change in the nature of these activities occurred during the financial year.

REVIEW OF OPERATIONS AND FINANCIAL RESULTS

Financial results:

Revenue for the financial year ended 31 December 2018 increased 32% to $20.33 million (2017: $15.45 million) as a result of increased market share, driving more product shipments. During the same period cost of goods sold (COGS) increased only 11% due to expected cost efficiencies and an inventory impairment in the prior year. The Group’s gross profit for FY18 increased 106% to $6.13 million (2017: $2.97 million). The expansion in gross margin was in-part a result of increase of sales to integrated device manufacture (IDM) customers to $7.15 million, which represented 35% of sales in 2018 (2017: $2.78 million, 18% of sales). Furthermore, leveraging Pivotal’s fixed manufacturing overhead in Fremont, and moving manufacturing operations to South Korea helped the Company achieve cost and operational efficiencies.

Total operating expenses for the year increased by 48% to $10.18 million (2017: $6.89 million). This increase is largely due to the incurrence of $0.73 million Initial Public Offer (IPO) costs, increased travel and consulting costs since the commencement of trading as an ASX listed company, as well as planned increases in research and development and sales and marketing costs as the Group scales.

4

REVIEW OF OPERATIONS AND FINANCIAL RESULTS (CONTINUED)

The $4.05 million operating loss represented an increase of 3% compared to the prior period (2017: $3.92 million).

Net Loss in the current period of $66.10 million (2017: loss of $9.82 million) included $61.98 million loss due to the impact of the fair value remeasurement of financial liabilities prior to conversion to common shares based on the IPO price. These financial liabilities were Preferred Stock, Common Stock Warrants, Series C Preferred Stock Warrants, and Series D Preferred Stock Warrants. Immediately prior to completion of the IPO, all warrants were converted to Group’s shares either for cash or in a cashless exercise (according to warrant terms), and all Preferred Stock was converted to Common Stock or were cancelled for a cash payment via a “sell-down’ transaction.

Key achievements for the period included:

Introduction of the new Flow Ratio Controller (FRC) Product

Pivotal’s newly introduced FRC featured 3 channel control with average channel flow being two (2) liters per minute. The FRC can be configured for either DNET or EtherCat and is compatible with all current and advanced generation original equipment maker (OEM) tool sets. This prototype was launched with live product demonstrations at the Semicon West in San Francisco, California.

Incorporation of Subsidiaries

Pivotal SaleCo, Inc. was incorporated in the State of Delaware, USA on 14 May 2018 for the purpose of facilitating the sell down of certain existing shares held by the shareholders of the parent Company.

On 16 March 2018, Pivotal incorporated a wholly-owned subsidiary in the Republic of South Korea named Pivotal Systems Korea, Limited. This subsidiary will be responsible for administration and logistical operations related to the Korean Compart manufacturing facility.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

On 2 July 2018 AEST, the Company successfully listed its CHESS Depository Interests (CDIs) on the ASX, following the issue of 28,785,008 new CDIs over shares of common stock at an issue price of AU$1.86 per CDI to raise AU$53.5 million (US$39.5 million), which included the sell down of 9,430,169 CDIs owned by existing shareholders.

The capital raised by the IPO will be mainly used to expand operations in Korea, Japan, Taiwan, China and the United States, to invest in research and development, to fund working capital requirements and has partly been used to repay existing debt at the time of the IPO.

There were no other significant changes in the state of affairs of the Group during the financial year.

DIVIDENDS

No dividends were paid during the year ended 31 December 2018 and the Company does not intend to pay any dividends for the year ended 31 December 2018 (2017: $Nil).

PRESENTATION CURRENCY

The functional and presentation currency of the Group is United States Dollars (US Dollars). The financial report is presented in US Dollars with all references to dollars, cents or $’s in these financial statements presented in US currency, unless otherwise stated.

5

ROUNDING OF AMOUNTS

Unless otherwise stated, amounts in this report have been rounded to the nearest thousand United States Dollars.

JURISDICTION OF INCORPORATION

The Company is incorporated in the State of Delaware, United States of America and is a registered foreign entity in Australia. As a foreign company registered in Australia, the Company is subject to different reporting and regulatory regimes than Australian companies.

DELAWARE LAW, CERTIFICATE OF INCORPORATION AND BYLAWS

As a foreign company registered in Australia, the Company is not subject to Chapters 6, 6A, 6B and 6C of the Corporations Act dealing with the acquisition of shares (including substantial shareholdings and takeovers). Under the provisions of Delaware General Corporation Law (“DGCL”), shares are freely transferable subject to restrictions imposed by US federal or state securities laws, by the Company’s certificate of incorporation or bylaws, or by an agreement signed with the holders of the shares at issue. The Company’s amended and restated certificate of incorporation and bylaws do not impose any specific restrictions on transfer. However, provisions of the DGCL, the Company’s Certificate of Incorporation and the Company’s Bylaws could make it more difficult to acquire the Company by means of a tender offer (takeover), a proxy contest or otherwise, or to remove incumbent officers and Directors of the Company. These provisions could discourage certain types of coercive takeover practices and takeover bids that the Board may consider inadequate and to encourage persons seeking to acquire control of the Company to first negotiate with the Board. The Company believes that the benefits of increased protection of its ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure the Company outweigh the disadvantages of discouraging takeover or acquisition proposals because, among other things, negotiation of these proposals could result in an improvement of their terms.

MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR

The new manufacturing facility in South Korea has been audited and approved for operation by major OEM and IDM customers. Operations commenced late January 2019.

No other matter or circumstance has arisen since 31 December 2018 that has significantly affected, or may significantly affect the Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS

The Group’s growth strategy is to continue efforts to aggressively take market share from the traditional players in the GFC industry with the continued introduction of innovative products and to expand our business with our key OEM and IDM customers.

6

ENVIRONMENTAL REGULATION

The Group is not subject to any significant environmental regulation under United States of America legislation. The Group is committed to the sustainable management of environmental, health, and safety (EHS) concerns as a core business principle. This includes ensuring compliance with all applicable government standards and regulations and providing a safe and healthy workplace, while reducing our environmental footprint. We integrate health, safety, and environmental considerations into all aspects of our business, including product design and services, to provide productive and responsible solutions by:

·Striving for zero accidents through the application of an EHS Management System.

·Implementing pollution prevention control strategies.

·Committing to continual improvement for our customers, Company, and Group’s personnel.

The Board of Directors considers that adequate systems are in place to manage the Group’s obligations and is not aware of any breach of environmental requirements as they relate to the Group.

CORPORATE GOVERNANCE

The Company, as a Delaware incorporated corporation, seeks to achieve substantive compliance with the governance recommendations set out in the ‘Corporate Governance Principles and Recommendations 3rd Edition’, published by the ASX Corporate Governance Council (the ASX Principles). The Company’s Corporate Governance Statement can be viewed at www.pivotalsys.com/investors/. The Corporate Governance Statement sets out the extent to which Pivotal has followed the ASX Corporate Governance Council’s 29 Recommendations during the year ended 31 December 2018.

SHARE OPTIONS

Share options over issued shares in the Company were granted during the financial year. The number of options outstanding as at the date of this reports, and all other movements in share options, are disclosed in Note 20 to the financial statements.

SECURITIES ON ISSUE

The Company has the following securities on issue as at 31 December 2018:

	Common Stock	CDI equivalent
Shares of common stock	110,998,864	110,998,864
Options over shares of common stock	14,771,387	—

7

INFORMATION ON DIRECTORS

John Hoffman Executive Chairman and Chief Executive Officer

John Hoffman has over 25 years of global high technology management experience building growth organizations in both the semiconductor and information technology markets.

Prior to joining Pivotal Systems, John was a Senior VP with Spencer Trask Ventures, a New York based venture capital firm. While at Spencer Trask, John was primarily involved in the solar and integrated circuit efforts of the firm. Prior to Spencer Trask, John was the Chief Executive Officer of RagingWire Enterprise Solutions, an Inc 500 fastest growing private company. John reorganized the company and enabled record growth in revenue and profitability during his tenure. Prior to RagingWire, John worked in various general manager roles at Applied Materials for 18 years. He was the President of the billion dollar “Etch Product Business Group”, VP and GM of the Process Control and Diagnostic Business Group and the General Manager of the Customer Service Division which grew by over 300% during his tenure.

Special responsibilities:	Chairman of the Board.
Other directorships:	None
Dr. Joseph Monkowski	Executive Director and Chief Technical Officer

Joseph Monkowski has extensive experience in the semiconductor industry focused on providing process equipment and metrology solutions for next generation device manufacturing.

Prior to joining Pivotal, Monkowski was the SVP of Business Development for Advanced Energy Industries, where he led the company’s M&A strategy to expand its product portfolio and position the company as a market leader in the semiconductor subsystems space. Previously, he held senior executive positions at Pacific Scientific, Photon Dynamics and Lam Research, where he served as EVP and CTO. During his career, Monkowski led efforts to design and build a number of leading CVD and plasma etch systems, winning the R&D 100 award and multiple Semiconductor International Best Product awards. He has authored numerous patents and publications.

Special responsibilities:	None
Other directorships:	None
Ryan Benton	Independent Non-Executive Director

Ryan joined the Board in 2015 bringing over 25 years of finance, operations, and transaction experience. Ryan previously served as CFO of BrainChip Holdings Ltd (ASX: BRN) and CEO and Board Member at Exar Corporation (NYSE: EXAR), which was acquired by MaxLinear Corporation (NASDAQ: MXL) in May 2017. Previous roles included senior and consulting positions at ASM International NV (NASDAQ: ASMI), and eFunds Corporation (NASDAQ: EFDS).

Special responsibilities:	Chairman of the Audit and Risk Management Committee.
	Member of the Remuneration and Nomination Committee.
Other directorships:	Executive director of Revasum Inc. (ASX: RVS).

8

INFORMATION ON DIRECTORS (continued)

Kevin Landis Non-Executive Director

Kevin joined the Board in 2012 and is the CEO and CIO of Firsthand Capital Management, an investment management firm he founded in 1994. Firsthand Capital Management is the investment adviser to Firsthand Technology Value Fund, Inc. (NASDAQ: SVVC), a publicly traded venture capital fund. Kevin has over two decades of experience in engineering, market research, product management and investing in the technology sector. Kevin is Firsthand’s nominee director to the board of Pivotal Systems Corporation.

Special responsibilities:	Member of the Audit and Risk Management Committee.
	Member of the Remuneration and Nomination Committee.
Other directorships:	Non-executive director - Revasum, Inc (ASX: RVS), Hera Systems, Inc.,
	IntraOp Medical Corp., QMAT, Inc. and Silicon Genesis Corp. and Wrightspeed, Inc.
David Michael	Non-Executive Director

David Michael is Managing Director at Anzu Partners, an investment partnership which invests in innovative industrial technology companies. In addition to his role at Pivotal Systems, he is also Board member of Nuburu (industrial lasers), Axsun (MEMS-based sensors for medical and industrial uses), and Terapore (nanofiltration membranes for ultrapure water and other applications.

Mr. Michael was formerly Senior Partner and Managing Director of The Boston Consulting Group (BCG), where his career spanned numerous leadership roles across the firm. He formerly led BCG’s Greater China business and their Asia Technology Practice. He served a range of clients in semiconductors, components, hardware, software, and services. He was based for 7 years in Silicon Valley and for 16 years in Greater China. He remains a Senior Advisor to the firm.

Special responsibilities:	Member of the Audit and Risk Management Committee.
	Member of the Remuneration and Nomination Committee.
Other directorships:	Non-executive director - Taiwan Cement Corporation (XTAI:1101);
	Nuburu, Axsun, and Terapore
Peter McGregor	Independent Non-Executive Director

Peter McGregor was appointed a non-executive director on 23 August 2018 and has over 30 years’ experience in senior finance and management roles, including having been Chief Executive Officer of technology company, Think Holdings, Chief Financial Officer of the ASX50 transport company, Asciano, and a partner in the Investment Banking firm of Goldman Sachs JBWere.

He also spent time as a Managing Director within the Institutional Banking & Markets division of Commonwealth Bank and was Chief Operating Officer of ASX-listed Australian Infrastructure Fund. Peter is an experienced company Director, having served as Chairman of the Port of Geelong and as a Director of Melbourne, Gold Coast and Darwin Airports.

Special responsibilities:	Chairman of the Remuneration and Nomination Committee.
	Member of the Audit and Risk Management Committee.
Other directorships:	Non-executive Director - Brisbane Lions Club (Australian Football League);
	Nutrano Produce Group Limited

9

SECURITIES HELD BY DIRECTORS AND KEY MANAGEMENT PERSONNEL

The directors and key management personnel of the Company are shown together with their holdings of common shares and options, held directly or indirectly:

	Common		Common
	Stock	Options	Stock	Options
	Direct		Indirect
John Hoffman	1,441,870	3,348,659	—	—
Dr. Joseph Monkowski	1,445,683	3,339,089	—	—
Ryan Benton	195,000	201,000	—	—
Kevin Landis (1)	—	—	231,535	—
David Michael	—	—	—	—
Peter McGregor	—	—	—	—
Omesh Sharma	1,041,870	2,021,357	—	—
	4,124,423	8,910,105	231,535	—

(1)Common stock held by Silicon Valley Investor Holdings Pty Ltd, of which Kevin Landis is the majority shareholder.

REMUNERATION REPORT

EXECUTIVE COMPENSATION

This section discusses the principles underlying our policies and decisions with respect to the compensation of our named executive officers, and all material factors relevant to an analysis of these policies and decisions. Our named executive officers for the year ended 31 December 2018 were:

John Hoffman	Executive Chairman, President and Chief Executive Officer;
Dr Joseph Monkowski	Executive Director and Chief Technical Officer; and
Omesh Sharma	Chief Financial Officer.

COMPONENTS OF EXECUTIVE COMPENSATION

The principal components of our executive compensation are base salary, cash bonuses and long-term incentives. Our Remuneration and Nomination Committee considers that each component of executive compensation must be evaluated and determined with reference to competitive market data, individual and corporate performance, our recruiting and retention goals and other information we deem relevant.

Our executive officers are also eligible to participate in our 401(k) retirement plan as well as medical and other benefit plans.

The terms of each named executive officer’s compensation are derived from the employment agreements the Company has entered into with them.

10

REMUNERATION REPORT (continued)

COMPONENTS OF EXECUTIVE COMPENSATION (continued)

The components of the executive compensation packages for our named executive officers for the year ended 31 December 2018 are as follows:

John Hoffman      Executive Chairman, President and Chief Executive Officer

Mr. Hoffman received a fixed remuneration package of $325,000 and is eligible to participate in various customary employee benefit plans of Pivotal. Pursuant to Mr. Hoffman’s Retention Agreement, dated 11 May, 2018, if Mr. Hoffman is terminated by the Company without cause or if he resigns for good reason and Mr. Hoffman signs a general release of claims in favor of the Company and complies with certain other requirements, the Company must pay Mr. Hoffman severance in an amount equal to twelve months of his base salary, twelve months of health insurance cover and 100% of his annual target bonus for the period in which termination occurs. All of Mr. Hoffman’s unvested Options are subject to acceleration of vesting upon a change of control of the Company, and certain of his Options vest only subject to achievement of specified performance metrics and a time-based vesting schedule.

Dr. Joseph Monkowski       Executive Director and Chief Technical Officer

Dr. Monkowski received a fixed remuneration package of $275,000 and is eligible to participate in various customary employee benefit plans of Pivotal. Pursuant to Dr. Monkowski’s Retention Agreement, dated 11 May, 2018, if Dr. Monkowski is terminated by the Company without cause or if he resigns for good reason and Mr. Hoffman signs a general release of claims in favor of the Company and complies with certain other requirements, the Company must pay Dr. Monkowski severance in an amount equal to twelve months of his base salary, twelve months of health insurance cover and 100% of his annual target bonus for the period in which termination occurs. All of Dr. Monkowski’s unvested Options are subject to acceleration of vesting upon a change of control of the Company, and certain of his Options vest only subject to achievement of specified performance metrics and a time-based vesting schedule.

Omesh Sharma                           Chief Financial Officer

Mr. Sharma received a fixed remuneration package of $255,000 and is eligible to participate in various customary employee benefit plans of Pivotal. Pursuant to Mr. Sharma’s Retention Agreement, dated 11 May, 2018, if Mr. Sharma is terminated by the Company without cause or if he resigns for good reason and Mr. Sharma signs a general release of claims in favor of the Company and complies with certain other requirements, the Company must pay Mr. Sharma severance in an amount equal to twelve months of his base salary, twelve months of health insurance cover and 100% of his annual target bonus for the period in which termination occurs. All of Mr. Sharma’s unvested Options are subject to acceleration of vesting upon a change of control of the Company, and certain of his Options vest only subject to achievement of specified performance metrics and a time-based vesting schedule.

11

REMUNERATION REPORT (continued)

NON-EXECUTIVE COMPENSATION

The Board is responsible for determining and reviewing compensation arrangements for each non-executive director. The non-executive directors for the year ended 31 December 2018 were as follows:

Ryan Benton

Kevin Landis

David Michael

Peter McGregor

The Company has entered into a non-executive director agreement with Mr. Benton whereby he is entitled to receive US$80,000 per annum for his role as a non-executive director, and a further US$20,000 per annum as chair of the Audit and Risk Committee.

The Company has also entered into a non-executive director agreement with Mr. McGregor whereby he is entitled to receive AU$80,000 per annum as a non-executive director, and a further AU$20,000 per annum as chair of the Remuneration and Nomination Committee.

Mr. Landis and Mr. Michael do not receive compensation for their services as a non-executive director.

REMUNERATION TABLE

Remuneration earned by key management personnel during the year is summarized as follows:

			401k &
	Salary and	Cash bonus	other	Share based
	fees	(3)	benefits	payment	Total
2018	US$	US$	US$	US$	US$
John Hoffman	325,000	—	45,613	10,379	380,992
Joseph Monkowski	275,000	—	38,171	10,379	323,550
Ryan Benton (1)	50,000	—	—	14,119	64,119
Kevin Landis	—	—	—	—	—
David Michael	—	—	—	—	—
Peter McGregor (2)	23,975	—	—	—	23,975
Omesh Sharma	255,000	—	45,510	6,919	307,429
	928,975	—	129,294	41,796	1,100,065

(1)Mr Benton receives non-executive director fees of US$80,000 and US$20,000 as Chairman of the Audit and Risk Management Committee. Fees earned during the year totaled $50,000.

(2)Mr McGregor receives non-executive fees as an Australian resident non-executive director of AU$80,000, and AU$20,000 as Chairman of the Remuneration and Nomination Committee, effective from his appointment date of 23 August 2018. Fees earned during the year totaled US$23,975.

(3)   No cash bonuses were awarded during the current year.

12

MEETINGS ATTENDED BY BOARD

The number of meetings of directors (including meetings of committees of directors) held during the year and the number of meetings attended by each director was as follows:

			Audit & Risk
	Board of		Management		Remuneration &
	Directors		Committee		Nomination Committee
	Eligible	Attendance	Eligible	Attendance	Eligible	Attendance
John Hoffman	17	17	—	—	—	—
Joseph Monkowski	16	16	—	—	—	—
Ryan Benton	17	17	3	3	2	2
Kevin Landis	17	17	3	3	2	2
David Michael	17	17	3	3	2	2
Peter McGregor	3	3	2	2	2	2

INDEMNITY AND INSURANCE OF DIRECTORS AND OFFICERS

The Company has indemnified directors and executive of the Company for costs incurred, in their capacity as a director or officer, for which they may be held personally liable, except where there is a lack of good faith.

INDEMNITY AND INSURANCE OF AUDITOR

The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the Company or any related entity against a liability incurred by the auditor.

During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company or any related entity.

NON-AUDIT SERVICES

Details of amounts paid or payable to the auditor for non-audit services provided during the year are outlined in Note 27 to the financial statements:

PROCEEDINGS ON BEHALF OF THE COMPANY

No proceedings have been brought or intervened in on behalf of the Company.

On behalf of the directors

/s/ John Hoffman

John Hoffman

Director and Chief Executive Officer

26 February 2019 (Fremont PST), 27 February 2019 (Sydney AEST)

13

Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the year ended 31 December 2018

		2018		2017
	Note	US$’000		US$’000
Revenue	2	20,328		15,446
Cost of goods sold		(14,198	)	(12,472	)
Gross profit		6,130		2,974
Gross margin		30.2	%	19.3	%
Expenses
Research & development	3	(3,139	)	(2,451	)
Selling & marketing	3	(3,175	)	(2,650	)
General & administrative	3	(3,867	)	(1,789	)
Total expenses		(10,181	)	(6,890	)
Operating loss		(4,051	)	(3,916	)
Finance income	3	76		—
Finance expenses - interest paid	3	(152	)	(81	)
Other expenses	3	(61,976	)	(5,820	)
Net loss before income tax expense		(66,103	)	(9,817	)
Income tax expense	4	—		—
Net loss for the year		(66,103	)	(9,817	)
Other comprehensive income
Other comprehensive income for the year, net of tax		—		—
Total comprehensive loss for the year attributable to the members of Pivotal Systems Corporation		(66,103	)	(9,817	)
Loss per share attributable to the members of Pivotal Systems Corporation
Basic and diluted loss per share ($ per share)	5	(1.04	)	(0.66	)

The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.

14

Consolidated Statement of Financial Position

As at 31 December 2018

		2018		2017
	Note	US$’000		US$’000
Assets
Current assets
Cash and cash equivalents	7	17,489		1,148
Trade and other receivables	8	3,870		2,563
Inventories	9	6,347		4,687
Other assets	10	334		119
Total current assets		28,040		8,517
Non-current assets
Property, plant and equipment	11	302		341
Intangible assets	12	9,078		8,349
Other assets		9		9
Total non-current assets		9,389		8,699
Total assets		37,429		17,216
Liabilities
Current liabilities
Trade and other payables	13	5,336		4,392
Employee benefits	14	423		341
Provisions	15	110		459
Borrowings	16	—		3,008
Financial liabilities	17	—		39,009
Total current liabilities		5,869		47,209
Total liabilities		5,869		47,209
Net assets/(liabilities)		31,560		(29,993	)
Contributed equity	18	170,818		43,263
Reserves	20	1,280		1,179
Accumulated losses		(140,538	)	(74,435	)
Total equity		31,560		(29,993	)

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

15

Consolidated Statement of Changes in Equity

For the year ended 31 December 2018

	Contributed			Accumulated
	equity		Reserves	losses		Total equity
	US$’000		US$’000	US$’000		US$’000
Balance at 1 January 2017	42,405		1,135	(64,618	)	(21,078	)
Loss after income tax expense for the year	—		—	(9,817	)	(9,817	)
Other comprehensive loss for the year, net of tax	—		—	—		—
Total comprehensive loss for the year	—		—	(9,817	)	(9,817	)
Transactions with owners in their capacity as owners:
Shares issued (note 18)	858		—	—		858
Share-based payments (note 20)	—		44	—		44
Balance at 31 December 2017	43,263		1,179	(74,435	)	(29,993	)
Balance at 1 January 2018	43,263		1,179	(74,435	)	(29,993	)
Loss after income tax expense for the year	—		—	(66,103	)	(66,103	)
Other comprehensive loss for the year, net of tax	—		—	—		—
Total comprehensive loss for the year	—		—	(66,103	)	(66,103	)
Transactions with owners in their capacity as owners:
Shares issued on conversion of preferred
stock and warrants, net of cost (note 18)	102,730		—	—		102,730
Issue of listed ordinary share capital (note 18)	26,586		—	—		26,586
Share issue costs	(1,761	)	—	—		(1,761	)
Share-based payments (note 20)	—		101	—		101
Balance at 31 December 2018	170,818		1,280	(140,538	)	31,560

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

16

Consolidated Statement of Cash Flows

For the year ended 31 December 2018

		2018		2017
	Note	US$’000		US$’000
Cash flows used in operating activities
Receipts from customers		19,321		15,884
Payments to suppliers and employees		(22,587	)	(16,675	)
Interest paid		(152	)	(81	)
Payment related to the exercise of put option of warrants related to debt discount		(315	)	—
Net cash used in operating activities	7	(3,733	)	(872	)
Cash flows used in investing activities
Payments for property, plant and equipment		(288	)	(385	)
Payments for capitalized development expenses		(3,478	)	(3,066	)
Net cash used in investing activities		(3,766	)	(3,451	)
Cash flows from financing activities
Proceeds from the issue of common stock		39,540		—
Payment to selling shareholders, net of costs		(12,954	)	—
Payment of share issue costs	18	(1,761	)	—
Proceeds from the issue of preferred stock		2,000		—
Proceeds from the exercise of options	18	61		31
Proceeds from the exercise of warrants		1		255
Proceeds from bank loans	16	1,917		3,425
Repayment of bank loans	16	(4,925	)	(2,898	)
Transaction costs related to the loans and borrowings		(120	)	—
Net cash from financing activities		23,759		813
Net increase in cash and cash equivalents		16,260		(3,510	)
Cash and cash equivalents at the beginning of the financial year		1,148		4,658
Net effect of foreign exchange		81		—
Cash and cash equivalents at the end of the year	7	17,489		1,148

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

17

Notes to the Consolidated Financial Statements

Note 1. Significant accounting policies

The principal accounting policies adopted in the preparation of the consolidated financial statements are set out either in the respective notes or below. These policies have been consistently applied to all the periods presented, unless otherwise stated. The financial statements are for the Group including Pivotal Systems Corporation and its subsidiaries, referred to as “Pivotal”, “Company” or “Group”.

Basis of preparation

These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (“AASB”). The financial statements comprise the consolidated financial statements of the Group which is a for-profit entity for financial reporting purposes under Australian Accounting Standards.

Historical cost convention

The consolidated financial statements, except for the cash flow information, have been prepared on an accrual basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities.

Critical accounting estimates

The preparation of the consolidated financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed throughout the financial statements.

