10-Q 1 fp0015399_10q.htm
 
 
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549  

FORM 10-Q  

[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
 
For the quarterly period of June 30, 2015 or
   
[  ]
TRANSITION QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 333-168195

FIRSTHAND TECHNOLOGY VALUE FUND, INC.
(Exact Name of Registrant as Specified in Charter)  
         
 
MARYLAND
  
27-3008946
  
 
(State or Other Jurisdiction of
  
(I.R.S. Employer
  
 
Incorporation or Organization)
  
Identification No)
  
         
 
150 Almaden Boulevard, Suite 1250
      
 
San Jose, California
  
95113
  
 
(Address of Principal Executive Offices)
  
(Zip Code)
  

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     [X] Yes      [  ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
         
  [  ]
Large Accelerated Filer
 [X]
Accelerated Filer
  [  ]
Non-accelerated Filer
 [  ]
Smaller Reporting Company
       
(Do not check if smaller reporting company)

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
Class
Outstanding at July 31, 2015
Common Stock, $0.001 par value per share
7,702,705
 
 
TABLE OF CONTENTS
 
 PART I. FINANCIAL INFORMATION 2
 
Item 1.
Financial Statements
2
   
Statements of Assets and Liabilities as of June 30, 2015 (Unaudited) and December 31, 2014
3
   
Statements of Operations (Unaudited) for the Three Months Ended June 30, 2015, and June 30, 2014 and for the Six Months Ended June 30, 2015, and June 30, 2014
4
   
Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2015 and the Six Months Ended June 30, 2014
5
   
Statements of Changes in Net Assets for the Six Months Ended June 30, 2015 (Unaudited) and the Year Ended December 31, 2014
6
   
Selected Per Share Data and Ratios for the Six Months Ended June 30, 2015 (Unaudited), for the Year Ended December 31, 2014, for the Year Ended December 31, 2013, for the Year Ended December 31, 2012, and for the Period April 18, 2011 (Commencement of Operations) Through December 31, 2011
7
   
Schedule of Investments (Unaudited) as of June 30, 2015
8
   
Notes To Financial Statements (Unaudited)
11
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
23
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
31
 
Item 4.
Controls and Procedures
33
 PART II. OTHER INFORMATION 34
 
Item 1.
Legal Proceedings
35
 
Item 1A.
Risk Factors
35
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
35
 
Item 3.
Defaults Upon Senior Securities
35
 
Item 4.
Mine Safety Disclosures
35
 
Item 5.
Other Information
35
 
Item 6.
Exhibits
35
SIGNATURES
36

1
 
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

See accompanying notes to financial statements

2
 
Firsthand Technology Value Fund, Inc.
Statements of Assets and Liabilities
   
 
    
 
  
   
AS OF
JUNE 30, 2015
(UNAUDITED)
    
AS OF
DECEMBER 31, 2014
  
ASSETS
        
Investment securities:
        
Unaffiliated investments at acquisition cost
  
$
107,709,535
    
$
118,567,567
  
Affiliated investments at acquisition cost
    
15,375,885
      
13,375,885
  
Controlled investments at acquisition cost
    
64,330,580
      
60,815,580
  
Total acquisition cost
  
$
187,416,000
    
$
192,759,032
  
Unaffiliated investments at market value
  
$
106,733,728
    
$
118,830,054
  
Affiliated investments at market value
    
17,191,982
      
14,916,840
  
Controlled investments at market value
    
62,096,467
      
57,918,973
  
Total market value * (Note 6)
    
186,022,177
      
191,665,867
  
Cash**
    
3,633,796
      
69,014,110
  
Receivable from dividends and interest
    
3,412,007
      
2,729,276
  
Other assets
    
25,294
      
29,993
  
Total Assets
    
193,093,274
      
263,439,246
  
LIABILITIES
                
Payable for securities purchased
    
—
      
38,253,718
  
Incentive fees payable (Note 4)
    
2,831,900
      
13,716,658
  
Payable to affiliates (Note 4)
    
971,371
      
1,294,481
  
Consulting fee payable
    
30,500
      
23,000
  
Accrued expenses and other payables
    
261,896
      
421,318
  
Total Liabilities
    
4,095,667
      
53,709,175
  
NET ASSETS
  
$
188,997,607
    
$
209,730,071
  
Net Assets consist of:
                
Common Stock, par value $0.001 per share 100,000,000 shares authorized
  
$
7,703
    
$
8,562
  
Paid-in-capital
    
184,982,547
      
204,981,680
  
Accumulated net investment income
    
3,485,354
      
5,832,994
  
Accumulated net realized gain from security transactions, purchased and written options
    
1,915,826
      
—
  
Net unrealized depreciation on investments and warrants transactions
    
(1,393,823
)
    
(1,093,165
)
NET ASSETS
  
$
188,997,607
    
$
209,730,071
  
Shares of Common Stock outstanding
    
7,702,705
      
8,562,173
  
Net asset value per share (Note 2)
  
$
24.54
    
$
24.49
  
 
*
Includes warrants whose primary risk exposure is equity contracts.
** Cash composed primarily of the Fidelity Institutional Money Market Treasury Portfolio which invests primarily in U.S. Treasury securities. The yield as of 06/30/15 was 0.01%. Please see https://fundresearch.fidelity.com/mutual-funds/summary/316175504 for additional information.

