10-Q: Firsthand Tech Value Fund Reports Q3 2025 Losses

Firsthand Technology Value Fund, Inc. reported a significant decline in net assets and net asset value per share for the quarter ended September 30, 2025, alongside increased operating losses.

Summary

• Net assets decreased significantly to $296,547 as of September 30, 2025, from $1,060,679 at December 31, 2024.
• Net asset value (NAV) per share fell to $0.04 at September 30, 2025, from $0.15 at December 31, 2024.
• The company experienced a net investment loss of $(430,629) for the three months ended September 30, 2025, compared to a loss of $(355,961) for the same period in 2024.
• For the nine months ended September 30, 2025, net investment loss was $(607,021), a significant deterioration from net investment income of $2,280,700 in the prior year period, primarily due to the absence of a management fee waiver in 2025.
• Total operating expenses for the nine months ended September 30, 2025, were $786,161, compared to $(2,182,907) for the same period in 2024, largely due to a $3.0 million management fee waiver in 2024 that was not present in 2025.
• Realized losses from security transactions for the nine months ended September 30, 2025, totaled $(24,169,015).
• Net unrealized appreciation on investments for the nine months ended September 30, 2025, was $24,011,904, primarily attributable to the maturing of certain convertible notes issued by Wrightspeed.
• The total return based on Net Asset Value for the nine months ended September 30, 2025, was (73.33)%.
• Restricted securities constituted 66.7% of net assets ($197,925) at September 30, 2025, up from 29.7% ($315,250) at December 31, 2024.
• The Investment Management Agreement with Firsthand Capital Management, Inc. was approved for continuation through August 31, 2026.

Sentiment

Score: 2

Explanation: The company experienced a severe decline in net assets and NAV per share, significant operating losses, and substantial realized losses. The portfolio has a high concentration of illiquid, restricted securities, and faces ongoing legal challenges. While there was some unrealized appreciation, it was offset by realized losses and increased expenses. The overall financial health and operational performance are highly negative.

Positives

• Net unrealized appreciation on investments for the nine months ended September 30, 2025, was $24,011,904, indicating some portfolio value recovery or revaluation.
• The Investment Management Agreement was renewed, suggesting continuity in management and strategy.

Negatives

• Net assets decreased by approximately 72% from $1,060,679 at December 31, 2024, to $296,547 at September 30, 2025.
• Net asset value per share declined significantly from $0.15 to $0.04.
• The company reported a net investment loss of $(607,021) for the nine months ended September 30, 2025, a substantial negative swing from a net investment income of $2,280,700 in the prior year.
• Operating expenses increased significantly for the nine months ended September 30, 2025, due to the absence of a management fee waiver that was in effect in 2024.
• Realized losses from security transactions amounted to $(24,169,015) for the nine months ended September 30, 2025.
• The company's gross assets declined from approximately $21 million to approximately $1 million between June 30, 2023, and June 30, 2025, primarily due to the terminal failures of three portfolio companies: IntraOp, Wrightspeed, and Revasum.
• A high percentage of net assets (66.7%) are held in restricted, illiquid securities at September 30, 2025.

Risks

• Investments in privately-held companies are inherently illiquid, restricting the ability to sell positions.
• Investments in small publicly-traded companies may have low trading volumes and volatile prices.
• The company does not choose investments based on a strategy of diversification, making the portfolio vulnerable to events affecting a single sector, industry, or portfolio company.
• Valuation of privately-held securities is subjective and based on significant estimates and judgments, which may differ materially from ultimately realized values.
• Changes in valuation of privately-held companies can be volatile.
• The company is exposed to market disruption and geopolitical risks, including inflation, interest rates, trade disputes, supply chain disruptions, natural disasters, climate change, pandemics, terrorism, cybersecurity events, and military conflicts.
• Holding a portion of assets in cash may result in losses if management fees and other operating expenses exceed low interest income.
• The company may be subject to contractual restrictions or securities law limits on its ability to sell portfolio holdings due to affiliation with a portfolio company or the relative size of its holding.

Future Outlook

The company's forward-looking statements cover future operating results, business prospects, the impact of investments, the effect of a protracted decline in credit market liquidity, informal relationships with third parties, the expected market for venture capital investments, dependence on the general economy, ability to access the equity market, portfolio companies' objectives, expected financings and investments, regulatory structure and tax status, adequacy of cash resources and working capital, timing of cash flows and dividend distributions, impact of interest rate fluctuations, valuation of illiquid investments, and the ability to recover unrealized losses. The company undertakes no obligation to update these statements.

