Firsthand Technology Value (SVVC) 10-K, filed Mar 16, 2020

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

(Mark One)

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2019 or

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______
Commission file number: 814-00830

Firsthand Technology Value Fund, Inc.

(Exact name of registrant as specified in its charter)

Maryland<br><br>(State or other jurisdiction of<br><br>incorporation or organization)	27-3008946<br><br>(I.R.S. Employer<br><br>Identification No.)

150 Almaden Boulevard, Suite 1250
San Jose, California 95113
(Address and zip code of principal executive offices)

(408) 886-7096***(Registrant’s telephone number, including area code)***

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $0.001 par value	The NASDAQ Global Market

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [ ]Yes [X] No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. [ ]Yes [X] No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X]Yes [ ] No

Indicate by check mark whether the issuer has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X]Yes [ ] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in the definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act). (check one):

Large accelerated filer [ ]	Accelerated filer [X]	Non-accelerated filer [ ]<br><br>(Do not check if a smaller reporting company)	Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). [ ]Yes [X] No

The aggregate market value of the Common Stock held by non-affiliates of the registrant as of December 31, 2019 was approximately $41 million (computed using the closing price of $6.43 per share of Common Stock on December 31, 2019, as reported by the NASDAQ Global Market).

As of March 1, 2020, Firsthand Technology Value Fund had 6,893,056 shares of common stock, par value $0.001 per share, outstanding. of the registrant’s definitive proxy statement prepared in connection with the Annual Meeting of Stockholders to be held in 2020 are incorporated by reference in Part III of this Form 10-K.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement prepared in connection with the Annual Meeting of Stockholders to be held in 2020 are incorporated by reference in Part III of this Form 10-K.

TABLE OF CONTENTS
PART I
Item 1. Business	4
Item 1A. Risk Factors	18
Item 1B. Unresolved Staff Comments	25
Item 2. Properties	26
Item 3. Legal Proceedings	26
Item 4. Mine Safety Disclosures	26
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	26
Item 6. Selected Financial Data	27
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 7A. Quantitative And Qualitative Disclosures About Market Risk	40
Item 8. Financial Statements and Supplementary Data	44
Item 9. Changes In And Disagreements With Accountants On Accounting And Financial Disclosure	94
Item 9A. Controls and Procedures	94
Item 9B. Other Information	95
Part III
Item 10. Directors, Executives Officers And Corporate Governance	95
Item 11. Executive Compensation	95
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	95
Item 13. Certain Relationships and Related Transactions, and Director Independence	96
Item 14. Principal Accountant Fees and Services	96
Part IV
Item 15. Exhibits, Financial Statements Schedules	96

PART I

Item 1. Business

FORWARD LOOKING STATEMENTS

This report, and other statements that we may make, may contain forward-looking statements, which relate to future events or our future performance or financial condition. We use words such as “anticipates,” “believes,” “expects,” “plans,” “will,” “may,” “continues,” “seeks,” “likely,” “intends,” and similar expressions to identify forward-looking statements. The forward-looking statements contained in this Annual Report on Form 10-K involve risks and uncertainties, including forward-looking statements as to:

●	our future operating results,
●	our business prospects and the prospects of our prospective portfolio companies,
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●	the impact of investments that we expect to make,
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●	our contractual arrangements and relationships with third parties,
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●	the dependence of our future success on the general economy and its impact on the industries in which we invest,
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●	the ability of our prospective portfolio companies to achieve their objectives,
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●	our expected financings and investments,
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●	the adequacy of our cash resources and working capital, and
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●	the timing of cash flows, if any, from the operations of our prospective portfolio companies.
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Our actual results could differ materially from those projected in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” and elsewhere in this Annual Report on Form 10-K. In addition, several factors that could materially affect our actual results are the ability of the portfolio companies in which we invest to achieve their objectives; our ability to source favorable private investments; changes in the securities markets, especially the markets for technology companies including those that may be early stage or micro-cap companies; the dependence of our future success of the general economy and its impact on the industries in which we invest and other factors discussed in our periodic filings with the Securities and Exchange Commission (the “SEC”).

Unpredictable or unknown factors could also have material adverse effects on us. Since our actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements, we cannot give any assurance that any of the events anticipated by the forward-looking statements will occur, or, if any of them do, what impact they will have on our results of operations and financial condition. All forward-looking statements included in this Annual Report on Form 10-K are expressly qualified in their entirety by the foregoing cautionary statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We do not undertake any obligation to update, amend or clarify these forward-looking statements or the risk factors contained in this Annual Report on Form 10-K, whether as a result of new information, future events or otherwise, except as may be required under the federal securities laws. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC.

GENERAL

Firsthand Technology Value Fund, Inc. (“we,” “us,” “our,” the “Company”, the “Fund,” or “SVVC”) is an externally managed, closed-end, non-diversified management investment company organized as a Maryland corporation that has elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). As such, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70 percent of our total assets in “qualifying assets,” including securities of private or micro-cap public U.S. companies, cash, cash equivalents, U.S. government securities and high-quality debt investments

that mature in one year or less. In addition, for tax purposes since the inception of the Fund, we have elected to be treated as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code of 1986, as amended, which we refer to as the “Code.” Starting in 2018, however, we are no longer a RIC and will be taxed as a C corporation for tax purposes. Firsthand Capital Management, Inc. (the “Investment Adviser”, the “Adviser”, or “FCM”) serves as our investment adviser and manages the investment process on a daily basis.

We were incorporated under the Maryland General Corporation Law in April 2010 and acquired our initial portfolio of securities through the reorganization (the “Reorganization”) into us of Firsthand Technology Value Fund (“TVF”), an open-end mutual fund and a series of Firsthand Funds, which is a Delaware statutory trust. The reorganization was completed on April 15, 2011 and we commenced operations on April 18, 2011.

Our investment objective is to seek long-term growth of capital, principally by seeking capital gains on our equity and equity-related investments. There can be no assurance that we will achieve our investment objective. Under normal circumstances, we invest at least 80 percent of our total assets for investment purposes in technology companies. We consider technology companies to be those companies that derive at least 50 percent of their revenues from products and/or services within the information technology sector and in the “cleantech” sector. Information technology companies include, but are not limited to, those focused on computer hardware, software, telecommunications, networking, Internet, and consumer electronics. While there is no standard definition of cleantech, it is generally regarded as including goods and services designed to harness renewable energy and materials, eliminate emissions and waste, and reduce the use of natural resources. In addition, under normal circumstances we invest at least 70 percent of our assets in privately held companies and public companies with market capitalizations less than $250 million. Our portfolio is primarily composed of equity and equity derivative securities of technology and cleantech companies (as defined above). These investments generally range between $1 million and $10 million each, although the investment size will vary proportionately with the size of our capital base. We acquire our investments through direct investments in private companies, negotiations with selling shareholders, and in organized secondary marketplaces for private securities.

While our primary focus is to invest in illiquid private technology and cleantech companies, we may also invest in micro-cap publicly traded companies. In addition, we may invest up to 30% of the portfolio in opportunistic investments that do not constitute the private companies and micro-cap public companies described above. These other investments may include investments in securities of public companies that are actively traded. These other investments may also include investments in high-yield bonds, distressed debt, or securities of public companies that are actively traded; and securities of companies located outside of the United States. Our investment activities are managed by FCM.

Neither our investments nor an investment in us are intended to constitute a balanced investment program. We expect to be risk-seeking rather than risk-averse in our investment approach. There is no assurance that our investment objective will be achieved.

We invest a substantial portion of our assets in securities that we consider to be private venture capital equity investments. These private venture capital equity investments usually do not pay interest or dividends and usually are subject to legal or contractual restrictions on resale that may adversely affect the liquidity and marketability of such securities. We expect to make speculative venture capital investments with limited marketability and a greater risk of investment loss than less-speculative investments. We are not limited by the diversification requirements applicable to a regulated investment company (“RIC”), which means that we may commit all of our assets to only a few investments.

Subject to continuing to meet the compliance tests applicable to BDCs, there are no limitations on the types of securities or other assets in which we may invest. Investments may include the following:

●	Venture capital investments, whether in corporate, partnership, or other form, including development-stage or start-up entities;
●	Equity, equity-related securities (including options and warrants), and debt with equity features from either private or public issuers;
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●	Debt obligations of all types having varying terms with respect to security or credit support, subordination, purchase price, interest payments, and maturity;
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●	Foreign securities;
●	Intellectual property or patents or research and development in technology or product development that may lead to patents or other marketable technology; and
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●	Miscellaneous investments.
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The table below provides a summary of our investments as of December 31, 2019.

INVESTMENT	BUSINESS DESCRIPTION	FAIR VALUE1
EQX Capital, Inc.	Equipment Leasing	2,519,870
Fidelity Investments Money Market Treasury Portfolio - Class I ^2^	Investment Company	5,201,855
Hera Systems, Inc.	Aerospace	7,965,893
IntraOp Medical Corp.	Medical Devices	18,963,955
Kyma, Inc.	Advanced Materials	100,000
Lyncean Technologies, Inc.	Semiconductor Equipment	992,520
Phunware, Inc. ^2^	Mobile Computing	812,666
Pivotal Systems Corp. ^2^	Semiconductor Equipment	41,670,037
QuickLogic Corp. ^2^	Semiconductors	257,142
Revasum, Inc. ^2^	Semiconductor Equipment	19,173,339
Silicon Genesis Corp.	Intellectual Property	1,533,090
SVXR, Inc.	Semiconductor Equipment	4,881,123
Telepathy Investors, Inc.	Consumer Electronics	0
UCT Coatings, Inc.	Advanced Materials	834,150
Wrightspeed, Inc.	Automotive	15,648,947

All values are in US Dollars.

^1^	Fair value for our private company holdings was determined in good faith by our Board of Directors (the “Board” or “Board of Directors”) on December 31, 2019. For public companies, the figure represents the market value of our securities on December 31, 2019, less any discount due to resale restriction on the security.
^2^	Public company.
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INVESTMENTS AND STRATEGIES

The following is a summary description of the types of assets in which we may invest, the investment strategies we may use, and the attendant risks associated with our investments and strategies.

VENTURE CAPITAL INVESTMENTS

We define venture capital as the money and resources made available to privately held start-up firms and privately held and publicly traded small businesses with exceptional growth potential. These businesses can range in stage from pre-revenue to generating positive cash flow. Most of our long-term venture capital investments are in thinly capitalized, unproven, small companies focused on commercializing risky technologies. These businesses also tend to lack management depth, have limited or no history of operations, and have not attained profitability. Because of the speculative nature of these investments, these securities have a significantly greater risk of loss than traditional investment securities. Some of our venture capital investments will never realize their potential, and some will be unprofitable or result in the complete loss of our investment.

We acquire our investments through direct investments in private companies, negotiations with selling shareholders, and in organized secondary marketplaces for private securities. Our current focus is on investing in late-stage private companies, particularly those with potential for near-term realizations by way of initial public offering (“IPO”) or acquisition.

In connection with our venture capital investments, we may participate in providing a variety of services to our portfolio companies, including the following:

●	Recruiting management,
●	Formulating operating strategies,
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●	Formulating intellectual property strategies,
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●	Assisting in financial planning,
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●	Providing management in the initial start-up stages, and
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●	Establishing corporate goals.
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We may assist in raising additional capital for these companies from other potential investors and may subordinate our own investment to that of other investors. We typically find it necessary or appropriate to provide additional capital of our own. We may introduce these companies to potential joint venture partners, suppliers, and customers. In addition, we may assist in establishing relationships with investment bankers and other professionals. We may also assist with mergers and acquisitions (“M&As”). We do not currently derive income from these companies for the performance of any of the above services.

We may control, be represented on, or have observer rights on the board of directors of a portfolio company through one or more of our officers or directors, who may also serve as officers of the portfolio company. We indemnify our officers and directors for serving on the board of directors or as officers of portfolio companies, which exposes us to additional risks. Particularly during the early stages of an investment, we may, in rare instances, in effect be conducting the operations of the portfolio company. Our goal is to assist each company in establishing its own independent capitalization, management, and board of directors. As a venture capital-backed company emerges from the developmental stage with greater management depth and experience, we expect that our role in the portfolio company’s operations will diminish.

EQUITY, EQUITY-RELATED SECURITIES AND DEBT WITH EQUITY FEATURES

We may invest in equity, equity-related securities, and debt with equity features. These securities include common stock, preferred stock, debt instruments convertible into common or preferred stock, limited partnership interests, other beneficial ownership interests and warrants, options, or other rights to acquire any of the foregoing.

We may make investments in companies with operating histories that are unprofitable or marginally profitable, that have negative net worth, or that are involved in bankruptcy or reorganization proceedings. These investments would involve businesses that management believes have potential through the infusion of additional capital and management assistance. In addition, we may make investments in connection with the acquisition or divestiture of companies or divisions of companies. There is a significantly greater risk of loss with these types of securities than is the case with traditional investment securities.

Warrants, options, and convertible or exchangeable securities generally give the investor the right to acquire specified equity securities of an issuer at a specified price during a specified period or on a specified date. Warrants and options fluctuate in value in relation to the value of the underlying security and the remaining life of the warrant or option, while convertible or exchangeable securities fluctuate in value both in relation to the intrinsic value of the security without the conversion or exchange feature and in relation to the value of the conversion or exchange feature, which is like a warrant or an option. When we invest in these securities, we incur the risk that the option feature will expire worthless, thereby either eliminating or diminishing the value of our investment.

Most of our current portfolio company investments are in the equity securities of private companies. Investments in equity securities of private companies often involve securities that are restricted as to sale and cannot be sold in the open market without registration under the Securities Act of 1933, as amended or pursuant to a specific exemption from these registrations. Opportunities for sale are more limited than in the case of marketable securities, although these investments may be purchased at more advantageous prices and may offer attractive investment opportunities. Even if one of our portfolio companies completes an IPO, we are typically subject to a lock-up agreement for 180 days, and the stock price may decline substantially before we are free to sell.

We may also invest in publicly traded securities of whatever nature, including relatively small, emerging growth companies that management believes have long-term growth potential. These investments may be through open-market transactions or through private investments in public equity (“PIPE transactions”). Securities purchased in PIPE transactions are typically subject to a lock-up agreement for 180 days, or are issued as unregistered securities that are not freely available for six months.

Even if we have registration rights to make our investments in privately held and publicly traded companies more marketable, a considerable amount of time may elapse between a decision to sell or register the securities for sale and the time when we are able to sell the securities. The prices obtainable upon sale may be adversely affected by market conditions or negative conditions affecting the issuer during the intervening time. We may elect to hold formerly restricted securities after they have become freely marketable, either because they remain relatively illiquid or because we believe that they may appreciate in value, during which holding period they may decline in value and be especially volatile as unseasoned securities. If we need funds for investment or working capital purposes, we might need to sell marketable securities at disadvantageous times or prices.

DEBT OBLIGATIONS

We may hold debt securities, including in privately held and thinly traded public companies, for income and as a reserve pending more speculative investments. Debt obligations may include U.S. government and agency securities, commercial paper, bankers’ acceptances, receivables or other asset-based financing, notes, bonds, debentures, or other debt obligations of any nature and repurchase agreements related to these securities. These obligations may have varying terms with respect to security or credit support; subordination; purchase price; interest payments; and maturity from private, public, or governmental issuers of any type located anywhere in the world. We may invest in debt obligations of companies with operating histories that are unprofitable or marginally profitable, that have negative net worth or are involved in bankruptcy or reorganization proceedings, or that are start-up or development-stage entities. In addition, we may participate in the acquisition or divestiture of companies or divisions of companies through issuance or receipt of debt obligations. As of December 31, 2019, the debt obligations held in our portfolio consisted of convertible bridge notes and term notes. The convertible bridge notes generally do not generate cash payments to us, nor are they held for that purpose. Our convertible bridge notes and the interest accrued thereon are held for the purpose of potential conversion into equity at a future date. The term notes we hold are income generating.