See accompanying notes to financial statements
 
3
 
Firsthand Technology Value Fund, Inc.
Statements of Operations (Unaudited)
         
   
FOR THE THREE MONTHS ENDED
    
FOR THE SIX MONTHS ENDED
  
 
JUNE 30, 2015
    
JUNE 30, 2014
     JUNE 30, 2015     JUNE 30, 2014
INVESTMENT INCOME
                
Unaffiliated dividend income
  
$
68,000
    
$
—
    
$
148,000
    $
—
  
Unaffiliated interest
    
7,681
      
1,388
      
15,103
      
3,572
  
Affiliated/controlled interest
    
474,728
      
466,433
      
947,463
      
842,206
  
Royalty income
    
—
      
36,617
      
14,261
      
71,869
  
TOTAL INVESTMENT INCOME
    
550,409
      
504,438
      
1,124,827
      
917,647
  
EXPENSES
                                
Investment advisory fees (Note 4)
    
971,371
      
1,278,346
      
1,994,761
      
2,570,335
  
Administration fees
    
30,087
      
37,219
      
63,339
      
70,245
  
Custody fees
    
3,673
      
4,740
      
8,175
      
8,672
  
Transfer agent fees
    
8,673
      
9,007
      
18,015
      
17,552
  
Registration and filing fees
    
5,734
      
5,773
      
11,405
      
11,483
  
Professional fees
    
711,361
      
95,987
      
846,435
      
496,226
  
Printing fees
    
59,341
      
58,074
      
99,810
      
102,875
  
Trustees fees
    
25,000
      
15,000
      
50,000
      
30,000
  
Settlement fees
    
—
      
838,000
      
—
      
838,000
  
Miscellaneous fees
    
13,723
      
20,076
      
26,831
      
37,480
  
TOTAL GROSS EXPENSES
    
1,828,963
      
2,362,222
      
3,118,771
      
4,182,868
  
Incentive fee adjustments (Note 4)
    
(401,080
)
    
242,048
      
353,696
      
(1,432,939
)
TOTAL NET EXPENSES
    
1,427,883
      
2,604,270
      
3,472,467
      
2,749,929
  
                                 
NET INVESTMENT LOSS
    
(877,474
)
    
(2,099,832
)
    
(2,347,640
)
    
(1,832,282
)
Net Realized and Unrealized Gains (Losses) on Investments:
                                
Net realized gains (losses) from security transactions
                                
Non-affiliated and other assets
    
121,642
      
—
      
1,290,832
      
132
  
Net realized gains from written option transactions (1)
    
473,497
      
—
      
624,994
      
—
  
Net change in unrealized depreciation on investments
    
(2,603,977
)
    
(2,810,222
)
    
(294,886
)
    
(8,330,700
)
Net change in unrealized appreciation (depreciation) on warrants transactions (1)
    
3,435
      
346,405
      
(5,772
)
    
(2,423,314
)
Net change in unrealized appreciation on purchased options (1)
    
—
      
3,324,453
      
—
      
3,324,453
  
Net change in unrealized appreciation on written options (1)
    
—
      
24,754
      
—
        
24,754
  
Net Realized and Unrealized Gains (Losses) on Investments
    
(2,005,403
)
    
885,390
      
1,615,168
       
(7,404,675
)
Net Decrease In Net Assets Resulting From Operations
  
$
(2,882,877
)
  
$
(1,214,442
)
  
$
(732,472
)
   $ 
(9,236,957
)
Net Decrease In Net Assets Per Share Resulting From Operations (2)
  
$
(0.37
)
  
$
(0.13
)
  
$
(0.10
)
   $
(1.02
)
 
(1) Primary risk exposure is equity contracts.
(2) Per share results are calculated based on weighted average shares outstanding for each period.
 
See accompanying notes to financial statements
 
4
 
Firsthand Technology Value Fund, Inc.
Statements of Cash Flows (unaudited)
         
   
FOR THE
    
FOR THE
  
   
SIX MONTHS ENDED
    
SIX MONTHS ENDED
  
   
JUNE 30, 2015
    
JUNE 30, 2014
  
CASH FLOWS FROM OPERATING ACTIVITIES
        
Net decrease in Net Assets resulting from operations
  
$
(732,472
)
  
$
(9,236,957
)
                 
Adjustments to reconcile net increase (decrease) in Net Assets derived from operations to net cash provided by (used in) operating activities:
                
Purchases of investments
    
(24,176,276
)
    
(35,180,659
)
Proceeds from disposition of investments
    
33,152,358
      
—
  
Net purchases from short-term investments
    
(2,350,000
)
    
—
  
Net proceeds from written options
    
624,994
      
264,754
  
Net proceeds from purchased options
    
—
      
(1,792,932
)
Proceeds from litigation claim
    
7,782
      
132
  
Increase in dividends, interest, and reclaims receivable
    
(682,731
)
    
(586,986
)
Decrease in payable for investment purchased
    
(38,253,718
)
    
—
  
Increase (decrease) in payable to affiliates
    
(323,110
)
    
6,315
  
Decrease in incentive fees payable
    
(10,884,758
)
    
(1,432,939
)
Decrease (increase) in other assets
    
4,699
      
(153,121
)
Decrease in accrued expenses and other payables
    
(151,922
)
    
(410,738
)
Net realized gain from investments
    
(1,290,832
)
    
(132
)
Net realized gain from written options
    
(624,994
)
    
—
  
Net unrealized appreciation (depreciation) from investments, purchased and written options and warrants transactions
    
300,658
      
7,404,807
  
Net cash provided by (used in) operating activities
    
(45,380,322
)
    
(41,118,456
)
                 
CASH FLOWS FROM FINANCING ACTIVITIES
                
Cost from shares redeemed
    
(19,999,992
)
    
—
  
Net cash provided (used) by financing activities
    
(19,999,992
)
    
—
  
                 
Net decrease in cash
    
(65,380,314
)
    
(41,118,456
)
Cash - beginning of period
    
69,014,110
      
83,179,168
  
Cash - end of period
  
$
3,633,796
    
$
42,060,712
  
 
See accompanying notes to financial statements
 
5
 
Firsthand Technology Value Fund, Inc.
Statements of Changes in Net Assets
         
   
FOR THE SIX MONTHS ENDED
 JUNE 30, 2015 (UNAUDITED)
    
FOR THE YEAR ENDED DECEMBER 31, 2014
  
FROM OPERATIONS:
        
Net investment loss
  
$
(2,347,640
)
   $
(10,777,461
)
Net realized gains from security transactions and written and purchased options
    
1,915,826
      
67,052,857
  
Net change in unrealized depreciation on investments, and warrants transactions
    
(300,658
)
    
(40,291,286
)
Net increase (decrease) in net assets from operations
    
(732,472
)
    
