Firsthand Technology(SVVC) - 2023 Q1 - Quarterly Report

Financial Performance - As of March 31, 2023, total assets decreased to $35,620,583 from $40,203,857 as of December 31, 2022, representing a decline of approximately 11.5%[10] - Total liabilities increased to $9,753,216 from $9,594,266, marking a rise of about 1.7%[10] - Net assets decreased to $25,867,367 from $30,609,591, reflecting a decline of approximately 15.5%[10] - Total investment income for the three months ended March 31, 2023, was $191,262, down 90.1% from $1,936,290 for the same period in 2022[13] - Net investment income resulted in a loss of $198,089 for Q1 2023, compared to a gain of $1,203,425 in Q1 2022[18] - The net decrease in net assets resulting from operations was $4,742,224 for Q1 2023, compared to a decrease of $7,349,942 in Q1 2022[18] - The company reported a total return based on net asset value of (15.54)% for the three months ended March 31, 2023[19] - Operating expenses totaled approximately $389,351 for the three months ended March 31, 2023, compared to $732,865 for the same period in 2022, reflecting a reduction of about 46.8%[154] - The net investment loss before taxes was $(198,089) for the three months ended March 31, 2023, compared to a net investment income of $1,203,425 for the same period in 2022, marking a change of approximately 116.5%[156] Investment Portfolio - The company has made significant investments in companies like Hera Systems, Inc. and IntraOp Medical Corp., with substantial holdings in convertible notes and preferred stocks[26] - The company holds convertible notes from Intraop Medical Corp. maturing in December 2023 with an interest rate of 15%, totaling $3,000,000 in value[28] - The cost basis for the convertible notes from Intraop Medical Corp. is $3,000,000, with a current value of $1,544,202, indicating a significant unrealized loss[29] - The company has invested $39,774,889 in RevAsum, Inc., which represents 24.7% of its net assets, with a current value of $6,381,006[31] - The company has a total investment of $14,315,334 in various notes and stocks, with a focus on advanced materials and semiconductor equipment sectors[29] - The company has convertible notes from Wrightspeed, Inc. maturing in June 2023, with a total value of $4,929,015 and an interest rate of 12%[31] - The company’s investment strategy includes a focus on convertible notes and preferred stocks, indicating a preference for fixed-income securities in its portfolio[29] - The total investments amounted to $136.7 million, representing a 136.7% increase over the cost basis of $134.7 million[35] - The total value of convertible notes held by Intraop Medical Corp. includes multiple issuances, with the latest being $1,000,000 issued on October 22, 2021[41] - The fund's investment strategy includes a focus on medical devices, aerospace, and advanced materials sectors, indicating a diversified portfolio[39] Valuation and Fair Value - The fair value of the investment portfolio was approximately $35.4 million as of March 31, 2023, down from approximately $40.2 million as of December 31, 2022, representing a decrease of about 19.0%[145] - The total gross unrealized depreciation of the Company's investments was $(101,061,201), resulting in a net unrealized depreciation of $(99,347,163) as of March 31, 2023[108] - The company utilizes a multi-step valuation process for investments lacking readily available market quotations[81] - The fair value hierarchy prioritizes Level 1 measurements based on unadjusted quoted prices in active markets[90] - The market approach is primarily relied upon for fair value measurements, supplemented by income and asset-based approaches[88] Regulatory Compliance and Strategy - The company is required to invest at least 70% of its total assets in qualifying assets as part of its regulatory compliance[141] - The company invests at least 80% of its assets in technology companies, with a focus on those deriving at least 50% of revenues from the information technology or cleantech sectors[52] - The company may invest up to 30% of the portfolio in opportunistic investments outside of private and micro-cap public companies[144] - The board of directors will determine the timing and amount of distributions, with no minimum distribution requirement on income or capital gains[164] Risks and Future Outlook - The company has significant exposure to geopolitical risks, including the impact of the COVID-19 pandemic and the Russia-Ukraine conflict on financial performance[136] - The company anticipates that its future operating results will be influenced by the general economy and the performance of its portfolio companies[141] - Investments in immature privately-held companies are inherently more volatile and can lose or gain value suddenly due to internal or external events[178][179] Tax and Legal Matters - The Company has net operating loss carryforwards of $16,500,072 for federal and state income tax purposes, which may be carried forward indefinitely[119] - The effective tax rate for the three-month period ended March 31, 2023, was 0%, consistent with the previous year, due to changes in deferred tax assets and valuation allowances[113] - The Company has established a full valuation allowance on its net deferred tax assets, indicating that it is more likely than not that these assets will not be realized in the future[114] - The Company was taxed as a corporation for fiscal year 2018 and will continue to be taxed in that manner unless it qualifies again as a regulated investment company (RIC)[105] - There have been no changes in internal control over financial reporting that materially affected the company's reporting[187] - The company is not a party to any material pending legal proceedings[190]