Firsthand Technology(SVVC) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The unaudited financial statements detail assets, operations, cash flows, and investments for the periods ended June 30, 2025, and December 31, 2024 Consolidated Statements of Assets and Liabilities The company's total assets and net assets significantly decreased from December 2024 to June 2025 Consolidated Statements of Assets and Liabilities | ASSETS/LIABILITIES | JUNE 30, 2025 (UNAUDITED) | DECEMBER 31, 2024 | | :--- | :--- | :--- | | Total Assets | $1,167,234 | $1,795,613 | | Total Liabilities | $419,975 | $734,934 | | NET ASSETS | $747,259 | $1,060,679 | | Net asset value per share | $0.11 | $0.15 | - Total Assets decreased by approximately 35% from $1,795,613 as of December 31, 2024, to $1,167,234 as of June 30, 2025[9] - Net Assets decreased by approximately 29.6% from $1,060,679 to $747,259 over the same period[9] Consolidated Statements of Operations The company experienced improved net investment income in Q2 2025, though net assets declined due to investment losses Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | TOTAL INVESTMENT INCOME | $170,861 | $29,956 | $176,826 | $62,001 | | TOTAL NET EXPENSES | $234,035 | $208,767 | $353,218 | $(2,574,660) | | NET INVESTMENT INCOME/(LOSS) | $(63,174) | $(178,811) | $(176,392) | $2,636,661 | | Net Realized and Unrealized Gains (Losses) on Investments | $(26,788) | $1,028,811 | $(137,028) | $(2,879,112) | | Net Increase (Decrease) In Net Assets Resulting From Operations | $(89,962) | $850,000 | $(313,420) | $(242,451) | | Net Increase (Decrease) In Net Assets Per Share Resulting From Operations | $(0.01) | $0.12 | $(0.04) | $(0.04) | - Net investment income/(loss) improved from $(178,811) in Q2 2024 to $(63,174) in Q2 2025, primarily due to increased investment income[11] - However, net assets decreased significantly in Q2 2025 due to net realized and unrealized losses on investments[11] Consolidated Statements of Cash Flows Operating activities generated positive cash flow in the first six months of 2025, reversing the cash use seen in the prior year period Consolidated Statements of Cash Flows (Unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $135 | $63 | $159 | $(58) | | Net cash provided by financing activities | — | — | — | — | | Net increase (decrease) in cash | $135 | $63 | $159 | $(58) | | Cash and foreign currency - end of period | $2,671 | $2,707 | $2,671 | $2,707 | - Operating activities generated positive cash flow of $159 for the six months ended June 30, 2025, a notable improvement from the $(58) used in the six months ended June 30, 2024[14] Consolidated Statements of Changes in Net Assets Net assets declined in the first half of 2025, driven by substantial realized losses from security transactions Consolidated Statements of Changes in Net Assets (Unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net investment (loss) income | $(63,174) | $(178,811) | $(176,392) | $2,636,661 | | Net realized (loss) from security transactions | $(24,169,015) | — | $(24,169,015) | — | | Net change in unrealized appreciation (depreciation) on investments | $24,142,227 | $1,028,811 | $24,031,987 | $(2,879,112) | | Net increase (decrease) in net assets from operations | $(89,962) | $850,000 | $(313,420) | $(242,451) | | NET ASSETS: End of period | $747,259 | $1,017,920 | $747,259 | $1,017,920 | - Net assets decreased by $313,420 for the six months ended June 30, 2025, primarily due to significant net realized losses from security transactions[15] Selected Per Share Data and Ratios Net asset value per share continued its decline in the first half of 2025, reflecting a negative total return based on NAV Selected Per Share Data and Ratios | Metric | Six Months Ended June 30, 2025 | Year Ended December 31, 2024 | Year Ended December 31, 2023 | Year Ended December 31, 2022 | Year Ended December 31, 2021 | Year Ended December 31, 2020 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net asset value at beginning of period | $0.15 | $0.18 | $4.44 | $13.75 | $14.82 | $17.70 | | Total from investment operations | $(0.04) | $(0.03) | $(4.26) | $(9.31) | $(1.07) | $(3.34) | | Net asset value at end of