15,984,110
  
                 
FROM DISTRIBUTIONS
                
From realized gains on investments
    
—
      
(53,158,463
)
TOTAL DISTRIBUTIONS
    
—
      
(53,158,463
)
                 
FROM CAPITAL SHARE TRANSACTIONS
                
Value of shares repurchased
    
(19,999,992
)
    
(9,999,991
)
Net decrease in net assets from capital share transactions
    
(19,999,992
)
    
(9,999,991
)
TOTAL DECREASE IN NET ASSETS
    
(20,732,464
)
    
(47,174,344
)
                 
NET ASSETS:
                
Beginning of period
    
209,730,071
      
256,904,415
  
End of period
  
$
188,997,607
    $ 
209,730,071
  
Accumulated Net Investment Income
  
$
3,485,354
    $ 
5,832,994
  
                 
COMMON STOCK ACTIVITY:
                
Shares repurchased
    
(859,468
)
    
(509,859
)
Net decrease in shares outstanding
    
(859,468
)
    
(509,859
)
Shares outstanding, beginning of period
    
8,562,173
      
9,072,032
  
Shares outstanding, end of period
    
7,702,705
      
8,562,173
  
 
See accompanying notes to financial statements
 
6

Firsthand Technology Value Fund, Inc.
Financial Highlights
Selected per share data and ratios for a share outstanding throughout each period

   
FOR THE SIX MONTHS ENDED JUNE 30, 2015 (UNAUDITED)
    
FOR THE YEAR ENDED DECEMBER 31, 2014
    
FOR THE YEAR ENDED DECEMBER 31, 2013
    
FOR THE YEAR ENDED DECEMBER 31, 2012
    
FOR THE PERIOD ENDED DECEMBER 31, 2011(1)
  
Net asset value at beginning of period
  
$
24.49
    
$
28.32
    
$
22.90
    
$
23.92
    $ 
27.01
  
Income from investment operations:
                                        
Net investment loss
    
(0.30
)
    
(1.26
)
    
(1.42
)
    
(0.39
)
    
(0.41
)
Net realized and unrealized gains (losses) on investments
    
0.35
      
3.04
      
7.16
      
(1.01
)
    
(2.68
)
Total from investment operations
    
0.05
      
1.78
      
5.74
      
(1.40
)
    
(3.09
)
                                         
Distributions from:
                                        
Realized capital gains
    
—
      
(5.86
)
    
(0.32
)
    
—
      
—
  
Premiums from shares sold in offerings
    
—
      
—
      
—
(2)
    
0.38
      
—
  
Anti-dilutive effect from capital share transactions
    
—
      
0.25
      
—
      
—
      
—
  
Net asset value at end of period
  
$
24.54
    
$
24.49
    
$
28.32
    
$
22.90
    $ 
23.92
  
Market value at end of period
  
$
12.90
    
$
18.65
    
$
23.17
    
$
17.44
    $ 
14.33
  
                                         
Total return
                                        
Based on Net Asset Value
    
0.20
%(A)
    
12.54
%
    
25.30
%
    
(4.26
)%
    
(11.44
)%(A)
Based on Market Value
    
(30.83
)%(A)
    
4.76
%
    
34.61
%
    
21.70
%
    
(46.95
)%(A)
Net assets at end of period (millions)
  
$
189.0
    
$
209.7
    
$
256.9
    
$
195.9
    $ 
83.63
  
Ratio of total expenses to average net assets
    
3.58
%(B)(3)
    
5.29
%(3)
    
6.52
%(3)
    
2.56
%
    
2.76
%(B)
Ratio of total expenses to average net assets, excluding incentive fees
    
3.22
%(B)
    
3.12
%
    
2.67
%
    
2.56
%
    
2.76
%(B)
Ratio of net investment loss to average net assets
    
(2.42
)%(B)
    
(4.31
)%
    
(5.96
)%
    
(2.12
)%
    
(2.28
)%(B)
Portfolio turnover rate
    
13
%(A)
    
95
%
    
17
%
    
10
%
    
18
%(A)

(1) For the period April 18, 2011 (inception) through December 31, 2011.
(2) Less than $0.005 per share.
(3) Amount includes the incentive fee. For the six months ended June 30, 2015, the year ended December 31, 2014, and the year ended December 31, 2013, the ratio of the incentive fee to average net assets was 0.36%, 2.17%, and 3.85%, respectively.
(A) Not Annualized.
(B) Annualized.
 
See accompanying notes to financial statements
 
7
 
Firsthand Technology Value Fund, Inc.
Schedule of Investments
JUNE 30, 2015 (UNAUDITED)

PORTFOLIO COMPANY
(% OF NET ASSETS)
 AND INDUSTRY
  
TYPE OF INVESTMENT
  
SHARES/PAR
 VALUE ($)
    
COST BASIS
    
VALUE
  
ALIPHCOM, INC. (5.4%)
Consumer Electronics
Common Stock *(1)
    
2,128,005
    
$
10,108,024
    $ 
10,147,668
  
                           
CLOUDERA, INC. (0.3%)
Software
Common Stock *(1)
    
20,000
      
580,000
      
561,778
  
                           
GILT GROUPE
HOLDINGS, INC. (1.7%)
Internet
Common Stock *(1)
    
198,841
      
4,558,112
      
3,284,277
  
                           
HERA SYSTEMS, INC. (0.1%)
Aerospace
Convertible Note (1)
Matures December 2015
 Interest Rate 5%
    
250,000
      
250,000
      
250,000
  
                           
HIGHTAIL, INC. (5.2%)
Cloud Computing
Preferred Stock - Series E *(1)
    
2,268,602
      
9,999,998
      
9,895,869
  
                           
HIKU LABS, INC. (0.3%)
Consumer Electronics
Convertible Note (1)
Matures September 2015
 Interest Rate 5%
    
600,000
      
600,000
      
600,000
  
                           
INTEVAC, INC. (0.8%)
Other Electronics
Common Stock *
    
243,883
      
2,721,734
      
1,426,716
  
                           
INTRAOP MEDICAL CORP. (12.6%)
Preferred Stock - Series A-1 *(1)(2)
    