Our investments in debt obligations may be of varying quality, including non-rated, unsecured, highly speculative debt investments with limited marketability. Investments in lower-rated and non-rated securities, commonly referred to as “junk bonds,” including our venture debt investments, are subject to special risks, including a greater risk of loss of principal and non-payment of interest. Generally, lower-rated securities offer a higher return potential than higher-rated securities, but involve greater volatility of price and greater risk of loss of income and principal, including the possibility of default or bankruptcy of the issuers of these securities. Lower-rated securities and comparable non-rated securities will likely have large uncertainties or major risk exposure to adverse conditions and are predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal in accordance with the terms of the obligation. The occurrence of adverse conditions and uncertainties to issuers of lower-rated securities would likely reduce the value of lower-rated securities held by us, with a commensurate effect on the value of our shares.

The markets in which lower-rated securities or comparable non-rated securities are traded generally are more limited than those in which higher-rated securities are traded. The existence of limited markets for these securities may restrict our ability to obtain accurate market quotations for the purposes of valuing lower-rated or non-rated securities and calculating net asset value or to sell securities at their fair value. Any economic downturn could adversely affect the ability of issuers’ lower-rated securities to repay principal and pay interest thereon. The market values of lower-rated and non-rated securities also tend to be more sensitive to individual corporate developments and changes in economic conditions than higher-rated securities. In addition, lower-rated securities and comparable non- rated securities generally present a higher degree of credit risk. Issuers of lower-rated securities and comparable non-rated securities are often highly leveraged and may not have more traditional methods of financing available to them, so that their ability to service their debt obligations during an economic downturn or during sustained periods of rising interest rates may be impaired. The risk of loss owing to default by these issuers is significantly greater because lower-rated securities and comparable non-rated

securities generally are unsecured and frequently are subordinated to the prior payment of senior indebtedness. We may incur additional expenses to the extent that we are required to seek recovery upon a default in the payment of principal or interest on our portfolio holdings.

The market value of investments in debt securities that carry no equity participation usually reflects yields generally available on securities of similar quality and type at the time purchased. When interest rates decline, the market value of a debt portfolio already invested at higher yields can be expected to rise if the securities are protected against early call. Similarly, when interest rates increase, the market value of a debt portfolio already invested at lower yields can be expected to decline. Deterioration in credit quality also generally causes a decline in market value of the security, while an improvement in credit quality generally leads to increased value.

FOREIGN SECURITIES

We may make investments in securities of issuers whose principal operations are conducted outside the United States, and whose earnings and securities are stated in foreign currency. In order to maintain our status as a BDC, our investments in non-qualifying assets, including the securities of companies organized outside the U.S., would be limited to 30 percent of our assets.

Compared to otherwise comparable investments in securities of U.S. issuers, currency exchange risk of securities of foreign issuers is a significant variable. The value of these investments to us will vary with the relation of the currency in which they are denominated to the U.S. dollar, as well as with intrinsic elements of value such as credit risk, interest rates, and performance of the issuer. Investments in foreign securities also involve risks relating to economic and political developments, including nationalization, expropriation of assets, currency exchange freezes, and local recession. Securities of many foreign issuers are less liquid and more volatile than those of comparable U.S. issuers. Interest and dividend income and capital gains on our foreign securities may be subject to withholding and other taxes that may not be recoverable by us. We may seek to hedge all or part of the currency risk of our investments in foreign securities through the use of futures, options, and forward currency purchases or sales.

INTELLECTUAL PROPERTY

We believe there is a role for organizations that can assist in technology transfer. Scientists and institutions that develop and patent intellectual property perceive the need for and rewards of entrepreneurial commercialization of their inventions. Our form of investment may be:

●	Funding research and development in the development of a technology,
●	Obtaining licensing rights to intellectual property or patents,
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●	Acquiring intellectual property or patents, or
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●	Forming and funding companies or joint ventures to commercialize further intellectual property.
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Income from our investments in intellectual property or its development may take the form of participation in licensing or royalty income, fee income, or some other form of remuneration. Investment in developmental intellectual property rights involves a high degree of risk that can result in the loss of our entire investment as well as additional risks, including uncertainties as to the valuation of an investment and potential difficulty in liquidating an investment. Further, investments in intellectual property generally require investor patience, as investment return may be realized only after or over a long period. At some point during the commercialization of a technology, our investment may be transformed into ownership of securities of a development-stage or start-up company, as discussed under “Venture Capital Investments” above.

REPURCHASE OF SHARES

Our shareholders do not have the right to compel us to redeem our shares. We may, however, purchase outstanding shares of our common stock from time to time, subject to approval of our Board of Directors and in compliance with applicable corporate and securities laws. The Board of Directors may authorize public open-market purchases or privately negotiated

transactions from time to time when deemed to be in the best interest of our shareholders. Public purchases would be conducted only after notification to shareholders through a press release or other means. The Board of Directors may or may not decide to undertake any purchases of our common stock.

Our repurchases of our common shares would decrease our total assets and would therefore likely have the effect of increasing our expense ratio. Subject to our investment restrictions, we may borrow money to finance the repurchase of our common stock in the open market pursuant to any tender offer. Interest on any borrowings to finance share repurchase transactions would reduce our net assets. If, because of market fluctuations or other reasons, the value of our assets falls below the required 1940 Act coverage requirements, we may have to reduce our borrowed debt to the extent necessary to comply with the requirement. To achieve a reduction, it is possible that we may be required to sell portfolio securities at inopportune times when it may be disadvantageous to do so.

PORTFOLIO COMPANY TURNOVER

Changes with respect to portfolio companies will be made as our management considers necessary in seeking to achieve our investment objective. The rate of portfolio turnover will not be treated as a limiting or relevant factor when circumstances exist that are considered by management to make portfolio changes advisable.

Although we expect that many of our investments will be relatively long term in nature, we may make changes in particular portfolio holdings whenever it is considered that an investment no longer has substantial growth potential or has reached its anticipated level of performance, or (especially when cash is not otherwise available) that another investment appears to have a relatively greater opportunity for capital appreciation. We may also make general portfolio changes to increase our cash to position us in a defensive posture. We may make portfolio changes without regard to the length of time we have held an investment, or whether a sale results in profit or loss, or whether a purchase results in the reacquisition of an investment that we may have only recently sold. Our investments in privately held companies are illiquid, which limits portfolio turnover. The portfolio turnover rate may vary greatly during a year as well as from year to year and may also be affected by cash requirements.

COMPETITION

We compete for investments with a number of BDCs and other investment funds (including private equity funds and venture capital funds), reverse merger and special purpose acquisition company (“SPACs”) sponsors, investment bankers that underwrite initial public offerings, hedge funds that invest in PIPEs, traditional financial services companies such as commercial banks, and other sources of financing. Many of these entities have greater financial and managerial resources than we do. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act will impose on us as a BDC. We believe we compete with these entities primarily on the basis of our willingness to make smaller, non-controlling investments, the experience and contacts of our investment professionals within our targeted industries, our responsive and efficient investment analysis and decision-making processes, and the investment terms that we offer. We do not seek to compete primarily on the deal terms we offer to potential portfolio companies. We use the industry information available to FCM to assess investment risks and determine appropriate pricing for our investments in portfolio companies. In addition, we believe that the relationships of Kevin Landis (FCM’s President and Chief Investment Officer), and the other senior investment professionals FCM retains, enable us to learn about, and compete effectively for, financing opportunities with attractive companies in the industries in which we seek to invest. For additional information concerning the competitive risks we face, see “Risk Factors—Risks relating to our business and structure—We operate in a highly competitive market for investment opportunities.”

REGULATION

The Small Business Investment Incentive Act of 1980 added the provisions of the 1940 Act applicable only to BDCs. BDCs are a special type of investment company. After a company files its election to be treated as a BDC, it may not withdraw its election without first obtaining the approval of holders of a majority of its outstanding voting securities. The following is a brief description of the 1940 Act provisions applicable to BDCs, qualified in its entirety by reference to the full text of the 1940 Act and the rules issued thereunder by the Securities and Exchange Commission (“SEC”).

Generally, to be eligible to elect BDC status, a company must primarily engage in the business of furnishing capital and making significant managerial assistance available to companies that do not have ready access to capital through conventional financial channels. Such companies that satisfy certain additional criteria described below are termed “eligible portfolio companies.” In general, in order to qualify as a BDC, a company must: (i) be a domestic company; (ii) have registered a class of its securities pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); (iii) operate for the purpose of investing in the securities of certain types of portfolio companies, including early-stage or emerging companies and businesses suffering or just recovering from financial distress (see following paragraph); (iv) make available significant managerial assistance to such portfolio companies; and (v) file a proper notice of election with the SEC.

An eligible portfolio company generally is a domestic company that is not an investment company or a company excluded from investment company status pursuant to exclusions for certain types of financial companies (such as brokerage firms, banks, insurance companies, and investment banking firms) and that: (i) has a fully diluted market capitalization of less than $250 million and has a class of equity securities listed on a national securities exchange, (ii) does not have a class of securities listed on a national securities exchange, or (iii) is controlled by the BDC by itself or together with others (control under the 1940 Act is presumed to exist where a person owns at least 25 percent of the outstanding voting securities of the portfolio company) and the BDC has a representative on the Board of Directors of such company.

We may be examined periodically by the SEC for compliance with the 1940 Act.

As with other companies regulated by the 1940 Act, a BDC must adhere to certain substantive regulatory requirements. A majority of our directors must be persons who are not “interested persons”, as that term is defined in the 1940 Act. Additionally, we are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect the BDC. Furthermore, as a BDC, we are prohibited from protecting any director or officer against any liability to us or our shareholders arising from willful malfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of such person’s office.

The 1940 Act provides that we may not make an investment in non-qualifying assets unless at the time at least 70 percent of the value of our total assets (measured as of the date of our most recently filed financial statements) consists of qualifying assets. Qualifying assets include: (i) securities of eligible portfolio companies; (ii) securities of certain companies that were eligible portfolio companies at the time we initially acquired their securities and in which we retain a substantial interest; (iii) securities of certain controlled companies; (iv) securities of certain bankrupt, insolvent, or distressed companies; (v) securities received in exchange for or distributed in or with respect to any of the foregoing; and (vi) cash items, U.S. government securities, and high quality short-term debt. The SEC has adopted a rule permitting a BDC to invest its cash in certain money market funds. The 1940 Act also places restrictions on the nature of the transactions in which, and the persons from whom, securities can be purchased in some instances in order for the securities to be considered qualifying assets.

We are permitted by the 1940 Act, under specified conditions, to issue multiple classes of debt and a single class of preferred stock if our asset coverage, as defined in the 1940 Act, is at least 200 percent after the issuance of the debt or the preferred stock (i.e., such senior securities may not be in excess of our net assets). Under specific conditions, we are also permitted by the 1940 Act to issue warrants.

Except under certain conditions, we may sell our securities at a price that is below the prevailing net asset value per share only during the 12-month period after (i) a majority of our directors and our disinterested directors have determined that such sale would be in the best interest of us and our stockholders, and (ii) the holders of a majority of our outstanding

voting securities and the holders of a majority of our voting securities held by persons who are not affiliated persons of ours approve our ability to make such issuances. A majority of the disinterested directors must determine in good faith that the price of the securities being sold is not less than a price that closely approximates the market value of the securities, less any distribution discount or commission.

Certain transactions involving certain closely related persons of the Company, including its directors, officers, and employees, may require the prior approval of the SEC. However, the 1940 Act ordinarily does not restrict transactions between us and our portfolio companies.

TAX STATUS

We are subject to corporate income tax under state and federal law, including under Subchapter C of the Code. This is the same tax status as applies to ordinary operating corporations with publicly traded stock.

INVESTMENT OPPORTUNITY

SVVC invests primarily in equity securities of private technology companies in the United States. We believe that the growth potential exhibited by private technology companies, including cleantech companies, creates an attractive investment environment for SVVC.

The last 20 years has been marked by dramatic changes in the initial public offering (“IPO”) market. Since the dot-com bubble burst in 2000, emerging technology companies have often chosen to stay private longer. The combination of volatile equity markets, increased regulatory requirements (such as the Sarbanes-Oxley Act of 2002), and a lack of investment research coverage has made it less attractive for companies to access the public markets through an IPO. We believe the result is an environment with more opportunities to invest in relatively mature private companies, either directly via primary investments or by purchasing shares in the growing secondary market.

At the same time we believe there are a number of powerful trends creating opportunities for innovative companies and investors alike. The dramatic growth of social networking, cloud computing, and powerful, connected mobile computing devices has enabled new ways of communicating, doing business, and accessing information anytime, anywhere. The Company was established to benefit from convergence of exciting technologies and the growth of private investment opportunities.

COMPETITIVE ADVANTAGES

We believe that we have the following competitive advantages over other capital providers in technology and cleantech companies:

MANAGEMENT EXPERTISE

Kevin Landis, our Chief Executive Officer and Chief Financial Officer, has principal management responsibility for Firsthand Capital Management, Inc. as its owner, President and Chief Investment Officer. Mr. Landis has more than 20 years of experience in technology sector investing, and he intends to dedicate a substantial portion of his time to managing the Company. Mr. Landis controls FCM and is a trustee of Firsthand Funds and a director of the Company.

DISCIPLINED INVESTMENT APPROACH

The Investment Adviser employs a disciplined approach in selecting investments. The Investment Adviser’s investment philosophy focuses on ensuring that our investments have an appropriate return profile relative to risk. When market conditions make it difficult for us to invest according to our criteria, the Investment Adviser intends to be highly selective in deploying our capital. We believe this approach enables us to build an attractive investment portfolio that meets our return and value criteria over the long term.

We believe it is critical to conduct extensive due diligence on investment targets. In evaluating new investments we, through the Investment Adviser, conduct a rigorous due diligence process that draws from the Investment Adviser’s investment experience, industry expertise, and network of contacts.

FOCUSING ON INVESTMENTS THAT CAN GENERATE POSITIVE RISK-ADJUSTED RETURNS

The Investment Adviser seeks to maximize the potential for capital appreciation. In making investment decisions the Investment Adviser seeks to pursue and invest in companies that meet several of the following criteria:

●	outstanding technology,
●	barriers to entry (i.e., patents and other intellectual property rights),
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●	experienced management team,
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●	established financial sponsors that have a history of creating value with portfolio companies,
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●	strong and competitive industry position, and
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●	viable exit strategy.
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Assuming a potential investment meets most or all of our investment criteria, the Investment Adviser intends to be flexible in adopting transaction structures that address the needs of prospective portfolio companies and their owners. Our investment philosophy is focused on internal rates of return over the life of an investment. Given our investment criteria and due diligence process, we structure our investments so they correlate closely with the success of our portfolio companies.

ABILITY TO SOURCE AND EVALUATE TRANSACTIONS THROUGH THE INVESTMENT ADVISER’S RESEARCH CAPABILITY AND ESTABLISHED NETWORK

FCM’s investment management team has overseen investments in dozens of private companies across various industries while employed by FCM and its affiliates since 1994. We believe the expertise of the Investment Adviser’s management team enables FCM to identify, assess, and structure investments successfully across all levels of a company’s capital structure and to manage potential risk and return at all stages of the economic cycle.

We seek to identify potential investments both through active origination and through dialogue with numerous management teams, members of the financial community, and corporate partners with whom Mr. Landis has long-standing relationships. We believe that the team’s broad network of contacts within the investment, commercial banking, private equity and investment management communities in combination with their strong reputation in investment management, enables us to attract well-positioned prospective portfolio companies.

LONGER INVESTMENT HORIZON WITH ATTRACTIVE PUBLICLY TRADED MODEL

Unlike private equity and venture capital funds, we are not subject to standard periodic capital return requirements. Such requirements typically stipulate that funds raised by a private equity or venture capital fund, together with any capital gains on such invested funds, must be returned to investors after a pre-agreed time period. These provisions often force private equity and venture capital funds to seek returns on their investments through mergers, public equity offerings, or other liquidity events more quickly than they otherwise might, potentially resulting in both a lower overall return to investors and an adverse impact on their portfolio companies. While we are required to distribute substantially all realized gains, we believe that with our dividend reinvestment plan and our flexibility to make investments with a long-term view and without the capital return requirements of traditional private investment vehicles provide us with the opportunity to generate returns on invested capital and at the same time enable us to be a better long-term partner for our portfolio companies.

INVESTMENTS

FCM seeks to create a diversified portfolio of equity securities by making initial investments of approximately $1 million to $10 million of capital, on average, in the securities of micro-cap public and private companies.