period | $0.11 | $0.15 | $0.18 | $4.44 | $13.75 | $14.82 | | Market value at end of period | $0.06 | $0.06 | $0.30 | $0.95 | $4.01 | $4.47 | | Total Return Based on Net Asset Value | (26.67)% | (16.67)% | (95.95)% | (67.71)% | (7.22)% | (16.27)% | | Total Return Based on Market Value | 0.0% | (80.00)% | (68.42)% | (76.31)% | (10.29)% | (30.48)% | | Net assets at end of period (millions) | $0.7 | $1.1 | $1.3 | $30.6 | $94.8 | $102.1 | | Ratio of total expenses to average net assets: Total expenses | 81.86% | (181.20)% | (7.21)% | 4.11% | 3.12% | 11.12% | | Ratio of net investment income (loss) to average net assets: Net investment income (loss) | (40.88)% | 206.76% | 8.13% | (20.96)% | 2.94% | 0.64% | - Net asset value per share decreased from $0.15 to $0.11 as of June 30, 2025, reflecting a total return of (26.67)% based on NAV[16] Consolidated Schedule of Investments The portfolio's fair value decreased, with a significant shift in allocation from Intellectual Property to Advanced Materials Portfolio Composition by Industry Sector (Fair Value) | Industry Sector | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Exchange-Traded/Money Market Funds | 67.6% | 70.3% | | Advanced Materials | 25.1% | 0.0% | | Equipment Leasing | 3.5% | 2.8% | | Other Assets/(Liabilities) | 3.2% | 0.0% | | Medical Devices | 0.6% | 2.4% | | Semiconductor Equipment | 0.0% | 0.0% | | Automotive | 0.0% | 0.0% | | Intellectual Property | 0.0% | 24.5% | | Total Investments (Cost) | $92,313,380 | $116,682,498 | | Total Market Value | $723,147 | $1,060,474 | - The portfolio's fair value decreased from approximately $1.0 million to $0.7 million as of June 30, 2025[133][135] - The allocation to Advanced Materials significantly increased to 25.1%, while Intellectual Property decreased to 0.0%[133][135] Notes to Consolidated Financial Statements These notes provide detailed explanations of accounting policies, business risks, fair value measurements, and other key financial matters NOTE 1. THE COMPANY The company operates as an externally managed, non-diversified Business Development Company focused on technology investments - Firsthand Technology Value Fund, Inc is an externally managed, non-diversified, closed-end management investment company treated as a Business Development Company (BDC)[38] - The Company invests at least 80% of its assets in technology companies and at least 70% in privately held or small-cap public companies[38] - The Company's shares are quoted on the OTCQB market under the symbol 'SVVC' after voluntarily delisting from NASDAQ[38] NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The company's accounting policies are centered on fair value measurement for investments, involving significant estimates and judgments - Investments are valued at 'fair value' as determined by the Board of Directors, involving significant estimates and judgments[47][62] - The Company held $218,026 in restricted securities as of June 30, 2025, down from $315,250 as of December 31, 2024[49] - The Company accounts for realized gains/losses on a specific identification basis[53] NOTE 3. BUSINESS RISKS AND UNCERTAINTIES The company faces significant risks from its concentration in illiquid, privately-held securities and its non-diversified portfolio - The Company invests a substantial portion of its assets in illiquid, privately-held companies, which are inherently speculative[60] - The portfolio is not diversified, making it vulnerable to events affecting a single sector or company[61] - Valuation of privately-held securities involves significant estimates and judgments and may differ materially from ultimately realized values[62] NOTE 4. INVESTMENT MANAGEMENT FEE The investment manager receives a base management fee and an incentive fee, but has recently waived significant portions of these fees - The Company pays FCM a base management fee of 2.00% of gross assets and an incentive fee of 20% of cumulative realized capital gains[66][67] - FCM waived future accruals of the base management fee from October 1, 2023, through December 31, 2024, and waived a total of $5.5 million of accrued but unpaid fees[68][69] NOTE 5. DEBT The company currently has no plans to use