6,800,000
      
6,800,000
      
5,760,552
  
Medical Devices
Preferred Stock - Series A-2 *(1)(2)
    
13,500,000
      
13,499,940
      
11,436,390
  
Term Note (1)(2)
Matures February 2016
 Interest Rate 8%
    
3,000,000
      
3,000,000
      
3,000,000
  
Convertible Note (1)(2)
Matures July 2016
 Interest Rate 15%
    
1,000,000
      
1,000,000
      
1,000,000
  
Preferred Stock - Series B *(1)(2)
    
3,000,000
      
3,000,000
      
2,541,420
  
                       
23,738,362
  
                           
INVENSENSE, INC. (4.0%)
Semiconductors
Common Stock *
    
500,000
      
8,003,882
      
7,550,000
  
                           
MATTSON TECHNOLOGY, INC. (5.8%)
Semiconductor Equipment
Common Stock *
    
3,280,000
      
8,239,200
      
10,988,000
  
                           
NUTANIX, INC. (2.1%)
Networking
Preferred Stock - Series A *(1)
    
227,272
      
3,999,987
      
3,999,987
  
 
See accompanying notes to financial statements
 
8

Firsthand Technology Value Fund, Inc.
Schedule of Investments - continued
JUNE 30, 2015 (UNAUDITED)

PORTFOLIO COMPANY
(% OF NET ASSETS)
 AND INDUSTRY
TYPE OF INVESTMENT
  
SHARES/PAR
 VALUE ($)
    
COST BASIS
    
VALUE
   
PHUNWARE, INC. (5.1%)
Mobile Computing
Preferred Stock - Series E *(1)
    
3,257,328
    
$
9,999,997
    $ 
9,652,440
  
                           
PIVOTAL SYSTEMS CORP. (10.9%)
Preferred Stock - Series C * (1)(2)
    
2,291,260
      
2,657,862
      
2,657,862
  
Semiconductor Equipment
Preferred Stock - Series B *(1)(2)
    
7,942,811
      
4,000,000
      
6,371,961
  
Preferred Stock - Series A *(1)(2)
    
11,914,217
      
6,000,048
      
9,557,942
  
Convertible Note (1)(2)
Matures March 2016
 Interest Rate 10%
    
2,000,000
      
2,000,000
      
2,000,000
  
                       
20,587,765
  
                       
QMAT, INC. (6.3%)
Advanced Materials
Preferred Stock Warrants -
Series A *(1)(2)
    
2,000,000
      
0
      
562,128
  
Preferred Stock - Series A *(1)(2)
    
12,000,240
      
12,000,240
      
11,438,112
  
                       
12,000,240
  
 
QUALCOMM, INC. (3.3%)
Communications Equipment
Common Stock
    
100,000
      
7,496,400
      
6,263,000
  
                           
ROKU, INC. (0.2%)
Consumer Electronics
Common Stock *(1)
    
250,000
      
437,500
      
437,500
  
                           
SILICON GENESIS CORP. (2.8%) **
Preferred Stock - Series 1-F *(1)(2)
    
912,453
      
583,060
      
0
  
Intellectual Property
Common Stock Warrants *(1)(2)
    
37,982
      
6,678
      
0
  
 
Common Stock *(1)(2)
    
921,892
      
169,045
      
0
  
Preferred Stock - Series 1-D *(1)(2)
    
850,830
      
431,901
      
0
  
Preferred Stock - Series 1-C *(1)(2)
    
82,914
      
109,518
      
0
  
Preferred Stock - Series 1-E *(1)(2)
    
5,704,480
      
2,946,535
      
0
  
Term Note (1)(2)
Matures December 2016
 Interest Rate 12%
    
3,000,000
      
3,000,000
      
3,000,000
  
Convertible Note (1)(2)
    
1,250,000
      
1,610,753
      
1,250,000
  
Common Stock Warrants *(1)(2)
    
5,000,000
      
0
      
0
  
Convertible Note (1)(2)
    
1,000,000
      
1,000,000
      
1,000,000
  
Common Stock Warrants *(1)(2)
    
3,000,000
      
0
      
0
  
                       
5,250,000
  
 
SUNRUN, INC. (4.8%)
Common Stock *(1)
    
674,820
      
6,417,495
      
9,031,791
  
Renewable Energy
                          
 
TAPAD, INC. (5.5%)
Preferred Stock - Series B-2 *(1)
    
492,244
      
7,149,992
      
7,149,992
  
Advertising Technology
Preferred Stock - Series B-1 *(1)
    
280,048
      
2,999,986
      
3,187,114
  
                       
10,337,106
  
 
See accompanying notes to financial statements
 
9

Firsthand Technology Value Fund, Inc.
Schedule of Investments - continued
JUNE 30, 2015 (UNAUDITED)

PORTFOLIO COMPANY
(% OF NET ASSETS)
 AND INDUSTRY
TYPE OF INVESTMENT
  
SHARES/PAR
 VALUE ($)
    
COST BASIS
    
VALUE
  
TELEPATHY INVESTORS, INC. (3.2%)
Preferred Stock - Series A *(1)(3)
    
15,238,000
    
$
3,999,999
    $
4,000,000
  
Consumer Electronics
Convertible Note (1)(3)
Matures June 2017
 Interest Rate 10%
    
2,000,000
      
2,000,000
      
2,000,000
  
                       
6,000,000
  
 
TURN INC. (8.0%)
Preferred Stock - Series E *(1)
    
1,798,562
      
15,000,007
      
15,114,396
  
Advertising Technology
                          
 
TWITTER, INC. (1.9%)
Common Stock
    
100,000
      
4,000,540
      
3,622,000
  
Social Networking
                          
                           
UCT COATINGS, INC. (0.2%)
Common Stock Warrants *(1)
    
136,986
      
0
      
0
  
Advanced Materials
Common Stock *(1)
    
1,500,000
      
662,235
      
434,400
  
Common Stock Warrants *(1)
    