Our portfolio consists primarily of equity securities of private companies and cash and we expect that our portfolio will continue to consist primarily of, equity positions in private companies and cash. These investments include holdings in several private technology and cleantech companies. Moreover, we may acquire investments in the secondary market and, in analyzing such investments, we will employ the same analytical process as we use for our primary investments. For description of our current investments, see “Portfolio Investments.”

We generally seek to invest in companies from the broad variety of industries in which the Investment Adviser has expertise. The following is a representative list of the industries in which we may elect to invest.

●	Advanced Materials
●	Advertising Technology
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●	Automotive
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●	Biofuels
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●	Cloud Computing
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●	Computer Hardware
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●	Computer Peripherals
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●	Computer Software
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●	Electronic Components
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●	Energy Efficiency
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●	Fuel Cells
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●	Medical Devices
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●	Mobile Computing
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●	Semiconductors
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●	Social Networking
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●	Solar Photovoltaics
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●	Solid-state Lighting
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●	Telecommunications
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●	Water Purification
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●	Wearable Technology
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●	Wind-Generated Electricity
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We may invest in other industries if we are presented with attractive opportunities.

We may on a limited basis purchase or sell options on indexes or securities. We may engage in these transactions to manage risks or otherwise protect the value of the portfolio, and to use these strategies to a limited extent on an opportunistic basis.

INVESTMENT SELECTION

The Investment Adviser seeks to maximize the potential for capital appreciation.

PROSPECTIVE PORTFOLIO COMPANY CHARACTERISTICS

We have identified several criteria that we believe are important in identifying and investing in prospective portfolio companies. These criteria provide general guidelines for our investment decisions; however, we caution you that no single portfolio company (or prospective portfolio company) will meet all of these criteria. Generally, we use our experience and access to market information generated to identify investment candidates and to structure investments quickly and effectively.

Outstanding Technology

Our investment philosophy places a premium on identifying companies that have developed disruptive technologies, that is, technologies with the potential to dramatically alter the economics or performance of a particular type of product or service.

Barriers to Entry

We believe having defensible barriers to entry, in the form of patents or other intellectual property rights, is critically important in technology industries, in which change happens very rapidly. We seek out companies that have secured protection of key technologies through patents, trademarks, or other means.

Experienced management and established financial sponsor relationship

We generally require that our portfolio companies have an experienced management team. We also require the portfolio companies to have in place proper incentives to induce management to succeed and to act in concert with our interests as investors, including having significant equity interests. In addition, we focus our investments in companies backed by strong financial sponsors that have a history of creating value and with whom members of our investment adviser have an established relationship.

Strong and defensible competitive market position in industry

We seek to invest in target companies that have developed leading market positions within their respective markets and are well positioned to capitalize on growth opportunities. We seek companies that demonstrate significant competitive advantages versus their competitors, which should help to protect their market position and profitability.

Viable exit strategy

We seek to invest in companies that we believe will provide a steady stream of cash flow to reinvest in their respective businesses. In addition, we also seek to invest in companies whose business models and expected future cash flows offer attractive exit possibilities. These companies include candidates for strategic acquisition by other industry participants and companies that may repay our investments through an initial public offering of common stock or another capital market transaction. In today’s market environment, we believe that a strategic sale is more likely than an IPO for many of our portfolio companies, although IPOs cannot be ruled out. We believe that an acquisition by a strategic buyer is possible at any time for any of our companies.

DUE DILIGENCE

We believe it is critical to conduct extensive due diligence on investment targets. In evaluating new investments, we, through the Investment Adviser, conduct a rigorous due diligence process that draws from the Investment Adviser’s investment experience, industry expertise, and network of contacts. The Investment Adviser conducts extensive due diligence investigations in their investment activities. In conducting due diligence, the Investment Adviser uses publicly available information as well as information from its relationships with former and current management teams, consultants, competitors, and investment bankers.

Our due diligence typically includes:

●	review of historical and prospective financial information;
●	review of technology, product, and business plan;
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●	on-site visits;
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●	interviews with management, employees, customers, and vendors of the potential portfolio company;
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●	background checks; and
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●	research relating to the company’s management, industry, markets, products and services, and competitors.
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Upon the completion of due diligence, the Investment Adviser’s investment committee determines whether to pursue the potential investment. Additional due diligence with respect to any investment may be conducted on our behalf by attorneys and accountants prior to the closing of the investment, as well as other outside consultants, experts, and/or advisers, as appropriate. To the extent unaffiliated, third-party consultants, experts, and/or advisers are used, we will be responsible for those expenses.

INVESTMENT STRUCTURE

Once we have determined that a prospective portfolio company is suitable for investment, we work with the management of that company and its other capital providers to structure an investment. We negotiate among these parties to agree on how our investment is expected to perform relative to the other capital in the portfolio company’s capital structure.

MANAGERIAL ASSISTANCE

As a BDC, we offer, and must provide upon request, managerial assistance to certain of our portfolio companies. This assistance could involve, among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies, and providing other organizational and financial guidance. We may receive fees for these services. FCM will provide such managerial assistance on our behalf to portfolio companies that request this assistance. For a description of relationships between us and our portfolio companies, please see “Portfolio Companies.”

ONGOING RELATIONSHIPS WITH PORTFOLIO COMPANIES

Monitoring

FCM monitors our portfolio companies on an ongoing basis. Specifically, FCM monitors the financial trends of each portfolio company to determine if they are meeting their respective business plans and to assess the appropriate course of action for each company.

FCM has several methods of evaluating and monitoring the performance and fair value of our investments, which may include the following:

●	Assessment of success in adhering to portfolio company’s technology development, business plan and compliance with covenants;
●	Periodic and regular contact with portfolio company management and, if appropriate, the financial or strategic sponsor, to discuss financial position, requirements, and accomplishments;
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●	Comparisons to other portfolio companies in the industry, if any;
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●	Attendance at and participation in board meetings; and
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●	Review of monthly and quarterly financial statements and financial projections for portfolio companies.
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Valuation Process

The following is a description of the steps we take each quarter to determine the value of our portfolio. Investments for which market quotations are readily available are recorded in our financial statements at such market quotations. With respect to investments for which market quotations are not readily available, our Board of Directors undertakes a multi-step valuation process each quarter, as described below under “Determination of Net Asset Value.” Currently, our Board of Directors solicits valuation recommendations from a third-party valuation firm on a quarterly basis.

We expect that all of our portfolio investments will be recorded at fair value as determined under the valuation process discussed above. As a result, there will be uncertainty with respect to the value of our portfolio investments.

INVESTMENT MANAGEMENT AGREEMENT

MANAGEMENT SERVICES

FCM has entered into an Investment Management Agreement (the “Investment Management Agreement”) with us whereby FCM provides investment management services. Subject to the overall supervision of our Board of Directors, the Investment Adviser manages the day-to-day operations of, provides investment management services to, and serves as portfolio manager for us. Mr. Landis, FCM’s President and Chief Investment Officer, has been primarily responsible for our portfolio management since our inception. Under the terms of the Investment Management Agreement, FCM will:

●	determine the composition of our portfolio, the nature and timing of the changes to our portfolio, and the manner of implementing such changes;
●	identify, evaluate and negotiate the structure of the investments we make (including performing due diligence on our prospective portfolio companies); and
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●	close and monitor the investments we make.
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FCM’s services under the Investment Management Agreement are not exclusive, and it is free to furnish similar services to other entities so long as its services to us are not impaired. FCM currently serves as investment manager to Firsthand Funds, a family of open-end mutual funds.

INVESTMENT MANAGEMENT FEE

Pursuant to the Investment Management Agreement, we pay FCM a fee for investment management services consisting of two components—a base management fee and an incentive fee.

The base management fee will be calculated at an annual rate of 2.00% of our gross assets. For services rendered under the Investment Management Agreement, the base management fee will be payable quarterly in arrears. The base management fee will be calculated based on the average of (1) the value of our gross assets at the end of the current calendar quarter and (2) the value of our gross assets at the end of the preceding calendar quarter; and appropriately adjusted for any share issuances or repurchases during the current calendar quarter. Base management fees for any partial month or quarter will be pro-rated. The incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Management Agreement, as of the termination date), and equals 20% of our realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fees.

Mathematically, the formula for computing the annual incentive fee can be written as:

For the purposes of calculating realized capital gains, the cost basis of each security acquired in the Reorganization shall be equal to the greater of the original purchase price of that security by Firsthand Funds or the fair market value of the security at the time of the Reorganization.

EXAMPLE INCENTIVE FEE CALCULATION

EXAMPLE: INCENTIVE FEE ON CAPITAL GAINS:

Assumptions

Year 1 = no net realized capital gains or losses
Year 2 = $50,000 realized capital gains and $20,000 realized capital losses and unrealized capital depreciation. Capital gain incentive fee = 20% x (realized capital gains for year computed net of all realized capital losses and unrealized capital depreciation at year end)

Calculation of Incentive Fee

Year 1 incentive fee	= 20% x (0)<br><br>= 0 (no incentive fee)
Year 2 incentive fee	= 20% x ($50,000 - $20,000) - 0<br><br>= 20% x $30,000<br><br>= $6,000

AVAILABLE INFORMATION

Additional information about us, including quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, are available free of charge on our website at www.firsthandtvf.com. Information on our website is not part of this Annual Report on Form 10-K.

EMPLOYEES

We do not currently have any direct employees. Mr. Landis, our Chief Executive Officer, is the majority owner and Chief Investment Officer of the Investment Adviser. The Investment Adviser currently employs a staff of 12, including investment, legal, and administrative professionals.

Item 1A. Risk Factors

Investing in the Company involves a number of significant risks relating to our business and investment objective. As a result, there can be no assurance that we will achieve our investment objective.

RISKS RELATING TO OUR BUSINESS AND STRUCTURE

WE HAVE A LIMITED OPERATING HISTORY.

We were incorporated in April 2010 and commenced operations on April 15, 2011. We are subject to all of the business risks and uncertainties associated with any business, including the risk that we will not achieve our investment objective and that the value of your investment could decline substantially. The net assets of SVVC, as of December 31, 2019, were approximately $127.1 million.

WE ARE DEPENDENT UPON FCM’S KEY PERSONNEL FOR OUR FUTURE SUCCESS.

If the Investment Adviser is unable to hire and retain qualified personnel, or if it loses any key member of its management team, our ability to achieve our investment objective could be significantly impaired.

We depend on the diligence, skill, and access to the network of business contacts of the management of FCM, including Mr. Landis, the owner, President and Chief Executive Officer of FCM. We also depend, to a significant extent, on FCM’s access to the investment information and deal flow generated by Mr. Landis and any other investment professionals of FCM. Mr. Landis and other management personnel of FCM evaluate, negotiate, structure, close, and monitor our investments. Our future success depends on the continued service of Mr. Landis and other management personnel of FCM. The resignation of FCM, or the departure of Mr. Landis or any other key managers hired by FCM could have a material adverse effect on our ability to achieve our investment objective. In addition, we can offer no assurance that FCM will remain the Investment Adviser.

THE INVESTMENT ADVISER AND ITS MANAGEMENT HAS LIMITED EXPERIENCE MANAGING A BDC.

The 1940 Act imposes numerous constraints on the operations of BDC. For example, BDC are required to invest at least 70% of their total assets primarily in securities of private or micro-cap U.S. public companies, cash, cash equivalents, U.S. government securities, and other high quality debt investments that mature in one year or less. These constraints

may hinder the Investment Adviser’s ability to take advantage of attractive investment opportunities and to achieve our investment objective. Under the 1940 Act, our ability to own publicly-traded securities with market capitalizations in excess of $250 million is limited. While Mr. Landis has more than 20 years of experience managing technology stock mutual funds investments and more than 15 years of experience managing private equity investments, Mr. Landis and FCM have only managed a BDC since April 2011, when they began managing SVVC. The investment philosophy and techniques used by Mr. Landis and FCM may differ from those of other funds. Accordingly, we can offer no assurance that SVVC will replicate the historical performance of other investment companies with which Mr. Landis has been affiliated, and we caution you that our investment returns could be substantially lower than the returns achieved by such other companies.

THE INVESTMENT ADVISER AND ITS MANAGEMENT MANAGE OTHER FUNDS.

In addition to managing SVVC, FCM is also the investment adviser to two open-end mutual funds in the Firsthand Funds family: Firsthand Technology Opportunities Fund and Firsthand Alternative Energy Fund. Mr. Landis, who has primary responsibility for SVVC, also serves as portfolio manager of Firsthand Alternative Energy Fund and Firsthand Technology Opportunities Fund. This may reduce the time FCM and its investment management team have to devote to the affairs of SVVC. The other funds managed by FCM have stated investment objectives which differ from our own. Accordingly, there may be times when the interests of FCM’s management team differ from our interests.

THE INVESTMENT ADVISER MAY NOT BE ABLE TO ACHIEVE THE SAME OR SIMILAR RETURNS TO THOSE ACHIEVED BY ITS INVESTMENT PROFESSIONALS WHILE THEY WERE EMPLOYED AT PRIOR JOBS.

Although Mr. Landis has been a portfolio manager of a number of open-end mutual funds in the Firsthand Funds family, Mr. Landis’s track record and achievements are not necessarily indicative of future results that will be achieved by FCM on our behalf. FCM and its investment professionals’ skills and expertise may not be as well suited to our objectives, strategies and requirements as they are for certain other funds. FCM and many of its investment professionals are relatively inexperienced in managing closed end funds and our investment objectives, policies and regulatory limitations differ substantially from the other funds FCM and its investment professionals have managed. Similarly, while the research and operational professionals that support Mr. Landis in his management of Firsthand Funds are substantially the same individuals that will be supporting us, there is no assurance that they will be able to provide the same level of services to us as they did (or currently do) for Firsthand Funds.

OUR FINANCIAL CONDITION AND RESULTS OF OPERATION WILL DEPEND ON OUR ABILITY TO MANAGE FUTURE GROWTH EFFECTIVELY.

Our ability to achieve our investment objective will depend on our ability to grow, which will depend, in turn, on FCM’s ability to identify, invest in, and monitor companies that meet our investment criteria.

Accomplishing this result on a cost-effective basis will be largely a function of FCM’s structuring of the investment process, its ability to provide competent, attentive, and efficient services to us and our access to financing on acceptable terms. The management team of FCM will have substantial responsibilities under the Investment Management Agreement. In addition, the employees of FCM may also be called upon to provide managerial assistance to our portfolio companies as the principals of our administrator. Such demands on their time may distract them or slow our rate of investment. Any failure to manage our future growth effectively could have a material adverse effect on our business, financial condition, and results of operations.

WE OPERATE IN A HIGHLY COMPETITIVE MARKET FOR INVESTMENT OPPORTUNITIES.

A number of entities will compete with us to make the types of investments that we plan to make. We will compete with other venture capital firms and venture capital funds, various public and private investment funds, including hedge funds, other BDCs, commercial and investment banks, commercial financing companies, and various technology and alternative energy companies’ internal venture capital arms. Many of our potential competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a stronger network of contacts and better connections for deal flows or have access to funding sources that are not available to us. In addition, some of our competitors have higher risk tolerances or different risk assessments, which could

allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act will impose on us as a BDC. We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations. Also, as a result of this competition, we may not be able to take advantage of attractive investment opportunities from time to time, and we can offer no assurance that we will be able to identify and make investments that are consistent with our investment objective.

REGULATIONS GOVERNING OUR OPERATION AS A BUSINESS DEVELOPMENT COMPANY WILL AFFECT OUR ABILITY TO, AND THE WAY IN WHICH WE, RAISE ADDITIONAL CAPITAL.

We are not generally able to issue and sell our common stock at a price below net asset value per share. We may, however, sell our common stock at a price below the current net asset value of the common stock, or sell warrants, options, or rights to acquire such common stock, at a price below the current net asset value of the common stock if our Board of Directors determines that such sale is in the best interests SVVC, and our stockholders approve SVVC’s policy and practice of making such sales. Our stockholders have not approved a policy or practice of selling our common stock below our net asset value per share. However, our Board of Directors may ask our stockholders to vote on such a policy and practice at upcoming stockholders meetings. In any such case, the price at which our securities are to be issued and sold may not be less than a price which, in the determination of our Board of Directors, closely approximates the market value of such securities (less any distributing commission or discount).