leverage and has no significant outstanding debt obligations - The Company currently has no plan to use leverage and does not have any significant outstanding debt obligations[71] NOTE 6. FAIR VALUE Fair value for illiquid securities is determined by the Board, with a significant portion of assets classified as Level 3 inputs - Fair value is determined by the Board of Directors for securities without readily available market quotations[74][75][77] - The primary valuation approaches used are the market approach, income approach, and asset-based approach[78][83] Fair Value Hierarchy of Net Assets (June 30, 2025) | ASSETS | LEVEL 1 QUOTED PRICES | LEVEL 2 OTHER SIGNIFICANT OBSERVABLE INPUTS | LEVEL 3 SIGNIFICANT UNOBSERVABLE INPUTS | | :--- | :--- | :--- | :--- | | Common Stocks | $— | $— | $187,399 | | Preferred Stocks | $— | $— | $25,815 | | Convertible Notes | $— | $— | $4,812 | | Mutual Funds | $505,121 | $— | $— | | Total | $505,121 | $— | $218,026 | Reconciliation of Level 3 Assets (12/31/2024 to 06/30/2025) | INVESTMENTS AT FAIR VALUE USING SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3) | BALANCE AS OF 12/31/24 | NET PURCHASES/ CONVERSIONS | NET SALES/ CONVERSIONS | NET REALIZED GAINS/ (LOSSES) | NET UNREALIZED APPRECIATION (DEPRECIATION) (1) | TRANSFERS IN (OUT) OF LEVEL 3 | BALANCE AS OF 06/30/25 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Common Stocks | $260,497 | $— | $— | $— | $(73,098) | $— | $187,399 | | Preferred Stocks | $29,466 | $— | $— | $— | $(3,651) | $— | $25,815 | | Convertible and Non Convertible Notes | $25,287 | $— | $— | $(24,129,015) | $24,108,540 | $— | $4,812 | | Total | $315,250 | $— | $— | $(24,129,015) | $24,031,791 | $— | $218,026 | NOTE 7. FEDERAL INCOME TAXES The company is taxed as a corporation and maintains a full valuation allowance on its net deferred tax assets - The Company has been taxed as a corporation since 2018, no longer qualifying as a Regulated Investment Company (RIC)[95] - As of June 30, 2025, the Company has a net unrealized depreciation of $91,590,233 on its portfolio investments for tax purposes[98] - The Company has a full valuation allowance on its net deferred tax assets due to uncertainty of future taxable income[102] Net Operating Loss and Capital Loss Carryforwards (as of December 31, 2024) | Type of Loss Carryforward | Amount | | :--- | :--- | | Net operating loss | $11,593,301 | | Capital loss (expiring 12/31/25) | $7,516,642 | | Capital loss (expiring 12/31/27) | $3,129,665 | | Capital loss (expiring 12/31/28) | $7,864,982 | | Capital loss (expiring 12/31/29) | $11,686,668 | | Total Capital Loss | $30,197,957 | NOTE 8. INVESTMENT TRANSACTIONS There were no investment security purchases or sales during the second quarter of 2025 - For the quarter ended June 30, 2025, there were no purchases or sales of investment securities[110] NOTE 9. SHARE BUYBACKS The company has historically engaged in share repurchases through various plans and tender offers to enhance shareholder value - The Fund completed a discretionary share repurchase plan in September 2016, repurchasing 272,008 shares for approximately $2 million[111] - Another share repurchase plan was approved in November 2017, with 128,551 shares repurchased for approximately $1.1 million as of December 31, 2017[112] - A modified Dutch auction tender offer in December 2019 resulted in the purchase of 285,714 shares at $7.00 per share[114][115] NOTE 10. INVESTMENTS IN AFFILIATES AND CONTROLLED INVESTMENTS The company holds significant stakes in several portfolio companies, with its CEO serving on multiple boards, creating potential conflicts of interest - The Company identifies investments where it owns greater than 5% as affiliates and greater than 25% as controlled investments[116] - Kevin Landis, the Company's CEO, serves on the boards of several portfolio companies, which may create conflicts of interest[119] Summary of Affiliate and Controlled Investments (12/31/2024 to 06/30/2025) | Category | Value at 12/31/24 | Realized Gain (Loss) | Change in Appreciation/ Depreciation | Value at 6/30/25 | | :--- | :--- | :--- | :--- | :--- | | Total Affiliates | $260,497 | $— | $(73,098) | $187,399 | | Total Controlled