33,001
      
0
      
0
  
Common Stock Warrants *(1)
    
2,283
      
67
      
0
  
                       
434,400
  
                           
VUFINE. INC. (0.3%)
Preferred Stock - Series A *(1)(2)
    
5,000,000
      
500,000
      
500,000
  
Consumer Electronics
Common Stock *(1)(2)
    
750,000
      
15,000
      
20,100
  
                       
520,100
  
 
WESTERN DIGITAL CORP. (1.7%)
Common Stock
    
40,000
      
4,484,379
      
3,136,800
  
Peripherals
                          
 
WRIGHTSPEED, INC. (5.9%)
Preferred Stock - Series C *(1)(3)
    
2,267,659
      
5,999,999
      
7,276,464
  
Automotive
Preferred Stock - Series D *(1)(3)
    
1,100,978
      
3,375,887
      
3,915,518
  
                       
11,191,982
  
TOTAL INVESTMENTS
                          
(Cost $187,416,000)
                          
—98.4%
                      
186,022,177
  
 
OTHER ASSETS IN EXCESS
                          
OF LIABILITIES — 1.6%
                      
2,975,430
  
                           
NET ASSETS — 100.0%
                    
$
188,997,607
  

* Non-income producing security.
** On February 17, 2015, Silicon Genesis Corp. filed a Voluntary Petition for Chapter 11 protection under the U.S. Bankruptcy Code. The Fund currently is the sole secured creditor of Silicon Genesis.
(1) Restricted security. Fair Value is determined by or under the direction of the Company’s Board of Directors (See note 3).
(2) Controlled investments.
(3) Affiliated issuer.
 
See accompanying notes to financial statements
 
10
 
Firsthand Technology Value Fund, Inc. (the “Company”)
Notes to Financial Statements
JUNE 30, 2015 (UNAUDITED)

NOTE 1. THE COMPANY

Firsthand Technology Value Fund, Inc. (the “Company,” “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 net 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 total assets in privately held companies and in 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 the Company’s capital base. The Company’s shares are listed on the NASDAQ Global Market under the symbol “SVVC.”

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:

USE OF ESTIMATES. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) 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.

INTERIM FINANCIAL STATEMENTS. Interim financial statements are condensed and should be read in conjunction with the Company’s latest annual financial statements. Interim disclosures generally do not repeat those of the annual statements.

PORTFOLIO INVESTMENT VALUATIONS. Investments are stated at “value” as defined in the 1940 Act and in the applicable regulations of the Securities and Exchange Commission and in accordance with GAAP. Value, as defined in Section 2(a)(41) of the 1940 Act, is (i) the market value of those securities for which a market quotation is readily available and (ii) the fair value as determined in good faith by, or under the direction of, the board of directors for all other securities and assets. On June 30, 2015, our financial statements include venture capital investments valued at approximately $153.0 million. The fair values of our venture capital investments were determined in good faith by, or under the direction of, the Board of Directors of the Company (the “Board” or the “Board of Directors”). 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.
 
11

Firsthand Technology Value Fund, Inc.
Notes to Financial Statements - continued
JUNE 30, 2015 (UNAUDITED)

RESTRICTED SECURITIES. At June 30, 2015, we held $153,035,661 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 Company is calculated by dividing the sum of the value of the securities held by the Company, plus cash or other assets, minus all liabilities (including estimated accrued expenses), by the total number of shares outstanding of the Company, 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. Unrealized appreciation or depreciation is computed as the difference between the fair value of the investment and the cost basis of such investment.

INCOME TAXES. As we intend to continue to qualify as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), the Company does not provide for income taxes. 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 rate of exchange of such currencies against U.S. dollars on the date of valuation.

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 did not have any written options as of June 30, 2015. The net realized gains/(loss) from written options and the net change in unrealized appreciation (depreciation) on written options for the quarter ended June 30, 2015 can be found on the Statement of Operations.
 
12

Firsthand Technology Value Fund, Inc.
Notes to Financial Statements - continued
JUNE 30, 2015 (UNAUDITED)

The number of option contracts written and the premiums received during the three months ended June 30, 2015 were as follows:
 
   
CONTRACTS
    
RECEIVED
  
Options outstanding, beginning of year
    
—
    
$
—
  
Options written during period
    
8,100
      
1,384,952
  
Options closed during period
    
(1,000
)
    
(98,668
)
Options expired during period
    
(5,032
)
    
(541,326
)
Options exercised during period
    
(2,068
)
    
(744,958
)
Options outstanding, end of period
    
—
    
$
—
  

The average volume of the Fund’s derivatives during the three months ended June 30, 2015 is as follows:

   
Purchased Options
 (Contracts)
    
Warrants (Shares)
    
Written Options (Contracts)
  
Firsthand Technology Value Fund, Inc.
    
—
      
10,210,252
      
—
  

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.
 
13

Firsthand Technology Value Fund, Inc.
Notes to Financial Statements - continued
JUNE 30, 2015 (UNAUDITED)
 
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 Valuation Committee of the Advisor (as defined below) (the “Adviser Valuation Committee”) or the independent valuation firm;

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

(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 Firsthand Capital Management, Inc. (“FCM” or the “Adviser”), 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 our 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 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, 2015, 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 June 30, 2015, accrued incentive fees totaled $2,831,900.

NOTE 5. DEBT

The Company does not currently have any significant outstanding debt obligations (other than normal operating expense accruals).

14

Firsthand Technology Value Fund, Inc.
Notes to Financial Statements - continued
JUNE 30, 2015 (UNAUDITED)

NOTE 6. FAIR VALUE

Securities traded on, or quoted by, the NASDAQ Stock Market, Inc. (“NASDAQ”) are valued according to the NASDAQ official closing price. Securities traded on other stock exchanges, including the New York Stock Exchange (“NYSE”), are valued at their last reported sale price as of the close of trading of that exchange (normally 4:00 P.M. Eastern Time for the NYSE). 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.