ANY FAILURE ON OUR PART TO MAINTAIN OUR STATUS AS A BUSINESS DEVELOPMENT COMPANY WOULD REDUCE OUR OPERATING FLEXIBILITY.

If we do not remain a BDC, we might be regulated as a closed-end investment company under the 1940 Act, which would subject us to substantially more regulatory restrictions under the 1940 Act and correspondingly decrease our operating flexibility and increase our cost of doing business. Furthermore, any failure to comply with the requirements imposed on BDCs by the 1940 Act could cause the SEC to bring an enforcement action against us or expose us to claims of private litigants.

IF WE DO NOT INVEST A SUFFICIENT PORTION OF OUR ASSETS IN QUALIFYING ASSETS, WE COULD FAIL TO QUALIFY AS A BUSINESS DEVELOPMENT COMPANY OR BE PRECLUDED FROM INVESTING ACCORDING TO OUR CURRENT BUSINESS STRATEGY.

As a BDC, we may not acquire any assets other than “qualifying assets” unless, at the time of and after giving effect to such acquisition, at least 70% of our total assets are qualifying assets. See “Regulation” above.

We may be precluded from investing in what we believe are attractive investments if such investments are not qualifying assets for purposes of the 1940 Act. If we do not invest a sufficient portion of our assets in qualifying assets, we could lose our status as a BDC, which would have a material adverse effect on our business, financial condition, and results of operations. Similarly, these rules could prevent us from making follow-on investments in existing portfolio companies (which could result in the dilution of our position) or could require us to dispose of investments at inappropriate times in order to comply with the 1940 Act. If we need to dispose of such investments quickly, it would be difficult to dispose of such investments on favorable terms. For example, we may have difficulty in finding a buyer and, even if we do find a buyer, we may have to sell the investments at a substantial loss.

WE ARE A NON-DIVERSIFIED INVESTMENT COMPANY WITHIN THE MEANING OF THE 1940 ACT, AND THEREFORE WE ARE NOT LIMITED WITH RESPECT TO THE PROPORTION OF OUR ASSETS THAT MAY BE INVESTED IN SECURITIES OF A SINGLE ISSUER.

We are classified as a non-diversified investment company within the meaning of the 1940 Act, which means that we are not limited by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer. To the extent that we assume large positions in the securities of a small number of issuers, our net asset value may fluctuate to a greater extent than that of a diversified investment company as a result of changes in the financial condition or the market’s assessment of the issuer. We may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company. Beyond our income tax diversification requirements, we do not have fixed guidelines for diversification, and our investments could be concentrated in relatively few portfolio companies.

WE WILL NEED TO RAISE ADDITIONAL CAPITAL TO GROW.

We will need additional capital to fund growth in our investments once we have fully invested the cash (and other liquid assets, if any) received, we may issue equity securities in order to obtain this additional capital. A reduction in the availability of new capital could limit our ability to grow or pursue business opportunities. During the years that we have elected and maintained our status as a RIC, we will be required to distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, to our stockholders to maintain our RIC status. As a result, if stockholders opt out of reinvesting those distributions back into SVVC, these earnings will not be available to fund new investments. If we fail to obtain additional capital to fund our investments, this could limit our ability to grow, which may have an adverse effect on the value of our securities.

MANY OF OUR PORTFOLIO INVESTMENTS WILL BE RECORDED AT FAIR VALUE AS DETERMINED IN GOOD FAITH BY OUR BOARD OF DIRECTORS. AS A RESULT, THERE WILL BE UNCERTAINTY AS TO THE VALUE OF OUR PORTFOLIO INVESTMENTS.

A large percentage of our portfolio investments will be in the form of securities that are not publicly traded. The fair value of securities and other investments that are not publicly traded may not be readily determinable. We will value these securities quarterly at fair value according to our written valuation procedures and as determined in good faith by our Board of Directors. Our Board of Directors may use the services of a nationally recognized independent valuation firm to aid it in determining the fair value of these securities. The methods for valuing these securities may include: fundamental analysis (sales, income, or earnings multiples, etc.), discounts from market prices of similar securities, purchase price of securities, subsequent private transactions in the security or related securities, or discounts applied to the nature and duration of restrictions on the disposition of the securities, as well as a combination of these and other factors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, may fluctuate over short periods of time, and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. Our net asset value could be adversely affected if our determinations regarding the fair value of our investments were materially higher than the values that we ultimately realize upon the disposal of such securities.

THE LACK OF LIQUIDITY IN OUR INVESTMENTS MAY ADVERSELY AFFECT OUR BUSINESS.

We primarily make investments in private companies. Substantially all of these securities will be subject to legal and other restrictions on resale or will otherwise be less liquid than publicly traded securities. The illiquidity of our investments may make it difficult for us to sell such investments if the need arises. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we have previously recorded our investments. In addition, we may face other restrictions on our ability to liquidate an investment in a portfolio company to the extent that we have material non-public information regarding such portfolio company.

WE MAY EXPERIENCE FLUCTUATIONS IN OUR QUARTERLY RESULTS.

We could experience fluctuations in our quarterly operating results due to a number of factors, including the performance of the portfolio securities we hold; the level of our expenses; variations in, and the timing of the recognition of, realized and unrealized gains or losses; the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.

THERE ARE SIGNIFICANT POTENTIAL CONFLICTS OF INTEREST THAT COULD IMPACT OUR INVESTMENT RETURNS.

Our executive officers and directors may serve as officers, directors or principals of entities that operate in the same or a related line of business as we do or of investment funds managed by affiliates of FCM that may be formed in the future. Accordingly, if this occurs, they may have obligations to investors in those entities, the fulfillment of which might not be in the best interests of us or our stockholders.

In the course of our investing activities, we will pay investment management and incentive fees to FCM, and will reimburse FCM for certain expenses it incurs. As a result, investors in our common stock will invest on a “gross” basis and receive distributions on a “net” basis after expenses, resulting in a lower rate of return than an investor might achieve through direct investments. Accordingly, there may be times when the management team of FCM has interests that differ from those of our stockholders, giving rise to a conflict.

Several members of our Board of Directors are also trustees of the Board of Trustees of Firsthand Funds. Of the five directors of the Company, Messrs. Landis, Burglin, and Lee all serve as both directors for the Company and trustees for Firsthand Funds. Messrs. Petredis and Yee are the only directors of the Company who are not also trustees of Firsthand Funds. We believe such a commonality of the board brings continuity of oversight and allows our Board to maintain the institutional knowledge and experience of overseeing illiquid securities and their pricing methods.

OUR INCENTIVE FEE MAY INDUCE FCM TO MAKE SPECULATIVE INVESTMENTS AND THESE FEES WILL, IN EFFECT, BE BORNE BY OUR COMMON STOCKHOLDERS.

The incentive fee payable by us to FCM may create an incentive for FCM to make investments on our behalf that are risky or more speculative than would be the case in the absence of such compensation arrangement. The incentive fee payable to the Investment Adviser is calculated based on a percentage of our return on invested capital. This may encourage the Investment Adviser to invest in higher risk investments in the hope of securing higher returns.

We may invest, to the extent permitted by law, in the securities and instruments of other investment companies, including private funds, as well as other special purpose vehicles set up by third parties for investment in a particular private company. To the extent we so invest, we will bear our ratable share of any such investment company’s expenses, including management and incentive fees. We will also remain obligated to pay investment advisory fees, consisting of a base management fee and incentive fees, to FCM with respect to the assets invested in the securities and instruments of other investment companies under the Investment Management Agreement. With respect to any such investments, each of our stockholders will bear his or her share of the investment advisory fees of FCM as well as indirectly bearing the investment advisory fees and other expenses of any investment companies in which we invest.

CHANGES IN LAWS OR REGULATIONS GOVERNING OUR OPERATIONS MAY ADVERSELY AFFECT OUR BUSINESS.

We and our portfolio companies will be subject to regulation by laws at the local, state, and federal levels. These laws and regulations, as well as their interpretation, may be changed from time to time. Accordingly, any change in these laws or regulations could materially and adversely affect our business.

PROVISIONS OF THE MARYLAND GENERAL CORPORATION LAW AND OF OUR CHARTER AND BYLAWS COULD DETER TAKEOVER ATTEMPTS AND HAVE AN ADVERSE IMPACT ON THE PRICE OF OUR COMMON STOCK.

The Maryland General Corporation Law, our charter, and our bylaws contain provisions that may discourage, delay or make more difficult a change in control of the Company or the removal of the Company’s directors. We are subject to the Maryland Business Combination Act, the application of which is subject to any requirements of the 1940 Act. Our Board of Directors has adopted a resolution exempting from the Maryland Business Combination Act any business combination between us and any other person, subject to prior approval of such business combination by our Board, including approval by a majority of our disinterested directors. If the resolution exempting business combinations is repealed or our Board does not approve a business combination, the Maryland Business Combination Act may discourage third parties from trying to acquire control of us and increase the difficulty of consummating such an offer. Our bylaws exempt from the Maryland Control Share Acquisition Act acquisitions of our common stock by any person. If we amend our bylaws to repeal the exemption from the Maryland Control Share Acquisition Act, the Maryland Control Share Acquisition Act also may make it more difficult for a third party to obtain control of us and increase the difficulty of consummating such an offer.

We have also adopted other measures that may make it difficult for a third party to obtain control of us, including provisions of our charter classifying our Board of Directors in three classes serving staggered three-year terms and until their successors are duly elected and qualify, and provisions of our charter authorizing our Board of Directors (all without

stockholder approval) to classify or reclassify shares of our stock in one or more classes or series, to cause the issuance of additional shares of our stock, and to amend our charter to increase or decrease the number of shares of stock that we have authority to issue. These provisions, as well as other provisions of our charter and bylaws, may delay, defer, or prevent a transaction or a change in control that might otherwise be in the best interests of our stockholders.

OUR BOARD OF DIRECTORS MAY CHANGE OUR INVESTMENT OBJECTIVE, OPERATING POLICIES, AND STRATEGIES WITHOUT PRIOR NOTICE OR STOCKHOLDER APPROVAL.

Our Board of Directors has the authority to modify or waive certain of our operating policies and strategies without prior notice and without stockholder approval (except as required by the 1940 Act). However, absent stockholder approval, we may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC. We cannot predict the effect any changes to our current operating policies and strategies would have on our business, operating results, and value of our stock. Nevertheless, the effects may adversely affect our business and impact our ability to make distributions.

RISKS RELATED TO OUR INVESTMENTS

OUR INVESTMENTS IN PROSPECTIVE PORTFOLIO COMPANIES MAY BE RISKY, AND YOU COULD LOSE ALL OR PART OF YOUR INVESTMENT.

Equity Investments. We make equity investments primarily in equity securities and equity derivatives (such as options, warrants, rights, etc.) of privately placed venture capital stage technology and alternative energy companies as well as publicly traded micro-cap companies (those with market capitalizations of less than $250 million). Our goal is ultimately to dispose of these equity interests and realize gains upon our disposition of such interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value or lose all value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience.

In addition, investing in privately placed technology and clean tech companies involves a number of significant risks, including that private companies generally have limited operating history and are not as well capitalized as public companies. In addition, private company valuations may fluctuate more dramatically than those of public companies and they frequently have less diverse product lines and smaller market presence than larger competitors. These factors could adversely affect our investment returns as compared to companies investing primarily in the securities of public companies.

WE MAY INVEST IN MICRO-CAP PUBLIC COMPANIES AND COMPANIES WE MAY HOPE WILL HAVE SUCCESSFUL INITIAL PUBLIC OFFERINGS.

Although micro-cap companies may have potential for rapid growth, they are subject to wider price fluctuations due to factors inherent in their size, such as lack of management experience and financial resources and limited trade volume and frequency. To make a large sale of securities of micro-cap companies that trade in limited volumes, SVVC may need to sell portfolio holdings at a discount or make a series of small sales over an extended period of time.

We have invested in, and we expect to continue to invest in, companies that we believe are likely to issue securities in initial public offerings (“IPOs”). Although there is a potential the pre-IPO securities that we buy may increase in value if the company does issue securities in an IPO, IPOs are risky and volatile and may cause the value of our securities to fall dramatically. Also, because securities of pre-IPO companies are generally not freely or publicly tradeable, we may not have access to purchase securities in these companies in the amounts or at the prices we desire. Securities issued by these privately-held companies have no trading history, and information about such companies may be available for very limited periods. The companies that we anticipate holding successful IPOs may not ever issues shares in an IPO and a liquid market for their securities may never develop, which may negatively affect the price at which we can sell any such securities and make it more difficult to sell such securities, which could also adversely affect our liquidity.

WE EXPECT TO PURCHASE SECURITIES IN IPOS, WHICH INVOLVE SIGNIFICANT RISKS FOR US, AND WE MAY NOT BE ABLE TO PARTICIPATE IN OFFERINGS TO THE EXTENT DESIRED OR AT ALL.

Securities purchased in IPOs are often subject to the general risk associated with investments in companies with smaller market capitalizations, and typically to a heightened degree. Securities issued in IPOs have no trading history, and information about companies may be available for very limited periods. In addition, under certain market conditions, a relatively small number of companies may issue securities in IPOs. Our investment performance during periods when we are unable to invest significantly or at all in IPOs may be lower than during periods when we are able to do so.

IPO securities may be volatile, and we cannot predict whether investments in IPOs will be successful. If the Company grows in size, the possible positive effects of IPO investments on the Company may decrease.

WE HAVE NOT YET IDENTIFIED ALL OF THE PORTFOLIO COMPANY INVESTMENTS WE INTEND TO ACQUIRE.

The Investment Adviser will select our investments, and our stockholders will have no input with respect to such investment decisions. These factors increase the uncertainty, and thus the risk, of investing in our shares.

ECONOMIC RECESSIONS OR DOWNTURNS COULD IMPAIR OUR PORTFOLIO COMPANIES AND HARM OUR OPERATING RESULTS.

Many of our portfolio companies are susceptible to economic slowdowns or recessions and may fail or require additional capital investments from us during those periods. Therefore, our non-performing assets are likely to increase and the value of our portfolio is likely to decrease during these periods. These events could harm our operating results.

OUR FAILURE TO MAKE FOLLOW-ON INVESTMENTS IN OUR PORTFOLIO COMPANIES COULD IMPAIR THE VALUE OF OUR PORTFOLIO.

Following an initial investment in a portfolio company, we may make additional investments in that portfolio company as “follow-on” investments, in order to:

●	increase or maintain in whole or in part our equity ownership percentage; or
●	exercise warrants, options, or convertible securities that were acquired in the original or subsequent financing.
---	---

We have the discretion to make any follow-on investments, subject to the availability of capital resources and the availability of securities in the applicable public company. We may elect not to make follow-on investments in a portfolio company and we may lack sufficient funds to make those investments. The failure to make follow-on investments may, in some circumstances, jeopardize the continued viability of a portfolio company and our initial investment, or may result in a missed opportunity for us to increase our participation in a successful operation. Even if we have sufficient capital to make a desired follow-on investment, we may elect not to make a follow-on investment because we may not want to increase our concentration of risk, because we prefer other opportunities, or because we are inhibited by compliance with BDC requirements or the desire to maintain our tax status.

WE SOMETIMES DO NOT HOLD CONTROLLING EQUITY INTERESTS IN OUR PORTFOLIO COMPANIES AND WE MAY NOT BE IN A POSITION TO EXERCISE CONTROL OVER OUR PORTFOLIO COMPANIES OR TO PREVENT DECISIONS BY MANAGEMENT OF OUR PORTFOLIO COMPANIES THAT COULD DECREASE THE VALUE OF OUR INVESTMENTS.

Although we have held control and will continue to do so for some instruments, we do not anticipate always taking controlling equity positions in our portfolio companies. As a result, we will be subject to the risk that a portfolio company may make business decisions with which we disagree, and the stockholders and management of a portfolio company may take risks or otherwise act in ways that are adverse to our interests. Due to the lack of liquidity for the equity investments that we will typically hold in our portfolio companies, we may not be able to dispose of our investments in the event we disagree with the actions of a portfolio company, and may therefore suffer a decrease in the value of our investments.