Investments | $54,753 | $(24,169,015) | $24,104,889 | $30,627 | | Total Affiliates and Controlled Investments | $315,250 | $(24,169,015) | $24,031,791 | $218,026 | NOTE 11. MARKET DISRUPTION AND GEOPOLITICAL RISKS The company is exposed to various market and geopolitical risks that can adversely impact its portfolio companies and investment values - The Company is exposed to market disruption and geopolitical risks, including inflation, interest rates, and supply chain disruptions[120] - Global events, such as the Russia-Ukraine conflict and Middle East tensions, can cause market volatility and significant adverse impacts[120] NOTE 12. LITIGATION The company is currently a defendant in two separate lawsuits alleging securities law violations, fraud, and breaches of fiduciary duty - Star Equity Fund, LP filed a class action complaint on February 28, 2025, alleging federal securities law violations and breaches of fiduciary duties[122] - VestedCap, LLC amended a complaint on January 22, 2025, adding the Fund as a co-defendant and asserting claims of wire fraud and RICO Act violations[124] - The Fund believes these allegations lack merit and intends to vigorously defend these actions[122][124] NOTE 13. SUBSEQUENT EVENTS No material subsequent events requiring disclosure or recognition have occurred after the balance sheet date - Management has evaluated subsequent events and determined there are no events requiring recognition or disclosure[125] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, operational results, portfolio composition, and performance for the six months ended June 30, 2025 OVERVIEW The company operates as a BDC with the objective of long-term capital growth through investments in technology and cleantech companies - The Company is an externally managed, closed-end, non-diversified management investment company operating as a BDC[130] - The investment objective is long-term capital growth, primarily through equity investments in technology and cleantech companies[131] - The Company may invest up to 30% of its portfolio in opportunistic investments, including publicly traded securities and non-U.S. companies[132] PORTFOLIO COMPOSITION The investment portfolio's fair value decreased, with a major reallocation from Intellectual Property to Advanced Materials - The fair value of the investment portfolio was approximately $0.7 million as of June 30, 2025, a decrease from approximately $1.0 million as of December 31, 2024[133] Portfolio Composition by Industry Sector (Fair Value) | Industry Sector | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Exchange-Traded/Money Market Funds | 67.6% | 70.3% | | Advanced Materials | 25.1% | 0.0% | | Equipment Leasing | 3.5% | 2.8% | | Other Assets/(Liabilities) | 3.2% | 0.0% | | Medical Devices | 0.6% | 2.4% | | Semiconductor Equipment | 0.0% | 0.0% | | Automotive | 0.0% | 0.0% | | Intellectual Property | 0.0% | 24.5% | RESULTS OF OPERATIONS This section analyzes the company's financial performance, comparing results from 2025 against the same periods in 2024 Comparison of the three months ended June 30, 2025 to the three months ended June 30, 2024. Investment income rose sharply in Q2 2025, but a significant net loss from operations was driven by realized investment losses Key Financial Results (Three Months Ended June 30) | Metric | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Investment Income | $170,861 | $29,956 | +470.3% | | Operating Expenses | $234,035 | $208,767 | +12.1% | | Net Investment Income/(Loss) | $(63,174) | $(178,811) | +64.6% | | Net Realized and Unrealized Gains (Losses) on Investments | $(26,788) | $1,028,811 | -102.6% | | Net Increase (Decrease) In Net Assets Resulting From Operations | $(89,962) | $850,000 | -110.6% | | Net Increase (Decrease) In Net Assets Per Share Resulting From Operations | $(0.01) | $0.12 | -108.3% | - Investment income significantly increased by 470.3% due to an interest accrual adjustment on Hera Systems investments[137][138] - Net operating expenses increased by 12.1% primarily due to higher professional fees and the absence of a fee waiver in 2025[140][141] - The Company recognized $24,169,015 in realized losses in Q2 