Basis of consolidation

The consolidated financial statements comprise the financial statements of the Group as at the end of the reporting period. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:

·Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)

·Exposure, or rights, to variable returns from its involvement with the investee, and

·The ability to use its power over the investee to affect its returns

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

·The contractual arrangement with the other vote holders of the investee

·Rights arising from other contractual arrangements

·The Group’s voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of profit and loss and other comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary.

18

Notes to the Consolidated Financial Statements

Note 1. Significant accounting policies (continued)

Basis of consolidation (continued)

Profit or loss and each component of other comprehensive income are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-Group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

Rounding of amounts

Amounts in this report have been rounded off to the nearest thousand United States dollars unless otherwise stated.

Functional currency

The financial statements are presented in US dollars, which is the functional and presentational currency of the Group. There has been no change in the functional and presentational currency of the Group.

Foreign currency transactions

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items held at fair value are reported at the exchange rate at the date when the fair values were determined.

Exchange differences arising on the translation of monetary items are recognized in profit or loss.

Exchange differences arising on the translation of non-monetary items are recognized directly in other comprehensive income to the extent that the underlying gain or loss is directly recognized in other comprehensive income; otherwise the exchange difference is recognized in profit or loss.

Current and non-current classification

Assets and liabilities are presented in the statement of financial position based on current and non-current classification.

An asset is current when it is expected to be realized or intended to be sold or consumed in normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realized within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current.

A liability is current when it is expected to be settled in normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current.

Deferred tax assets and liabilities are always classified as non-current.

19

Notes to the Consolidated Financial Statements

Note 1. Significant accounting policies (continued)

New, revised or amended Accounting Standards and Interpretations adopted

The Group has adopted all of the new, revised or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) and the International Financial Reporting Interpretations Committee (IFRIC) that are relevant to its operations and effective for the year commencing 1 January 2018. There has been no material impact on the financial statements of the Group. The nature and effect of these changes are disclosed below.

AASB 15 Revenue from Contracts with customers

AASB 15 supersedes AASB 118 Revenue and related Interpretations and it applies to all revenue arising from contracts with customers, unless those contracts are in the scope of other standards. The new standard establishes a five-step model to account for revenue arising from contracts with customers. Under AASB 15, revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

The standard requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract.

Effective January 1, 2018, the Group adopted AASB 15 using the full retrospective method of adoption. The Group determined there was no material financial effect of adopting AASB 15 and no adjustment has been noted.

The Group has disaggregated revenue recognized from contracts with customers into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Refer to Note 2 for the disclosure on disaggregated revenue.

AASB 9 Financial Instruments

AASB 9 Financial Instruments replaces AASB 139 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 1 January 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting.

AASB 9 sets out requirements for recognizing and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. The Group has adopted AASB 9 retrospectively in accordance with the standard; changes in accounting policies resulting from the adoption of AASB 9 did not have a material impact on the Group’s consolidated financial statements.

AASB 9 largely retains the existing requirements of AASB 139 for the classification and measurement of financial liabilities, however, it eliminates the previous AASB 139 categories for financial assets held to maturity, receivables and available for sale. Under AASB 9, on initial recognition a financial asset is classified as measured at:

20

Notes to the Consolidated Financial Statements

Note 1. Significant accounting policies (continued)

·Amortized cost;

·Fair Value through Other Comprehensive Income (“FVOCI”) - debt investment;

·FVOCI - equity investment; or

·Fair Value through Profit or Loss (“FVTPL”)

The classification of financial assets under AASB 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. A financial asset (unless it is a trade receivable without a significant financing component that is initially measured at the transaction price) is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition. For financial assets measured at amortized cost, these assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses.

Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

As of 31 December 2018, the Group’s financial instruments consist of cash and cash equivalents, trade and other receivables and trade and other payables.

Cash and cash equivalents and trade and other receivables previously designated as loans and receivables under AASB 139 are now classified as amortized cost under AASB 9. The trade and other payables are designated as other financial liabilities, which are measured at amortized cost.

The Group’s preferred shares and warrant liabilities, designated at fair value through profit or loss, were converted to common stock on 2 July 2018. The financial effect of fair value remeasurement prior to conversion is reflected in the statement of profit or loss and other comprehensive income.

The cash and cash equivalents, trade and other receivables, trade and other payables approximate their fair value due to their short-term nature.

The Group classified the fair value of the financial instruments according to the following fair value hierarchy based on the amount of observable inputs used to value the instruments:

The three levels of the fair value hierarchy are:

·Level 1 - Values based on unadjusted quoted prices available in active markets for identical assets or liabilities as of the reporting date.

·Level 2 - Values based on inputs, including quoted prices, time value and volatility factors, which can be substantially observed or corroborated in the marketplace. Prices in Level 2 are either directly or indirectly observable as of the reporting date.

·Level 3 - Values based on prices or valuation techniques that are not based on observable market data.

Impairment of financial assets

AASB 9 replaces the ‘incurred loss’ model in AASB 139 with an ‘expected credit loss’ (“ECL”) model. The new impairment model is applied to financial assets measured at amortized cost, contract assets and debt investments at Fair Value Through Other Comprehensive Income (“FVOCI”), but not to investments in equity instruments.

21

Notes to the Consolidated Financial Statements

Note 1. Significant accounting policies (continued)

Under AASB 9, loss allowances are measured on either of the following bases:

·12-month ECLs: these are ECLs that result from possible default events within the 12 months after the reporting date; and

·Lifetime ECL: these are ECLs that result from all possible default events over the expected life of a financial instrument.

ECLs are probability-weighted estimates of credit losses. Credit losses are measured at the present value of all cash shortfalls (I.e. the difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive). ECLs are discounted at the effective interest rate of the financial asset.

The Group has adopted a simplified approach for trade receivables on the initial transaction date (1 January 2018) with an amount equal to the full ECL to be recognized. As the ECL assessment has resulted in an immaterial credit loss, no impairment allowance has been recognized by the Group.

New standards and interpretations not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2018 reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new standards and interpretations is set out below.

AABS 16 Leases: This standard will primarily affect the accounting by lessees and will result in the recognition of almost all leases on the balance sheet. The standard removes the current distinction between operating and financing leases and requires recognition of an asset (the right to use the leased item) and a financial liability to pay rentals for almost all lease contracts. Based on Pivotal’s assessment, the Group does not expect a material impact on the Group’s assets and liabilities when the standard is adopted.

Note 2. Revenue from contracts with customers

	2018		2017
	US$’000		US$’000
Product revenue	20,371		15,504
Provision for sales returns	(43	)	(58	)
Net revenue from contracts with customers	20,328		15,446

The following table reflects net revenue by type of customer:

	2018	2017
	US$’000	US$’000
Integrated device manufacturer (IDM)	7,150	2,780
Original equipment manufacturer (OEM)	13,178	12,666
Net revenue from contracts with customers	20,328	15,446

22

Notes to the Consolidated Financial Statements

Note 2. Revenue from contracts with customers (continued)

Accounting policy for revenue recognition

The Group earns revenue from contracts with customers, primarily through the design, development, manufacture and sale of gas flow controllers. Our contracts are priced based on the specific negotiations with each customer.

Pivotal accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

Pivotal recognizes revenue from product sales when the customer obtains control of the Group’s product, which occurs at a point in time, typically upon delivery to the customer. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues. The Group expenses incremental costs of obtaining a contract as and when incurred because the expected amortization period of the asset that the Group would have recognized is one year or less.

Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established and which result from discounts, returns, and other allowances that are offered within contracts between the Group and its customers.

Revenue is disaggregated by type of customer and by geography as we believe it best depicts how the nature, amount, timing, and uncertainty of our revenue and cash flows are affected by economic factors. Revenues by geography are based on the shipping address of the customer. Refer to Note 6 Operating segment for revenue by geography.

The timing of revenue recognition may differ from the time of billing to the customers. Generally, the payment terms of the Group’s offerings range from 30 to 90 days of the invoice date. Receivables primarily relate to the Groups right to consideration for performance obligations completed and billed at the reporting date for which Pivotal has an unconditional right to consideration before it invoices the customer. Such amounts are commonly referred to as trade receivables. Refer to Note 8 Current assets - trade and other receivables. When another party is involved in the provision of goods or services to a customer, Pivotal is generally the principal in its transactions and therefore reports gross revenue based on the billed amounts to its customers.

Contract liabilities consist of advance consideration received from customers and billings in excess of revenue recognized and deferred revenue, which precede the Group’s satisfaction of the associated performance obligation(s). The Group’s contract liabilities primarily result from customer payments received upfront for performance obligations that are satisfied at a point in time. Contract liabilities are recognized as revenue when the goods are delivered to our customer. The Group does not have contract liabilities as of December 31, 2018, and December 31, 2017.

Due to the relationship between the Group’s performance and the customer’s payment, Pivotal typically does not have conditional rights to consideration in exchange for goods or services transferred to a customer. Generally, Pivotal has the right to bill the customer as goods are delivered and services are provided, which results in the Group’s right to payment being unconditional. Therefore, our balance sheet does not present contract assets.

Due to the nature of the product, each contract with a customer has distinct performance obligations that are capable of being distinct on their own and within the context of the contract. Additionally, based on the contract terms, which generally include performance obligations subject to cancellation terms, the Group does not have material unsatisfied performance obligations as of December 31, 2018 (2017: Nil).

23

Notes to the Consolidated Financial Statements

Note 2. Revenue from contracts with customers (continued)

Determination of transaction price

Transaction price includes estimates of variable consideration which may result from discounts, returns and other allowances for which reserves are established. When applicable, these reserves are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable. Where appropriate, these estimates take into consideration a range of possible outcomes that are probability-weighted for relevant factors such as Pivotal’s historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. The amount of variable consideration that is included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from the Group’s estimates. If actual results in the future vary from the Group’s estimates, Pivotal will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.

24

Notes to the Consolidated Financial Statements

Note 3. Expenses

Net Loss before income tax includes the following specific expenses:

	2018	2017
	US$’000	US$’000
Research & development
Amortization of capitalized development costs (Note 12)	2,799	2,451
Salary and benefits	250	—
Other	90	—
	3,139	2,451
Selling & marketing
Salary and benefits	787	765
Commissions and bonuses	1,451	1,063
Travel and outside services	499	549
Other	438	273
	3,175	2,650
General & administrative
Salary and benefits	1,213	921
Travel and outside services	1,397	447
IPO costs	725	—
Other	532	421
	3,867	1,789
Other expenses and income
Finance income
Foreign exchange gains	76	—
Finance expense
Interest expense	152	81
Other expenses
Loss from financial liabilities measured at fair value through the profit or loss	61,976	5,820

Accounting policy for expenses

Research costs

Expenditure on research activities, undertaken with the prospect of obtaining new technical knowledge and understanding, is recognized in the statement of profit or loss and other comprehensive income as an expense when it is incurred.

Other expenses

Other expenses classified according to their function, as selling & marketing or general & administrative, include expenses mainly related with facilities, materials, depreciation, and share-based payment transactions.

25

Notes to the Consolidated Financial Statements

Note 3. Expenses (continued)

Contract costs

Contract costs are mainly comprised with commissions paid for the initial contract with a customer and for contract renewals and are classified as selling and marketing expenses in the consolidated statement of profit or loss and other comprehensive income. Renewal commissions are considered to be commensurate with the initial contract commissions. As a result, Pivotal amortizes the commission costs, for a new contract or a contract renewal, over the initial contract term, which is less than a year. Additionally, Pivotal applies the practical expedient of expensing sales commissions as incurred considering that the amortization period is one year or less.

Note 4. Income tax expense

	2018		2017
	US$’000		US$’000
Deferred tax	—		—
Current tax	—		—
Aggregate income tax expense	—		—
Effective tax rate:
Net Loss before income tax expense	(66,103	)	(9,817	)
Tax at the statutory tax rate of 21% (2017: 34%)	(13,882	)	(3,338	)
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Temporary differences	(166	)	(293	)
Permanent differences	24		12
Disallowable expenses	12,899		1,979
Unutilized losses carried forward	1,125		1,886
Effect on unutilized losses of future reduction in tax rate to 21%	—		(246	)
Income tax expense	—		—

Based on historical losses and the expectation of future losses, management cannot conclude that it is more likely than not that the net deferred tax assets will be fully realizable. Accordingly, the Group has provided a full valuation allowance against its net deferred tax assets for the financial years ended 31 December 2018 and 31 December 2017.

As of 31 December 2018, the Group had federal and state net operating loss carry forwards of approximately $29.8 million and $4.8 million (2017: $27.8 million and $4.5 million), respectively, available to reduce future taxable income, if any. The net operating loss carry forwards will expire beginning 2032 through 2037 for both federal and California income tax purposes. Beginning in 2018 Federal net operating losses are carried forward indefinitely.

As of 31 December 2018, the Group had federal and state research credit carry forwards of $0.4 million (2017: $Nil) and $1.0 million (2017: $0.7 million). Federal tax credits begin to expire in 2037. The state tax credits have no expiration date.

26

Notes to the Consolidated Financial Statements

Note 4. Income tax expense (continued)

Utilization of the net operating loss carry forwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.

Accounting policy for Income tax

The income tax expense for the year comprises current income tax expenses and deferred tax expenses.

Current income tax expense charged to the profit or loss in the tax payable on taxable income for the current period. Current tax liabilities are measured as the amounts expected to be paid to the relevant tax authority using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realized, or the liability is settled, and their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability.

Deferred tax assets relating to temporary differences and unused tax losses are only recognized to the extent that it is probably that future taxable profit will be available against which the benefits of the deferred tax asset can be utilized.

Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.

Critical accounting judgements, estimates and assumptions

The Group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Group recognizes liabilities for anticipated tax audit issues based on the Group’s current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made.

27

Notes to the Consolidated Financial Statements

Note 5. Net loss per share

Basic net loss per share has been computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is calculated by dividing net loss by the weighted-average number of shares of common stock and potential dilutive securities outstanding during the period.

Because the Group is in a net loss position, diluted net loss per share excludes the effects of common stock equivalents consisting of stock options, preferred shares and warrants, which are all anti-dilutive. The total number of shares subject to stock options (2017: options, preferred shares and warrants) were excluded from consideration in the calculation of diluted net loss per share.

	2018		2017
	US$’000		US$’000
Net loss attributable to ordinary equity holders of Pivotal Systems Corporation used in calculating basic and diluted loss per share:	(66,103	)	(9,817	)

	Number	Number
Weighted average number of ordinary shares for basic loss per share	63,574,081	14,827,961
Effect of dilution of share options, preferred stock and warrants	—	—
Weighted average number of ordinary shares adjusted for the effect of dilution	63,574,081	14,827,961

	$ per share		$ per share
Basic and diluted loss per share	(1.04	)	(0.66	)

28

Notes to the Consolidated Financial Statements

Note 6. Operating segments

For operating purposes, the Group is organized into one main operating segment, focused on the technological design, development, manufacture and sale of high-performance gas flow controllers.

All the activities of the Group are interrelated, and each activity is dependent on the others. Accordingly, all significant operating disclosures are based upon analysis of the Group as one segment. The financial results from this segment are equivalent to the financial statements of the Group as a whole.

Pivotal Systems Corporation derives all of the revenue of the Group and maintains the majority of the assets in the United States.

Geographically, the Group has the following revenue information based on the location of its customers:

	2018		2017
	US$’000		US$’000
Asia	15,540		10,296
North America	4,788		5,150
	20,328		15,446
The following customers accounted for more than 10% of revenues:
Customer A	47	%	46	%
Customer B	34	%	17	%
Customer C	15	%	33	%
	96	%	96	%

Note 7. Current assets - cash and cash equivalents

	2018	2017
	US$’000	US$’000
Cash at bank	17,489	1,148
	17,489	1,148

There are no restrictions or limitations on the use of cash and cash equivalents.

Accounting policy for cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less or that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

29

Notes to the Consolidated Financial Statements

Note 7. Current assets - cash and cash equivalents (continued)

Reconciliation of Cash Outflow from Operating Activities with Net Loss for the year

	2018		2017
	US$’000		US$’000
Loss for the year	(66,103	)	(9,817	)
Depreciation expense	342		136
Amortization expense	2,818		2,471
Share based payment expense reported as operating activities	70		44
Fair value remeasurement of financial liabilities	61,976		5,820
Put option reported as operating activity	(315	)	—
Interest paid reported as financing activity	120		—
Foreign exchange gain	(81	)	—
Change in operating assets and liabilities
(Increase)/decrease in trade and other receivables	(1,307	)	439
Increase in inventories	(1,660	)	(1,832	)
Increase in other current assets	(215	)	(26	)
Increase in trade and other payables	889		1,656
Increase in employee benefits	82		76
(Decrease)/increase in provisions	(349	)	161
Net Cash Outflow from operating activities	(3,733	)	(872	)

Non-cash transactions:

Non-cash Financing activities in the Consolidated Statement of Cashflows includes $102.14 million relating to the conversion of preferred shares and warrants into common stock as a result of the Group’s Initial Public Offering. Refer Note 17: Financial Liabilities.

Note 8. Current assets - trade and other receivables

	2018	2017
	US$’000	US$’000
Trade receivables	3,570	2,563
Other receivables	300	—
	3,870	2,563

Accounting policy for trade and other receivables

Trade receivables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method, less any provision for impairment. Trade receivables generally have 30 to 90-day payment terms.

30

Notes to the Consolidated Financial Statements

Note 8. Current assets - trade and other receivables (continued)

Collectability of trade receivables is reviewed on an ongoing basis in accordance with the expected credit loss (“ECL”) model.

The ECL assessment completed by the Group as at 31 December 2018 has resulted in an immaterial credit loss and no impairment allowance has been recognized by the Group (2017: $Nil).

Note 9. Current assets - inventories

	2018		2017
	US$’000		US$’000
Raw materials	5,187		1,488
Work in progress	845		915
Finished goods	804		2,584
Inventories - gross	6,836		4,987
Less: Provision for impairment	(489	)	(300	)
Inventories - net	6,347		4,687

The prior year comparative includes $0.61 million write off to cost of goods sold resulting from the supply of faulty units and provision variances. There were no write offs noted for the 2018 financial year.

Accounting policy for inventories

Raw materials, work in progress and finished goods are stated at the lower of cost and net realizable value on a ‘first in first out’ basis. Cost comprises of direct materials and delivery costs, direct labor, import duties and other taxes, an appropriate proportion of variable and fixed overhead expenditure based on normal operating capacity. Costs of purchased inventory are determined after deducting rebates and discounts received or receivable.

The Group’s inventories are concentrated in high-technology parts and components that may be specialized in nature or subject to rapid technological obsolescence. These factors are considered in estimating required reserves to state inventories at the lower of cost or net realizable value.

Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Critical accounting judgements, estimates and assumptions

The provision for impairment of inventories assessment requires a degree of estimation and judgement. The level of the provision is assessed by taking into account the recent sales experience, the ageing of inventories and other factors that affect inventory obsolescence.

Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are in included in cost of goods sold.

31

Notes to the Consolidated Financial Statements

Note 10. Current assets - other assets

	2018	2017
	US$’000	US$’000
Prepaid expenses	325	109
Other assets	9	10
	334	119

Note 11. Non-current assets - property, plant and equipment

	2018		2017
	US$’000		US$’000
Leasehold improvements - at cost	31		11
Less: Accumulated depreciation	(13	)	(11	)
Net book value leasehold improvements	18		—
Plant and equipment - at cost	1,553		1,353
Less: Accumulated depreciation	(1,269	)	(1,012	)
Net book value plant and equipment	284		341
Net book value property, plant and equipment	302		341

	Leasehold		Plant &
	improvements		equipment		Total
	US$’000		US$’000		US$’000
Balance at 1 January 2017	—		125		125
Additions	—		385		385
Depreciation expense	—		(169	)	(169	)
Balance at 31 December 2017	—		341		341
Additions	20		323		343
Cost of assets impaired	—		(123	)	(123	)
Accumulated depreciation of assets impaired	—		120		120
Depreciation expense	(2	)	(377	)	(379	)
Balance at 31 December 2018	18		284		302

32

Notes to the Consolidated Financial Statements

Note 11. Non-current assets - property, plant and equipment (continued)

	2018	2017
Reconciliation of depreciation expense	US$’000	US$’000
Depreciation allocated to capitalized development costs	37	33
Depreciation expensed to research & development costs	4	—
Depreciation expensed to selling & marketing	4	2
Depreciation expensed to general & administrative	15	33
Depreciation expensed to cost of goods sold	319	101
Total depreciation expense	379	169

Accounting policy for property, plant and equipment

Plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the assets carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

Plant and equipment are depreciated, and leasehold improvements are amortized, over their estimated useful lives using the straight-line method.

The expected useful lives of the assets are as follows:

Plant & equipment	2-5 years
Leasehold improvements	over the remaining lease term

The residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date or when there is an indication that they have changed.

A carrying amount is written down immediately to its recoverable amount if the carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the statement profit or loss and other comprehensive income.

Critical accounting judgements, estimates and assumptions

Estimation of useful lives of assets

The Group determines the estimated useful lives and related depreciation and amortization charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortization charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down.

33

Notes to the Consolidated Financial Statements

Note 12. Non-current assets - intangible assets

	2018		2017
	US$’000		US$’000
Patent - at cost	50		50
Less: Accumulated amortization	(42	)	(23	)
	8		27
Capitalized development - at cost	18,845		15,298
Less: Accumulated amortization	(9,775	)	(6,976	)
	9,070		8,322
Net written down value intangible assets	9,078		8,349

			Capitalized
	Patent		Development		Total
	US$’000		US$’000		US$’000
Balance at 1 January 2017	47		7,673		7,720
Additions	—		3,100		3,100
Amortization expense	(20	)	(2,451	)	(2,471	)
Balance at 31 December 2017	27		8,322		8,349
Additions	—		3,547		3,547
Amortization expense	(19	)	(2,799	)	(2,818	)
Balance at 31 December 2018	8		9,070		9,078

Accounting policy for intangible assets

Development costs

Development costs on an individual project are recognized as an intangible asset when the Group can demonstrate:

·The technical feasibility of completing the intangible asset so that the asset will be available for use or sale.

·Its intention to complete and its ability and intention to use or sell the asset.

·How the asset will generate future economic benefits.

·The availability of resources to complete the asset.

·The ability to measure reliably the expenditure during the development.

34

Notes to the Consolidated Financial Statements

Note 12. Non-current assets - intangible assets (continued)

The costs that are eligible for capitalization of development costs are the following:

·Hardware and Software engineers’ compensation for time directly attributable to coding the software.

·An allocated amount of direct costs, such as overhead related to programmers and the facilities they occupy.

·Costs associated with testing the software for market (i.e. alpha, beta tests).

·Borrowing costs.

·Patents acquisition and registration costs (patents, application fees, and legal fees).

·Other direct developing costs that are incurred to bring the hardware with embedded software to market.

Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortization and accumulated impairment losses. Amortization of the asset begins when development is complete and the asset is available for use. Development costs are amortized on a straight-line basis over the finite life based on the period of expected future sales from the related project which is 5 years. Amortization is recorded in profit or loss.

During the period of development, the asset is tested for impairment annually. At the end of the year, the Group has considered indicators of impairment of the intangible assets and determined there were none.

Patents and trademarks

Significant costs associated with patents and trademarks are deferred and amortized on a straight-line basis over the period of their expected benefit, being their finite life of 5 years.

Critical accounting judgements, estimates and assumptions

Capitalized development costs

The Group capitalizes development costs for a project in accordance with the accounting policy. Initial capitalization of cost is based on management’s judgement that technological and economic feasibility is confirmed. In determining the amounts to be capitalized, management makes assumptions regarding the expected future cash generation of the project, discount rates to be applied and the expected period of the benefits.

Impairment of intangible assets

The Group assesses impairment of intangible assets other than goodwill at each reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions.

35

Notes to the Consolidated Financial Statements

Note 13. Current liabilities - trade and other payables

	2018	2017
	US$’000	US$’000
Trade payables	4,522	2,771
Accrued expenses	814	1,621
	5,336	4,392

Accounting policy for trade and other payables

These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortized cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition.

Note 14. Current provisions - employee benefits

	2018		2017
	US$’000		US$’000
Provision for annual leave	423		341
	423		341
Movement in provision for annual leave:
Opening balance	341		265
Additions	201		198
Leave taken	(119	)	(122	)
Closing balance	423		341

Accounting policy for employee benefits

Provisions for wages and salaries, including non-monetary benefits and annual leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the balances are settled.

36

Notes to the Consolidated Financial Statements

Note 15. Current provisions - warranty provision

	2018		2017
	US$’000		US$’000
Provision for warranty	110		459
	110		459
Movement in provision for warranty:
Opening balance	459		298
Additions	110		509
Expired warranties	(459	)	(348	)
Closing balance	110		459

Accounting policy for provisions

The provision represents the estimated warranty claims in respect of products sold which are still under warranty at the reporting date. The provision is estimated based on historical warranty claim information, sales levels and any recent trends that may suggest future claims could differ from historical amounts.

Critical accounting judgements, estimates and assumptions

In determining the level of provision required for warranties the Group has made judgements in respect of the expected performance of the products, the number of customers who will actually claim under the warranty and how often, and the costs of fulfilling the conditions of the warranty. The provision is based on estimates made from historical warranty data associated with similar products and services.