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 of the Board is responsible for determining the valuation of the Company’s assets within the guidelines established by the Board of Directors. The Valuation Committee of the Board 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. FCM and the independent valuation firm rely primarily on the market and income approaches. We also considered the asset-based approach in our analysis because certain of the portfolio companies do not have substantial operating earnings relative to the value of their underlying assets.
 
15

Firsthand Technology Value Fund, Inc.
Notes to Financial Statements - continued
JUNE 30, 2015 (UNAUDITED)

- 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 and the multi-period excess earnings method, which is used to measure the fair value of certain assets.
 
- Asset-Based Approach (A): The asset-based approach examines the value of a company’s assets net of its liabilities to derive a value for the equity holders.

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

16

Firsthand Technology Value Fund, Inc.
Notes to Financial Statements - continued
JUNE 30, 2015 (UNAUDITED)

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 June 30, 2015:

   
LEVEL 1 QUOTED PRICES
    
LEVEL 2 OTHER SIGNIFICANT
 OBSERVABLE INPUTS
    
LEVEL 3 SIGNIFICANT
 UNOBSERVABLE INPUTS
  
Assets
            
Common Stocks
            
Advanced Materials
  
$
—
    
$
—
    
$
434,400
  
Communications Equipment
    
6,263,000
      
—
      
—
  
Consumer Electronics
    
—
      
—
      
10,605,268
  
Internet
    
—
      
—
      
3,284,277
  
Other Electronics
    
1,426,716
      
—
      
—
  
Peripherals
    
3,136,800
      
—
      
—
  
Renewable Energy
    
—
      
—
      
9,031,791
  
Semiconductor Equipment
    
10,988,000
      
—
      
—
  
Semiconductors
    
7,550,000
      
—
      
—
  
Social Networking
    
3,622,000
      
—
      
—
  
Software
    
—
      
—
      
561,778
  
Total Common Stocks
    
32,986,516
      
—
      
23,917,514
  
Preferred Stocks
                        
Advanced Materials
    
—
      
—
      
11,438,112
  
Advertising Technology
    
—
      
—
      
25,451,502
  
Automotive
    
—
      
—
      
11,191,982
  
Cloud Computing
    
—
      
—
      
9,895,869
  
Consumer Electronics
    
—
      
—
      
4,500,000
  
Medical Devices
    
—
      
—
      
19,738,362
  
Mobile Computing
    
—
      
—
      
9,652,440
  
Networking
    
—
      
—
      
3,999,987
  
Semiconductor Equipment
    
—
      
—
      
18,587,765
  
Total Preferred Stocks
    
—
      
—
      
114,456,019
  
Asset Derivatives *
                        
Equity Contracts
    
—
      
—
      
562,128
  
Total Asset Derivatives
    
—
      
—
      
562,128
  
Convertible Notes
                        
Aerospace
    
—
      
—
      
250,000
  
Consumer Electronics
    
—
      
—
      
2,600,000
  
Intellectual Property
    
—
      
—
      
5,250,000
  
Medical Devices
    
—
      
—
      
4,000,000
  
Semiconductor Equipment
    
—
      
—
      
2,000,000
  
Total Convertible Notes
    
—
      
—
      
14,100,000
  
Total
  
$
32,986,516
    
$
—
    
$
153,035,661
  

* 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 quarter. There were no transfers between Levels 1 and 2 as of June 30, 2015.
 
17
 
Firsthand Technology Value Fund, Inc.
Notes to Financial Statements - continued
JUNE 30, 2015 (UNAUDITED)
Following is a reconciliation of Level 3 assets (at either the beginning or the ending of the quarter) for which significant unobservable inputs were used to determine fair value.
 
INVESTMENTS AT FAIR VALUE USING SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)
  
BALANCE
AS OF
 12/31/14
    
NET
 PURCHASES
    
NET
 SALES
    
NET
REALIZED
 GAINS
    
NET UNREALIZED
APPRECIATION
(DEPRECIATION)(1)
    
TRANSFERS
IN (OUT)
OF
 LEVEL 3
    
BALANCE
AS OF
 6/30/15
  
Common Stocks
                            
Advanced Materials
  
$
607,650
    
$
—
    
$
—
    
$
—
    
$
(173,250
)
  
$
—
    
$
434,400
  
Consumer Electronics
    
11,820,642
      
452,500
      
—
      
—
      
(1,667,874
)
    
—
      
10,605,268
  
Internet
    
2,547,272
      
—
      
—
      
—
      
737,005
      
—
      
3,284,277
  
Renewable Energy
    
5,061,960
      
—
      
—
      
—
      
3,969,831
      
—
      
9,031,791
  
Software
    
—
      
580,000
      
—
      
—
      
(18,222
)
    
—
      
561,778
  
Preferred Stocks
                                                        
Advanced Materials
    
11,432,476
      
—
      
—
      
—
      
5,636
      
—
      
11,438,112
  
Advertising Technology
    
19,323,228
      
5,999,995
      
—
      
—
      
128,279
      
—
      
25,451,502
  
Automotive
    
10,916,840
      
—
      
—
      
—
      
275,142
      
—
      
11,191,982
  
Cloud Computing
    
9,999,998
      
—
      
—
      
—
      
(104,129
)
    
—
      
9,895,869
  
Consumer Electronics
    
4,000,000
      
500,000
      
—
      
—
      
—
      
—
      
4,500,000
  
Medical Devices
    
15,986,250
      
3,000,000
      
—
      
—
      
752,112
      
—
      
19,738,362
  
Mobile Computing
    
9,999,997
      
—
      
—
      
—
      
(347,557
)
    
—
      
9,652,440
  
Networking
    
—
      
3,999,987
      
—
      
—
      
—
      
—
      
3,999,987
  
Semiconductor Equipment
    
18,682,483
      
—
      
—
      
—
      
(94,718
)
    
—
      
18,587,765
  
Asset Derivatives
                                                        
Equity Contracts
    
567,900
      
—
      
—
      
—
      
(5,772
)
    
—
      
562,128
  
Convertible Notes
                                                        
Aerospace
    
—
      
250,000
      
—
      
—
      
—
      
—
      
250,000
  
Consumer Electronics
    
500,000
      
2,100,000
      
—
      
—
      
—
      
—
      
2,600,000
  
Intellectual Property
    
5,250,000
      
—
      
—
      
—
      
—
      
—
      
5,250,000
  
Medical Devices
    
4,000,000
      
—
      
—
      
—
      
—
      
—
      
4,000,000
  
Semiconductor Equipment
    
2,000,000
      
—
      
—
      
—
      
—
      
—
      
2,000,000
  
Total
  
$
132,696,696
    
$
16,882,482
    
$
—
    
$
—
    
$
3,456,483
    
$
—
    
$
153,035,661
  
 
(1)
The net change in unrealized depreciation from Level 3 instruments held as of June 30, 2015 was $3,456,483.
 