2025, primarily from the maturing of Wrightspeed notes[145][147] Comparison for the six months ended June 30, 2025 and June 30, 2024 The first half of 2025 saw a net loss from operations, contrasting with a net gain in 2024, largely due to fee waivers in the prior year Key Financial Results (Six Months Ended June 30) | Metric | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Investment Income | $176,826 | $62,001 | +185.2% | | Operating Expenses | $353,218 | $(2,574,660) | +113.7% | | Net Investment Income/(Loss) | $(176,392) | $2,636,661 | -106.7% | | Net Realized and Unrealized Gains/(Losses) on Investments | $(137,028) | $(2,879,112) | +95.2% | | Net Increase (Decrease) In Net Assets Resulting From Operations | $(313,420) | $(242,451) | -29.3% | | Net Increase (Decrease) In Net Assets Per Share Resulting From Operations | $(0.04) | $(0.04) | 0.0% | - Investment income increased by 185.2% due to an interest accrual adjustment on Hera Systems investments[150][151] - Operating expenses significantly increased due to higher professional fees and the absence of a management fee waiver in 2025[152][153] - Net investment income shifted from a gain of $2,636,661 in 2024 to a loss of $(176,392) in 2025, largely due to the 2024 management fee waiver[154] - The Company recognized $24,169,015 in realized losses in the first six months of 2025, primarily from the maturity of Wrightspeed notes[156][157] DISTRIBUTION POLICY Distributions are determined by the Board of Directors, and there is no minimum required payout level - The Board of Directors determines the timing and amount of any distributions; the Company is not required to pay any minimum level of distributions[161] CONTRACTUAL OBLIGATIONS The company has no contractual obligations requiring disclosure under Regulation S-K - The Fund does not have any contractual obligations that meet the requirements for disclosure under Item 303 of Regulation S-K[162] OFF-BALANCE SHEET ARRANGEMENTS The company does not have any off-balance sheet arrangements - The Fund does not have any off-balance sheet arrangements[163] CRITICAL ACCOUNTING POLICIES Key accounting policies include the valuation of portfolio investments, revenue recognition, and the measurement of realized and unrealized gains - Valuation of Portfolio Investments: Non-publicly traded securities are valued at fair value determined in good faith by the Board of Directors[165] - Revenue Recognition: Interest or dividend income is recorded on an accrual basis[167] - Net Realized Gains or Losses: Realized gains/losses are measured by the difference between net proceeds and cost basis[168] Recently Issued Accounting Standards Recently issued accounting standards are not expected to materially impact the company's financial statements - The Company believes that recently issued accounting standards not yet effective will not have a material impact on its financial statements[169] Inflation Inflation has not had a significant direct impact on the company's operational results during the reporting periods - Inflation has not significantly affected the Company's results of operations in the presented reporting periods[170] SUBSEQUENT EVENTS No material events have occurred subsequent to the balance sheet date that would require disclosure - No material events related to the investment portfolio have occurred subsequent to June 30, 2025[171] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks stem from the valuation of illiquid private investments and its holdings in small, speculative companies VALUATION RISK Valuation of illiquid, privately-held securities is inherently uncertain and subject to significant fluctuation - Valuation of illiquid, privately-held securities is determined in good faith by the Board of Directors due to the absence of a public market[174] - Valuations are inherently uncertain and can differ materially from values ultimately realized upon disposal[174][177] - Investments in privately held, immature companies are highly volatile and susceptible to sudden changes in value[175][176] PRIVATELY PLACED SMALL COMPANIES RISK Investments in small, privately placed companies are speculative and subject to resale