AN INVESTMENT STRATEGY FOCUSED PRIMARILY ON PRIVATELY HELD COMPANIES PRESENTS CERTAIN CHALLENGES, INCLUDING THE LACK OF AVAILABLE INFORMATION ABOUT THESE COMPANIES, A DEPENDENCE ON THE TALENTS AND EFFORTS OF ONLY A FEW KEY PORTFOLIO COMPANY PERSONNEL, AND A GREATER VULNERABILITY TO ECONOMIC DOWNTURNS.

We invest primarily in privately held companies. Generally, little public information exists about these companies, and we will be required to rely on the ability of FCM’s investment professionals to obtain adequate information to evaluate the potential returns from investing in these companies. If we are unable to uncover all material information about these companies, we may not make a fully informed investment decision, and we may lose money on our investments. Also, privately held companies frequently have less diverse product lines and a smaller market presence than larger competitors. These factors could adversely affect our investment returns as compared to companies investing primarily in the securities of public companies.

OUR PORTFOLIO COMPANIES MAY ISSUE ADDITIONAL SECURITIES OR INCUR DEBT THAT RANKS EQUAL OR SENIOR TO OUR INVESTMENTS IN SUCH COMPANIES.

We also invest primarily in equity securities issued by our portfolio companies. The portfolio companies may be permitted to issue additional securities or incur other debt that ranks equally with, or senior to, the equity securities in which we invest. By their terms, such other securities (especially if they are debt securities) may provide that the holders are entitled to receive payment of interest or principal before we are entitled to receive any distribution from the portfolio companies. Also, in the event of insolvency, liquidation, dissolution, reorganization, or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our equity investment in that portfolio company would typically be entitled to receive payment in full before equity investors like us may receive any distribution in respect of our investment. After repaying such senior creditors, the portfolio company may not have any remaining assets to distribute to us.

WE MAY PURCHASE OR SELL OPTIONS ON SECURITIES AND INDEXES, WHICH MAY EXPOSE US, AND YOUR INVESTMENT IN OUR COMMON STOCK, TO CERTAIN RISKS.

We may on a limited basis purchase or sell options on indexes or securities. The use of options has risks and our ability to successfully use these techniques depends on our ability to predict pertinent market movements, which cannot be assured. The use of options may result in losses greater than if they had not been used, may require us to sell or purchase portfolio securities at inopportune times or for prices other than current market values, may limit the amount of appreciation we can realize on an investment or may cause us to hold a security we might otherwise sell.

OUR INVESTMENTS IN FOREIGN SECURITIES MAY INVOLVE SIGNIFICANT RISKS IN ADDITION TO THE RISKS INHERENT IN U.S. INVESTMENTS.

Our investment strategy involves potential investments in equity securities of foreign companies. Investing in foreign companies may expose us to additional risks not typically associated with investing in U.S. companies. These risks include changes in exchange control regulations; political and social instability; expropriation; imposition of foreign taxes; less liquid markets and less available information than is generally the case in the United States; higher transaction costs; less government supervision of exchanges, brokers and issuers; less developed bankruptcy laws; difficulty in enforcing contractual obligations; lack of uniform accounting and auditing standards; and greater price volatility.

Although most of our investments will be U.S. dollar-denominated, any investments denominated in a foreign currency will be subject to the risk that the value of a particular currency will change in relation to one or more other currencies. Among the factors that may affect currency values are trade balances, the level of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation, and political developments. We may employ hedging techniques to minimize these risks, but we can offer no assurance that we will, in fact, hedge currency risk, or, if we do, that such strategies will be effective.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Under the terms of the Investment Management Agreement, Firsthand Capital Management, Inc. is responsible for providing office space to the Company and for the costs associated with providing such space. Our offices are located at 150 Almaden Blvd., Suite 1250, San Jose, CA 95113.

Item 3. Legal Proceedings

We are not currently subject to any material pending legal proceedings.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

MARKET INFORMATION

Our common stock is traded on the Nasdaq Global Market under the symbol “SVVC.” The following table sets forth the range of the high and low closing sales prices of the Company’s shares during each quarter during the last fiscal year, as reported by Nasdaq Global Market. The quarterly stock prices quoted represent interdealer quotations and do not include markups, markdowns, or commissions.

2019 Quarter Ending	Low	High
March 31	11.25	14.93
June 30	9.31	13.18
September 30	7.38	9.31
December 31	5.52	7.65

All values are in US Dollars.

SHAREHOLDERS

As of February 28, 2019, there were approximately 1,300 shareholders of record and approximately 11,500 beneficial owners of the Company’s common stock.

DIVIDENDS

There were no distributions in 2019.

RECENT SALES OF UNREGISTERED SECURITIES

The Company did not issue any unregistered securities during the year ended December 31, 2019.

PERFORMANCE GRAPH

The graph and table below compares the cumulative total return of holders of our common stock with the cumulative total returns of the S&P 500 Index and the NASDAQ Composite Index. The comparison assumes that the value of the investment in our common stock and in the index (including reinvestment of dividends) was $10,000 on April 18, 2011 (our inception date), and tracks it through December 31, 2019.

We, however, do not believe either the S&P 500 Index or the NASDAQ Composite Index to be appropriate comparable indices of the Company’s benchmark results. The Company is a publicly traded venture capital fund that invests primarily in private and micro cap technology companies. The S&P 500 Index and the NASDAQ Composite Index are both indices of publicly traded large capitalization companies, with performance predominantly driven by the largest companies in the index. Nevertheless, we do not believe there is currently a widely accessible and generally accepted index that tracks publicly traded venture capital funds. When compared to the S&P 500 Index and the NASDAQ Composite Index, we have underperformed those broad market indices because equity securities of the private companies in our portfolio have not appreciated substantially during the recent bull market for publicly traded stocks.

STOCK TRANSFER AGENT

BNY Mellon Shareowner Services, 301 Bellevue Parkway, Wilmington, Delaware 19809 (1.800.331.1710) serves as our transfer agent.

Item 6. Selected Financial Data

The information below was derived from the audited Consolidated Financial Statements included in this report. This information should be read in conjunction with those Consolidated Financial Statements and Supplementary Data and the notes thereto. These historical results are not necessarily indicative of the results to be expected in the future.

Firsthand Technology Value Fund, Inc.

Consolidated Statements of Assets and Liabilities

	AS OF<br>DECEMBER 31, 2019		AS OF<br>DECEMBER 31, 2018
ASSETS
Investment securities:
Unaffiliated investments at acquisition cost	11,722,468	*	3,961,467	*
Affiliated investments at acquisition cost	4,744,427		31,002,275
Controlled investments at acquisition cost	127,774,164		132,313,596
Total acquisition cost	144,241,059		167,277,338
Unaffiliated investments at market value	7,364,183	*	5,696,042	*
Affiliated investments at market value	5,715,273		34,045,111
Controlled investments at market value	107,475,131		170,112,417
Total market value ** (Note 6)	120,554,587		209,853,570
Receivable for securities sold	—		1,005
Receivable from dividends and interest	2,507,714		2,308,366
Deferred tax benefit	7,842,583		—
Other assets	21,800		18,713
Total Assets	130,926,684		212,181,654
LIABILITIES
Payable for securities purchased	—		365,783
Incentive fees payable (Note 4)	—		9,261,847
Payable to affiliates (Note 4)	3,461,822		2,334,727
Deferred tax liability	—		8,432,559
Consulting fee payable	16,500		19,500
Accrued expenses and other payables	358,971		149,279
Total Liabilities	3,837,293		20,563,695
NET ASSETS	127,089,391		191,617,959
Net Assets consist of:
Common Stock, par value $0.001 per share 100,000,000 shares authorized	7,179		7,179
Paid-in-capital	178,770,434		178,770,434
Total distributable earnings (loss)	(51,688,222	)	12,840,346
NET ASSETS	127,089,391		191,617,959
Shares of Common Stock outstanding	7,302,146		7,302,146
Shares of Treasury Stock outstanding	(123,376	)	(123,376	)
Total Shares of Common Stock outstanding	7,178,770		7,178,770
Net asset value per share (Note 2)	17.70		26.69

All values are in US Dollars.

*	Includes Fidelity Investment Money Market Treasury Portfolio - Class I, which invests primarily in U.S. Treasury securities. The yields as of 12/31/19 and 12/31/18 were 1.50% and 2.24%, respectively. Please see https://fundresearch.fidelity.com/mutual-funds/summary/316175504 for additional information.
**	Includes warrants whose primary risk exposure is equity contracts.
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See accompanying notes to financial statements

Firsthand Technology Value Fund, Inc.

Consolidated Statements of Operations

	FOR THE YEAR ENDED<br>DECEMBER 31, 2019		FOR THE YEAR ENDED<br>DECEMBER 31, 2018		FOR THE YEAR ENDED<br>DECEMBER 31, 2017
INVESTMENT INCOME
Unaffiliated interest	72,502		6,228		1,522
Affiliated/controlled interest	1,717,149		3,440,610		1,540,089
Affiliated/Controlled loan origination income	—		21,000		24,180
TOTAL INVESTMENT INCOME	1,789,651		3,467,838		1,565,791
EXPENSES
Investment advisory fees (Note 4)	3,405,735		4,128,311		2,975,982
Administration fees	141,714		207,292		187,846
Custody fees	15,070		32,123		22,152
Transfer agent fees	33,353		35,176		33,017
Registration and filing fees	30,700		30,600		23,100
Professional fees	432,337		375,496		535,293
Printing fees	172,820		62,376		195,892
Trustees fees	200,000		200,000		137,500
Compliance fees	118,780		114,648		107,640
Miscellaneous fees	53,513		87,830		174,670
TOTAL GROSS EXPENSES	4,604,022		5,273,852		4,393,092
Incentive fee adjustments (Note 4)	(9,261,847	)	7,570,807		1,691,040
TOTAL NET EXPENSES	(4,657,825	)	12,844,659		6,084,132
NET INVESTMENT INCOME (LOSS), BEFORE TAXES	6,447,476		(9,376,821	)	(4,518,341	)
Deferred tax benefit	(538,914	)	538,915		—
Net investment income (loss), net of deferred taxes	5,908,562		(8,837,906	)	(4,518,341	)
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gains (losses) from security transactions on:
Affiliated/Controlled	(24,091,097	)	(10,658,458	)	5,058,105
Non-affiliated/controlled and other assets	3,004,025		5,432,378		(1,516,161	)
Written options (1)	98,590		231,422		—
Deferred tax benefit/expenses	4,623,742		1,192,325		—
Net realized gains (losses), net of deferred taxes	(16,364,740	)	(3,802,333	)	3,541,944
Net change in unrealized appreciation (depreciation) on:
Non-affiliated investments	(6,092,860	)	(5,442,441	)	19,408,570
Affiliated/controlled investments and foreign currency	(52,627,051	)	47,667,121		1,138,114
Affiliated/controlled warrants investments (1)	(7,542,793	)	451,886		6,609,282
Deferred tax benefit/expenses	12,190,314		(10,163,798	)	—
Net change in unrealized appreciation (depreciation), net of deferred taxes	(54,072,390	)	32,512,768		27,155,966
Net Realized and Unrealized Gains (Losses) on Investments, Net of Deferred Taxes	(70,437,130	)	28,710,435		30,697,910
Net Increase (Decrease) In Net Assets Resulting From Operations, Net of Deferred Taxes	(64,528,568	)	19,872,529		26,179,569
Net Increase (Decrease) In Net Assets Per Share Resulting From Operations (2)	(8.99	)	2.73		3.59

All values are in US Dollars.

(1)	Primary exposure is equity risk.
(2)	Per share results are calculated based on weighted average shares outstanding for each period.
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See accompanying notes to financial statements

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information contained in this section should be read in conjunction with our 2019 Consolidated Financial Statements and notes thereto.

OVERVIEW

We are an externally managed, closed-end, non-diversified management investment company organized as a Maryland corporation that has elected to be treated as a BDC under the 1940 Act. As such, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70% of our total assets in “qualifying assets,” including securities of private or micro-cap public U.S. companies, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. In addition, for tax purposes we have elected to be treated as a RIC under Subchapter M of the Code. FCM serves as our investment adviser and manages the investment process on a daily basis.

Our investment objective is to seek long-term growth of capital, principally by seeking capital gains on our equity and equity-related investments. There can be no assurance that we will achieve our investment objective. Under normal circumstances, we invest at least 80% of our net assets for investment purposes in technology companies. We consider technology companies to be those companies that derive at least 50% of their revenues from products and/or services within the information technology sector or in the “cleantech” sector. Information technology companies include, but are not limited to, those focused on computer hardware, software, telecommunications, networking, Internet, and consumer electronics. While there is no standard definition of cleantech, it is generally regarded as including goods and services designed to harness renewable energy and materials, eliminate emissions and waste, and reduce the use of natural resources. In addition, under normal circumstances we invest at least 70% of our total assets in privately held companies and public companies with market capitalizations of less than $250 million. Our portfolio is primarily composed of equity and equity derivative securities of technology and cleantech companies (as defined above). These investments generally range between $1 million and $10 million each, although the investment size will vary proportionately with the size of our capital base. We acquire our investments through direct investments in private companies, negotiations with selling shareholders, and in organized secondary marketplaces for private securities.

While our primary focus is to invest in illiquid private technology and cleantech companies, we also may invest in micro-cap publicly traded companies. In addition, we may invest up to 30 percent of the portfolio in opportunistic investments that do not constitute the private companies and micro-cap public companies described above. These other investments may include investments in securities of public companies that are actively traded or in actively traded derivative securities such as options on securities or security indices. These other investments may also include investments in high-yield bonds, distressed debt, or securities of public companies that are actively traded and securities of companies located outside of the United States. Our investment activities are managed by FCM.

The following table summarizes the fair value of our investment portfolio by industry sector as of December 31, 2019 and December 31, 2018.

	December 31, 2019	December 31, 2018
Semiconductor Equipment	52.5%	61.8%
Medical Devices	14.9%	15.4%
Automotive	12.3%	4.8%
Aerospace	6.3%	3.5%
Equipment Leasing	2.0%	1.8%
Intellectual Property	1.2%	1.7%
Advanced Materials	0.8%	7.4%
Mobile Computing	0.6%	10.0%
Semiconductor	0.2%	0.4%
Consumer Electronics	0.0%	2.5%
Exchange-Traded/Money Market Funds	4.1%	0.2%
(Liabilities)/Other Assets	5.1%	(9.5%)
Net Assets	100.0%	100.0%

Certain trends in the technology industry may have an impact on the portfolio in coming quarters. In particular, the semiconductor industry, which has historically been a highly cyclical industry, has enjoyed a period of strong growth over the past several years. Given the substantial weighting of semiconductor investments in the current portfolio, the Fund will be sensitive to changes in this industry. Fund performance may also be impacted by the speed of adoption of certain new technologies, including, but not limited to: electric drivetrains for trucks, electron intra-operative radiation for cancer treatment, X-ray inspection of electronic components, and small form factor satellites.

MATURITY OF PRIVATE COMPANIES IN THE CURRENT PORTFOLIO

The Fund invests in private companies at various stages of maturity. As our portfolio companies mature, they move from the “early (development) stage” to the “middle (revenue) stage” and then to the “late stage.” We expect that this continuous progression may create a pipeline of potential exit opportunities through initial public offerings (IPOs) or acquisitions. Of course, some companies do not progress.

The illustration below describes typical characteristics of companies at each stage of maturity and where we believe our current portfolio companies fit within these categories. We expect some of our portfolio companies to transition between stages of maturity over time. The transition may be forward if the company is maturing and is successfully executing its business plan or may be backward if the company is not successfully executing its business plan or decides to change its business plan substantially from its original plan.

EARLY STAGE	MIDDLE STAGE	LATE STAGE
Developing product or service for market, high level of research and development, little or no revenue.	Established product, customers, business model; limited revenues.	Appreciable revenue; may be break-even or profitable; IPO or acquisition candidate.

RESULTS OF OPERATIONS

The following information is a comparison for the year ended December 31, 2019, December 31, 2018, and December 31, 2017.

INVESTMENT INCOME

For the year ended December 31, 2019, we had investment income of $1,789,651 primarily attributable to interest accrued on convertible/term note investments with IntraOp Medical Corp, Wrightspeed and Hera.