37

Notes to the Consolidated Financial Statements

Note 16. Borrowings

Borrowings includes the following liabilities carried at amortized cost:

	2018	2017
	US$’000	US$’000
Current
Financial liability with Bridge Bank	—	3,008
	—	3,008

	Square One
	Bank		Bridge Bank		Total
	US$’000		US$’000		US$’000
Balance as at 1 January 2017 (1)	2,482		—		—
Financial liability with Bridge Bank (2)	—		2,500		2,500
Financial liability with Bridge Bank (2)	—		925		925
Interest accrued on facility	58		106		164
Interest paid on facility	(58	)	(106	)	(164	)
Repayment of facility (2)	—		(417	)	(417	)
Repayment of facility (1)	(2,482	)	—		(2,482	)
Balance as at 31 December 2017	—		3,008		3,008
Financial liability with Bridge Bank (2)	—		1,917		1,917
Interest accrued on facility	—		152		152
Interest paid on facility	—		(152	)	(152	)
Repayment of facility (2)	—		(4,925	)	(4,925	)
Balance as at 31 December 2018	—		—		—

(1)Square One Bank Loan

In July 2015, the Company entered into a Debt Facility Agreement with Square One Bank for $2.5 million for a term of 24 months with an interest rate of the Bank’s prime rate of 1.75% and $1.5 million line of credit with an interest rate of the Bank’s prime rate plus 1%. Interest only payments were required for the first 24 months with a reduction in principal due thereafter.

The Company issued warrants to purchase 43,103 shares of Series C preference shares in connection with the Debt Facility agreement. The warrants were converted to shares prior to the completion of the IPO. Refer Note 17 (a)(3).

The loan was repaid on 4 March 2017.

(2)Bridge Bank Loan

On 31 March 2017, the Company entered into a Debt Facility Agreement with Bridge Bank for a first tranche of $2.5 million and an additional amount of $925,000 subject to the achievement of certain funding milestones which were completed in September 2017. Interest accrued at a per annum rate equal to 2% above the Prime Rate.

38

Notes to the Consolidated Financial Statements

Note 16. Borrowings (continued)

The Company also held a $ 1.5million AR line of credit with Bridge Bank with an interest rate of the Bank’s prime rate plus 1.25%. The facility term provided interest only payments until 31 August 2017 with repayments of principal and interest for 24 months thereafter.

On 8 January 2018, the Company amended the loan agreement with Bridge Bank, allowing the Company to borrow an aggregate of $4.0 million. An additional advance of $1.9 million was made to the Company on 9 January 2018. The amended agreement acknowledged the Company was not in compliance with their financial covenants as of 30 November 2017 and offered a waiver on the default.

The Bridge Bank loan was secured over all personal property of the Company, whether presently existing or hereafter created or acquired, as per the loan agreement.

The loan was repaid on 31 July 2018 and incurred an early payment fee of $0.12 million.

Accounting policy for Borrowings

Loans and borrowings are initially recognized at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortized cost using the effective interest method.

Borrowing costs are capitalized as part of the cost of a qualifying asset when it takes a substantial period of time to get ready for its intended use or sale. The Group capitalized borrowing costs for an internally generated intangible asset in the development phase since 2015. The interest capitalization rate is applied only to costs that themselves have been capitalized as development costs.

Note 17. Current liabilities - financial liabilities

	2018	2017
	US$’000	US$’000
Warrant liability at fair value (a)	—	8,082
Preferred stock at fair value (b)	—	30,927
	—	39,009

39

Notes to the Consolidated Financial Statements

Note 17. Current liabilities - financial liabilities (continued)

(a)Warrants on Issue and Warrant Liability at Fair Value

	Common		Series C		Series D
	Stock B		Preferred		Preferred		Total		Total
	Number		Number		Number		Number		$’000
As at 1 January 2017	21,824,332		43,103		8,520,148		30,387,583		6,959
Converted to common stock (1) (i)	(2,212,822	)	—		—		(2,212,822	)	(828	)
Warrants issued (2) (i)	—		—		193,826		193,826		14
Converted to preferred stock (2) (ii)	—		—		(363,068	)	(363,068	)	(33	)
Fair value remeasurement of warrants on issue	—		—		—		—		1,970
As at 31 December 2017	19,611,510		43,103		8,350,906		28,005,519		8,082
Converted to common stock (1) (ii)	(1,418,734	)	—		—		(1,418,734	)	(531	)
Warrants issued (2) (iii)	—		—		258,435		258,435		24
Warrants bought back on exercise of put option (2) (iv)	—		—		(452,261	)	(452,261	)	(315	)
Converted to preferred stock (2) (v)	—		—		(2,871,502	)	(2,871,502	)	(261	)
Fair value remeasurement of warrants on issue	—		—		—		—		21,615
Shares surrendered for cashless exercise (3)	(13,041	)	(35,842	)	(2,639,000	)	(2,687,883	)	—
Converted to common stock (3)	(18,179,735	)	(7,261	)	(2,646,578	)	(20,833,574	)	(28,614	)
As at 31 December 2018	—		—		—		—		—

(1)Class B Common Stock Warrants

As at 1 January 2017, 21,824,332 shares of Class B Common Stock at an exercise price of $0.001 per share were on issue in connection with secured note financing agreement executed in February 2016. These warrants were exercisable at any time prior to seven years from the issuance date and were valued at their fair value using the Black Scholes model.

(i)On 20 January 2017, 2,212,822 Class B Common Stock Warrants were exercised at the exercise price of $0.001 per share. This resulted in a reduction in the fair value of the warrants of $0.83 million.

(ii)On 25 January 2018, 1,418,734 Class B Common Stock Warrants were exercised at the exercise price of $0.001 per share, resulting in a reduction in the fair value of the warrants of $0.53 million.

40

Notes to the Consolidated Financial Statements

Note 17. Current liabilities - financial liabilities (continued)

(2)Series D Preferred Stock Warrants

As at 1 January 2017, 8,520,148 Series D Preferred Stock Warrants to purchase 8,520,148 shares of Series D Preferred Stock were on issue at an exercise price of $0.6965 per share. These warrants were exercisable at any time prior to 6 September 2023 and were valued at their fair value using the Black Scholes model.

(i)On 31 March 2017, in connection with the Loan and Security Agreement with Bridge Bank, the Company issued 193,826 of Series D Preferred Stock at an exercise price of $0.6965 per share.

(ii)On 24 August 2017, 363,068 Series D Preferred Stock Warrants were exercised at the exercise price of $0.6965 per share. This resulted in a reduction in the fair value of the warrants of $32,955.

(iii)On 8 January 2018 and 16 April 2018, the Company issued 172,290 and 86,145 Series D Preferred Stock Warrants (respectively) in connection with the Loan and Security Agreement with Bridge Bank at an exercise price of $0.6965 per share, being the total number of warrants held by Bridge bank to 452,261.

(iv)The warrants were exercisable at any time prior to 31 March 2027 and included a put option under which the Company was required to purchase all rights that the holder has for a cash payment in the case of certain events prior to the expiration date and at the request of warrant holder. This put option was exercised by the Bridge Bank and the Company paid $0.315 million to Bridge Bank on 29 June 2018.

(v)On 18 May 2018, 2,871,502 Series D Preferred Stock Warrants were exercised at the exercise price of $0.6965 per share. This resulted in a reduction in the fair value of the warrants of $0.26 million.

(3)Automatic exercise of Series C and Series D Preferred Stock Warrants and Class B Common Stock Warrants into shares.

All Series C and Series D Preferred Stock Warrants and Class B Common Stock Warrants in existence immediately prior to the allotment of CDIs under the IPO were converted to Common Stock Shares in the Company in accordance with their terms. Prior to this occurring, all Warrants were converted to Common and Preferred Stock upon completion of a cashless exercise.

41

Notes to the Consolidated Financial Statements

Note 17. Current liabilities - financial liabilities (continued)

(b)Preferred Stock

	Series Seed		Series A		Series B		Series C		Series D
	Preferred		Preferred		Preferred		Preferred		Preferred		Total		Total
	Stock		Stock		Stock		Stock		Stock		Number		US$000
Balance at 1 January 2017	1,702,416		16,576,103		15,050,939		4,716,784		12,780,219		50,826,462		26,806
Issued on conversion of warrants (1) (i)	—		—		—		—		363,068		363,068		229
Fair value adjustment	—		—		—		—		—		—		3,892
Balance at 31 December 2017	1,702,416		16,576,103		15,050,939		4,716,784		13,143,287		51,189,530		30,927
Issued on conversion of warrants (1) (ii)	—		—		—		—		2,871,502		2,871,502		3,905
Fair value adjustment	—		—		—		—		—		—		38,693
Conversion of Preferred Stock to Common Stock (2)	(1,702,416	)	(16,576,103	)	(15,050,939	)	(4,716,784	)	(16,014,789	)	(54,061,032	)	(73,523	)
Balance at 31 December 2018	—		—		—		—		—		—		—

(1)Series D Preferred Stock

(i)On 24 August 2017, 363,068 shares of Series D Preferred Stock were issued with a par value of $0.00001 via conversion of a warrant and cash payment. The fair value of $0.23 million was determined using the Black Scholes model.

(ii)On 18 May 2018, 2,871,502 shares of Series D Preferred Stock were issued with a par value of $0.00001 via conversion of a warrant and cash payment. The fair value of $3.9 million was determined using the Black Scholes model.

(2)Automatic conversion of Series Seed, A, B C, and D Preferred Stock to Common Stock.

All shares of Preferred Stock in existence immediately prior to the allotment of CDIs under the IPO were converted into Common Stock Shares in the Company in accordance with their terms.

Accounting policy for financial liabilities

Common stock warrants and preferred stock warrants are derivatives classified as a financial liability. Preferred stock are financial liabilities designated at fair value through profit or loss considering that the preferred stock conversion feature is an embedded derivative whose value increases with the value of the common stock. Formal valuations have been obtained for these instruments and have been communicated to key management personnel.

During all financial year ends included in the financial statements, the fair value of the common stock warrants, preferred stock warrants and preferred stock is determined using the Black Scholes model, which requires the use of subjective assumptions including volatility, expected term, risk free rate and the fair value of the underlying common stock.

42

Notes to the Consolidated Financial Statements

Note 17. Current liabilities - financial liabilities (continued)

Promissory notes are initially recognized at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortized cost using the effective interest method.

Borrowing costs on promissory notes are capitalized as part of the cost of a qualifying asset when it takes a substantial period of time to get ready for its intended use or sale. The Group capitalized borrowing costs for an internally generated intangible asset in the development phase since 2015. The interest capitalization rate is applied only to costs that themselves have been capitalized as development costs.

Critical accounting judgements, estimates and assumptions

Critical accounting judgements are required to be made by management in determining as to whether the above mentioned financial instruments should be classified as debt or equity. The factors entering in to the determination for each instrument are as follows:

Common and preferred stock warrants

The terms of the common stock warrant and preferred stock warrant purchase agreements stipulate that the holder has an option to ‘Net Exercise’ the warrant if the fair market value of one exercise share is greater than the exercise price. If this option is chosen, no cash is paid by the holder on exercise, and a further calculation is performed to determine how many shares the holder is entitled to. As a result of this, the warrants fail the fixed-for-fixed rule with regards to being classified as equity, and as such, have been recognized as a financial liability.

Preferred stock

The terms of the certificate of incorporation (COI) of the Company stipulate that preferred stock holders are entitled to vote, and that they vote together with the common stock holders as a single class, as though they had already converted their preferred stock. The preferred stock holders control the board as a result of this. The COI also stipulates that in the event of any voluntary or involuntary liquidation, deemed liquidation, dissolution, winding up of the Company, the preferred stock holders are entitled to redeem their preferred stock. Given that the preferred stock holders control the board; management have acknowledged that they could force an event which results in liquidation. As a result of this, redemption is at the option of the holder of the instrument, and as such they have been classified as a financial liability.

43

Notes to the Consolidated Financial Statements

Note 18. Equity - Contributed equity

	2018	2018	2017	2017
	Number	US$’000	Number	US$’000
Shares of Common Stock	110,998,864	170,818	15,056,268	43,263
	110,998,864	170,818	15,056,268	43,263

(a)Movements in Shares of Common Stock

	Shares
	Number	US$’000
Balance as at 1 January 2017	12,708,006	42,405
Shares issued on exercise of warrants	2,212,822	825
Shares issued on exercise of options	135,440	33
Balance as at 31 December 2017	15,056,268	43,263
Shares issued on exercise of warrants (Note 17 (a))	1,418,734	532
Shares issued on exercise of options (Note 20)	274,424	61
Shares issued on conversion of warrant prior to IPO (1) (Note 17)	20,833,567	28,614
Shares issued on conversion of preferred stock prior to IPO (1) (Note 17(b))	54,061,032	73,523
	91,644,025	145,993
New shares issued on completion of IPO (2)	19,354,839	26,586
Share issue costs related to listing on the ASX	—	(1,761	)
Balance as at 31 December 2018	110,998,864	170,818

Terms and conditions of contributed equity

Common Stock

The holders of shares of common stock participate in dividends and the proceeds on the winding up of the Company in proportion to the number of and amounts paid on the shares held. The fully paid shares of common stock have a par value of $0.00001 and the Company has a limited amount of authorized capital of 370,000,000 shares, 250,000,000 of which are designated “Common Stock” and 120,000,000 of which are designated “Preferred Stock”.

The holders of Common Stock are entitled to one vote for each share of common stock held at the meetings of stockholders (and written actions in lieu of meetings). There is no cumulative voting. They are also entitled to receive, when, as and if declared by the Board, out of any assets of the Company legally available therefor, any dividends as may be declared from time to time by the Board.

44

Notes to the Consolidated Financial Statements

Note 18. Equity - Contributed equity (continued)

In connection with the Company’s IPO of CDIs, with each CDI representing an interest in one share of Common Stock, certain stockholders entered into an escrow agreement with the Company under which the stockholder agreed, among other things, to certain restrictions and prohibitions for a period of time (the “Lock-Up Period”), from engaging in transactions in the shares of Common Stock (including Common Stock in the form of CDIs), shares of Common Stock that may be acquired upon exercise of a stock option, warrant or other right, and shares of Common Stock that arise from such Common Stock (collectively, the “Restricted Securities”). The Restricted Securities shall automatically be converted into shares of Common Prime Stock, on a one for one basis if the Company determines, in its sole discretion, that the stockholder breached any term of the stockholder’s escrow agreement or breached the official listing rules of the ASX relating to the Restricted Securities. Any shares of Common Stock converted to Common Prime Stock under these terms should be automatically converted back into shares of Common Stock, on a one for one basis, upon the earlier to occur of (i) the expiration of the Lock-Up Period in the escrow agreement or the (ii) breach of the listing rules being remedied, as applicable.

(1)Immediately prior to the completion of an IPO on the Australian Securities Exchange, the Company completed the following changes to its capital structure:

a.Reclassification of existing Class B Common stock as Common Stock

b.Conversion of the existing Series Seed, A, B, C and D Preferred Stock into shares of Common Stock

c.Cancellation of warrants where applicable

d.Automatic exercise of the Series C, Series D and Class B Common Stock warrants into shares of Common Stock.

(2)The Company completed the IPO on the Australian Securities Exchange on 2 July 2018 with the issue of 19,354,839 new shares.

Accounting policy for contributed equity

Shares of common stock are classified as equity.

Incremental costs directly attributable to the issue of new shares, warrants or options are shown in equity as a deduction, net of tax, from the proceeds.

45

Notes to the Consolidated Financial Statements

Note 19. Capital management

Capital managed by the Board comprises contributed equity totaling $170.82 million (2017: $43.26 million). When managing capital, management’s objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity. Managed capital is disclosed on the face of the statement of financial position and comprises contributed equity and reserves.

Management may adjust the capital structure to take advantage of favorable costs of capital or higher returns on assets. As the market is constantly changing, management may issue new shares or sell assets to raise cash, change the amount of dividends to be paid to shareholders (if at all) or return capital to shareholders.

During the financial year ending 31 December 2018, management did not pay a dividend and does not expect to pay a dividend in the foreseeable future.

The Company encourages employees to be shareholders through the Long Term Incentive Plan.

There were no changes in the Group’s approach to capital management during the year. Risk management policies and procedures are established with regular monitoring and reporting.

Neither the Group nor its subsidiaries are subject to externally imposed capital requirements.

Note 20. Share-based payments

Share based payment reserve

The reserve is used to recognize the value of equity benefits provided to employees, consultants and directors as part of their remuneration, and other parties as part of their compensation for services.

				Share Based
	WAEP	Share options		Payment Reserve
	$	Number		US$’000
Opening reserve 1 January 2017	0.23	11,771,375		1,135
Expense in the period		—		44
Granted	0.34	2,765,500		—
Exercised	0.23	(135,440	)	—
Forfeited	0.23	(71,022	)	—
Expired	0.23	(498,433	)	—
Closing reserve 31 December 2017	0.26	13,831,980		1,179
Expense in the period		—		101
Granted	0.76	1,684,000		—
Exercised	0.22	(274,424	)	—
Forfeited	0.31	(350,222	)	—
Expired	0.26	(119,947	)	—
Closing reserve 31 December 2018	0.31	14,771,387		1,280

46

Notes to the Consolidated Financial Statements

Note 20. Share-based payments (continued)

Share based payment expense:

	2018	2017
	US$’000	US$’000
Options issued to directors, employee and consultants	101	44
	101	44

The Company grants stock options to its employees, directors, and consultants for a fixed number of shares with an exercise price equal to or greater than the fair value of the common stock at the date of grant and expire no later than 10 years from the date of grant.

The 2003 Equity Incentive Plan expired in 2012 however 27,607 (2017: 27,962) unexercised options are still outstanding as at 31 December 2018.

The 2012 Equity Incentive Plan (the “Plan”) was adopted on 29 June 2012 and authorized the Company to grant incentive stock options and non-statutory stock options to employees, directors, and consultants for up to 20,220,222(2017: 16,720,222) shares of common stock. Incentive Stock Options (ISO) may be granted only to employees. Nonqualified stock options may be granted to employees, directors and consultants. The Company issues new shares of common stock upon the exercise of stock options.

The Share Plan grants are based on employee’s contribution and commitment to the Company over a period of several years plus the ability of the employees to impact and influence the outcome and direction of the organization in the future. The shares under the Share Plan which are not yet vested will be accounted for as non-cash expense over the remainder of the vesting period.

47

Notes to the Consolidated Financial Statements

Note 20. Share-based payments (continued)

Option Pricing Model

The fair value of the equity-settled share options granted throughout the year is estimated as at the date of grant using a Black Scholes Option Pricing Model.

The following tables list the inputs to the models used for the valuation of options granted in the year ended 31 December 2018.

	Grant date
	15-Feb-18		28-Feb-18		28-Feb-18		29-Mar-18		15-Apr-18		15-Apr-18		1-Oct-18
Number of options issued	25,000		800,000		150,000		84,000		170,000		60,000		395,000
Fair value at measurement date US$	0.158		0.141		0.141		0.216		0.158		0.216		0.79
Share price at grant date US$	0.37		0.37		0.37		0.37		0.37		0.37		2.05
Exercise price US$	0.37		0.37		0.37		0.37		0.37		0.37		2.05
Expected volatility	46	%	46	%	46	%	46	%	46	%	46	%	45	%
Vesting conditions	Type 1		Type 4		Type 5		Type 3		Type 1		Type 2		Type 1

Vesting conditions

Type 125% of the options vest 12 months from vesting date, with the remaining 75% vesting on a monthly basis over the following 36 months.

Type 2Options vest on a monthly basis over 48 months from vesting start date.

Type 3Options vest on a monthly basis over 36 months from vesting start date.

Type 4Options vest in four equal tranches subject to (a) the achievement individually of Milestones and each tranche vesting 25% per year on each anniversary of the grant date, and subject to Single-Trigger change of control conditions.

Type 5Options vest in two equal tranches subject to achievement of certain Milestones and each tranche vesting 25% per year on each anniversary of the grant date.

The weighted average remaining contractual life for the share options outstanding at 31 December 2018 is 6.34 years (2017: 7.15 years). The weighted average fair value of options granted during the year was $0.31 (2017: $0.05). The range of exercise prices for options outstanding at the end of the current and prior year was $0.1 to $38.35.

The expected dividend yield for all options granted during these periods was nil. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome.

48

Notes to the Consolidated Financial Statements

Note 20. Share-based payments (continued)

Accounting policy for share-based payments

The Company provides benefits to employees (including Directors) in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions) via the 2017 Omnibus Incentive Plan (“the Plan”).

The terms of the share options are as determined by the Board. The cost of these equity-settled transactions to employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by using a Black & Scholes model.

In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of the shares of the Company (market conditions) if applicable.

The cost of equity-settled transactions is recognized, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled (the vesting period), ending on the date on which the relevant employees become fully entitled to the award (the vesting date).

At each subsequent reporting date until vesting, the cumulative charge to the statement of profit or loss and other comprehensive income is the product of (i) the grant date fair value of the award; (ii) the current best estimate of the number of awards that will vest, taking into account such factors as the likelihood of employee turnover during the vesting period and the likelihood of non-market performance conditions being met; and (iii) the expired portion of the vesting period.

The charge to the statement of profit or loss and other comprehensive income for the period is the cumulative amount as calculated above less the amounts already charged in previous periods. There is a corresponding credit to equity.

Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards vest than were originally anticipated to do so. Any award subject to a market condition is considered to vest irrespective of whether or not the market condition is fulfilled, provided that all other conditions are satisfied.

If a non-vesting condition is within the control of the Company or the employee, the failure to satisfy the condition is treated as a cancellation. If a non-vesting condition within the control of neither the Company nor employee is not satisfied during the vesting period, any expense for the award not previously recognized is recognized over the remaining vesting period, unless the award is forfeited.

Critical accounting judgements, estimates and assumptions

The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using the Black Scholes option pricing model, using the assumptions noted above. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities in the next annual reporting period but may impact expenses and equity.

49

Notes to the Consolidated Financial Statements

Note 21. Financial instruments - Fair value

Accounting classification and fair values

The Group’s financial instruments consist mainly of deposits with banks, accounts receivable and payable and leases. The directors consider that the fair value of financial assets and liabilities approximate their carrying amounts as at 31 December 2018.

As at 31 December 2017, and immediately prior to listing on 2 July 2018, the Company held Warrants and Preferred Stock which were considered to be a derivative financial instrument and measured at fair value as at those dates based on formation valuations.

The following table shows the carrying amounts of financial assets and financial liabilities measured at fair value, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

	Other			Fair
	financial		Fair value	value	Fair value	Fair value
	liabilities	Total	Level 1	Level 2	Level 3	Total
2018	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
Warrant liability	—	—	—	—	—	—
Preferred stock liability	—	—	—	—	—	—
Total	—	—	—	—	—	—

	Other			Fair
	financial		Fair value	value	Fair value	Fair value
	liabilities	Total	Level 1	Level 2	Level 3	Total
2017	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
Warrant liability	8,082	8,082	—	—	8,082	8,082
Preferred stock liability	30,927	30,927	—	—	30,927	30,927
Total	39,009	39,009	—	—	39,009	39,009

Fair values of warrant and preferred stock liabilities do not have quoted prices and have been determined based on professional appraisals that would be classified as Level 3 of the fair value hierarchy as defined in AASB 13 Fair Value Measurement.

50

Notes to the Consolidated Financial Statements

Note 22. Commitments

	2018	2017
	US$’000	US$’000
Operating Lease commitments
Committed at the reporting date but not recognized as liabilities:
Within one year	168	169
One to five years	126	308
More than five years	—	—
	294	477
Rental expense on operating leases:
Minimum lease payments	168	162

Operating lease commitments includes contracted amounts for warehouses and offices under non-cancellable operating leases expiring within one to three years with, in some cases, options to extend. The lease has various escalation clauses. On renewal, the terms of the lease are renegotiated.

Note 23. Contingent liabilities and contingent assets

The Group has no material contingent liabilities or contingent assets as at 31 December 2018 (2017: Nil).

Note 24. Financial Risk Management

The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, price risk and interest rate risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the financial performance of the Group. The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate and other price risks, ageing analysis for credit risk and liquidity risk.

Risk management is carried out by senior finance executives (“Finance”). Risk management includes identification and analysis of the risk exposure of the Group and appropriate procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within the Group’s operating units. Finance reports to the Board on a quarterly basis.

51

Notes to the Consolidated Financial Statements

Note 24. Financial Risk Management (continued)

The Group financial instruments consist mainly of deposits with banks, accounts receivables and payables, financial liabilities and borrowings.

	2018	2017
	US$’000	US$’000
Financial assets
Cash and cash equivalents	17,489	1,148
Trade and other receivables	3,870	2,563
	21,359	3,711
Financial liabilities
Trade and other payables	5,336	4,392
Financial liabilities	—	39,009
Borrowings	—	3,008
	5,336	46,409

Interest rate risk

The Group’s exposure to interest rate risk occurs through its deposits and borrowings with banks which are exposed to variable interest rates. The Group does not use derivatives to mitigate this exposure. The Group adopts a policy of ensuring that as far as possible it maintains excess cash and cash equivalents in interest bearing accounts.

The average interest rate on cash balances is 0.01% (2017: 0%). The average interest rate on borrowings was 7% at the time the loans were fully repaid on 31 July 2018.

Liquidity Risk

Liquidity Risk arises from the possibility that the Group may encounter difficulty in settling its debt or otherwise meeting its obligations related to financial liabilities. The Group manages liquidity by monitoring forecast cash flows and ensuring that adequate liquid cash balances are maintained.

52

Notes to the Consolidated Financial Statements

Note 24. Financial Risk Management (continued)

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements:

				Total
	Less than 6	6 to 12	Between 1	contractual
	months	months	and 2 years	cashflow
2018	US$’000	US$’000	US$’000	US$’000
Trade and other payables	5,336	—	—	5,336
	5,336	—	—	5,336

				Total
	Less than 6	6 to 12	Between 1	contractual
	months	months	and 2 years	cashflow
2017	US$’000	US$’000	US$’000	US$’000
Trade and other payables	4,392	—	—	4,392
Financial liabilities	39,009	—	—	39,009
Borrowings	3,008	—	—	3,008
	46,409	—	—	46,409

Credit Risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group’s cash and cash equivalents and receivables from customers.

Cash and cash equivalents

The Group limits its exposure to credit risk by only investing in liquid securities and only with counterparties that have an acceptable credit rating.