restrictions, affecting liquidity - The Company's investments in small, privately placed companies are speculative and often subject to resale restrictions, adversely affecting liquidity[178] - This risk of loss may prevent shareholders from achieving price appreciation, dividend distributions, and return of capital[178] WE CURRENTLY HOLD A PORTION OF OUR ASSETS IN CASH Holding cash presents a risk of low returns, potentially not covering operating expenses, but provides liquidity for investments - A portion of the Company's assets is held in cash, which is expected to earn low yields, potentially leading to losses[179] - Cash reserves are maintained for follow-on investment opportunities and for distributing proceeds from liquidated investments[180][181] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of the end of the fiscal quarter (a) Evaluation of Disclosure Controls and Procedures Management's evaluation confirmed the effectiveness of disclosure controls and procedures as of June 30, 2025 - As of June 30, 2025, management evaluated the effectiveness of disclosure controls and procedures[182] - The CEO and CFO concluded that disclosure controls and procedures were effective, providing reasonable assurance of timely reporting[182] (b) Changes in Internal Control Over Financial Reporting No material changes to internal control over financial reporting occurred during the most recent fiscal quarter - There have been no changes in internal control over financial reporting during the fiscal quarter ended June 30, 2025, that have materially affected internal controls[182] PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. The company faces two significant legal proceedings alleging securities law violations, fraud, and breaches of fiduciary duty - Star Equity Fund, LP filed a class action and derivative complaint on February 28, 2025, alleging securities law violations and breaches of fiduciary duties[183] - VestedCap, LLC amended its complaint on January 22, 2025, adding the Fund as a co-defendant and asserting claims including wire fraud and RICO Act violations[185] - The Fund believes the allegations lack merit and will vigorously defend these actions, noting that defense costs could be significant[183][185] ITEM 1A. RISK FACTORS. There have been no material changes to the risk factors previously disclosed in the company's most recent Form 10-K - There have been no material changes from risk factors as previously disclosed in the Company's Form 10-K for the period ended December 31, 2024[186] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. This section is listed as an item in the report but contains no specific content or disclosures ITEM 3. DEFAULTS UPON SENIOR SECURITIES. This section is listed as an item in the report but contains no specific content or disclosures ITEM 4. MINE SAFETY DISCLOSURES. This section is listed as an item in the report but contains no specific content or disclosures ITEM 5. OTHER INFORMATION. The Board of Directors approved the continuation of the Investment Management Agreement with Firsthand Capital Management, Inc INVESTMENT MANAGEMENT AGREEMENT APPROVAL DISCLOSURE (UNAUDITED) The Board approved the continuation of the Investment Management Agreement after considering the adviser's services, performance, and fees - The Board of Directors approved the continuation of the Investment Management Agreement with Firsthand Capital Management, Inc for an additional one-year period[187] - The Board considered factors such as the Adviser's personnel, compliance procedures, comparative fees, and Company performance[188][191][192][193][195] - Company performance showed a 91% NAV decline and 96% stock price fall for the 12 months ended June 30, 2024, due to setbacks at three portfolio companies[197] - The Board noted the Adviser's efforts to support the Company by waiving accrued management fees and paying for certain Company expenses[198][199] ITEM 6. EXHIBITS. This section lists the CEO and CFO certifications filed as exhibits with the Form 10-Q - Exhibits include CEO and CFO certifications pursuant to Rule 13a-14 of the Securities Exchange Act of 1934 and Section 1350 of the Sarbanes-Oxley Act[206][208]