10-Q: Firsthand Technology Value Fund Reports Net Asset Value of $0.15 per Share in Q2 2024

Firsthand Technology Value Fund reports a net asset value of $0.15 per share for the second quarter of 2024, amid strategic portfolio adjustments and management fee waivers.

Summary

• Firsthand Technology Value Fund, Inc., a non-diversified, closed-end management investment company, announced its financial results for the quarter ended June 30, 2024.
• The net asset value (NAV) per share stood at $0.15 as of June 30, 2024, compared to $0.18 at the end of 2023.
• The fund's total assets amounted to $5,701,413, while net assets were reported at $1,017,920.
• Investment income for the quarter was $29,956, primarily from affiliated/controlled interest.
• Net expenses totaled $208,767, influenced by a management fee waiver.
• The fund experienced a net investment loss of $178,811.
• Net realized and unrealized gains on investments amounted to $1,028,811.
• The net increase in net assets resulting from operations was $850,000, or $0.12 per share.
• The fund's investment portfolio had a fair value of approximately $5.7 million as of June 30, 2024.
• The fund's largest holding is Hera Systems, Inc., representing 509.2% of net assets.
• The fund held $5,661,236 in restricted securities, representing 556.2% of net assets.
• The fund has a full valuation allowance on its net deferred tax assets.
• The fund has net operating loss carryforwards of $12,387,144 for federal and state income tax purposes.
• The fund has net capital loss carryforwards of $32,741,364 for federal and state income tax purposes, expiring between 2024 and 2028.
• The fund has entered into a fee waiver agreement with FCM, waiving future accruals of the base management fee starting October 1, 2023, through December 31, 2024, with future recoupment to the extent permitted by the Investment Management Agreement.
• FCM also agreed to waive $2.5 million of base management fee that has been accrued but unpaid prior to but unpaid as of September 30, 2023.
• Effective March 31, 2024, the Company has entered into a fee waiver agreement with FCM, waiving $3.0 million of base management fee that has been accrued but unpaid prior to but unpaid as of March 31, 2024.

Sentiment

Score: 4

Explanation: The document presents a mixed sentiment. While there are positive aspects such as net realized and unrealized gains on investments and management fee waivers, the decrease in net asset value per share and net investment loss indicate challenges. The high concentration of assets in restricted securities and a single holding (Hera Systems) also contribute to a cautious outlook.

Positives

• The fund experienced net realized and unrealized gains on investments of $1,028,811 for the quarter.
• The fund reported a net increase in net assets resulting from operations of $850,000, or $0.12 per share for the quarter.
• Management fee waivers by FCM reduced net expenses.
• The fund has net operating loss carryforwards of $12,387,144 for federal and state income tax purposes, which may be carried forward indefinitely.

Negatives

• The net asset value per share decreased from $0.18 at the end of 2023 to $0.15 as of June 30, 2024.
• The fund experienced a net investment loss of $178,811 for the quarter.
• The fund's largest holding, Hera Systems, Inc., represents a significant concentration of risk at 509.2% of net assets.
• The fund holds a substantial portion of its assets in restricted securities, which may limit liquidity.
• The fund has a full valuation allowance on its net deferred tax assets, indicating uncertainty about future realization of such assets.
• The fund has net capital loss carryforwards of $32,741,364 for federal and state income tax purposes, expiring between 2024 and 2028.

Risks

• The fund invests a substantial portion of its assets in privately-held companies, the securities of which are inherently illiquid.
• The fund's investments in small companies are considered speculative in nature.
• The fund's investments are subject to legal or contractual restrictions on resale that adversely affect the liquidity and marketability of such securities.
• The fund does not choose investments based on a strategy of diversification, making it more vulnerable to events affecting a single sector, industry, or portfolio company.
• The valuation of the fund's securities is determined in good faith by the Board of Directors and is subject to significant estimates and judgments.
• The fund's determinations regarding the fair value of its investments may be materially higher than the values that it ultimately realizes upon the disposal of such securities.
• The fund's portfolio companies have experienced, and may in the future experience, the impacts of inflation on their operating results.
• The duration of the coronavirus outbreak and the Russian-Ukraine conflict could adversely affect the Companys performance.
• Serving as a director or officer of portfolio companies may cause conflicts of interest.

Future Outlook

The document does not provide a detailed future outlook, but it mentions the fund's investment objective is to seek long-term growth of capital, principally by seeking capital gains on its equity and equity-related investments.

Industry Context

The fund operates as a business development company (BDC) and invests primarily in technology and cleantech companies, which are sectors known for their growth potential but also for their inherent risks and volatility.

Comparison to Industry Standards

• The Board noted that the Companys advisory fee structure was comparable to that of funds in the business development company comparison group.
• The Board also noted that the Adviser, in an effort to support the Company and help it to preserve cash, has not collected its accrued management fees for a number of years.

Stakeholder Impact

• Shareholders may be concerned about the decrease in net asset value per share.
• The management fee waivers by FCM are beneficial for shareholders as they reduce expenses.
• The fund's investment strategy and performance will impact shareholder returns.

Key Dates

Keywords

net asset value, investment income, financial results, technology fund, portfolio investments, restricted securities, management fees, venture capital, Firsthand Technology Value Fund, SVVC