Management Comments

• The allegations in the Star Equity Fund, LP complaint lack merit, and the company intends to vigorously defend this action.
• The allegations in the VestedCap, LLC complaint lack merit, and the company intends to vigorously defend this action.
• The Board concluded that re-approval of the Investment Management Agreement was in the best interest of the Company and its shareholders, considering the costs of providing investment management and other services, and that the profits and ancillary benefits to the Adviser were not excessive.
• The Board noted that for a period of more than five years beginning in 2018, the Adviser had not collected any accrued management fees and had been paying certain company expenses to help preserve cash.
• The Board noted that in 2024, with the company's sale of Hera Systems, the Adviser was able to collect the management fees and unreimbursed expenses that remained payable at that time.

Industry Context

The company operates as a Business Development Company (BDC) focused on technology and cleantech, primarily investing in privately held or micro-cap public companies. The significant decline in net assets and NAV, coupled with substantial realized losses and ongoing legal challenges, suggests a difficult operating environment for its specific investment strategy, particularly in illiquid venture capital stage companies. The failures of key portfolio companies (IntraOp, Wrightspeed, Revasum) highlight the inherent high-risk nature of its concentrated investment approach in early-stage technology ventures, which can be more susceptible to market downturns and specific company failures compared to diversified portfolios.

Comparison to Industry Standards

• The company's advisory fee structure was deemed comparable to other business development companies in its comparison group.
• The company's effective Advisory Fee Rate for common stock holders was noted as lower than its peers, primarily because many funds in the comparison group utilize leverage in their investment strategies, which the company currently does not plan to use.

Management Changes

Corporate Governance

Legal Proceedings

• On February 28, 2025, Star Equity Fund, LP filed a putative class action and derivative complaint against Firsthand Capital Management, Inc., Scalar, LLC, current and former board members, and an officer, naming the Fund as a nominal defendant. Allegations include violations of federal securities laws for false/misleading statements regarding asset valuation, breaches of fiduciary duties, and breach of contract. The Fund believes the allegations lack merit and intends to vigorously defend, but defense costs may be significant.
• On September 5, 2023, VestedCap, LLC filed a complaint against IntraOp Medical Corporation and Kevin Landis, later amended on January 22, 2025, to add the Fund as a co-defendant. Claims against the Fund include wire fraud, RICO Act violations, fraud and deceit, conversion, and declaratory relief, alleging the Fund is the alter ego of IntraOp and Kevin Landis. The Fund believes the allegations lack merit and intends to vigorously defend, but defense costs may be significant.

Related Party Transactions

• Firsthand Capital Management, Inc. (FCM), the investment adviser, has waived significant base management fees in 2023 and 2024 ($2.5 million and $3.0 million respectively) to support the company and preserve cash. These fees are subject to recapture provisions, but none have been recaptured to date.
• Kevin Landis, the CEO and CFO, also serves on the boards of directors of portfolio companies EQX Capital, Inc., IntraOp Medical Corp., Revasum, Inc., and Wrightspeed, Inc., and as interim CEO at IntraOp Medical Corp. and Wrightspeed, Inc. The company acknowledges potential conflicts of interest arising from these roles.

Stakeholder Impact

• Shareholders: Significant decline in NAV and net assets, substantial realized losses, and increased operating expenses negatively impact shareholder value. Ongoing legal proceedings pose further financial risk and uncertainty.
• Management/Adviser (FCM): The adviser has waived substantial fees to support the company, indicating a commitment but also reflecting the company's financial distress. The renewal of the management agreement provides continued revenue potential for FCM, subject to the company's performance.
• Directors: Participation in a deferred compensation plan aligns their interests with shareholder value, but the decline in NAV means deferred compensation value has also decreased.
• Portfolio Companies: The terminal failures of IntraOp, Wrightspeed, and Revasum have led to significant write-downs and losses for the fund, indicating severe challenges for these specific investments.

Next Steps

• The company intends to vigorously defend against the legal complaints filed by Star Equity Fund, LP and VestedCap, LLC.
• The Investment Management Agreement with Firsthand Capital Management, Inc. is continued through August 31, 2026.
• Deferred compensation for eligible directors from 2024 and 2025 will be paid on the earlier of January 1, 2026, and January 1, 2027, respectively, or their separation of service.

Key Dates

Recommendation

The company's financial performance is severely distressed, marked by a drastic 72% decline in net assets and NAV per share, substantial net investment losses, and significant realized losses from portfolio company failures. Operating expenses have surged due to the absence of prior fee waivers. The portfolio is heavily concentrated in illiquid, restricted securities, and the company faces multiple ongoing legal challenges that could incur significant defense costs. Given the profound deterioration in financial health, high risk profile, and lack of clear positive catalysts, a seasoned investor would likely recommend a strong sell to minimize further capital erosion.

Keywords

Business Development Company, BDC, Technology Investments, Cleantech, Venture Capital, Private Equity, Illiquid Securities, SEC Filing, 10-Q, Investment Management, Portfolio Valuation, Financial Performance, Net Asset Value, Realized Losses, Unrealized Appreciation, Legal Proceedings, Corporate Governance, Restricted Securities