Trade and other receivables

The Group operates primarily in developing, manufacturing and selling of high-performance gas flow controllers and has trade receivables. There is risk that these receivables may not be recovered and the Group monitors its receivables balances and collections on a monthly basis to mitigate any risk. The Group monitors the expected credit loss model and values trade and other receivables accordingly (see Note 8).

53

Notes to the Consolidated Financial Statements

Note 24. Financial Risk Management (continued)

Set out below is the information about the credit risk exposure on the Group’s trade and other receivables.

	Trade and other receivables
	<30 days	30-60 days	61-90 days	>91 days	Total
2018
Estimated total gross carrying amount	1,335	1,295	639	601	3,870
2017
Estimated total gross carrying amount	887	1,003	374	299	2,563

Currency Risk

The Group is exposed to fluctuations in foreign currencies arising from the purchase of goods and services in currencies other than the transacting entity’s functional currency.

The Group completed its listing on the ASX during the year, raising capital and incurring IPO related transactions in Australian dollars (AUD). Funds raised were converted to USD to limit exposures to currency fluctuations.

Operations commenced in the Republic of Korea near the end of the year resulting in transactions being incurred in South Korean Won. As a result, the Group’s statement of financial position can be affected by movements in the USD/KRW exchange rate when translating to the USD functional currency, however this is considered negligible.

Note 25. Related party transactions

Subsidiaries

The Consolidated financial statements include the financial statements of Pivotal Systems Corporation and the following subsidiaries:

	Country of	Beneficial interest
Name	incorporation	2018		2017
Pivotal Systems Korea, Ltd (1)	Republic of Korea	100	%	—
Pivotal SaleCo, Inc. (2)	United States of America	100	%	—

(1)Pivotal Systems Korea, Ltd., was incorporated in South Korea on 16 March 2018 and will be responsible for administration and logistics in relation to shipments from the new Korean Compart manufacturing facility.

(2)Pivotal SaleCo, Inc. was incorporated in the State of Delaware in the United States on 14 May 2018 for the purpose of facilitating the sell down of certain existing shares held by the shareholders of the parent Company under the IPO.

54

Notes to the Consolidated Financial Statements

Note 25. Related party transactions (continued)

Key management personnel

The following persons were identified as key management personnel of Pivotal during the financial year ended 31 December 2018:

John Hoffman	Executive Chairman and Chief Executive Officer
Dr. Joseph Monkowski	Executive Director and Chief Technical Officer
Ryan Benton	Independent Non-Executive Director
Kevin Landis	Non-Executive Director
David Michael	Non-Executive Director
Peter McGregor	Independent Non-Executive Director
Omesh Sharma	Chief Financial Officer

Compensation

The aggregate compensation made to key management personnel of the Group is set out below:

	Short term
	employee	Post employee
	benefits	benefits
	(Salary and	(401k & other	Share based	Total
	fees)	benefits)	payment	2018
2018	US$	US$	US$	US$
John Hoffman	325,000	45,613	10,379	380,992
Dr. Joseph Monkowski	275,000	38,171	10,379	323,550
Ryan Benton	50,000	—	14,119	64,119
Kevin Landis	—	—	—	—
David Michael	—	—	—	—
Peter McGregor	23,975	—	—	23,975
Omesh Sharma	255,000	45,510	6,919	307,429
	928,975	129,294	41,796	1,100,065

	Short term
	employee	Post employee
	benefits	benefits
	(Salary and	(401k & other	Share based	Total
	fees)	benefits)	payment	2017
2017	US$	US$	US$	US$
John Hoffman	325,000	24,271	583	349,854
Dr. Joseph Monkowski	275,000	17,160	583	292,743
Ryan Benton	—	—	6,971	6,971
Kevin Landis	—	—	—	—
David Michael	—	—	—	—
Omesh Sharma	255,000	31,040	389	286,429
	855,000	72,471	8,526	935,997

55

Notes to the Consolidated Financial Statements

Note 25. Related party transactions (continued)

Shares and other equity instruments held by key management personnel

The table below notes the common shares and options held directly or indirectly by the directors and other key management personnel of the Company:

	Common		Common
	Stock	Options	Stock	Options
	Direct		Indirect
John Hoffman	1,441,870	3,348,659	—	—
Dr. Joseph Monkowski	1,445,683	3,339,089	—	—
Ryan Benton	195,000	201,000	—	—
Kevin Landis (1)	—	—	231,535	—
David Michael	—	—	—	—
Peter McGregor	—	—	—	—
Omesh Sharma	1,041,870	2,021,357	—	—
	4,124,423	8,910,105	231,535	—

(1)Common stock held by Silicon Valley Investor Holdings Pty Ltd, of which Kevin Landis is the majority shareholder.

Share options granted to key management personnel

		2018	2017
		Number	Number
	Class of underlying shares	Granted	Granted
John Hoffman (1)	Ordinary	300,000	300,000
Dr. Joseph Monkowski (1)	Ordinary	300,000	300,000
Ryan Benton	Ordinary	84,000	—
Omesh Sharma (1)	Ordinary	200,000	200,000
		884,000	800,000

(1)Options issued in the current year include specific performance conditions – refer Note 20.

Other related parties

Other related parties identified by the Group comprise:

·Firsthand Venture Investors, a substantial shareholder of the Company, represented on the board of directors by its nominee, Kevin Landis;

·Anzu Partners LLC, a company of which David Michael is a partner and director;

·Anzu Pivotal, LLC, a substantial shareholder of the Company, and Anzu Industrial Capital Partners LP, both of which David Michael is a partner and director; and

·Silicon Valley Investor Holdings Pty Ltd, a company which is controlled by Kevin Landis.

56

Notes to the Consolidated Financial Statements

Note 25. Related party transactions (continued)

Transactions with related parties

Anzu Partners, LLC, an entity of which David Michael is a director, provided US based public relation services to the Group totaling $30,250 during the current year (2017: $Nil).

Receivable from and payable to related parties

Payables of $25,000 were owed to Ryan Benton as at 31 December 2018.

There were no trade receivables from or trade payables to related parties at the current and previous reporting dates.

Loans to/from related parties

There were no loans to or from related parties at the current and previous reporting dates.

Pivotal SaleCo, Inc. transaction

As part of the IPO, Pivotal SaleCo, Inc. acquired 9,430,169 existing shares from certain shareholders of Pivotal Systems Corporation (“Selling Shareholders”) and transferred the shares to successful applicants under the IPO at the offer price of A$1.86. The price paid by Pivotal SaleCo to the selling shareholders was equal to the Offer Price of A$1.86 less sale costs of 4.5% of sale proceeds.

Financial instrument balances held with related parties

All financial instrument balances reported at 31 December 2017 were extinguished with the conversion or exercise of preferred stock and warrants to common shares prior to or on 2 July 2018.

			Number of	Number of
		Financial	instruments	instruments
	Nature of related	instrument	held	held
Related party name	party relationship	type	31 Dec 2018	31 Dec 2017
Firsthand Venture Investors	Nominee director	Preferred stock	—	33,508,691
Omesh Sharma	Key management personnel	Preferred stock	—	141,870
John Hoffman	Director	Preferred stock	—	141,870
Dr. Joseph Monkowski	Director	Preferred stock	—	141,870
Anzu Pivotal LLC	Directors in common	Preferred stock	—	4,307,251
Anzu Industrial Capital Partners LP	Directors in common	Preferred stock	—	2,128,101
Firsthand Venture Investors	Nominee director	Common stock warrants	—	18,180,475
Anzu Industrial Capital Partners LP	Directors in common	Common stock warrants	—	1,418,734
Anzu Pivotal LLC	Directors in common	Preferred stock warrants	—	2,871,502
Firsthand Venture Investors	Nominee director	Preferred stock warrants	—	4,158,654

57

Notes to the Consolidated Financial Statements

Note 26. Events after the reporting period

The new manufacturing facility in South Korea has been audited and approved for operation by major OEM and IDM customers. Operations commenced late January 2019.

No other matter or circumstance has arisen since 31 December 2018 that has significantly affected, or may significantly affect the Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years.

Note 27. Auditor’s remuneration

During the financial year, the following fees were paid or payable for audit and other services provided by BDO East Coast Partnership and BDO affiliates.

	2018	2017
	US$	US$
Audit services
Audit or review of the financial statements	123,834	27,650
Non-audit services
Taxation services	8,906	8,906
Due diligence services related to Initial Public Offering	209,216	—
	341,956	36,556
Services provided by BDO affiliates:
Auditing or reviewing the financial statements	—	60,000
Taxation services	—	31,340
	341,956	127,896

58

Notes to the Consolidated Financial Statements

Note 28. Parent Entity Information

	2018		2017
	US$’000		US$’000
Current assets	28,040		8,517
Non-current assets	9,389		8,699
Total assets	37,429		17,216
Current liabilities	5,869		47,209
Non-current liabilities	—		—
Total liabilities	5,869		47,209
Net assets/(liabilities)	31,560		(29,993	)
Contributed equity	170,818		43,263
Share based payment reserve	1,280		1,179
Accumulated losses	(140,538	)	(74,435	)
Total shareholders’ equity	31,560		(29,993	)
Loss of the parent entity	(66,103	)	(9,817	)
Total comprehensive income of the parent entity	(66,103	)	(9,817	)

The parent entity has no contingent liabilities at the end of the financial year (2017: Nil).

No guarantees have been entered into by the parent entity in relation to the debts of its subsidiaries as a 31 December 2018 or 31 December 2017.

59

Directors’ Declaration

In accordance with a resolution of the directors of Pivotal Systems Corporation, the directors of the Company declare that:

1.The financial statements and notes thereto, comply with Australian Accounting Standards;

2.The financial statements and notes thereto, give a true and fair view of the Group’s financial position as at 31 December 2018 and of the performance for the year ended on that date; and

3.In the directors’ opinion there are reasonable grounds to believe that Pivotal Systems Corporation will be able to pay its debts as and when they become due and payable.

On behalf of the directors

/s/ John Hoffman

John Hoffman

Executive Chairman and Chief Executive Officer

26 February 2019 (Fremont PST), 27 February 2019 (Sydney AEST)

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	Tel: +61 2 9251 4100	Level 11, 1 Margaret St
	Fax: +61 2 9240 9821	Sydney NSW 2000
	www.bdo.com.au	Australia

INDEPENDENT AUDITOR’S REPORT

To the members of Pivotal Systems Corporation

Report on the Audit of the Financial Report

Opinion

We have audited the financial report of Pivotal Systems Corporation (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 31 December 2018, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies and the directors’ declaration.

In our opinion the accompanying financial report presents fairly, in all material respects, the Group’s financial position as at 31 December 2018 and of its financial performance and its cash flows for the year then ended in accordance with Australian Accounting Standards.

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

BDO East Coast Partnership ABN 83 236 985 726 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO East Coast Partnership and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.

61

Revenue Recognition

Key audit matter

As disclosed in the revenue recognition accounting policy in Note 2, the Group’s revenue is derived primarily from the sale of gas flow controllers with revenue being recognised at a point in time when the customer obtains control of the Group’s product which typically occurs upon the delivery to the customer.

The recognition of revenue is a key performance indicator to the users of the financial statements and as such is of high interest to stakeholders.

Due to these factors and the overall significance of revenue to the Group, we considered this matter to be significant to our audit.

How the matter was addressed in our audit

To determine whether revenue was appropriately accounted for and disclosed within the financial statements, we undertook, amongst others, the following audit procedures:

·Evaluated the revenue recognition policies for all material sources of revenue and from our detailed testing performed below, ensured that revenue was being recognised appropriately, in line with Australian Accounting Standards and policies disclosed within the financial statements.

·Substantively tested a sample of revenue transactions throughout the financial year, tracing sales invoices to supporting sales documentation, shipping documentation and cash receipts. This included ensuring that revenue was recognised in accordance with the requirements of AASB 15: Revenue from Contracts with Customers.

·Performing detailed cut-off testing to ensure that revenue transactions around the year end had been recorded in the correct period including obtaining customer confirmations where required.

Conversion of Debt Instruments on Completion of Initial Public Offering (‘IPO’)

Key audit matter

During the year, as disclosed in Notes 3 and 17, the Group recognised a fair value loss of $61,976,000 upon conversion of the Group’s outstanding debt instruments (Preferred Stock and Warrants) to equity following the completion of an IPO transaction.

Our focus in relation to this matter was to ensure that all the outstanding debt instruments had been correctly accounted for and measured at the appropriate fair value at the date of conversion. We considered this area to be significant to our audit due to the one-off nature and overall impact of this transaction on the Group’s reported result for the financial year.

How the matter was addressed in our audit

To determine whether the conversion of the Group’s outstanding debt instruments had been appropriately reflected in the financial statements, we undertook, amongst others, the following audit procedures:

·Reviewed the third party valuation of the debt instruments immediately prior to IPO, including assessing the accuracy of inputs included within the valuation.

·Agreed the outstanding debt instruments and any additions and / or early conversions during the financial year to supporting documentation.

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·Reviewed and re-performed management’s calculation of the fair value movement of the debt instruments on conversion and agreed the underlying journal entries to the general ledger.

·Evaluated the adequacy and accuracy of the disclosure of the conversion of the debt instruments within the financial statements.

Existence and Valuation of Inventory

Key audit matter

As disclosed in Note 9, the Group held inventories of $6,347,000 as at 31 December 2018, which consisted of a combination of raw materials, work in progress and finished goods.

This matter was considered significant to our audit given the relative size of the balance in the consolidated statement of financial position, the estimates and judgements involved in assessing net realisable value and the significant effort required in auditing this balance.

How the matter was addressed in our audit

In assessing the existence and carrying value of the Group’s inventory, we undertook, amongst others, the following audit procedures:

·Attended the year end stock-take in order to validate the existence and condition of inventories held.

·Obtained third party confirmation to validate inventories held on consignment.

·Performed detailed testing of a sample of goods despatched and goods received to ensure the transactions around the year end were recorded in the correct period.

·Selected a sample of inventory items to ensure inventory was recorded at the lower of cost and net realisable value, by reference to recent sales.

·Evaluated the inventory obsolescence provision through consideration of the composition of inventory on hand, historic sales trends and repair costs.

Other information

The directors are responsible for the other information. The other information comprises the information in the Group’s Annual Report for the year ended 31 December 2018, but does not include the financial report and the auditor’s report thereon.

Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon.

63

In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the directors for the Financial Report

The directors of the Company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error.

In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.

A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf

This description forms part of our auditor’s report.

BDO East Coast Partnership

BDO

/s/ Martin Coyle

Martin Coyle

Partner

Sydney, 27 February 2019

64

Additional Shareholder Information

SHAREHOLDER INFORMATION AS AT 18 JANUARY 2019

Additional Shareholder Information required by the Australian Securities Exchange Limited (ASX) Listing Rules is set out below.

In accordance with the 3rd edition ASX Corporate Governance Council’s Principles and Recommendations, the 2018 Corporate Governance Statement, as approved by the Board, is available on the Company’s website at: https://www.pivotalsys.com/investors. The Corporate Governance Statement sets out the extent to which Pivotal has followed the ASX Corporate Governance Council’s 29 Recommendations during the 2018 financial year.

The Company has issued a total of 110,998,864 fully paid shares of common stock (Shares) which equates to 110,998,864 Chess Depository Receipts (CDIs). In accordance with the Company’s Replacement Prospectus dated 22 June 2018, 1 CDI equates to 1 Share. As at the date of this report, 28,785,008 CDIs are issued and held by 496 CDI holders which represents 28,785,008 Shares. 82,213,856 Shares are held by 47 shareholders who have not elected to hold Company securities in the form of CDIs.

1.     Substantial shareholders

The number of securities held by substantial shareholders and their associates as advised to the ASX are set out below:

Fully Paid Ordinary Shares

	Number	Number
Name	Shares	CDIs	%
LHC Capital Partners Pty Ltd	9,794,592	9,794,592	8.82	%

2.     Number of security holders and securities on issue

Pivotal has issued the following securities:

(a)   82,213,856 fully paid ordinary shares held by 47 shareholders;

(b)   28,785,008 CDIs held by 496 CDI holders; and

(c)   14,771,383 unlisted options held by 45 option holders.

Details of the Top 20 Shareholders are set out in section 6 below.

3.     Voting rights

Ordinary shares

At a meeting of the Company’s stockholders, every stockholder present, in person or by proxy is entitled to one vote for each share held on the record date for the meeting on all matters submitted to a vote of stockholders.

CDIs

CDI holders are entitled to one vote for every one CDI they hold.

Options

Option holders do not have any voting rights on the options held by them.

65

Distribution of security holders

	Fully Paid Shares of Common Stock
Category	Total Shareholders	Number of Shares	%
1 - 1,000	15	1,038	0.00
1,001 - 5,000	3	10,522	0.01
5,001 -  10,000	2	15,624	0.01
10,001 - 100,000	10	435,774	0.39
100,001 and over	18	110,535,906	99.59
Total	48	110,998,864	100.00

	Chess Depositary Interests (CDIs)
Category	Total CDI Holders	Number of CDIs	%
1 - 1,000	145	80,456	0.28
1,001 - 5,000	149	404,077	1.40
5,001 - 10,000	95	718,687	2.50
10,001 - 100,000	94	1,920,144	6.67
100,001 and over	13	25,661,644	89.15
Total	496	28,785,008	100.00

	Unquoted Options
Category	Total Option Holders	Number of Options	%
1 -1,000	8	2,265	0.02	%
1,001 - 5,000	2	7,161	0.05	%
5,001 - 10,000	6	49,099	0.33	%
10,001 - 100,000	21	917,076	6.21	%
100,001 and over	18	13,795,782	93.40	%
Total	55	14,771,383	100.00	%

Note that the Unquoted Options as stated above have various exercise prices and expiry dates.

4.     Unmarketable parcel of shares

The number of CDI Holders holding less than a marketable parcel of CDIs (being A$500) is 42 based on the Company’s closing CDI price of A$1.46, on 18 January 2019.

66

5.Twenty largest shareholders of quoted equity securities

Chess Depositary Interests

Details of the 20 largest CDI Holders by registered CDI holding are as follows.

	Name	No. of CDIs	%
1	UBS NOMINEES PTY LTD	7,118,850	24.73
2	HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED	5,342,257	18.56
3.	HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2	5,039,982	17.51
4	BNP PARIBAS NOMINEES PTY LTD	2,173,310	7.55
5	J P MORGAN NOMINEES AUSTRALIA PTY LIMITED	1,708,590	5.94
6	NATIONAL NOMINEES LIMITED	1,470,489	5.11
7	BNP PARIBAS NOMS PTY LTD	1,226,438	4.26
8	AMP LIFE LIMITED	492,643	1.71
9	BT PORTFOLIO SERVICES LIMITED	312,524	1.09
10	TOKYO ELECTRON EUROPE LIMITED	268,818	0.93
11	SILICON VALLEY INVESTOR HOLDINGS PTY LTD	231,535	0.80
12	WASHINGTON H SOUL PATTINSON AND COMPANY LIMITED	141,462	0.49
13	TRIPLE IMAGE FILMS PTY LIMITED	134,746	0.47
14	INVIA CUSTODIAN PTY LIMITED	85,640	0.30
15	KRUGER PARK PTY LTD	57,634	0.20
16	MRS ANNE ELIZABETH CRABB	52,674	0.18
17	CHAMP 7 PTY LTD	50,000	0.17
17	AWM NOMINEES PTY LTD	50,000	0.17
18	MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED	45,978	0.16
19	AILA HEIGHTS PTY LTD	38,000	0.13
19	MISS JODI CLUES	38,000	0.13
20	MS CANDICE KEANLY	37,428	0.13
	Total	26,116,998	90.73
	Balance of register	2,668,010	9.27
	Grand total	28,785,008	100.00

67

Fully Paid Ordinary Shares of Common Stock

Details of the 20 largest Shareholders by registered shareholding are as follows.

		No. of
	Name	Shares	%
1	FIRSTHAND VENTURE INVESTORS	53,758,441	48.43
2	CHESS DEPOSITORY NOMINEES PTY LIMITED	28,785,008	25.93
3.	ENTERPRISE PARTNERS MANAGEMENT LLC	7,677,125	6.92
4	ANZU PIVOTAL LLC	7,178,753	6.47
5	MARK F FITZGERALD MARK F FITZGERALD LIVING	3,095,865	2.79
6	ANZU INDUSTRIAL CAPITAL PARTNERS LP	2,875,420	2.59
7	JOSEPH MONKOWSKI	1,445,683	1.30
8	JOHN HOFFMAN	1,441,870	1.30
9	OMESH SHARMA	1,041,870	0.94
10	MICHAEL FITZGERALD	946,266	0.85
11	AICP LIMITED	671,415	0.60
12	HOSEUNG CHANG HS INC 13	388,670	0.35
13	SANFORD MICHAEL JOHNSON	388,593	0.35
14	RYAN BENTON	195,000	0.18
15	ADAM MONKOWSKI AND MELANIE A GOSSHEIDER	170,972	0.15
16	RAJBINDER BAINS	170,000	0.15
17	SURINDERPAL BAINS	170,000	0.15
18	CARTER CRUM	134,955	0.12
19	TRAVIS OWENS	100,000	0.09
20	JOSEPH BRONSON	83,146	0.07
	Total	110,719,052	99.75
	Balance of register	279,812	0.25
	Grand total	110,998,864	100.00

Subject to rounding

68

6.The name of the entity’s secretary (in the case of a trust, the name of the responsible entity and its secretary).

The Company has not formally appointed a Company Secretary. Naomi Dolmatoff has been appointed as the Company’s ASX Representative pursuant to ASX Listing Rule 12.6.

7.The address and telephone number of the Company’s registered office in Australia; and of its principal administrative office.

The Company is incorporated in the State of Delaware, United States of America.

The Company’s registered office in the USA is:

C/- Incorporating Services Ltd, 3500 South Dupont Highway, Dover, Delaware 19901 USA

The Company’s Principal place of business is:

Suite 100, 48389 Fremont Blvd, Fremont, CA 94538 USA.

T: +1 (510) 770 9125

The Company’s registered Australian office is:

Company Matters Pty Ltd

Level 12, 680 George Street, Sydney NSW 2000

T: +61 (02) 8280 7355

8.The address and telephone number of each office at which a register of securities, register of depositary receipts or other facilities for registration of transfers is kept.

American Stock Transfer and Trust Company, LLC

6201, 15th Avenue

Brooklyn, NY 11219 USA

Telephone: +1 (718) 921 8386

Link Market Services

Level 12, 680 George Street

Sydney NSW 2000 Australia

T: +61 1300 554 474

9.     The Company’s Securities are not traded on any other exchange other than the ASX.

69

10.The number and class of restricted securities or securities subject to voluntary escrow that are on issue and the date that the escrow period ends is set out as follows:

	Number of
Class	Securities	Escrow Period
ASX Restricted - shares	40,905,438	To be held in escrow for 24 months from the date of commencement of official quotation.
ASX Restricted - unquoted options	6,888,748	To be held in escrow for 24 months from the date of commencement of official quotation.
Voluntary Restricted - shares Voluntary Restricted - unquoted options	40,266,548 5,466,278	20% of the voluntary restricted shares and voluntary unquoted options for a total of 8,771,172 securities to be held in escrow until the day following the release of the Company’s Appendix 4E preliminary financial results for the year ending 31 December 2018. 35% of voluntary restricted shares and voluntary unquoted options for a total of 15,349,557 securities to be held in escrow until the day following the release of the Company’s Appendix 4D Half Year Report for the 6 month period ended 30 June 2019. 45% of voluntary restricted shares and voluntary unquoted options for a total of 21,612,097 securities to be held in escrow until the day following the release of the Company’s Appendix 4E preliminary financial results for the year ended 31 December 2019.
Voluntary Restricted - shares	1,041,870	Subject to escrow for a period of 24 months commencing on the date on which official quotation by ASX of the Company’s CDIs commences.
Voluntary Restricted - unquoted options	2,021,357	Subject to escrow for a period of 24 months commencing on the date on which official quotation by ASX of the Company’s CDIs commences.

Note: Official quotation of the Company’s CDIs occurred on 2 July 2018.

11.  Review of operations and activities

A detailed review of operations and activities is reported in the 2018 Annual Report.

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12.  On market buy-back

There is no current on market buy-back.

13.  Statement regarding use of cash and assets.

During the period between 2 July 2018 and 31 December 2018, the Company has used its cash and assets readily convertible to cash that it had at the time of ASX admission in a way consistent with its business objectives set out in the Prospectus dated 22 June 2018.

14.  Other

Pivotal is not subject to Chapters 6, 6A, 6B and 6C of the Corporations Act 2001 (Cth) dealing with the acquisition of its shares (including substantial holdings and takeovers).

Anti-takeover provisions of Delaware Law, Certificate of Incorporation and Bylaws

Provisions of the Delaware General Corporation Law, the Company’s Certificate of Incorporation and the Company’s Bylaws could make it more difficult to acquire the Company by means of a tender offer (takeover), a proxy contest or otherwise, or to remove incumbent officers and Directors of the Company. These provisions (summarised below) could discourage certain types of coercive takeover practices and takeover bids that the Board may consider inadequate and to encourage persons seeking to acquire control of the Company to first negotiate with the Board. The Company believes that the benefits of increased protection of its ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure the Company outweigh the disadvantages of discouraging takeover or acquisition proposals because, among other things, negotiation of these proposals could result in an improvement of their terms.

The Company’s bylaws do not contain any limitations on the acquisition of securities, except that clause 9 of Article XI, Section 11.1. of the bylaws provides as follows:

“The Corporation may refuse to acknowledge or register any transfer of shares of the Corporation’s capital stock (including shares in the form of CDIs) held or acquired by a stockholder (including shares of the Corporation’s capital stock that may be acquired upon exercise of a stock option, warrant or other right) or shares of the Corporation’s capital stock which attach to or arise from such shares which are not made:

a.in accordance with the provisions of Regulation S of the Securities Act of 1933 (U.S.), as amended to date and the rules and regulations promulgated thereunder (the “U.S. Securities Act”) (Rule 901 through Rule 905 and preliminary notes);

b.pursuant to registration under the U.S. Securities Act; or

c.pursuant to an available exemption from registration.”