18
 
Firsthand Technology Value Fund, Inc.
Notes to Financial Statements - continued
JUNE 30, 2015 (UNAUDITED)
 
The below chart represents quantitative disclosure about significant unobservable inputs for Level 3 fair value measurements at June 30, 2015:
 
   
FAIR VALUE AT 6/30/15
  
VALUATION TECHNIQUES
  
UNOBSERVABLE INPUTS
  
RANGE (WEIGHTED AVG.)
  
Direct venture capital investments: Advanced Materials
 		  
$12.4M
 
Market Comparable Companies
EBITDA Multiple
  
5.6x - 7.7x
 
     
Prior Transaction Analysis
Revenue Multiple
  
0.9x - 1.3x
 
        
Volatility
  
47.49% - 54.68%
 
        
Risk-Free Rate
  
1.62%
 
         
Discount for Lack of Marketability
  
28.5% - 32.3%
 
Direct venture capital investments: Advertising
Technology
 		  
$25.5M
 
Market Comparable Companies
Revenue Multiple
  
0.7x
 
     
Prior Transaction Analysis
Volatility
  
53.59%
 
        
Risk-Free Rate
  
0.64%
 
         
Discount for Lack of Marketability
  
0.0%
 
Direct venture capital invest­ments: Aerospace
    $0.2M
Prior Transaction Analysis
Discount for Lack of Marketability
0.0%
Direct venture capital investments: Automotive
 		  
$11.2M
 
Prior Transaction Analysis
Volatility
  
63.92%
 
        
Risk-Free Rate
  
1.00%
 
         
Discount for Lack of Marketability
  
0.0%
 
Direct venture capital investments: Cloud Computing
  
$9.9M
 
Prior Transaction Analysis
Volatility
  
39.63%
 
        
Risk-Free Rate
  
0.27%
 
           
Discount for Lack of Marketability
  
0.0%
 
Direct venture capital investments: Consumer Electronics
 		  
$17.7M
 
Prior Transaction Analysis
Volatility
  
45.94% - 61.73%
 
        
Risk-Free Rate
  
0.27% - 1.62%
 
         
Discount for Lack of Marketability
  
0.0% - 28.6%
 
Direct venture capital investments: Intellectual Property
 		  
$5.3M
 
Market Comparable Companies
Revenue Multiple
  
1.0x - 1.3x
 
        
Volatility
  
47.38%
 
        
Risk-Free Rate
  
0.11%
 
         
Discount for Lack of Marketability
  
0.0%
 
Direct venture capital investments: Internet
 		  
$3.3M
 
Prior Transaction Analysis
Volatility
  
43.38%
 
        
Risk-Free Rate
  
0.27%
 
         
Discount for Lack of Marketability
  
13.4%
 
Direct venture capital investments: Medical Devices
 		  
$23.7M
 
Market Comparable Companies
Revenue Multiple
  
2.0x - 2.4x
 
        
Volatility
  
75.05%
 
     
Prior Transaction Analysis
Risk-Free Rate
  
1.31%
 
         
Discount for Lack of Marketability
  
0.0%
 
Direct venture capital investments: Mobile Computing
 		  
$9.6M
 
Market Comparable Companies
Revenue Multiple
  
1.4x - 1.8x
 
        
Volatility
  
80.09%
 
     
Prior Transaction Analysis
Risk-Free Rate
  
0.64%
 
         
Discount for Lack of Marketability
  
0.0%
 
 
19
 
Firsthand Technology Value Fund, Inc.
Notes to Financial Statements - continued
JUNE 30, 2015 (UNAUDITED)
 
   
FAIR VALUE AT 6/30/15
  
VALUATION TECHNIQUES
  
UNOBSERVABLE INPUTS
  
RANGE (WEIGHTED AVG.)
  
Direct venture capital investments: Networking
  		  
$4.0M
 
Prior Transaction Analysis
Volatility
  
26.44%
 
             
Risk-Free Rate
  
0.27%
 
             
Discount for Lack of Marketability
  
8.2%
 
Direct venture capital investments: Renewable Energy
  		  
$9.0M
 
Prior Transaction Analysis
Volatility
  
75.75%
 
             
Risk-Free Rate
  
0.01%
 
             
Discount for Lack of Marketability
  
11.8%
 
Direct venture capital investments: Semiconductor Equipment 
 
  
$20.6M
 
Prior Transaction Analysis
Volatility
  
41.36%
 
             
Risk-Free Rate
  
1.00%
 
           
Discount for Lack of Marketability
  
0.0%
 
Direct venture capital investments: Software
  		  
$0.6M
 
Prior Transaction Analysis
Volatility
  
57.10%
 
             
Risk-Free Rate
  
0.28%
 
             
Discount for Lack of Marketability
  
0.0%
 
 
NOTE 7. FEDERAL INCOME TAXES
 
The Company has elected, and intends to qualify annually, for the special tax treatment afforded RICs under the Code. As provided in the Code, in any fiscal year in which a BDC so qualifies and distributes at least 90% of its taxable net income, the BDC (but not the shareholders) will be relieved of federal income tax on the income distributed. Accordingly, no provision for income taxes has been made. To avoid imposition of the excise tax applicable to regulated investment companies, the Company intends to declare as dividends in each calendar year at least 98% of its net investment income (earned during the calendar year) and 98.2% of its net realized capital gains (earned during the 12 months ended October 31) plus undistributed amounts, if any, from prior years.
 