For the year ended December 31, 2018, we had investment income of $3,467,838 primarily attributable to interest accrued on convertible/term note investments with IntraOp Medical Corp, Wrightspeed, QMAT, and Telepathy Investors.

For the year ended December 31, 2017, we had investment income of $1,565,791 primarily attributable to interest accrued on convertible/term note investments with IntraOp Medical Corp, QMAT, and Telepathy Investors.

The lower level of investment income in the year ended December 31, 2019 compared to the year ended December 31, 2018 was due to the write-off of interest attributable to our QMAT and Vufine notes.

The higher level of investment income in the year ended December 31, 2018 compared to the year ended December 31, 2017 was due to increasing principal amounts on notes issued by IntraOp, QMAT and Wrightspeed.

OPERATING EXPENSES

Operating expenses totaled approximately $(4,657,825) during the year ended December 31, 2019, $12,844,659 during the year ended December 31, 2018 and $6,084,132 during the year ended December 31, 2017.

Significant components of operating expenses for the year ended December 31, 2019, were a management fee expense of $3,405,735, professional fees (audit, legal, accounting, and consulting) of $432,337, and incentive fee adjustments (which were accrued but are not payable until gains in the portfolio are realized) of $(9,261,847). Significant components of operating expenses for the year ended December 31, 2018, were a management fee expense of $4,128,311, professional fees (audit, legal, accounting, and consulting) of $375,496, and incentive fees (which were accrued but are not payable until gains in the portfolio are realized) of $7,570,807. Significant components of operating expenses for the year ended December 31, 2017, were a management fee expense of $2,975,982, professional fees (audit, legal, accounting, and consulting) of $535,293, and incentive fees (which were accrued but are not payable until gains in the portfolio are realized) of $1,691,040.

The lower level of operating expenses for the year ended December 31, 2019 compared to the year ended December 31, 2018 is primarily attributable to the reversal of the accrual of an incentive fee which is accrued but not payable until gains in the portfolio are realized. The incentive fee payable was reduced to $0 due to the decrease in the market value of our portfolio.

The higher level of operating expenses for the year ended December 31, 2018 compared to the year ended December 31, 2017 is primarily attributable to the incentive fee accrual in 2018, which is a quarterly accrual based on what the incentive fee would be if the entire portfolio were liquidated at fair market value.

NET INVESTMENT GAIN/(LOSS)

The net investment gain/(loss) before taxes was $6,447,476 for the year ended December 31, 2019, $(9,376,821) for the year ended December 31, 2018 and $(4,518,341) for the year ended December 31, 2017.

The greater net investment gain before taxes in the year ended December 31, 2019 compared to the loss for the year ended December 31, 2018 is primarily due to the reversal of the accrual of an incentive fee in 2018 which was accrued but is not payable until gains in the portfolio are realized. The incentive fee was reduced to $0 due to the decrease in the market value of our portfolio.

The greater net investment loss in the year ended December 31, 2018 compared to the year ended December 31, 2017 is primarily due to the accrual of an incentive fee in 2018 which was accrued but is not payable until gains in the portfolio are realized.

NET INVESTMENT REALIZED GAINS AND LOSSES AND UNREALIZED APPRECIATION AND DEPRECIATION

A summary of the net realized and unrealized gains and losses on investments for the years ended December 31, 2019, December 31, 2018, and December 31, 2017, is shown below.

	Year Ended<br>December 31, 2019
Realized losses	(20,988,482	)
Net change in unrealized appreciation on investments	(66,262,704	)
Deferred tax benefit	16,814,056
Net realized and unrealized loss on investments	(70,437,130	)

All values are in US Dollars.

	As of<br>December 31, 2019
Gross unrealized appreciation on portfolio investments	40,954,730
Gross unrealized depreciation on portfolio investments	(64,641,202	)
Net unrealized depreciation on portfolio investments, warrants, and other assets	(23,686,472	)

All values are in US Dollars.

	Year Ended<br>December 31, 2018
Realized losses	(4,994,658	)
Net change in unrealized appreciation on investments	42,676,566
Deferred tax expense	(8,971,473	)
Net realized and unrealized gain on investments	28,710,435

All values are in US Dollars.

	As of<br>December 31, 2018
Gross unrealized appreciation on portfolio investments	99,485,489
Gross unrealized depreciation on portfolio investments	(56,909,257	)
Net unrealized appreciation on portfolio investments, warrants, and other assets	42,576,232

All values are in US Dollars.

	Year Ended<br>December 31, 2017
Realized gains	3,541,944
Net change in unrealized depreciation on investments	27,155,966
Net realized and unrealized gain on investments	30,697,910

All values are in US Dollars.

	As of<br>December 31, 2017
Gross unrealized appreciation on portfolio investments	44,878,771
Gross unrealized depreciation on portfolio investments	(44,979,105	)
Net unrealized depreciation on portfolio investments, warrants, and other assets	(100,334	)

All values are in US Dollars.

During the year ended December 31, 2019, we recognized net realized losses of approximately $20,988,482 from the sale/write-off of investments. Realized losses were higher compared to the Fund’s realized losses in 2018 due to the sale/write-off of our QMAT and Vufine positions.

During the year ended December 31, 2019, net unrealized appreciation on total investments decreased by $66,262,704. The change in net unrealized appreciation and depreciation of our private investments is based on portfolio asset valuations determined in good faith by our Board of Directors. The decrease in unrealized appreciation on total investments during the year is due primarily to the decrease in value of our investments, most notably, IntraOp Medical, Phunware, QMAT and Revasum.

During the year ended December 31, 2018, we recognized net realized losses of approximately $4,994,658 from the sale/write-off of investments. Realized losses were higher compared to the Fund’s realized gains in 2017 due to the write-off of our Aliphcom position and the transfer of securities from our controlled foreign corporations (CFCs) to the Fund.

During the year ended December 31, 2018, net unrealized appreciation on total investments increased by $42,676,566. The change in net unrealized appreciation and depreciation of our private investments is based on portfolio asset valuations determined in good faith by our Board of Directors. The increase in unrealized appreciation on total investments during the year is due primarily to the increase in value of our investments, most notably, Pivotal and Revasum.

During the year ended December 31, 2017, we recognized net realized gains of approximately $3,541,944 from the sale of investments. Realized gains were higher compared to the Fund’s net realized losses in 2016 due to the buyout of our Gilt Groupe position and the sale of our Invensense common stock in 2016 which created realized losses in 2016.

During the year ended December 31, 2017, net unrealized depreciation on total investments decreased by $27,155,966. The change in net unrealized appreciation and depreciation of our private investments is based on portfolio asset valuations determined in good faith by our Board of Directors. The decrease in unrealized depreciation on total investments during the year is due primarily to the increase in value of our investments, most notably, Pivotal, QMAT, Revasum, Nutanix, Roku and Phunware.

INCOME AND EXCISE TAXES

Beginning on June 30, 2018, we were no longer able to qualify as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). This change in tax status resulted from the increase in the value of a single holding, Pivotal Systems Corp., which meant that we were no longer able to satisfy the diversification requirements for qualification as a RIC. As a result of this change, we will be taxed as a corporation for our fiscal year ended December 31, 2019, and will continue to be taxed in that manner for future fiscal years, paying federal and applicable state corporate taxes on our taxable income, unless and until we are able to once again qualify as a RIC, based on changes in the composition of our portfolio. Consequently, at the close of each fiscal quarter beginning with the quarter ended June 30, 2018, we will record a deferred tax liability for any net realized gains and net ordinary income for the year-to-date period plus net unrealized gains as of the end of the quarter.

NET INCREASE/(DECREASE) IN ASSETS RESULTING FROM OPERATIONS AND CHANGE IN NET ASSETS PER SHARE

For the year ended December 31, 2019, the net decrease in net assets resulting from operations (net of deferred taxes) totaled $64,528,568 and the basic and fully diluted net change in net assets per share for the year ended December 31, 2019 was $(8.99).

For the year ended December 31, 2018, the net increase in net assets resulting from operations (net of deferred taxes) totaled $19,872,529 and the basic and fully diluted net change in net assets per share for the year ended December 31, 2018 was $2.73.

For the year ended December 31, 2017, the net increase in net assets resulting from operations totaled $26,179,569 and the basic and fully diluted net change in net assets per share for the year ended December 31, 2017 was $3.59.

The greater decrease in net assets resulting from operations (net of deferred taxes) for the year ended December 31, 2019 as compared to an increase for the year ended December 31, 2018, is due primarily to a decrease in the asset valuations of our holdings, which are determined in good faith by our Board of Directors.

The lesser increase in net assets resulting from operations (net of deferred taxes) for the year ended December 31, 2018 as compared to the year ended December 31, 2017, is due primarily due to an increase in the incentive fee expense accrual in 2018 and an accrual for deferred taxes since the Fund is now classified as a C corporation.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Our liquidity and capital resources are generated primarily from sales or liquidation proceeds of our investments. In management’s view, we have sufficient liquidity and capital resources to pay our operating expenses and conduct investment activities over the next twelve months.

Our primary uses of cash are to make investments, pay our operating expenses, and make distributions to our stockholders. For the years ended December 31, 2019, 2018, and 2017, our operating expenses were $4,604,022, $5,273,852, and $4,393,092, respectively.

For the year ended December 31, 2019, our total cash reserves and liquid securities increased approximately 34%, primarily due to the sale of portfolio investments and the expiration of restrictions on some of our private holdings. We believe that our current liquid assets are sufficient to meet the Company’s short-term financing needs.

During the year ended December 31, 2019, cash and cash equivalents increased to $5,201,855 at the end of the year, from $438,442 at the beginning of the year. The increase in cash and cash equivalents primarily resulted from the sale of portfolio investments in 2019.

At December 31, 2019, we had investments in public and private securities totaling approximately $120.6 million. Also, at December 31, 2019, we had approximately $0.0 million in cash. We primarily invest cash on hand in money market treasury portfolios. We expect the portion of our portfolio consisting of cash and cash equivalents to decrease as we become fully invested.

As of December 31, 2019, net assets totaled approximately $127.1 million, with an NAV per share of $17.70. Our primary use of funds will be investments in portfolio companies and payments of fees and other operating expenses we incur. Additionally, we expect to raise additional capital to support our future growth through future equity offerings. To the extent we determine to raise additional equity through an offering of our common stock at a price below NAV, existing investors will experience dilution.

PORTFOLIO INVESTMENTS

PRIVATE INVESTMENTS

We make investments in securities of both public and private companies. December 31, 2019, we had investments in the following private companies:

EQX Capital, Inc.

EQX Capital, Inc. (“EQX”), San Francisco, California, is an equipment leasing company.

At December 31, 2019, our investment in EQX consisted of 3,200,000 shares of Series A preferred stock and 100,000 shares of common stock with an aggregate fair value of approximately $2.5 million.

Hera Systems, Inc.

Hera Systems, Inc. (“Hera”), San Jose, CA, is currently developing a constellation of micro satellites to launch into low Earth orbit with imaging and communications capabilities.

At December 31, 2019, our investment in Hera consisted of 3,642,324 shares of Series A preferred stock, 7,039,203 shares of Series B preferred stock, 2,400,000 shares of Series C preferred stock, $500,000 par value convertible note, $500,000 par value convertible note and 24,414,922 shares of Series B warrants with an aggregate fair value of approximately $8.0 million.

IntraOp Medical Corp.

IntraOp Medical Corporation (“IntraOp”), Sunnyvale, California, manufactures and markets the Mobetron, a medical device for delivering Intra Operative Electron Radiation Therapy to cancer patients.

At December 31, 2019, our investment in IntraOp consisted of 26,856,187 shares of Series C preferred stock, $3,000,000 par value term note, $2,000,000 par value term note, $1,300,000 par value convertible note, $500,000 par value convertible note, $500,000 par value convertible note and a $10,961,129 par value convertible note with a combined aggregate fair value of approximately $19.0 million.

Kyma, Inc.

Kyma, Inc. (“Kyma”), Raleigh, NC, is a supplier of high-quality gallium nitride-based wafers to semiconductor device manufacturers in the electronics and optical markets.

At December 31, 2019, our investment in Kyma consisted of a $100,000 par value convertible note with a combined fair value of approximately $100 thousand.

Lyncean Technologies, Inc.

Lyncean Technologies, Inc. (“Lyncean”), Fremont, CA, is a developer X-ray and extreme ultraviolet (EUV) light sources for laboratory and commercial use.

At December 31, 2019, our investment in Lyncean consisted of 869,792 shares of Series B preferred stock with a combined fair value of approximately $1.0 million.

Silicon Genesis Corp.

Silicon Genesis Corporation (“SiGen”), San Jose, CA, provides engineered substrate process technology for the semiconductor, display, optoelectronics, and solar markets.

At December 31, 2019, our investments in SiGen consisted of 82,914 shares of Series 1-C preferred stock, 850,830 shares of Series 1-D preferred stock, 5,704,480 shares of Series 1-E preferred stock, 912,453 shares of Series 1-F preferred stock, 48,370,793 shares of Series 1-G preferred stock, 837,942 shares of Series 1-H preferred stock, 921,892 shares of common stock, and warrants for 8,037,982 shares of common stock with a combined fair value of approximately $1.5 million.

SVXR, Inc.

SVXR, Inc. (“SVXR”), San Jose, California, is an X-ray inspection tool manufacturer whose products are used for inline product monitoring, defect detection, and metrology.

At December 31, 2019, our investment in SVXR consisted of 8,219,454 shares of Series A preferred stock with a combined fair value of approximately $4.9 million.

Telepathy Investors, Inc.

Telepathy Investors, Inc. (“Telepathy”), Sunnyvale, California, is developing wearable consumer electronics products.

At December 31, 2019, our investment in Telepathy consisted of 15,238,000 shares of Series A preferred stock, a $2,000,000 par value convertible note, a $500,000 par value convertible note, a $500,000 par value convertible note, a $300,000 par value convertible note, a $300,000 par value convertible note, a $200,000 par value convertible note and a $150,000 par value convertible note with a combined fair value of approximately $0.0 million.

UCT Coatings, Inc.

UCT Coatings, Inc. (“UCT”), Stuart, Florida, is a leader in the development of metal coatings that reduce friction and improve efficiency in mechanical systems.

At December 31, 2019, our investments in UCT consisted of 1,500,000 shares of common stock with a combined fair value of approximately $834 thousand.

Wrightspeed, Inc.

Wrightspeed, Inc. (“Wrightspeed”), San Jose, California, is a supplier of electric drivetrains for medium-duty trucks.

At December 31, 2019, our investments in Wrightspeed consisted of 69,102 shares of common stock, 47,284,219 shares of Series AA preferred stock, warrants to purchase 181 shares of common stock, warrants to purchase 609,756 shares of Series AA preferred stock, and a $4,929,015 par value convertible note with a combined fair value of approximately $15.6 million.

PUBLIC INVESTMENTS

At December 31, 2019, we had investments in the following public securities:

Phunware, Inc.

Phunware, Inc. (“Phunware”), Austin, Texas, is a software company that develops tools and services to enable mobile computing applications.

At December 31, 2019, our investments in Phunware consisted of 682,913 shares of common stock with an aggregate fair value of approximately $813 thousand.

Pivotal Systems Corp.

Pivotal Systems, Corporation (“Pivotal Systems”), Fremont, California, provides monitoring and process control technologies for the semiconductor manufacturing industry.

At December 31, 2019, our investment in Pivotal Systems consisted of 45,090,506 shares of restricted and unrestricted common stock with a combined fair value of approximately $41.7 million.

Quicklogic Corp.

QuickLogic Corp. (“QuickLogic”) (NASDAQ: QUIK), Sunnyvale, CA, designs and markets system-on-a-chip (“SOC”) semiconductor solutions for smartphones, wearable and “Internet-of-things” devices, and other applications.

At December 31, 2019, our investment in Quicklogic consisted of 42,857 shares of common stock with a market value of approximately $257 thousand.

Revasum, Inc.

Revasum, (“Revasum”), San Luis Obispo, California, designs CMP and grinding technology for the semiconductor equipment industry.