71

EX-99.2

Exhibit 99.2

APPENDIX 4E — PRELIMINARY FINAL REPORT FOR THE

YEAR ENDED 31 DECEMBER 2018

1.   Company Details

Name of entity: Revasum, Inc.

ARBN: 629 268 533

Reporting Period: Fiscal year ended 31 December 2018

Previous Corresponding Period: Fiscal year ended 31 December 2017

2.   Results for Announcement to the Market

	2018		2017		Movement Up/(Down)
	US$’000		US$’000		US$’000		%
Revenue from ordinary activities	27,277		12,518		14,759		118	%
Gross profit	10,155		3,968		6,187		156	%
Operating loss	(1,020	)	(3,703	)	2,683		72	%
Loss from ordinary activities after tax attributable to members of the parent entity	(4,355	)	(3,751	)	(604	)	(16	)%

3.   Review of Operations and Financial Results

Refer to the accompanying Annual Financial Report for the Consolidated Statement of Profit or Loss and Other Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flows and accompanying notes.

Also refer to the Operational Update and Directors’ Report in the accompanying Annual Financial Report and accompanying announcement for further details and commentary on the results.

4.   Dividends

No dividends have been paid or are proposed to be paid by Revasum, Inc. for the fiscal year 2018 (2017: $Nil).

5.   Net Tangible Assets per share:

	2018	2017
Net tangible assets per share (US$ per share)	0.44	3.72	(1)

(1)     Please note this is pre-IPO and pre-capital restructure.

6.   Control Gained or Lost over Entities

During the fiscal year, Revasum, Inc. incorporated a subsidiary, Revasum Australia, Inc. The subsidiary is incorporated in the State of Delaware, United States of America. The subsidiary was dormant for the whole of fiscal year 2018.

7.   Details of Associates and Joint Venture Entities

The Group has no investments in associates or joint ventures during the reporting period.

8.   Accounting Standards

The annual financial report has been compiled using Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (“AASB”).

9.   Audit Status

The Revasum, Inc. annual financial report for the fiscal year ended 31 December 2018 has been subject to audit by our external auditors, BDO East Coast Partnership. A copy of the independent audit report to the members of Revasum, Inc. is included in the accompanying annual report.

/s/ Ryan Benton

Ryan Benton (Company Secretary)

26 February 2019

REVASUM, INC.

A DELAWARE CORPORATION

ARBN 629 268 533

ANNUAL FINANCIAL REPORT

FOR THE YEAR ENDED

31 DECEMBER 2018

TABLE OF CONTENTS

Corporate Directory	2
Chairman’s Letter	3
Operational Update	4
Directors’ Report	6
Consolidated Statement of Profit or Loss and Other Comprehensive Income	13
Consolidated Statement of Financial Position	14
Consolidated Statement of Changes in Equity	15
Consolidated Statement of Cash Flows	16
Notes to the Consolidated Financial Statements	17
Directors’ Declaration	43
Independent Auditor’s Report	44
Additional Shareholder Information	49

1

CORPORATE DIRECTORY

Company

Revasum, Inc.

825 Buckley Road

San Luis Obispo, 93401 USA

Phone: +1 (805) 541 6424

Website: www.revasum.com

Directors

Jerry Cutini	Executive Chairman, President and Chief Executive Officer
Ryan Benton	Executive Director, Senior Vice President and Chief Financial Officer
Kevin Landis	Non-Executive Director
Paul Mirabelle	Independent Non-Executive Director
Vivek Rao	Independent Non-Executive Director

Company Secretary

Ryan Benton

Australian Securities Exchange Representative

Naomi Dolmatoff

United States Registered Office

c/o Incorporating Services Ltd

3500 South Dupont Highway

Dover, Delaware 19901 USA

Australian Registered Office

c/o Company Matters Pty Limited

Level 12, 680 George Street

Sydney, NSW 2000 Australia

United States Legal Adviser

Troutman Sanders LLP

5 Park Plaza

Suite 1400

Irvine, CA, 92614 USA

Australian Legal Adviser

Maddocks

Angel Place Level 27

123 Pitt Street

Sydney, NSW 2000 Australia

Share Registries

Link Market Services	American Stock Transfer and Trust Company, LLC
Level 12, 680 George Street	6201, 15th Avenue
Sydney, NSW 2000 Australia	Brooklyn, NY 11219 USA
Telephone: +61 1300 554 474	Telephone: +1 (718) 921 8386

Securities Exchange Listing

Revasum, Inc. (ASX Code: RVS)

Chess Depository Interests (“CDIs”) over shares of the Company’s common stock are quoted on the Australian Securities Exchange. One CDI represents one fully paid share in the Company.

2

CHAIRMAN’S LETTER

Fellow Shareholders,

I am very pleased to present the Annual Financial Report for Revasum, Inc. for the 2018 Fiscal Year. We closed out 2018 by completing an Initial Public Offering (IPO) on the ASX in early December. This public listing provided the Company the capital it needs to take advantage of our enormous market opportunity. We also finished the year by executing operationally to meet our customer delivery commitments. These two things combined to bring an extraordinarily successful and eventful year to a close.

In addition to the IPO, we achieved numerous major milestones in 2018. Most importantly, we continued to succeed in winning where it counts most — at the customer. In 2018 we increased the number of active customers for our systems offering — adding 7 new customers to our roster. As a result, we saw phenomenal year-over-year revenue growth of 118%, which was in-line with the initial guidance in our IPO prospectus. Additionally, we secured commitments from two new strategic customers to work with Revasum on single-wafer Silicon Carbide (SiC) substrate manufacturing lines. Those critical programs will provide Revasum future revenue streams as they come online with volume manufacturing requirements.

Revasum sees growth potential across multiple markets in the semiconductor industry. Late 2018 and early 2019 saw multiple industry-wide announcements that confirm our belief in the growth potential for SiC substrates. Customers and potential customers all announced increased production and supply agreements for these important materials. End users, the automobile companies continue to announce increased usage of SiC devices for electric and hybrid-electric vehicles. In our view, this confirms our decision to invest in new product development for machines designed specifically to address this important market.

We have two key development programs in 2019 that will drive our growth in 2019 and 2020. We will start with SiC and continue with the release of our new CMP system in 2020. As we discussed in our IPO prospectus, the first new product we expect to deliver will be our first SiC-focused polishing system which we expect to deliver in the second half of 2019, on schedule and on budget. This system is being engineered with input from key customers (current and prospective) and we believe when released it will be well-positioned to capitalize on the growing market demand. The second new product being developed will be for the enormous and growing device CMP market. Revasum has a long history of designing machines for similar applications and we believe our expertise is the reason customers continue to seek us out to work with them on critical technology systems.

In 2018, the end markets we target showed strength and we capitalized on that opportunity. As we look forward into 2019 we’re encouraged by the continued strength in our end markets and the response from our customers to our new product development programs. All of us at Revasum thank you for your support and we look forward to the coming years.

Very Sincerely,

/s/ Jerry Cutini

Jerry Cutini

Executive Chairman, President and Chief Executive Officer

3

OPERATIONAL UPDATE

FISCAL YEAR 2018 HEADLINES

·Record revenue of US$27.3 million for the fiscal year ended 31 December 2018, an increase of 118% from the prior year.

·      Global resources added to support growth and new product development:

·       Headcount increased from 59 employees, to 106 employees during 2018.

·       Opened a branch office in Taiwan, increasing sales and service support for our Asia customer base.

·      Began new product development of Silicon Carbide (“SiC”)-focused polisher.

·      Development projects in progress with three leading SiC substrate manufacturers.

·Successfully completed an Initial Public Offering (“IPO”) and listing on the Australian Securities Exchange.

FISCAL YEAR 2018 SUMMARY OF RESULTS

(in thousands)

						IPO Prospectus
	Actual FY 2018					FY 2018 Forecast					Actual FY 2017
	Amount			% Sales		Amount			% Sales		Amount			% Sales
Revenue	$	27,277		100	%	$	27,496		100	%	$	12,518		100	%
Cost of Sales	17,122			63	%	17,526			64	%	8,550			68	%
Gross Margin	$	10,155		37	%	$	9,970		36	%	$	3,968		32	%
Research & Dev.	3,857			14	%	3,828			14	%	3,495			28	%
Selling & Marketing	3,405			12	%	3,276			12	%	2,125			17	%
General & Admin.	2,382			9	%	2,744			10	%	1,939			15	%
IPO Costs	1,264			5	%	1,015			4	%	—			—	%
Stock Based Comp.	267			1	%	286			1	%	112			1	%
Total Expenses	$	11,175		41	%	$	11,149		41	%	$	7,671		61	%
Operating Loss	$	(1,020	)	(4	)%	$	(1,179	)	(4	)%	$	(3,703	)	(30	)%
Adjusted EBITDA(1)	$	830		3	%	$	339		1	%	$	(3,126	)	(25	)%

(1) Adjusted EBITDA — Earnings before Interest, Taxes, Depreciation & Amortization, non-cash Stock-based compensation expense, IPO Costs, and certain non-operating items (e.g. gains & losses, valuation loss on common warrant). Management uses adjusted EBITDA to evaluate the operating performance of the business prior to the impact of significant items, the non-cash impact of depreciation and amortisation and interest and tax charges.

4

FISCAL YEAR 2018 KEY OPERATING HIGHLIGHTS

·Revenue of US$27.3 million increased 118% compared to prior fiscal year and compares to US$27.5 million forecasted total revenue in the IPO prospectus. These amounts include system revenue of US$21.6 million which represents an increase of 148% from the same period a year ago and compares to US$21.6 million forecasted system revenue in the IPO prospectus. System revenue increased principally as a result of an increase number of shipments — 35 units shipped in 2018 (in line with IPO prospectus forecast of 35 units) compared to 12 units shipped in the prior year.

·Gross margin of 37.2% up from the 31.7% reported in the prior year and compares to gross margin of 36.3% forecasted in the IPO prospectus.

·Operating expenses of US$11.2 million increased $3.5 million from the previous year’s expenses of US$7.7 million and was in-line with the US$11.1 million forecasted in the IPO prospectus. FY18 operating expenses include US$1.3 million costs associated with the ASX listing.

·For the full year 2018, the Company made an operating loss of US$1.0 million which compares to the operating loss of US$1.2 million forecasted in the IPO prospectus.

·Net loss of US$4.4 million compared to the previous year’s net loss of US$3.8 million, and a $4.8 million net loss forecasted in the IPO prospectus. FY18 net loss includes a non-cash US$3.1 million loss upon revaluation of common stock warrants prior to the ASX listing (compares to US$3.4 million forecasted revaluation loss in the IPO prospectus).

CONDENSED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2018

(in thousands)

	2018		2017
Cash and cash equivalents	$	24,469	$	2,406
Trade and other receivables	8,189		2,488
Inventories - net	8,378		4,039
Property, plant and equipment - net	1,034		382
Intangible assets - net	1,536		237
Other assets	600		658
Total assets	$	44,206	$	10,210
Trade and other payables	$	5,911	$	2,414
Customer deposits	2,742		3,313
Borrowings	—		1,000
Other liabilities	560		537
Total liabilities	$	9,213	$	7,264
Total equity	$	34,993	$	2,946

CONDENSED STATEMENT OF FINANCIAL POSITION HIGHLIGHTS

·Cash and cash equivalents at 31 December 2018 increased $22.1 million to $24.5 million, principally as result of funds received from the Company’s initial public offering on the ASX in December 2018.

·As of 31 December 2018, trade and other receivables increased to $8.2 million (up $5.7 million from 31 December 2017), inventories increased to $8.4 million (up $4.4 million from 31 December 2017), and trade and other payables increased to $5.9 million (up from $2.5 million from 31 December 2017) all due to increased sales volumes.

·      Borrowings as of 31 December 2018 were $Nil.

5

DIRECTORS’ REPORT

The directors present their report for Revasum, Inc. (“Revasum” or “Company”) together with the financial statements on the Consolidated Entity (referred to hereafter as the “Consolidated Entity” or “Group”) consisting of the Company and its subsidiary for the fiscal year ended 31 December 2018 and the auditor’s report thereon.

DIRECTORS

The following persons were directors of the Company during the whole of the fiscal year and up to the date of this report, unless otherwise stated:

Jerry Cutini	Executive Chairman, President and Chief Executive Officer (“CEO”)
Ryan Benton	Executive Director, Senior Vice President (“SVP”) and Chief Financial Officer (“CFO”)	Appointed 8 August 2018
Kevin Landis	Non-Executive Director
Paul Mirabelle	Independent Non-Executive Director	Appointed 18 October 2018
Vivek Rao	Independent Non-Executive Director	Appointed 24 October 2018

PRINCIPAL ACTIVITIES

Revasum designs, manufactures and markets a portfolio of semiconductor processing equipment. The Group’s product portfolio includes grinding, polishing and chemical mechanical planarization (CMP) equipment (also referred to as ‘‘systems”) used to manufacture substrates and devices for the global semiconductor industry.

The systems that Revasum manufactures are a key part of the production chain in manufacturing and processing wafers sized 200mm and below that are used to make microchips, sensors, LEDs, RF devices and power devices which are commonly used in connected IoT devices, cellphones, wearables, automotive, 5G and industrial applications.

No significant change in the nature of these activities occurred during the fiscal year.

REVIEW OF OPERATIONS AND FINANCIAL RESULTS

Revenue for the year ended 31 December 2018 increased by 118% to $27.28 million (2017: $12.52 million), including systems revenue of $21.62 million (2017: $8.65 million).

For the year ended 31 December 2018, the net operating loss was $4.36 million (2017: $3.75 million). This includes non-recurring expenditure in connection with the initial public offering (“IPO”) of $1.26 million (2017: $Nil) and a non-recurring loss on revaluation of warrants of $3.08 million (2017: $Nil).

On 17 August 2018, Revasum Australia, Inc., a wholly-owned subsidiary of Revasum, was incorporated in the State of Delaware, United States of America.

During the fiscal year, the Group opened a Taiwan Branch of Revasum, Inc.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

On 4 December 2018, the Company successfully listed its CHESS Depository Interests (CDIs) on the ASX, following an A$30.7 million (US$22.5 million) IPO. The Company issued 15,357,143 new CDIs over shares of common stock (ordinary shares) at an issue price of A$2.00 per CDI. The capital raised by the IPO will be mainly used to fund the development of two new products, increase headcount and for general corporate working capital.

There were no other significant changes in the state of affairs of the Group during the fiscal year.

DIVIDENDS

No dividends were paid or proposed during the year ended 31 December 2018 and the Company does not intend to pay any dividends for the fiscal year 2018 (2017: $Nil).

PRESENTATION CURRENCY

The functional and presentation currency of the Group is United States Dollars. The financial report is presented in United States Dollars with all references to dollars, cents or $’s in these financial statements presented in US currency, unless otherwise stated.

6

ROUNDING OF AMOUNTS

Unless otherwise stated, amounts have been rounded to the nearest thousand United States Dollars.

JURISDICTION OF INCORPORATION

The Company is incorporated in the State of Delaware, United States of America and is a registered foreign entity in Australia. As a foreign company registered in Australia, the Company is subject to different reporting and regulatory regimes than Australian companies.

DELAWARE LAW, CERTIFICATE OF INCORPORATION AND BYLAWS

As a foreign Company registered in Australia, the Company will not be subject to Chapters 6, 6A, 6B and 6C of the Corporations Act dealing with the acquisition of shares (including substantial shareholdings and takeovers). Under the provisions of Delaware General Corporation Law (“DGCL”), shares are freely transferable subject to restrictions imposed by US federal or state securities laws, by the Company’s certificate of incorporation or bylaws, or by an agreement signed with the holders of the shares at issue. The Company’s amended and restated certificate of incorporation and bylaws do not impose any specific restrictions on transfer. However, provisions of the DGCL, the Company’s Certificate of Incorporation and the Company’s Bylaws could make it more difficult to acquire the Company by means of a tender offer (takeover), a proxy contest or otherwise, or to remove incumbent officers and Directors of the Company. These provisions could discourage certain types of coercive takeover practices and takeover bids that the Board may consider inadequate and to encourage persons seeking to acquire control of the Company to first negotiate with the Board. The Company believes that the benefits of increased protection of its ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure the Company outweigh the disadvantages of discouraging takeover or acquisition proposals because, among other things, negotiation of these proposals could result in an improvement of their terms.

MATTERS SUBSEQUENT TO THE END OF THE FISCAL YEAR

On 2 January 2019, 657,500 options with an exercise price of US$1.26 and 150,000 restricted stock units were granted to employees and consultants.

On 25 January 2019, Revasum signed an agreement with regards to the implementation of a new ERP system. Estimated implementation costs payable to the ERP provider are $0.5 million. The initial subscription service term is for 5 years, with an annual fee. After this initial term, the subscription services will automatically renew from year to year unless terminated.

On 4 February 2019, 500,000 options with an exercise price of US$1.30 were granted to employees.

On 12 February 2019, IOOF Holdings Limited, a substantial shareholder of Revasum, Inc., increased their holding in the Company from 9.188% to 11.093%.

No other matter or circumstance has arisen since 31 December 2018 that has significantly affected, or may significantly affect the Group’s operations, the results of those operations, or the Group’s state of affairs in future fiscal years.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS

The Group’s core growth strategy involves continuing its strong market-driven product development focus in order to continue to capitalize on strong growth in demand for 200mm substrate and device fabrication capacity. The Group’s growth strategy also includes:

1.Increasing sales, marketing and product demonstration capabilities to secure new customers and help expedite the conversion of existing pipeline customers;

2.     Expanding the product portfolio which in turn increases the addressable market size; and

3.Continuing two customer-led product development projects, which are expected to add incremental sales and further enable Revasum to capitalize on key market trends.

CORPORATE GOVERNANCE

The Company, as a Delaware incorporated corporation, seeks to achieve substantive compliance with the governance recommendations set out in the ‘Corporate Governance Principles and Recommendations 3rd Edition’, published by the ASX Corporate Governance Council (the ASX Principles). The Company’s Corporate Governance Statement can be viewed at https://investors.revasum.com/investor-centre/.

7

ENVIRONMENTAL REGULATION

The Group is not subject to any significant environmental regulation under United States of America legislation. The Group is committed to the sustainable management of environmental, health, and safety (EHS) concerns as a core business principle. This includes ensuring compliance with all applicable government standards and regulations and providing a safe and healthy workplace, while reducing our environmental footprint. We integrate health, safety, and environmental considerations into all aspects of our business, including product design and services, to provide productive and responsible solutions by:

·              Striving for zero accidents through the application of an EHS Management System;

·              Implementing pollution prevention control strategies; and

·              Committing to continual improvement for our customers, Company, and personnel of the Group.

The Board of Directors considers that adequate systems are in place to manage the Group’s obligations and is not aware of any breach of environmental requirements as they relate to the Group.

SHARE OPTIONS AND RESTRICTED STOCK UNITS

Share options and restricted stock units (“RSUs”) over issued shares in the Company were granted both during the year, and also subsequent to the fiscal year end. The number of options and RSUs outstanding as at the date of this report, and all other movements in share options and RSUs, are disclosed in Note 20 to the financial statements.

SECURITIES ON ISSUE

The Company has the following securities on issue as at 31 December 2018:

Shares of common stock	76,508,678 (of which 23,186,498 are held as CDIs)
Options over shares of common stock	13,220,550
Restricted Stock Units	2,402,160

INFORMATION ON DIRECTORS

Jerry Cutini

Executive Chairman, President and Chief Executive Officer

Experience and expertise:	Jerry has over 35 years’ experience in the semiconductor equipment industry with roles at Applied Materials (NASDAQ: AMAT), Silicon Valley Group (NASDAQ: SVGI), OnTrak Systems (NASDAQ: ONTK), Lam Research (NASDAQ: LRCX), Gasonics International (NASDAQ: GSNX) and Aviza Technology (NASDAQ: AVZA), among others. Currently Jerry is involved with the Global Trade Association, of Semiconductor Equipment and Materials International (SEMI), North American Advisory Board (NAAB), Public Policy Committee.
Special responsibilities:	Chairman of the Board.
Other directorships:	None.

Ryan Benton

Executive Director, Senior Vice President and Chief Financial Officer

Experience and expertise:	Ryan joined Revasum as CFO in September 2018 bringing over 25 years of finance, operations, and transaction experience. Prior to this role, he served as CFO of BrainChip Holdings Ltd (ASX: BRN) and CEO and Board Member at Exar Corporation (NYSE: EXAR), which was acquired by MaxLinear Corporation (NASDAQ: MXL) in May 2017. Previous roles included senior and consulting positions at ASM International NV (NASDAQ: ASMI), and eFunds Corporation (NASDAQ: EFDS).
Special responsibilities:	Chief Financial Officer.
Other directorships:	Non-executive director and Audit Committee Chairman of Pivotal Systems Corporation ASX: PVS).

8

INFORMATION ON DIRECTORS (CONTINUED)

Kevin Landis

Non-Executive Director

Experience and expertise:	Kevin joined the Board in 2016 and is the CEO and CIO of Firsthand Capital Management, an investment management firm he founded in 1994. Firsthand Capital Management is the investment adviser to Firsthand Technology Value Fund, Inc. (NASDAQ: SVVC), a publicly traded venture capital fund. Kevin has over two decades of experience in engineering, market research, product management and investing in the technology sector. Kevin is Firsthand’s nominee director to the board of Revasum, Inc.
Special responsibilities:	Member of the Audit and Risk Committee.
	Member of the Remuneration and Nomination Committee.
Other directorships:	Non-executive director of Pivotal Systems Corporation (ASX: PVS).

Paul Mirabelle

Independent Non-Executive Director

Experience and expertise:	Paul is a business executive based in Australia with extensive leadership experience across both private and public companies, specializing in strategy, international growth, mergers and acquisitions, and private equity-backed ventures. Paul has extensive commercial experience, most recently as Asia Pacific Regional Director at Amplifon, the global leader in audiology, a role he has held since 2010.
Special responsibilities:	Chairman of the Audit and Risk Committee.
	Member of the Remuneration and Nomination Committee.
Other directorships:	Independent non-executive director of Vita Group Limited (ASX: VTG).

Vivek Rao

Independent Non-Executive Director

Experience and expertise:	Vivek Rao is a semiconductor capital equipment specialist with more than 23 years’ experience in the global industry. Vivek has held a number of technology leadership and managerial roles in the Silicon Valley and is presently the President and Chief Operations Officer of SPT Microtechnologies. He is also the Managing Director of international subsidiaries in Germany, Taiwan, Singapore and Malaysia for SPT Microtechnologies a division of Sumitomo Precision Products. Vivek is currently a Non-Executive Director of BluGlass Limited (ASX: BLG).
Special responsibilities:	Member of the Audit and Risk Committee.
	Chairman of the Remuneration and Nomination Committee.
Other directorships:	Non-Executive Director of BluGlass Limited (ASX: BLG).

DIRECTORS’ INTEREST IN EQUITY INSTRUMENTS OF THE COMPANY

The directors of the Group are shown together with their holdings of common stock and options, held directly or indirectly:

	Direct		Indirect
	Common Stock	Options/RSUs	Common Stock		Options/RSUs
Jerry Cutini	120,000	4,205,100	182,700	(1)	—
Ryan Benton	276,795	2,941,845	—		—
Kevin Landis	—	—	—		—
Paul Mirabelle	30,000	75,000	—		—
Vivek Rao	22,605	75,000	—		—
	449,400	7,296,945	182,700		—

(1)   Common stock held by Cutini Family Living Trust, of which Jerry Cutini is Trustee.

9

REMUNERATION REPORT

EXECUTIVE COMPENSATION

This section discusses the principles underlying our policies and decisions with respect to the compensation of our named executive officers, and all material factors relevant to an analysis of these policies and decisions. Our named executive officers for the fiscal year ended 31 December 2018 were:

·	Jerry Cutini	Executive Chairman, President and Chief Executive Officer; and
·	Ryan Benton	Executive Director, Senior Vice President and Chief Financial Officer.

COMPONENTS OF EXECUTIVE COMPENSATION

The principal components of our executive compensation are base salary, cash bonuses and long-term incentives. Our Remuneration and Nomination Committee consider that each component of executive compensation must be evaluated and determined with reference to competitive market data, individual and corporate performance, our recruiting and retention goals and other information we deem relevant.

Our executive officers are also eligible to participate in our 401(k) retirement plan.

The terms of each named executive officer’s compensation are derived from the employment agreements the Company has entered into with them.

The components of the executive compensation packages for our named executive officers for fiscal year 2018 were as follows:

Jerry Cutini — Executive Chairman, President and Chief Executive Officer

Mr. Cutini received a fixed remuneration package US$275,000 per annum. Mr. Cutini is also eligible to participate in various customary employee benefit programs maintained by Revasum and is eligible for an annual discretionary bonus as determined by the Board or the Remuneration and Nomination Committee.

Pursuant to Mr. Cutini’s Cash Bonus Incentive Award Agreement, Mr. Cutini has been granted a cash incentive bonus in the amount of US$550,000 payable upon the occurrence of certain events, including the Company completing an initial public offering of its common stock in the U.S. or in Australia and the Company’s Shares or CDIs (as applicable) trading at or above defined share price targets on a volume-weighted average selling price basis, for a period of at least thirty (30) consecutive trading days.

Pursuant to Mr. Cutini’s Employment Agreement, if Mr. Cutini is terminated by the Company without cause or if he resigns for good reason and Mr. Cutini signs a general release of claims in favour of the Company and complies with certain other requirements, the Company must pay Mr. Cutini severance in an amount equal to twelve months of his base salary, twelve months of health insurance coverage and 100% of his annual target bonus for the period in which termination occurs. All of Mr. Cutini’s unvested Options and Restricted Stock Units are subject to acceleration of vesting upon a change of control of the Company, certain of his Options vest only subject to achievement of a time-based vesting schedule and his Restricted Stock Units vest subject to both the achievement of a performance-based vesting schedule as well as time-based vesting schedule.

