Firsthand Technology(SVVC) - 2022 Q4 - Annual Report

Financial Performance - For the year ended December 31, 2022, the company reported an investment income of $(10,008,422), a decrease from $6,318,695 in 2021, primarily due to an interest adjustment on convertible/term note investments [190]. - Operating expenses for the year ended December 31, 2022 totaled approximately $2,439,045, down from $3,255,258 in 2021, mainly due to a decrease in total net assets [193]. - The net investment loss before taxes for the year ended December 31, 2022 was $(12,447,467), compared to a gain of $3,063,437 in 2021, attributed to interest adjustments on convertible notes [198]. - The company recognized net realized losses of approximately $3,129,665 from the sale of investments during the year ended December 31, 2022, higher than the realized gains in 2021 [202]. - The net decrease in net assets resulting from operations for the year ended December 31, 2022 was $64,145,033, with a basic and fully diluted net change in net assets per share of $(9.31) [210]. Investment Portfolio - As of December 31, 2022, the net unrealized depreciation on portfolio investments was $(102,668,087), reflecting a significant decrease in the value of investments, particularly in IntraOp Medical and Wrightspeed [201]. - The fair value of the investment portfolio as of December 31, 2022 showed a significant increase in Medical Devices to 55.9% from 28.6% in 2021, while Semiconductor Equipment decreased to 11.5% from 32.8% [182]. - The company invests at least 80% of its net assets in technology companies, with a focus on those deriving at least 50% of revenues from the information technology or cleantech sectors [178]. - The company may invest up to 30% of its portfolio in opportunistic investments outside of private and micro-cap public companies, including high-yield bonds and distressed debt [179]. - The investment in Revasum consisted of 39,774,889 shares with an aggregate fair value of approximately $3.5 million as of December 31, 2022 [234]. - The investment in Hera consisted of shares and convertible notes with an aggregate fair value of approximately $7.9 million [223]. - As of December 31, 2022, level 3 investments were valued at $35,929,006, representing 117% of the Company's net assets [267]. Cash and Liquidity - For the year ended December 31, 2022, total cash reserves and liquid securities decreased approximately 74% due to the purchase of portfolio securities [217]. - Cash and cash equivalents increased to $675,826 at the end of 2022, up from $616,064 at the beginning of the year [218]. - The company expects to raise additional capital to support future growth through equity offerings, which may lead to dilution for existing investors [220]. - The Company may hold a substantial portion of its assets in cash and cash equivalents, which are expected to earn low yields, potentially leading to losses if management fees exceed interest income [256]. - The Company is required to distribute substantially all net realized gains to shareholders annually, holding proceeds of liquidated investments in cash pending distribution [258]. Valuation and Risk - The valuation of securities in the portfolio is determined by the Board of Directors and may differ significantly from market values due to the absence of a readily ascertainable market [250]. - Investments in privately held companies are inherently volatile, with potential for sudden loss or gain in value due to internal or external events [252]. - The valuation methods for investments include fundamental analysis, market prices of similar securities, and discounts based on restrictions on securities [250]. - The valuation of level 3 investments involves significant judgment and unobservable inputs, leading to a high degree of auditor judgment and effort [268]. - The values assigned to assets may not represent amounts ultimately realized, as they depend on future circumstances and actual liquidation [253]. Internal Controls and Compliance - The Company maintains effective internal control over financial reporting as of December 31, 2022, according to PCAOB standards [273]. - The company intends to distribute at least 90% of ordinary income and realized net short-term capital gains to qualify as a RIC [236]. - The Company invests in small companies, which are considered speculative and may be subject to legal or contractual restrictions affecting liquidity [254].