At December 31, 2019, our investment in Revasum consisted of 46,834,340 shares of restricted and unrestricted common stock with an aggregate fair value of approximately $19.2 million

Fidelity Investments Money Market Treasury Portfolio - Class I

Fidelity Investments Money Market Treasury Portfolio - Class I (“Money Market”) is a money market portfolio that invests primarily in U.S. treasury securities.

At December 31, 2019, our investment in Money Market consisted of 5,201,855 shares of the money market fund with a market value of approximately $5.2 million.

DISTRIBUTION POLICY

Our board of directors will determine the timing and amount, if any, of our distributions. For each year in which the Fund has qualified as a RIC, we intend to pay distributions on an annual basis out of assets legally available therefore. In order to qualify as a RIC and to avoid corporate-level tax on our income, we must distribute to our stockholders at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, on an annual basis. In addition, we also intend to distribute any realized net capital gains (i.e., realized net long-term capital gains in excess of realized net short-term capital losses) at least annually.

CONTRACTUAL OBLIGATIONS

The Fund does not have any Contractual Obligations that meet the requirements for disclosure under Item 303 of Regulation S-K.

OFF-BALANCE SHEET ARRANGEMENTS

The Fund does not have any Off-Balance Sheet Arrangements.

CRITICAL ACCOUNTING POLICIES

This discussion of our financial condition and results of operations is based upon our financial statements, which are prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of these financial statements will require management to make estimates and assumptions that affect the

reported amounts of assets, liabilities, revenues, and expenses. Changes in the economic environment, financial markets, and any other parameters used in determining such estimates could cause actual results to differ. In addition to the discussion below, we will describe our critical accounting policies in the notes to our future financial statements.

Valuation of Portfolio Investments

As a business development company, we generally invest in illiquid equity and equity derivatives of securities of venture capital stage technology companies. Under written procedures established by our board of directors, securities traded on stock exchanges, or quoted by NASDAQ, are valued according to the NASDAQ Stock Market, Inc. (“NASDAQ”) official closing price, if applicable, or at their last reported sale price as of the close of trading on the New York Stock Exchange (“NYSE”) (normally 4:00 P.M. Eastern Time). If a security is not traded that day, the security will be valued at its most recent bid price. Securities traded in the over-the-counter market, but not quoted by NASDAQ, are valued at the last sale price (or, if the last sale price is not readily available, at the most recent closing bid price as quoted by brokers that make markets in the securities) at the close of trading on the NYSE. Securities traded both in the over-the-counter market and on a stock exchange are valued according to the broadest and most representative market. We obtain these market values from an independent pricing service or at the mean between the bid and ask prices obtained from at least two brokers or dealers (if available, otherwise by a principal market maker or a primary market dealer). In addition, a large percentage of our portfolio investments are in the form of securities that are not publicly traded. The fair value of securities and other investments that are not publicly traded may not be readily determinable. We value these securities quarterly at fair value as determined in good faith by our board of directors. Our board of directors may use the services of a nationally recognized independent valuation firm to aid it in determining the fair value of these securities. The methods for valuing these securities may include: fundamental analysis (sales, income, or earnings multiples, etc.), discounts from market prices of similar securities, purchase price of securities, subsequent private transactions in the security or related securities, or discounts applied to the nature and duration of restrictions on the disposition of the securities, as well as a combination of these and other factors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, may fluctuate over short periods of time, and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. Our net asset value could be adversely affected if our determinations regarding the fair value of our investments were materially higher than the values that we ultimately realize upon the disposal of such securities.

Revenue Recognition

We record interest income on an accrual basis and dividend income on the ex-dividend date to the extent that we expect to collect such amounts. We do not accrue as a receivable interest on loans and debt securities if we have reason to doubt our ability to collect such interest. Loan origination fees, original issue discount, and market discount are capitalized, and we amortize any such amounts as interest income. Upon the prepayment of a loan or debt security, any unamortized loan origination is recorded as interest income. We will record prepayment premiums on loans and debt securities as interest income when we receive such amounts.

Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation

We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.

Recently Issued Accounting Standards

From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by us as of the specified effective date. We believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial statements upon effectiveness.

Inflation

Inflation has not had a significant effect on our results of operations in any of the reporting periods presented herein. However, our portfolio companies have experienced, and may in the future experience, the impacts of inflation on their operating results.

SUBSEQUENT EVENTS

Subsequent to the close of the year on December 31, 2019, and through the date of the issuance of the financial statements included herein, a number of material events related to our portfolio of investments occurred, consisting primarily of purchased and sold securities. Since that date, we have purchased private securities with an aggregate cost of approximately $3.7 million.

On December 16, 2019, the Fund announced the commencement of a “modified Dutch auction” tender offer to purchase up to $2 million of its common stock at a price per share not less than $6.00 and not greater than $8.00, in $0.10 increments. The tender offer expired on February 14, 2020, and resulted in the purchase by the Fund of 285,714 shares of common stock at a price of $7.00 per share. As of February 28, 2020, the Fund had 6,893,056 shares outstanding.

I tem 7A. Quantitative And Qualitative Disclosures About Market Risk .

The Fund’s business activities contain elements of risk. We consider the principal types of market risk to be valuation risk and small company investment risk.

VALUATION RISK

Value, as defined in Section 2(a)(41) of the 1940 Act, is (i) the market price for those securities for which market quotations are readily available and (ii) fair value as determined in good faith by, or under the direction of, the Board of Directors for all other assets.

Because there is typically no public market for our interests in the small privately-held companies in which we invest, the valuation of the securities in that portion of our portfolio is determined in good faith by our Board of Directors with the assistance of our Valuation Committee, comprised of the independent members of our Board of Directors, in accordance with our Valuation Procedures. In addition, the Board of Directors may use the services of a nationally recognized independent valuation firm to aid it in determining the fair value of some of these securities. In the absence of a readily ascertainable market value, the determined value of our portfolio of securities may differ significantly from the values that would be placed on the portfolio if a ready market for such securities existed. Determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment, although our valuation policy is intended to provide a consistent basis for determining fair value of the portfolio investments. The methods for valuing these securities may include: fundamental analysis (sales, income, or earnings multiples, etc.), discounts from market prices of similar securities, purchase price of securities, subsequent private transactions in the security or related securities, or discounts applied to the nature and duration of restrictions on the disposition of the securities, as well as a combination of these and other factors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, may fluctuate over short periods of time, and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed.

Furthermore, changes in valuation of any of our investments in privately-held companies from one period to another may be volatile.

Investments in privately held, immature companies are inherently more volatile than investments in more mature businesses. Such immature businesses are inherently fragile and easily affected by both internal and external forces.

Our portfolio companies can lose much or all of their value suddenly in response to an internal or external adverse event. Conversely, these immature businesses can gain suddenly in value in response to an internal or external positive development.

The values assigned to our assets are based on available information and do not necessarily represent amounts that might ultimately be realized, as these amounts depend on future circumstances and cannot be reasonably determined until the individual investments are actually liquidated or become readily marketable. Upon sale of investments, the values that are ultimately realized may be different from what is presently estimated. This difference could be material.

PRIVATELY PLACED SMALL COMPANIES RISK

The Fund invests in small companies, and its investments in these companies are considered speculative in nature. The Fund’s investments often include securities that are subject to legal or contractual restrictions on resale that adversely affect the liquidity and marketability of such securities. As a result, the Fund is subject to risk of loss which may prevent our shareholders from achieving price appreciation, dividend distributions and return of capital.

WE MAY HOLD A PORTION OF OUR ASSETS IN CASH

As of December 31, 2019, we do not have a significant portion of the Fund’s assets invested in cash and/or cash equivalents. We may, however, from time to time hold a substantial portion of our assets in cash and/or cash equivalents, which are expected to earn low yields. Given the current low interest rate environment, to the extent the management fee and other operating expenses exceed interest income on the cash holdings of the Fund, the Fund may experience losses. Furthermore, the investment advisory fee payable by us will not be reduced while our assets are invested in cash-equivalent securities.

In some cases, particularly for primary transactions, it is to our advantage to hold sufficient cash reserve so that we can make additional subsequent investments in these companies in order to (a) avoid having our earlier investments become diluted in future dilutive financings, (b) invest additional capital into existing portfolio companies in case additional investments are necessary, and/or (c) exercise warrants, options, or convertible securities that were acquired as part of the earlier transactions. For this reason, in the case of primary transactions (as opposed to secondary transactions where we do not buy the securities from the issuing companies but instead from existing stockholders), we typically reserve cash in an amount at least equal to our initial investment for such follow-on opportunities. Cash reserves held with respect to a particular investment should, therefore, decline as it is held longer, and will typically not be needed once that portfolio company becomes public or we determine it is no longer in our best interest to make investments in such portfolio company.

We may from time to time liquidate various investments. We are required to distribute substantially all of our net realized gains to stockholders on an annual basis and, therefore, will generally hold the proceeds of liquidated investments in cash pending its distribution.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS

of Firsthand Technology Value Fund, Inc.

OPINION ON THE FINANCIAL STATEMENTS

We have audited the accompanying consolidated statements of assets and liabilities of Firsthand Technology Value Fund, Inc. (the “Company”), including the consolidated schedules of investments, as of December 31, 2019 and 2018, and the related consolidated statements of operations, changes in net assets, and cash flows for each of the years in the three-year period ended December 31, 2019, and the consolidated financial highlights for each of the years in the five-year period ended December 31, 2019, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, the results of its operations, the changes in its net assets, and its cash flows for each of the years in the three-year period ended December 31, 2019, and the financial highlights for each of the years in the five-year period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 10, 2020 expressed an unqualified opinion.

EMPHASIS OF MATTER

As explained in Note 6, the financial statements include investments valued at $114,282,924 (89.92% of net assets), whose fair values have been estimated under procedures established by the Board of Directors in the absence of readily ascertainable fair values. These estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material. Our opinion is not modified with respect to this matter.

BASIS FOR OPINION

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We have served as the Company’s auditor since 1997.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our procedures included confirmation of securities owned as of December 31, 2019 by correspondence with the custodian and portfolio companies. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

TAIT, WELLE R & BAKER LLP
Philadelphia, Pennsylvania
March 10 , 2020

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS

Firsthand Technology Value Fund, Inc.
San Jose, California

OPINION ON INTERNAL CONTROL OVER FINANCIAL REPORTING

We have audited Firsthand Technology Value Fund, Inc.’s (the Company’s) the internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on the criteria established in Internal Control—Integrated Framework (2013) issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of assets and liabilities, including the consolidated schedules of investments, as of December 31, 2019 and 2018, and the related consolidated statements of operations, changes in net assets, and cash flows for each of the years in the three-year period ended December 31, 2019, and the consolidated financial highlights for each of the years in the five-year period ended December 31, 2019, and the related notes (collectively referred to as the consolidated financial statements) of the Company, and our report dated March 10, 2020 expressed an unqualified opinion.

BASIS FOR OPINION

The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We have served as the Company’s auditor since 1997.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

DEFINITION AND LIMITATIONS OF INTERNAL CONTROL OVER FINANCIAL REPORTING

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

TAIT, WELLER & B AKER LLP
Philadelphia, Pennsylvania
March 10 , 20 20

I tem 8. Financial Statements and Supplementary Data

Firsthand Technology Value Fund, Inc.

Consolidated Statements of Assets and Liabilities

	AS OF<br>DECEMBER 31, 2019		AS OF<br>DECEMBER 31, 2018
ASSETS
Investment securities:
Unaffiliated investments at acquisition cost	11,722,468	*	3,961,467	*
Affiliated investments at acquisition cost	4,744,427		31,002,275
Controlled investments at acquisition cost	127,774,164		132,313,596
Total acquisition cost	144,241,059		167,277,338
Unaffiliated investments at market value	7,364,183	*	5,696,042	*
Affiliated investments at market value	5,715,273		34,045,111
Controlled investments at market value	107,475,131		170,112,417
Total market value ** (Note 6)	120,554,587		209,853,570
Receivable for securities sold	—		1,005
Receivable from dividends and interest	2,507,714		2,308,366
Deferred tax benefit	7,842,583		—
Other assets	21,800		18,713
Total Assets	130,926,684		212,181,654
LIABILITIES
Payable for securities purchased	—		365,783
Incentive fees payable (Note 4)	—		9,261,847
Payable to affiliates (Note 4)	3,461,822		2,334,727
Deferred tax liability	—		8,432,559
Consulting fee payable	16,500		19,500
Accrued expenses and other payables	358,971		149,279
Total Liabilities	3,837,293		20,563,695
NET ASSETS	127,089,391		191,617,959
Net Assets consist of:
Common Stock, par value $0.001 per share 100,000,000 shares authorized	7,179		7,179
Paid-in-capital	178,770,434		178,770,434
Total distributable earnings (loss)	(51,688,222	)	12,840,346
NET ASSETS	127,089,391		191,617,959
Shares of Common Stock outstanding	7,302,146		7,302,146
Shares of Treasury Stock outstanding	(123,376	)	(123,376	)
Total Shares of Common Stock outstanding	7,178,770		7,178,770
Net asset value per share (Note 2)	17.70		26.69

All values are in US Dollars.

*	Includes Fidelity Investment Money Market Treasury Portfolio - Class I, which invests primarily in U.S. Treasury securities. The yields as of 12/31/19 and 12/31/18 were 1.50% and 2.24%, respectively. Please see https://fundresearch.fidelity.com/mutual-funds/summary/316175504 for additional information.
**	Includes warrants whose primary risk exposure is equity contracts.
---	---

See accompanying notes to financial statements

Firsthand Technology Value Fund, Inc.

Consolidated Schedule of Investments

DECEMBER 31, 2019

PORTFOLIO<br><br>COMPANY<br><br>(% OF NET<br><br>ASSETS) AND INDUSTRY	TYPE OF INVESTMENT		SHARES/PAR<br>VALUE ()	COST BASIS	VALUE
EQX CAPITAL, INC.	Common Stock *(1)(2)(4)	6/10/2016	100,000	20,000	28,990
(2.0%) Equipment Leasing	Preferred Stock - Series A *(1)(2)(4)	6/10/2016	3,200,000	3,200,000	2,490,880
					2,519,870
HERA SYSTEMS, INC. (6.3%) Aerospace	Convertible Promissory Note Matures December 2020 Interest Rate 10% (1)(2)(4)	5/31/2018	500,000	500,000	500,000
	Convertible Promissory Note Matures December 2020 Interest Rate 10% (1)(2)(4)	1/19/2018	500,000	500,000	500,000
	Preferred Stock - Series A *(1)(2)(4)	9/18/2015	3,642,324	2,000,000	247,314
	Preferred Stock - Series B *(1)(2)(4)	8/07/17 - 2/1/19	7,039,203	6,587,102	1,397,282
	Preferred Stock - Series C *(1)(2)(4)	8/7/2019-11/12/19	2,400,000	2,400,000	476,400
	Preferred Stock Warrants - Series B *(1)(2)(4)	7/9/18 - 9/4/18	12,250,000	0	2,430,890
	Preferred Stock Warrants - Series B *(1)(2)(4)	2/1/2019	5,250,000	0	1,041,810
	Preferred Stock Warrants - Series B *(1)(2)(4)	8/7/2017	6,214,922	0	1,233,289
	Preferred Stock Warrants - Series B *(1)(2)(4)	9/28/2017	700,000	0	138,908
					7,965,893
INTRAOP MEDICAL CORP. (14.9%) Medical Devices	Convertible Note Matures June 2020 Interest Rate 15% (1)(2)(4)	12/31/2018	10,961,129	10,961,129	10,961,129
	Convertible Note Matures June 2020 Interest Rate 15% (1)(2)(4)	7/12/2019	1,300,000	1,300,000	1,300,000
	Convertible Note Matures June 2020 Interest Rate 15% (1)(2)(4)	10/11/2019	500,000	500,000	500,000

All values are in US Dollars.

See accompanying notes to financial statements

Firsthand Technology Value Fund, Inc.