Ryan Benton — Executive Director, Senior Vice President and Chief Financial Officer

Mr. Benton received a fixed remuneration package US$250,000 per annum. Mr. Benton is also eligible to participate in various customary employee benefit programs maintained by Revasum and is eligible for an annual discretionary bonus as determined by the Board or the Remuneration and Nomination Committee.

Pursuant to Mr. Benton’s Cash Bonus Incentive Award Agreement, Mr. Benton has been granted a cash incentive bonus in the amount of US$500,000 payable upon the occurrence of certain events, including the Company completing an initial public offering of its common stock in the U.S. or in Australia and the Company’s Shares or CDIs trading at or above defined share price targets on a volume-weighted average selling price basis, for a period of at least thirty (30) consecutive trading days.

Pursuant to Mr. Benton’s Employment Agreement, if Mr. Benton is terminated by the Company without cause or if he resigns for good reason and Mr. Benton signs a general release of claims in favour of the Company and complies with certain other requirements, the Company must pay Mr. Benton severance in an amount equal to twelve months of his base salary, twelve months of health insurance coverage and 100% of his annual target bonus for the period in which termination occurs. All of Mr. Benton’s unvested Options and Restricted Stock Units (“RSUs”) are subject to acceleration of vesting upon a change of control of the Company, certain of his Options vest only subject to achievement of a time-based vesting schedule and his RSUs vest subject to both the achievement of a performance-based vesting schedule as well as time-based vesting schedule.

10

COMPONENTS OF EXECUTIVE COMPENSATION (CONTINUED)

The following table sets out the executive compensation (excluding share options and RSUs issued) paid to our named executive officers under the above employment contracts during the fiscal year ended 31 December 2018:

	Base Salary		Cash Bonus	401(K)		Total
Executive Officer	(Gross $)		$	$		$
Jerry Cutini	$	275,000	—	$	5,288	$	280,288
Ryan Benton	70,192		—	—		70,192
	$	345,192	—	$	5,288	$	350,480

NON-EXECUTIVE DIRECTORS’ COMPENSATION

The non-executive directors for the fiscal year ended 31 December 2018 were as follows:

·	Kevin Landis	Non-Executive Director;
·	Paul Mirabelle	Independent Non-Executive Director; and
·	Vivek Rao	Independent Non-Executive Director.

The following table sets out the compensation (excluding share options and RSUs issued) paid to each of our non-executive directors during the fiscal year ended 31 December 2018, which does not include Mr. Landis, who did not receive compensation for his service as a director:

Non-Executive Director	Directors’ Fees ($)
Paul Mirabelle	$	12,164
Vivek Rao	11,178
	$	23,342

The Company has entered into non-executive director agreements with Mr. Mirabelle and Mr. Rao whereby they are entitled to receive US$50,000 per annum for their role as a non-executive director, and a further US$10,000 per annum as chair of the Remuneration and Nomination Committee and the Audit and Risk Committee respectively.

INDEMNITY AND INSURANCE OF DIRECTORS AND OFFICERS

The Company has indemnified directors and executives of the Company for costs incurred, in their capacity as a director or officer, for which they may be held personally liable, except where there is a lack of good faith.

INDEMNITY AND INSURANCE OF AUDITOR

The Company has not, during or since the end of the fiscal year, indemnified or agreed to indemnify the auditor of the Company or any related entity against a liability incurred by the auditor.

During the fiscal year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company or any related entity.

NON-AUDIT SERVICES

Details of amounts paid or payable to the auditor for non-audit services provided during the fiscal year by the auditor are outlined in Note 27 to the financial statements.

11

PROCEEDINGS ON BEHALF OF THE COMPANY

No proceedings have been brought or intervened in on behalf of the Company.

On behalf of the directors

/s/ Jerry Cutini

Jerry Cutini

Executive Chairman, President and Chief Executive Officer

26 February 2019

San Luis Obispo, California, USA

12

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER

COMPREHENSIVE INCOME

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

(in thousands, except share and per share amounts)

	Note	2018			2017
Revenue	2	$	27,277		$	12,518
Cost of goods sold		(17,122		)	(8,550		)
Gross profit		10,155			3,968
Gross margin		37.2		%	31.7		%
Expenses
Research & development	3	(3,857		)	(3,495		)
Selling & marketing	3	(3,405		)	(2,125		)
General & administrative	3	(2,382		)	(1,939		)
Initial public offering costs		(1,264		)	—
Stock based compensation	20	(267		)	(112		)
Total expenses		(11,175		)	(7,671		)
Operating loss		(1,020		)	(3,703		)
Finance income		15			—
Finance expenses		(275		)	(48		)
Revaluation of warrants	17	(3,075		)	—
Net loss before income tax expense		(4,355		)	(3,751		)
Income tax expense	4	—			—
Net loss for the year		$	(4,355	)	$	(3,751	)
Other comprehensive income for the year, net of tax		—			—
Total comprehensive loss for the year attributable to the members of Revasum, Inc.		$	(4,355	)	$	(3,751	)
Loss per share attributable to the members of Revasum, Inc.:
Basic and diluted loss per share	5	$	(0.67	)	$	(7.67	)

The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.

13

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2018

(in thousands, except share and per share amounts)

	Note	2018			2017
Assets
Current assets
Cash and cash equivalents	6	$	24,469		$	2,406
Trade and other receivables	7	8,189			2,488
Inventories - net	8	8,378			4,039
Other current assets	9	498			542
Total current assets		41,534			9,475
Non-current assets
Property, plant and equipment — net	10	1,034			382
Intangible assets - net	11	1,536			237
Other non-current assets		102			116
Total non-current assets		2,672			735
Total assets		$	44,206		$	10,210
Liabilities
Current liabilities
Trade and other payables	12	$	5,911		$	2,414
Customer deposits	13	2,742			3,313
Deferred revenue		60			128
Employee benefits	14	290			197
Warranty provision	15	183			131
Borrowings, current	16	—			405
Lease liabilities, current	21	9			81
Total current liabilities		$	9,195		$	6,669
Non-current liabilities
Borrowings, non-current	16	—			595
Lease liabilities, non-current	21	18			—
Total non-current liabilities		18			595
Total liabilities		$	9,213		$	7,264
Net assets		$	34,993		$	2,946
Contributed equity	18	$	43,154		$	7,019
Share-based payment reserve	20	379			112
Accumulated losses		(8,540		)	(4,185		)
Total equity		$	34,993		$	2,946

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

14

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

(in thousands, except share and per share amounts)

	Contributed			Share-based payment		Accumulated			Total
	equity			reserve		losses			equity
Balance at 1 January 2017	$	2,201		$	—	$	(434	)	$	1,767
Loss after income tax expense for the year	—			—		(3,751		)	(3,751		)
Other comprehensive loss for the year, net of tax	—			—		—			—
Total comprehensive loss for the year	$	—		$	—	$	(3,751	)	$	(3,751	)
Transactions with owners in their capacity as owners:
Shares issued	4,818			—		—			4,818
Share-based payments	—			112		—			112
Balance at 31 December 2017	$	7,019		$	112	$	(4,185	)	$	2,946
Loss after income tax expense for the year	—			—		(4,355		)	(4,355		)
Other comprehensive loss for the year, net of tax	—			—		—			—
Total comprehensive loss for the year	$	—		$	—	$	(4,355	)	$	(4,355	)
Transactions with owners in their capacity as owners:
Shares issued on conversion of convertible notes (Note 18)	8,799			—		—			8,799
Shares issued on exercise of warrants (Note 18)	6,825			—		—			6,825
Preferred stock issued (Note 18 (b))	200			—		—			200
Issue of listed ordinary share capital (Note 18)	22,544			—		—			22,544
Share issue costs (Note 18)	(2,233		)	—		—			(2,233		)
Share-based payments (Note 20)	—			267		—			267
Balance at 31 December 2018	$	43,154		$	379	$	(8,540	)	$	34,993

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

15

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

(in thousands, except share and per share amounts)

	Note	2018			2017
Cash flows used in operating activities
Receipts from customers		$	20,936		$	11,309
Payments to suppliers and employees		(28,850		)	(15,804		)
Interest received		15			—
Interest paid		(26		)	(48		)
Net cash used in operating activities		$	(7,925	)	$	(4,543	)
Cash flows used in investing activities
Payments for property, plant and equipment		(384		)	(167		)
Payments for capitalized development costs		(1,362		)	—
Net cash used in investing activities		$	(1,746	)	$	(167	)
Cash flows from financing activities
Proceeds from the issue of common stock	18	21,343			18
Proceeds from the issue of preferred stock	18	200			4,800
Proceeds from the issue of secured promissory note		—			1,000
Repayment of secured promissory note	16	(160		)	—
Proceeds from the issue and exercise of warrant	17	3,750			—
Proceeds from the issue of unsecured convertible promissory note	16	7,089			—
Payment of issue costs related to convertible promissory notes and common stock		(407		)	—
Finance lease payments		(81		)	(78		)
Net cash from financing activities		$	31,734		$	5,740
Net increase in cash and cash equivalents		22,063			1,030
Cash and cash equivalents at the beginning of the fiscal year		2,406			1,376
Cash and cash equivalents at the end of the year	6	$	24,469		$	2,406

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

16

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of the consolidated financial statements are set out either in the respective notes or below. These policies have been consistently applied to all the periods presented, unless otherwise stated. The financial statements are for the Group including Revasum, Inc. and its subsidiary.

BASIS OF PREPARATION

These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (“AASB”). The financial statements also comply with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. The financial statements comprise the consolidated financial statements of the Group which is a for-profit entity for financial reporting purposes under Australian Accounting Standards.

Historical cost convention

The consolidated financial statements, except for the cash flow information, have been prepared on an accrual basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities.

Critical accounting estimates

The preparation of the consolidated financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed throughout the financial statements.

BASIS OF CONSOLIDATION

The consolidated financial statements comprise the financial statements of the Group as at the end of the reporting period. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:

·      Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)

·      Exposure, or rights, to variable returns from its involvement with the investee, and

·      The ability to use its power over the investee to affect its returns

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

·      The contractual arrangement with the other vote holders of the investee

·      Rights arising from other contractual arrangements

·      The Group’s voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of profit and loss and other comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-Group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

ROUNDING OF AMOUNTS

Amounts in this report have been rounded off to the nearest thousand United States dollars, except share and per share amounts.

FUNCTIONAL CURRENCY

The financial statements are presented in US dollars, which is the functional and presentational currency of the Group. There has been no change in the functional and presentational currency of the Group.

17

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

FOREIGN CURRENCY TRANSACTIONS

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items held at fair value are reported at the exchange rate at the date when the fair values were determined.

Exchange differences arising on the translation of monetary items are recognized in profit or loss.

Exchange differences arising on the translation of non-monetary items are recognized directly in other comprehensive income to the extent that the underlying gain or loss is directly recognized in other comprehensive income; otherwise the exchange difference is recognized in profit or loss.

CURRENT AND NON-CURRENT CLASSIFICATION

Assets and liabilities are presented in the statement of financial position based on current and non-current classification.

An asset is current when it is expected to be realized or intended to be sold or consumed in normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realized within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current.

A liability is current when it is expected to be settled in normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current.

Deferred tax assets and liabilities are always classified as non-current.

NEW, REVISED OR AMENDED ACCOUNTING STANDARDS ADOPTED

The Group has retrospectively adopted, as at the date of incorporation, all of the new, revised or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) and the International Financial Reporting Interpretations Committee (IFRIC) that are relevant to its operations and effective for the year commencing 1 January 2018.

Revised or amending Accounting Standards or Interpretations that are not yet mandatory for the year commencing 1 January 2019 have not been early adopted.

NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2018 reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new standards and interpretations is set out below.

AASB 16 Leases: This standard will primarily affect the accounting by lessees and will result in the recognition of almost all leases on the balance sheet. The standard removes the current distinction between operating and financing leases and requires recognition of an asset (the right to use the leased item) and a financial liability to pay rentals for almost all lease contracts.

Information on the undiscounted amount of the Group’s operating lease commitments at 31 December 2018 under AASB 117, the current leases standard, is disclosed in note 21. Under AASB 16, the present value of these commitments would be shown as a liability on the balance sheet together with an asset representing the right-of-use. The ongoing income statement classification of what is currently predominantly presented as occupancy-related expenses will be split between amortisation and interest expense.

The initial assessment of the impact of AASB 16 has determined that it will have a material impact on the Group’s financial statements. Following further assessment, the Group will decide on the transition method it will adopt. Note that the application of AASB 16 will not impact cash flows.

18

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

NOTE 2. REVENUE

Revenue consists of the following (in thousands):

	2018		2017
Systems revenue	$	21,624	$	8,647
Service, spares and other revenue	5,653		3,871
	$	27,277	$	12,518

Accounting policy for revenue recognition

The Group has disaggregated revenue recognized from contracts with customers into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Revasum recognizes revenue from systems and spares when the Customer obtains control of the Group’s product, which occurs at a point in time, typically upon leaving the Group’s factory. Taxes collected from customers relating to this revenue and remitted to governmental authorities are excluded from revenues. The Group expenses incremental costs of obtaining a contract as and when incurred because the expected amortization period of the asset that the Group would have recognized is one year or less and the commission rate on the future orders, if any, is commensurate with the commission rate on the initial sale.

Revenues from systems and spares are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established and which result from discounts, returns, and other allowances that are offered within contracts between the Group and its customers.

Other revenue is recognized when the related services are performed or when the revenue is earned.

NOTE 3. EXPENSES

Net loss before income tax expense includes the following specific expenses (in thousands):

	2018		2017
Research & development
Salary and benefits	$	2,369	$	2,322
Travel	230		183
Other	1,258		990
	$	3,857	$	3,495
Selling & marketing
Salary and benefits	$	1,807	$	943
Commissions and bonuses	448		99
Travel	328		230
Amortization (Note 11)	129		313
Other	693		540
	$	3,405	$	2,125
General & administrative
Salary and benefits	$	1,729	$	1,220
TSA expense	247		338
Other	406		381
	$	2,382	$	1,939

19

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

NOTE 3. EXPENSES (CONTINUED)

Accounting policy for expenses

Research costs

Expenditure on research activities, undertaken with the prospect of obtaining new technical knowledge and understanding, is recognized in the statement of profit or loss and other comprehensive income as an expense when it is incurred.

Other expenses

Other expenses are classified according to their function, as selling & marketing or general & administrative, include expenses mainly related with facilities, materials and depreciation.

NOTE 4. INCOME TAX EXPENSE

Income tax expense consists of the following (in thousands):

	2018		2017
Deferred tax expense	$	—	$	—
Current tax expense	—		—
Aggregate income tax expense	$	—	$	—

Effective tax rate reconciliation (in thousands):

	2018			2017
Loss before income tax expense	$	(4,355	)	$	(3,751	)
Tax at the statutory tax rate of 21% (2017: 34%)	(915		)	(1,275		)
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Temporary differences	(90		)	365
Permanent differences	668			4
Disallowable expenses	—			—
Unutilized losses carried forward	337			906
Effect on unutilized losses of future reduction in tax rate to 21%	—			—
Income tax expense	$	—		$	—

Based on historical losses and the expectation of future losses, management cannot conclude that it is more likely than not that the net deferred tax assets will be fully realizable. Accordingly, the Group has provided a full valuation allowance against its net deferred tax assets for the fiscal years ended 31 December 2018 and 31 December 2017.

As of 31 December 2018, the Group had federal and state net operating loss carry forwards of approximately $4.4 million and $3.8 million (2017: federal $2.8 million and state $2.8 million), respectively, available to reduce future taxable income, if any. The net operating loss carry forwards will expire beginning 2036 for both federal and California income tax purposes. Beginning in 2018, federal net operating losses are carried forward indefinitely.

As of 31 December 2018, the Group had federal and state research credit carry forwards of $0.07 million (2017: $Nil) and $0.07 million (2017: $Nil). Federal tax credits begin to expire in 2037. The state tax credits have no expiration date.

Utilization of the net operating loss carry forwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.

Accounting policy for income tax

The income tax expense for the year comprises current income tax expenses and deferred tax expenses.

Current income tax expense charged to the profit or loss in the tax payable on taxable income for the current period. Current tax liabilities are measured as the amounts expected to be paid to the relevant tax authority using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.

20

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

NOTE 4. INCOME TAX EXPENSE (CONTINUED)

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realized, or the liability is settled, and their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability.

Deferred tax assets relating to temporary differences and unused tax losses are only recognized to the extent that it is probably that future taxable profit will be available against which the benefits of the deferred tax asset can be utilized.

Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.

Critical accounting judgements, estimates and assumptions

The Group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Group recognizes liabilities for anticipated tax audit issues based on the Group’s current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made.

NOTE 5. LOSS PER SHARE

The calculation of the basic and diluted loss per share is based on the following information (in thousands, except share and per share amounts):

	2018			2017
Reconciliation of earnings used in calculating earnings per share
Loss attributable to ordinary equity holders of Revasum, Inc.	$	(4,355	)	$	(3,751	)

	No. of shares			No. of shares
Reconciliation of shares used in calculating earnings per share
Opening balance — adjusted for the impact of the 15:1 share split	727,500			150,000
Shares issued (1-May-2017)	—			502,500
Shares issued (27-Dec-2017)	—			75,000
Shares issued on conversion of preferred stock on IPO (4-Dec-2018)	45,166,110			—
Shares issued on exercise of warrants on IPO (4-Dec-2018)	7,428,570			—
Shares issued on conversion of promissory notes on IPO (4-Dec-2018)	7,829,355			—
Shares issued on IPO (4-Dec-2018)	15,357,143			—
	76,508,679			727,500
Weighted average number of ordinary shares	6,540,851			488,825
Basic and diluted loss per share	$	(0.67	)	$	(7.67	)

Preferred stock and options over ordinary shares that would be dilutive if the Group was generating a profit have been excluded from the weighted average number of issued ordinary shares as the Group is generating a loss.

21

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

NOTE 6. CASH AND CASH EQUIVALENTS

Cash and cash equivalents consisted of the following (in thousands):

	2018		2017
Cash at bank	$	4,455	$	2,406
Call deposits	20,014		—
	$	24,469	$	2,406

There are no restrictions or limitations on the use of cash and cash equivalents.

Accounting policy for cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less or that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Reconciliation of Cash Flow from Operations with net loss for the year (in thousands):

	2018			2017
Net loss for the year	$	(4,355	)	$	(3,751	)
Depreciation expense	190			152
Amortization expense	129			313
Impairment of property, plant and equipment	—			24
Transfer of WIP to property, plant and equipment	(431		)	—
Unpaid capitalized development costs	(59		)	—
Share-based payment expense	267			112
Revaluation of warrants	3,075			—
Non-cash interest expense on convertible notes	143			—
Foreign exchange loss on convertible notes	96			—
Change in operating assets and liabilities
Increase in trade and other receivables	(5,701		)	(1,137		)
Increase in inventories - net	(4,338		)	(2,950		)
Decrease/(increase) in other assets	59			(411		)
Increase in trade and other payables	3,495			798
Decrease in deferred revenue	(70		)	(72		)
(Decrease)/increase in customer deposits	(570		)	2,226
Increase in employee benefits	93			22
Increase in warranty provision	52			131
Net cash outflow from operating activities	$	(7,925	)	$	(4,543	)

NOTE 7. TRADE AND OTHER RECEIVABLES

Trade and other receivables consisted of the following (in thousands):

	2018		2017
Trade receivables	$	7,387	$	1,823
Accrued income	802		665
	$	8,189	$	2,488

22

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

NOTE 7. TRADE AND OTHER RECEIVABLES (CONTINUED)

Trade receivables past due but not impaired (in thousands):

Months overdue	2018		2017
1 to 3 months	$	1,815	$	838
4 to 6 months	267		16
7 to 9 months	420		4
Over 9 months	93		—
	$	2,595	$	858

Amounts are considered as ‘past due’ when the debt has not been settled within the terms and conditions agreed between the Group and the customer or counter party to the transaction. Receivables that are past due are assessed for impairment by ascertaining solvency of the debtors and are provided for where there are specific circumstance indicating that the debt may not be fully repaid to the Group. Trade receivables that were past due but not impaired relate to a number of independent customers for whom there is no history of default.

Accounting policy for trade and other receivables

Trade receivables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method, less any provision for impairment. Trade receivables generally have 30 to 90 day payment terms.

Collectability of trade receivables is reviewed on an ongoing basis in accordance with the expected credit loss (“ECL”) model. Credit losses are measured at the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Group in accordance with the contract and the cash flows that the Group expects to receive). ECLs are discounted at the effective interest rate of the financial asset.

The ECL assessment completed by the Group as at 31 December 2018 has resulted in an immaterial credit loss and no impairment allowance has been recognized by the Group (2017: $Nil).

Critical accounting judgements, estimates and assumptions

The provision for impairment of receivables and the ECL calculation assessment requires a degree of estimation and judgment. The level of provision is assessed by taking into account the recent sales experience, the ageing of receivables, historical collection rates and specific knowledge of the individual debtors financial position.

NOTE 8. INVENTORIES - NET

Inventories consisted of the following (in thousands):

	2018			2017
Raw materials	$	7,498		$	4,573
Work in progress	1,682			1,059
Finished goods	576			183
Inventories - gross	$	9,756		$	5,815
Less: Provision for impairment of inventories	(1,378		)	(1,776		)
Inventories - net	$	8,378		$	4,039

Accounting policy for inventory

Raw materials, work in progress and finished goods are stated at the lower of cost and net realizable value on a ‘first in first out’ basis. Cost comprises of direct materials and delivery costs, direct labor, import duties and other taxes, an appropriate proportion of variable and fixed overhead expenditure based on normal operating capacity. Costs of purchased inventory are determined after deducting rebates and discounts received or receivable.

The Group’s inventories are concentrated in high-technology parts and components that may be specialized in nature or subject to rapid technological obsolescence. These factors are considered in estimating required reserves to state inventories at the lower of cost or net realizable value (“NRV”). NRV is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

23

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

NOTE 8. INVENTORIES — NET (CONTINUED)

Critical accounting judgements, estimates and assumptions

The provision for impairment of inventories assessment requires a degree of estimation and judgement. The level of the provision is assessed by taking into account the recent sales experience, the ageing of inventories and other factors that affect inventory obsolescence.

NOTE 9. OTHER CURRENT ASSETS

Other current assets consisted of the following (in thousands):

	2018		2017
Prepaid expenses	$	143	$	72
Advances on purchases	355		470
	$	498	$	542

NOTE 10. PROPERTY, PLANT AND EQUIPMENT - NET

Property, plant and equipment consisted of the following (in thousands):

	2018			2017
Leasehold improvements - at cost	$	46		$	13
Less: Accumulated depreciation	(6		)	(2		)
Leasehold improvements - net	$	40		$	11
Plant and equipment - at cost	$	1,114		$	459
Less: Accumulated depreciation	(178		)	(119		)
Plant and equipment - net	$	936		$	340
Leased equipment	$	126		$	68
Less: Accumulated depreciation	(68		)	(37		)
Leased equipment - net	$	58		$	31
Property, plant and equipment - net	$	1,034		$	382

Movements (in thousands):

	Leasehold
	improvements			Plant & equipment Leased equipment						Total
Balance at 31 December 2016	$	—		$	328		$	63		$	391
Additions	13			154			—			167
Depreciation expense	(2		)	(118		)	(32		)	(152		)
Impairment of asset	—			(24		)	—			(24		)
Balance at 31 December 2017	$	11		$	340		$	31		$	382
Additions	33			341			58			432
Transfer to inventory — work in progress	—			(83		)	—			(83		)
Transfer from inventory	—			493			—			493
Depreciation expense	(4		)	(155		)	(31		)	(190		)
Balance at 31 December 2018	$	40		$	936		$	58		$	1,034

24

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

NOTE 10. PROPERTY, PLANT AND EQUIPMENT — NET (CONTINUED)

Reconciliation of depreciation expense (in thousands):

	2018		2018
Depreciation allocated to research & development	$	174	$	122
Depreciation expensed to cost of goods sold	16		30
Total depreciation expense	$	190	$	152

Accounting policy for property, plant and equipment

Plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the assets carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

Plant and equipment are depreciated, and leasehold improvements are amortized, over their estimated useful lives using the straight-line method.

The expected useful lives of the assets are as follows:

Plant & equipment	3-10 years
Leasehold improvements	over the shorter of the useful life and the remaining lease term
Leased equipment	over the shorter of the useful life and the remaining lease term

The residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date or when there is an indication that they have changed.

A carrying amount is written down immediately to its recoverable amount if the carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the statement profit or loss and other comprehensive income.

Critical accounting judgements, estimates and assumptions

Estimation of useful lives of assets

The Group determines the estimated useful lives and related depreciation and amortization charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortization charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down.

NOTE 11. INTANGIBLE ASSETS - NET

Intangible assets consisted of the following (in thousands):

	2018			2017
Acquired intangible assets — at cost (a)	$	602		$	602
Less: Accumulated amortization (a)	(494		)	(365		)
Acquired intangible assets — net	$	108		$	237
Capitalized development costs — at cost (b)	$	1,428		$	—
Less: Accumulated amortization (b)	—			—
Capitalized development costs — net	$	1,428		$	—
Intangible assets - net	$	1,536		$	237

25

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

NOTE 11. INTANGIBLE ASSETS — NET (CONTINUED)

(a) Acquired intangible assets (in thousands)

	Product						Customer			Commission
	Technology			Backlog			Relationships			Agreement			Total
Balance at 31 December 2016	$	116		$	279		$	68		$	87		$	550
Amortization expense	(24		)	(209		)	(14		)	(66		)	(313		)
Balance at 31 December 2017	92			70			54			21			237
Amortization expense	(24		)	(70		)	(14		)	(21		)	(129		)
Balance at 31 December 2018	$	68		$	—		$	40		$	—		$	108

Accounting policy for acquired intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses. Internally generated intangibles, excluding capitalized development costs, are not capitalized and the related expenditure is reflected in the statement of profit or loss and other comprehensive income in the period in which the expenditure is incurred. The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets with finite lives is recognized in the statement of profit or loss in the expense category that is consistent with the function of the intangible assets.

Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

The useful economic life for each class of intangible asset disclosed above is as follows:

Product Technology	5 years
Backlog	1.5 years
Customer Relationships	5 years
Commission Agreement	1.5 years

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit or loss when the asset is de-recognized.

Critical accounting judgements, estimates and assumptions

Impairment of intangible assets

The Group assesses impairment of intangible assets other than goodwill at each reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate several key estimates and assumptions.

(b) Capitalized development costs (in thousands)

	Capitalized
	development costs
Balance at 31 December 2016	$	—
Additions	—
Balance at 31 December 2017	—
Additions	1,428
Balance at 31 December 2018	$	1,428

26

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

NOTE 11. INTANGIBLE ASSETS — NET (CONTINUED)

Accounting policy for capitalized development costs

Development costs on an individual project are recognized as an intangible asset when the Group can demonstrate:

·      The technical feasibility of completing the intangible asset so that the asset will be available for use or sale.

·      Its intention to complete and its ability and intention to use or sell the asset.

·      How the asset will generate future economic benefits.

·      The availability of resources to complete the asset.

·      The ability to measure reliably the expenditure during the development.

The costs that are eligible for capitalization of development costs are the following:

·      Engineers’ compensation for time directly attributable to developing the project.

·      An allocated amount of direct costs, such as overhead related to the project and the facilities they occupy.

·      Costs associated with testing of the product for market.

·      Patents acquisition and registration costs (patents, application fees, and legal fees).

·      Other direct developing costs that are incurred to bring the product to market.

Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortization and accumulated impairment losses. Amortization of the asset begins when development is complete and the asset is available for use. Development costs are amortized on a straight-line basis over the period of expected future sales from the related project which is 5 years. Amortization is recorded in profit or loss.

During the period of development, the asset is tested for impairment annually. At the end of the year, the Group has considered indicators of impairment of the intangible assets and determined there were none.

Critical accounting judgements, estimates and assumptions

Capitalized development costs

The Group capitalizes development costs for a project in accordance with the accounting policy. Initial capitalization of cost is based on management’s judgement that technological and economic feasibility is confirmed. In determining the amounts to be capitalized, management makes assumptions regarding the expected future cash generation of the project, discount rates to be applied and the expected period of the benefits.

NOTE 12. TRADE AND OTHER PAYABLES

Trade and other payables consisted of the following (in thousands):

	2018		2017
Trade payables	$	4,134	$	1,391
Accrued expenses	1,777		1,023
	$	5,911	$	2,414

Accounting policy for trade and other payables

These amounts represent liabilities for goods and services provided to the Group prior to the end of the fiscal year and which are unpaid. Due to their short-term nature they are measured at amortized cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition.

NOTE 13. CUSTOMER DEPOSITS

Customer deposits consisted of the following (in thousands):

	2018		2017
Customer deposits on sales	$	2,742	$	3,313
	$	2,742	$	3,313

Accounting policy for financial liabilities

These amounts represent deposits for sales provided to the Group in accordance with contract terms. Due to their short-term nature they are measured at amortized cost.

27

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

NOTE 14. EMPLOYEE BENEFITS

Employee benefits consisted of the following (in thousands):

	2018		2017
Provision for annual leave	$	290	$	197
	$	290	$	197

Accounting policy for employee benefits

Provision for annual leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the balances are settled.

NOTE 15. WARRANTY PROVISION

Warranty provision consisted of the following (in thousands):

	2018		2017
Warranty provision	$	183	$	131
	$	183	$	131

Accounting policy for warranty provision

The provision represents the estimated warranty claims in respect of products sold which are still under warranty at the reporting date. The provision is estimated based on historical warranty claim information, sales levels and any recent trends that may suggest future claims could differ from historical amounts.

Critical accounting judgements, estimates and assumptions

In determining the level of provision required for warranties the Group has made judgements in respect of the expected performance of the products, the number of customers who will actually claim under the warranty and how often, and the costs of fulfilling the conditions of the warranty. The provision is based on estimates made from historical warranty data associated with similar products and services.

NOTE 16. BORROWINGS

Borrowings includes the following liabilities carried at amortized cost (in thousands):

	2018		2017
Current
Secured promissory note (1)	$	—	$	405
Non-current
Secured promissory note (1)	—		595
	—		1,000

28

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

NOTE 16. BORROWINGS (CONTINUED)

Movements in borrowings (in thousands):

	2018			2017
Balance as at 1 January	$	1,000		$	—
Secured Promissory Note (1)	—			1,000
Interest accrued on facility	30			42
Interest paid on facility	(24		)	(42		)
Cash repayment of Secured Promissory Note	(160		)	—
Conversion of Secured Promissory Note (1)	(846		)	—
Issue of Senior Unsecured Subordinated Convertible Promissory Notes (2)	8,656			—
Costs of issuing Senior Unsecured Subordinated Convertible Promissory Notes	(740		)	—
Interest accrued on Senior Unsecured Subordinated Convertible Promissory Notes	142			—
Conversion of Senior Unsecured Subordinated Convertible Promissory Note to Common Stock (3)	(8,058		)	—
Balance as at 31 December	$	—		$	1,000

(1)Firsthand Venture Investors — secured promissory note

On 1 March 2017, the Company entered into a secured promissory note agreement with the major shareholder of the Company, Firsthand Venture Investors, totaling $1 million for a term of 36 months and an interest rate of 5% (“Secured Promissory Note”). Interest only payments were required for the first 12 months with a reduction in principal due thereafter and maturing in February 2020.

The Secured Promissory Note was secured over all personal property of the Company, whether presently existing or hereafter created or acquired, as per the supporting Security Agreement to the note agreement.

The Secured Promissory Note was fully repaid on 29 August 2018 by way of the issue of a Senior Unsecured Subordinated Convertible Promissory Note with a maturity date of 1 July 2019 (refer Note 16(2)).

(2)Senior Unsecured Subordinated Convertible Promissory Note (“Notes”)

On 28 August 2018, the Company entered into a Securities Purchase Agreement for the issuance and sale of up to $9,000,000 in aggregate principal amount of 5% Senior Unsecured Subordinated Convertible Promissory Notes with a maturity date of 1 July 2019 (“Notes”), of which $8,655,944 were issued. The Notes automatically convert at a fixed discount into the Company’s common stock (post stock split) upon listing approval for the Company to be admitted to the official list of the ASX and for the CHESS Depositary Interests over the Company’s Common Stock (“CDIs”) to be quoted on the ASX in connection with a qualifying Initial Public Offering (“IPO”). The Notes were issued in the following five tranches:

·Tranche 1 was issued on 29 August 2018 for a total of $4,534,950.

·Tranche 2 was issued on 31 August 2018 for a total of $1,617,000.

·Tranche 3 was issued on 31 August 2018 for a total of $307,598. This was issued in lieu of payment of the investment banking fees.

·Tranche 4 was issued on 29 August 2018 to Firsthand Venture Investors, a related party. The total value of this tranche was $1,846,397, with $1,000,000 being received in cash, and the remaining $846,397 repaying the then outstanding Secured Promissory Note (see Note 16 (1) for further details).

·Tranche 5 was issued on 31 August 2018 for a total of $350,000, including $100,000 from Jerry Cutini and $25,000 from Vivek Rao, directors of Revasum.

The Company received total consideration for the issuance of the Notes of US$7,089,002 in cash and repaid the $846,397 outstanding Secured Promissory Note (Refer Note 16 (1)). The consideration received was net of $624,776 fees and expenses. Additional fees were incurred of $115,019. Tranches 1, 2, and 3 above tranches were entered into at a fixed foreign exchange rate of US$1: A$1.36. After conversion and settlement into US$, the Company recognized a foreign exchange loss of $95,770.

29

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

NOTE 16. BORROWINGS (CONTINUED)

(3)Automatic exercise of Convertible Notes

In accordance with the terms of the Convertible Notes, all Convertible Notes in existence immediately prior to the allotment of CDIs under the IPO were converted to Common Stock Shares in the Company.

Accounting policy for convertible promissory notes

Promissory notes are initially recognized at the fair value of the consideration received, net of transaction costs. They are subsequently remeasured at amortized cost using the effective interest method.

NOTE 17. WARRANT LIABILITY

Warrant liability consisted of the following (in thousands):

	2018		2017
Warrants	$	—	$	—
	$	—	$	—

Movements in warrant liability (in thousands):

	2018			2017
Balance as at 1 January	$	—		$	—
Cash received on issue of warrants (1)	500			—
Fair value remeasurement of warrants on grant date	(450		)	—
Cash received on exercise of warrants (1) (b)	3,250			—
Fair value remeasurement of warrants at date of IPO	3,525			—
Conversion of warrants to common stock	(6,825		)	—
Balance as at 31 December	$	—		$	—

(1)Firsthand Venture Investor Warrant

On 31 July 2018, the Company issued a Stock Purchase Warrant (“Warrant”) to purchase up to 650,000 shares of the Company’s common stock, with a par value of $0.0001 per share, an exercise price per share of $10 and an expiry date of 31 July 2025. The warrant was also exercisable at any time via a cashless exercise, the fair value to be determined by the Board, or in the case of an IPO, the fair value would be equal to the IPO price. The warrant was issued to a related party, Firsthand Venture Investors. Consideration of $500,000 was received in respect of the warrant, and the warrant fair value was determined to be $0.078 per share. At the time of the IPO:

(a)The warrants were remeasured to the fair value based on the IPO price, discounted accordingly for lack of marketability at the time to $0.70;

(b)325,000 warrants were exercised resulting in a cash injection of $3,250,000, and the issue of 4,875,000 Common Stock based on the 15:1 stock split (refer Note 18(a)(1); and

(c)325,000 were converted to Common Stock via a cashless exercise resulting in the issue of 2,553,570 Common Stock based on the 15:1 stock split (refer Note 18(a)(1).

Accounting policy for common warrants

The Company accounts for its warrants and other derivative financial instruments as either equity or liabilities based upon the characteristics and provisions of each instrument.

Warrants classified as equity are recorded at fair value as of the date of issue on the Company’s balance sheet and no further adjustments to their valuation are made. Warrants classified as derivative liabilities and other derivative financial instruments that require separate accounting as liabilities are recorded on the Company’s balance sheet at their fair value on the date of issue and will be revalued on each subsequent balance sheet date until such instruments are exercised or expire, with any changes in the fair value between reporting periods recorded through the statement of profit or loss and other comprehensive income.

30

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

NOTE 17. WARRANT LIABILITY (CONTINUED)

Accounting policy for common warrants (continued)

Management estimates the fair value of these liabilities using option pricing models and assumptions that are based on the individual characteristics of the warrants or instruments on the valuation date, as well as assumptions for future financings, expected volatility, expected life, yield, and risk-free interest rate.

Critical accounting judgements, estimates and assumptions

The common warrants were classified as derivative liabilities with the fair value being determined using the Probability Weighted Expected Return Method. This method requires the use of subjective assumptions including volatility, expected term, risk free rate and the fair value of the underlying stock. Management obtained valuations from independent third parties for the purpose of calculating the fair value of the warrants.

NOTE 18. CONTRIBUTED EQUITY

Contributed equity consisted of the following:

	2018			2017
	Shares	US$’000		Shares	US$’000
Shares of Common Stock (a)	76,508,579	$	43,154	48,500	$	19
Preferred Stock (b)	—	—		2,986,470	7,000
	76,508,579	$	43,154	3,034,970	$	7,019

Issued capital

Shares of common stock are classified as equity.

Incremental costs directly attributable to the issue of new shares, warrants or options are shown in equity as a deduction, net of tax, from the proceeds.

(a)Movements in common stock:

	Shares	US$’000
Balance as at 1 January 2017	10,000	1
Shares issued on 1 May 2017	33,500	16
Shares issued on 27 December 2017	5,000	2
Balance as at 31 December 2017	48,500	19
Completion of 15:1 Share split (1)	679,000	—
Conversion of preferred stock — Note 18(b)	45,166,110	7,200
Shares issued on conversion of warrant prior to IPO (2)	7,428,570	6,825
Shares issued on conversion of Senior Unsecured Subordinated Convertible Promissory Note (2)	7,829,355	8,799
Shares issued on 4 December 2018 (3)	15,357,143	22,544
Share issue costs	—	(2,233	)
Balance as at 31 December 2018	76,508,679	43,154

Terms and conditions of contributed equity

The holders of shares of common stock participate in dividends and the proceeds on the winding up of the Company in proportion to the number of and amounts paid on the shares held. The fully paid shares of common stock have a par value of $0.0001 and the Company has a limited amount of authorized capital of 226,128,108 shares, 174,128,108 of which are designated “Common Stock” and 52,000,000 of which are designated “Common Prime Stock”. As at the fiscal year end date, no Common Prime Stock was on issue.

The holders of Common Stock are entitled to one vote for each share of common stock held at the meetings of stockholders. There shall be no cumulative voting. They are also entitled to receive, when, as and if declared by the Board, out of any assets of the Company legally available therefore, any dividends as may be declared from time to time by the Board.

31

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

NOTE 18. CONTRIBUTED EQUITY (CONTINUED)

In connection with the Company’s IPO of CHESS Depository Interests (CDIs), with each CDI representing an interest in one share of Common Stock, certain stockholders entered into an escrow agreement with the Company under which the stockholder agreed, among other things, to certain restrictions and prohibitions for a period of time (the “Lock-Up Period”), from engaging in transactions in the shares of Common Stock (including Common Stock in the form of CDIs), shares of Common Stock that may be acquired upon exercise of a stock option, warrant or other right, and shares of Common Stock that arise from such Common Stock (collectively, the “Restricted Securities”). The Restricted Securities shall automatically be converted into shares of Common Prime Stock, on a one for one basis if the Company determines, in its sole discretion, that the stockholder breached any term of the stockholder’s escrow agreement or breached the official listing rules of the ASX relating to the Restricted Securities. Any shares of Common Stock converted to Common Prime Stock under these terms should be automatically converted back into shares of Common Stock, on a one for one basis, upon the earlier to occur of (i) the expiration of the Lock-Up Period in the escrow agreement or the (ii) breach of the listing rules being remedied, as applicable

(1)On 17 October 2018, the Board approved a 15:1 forward split of the capital stock of the Company;

(2)Immediately prior to the completion of an IPO on the ASX, the Company completed the following changes to the capital structure:

a.Conversion of the existing Series Seed, A, and B Preferred Stock into shares of Common Stock;

b.Exercise of the Warrants held by Firsthand Venture Investors into shares of Common Stock, partly by a cashless exercise and partly by a net exercise for cash (Note 17(1));

c.Conversion of the Convertible Notes into shares of Common Stock (Note 16(3)); and

(3)The Company completed the IPO on the Australian Securities Exchange on 4 December 2018 with the issue of 15,357,143 new shares.

(b)Movements in preferred stock on issue:

	Series Seed		Series A		Series B
	Preferred		Preferred		Preferred		Total
	Stock		Stock		Stock		Shares		US$’000
Balance at 31 December 2016	—		2,200,000		—		2,200,000		2,200
Reclassified to Seed Preferred Stock (1)	2,200,000		(2,200,000	)	—		—		—
Issued (2)	—		441,998		—		441,998		2,000
Issued (3)	—		—		344,472		344,472		2,800
Balance at 31 December 2017	2,200,000		441,998		344,472		2,986,470		7,000
Issued (4)	—		—		24,604		24,604		200
Completion of 15:1 Share split (Note 18 (a))	30,800,000		6,187,972		5,167,064		42,155,036		—
Conversion of preferred stock to Common stock (5)	(33,000,000	)	(6,629,970	)	(5,536,140	)	(45,166,110	)	(7,200	)
Balance at 31 December 2018	—		—		—		—		—

(1)On 14 November 2016, 2,200,000 shares of Series A preferred stock were issued with a par value of $0.0001. The shares were subsequently reclassified to Series Seed on 27 October 2017.

(2)On 1 March 2017, 441,998 shares of Series A preferred stock were issued with a par value of $0.001 at an issue price of $4.5249.

(3)On 27 October 2017 and 18 December 2017, 246,051 shares and 98,421 shares, respectively, of Series B preferred stock were issued with a par value of $0.001 at an issue price of $8.1284.

(4)On 1 January 2018, 24,604 shares of Series B preferred stock were issued with a par value of $0.001 at an issue price of $8.1284.

(5)All preferred stock in existence immediately prior to the allotment of CDIs under the IPO were converted to Common Stock Shares in the Company.

32

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

NOTE 18. CONTRIBUTED EQUITY (CONTINUED)

Terms and conditions of contributed equity

The holders of Preferred Stock are entitled to the number of voting rights equal to the number of shares of Common Stock into which such shares of Preferred Stock held by such holder could then be converted. The Preferred Stock holders are eligible to vote on all matters on which the Common Stock holder is entitled to vote.

Critical accounting judgements, estimates and assumptions

The terms of the certificate of incorporation (COI) of the Company stipulate that preferred stock holders are entitled to vote, and that they vote together with the common stock holders as a single class, as though they had already converted their preferred stock. The preferred stock holders control the board as a result of this. The COI stipulates that there is no redemption feature in respect of the preferred stock, and dividends are not cumulative. Based on the above facts, management considered that the preferred stock was an equity instrument and was classified accordingly. All preferred stock was converted to Common Stock as at 31 December 2018.

NOTE 19. CAPITAL MANAGEMENT

Capital managed by the Board comprises contributed equity totaling $43.2 million (2017: $7.0 million). When managing capital, management’s objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity. Managed capital is disclosed on the face of the statement of financial position and comprises contributed equity and reserves.

Management may adjust the capital structure to take advantage of favorable costs of capital or higher returns on assets. As the market is constantly changing, management may issue new shares or sell assets to raise cash, change the amount of dividends to be paid to shareholders (if at all) or return capital to shareholders.

During the fiscal year ending 31 December 2018, management did not pay a dividend and does not expect to pay a dividend in the foreseeable future.

The Group encourages employees to be shareholders through the 2017 Omnibus Incentive Plan (Note 20).

There were no changes in the Group’s approach to capital management during the year. Risk management policies and procedures are established with regular monitoring and reporting.

Neither the Company nor its subsidiary are subject to externally imposed capital requirements.

NOTE 20. SHARE BASED PAYMENTS

2017 Omnibus Incentive Plan (2017 Plan)

The Company’s Amended and Restated 2017 Omnibus Incentive Plan (2017 Plan) provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, incentive awards, other stock-based awards, dividend equivalents and cash awards to directors, employees, consultants and contractors. Only employees of the Company are eligible to receive incentive stock options.

The 2017 Plan is administered by the Remuneration and Nomination Committee. Subject to the provisions of the 2017 Plan and the ASX Listing Rules, the administrator of the 2017 Plan generally has the authority to, among other things, construe and interpret all provisions of the 2017 Plan; approve persons to receive awards; approve the form and terms of awards and terms of vesting, exercisability and payment of awards; determine the number of Shares subject to awards; adopt, amend and rescind rules and regulations pertaining to the administration of the 2017 Plan; and accelerate the time at which any award may be exercised, become transferable or nonforfeitable or be earned and settled including, without limitation, in the event of a participant’s death, disability, retirement or involuntary termination of employment or service or in connection with a change in control of the Company.

In the event of certain corporate events or changes in the Company’s capitalization, the administrator will make adjustments to the number of Shares reserved for issuance under the 2017 Plan, the exercise prices of and the number of Shares subject to outstanding options and stock appreciation rights, and the purchase prices of and/or number of Shares subject to other outstanding awards, subject to compliance with applicable rules and regulations, including the ASX Listing Rules.

33

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

NOTE 20. SHARE BASED PAYMENTS (CONTINUED)

In the event of an acquisition or other combination, any or all outstanding awards may be assumed, converted or replaced by the successor or acquiring entity or may be substituted for equivalent awards granted by the successor or acquiring entity. Any awards not assumed or replaced in the acquisition or combination will terminate, without accelerating vesting on the date of such acquisition or combination.

Subject to compliance with applicable law, including the ASX Listing Rules, the Board has the authority to amend or terminate the 2017 Plan at any time and the ability to amend any outstanding awards under the 2017 Plan, provided that no such amendment or termination may materially adversely impair the rights of the participant with respect to such outstanding awards without the participant’s consent. Certain amendments require the approval of the Shareholders.

Unless earlier terminated, the 2017 Plan will terminate in 2027.

Share based payment expense (in thousands):

	2018		2017
Options issued to directors, employee and consultants (a)	$	82	$	112
Restricted stock units (‘RSUs’) issued to employees and consultants (b)	185		—
Total share-based payment expense:	$	267	$	112

(a)Options issued as share based payments

The Company grants stock options to its employees, directors, and consultants for a fixed number of shares with an exercise price equal to or greater than the fair value of the common stock at the date of grant and expire no later than 10 years from the date of grant.

(in thousands, except share and per share amounts)

	WAEP	Share options		Share-Based Payment
	$	Number		Reserve
Opening balance as at 1 January 2017		—		$	—
Expense in the period		—		112
Granted	0.03	702,370		—
Exercised	0.03	(5,000	)	—
Forfeited		—		—
Expired		—		—
Closing balance as at 31 December 2017	0.03	697,370		$	112
Expense in the period		—		82
Effect of 15:1 Split on opening balance	0.44	9,763,180		—
Granted	0.24	2,760,000		—
Exercised		—		—
Forfeited		—		—
Expired		—		—
Closing balance as at 31 December 2018	0.08	13,220,550		$	194

34

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

NOTE 20. SHARE BASED PAYMENTS (CONTINUED)

Option Pricing Model

For all share options issued during the fiscal year, the fair value of the equity-settled share options granted is estimated as at the date of grant using a Black Scholes Option Pricing Model.

The following tables list the inputs to the models used for the valuation of options granted in the year ended 31 December 2018.

	Grant Date
	5-Sep-18	5-Sep-18	5-Sep-18	5-Sep-18	15-Oct-18	2-Dec-18
Number of options issued	330,000	1,500,000	157,500	547,500	75,000	150,000
Fair value at measurement date US$	0.0537	0.0537	0.0537	0.0537	0.3292	0.5188
Share price at Grant date US$	0.15	0.15	0.15	0.15	0.92	1.45
Exercise price US$	0.15	0.15	0.15	0.15	0.92	1.45
Expected volatility %	50	50	50	50	50	50
Risk free interest rate %	2.27	2.27	2.27	2.27	2.27	2.27
Expected life of options in years	3	3	3	3	3	3
Vesting conditions	Type 1	Type 2	Type 3	Type 4	Type 4	Type 4

Vesting conditions
Type 1	6.2% of the options vest immediately, with the remaining 93.8% vesting on a monthly basis over the following 45 months.
Type 2	25% of the options vest on 1 May 2019, with the remaining 75% vesting on a monthly basis over the following 36 months.
Type 3	Options vest immediately.
Type 4	2% of the options vest on the anniversary of the date of grant, with the remaining 98% vesting on a monthly basis over the following 47 months.

The expected dividend yield for all options granted during these periods was nil. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome.

(b)Restricted Stock Units issued as share based payments

(in thousands, except share and per share amounts)

	RSU	Share-Based
	Number	Payment Reserve
Opening balance as at 1 January 2018	—	$	—
Issued during the year	2,402,160	185
Converted during the year	—	—
Closing balance as at 31 December 2018	2,402,160	$	185

No restricted stock units were on issue in the prior year.

35

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

NOTE 20. SHARE BASED PAYMENTS (CONTINUED)

Restricted Stock Units Pricing Model

The fair value of the equity-settled restricted stock units granted throughout the year is estimated as at the date of grant with reference to the IPO price, discounted accordingly for lack of marketability and non-controlling interest.

Accounting policy for share-based payments

The Company provides benefits to directors, employees and consultants in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions) via the 2017 Omnibus Incentive Plan (“the Plan”).

The terms of the share options are as determined by the Board. The cost of these equity-settled transactions to employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by using a Black & Scholes model.

In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of the shares of the Company (market conditions) if applicable.

The cost of equity-settled transactions is recognized, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled (the vesting period), ending on the date on which the relevant employees become fully entitled to the award (the vesting date).

At each subsequent reporting date until vesting, the cumulative charge to the statement of comprehensive income is the product of (i) the grant date fair value of the award; (ii) the current best estimate of the number of awards that will vest, taking into account such factors as the likelihood of employee turnover during the vesting period and the likelihood of non-market performance conditions being met; and (iii) the expired portion of the vesting period.

The charge to the statement of comprehensive income for the period is the cumulative amount as calculated above less the amounts already charged in previous periods. There is a corresponding credit to equity.

Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards vest than were originally anticipated to do so. Any award subject to a market condition is considered to vest irrespective of whether or not the market condition is fulfilled, provided that all other conditions are satisfied.

If a non-vesting condition is within the control of the Company or the employee, the failure to satisfy the condition is treated as a cancellation. If a non-vesting condition within the control of neither the Company nor employee is not satisfied during the vesting period, any expense for the award not previously recognized is recognized over the remaining vesting period, unless the award is forfeited.

NOTE 21. COMMITMENTS

(in thousands)

	2018		2017
Operating lease commitments
Committed at the reporting date but not recognized as liabilities, payable:
Within one year	$	757	$	561
One to five years	2,964		1,075
	$	3,721	$	1,636
Finance leases
Committed at the reporting date and recognized as liabilities, payable:
Within one year	$	9	$	84
One to five years	18		—
Total minimum lease payments	$	27	$	84
Less amounts representing finance charges	—		(3		)
Present value of minimum lease payments	$	27	$	81
Total lease expense included in operating expenses:	$	623	$	446

36

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

NOTE 21. COMMITMENTS (CONTINUED)

On 17 August 2018, the Company signed an amendment to the lease agreement for the premises at 825 Buckley Road, San Luis Obispo, California, USA. The amendment extended the lease to 30 November 2023, and also provides the Company with the right to extend the lease two times beyond 30 November 2023 by 30 months each time by providing written notice to the Lessor at least six months before the end of each lease period.