The Company is subject to tax provisions that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. Taxable years ending 2011, 2012, and 2013 remain open to federal and state audit. As of December 31, 2014, management has evaluated the application of these provisions to the Company and has determined that no provision for income tax is required in the Company’s financial statements for uncertain tax provisions.
 
NOTE 8. INVESTMENT TRANSACTIONS
 
Investment transactions (excluding short-term investments) were as follows for the three months ended June 30, 2015.
 
PURCHASES AND SALES
  
Purchases of investment securities
  
$
24,176,276
  
Proceeds from sales and maturities of investment securities
  
$
33,152,358
  
 
20
 
Firsthand Technology Value Fund, Inc.
Notes to Financial Statements - continued
JUNE 30, 2015 (UNAUDITED)
 
NOTE 9. 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, 2014 through June 30, 2015, is noted below:
 
   
SHARES/PAR ACTIVITY
                  
AFFILIATE/ CONTROLLED INVESTMENT*
  
BALANCE AT 12/31/14
    
PURCHASES/ MERGER
    
SALES/ MATURITY/ EXPIRATION
    
BALANCE AT 6/30/15
    
REALIZED GAIN (LOSS)
    
INTEREST
    
VALUE 6/30/15
    
ACQUISITION COST
  
IntraOp Medical Corp. Series A-1 Preferred*
    
6,800,000
      
—
      
—
      
6,800,000
    
$
—
    
$
—
    
$
5,760,552
    
$
6,800,000
  
IntraOp Medical Corp. Series A-2 Preferred*
    
13,500,000
      
—
      
—
      
13,500,000
      
—
      
—
      
11,436,390
      
13,499,940
  
IntraOp Medical Corp. Series B Preferred*
    
—
      
3,000,000
      
—
      
3,000,000
      
—
      
—
      
2,541,420
      
3,000,000
  
IntraOp Medical Corp. Term Note*
    
1,000,000
      
—
      
—
      
1,000,000
      
—
      
74,384
      
1,000,000
      
1,000,000
  
IntraOp Medical Corp. Convertible Note*
    
3,000,000
      
—
      
—
      
3,000,000
      
—
      
119,014
      
3,000,000
      
3,000,000
  
Pivotal Systems, Series A  Preferred*
    
11,914,217
      
—
      
—
      
11,914,217
      
—
      
—
      
9,557,942
      
6,000,048
  
Pivotal Systems, Series B  Preferred*
    
7,942,811
      
—
      
—
      
7,942,811
      
—
      
—
      
6,371,961
      
4,000,000
  
Pivotal Systems, Series C  Preferred*
    
2,291,260
      
—
      
—
      
2,291,260
      
—
      
—
      
2,657,862
      
2,657,862
  
Pivotal Systems, Convertible Note*
    
2,000,000
      
—
      
—
      
2,000,000
      
—
      
109,123
      
2,000,000
      
2,000,000
  
QMAT, Preferred Stock  Series A*
    
12,000,240
      
—
      
—
      
12,000,240
      
—
      
—
      
11,438,112
      
12,000,240
  
QMAT, Series A  Warrant*
    
2,000,000
      
—
      
—
      
2,000,000
      
—
      
—
      
562,128
      
—
  
Silicon Genesis Corp., Common*
    
921,892
      
—
      
—
      
921,892
      
—
      
—
      
—
      
169,045
  
Silicon Genesis Corp., Convertible Note*
    
1,250,000
      
—
      
—
      
1,250,000
      
—
      
290,141
      
1,250,000
      
1,610,753
  
Silicon Genesis Corp., Convertible Note*
    
1,000,000
      
—
      
—
      
1,000,000
      
—
      
180,776
      
1,000,000
      
1,000,000
  
Silicon Genesis Corp., Term Note*
    
3,000,000
      
—
      
—
      
3,000,000
      
—
      
169,581
      
3,000,000
      
3,000,000
  
Silicon Genesis Corp., Common Warrant*
    
37,982
      
—
      
—
      
37,982
      
—
      
—
      
—
      
6,678
  
Silicon Genesis Corp., Common Warrant*
    
5,000,000
      
—
      
—
      
5,000,000
      
—
      
—
      
—
      
—
  
Silicon Genesis Corp., Common Warrant*
    
3,000,000
      
—
      
—
      
3,000,000
      
—
      
—
      
—
      
—
  
 
21
 
Firsthand Technology Value Fund, Inc.
Notes to Financial Statements - continued
JUNE 30, 2015 (UNAUDITED)
 
 
SHARES/PAR ACTIVITY
AFFILIATE/
 CONTROLLED INVESTMENT*
  
BALANCE AT
 12/31/14
    
PURCHASES/
 MERGER
    
SALES/
MATURITY/
 EXPIRATION
    
BALANCE AT
 6/30/15
    
REALIZED GAIN
 (LOSS)
    
INTEREST
    
VALUE
 6/30/15
    
ACQUISITION
 COST
  
Silicon Genesis Corp., Series 1-C Preferred*
    
82,914
      
—
      
—
      
82,914
    
$
—
    
$
—
    
$
—
    
$
109,518
  
Silicon Genesis Corp., Series 1-D*
    
850,830
      
—
      
—
      
850,830
      
—
      
—
      
—
      
431,901
  
Silicon Genesis Corp., Series 1-E Preferred*
    
5,704,480
      
—
      
—
      
5,704,480
      
—
      
—
      
—
      
2,946,535
  
Silicon Genesis Corp., Series 1-F Preferred*
    
912,453
      
—
      
—
      
912,453
      
—
      
—
      
—
      
583,060
  
Telepathy Investors, Inc. Convertible Note
    
—
      
2,000,000
      
—
      
2,000,000
      
—
      
4,444
      
2,000,000
      
2,000,000
  
Telepathy Investors, Inc. Series A Preferred
    
15,238,000
      
—
      
—
      
15,238,000
      
—
      
—