NOTE 22. RELATED PARTY TRANSACTIONS

Subsidiaries

The consolidated financial statements include the financial statements of Revasum, Inc. and the following subsidiary:

	Country of	Beneficial interest
Name	incorporation	2018		2017
Revasum Australia, Inc. (1)	United States of America	100	%	—

(1)Revasum Australia, Inc. was incorporated in the State of Delaware in the United States on 17 August 2018.

Key management personnel

The following persons were identified as key management personnel of Revasum during the fiscal year ended 31 December 2018:

Jerry Cutini	Executive Chairman, President and CEO
Kevin Landis	Non-Executive Director
Ryan Benton	Executive Director, Senior Vice President and CFO
Paul Mirabelle	Independent Non-Executive Director
Vivek Rao	Independent Non-Executive Director

Compensation

The compensation paid to directors and key management personnel for the fiscal year ended 31 December 2018 is as follows:

	Base Salary (Gross)	401 (K)	Directors’ Fees	Total 2018	Total 2017
	$	$	$	$	$
Jerry Cutini	275,000	5,288	—	280,288	264,461
Ryan Benton	70,192	—	—	70,192	—
Paul Mirabelle	—	—	12,164	12,164	—
Vivek Rao	—	—	11,178	11,178	—
	345,192	—	23,342	373,822	264,461

Share options and restricted stock units granted to directors and other key management personnel

		2018	2017
	Class of underlying shares	Number	Number
Jerry Cutini	Common Stock	—	195,605
Ryan Benton	Common Stock	1,965,000	—
Paul Mirabelle	Common Stock	75,000	—
Vivek Rao	Common Stock	75,000	—
		2,115,000	195,605

(1)Options issued in the current year include specific performance conditions — refer Note 20.

37

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

NOTE 22. RELATED PARTY TRANSACTIONS (CONTINUED)

Restricted Stock Units granted to directors and other key management personnel

		Number
	Class of underlying shares	2018	2017
Jerry Cutini	Common Stock	1,271,025	—
Ryan Benton	Common Stock	976,845	—
		2,247,870	—

Transactions with related parties

Receivable from and payable to related parties

There were no trade receivables from or trade payables to related parties at the current and previous reporting dates.

Loans to and from related parties

There were no loans to or from related parties at the current and previous reporting dates.

Other transactions with related parties

Common Stock Warrants

On 31 July 2018, the Company issued a Stock Purchase Warrant (“Warrant”) to purchase up to 650,000 shares of the Company’s common stock, with a par value of $0.0001 per share, an exercise price per share of $10 and an expiry date of 31 July 2025. This warrant was issued to Firsthand Venture Inventors (‘Firsthand’). Kevin Landis is Firsthand’s nominee director to the Revasum board of directors. The stock purchase warrant was fully exercised as at the year-end date. For further disclosure with regards to the warrant please see Note 17 (1).

Senior Unsecured Subordinated Convertible Promissory Notes

On 28 August 2018, the Company entered into a Securities Purchase Agreement for the issuance and sale of up to $9,000,000 in aggregate principal amount of 5% Senior Unsecured Subordinated Convertible Promissory Notes with a maturity date of 1 July 2019 (“Notes”), of which $8,655,944 were issued. A proportion of convertible notes were issued to Directors and related parties. All convertible notes were fully converted to common stock as at the year-end date. For further disclosure with regards to the convertible notes please see Note 16 (2).

Financial instrument balances held with related parties

			Number of	Number of
	Nature of related	Financial	instruments held	instruments held
Related party name	party relationship	instrument type	2018	2017
Firsthand Venture Investors	Nominee director	Preferred stock	—	2,955,717
Firsthand Venture Investors	Nominee director	Common stock	53,834,340	10,000
Jerry Cutini	Director, CEO	Common stock	120,000	8,000
Cutini Family Living Trust	Trustee in common	Common stock	182,700	—
Ryan Benton	Director, SVP & CFO	Common stock	276,795	—
Paul Mirabelle	Director	Common stock	30,000	—
Vivek Rao	Director	Common stock	22,605	—
			54,466,440	2,973,717

38

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

NOTE 23. EVENTS AFTER THE REPORTING PERIOD

On 2 January 2019, 657,500 options with an exercise price of US$1.26 and 150,000 restricted stock units were granted to employees and consultants.

On 25 January 2019, Revasum signed an agreement with regards to the implementation of a new ERP system. Estimated implementation costs payable to the ERP provider are $0.5 million. The initial subscription service term is for 5 years, with an annual fee. After this initial term, the subscription services will automatically renew from year to year unless terminated.

On 4 February 2019, 500,000 options with an exercise price of US$1.30 were granted to employees.

On 12 February 2019, IOOF Holdings Limited, a substantial shareholder of Revasum, Inc., increased their holding in the Company from 9.188% to 11.093%.

No other matter or circumstance has arisen since 31 December 2018 that has significantly affected, or may significantly affect the Group’s operations, the results of those operations, or the Group’s state of affairs in future fiscal years.

NOTE 24. FINANCIAL RISK MANAGEMENT

The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, price risk and interest rate risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the financial performance of the Group. The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate and other price risks, ageing analysis for credit risk and liquidity risk.

Risk management is carried out by senior finance executives (“Finance”). Risk management includes identification and analysis of the risk exposure of the Group and appropriate procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within the Group’s operating units. Finance reports to the Board on a quarterly basis.

The Group financial instruments consist mainly of deposits with banks, accounts receivables and payables, financial liabilities and borrowings via the issue of convertible notes. The directors consider that the fair value of financial assets and liabilities approximates their carrying amounts.

(in thousands)

	2018		2017
Financial assets
Cash and cash equivalents	$	24,469	$	2,406
Trade and other receivables	8,189		2,488
	$	32,658	$	4,894
Financial liabilities
Trade and other payables	5,911		2,414
Customer deposits	2,742		3,313
Borrowings	—		1,000
	$	8,653	$	6,727

Liquidity Risk

Liquidity Risk arises from the possibility that the Group may encounter difficulty in settling its debt or otherwise meeting its obligations related to financial liabilities. The Group manages liquidity by monitoring forecast cash flows and ensuring that adequate liquid cash balances are maintained.

39

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

NOTE 24. FINANCIAL RISK MANAGEMENT (CONTINUED)

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements (in thousands):

					Between 1 and 2		Total contractual
2018	Less than 6 months		6 to 12 months		years		cashflow
Trade and other payables	$	5,911	$	—	$	—	$	5,911
Customer deposits	2,742		—		—		2,742
Borrowings	—		—		—		—
	$	8,653	$	—	$	—	$	8,653

					Between 1 and 2		Total contractual
2017	Less than 6 months		6 to 12 months		years		cashflow
Trade and other payables	$	2,414	$	—	$	—	$	2,414
Customer deposits	3,313		—		—		3,313
Borrowings	—		405		595		1,000
	$	5,727	$	405	$	595	$	6,727

Credit Risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group’s cash and cash equivalents and receivables from customers (refer to Note 7 for further disclosure on this matter).

Cash and cash equivalents

The Group limits its exposure to credit risk by only investing in liquid securities and only with counterparties that have an acceptable credit rating.

Trade and other receivables

The Group operates primarily in developing, manufacturing and selling a portfolio of semiconductor processing equipment and has trade receivables. There is risk that these receivables may not be recovered and the Group monitors its receivables balances and collections on a monthly basis to mitigate any risk. The Group monitors the expected credit loss model and values trade and other receivables accordingly.

Currency Risk

The Group is exposed to fluctuations in foreign currencies arising from the purchase of goods and services in currencies other than the transacting entity’s functional currency.

The Group completed its listing on the ASX during the year, raising capital and incurring IPO related transactions in Australian dollars (AUD). Funds raised were converted to USD to limit exposures to currency fluctuations.

Branch operations commenced in Taiwan near the end of the year resulting in transactions being incurred in Taiwan dollars. As a result, the Group’s statement of financial position can be affected by movements in the USD/TWD exchange rate when translating to the USD functional currency, however this is considered negligible.

40

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

NOTE 25. OPERATING SEGMENTS

For operating purposes, the Group is organized into one main operating segment, focused on the technological design, development, manufacture and sale of semiconductor processing equipment.

All the activities of the Group are interrelated, and each activity is dependent on the others. Accordingly, all significant operating disclosures are based upon analysis of the Group as one segment. The financial results from this segment are equivalent to the financial statements of the Group as a whole.

Geographically, the Group has the following revenue information based on the location of its customers (in thousands):

	2018		2017
Asia	$	17,047	$	4,262
North America	6,346		7,385
Europe	3,884		871
	$	27,277	$	12,518

The following customers accounted for more than 10% of revenues:

Customer A	31	%	11	%
Customer B	18	%	33	%
Customer C	7	%	20	%
Customer D	4	%	14	%
Customer E	1	%	10	%
	61	%	88	%

NOTE 26. CONTINGENT LIABILITIES AND CONTINGENT ASSETS

The Group has no material contingent liabilities or contingent assets as at 31 December 2018 (2017: Nil).

NOTE 27. AUDITOR’S REMUNERATION

During the fiscal year, the following fees were paid or payable for audit services provided by BDO:

	2018		2017
Audit services
Audit or review of financial statements — BDO East Coast Partnership	$	152,980	$	89,237
Audit of financial statements — BDO US	—		180,853
Other services — BDO
Taxation services	38,803		—
Due diligence services related to Initial Public Offering	232,658		—
	$	424,441	$	270,090

41

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

NOTE 28. PARENT ENTITY INFORMATION

(in thousands)

	Note	2018			2017
Current assets		$	41,534		$	9,475
Non-current assets		2,672			735
Total assets		$	44,206		$	10,210
Current liabilities		9,195			6,669
Non-Current liabilities		18			595
Total liabilities		$	9,213		$	7,264
Net Assets		$	34,993		$	2,946
Contributed equity	18	$	43,154		$	7,019
Share based payment reserve	20	379			112
Accumulated losses		(8,540		)	(4,185		)
Total shareholders’ equity		$	34,993		$	2,946
Profit or loss of the parent entity		$	(4,355	)	$	(3,751	)
Total comprehensive income of the parent entity		$	(4,355	)	$	(3,751	)

Guarantees entered into by the parent entity

No guarantees have been entered into by the parent entity during FY2018 or FY2017.

Commitments and contingent liabilities of the parent entity

The parent entity did not have any commitments or contingent liabilities as at 31 December 2017 or 31 December 2018.

42

DIRECTORS’ DECLARATION FOR THE FISCAL YEAR ENDED 31 DECEMBER 2018

In accordance with a resolution of the directors of Revasum, Inc., the directors of the Company declare that:

1.The financial statements and notes thereto, are in accordance with Australian Accounting Standards;

2.The financial statements and notes thereto, give a true and fair view of the Group’s financial position as at 31 December 2018 and of the performance for the year ended on that date; and

3.In the directors’ opinion there are reasonable grounds to believe that Revasum, Inc. will be able to pay its debts as and when they become due and payable.

On behalf of the directors

/s/ Jerry Cutini

Jerry Cutini

Executive Chairman, President and Chief Executive Officer

26 February 2019

San Luis Obispo, California, USA

43

	Tel: +61 2 9251 4100	Level 11, 1 Margaret St
	Fax: +61 2 9240 9821	Sydney NSW 2000
	www.bdo.com.au	Australia

INDEPENDENT AUDITOR’S REPORT

To the members of Revasum, Inc.

Report on the Audit of the Financial Report

Qualified Opinion

We have audited the financial report of Revasum, Inc. (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 31 December 2018, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies and the directors’ declaration.

In our opinion, except for the possible effects of the matter described in the Basis for qualified opinion section of our report, the accompanying financial presents fairly, in all material respects, the financial position of the Group as at 31 December 2018 and its financial performance and its cash flows for the year then ended in accordance with Australian Accounting Standards.

Basis for qualified opinion

We were appointed as auditors of the Company on 10 August 2018 and thus did not observe the counting of physical inventories at the beginning of the year. We were unable to satisfy ourselves by alternative means concerning inventory quantities held at 31 December 2017.

Since opening inventories enter into the determination of the financial performance and cash flows, we were unable to determine whether adjustments might have been necessary in respect of the income for the year reported in the consolidated statement of profit or loss and other comprehensive income and the net cash flows from operating activities reported in the consolidated statement of cash flows.

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

BDO East Coast Partnership ABN 83 236 985 726 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO East Coast Partnership and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Accounting for Initial Recognition and Subsequent Conversion of Financial Instruments

Key audit matter

As disclosed in Note 16 of the financial report, the Company has issued Senior Unsecured Subordinated Convertible Promissory Notes (“Notes”) raising a total of $8.656 million during the year before any cost adjustments.

As disclosed in Note 17 of the financial report, the Company has also issued Stock Purchase Warrants (“Warrants”) during the year.

The accounting for the Notes and Warrants was considered a key audit matter due to the complexity involved in assessing whether to account for the instruments as equity, financial liability or a combination of both, as well as the subsequent measurement of the individual components based on the terms and conditions of the agreements. The assessment included significant judgement and there is a high degree of estimation applied in determining the fair value of the separate components of the liability. Measurement subsequent to initial recognition including the accounting and measurement of the Notes and Warrants converted into equity involved significant judgement.

How the matter was addressed in our audit

We have evaluated the accounting for the Notes in accordance with AASB 132: Financial Instruments: Presentation and AASB 9: Financial Instruments.

Our procedures included, but were not limited to the following:

·Obtaining an understanding of and assessing the terms and conditions of the agreements to determine if the financial instruments are to be accounted for as equity, financial liability or a combination of both;

·Considering the appropriateness of the valuation methodology against the requirements of the applicable Australian Accounting Standard;

·Considering the reasonableness of the inputs to the valuation;

·Reviewing the measurement and accounting for the financial instruments subsequently converted into equity; and

·Reviewing the adequacy of the disclosures related to the initial and subsequent recognition of the financial instruments by comparing these disclosures to our understanding of the matter and the applicable Australian Accounting Standards.

Revenue Recognition

Key audit matter

As disclosed in Note 2, the Group recognised revenue of $27.277 million for the year ended 31 December 2018.

The recognition of revenue was considered as a key audit matter as it is a key performance indicator to the users of the financials; and there is a risk surrounding the application of AASB 15: Revenue from Contracts with Customers, in determining when performance obligations are met.

How the matter was addressed in our audit

We have evaluated revenue recognition in accordance with AASB 15: Revenue from Contracts with Customers.

Our procedures, included, amongst others:

·Evaluating the revenue recognition policies for all material sources of revenue and from our detailed testing described below, ensured that revenue was being recognised appropriately, in line with Australian Accounting Standards and policies disclosed within Note 2;

·Ensured that revenue was recognised in accordance with the requirements of AASB 15’s 5 step model. Substantively tested a sample of revenue transactions throughout the financial year, identifying specific performance obligations within the contracts, identifying the contract price, and tracing sales invoices to supporting documentation, shipping documentation and cash receipts for the year ended 31 December 2018; and

·Testing revenue transactions immediately prior and post 31 December 2018 year end to goods delivered documentation.

Existence and Valuation of Inventory

Key audit matter

As at 31 December 2018, the carrying value of the Group’s inventory was $8.378 million (2017: $4.039 million) as disclosed in Note 8 of the financial report.

Inventory was identified as a key audit matter because of the significant effort required in auditing this balance and the material nature of inventory to the Group.

How the matter was addressed in our audit

In assessing the existence and carrying value of the Group’s inventory, we undertook, amongst others, the following audit procedures:

·Attended the year end stock-take in order to validate the existence and condition of inventories held;

·Obtained third party confirmation to validate inventories held on consignment;

·Performed detailed testing of a sample of goods despatched and goods received to ensure the transactions around the year end were recorded in the correct period;

·Selected a sample of inventory items to ensure inventory was recorded at the lower of cost and net realisable value, by reference to recent sales; and

·Evaluated the inventory obsolescence provision through consideration of the composition of inventory on hand, historic sales trends and repair costs.

Other information

The directors are responsible for the other information. The other information comprises the information in the Group’s annual report for the year ended 31 December 2018, but does not include the financial report and the auditor’s report thereon.

Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the directors for the Financial Report

The directors of the Company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error.

In preparing the financial report, the directors are responsible for assessing the ability of the group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.

A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf

This description forms part of our auditor’s report.

BDO East Coast Partnership

BDO

/s/ Gareth Few

Gareth Few

Partner

Sydney, 26 February 2019

ADDITIONAL SHAREHOLDER INFORMATION

SHAREHOLDER INFORMATION AS AT 22 JANUARY 2019

Shareholder Information required by the Australian Securities Exchange Limited (ASX) Listing Rules and not disclosed elsewhere in the Report is set out below.

The Company has issued a total of 76,508,678 Shares of common stock (Shares) which equates to 76,508,678 Chess Depository Receipts (CDIs). 1 CDI represents the beneficial interest in 1 Share. As at the date of this report, 23,186,498 CDIs are issued and held by 484 CDI Holders which represents 23,186,498 Shares. 53,322,180 Shares are held by 14 shareholders who have not elected to hold Company securities in the form of CDIs.

1.Substantial shareholders

Chess Depositary Interests

The number of securities held by substantial shareholders and their associates as advised to the ASX are set out below:

Name	Number Shares	Number CDIs	%
IOOF Holdings Limited	6,015,174	6,015,174	7.862	%

Fully Paid Ordinary Shares of Common Stock

Name	Number Shares	%
Firsthand Venture Investors	51,914,325	67.8542

2.Number of security holders and securities on issue

Revasum has issued the following securities:

(a)53,322,180 fully paid ordinary shares held by 14 shareholders;

(b)23,186,498 CDIs held by 484 CDI holders;

(c)10,460,550 unlisted US$0.03 options held by 9 option holders;

(d)2,535,000 unlisted US$0.15 options held by 8 option holders;

(e)150,000 unlisted US$1.45 options held by 2 option holders;

(f)75,000 unlisted US$0.92 options held by 1 option holder;

(g)2,402,160 unlisted restricted stock units held by 3 restricted stock unit holders;

(h)657,500 unlisted US$1.26 options held by 3 option holders; and

(i)150,000 unlisted restricted stock units held by 2 restricted stock unit holders.

Details of the Top 20 Shareholders are set out in section 7 below.

3.Voting rights

Ordinary shares

At a meeting of the Company’s stockholders, every stockholder present, in person or by proxy is entitled to one vote for each share held on the record date for the meeting on all matters submitted to a vote of stockholders.

CDIs

CDI holders will be entitled to one vote for every one CDI they hold on the record date for the meeting on all matters submitted to a vote of stockholders.

Options

Option holders do not have any voting rights on the options held by them.

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Restricted stock units

Restricted stock unit holders do not have any voting rights on the restricted stock units held by them.

4.Distribution of security holders

	Fully Paid Shares of Common Stock
Category	Total Shareholders	Number of Shares	%
1 - 1,000	—	—	—
1,001 - 5,000	—	—	—
5,001 - 10,000	—	—	—
10,001 - 100,000	9	659,265	1.24
100,001 and over	5	52,662,915	98.76
Total	14	53,322,180	100.00

	Chess Depositary Interests (CDIs)
Category	Total CDI Holders	Number of CDIs	%
1 - 1,000	22	15,613,905	67.34
1,001 - 5,000	233	6,364,759	27.45
5,001 - 10,000	101	829,379	3.58
10,001 - 100,000	102	366,491	1.58
100,001 and over	26	11,964	0.05
Total	484	23,186,498	100.00

	Unquoted Options
Category	Total Option Holders	Number of Options	%
1 - 1,000	—	—	—
1,001 - 5,000	—	—	—
5,001 - 10,000	—	—	—
10,001 - 100,000	9	352,500	2.15
100,001 and over	13	16,077,710	97.85
Total	22	16,430,210	100.00

Note that the Unlisted Options as stated above have various exercise prices and expiry dates.

5.Unmarketable parcel of shares

The number of CDI Holders holding less than a marketable parcel of CDIs (being AU$500) is Nil based on the Company’s closing CDI price of A$1.68, on 22 January 2019.

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6.Twenty largest shareholders of quoted equity securities

Chess Depositary Interests

Details of the 20 largest CDI Holders by registered CDI holding are as follows.

	Name	No. of CDIs	% of CDIs on issue
1	CITICORP NOMINEES PTY LIMITED	2,292,108	9.89
2	BNP PARIBAS NOMS PTY LTD	1,947,656	8.40
3	FIRSTHAND VENTURE INVESTORS	1,920,015	8.28
4	WASHINGTON H SOUL PATTINSON AND COMPANY LIMITED	1,450,000	6.25
5	NATIONAL NOMINEES LIMITED	1,203,430	5.19
6	UBS NOMINEES PTY LTD	1,110,363	4.79
7	WASHINGTON H SOUL PATTINSON AND COMPANY LIMITED	946,935	4.08
8	J P MORGAN NOMINEES AUSTRALIA PTY LIMITED	847,500	3.66
9	BNP PARIBAS NOMS PTY LTD	696,435	3.00
10	HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2	639,637	2.76
11	BNP PARIBAS NOMS PTY LTD	633,120	2.73
12	BNP PARIBAS NOMS PTY LTD	332,475	1.43
13	TRIPLE IMAGE FILMS PTY LIMITED	312,250	1.35
14	MR PAUL MASI & MRS ANNE MASI	216,090	0.93
15	KEMBLA NO 20 PTY LTD	175,000	0.75
16	KIDSWORKS PTY LTD	175,000	0.75
17	GD EQUITIES PTY LTD	166,230	0.72
18	MR ALLAN ZION	133,230	0.57
19	NUTSVILLE PTY LTD	107,500	0.46
20	EKE HOLDINGS PTY LTD	106,270	0.46
	Total	15,512,865	66.90
	Balance of register	7,673,633	33.10
	Grand total	23,186,498	100.00

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Fully Paid Ordinary Shares of Common Stock

Details of the Shareholders by registered shareholding are as follows.

	Name	No. of Shares	%
1	Firsthand Venture Investors	51,914,325	97.36
2	Ryan Benton	276,795	0.52
3	Kevin Crofton	184,530	0.35
4	Wilbur Charles Krusell 2013 Supplemental Trust	167,265	0.31
5	Jerry Cutini	120,000	0.24
6	Cutini Family Living Trust	92,265	0.17
7	Rutgers Chow	92,265	0.17
8	Eric Jacobson	76,500	0.14
9	Bill Kalenian	76,500	0.14
10	Pat O’Connor	76,500	0.14
11	Sarah Okada	76,500	0.14
12	Belinda Reyna	76,500	0.14
13	Bryan Benton	46,125	0.09
14	Oak Ventures L P	46,110	0.09
	Total	53,322,180	100.00
	Balance of register	—	—
	Grand total	53,322,180	100.00

7.Ryan Benton is the Company Secretary appointed under Delaware General Corporation Law.

The Company has not formally appointed an Australian Company Secretary. Ms Naomi Dolmatoff has been appointed as the Company’s ASX Representative pursuant to ASX Listing Rule 12.6.

8.The address and telephone number of the Company’s registered office in Australia; and of its principal administrative office.

The Company’s registered office in the USA is:

C/O Incorporating Services Ltd, 3500 South Dupont Highway, Dover, Delaware 19901 USA

The Company’s Principal place of business is:

825 Buckley Road, San Luis Obispo, CA, 93401 United States.

T: +1 (805) 541 6424

The Company’s registered Australian office is:

Company Matters Pty Ltd

Level 12, 680 George Street, Sydney NSW 2000

T: +61 (02) 8280 7355

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9.The address and telephone number of each office at which a register of securities, register of depositary receipts or other facilities for registration of transfers is kept.

Link Market Services

Level 12, 680 George Street

Sydney NSW 2000 Australia

T: +61 1300 554 474

American Stock Transfer & Trust Company, LLC

6201, 15th Avenue

Brooklyn, NY 11219

T: +1 (718) 921-8386

10.The Company’s Securities are not traded on any other exchange other than the ASX.

11.The number and class of restricted securities or securities subject to voluntary escrow that are on issue and the date that the escrow period ends is set out as follows:

	Number of
Class	Securities	Escrow Period
ASX Restricted — shares	45,688,772	To be held in escrow for 24 months from the date of commencement of official quotation.
ASX Restricted — shares	56,985	To be held in escrow for 12 months from the date of commencement of official quotation.
ASX Restricted — unquoted options	7,296,945	To be held in escrow for 24 months from the date of commencement of official quotation.
Voluntary Restricted - shares	9,696,085	To be held in escrow until the day following the release of the Company’s 30 June 2019 half yearly results on the ASX announcement platform.
Voluntary Restricted — unquoted options	2,663,370	To be held in escrow until the day following the release of the Company’s 30 June 2019 half yearly results on the ASX announcement platform.
Voluntary Restricted - shares	417,820	To be held in escrow for 24 months from the date of commencement of official quotation.
Voluntary Restricted — unquoted options	5,708,505	To be held in escrow for 24 months from the date of commencement of official quotation.

Note: Official quotation of the Company’s CDIs occurred on 4 December 2018

12.Review of operations and activities

A detailed review of operations and activities is reported in the 2018 Annual Report.

13.On market buy-back

There is no current on market buy-back.

14.Statement regarding use of cash and assets.

During the period between 4 December 2018 and 31 December 2018, the Company has used its cash and assets readily convertible to cash that it had at the time of ASX admission in a way consistent with its business objectives set out in the Prospectus dated 9 November 2018.

15.Other

Revasum is not subject to Chapters 6, 6A, 6B and 6C of the Corporations Act 2001 (Cth) dealing with the acquisition of its shares (including substantial holdings and takeovers).

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