Consolidated Schedule of Investments - continued

DECEMBER 31, 2019

PORTFOLIO<br><br>COMPANY<br><br>(% OF NET<br><br>ASSETS) AND INDUSTRY	TYPE OF INVESTMENT		SHARES/PAR<br>VALUE ()	COST BASIS	VALUE
INTRAOP MEDICAL CORP.<br><br>(continued)	Convertible Note Matures June 2020 Interest Rate 15% (1)(2)(4)	10/29/2019	500,000	500,000	500,000
	Preferred Stock - Series C *(1)(2)(4)	7/12/2013	26,856,187	26,299,938	702,826
	Term Note Matures February 2020 Interest Rate 8% (1)(2)(4)	2/28/2014	3,000,000	3,000,000	3,000,000
	Term Note Matures February 2020 Interest Rate 8% (1)(2)(4)	2/10/2017	2,000,000	2,000,000	2,000,000
					18,963,955
KYMA, INC. (0.1%) Advanced Materials	Convertible Note Matures March 2020 Interest Rate 10% (1)(4)	3/11/2019	100,000	100,000	100,000
LYNCEAN TECHNOLOGIES, INC. (0.8%)	Preferred Stock - Series B *(1)(4)	7/3/2018	869,792	1,000,000	992,520
Semiconductor Equipment
PHUNWARE, INC. (0.6%)	Common Stock*	3/14/2014	682,913	4,567,633	812,666
Mobile Computing
PIVOTAL SYSTEMS CORP. (32.8%)	Common Stock *(1)(2)(4)	11/28/12 - 9/2/16	45,090,506	12,294,557	41,670,037
Semiconductor Equipment
QUICKLOGIC CORP. (0.2%)	Common Stock *	12/27/16 - 11/09/17	42,857	852,980	257,142
Semiconductors

All values are in US Dollars.

See accompanying notes to financial statements

Firsthand Technology Value Fund, Inc.

Consolidated Schedule of Investments - continued

DECEMBER 31, 2019

PORTFOLIO<br><br>COMPANY<br><br>(% OF NET<br><br>ASSETS) AND INDUSTRY	TYPE OF INVESTMENT		SHARES/PAR<br>VALUE ()	COST BASIS	VALUE
REVASUM, INC. (15.1%)	Common Stock *(1)(2)(4)	11/14/16 - 11/30/18	46,834,340	13,512,264	19,173,339
Semiconductor Equipment
SILICON GENESIS CORP. (1.2%)	Preferred Stock - Series 1-E *(1)(2)(4)	4/18/2011	5,704,480	2,372,403	645,177
Intellectual Property	Preferred Stock - Series 1-C *(1)(2)(4)	4/18/2011	82,914	109,518	5,157
	Preferred Stock - Series 1-D *(1)(2)(4)	4/18/2011	850,830	431,901	13,699
	Common Stock *(1)(2)(4)	4/18/2011	921,892	169,045	645
	Common Stock Warrants *(1)(2)(4)	4/18/2011	37,982	6,678	11
	Preferred Stock - Series 1-F *(1)(2)(4)	4/18/2011	912,453	456,389	142,434
	Common Stock Warrants *(1)(2)(4)	10/13/2011	5,000,000	0	2,000
	Common Stock Warrants *(1)(2)(4)	2/6/2012	3,000,000	0	1,200
	Preferred Stock - Series 1-G *(1)(2)(4)	3/10/2016	48,370,793	3,880,592	651,458
	Preferred Stock - Series 1-H *(1)(2)(4)	3/10/2016	837,942	936,895	71,309
					1,533,090
SVXR, INC. (3.8%) Semiconductor Equipment	Preferred Stock - Series A *(1)(3)(4)	1/11/17 - 8/29/18	8,219,454	4,082,192	4,881,123
TELEPATHY INVESTORS, INC. (0.0%)	Preferred Stock - Series A *(1)(2)(4)	7/29/2014	15,238,000	3,999,999	0
Consumer Electronics	Convertible Note Matures March 2020 Interest Rate 10% (1)(2)(4)	4/20/2016	500,000	500,000	0
	Convertible Note Matures March 2020 Interest Rate 10% (1)(2)(4)	6/23/2015	2,000,000	2,000,000	0

All values are in US Dollars.

See accompanying notes to financial statements

Firsthand Technology Value Fund, Inc.

Consolidated Schedule of Investments - continued

DECEMBER 31, 2019

PORTFOLIO<br><br>COMPANY<br><br>(% OF NET<br><br>ASSETS) AND INDUSTRY	TYPE OF INVESTMENT		SHARES/PAR<br>VALUE ()	COST BASIS	VALUE
TELEPATHY INVESTORS, INC.<br><br>(continued)	Convertible Note Matures March 2020 Interest Rate 10% (1)(2)(4)	5/3/2017	300,000	300,000	0
	Convertible Note Matures March 2020 Interest Rate 10% (1)(2)(4)	9/7/2018	200,000	200,000	0
	Convertible Note Matures March 2020 Interest Rate 10% (1)(2)(4)	1/29/2016	300,000	300,000	0
	Convertible Note Matures March 2020 Interest Rate 10% (1)(2)(4)	12/13/2016	500,000	500,000	0
	Convertible Note Matures March 2020 Interest Rate 10% (1)(2)(4)	6/21/2016	150,000	150,000	0
					0
UCT COATINGS, INC. (0.7%)	Common Stock *(1)(3)(4)	4/18/2011	1,500,000	662,235	834,150
Advanced Materials
WRIGHTSPEED, INC.	Common Stock *(1)(2)(4)	6/7/2019	69,102	7,460,851	3,980
(12.3%) Automotive	Common Stock Warrants *(1)(2)(4)	6/7/2019	181	0	0
	Convertible Note Matures December 2020 Interest Rate 12% (1)(2)(4)	6/7/2019	4,929,015	4,929,015	4,929,015
	Preferred Stock - Series AA *(1)(2)(4)	6/7/2019 - 9/25/2019	47,284,219	13,495,888	10,625,710
	Preferred Stock Warrants - Series AA *(1)(2)(4)	6/7/2019	609,756	0	90,242
					15,648,947

All values are in US Dollars.

See accompanying notes to financial statements

Firsthand Technology Value Fund, Inc.

Consolidated Schedule of Investments - continued

DECEMBER 31, 2019

PORTFOLIO<br><br>COMPANY<br><br>(% OF NET<br><br>ASSETS) AND INDUSTRY	TYPE OF INVESTMENT		SHARES/PAR<br>VALUE ()	COST BASIS	VALUE
INVESTMENT COMPANY (4.1%)	Fidelity Investments Money Market Treasury Portfolio - Class I (5)	Various	5,201,855	5,201,855	5,201,855
TOTAL INVESTMENTS (Cost $144,241,059) — 94.9%					120,554,587
OTHER ASSETS IN EXCESS OF LIABILITIES— 5.1%					6,534,804
NET ASSETS — 100.0%					127,089,391

All values are in US Dollars.

*	Non-income producing security.
(1)	Restricted security. Fair Value is determined by or under the direction of the Company’s Board of Directors (See note 3). At December 31, 2019, we held $114,282,924 (or 89.9% of net assets) in restricted securities (see Note 2).
---	---
(2)	Controlled investments.
---	---
(3)	Affiliated issuer.
---	---
(4)	Fair Value Level 3 security.
---	---
(5)	The Fidelity Investments Money Market Portfolio invests primarily in U.S. Treasury securities.
---	---

See accompanying notes to financial statements

Firsthand Technology Value Fund, Inc.

Consolidated Schedule of Investments

DECEMBER 31, 2018

PORTFOLIO<br><br>COMPANY<br><br>(% OF NET<br><br>ASSETS)<br><br>AND INDUSTRY	INVESTMENT TYPE		SHARES/PAR<br>VALUE ()	COST BASIS	VALUE
EQX CAPITAL,	Common Stock *(1)(2)(4)	6/10/16	100,000	20,000	36,470
INC (1.8%)Equipment Leasing	Preferred Stock - Series A *(1)(2)(4)	6/10/16	4,000,000	4,000,000	3,491,600
					3,528,070
HERA SYSTEMS, INC. (3.5%) Aerospace	Convertible Promissory Note Matures January 2019 Interest Rate 10% (1)(2)(4)	5/31/18	500,000	500,000	500,000
	Convertible Promissory Note Matures January 2019 Interest Rate 10% (1)(2)(4)	1/19/18	500,000	500,000	500,000
	Preferred Stock - Series A *(1)(2)(4)	9/18/15	3,642,324	2,000,000	207,977
	Preferred Stock - Series B *(1)(2)(4)	8/07/17 - 9/4/18	5,539,203	5,087,102	1,231,365
	Preferred Stock Warrants - Series B *(1)(2)(4)	8/7/17	6,214,922	0	1,380,956
	Preferred Stock Warrants - Series B *(1)(2)(4)	9/28/17	700,000	0	155,540
	Preferred Stock Warrants - Series B *(1)(2)(4)	7/9/18 - 9/4/18	12,250,000	0	2,721,950
					6,697,788
INTRAOP MEDICAL CORP. (15.4%)	Convertible Note Matures June 2020 Interest Rate 8% (1)(2)(4)	12/31/18	10,961,129	10,961,129	10,961,129
Medical Devices	Preferred Stock - Series C *(1)(2)(4)	7/12/13	26,856,187	26,299,938	13,565,328
	Term Note Matures February 2020 Interest Rate 8% (1)(2)(4)	2/10/17	2,000,000	2,000,000	2,000,000
	Term Note Matures February 2020 Interest Rate 8% (1)(2)(4)	2/28/14	3,000,000	3,000,000	3,000,000
					29,526,457

All values are in US Dollars.

See accompanying notes to financial statements

Firsthand Technology Value Fund, Inc.

Consolidated Schedule of Investments - continued

DECEMBER 31, 2018

PORTFOLIO<br><br>COMPANY<br><br>(% OF NET<br><br>ASSETS)<br><br>AND INDUSTRY	INVESTMENT TYPE		SHARES/PAR<br>VALUE ()	COST BASIS	VALUE
LYNCEAN TECHNOLOGIES, INC. (0.5%) Semiconductor Equipment	Preferred Stock - Series B *(1)(4)	7/3/18	869,792	1,000,000	1,000,000
PHUNWARE, INC. (10.0%) Mobile Computing	Common Stock *(1)(3)(4)	3/14/14	1,495,113	9,999,997	19,121,150
PIVOTAL SYSTEMS CORP. (28.1%) Semiconductor Equipment	Common Stock *(1)(2)(4)	11/28/12 - 9/2/16	53,758,441	19,446,197	53,825,978
QMAT, INC. (7.0%)	Preferred Stock - Series A *(1)(2)(4)	12/14/12 - 4/28/16	16,000,240	9,680,305	4,612,549
Advanced Materials	Preferred Stock - Series B *(1)(2)(4)	9/28/16 - 11/7/16	2,000,000	2,000,000	1,594,000
	Convertible Note Matures December 2019 Interest Rate 8% (1)(2)(4)	12/14/18	7,002,600	7,002,600	7,002,600
	Preferred Stock Warrants - Series C *(1)(2)(4)	12/14/18	4,932,208	0	81,381
	Preferred Stock Warrants - Series A *(1)(2)(4)	12/14/12	2,000,000	0	112,000
					13,402,530
QUICKLOGIC CORP. (0.4%) Semiconductors	Common Stock *	12/27/16 - 11/9/17	1,000,000	1,488,025	734,000
REVASUM, INC. (30.6%) Semiconductor Equipment	Common Stock *(1)(2)(4)	11/14/16 - 11/30/18	53,834,340	18,537,905	58,608,601

All values are in US Dollars.

See accompanying notes to financial statements

Firsthand Technology Value Fund, Inc.

Consolidated Schedule of Investments - continued

DECEMBER 31, 2018

PORTFOLIO<br><br>COMPANY<br><br>(% OF NET<br><br>ASSETS)<br><br>AND INDUSTRY	INVESTMENT TYPE		SHARES/PAR<br>VALUE ()	COST BASIS	VALUE
ROKU, INC. (1.8%) Consumer Electronics	Common Stock *	5/26/15 - 8/6/15	115,000	1,035,000	3,523,600
SILICON GENESIS CORP. (1.7%)	Preferred Stock - Series 1-E *(1)(2)(4)	4/18/11	5,704,480	2,372,403	1,233,879
Intellectual Property	Preferred Stock - Series 1-C *(1)(2)(4)	4/18/11	82,914	109,518	25,463
	Preferred Stock - Series 1-D *(1)(2)(4)	4/18/11	850,830	431,901	68,917
	Common Stock *(1)(2)(4)	4/18/11	921,892	169,045	4,517
	Common Stock Warrants *(1)(2)(4)	4/18/11	37,982	6,678	84
	Preferred Stock - Series 1-F *(1)(2)(4)	4/18/11	912,453	456,389	270,816
	Common Stock Warrants *(1)(2)(4)	10/13/11	5,000,000	0	2,000
	Common Stock Warrants *(1)(2)(4)	2/6/12	3,000,000	0	1,200
	Preferred Stock - Series 1-G *(1)(2)(4)	3/10/16	48,370,793	3,880,592	1,443,530
	Preferred Stock - Series 1-H *(1)(2)(4)	3/10/16	837,942	936,895	137,339
					3,187,745
SVXR, INC. (2.6%) Semiconductor Equipment	Preferred Stock - Series A *(1)(3)(4)	1/11/17 - 8/29/18	8,219,454	4,082,192	4,923,206
TELEPATHY INVESTORS, INC. (0.7%)	Convertible Note Matures January 2019 Interest Rate 10% (1)(2)(4)	6/21/16	150,000	150,000	14,678
Consumer Electronics	Convertible Note Matures January 2019 Interest Rate 10% (1)(2)(4)	9/7/18	200,000	200,000	19,570

All values are in US Dollars.

See accompanying notes to financial statements

Firsthand Technology Value Fund, Inc.

Consolidated Schedule of Investments - continued

DECEMBER 31, 2018

PORTFOLIO<br><br>COMPANY<br><br>(% OF NET<br><br>ASSETS)<br><br>AND INDUSTRY	INVESTMENT TYPE		SHARES/PAR<br>VALUE ()	COST BASIS	VALUE
TELEPATHY INVESTORS, INC. (continued)	Convertible Note Matures January 2019 Interest Rate 10% (1)(2)(4)	4/20/16	500,000	500,000	48,925
	Convertible Note Matures January 2019 Interest Rate 10% (1)(2)(4)	6/23/15	2,000,000	2,000,000	195,700
	Convertible Note Matures January 2019 Interest Rate 10% (1)(2)(4)	5/3/17	300,000	300,000	29,355
	Preferred Stock - Series A *(1)(2)(4)	7/29/14	15,238,000	3,999,999	927,994
	Convertible Note Matures January 2019 Interest Rate 10% (1)(2)(4)	1/29/16	300,000	300,000	29,355
	Convertible Note Matures January 2019 Interest Rate 10% (1)(2)(4)	12/13/16	500,000	500,000	48,925
					1,314,502
UCT COATINGS, INC. (0.4%) Advanced Materials	Common Stock *(1)(3)(4)	4/18/11	1,500,000	662,235	748,950
VUFINE, INC. (0.0%) Consumer Electronics	Convertible Note Matures July 2019 Interest Rate 12% (1)(2)(4)	10/31/18	200,000	200,000	1,537
	Convertible Note Matures July 2019 Interest Rate 12% (1)(2)(4)	7/10/17	1,500,000	1,500,000	11,526
	Convertible Note Matures July 2019 Interest Rate 12% (1)(2)(4)	9/13/18	100,000	100,000	768
	Convertible Note Matures October 2019 Interest Rate 12% (1)(2)(4)	10/16/17	250,000	250,000	1,921
	Convertible Note Matures July 2019 Interest Rate 12% (1)(2)(4)	1/31/18	350,000	350,000	2,689

All values are in US Dollars.

See accompanying notes to financial statements

Firsthand Technology Value Fund, Inc.

Consolidated Schedule of Investments - continued

DECEMBER 31, 2018

PORTFOLIO<br><br>COMPANY<br><br>(% OF NET<br><br>ASSETS)<br><br>AND INDUSTRY	INVESTMENT TYPE		SHARES/PAR<br>VALUE ()	COST BASIS	VALUE
VUFINE, INC. (0.0%) (continued)	Convertible Note Matures July 2019 Interest Rate 12% (1)(2)(4)	6/19/18	300,000	300,000	2,305
	Common Stock *(1)(2)(4)	2/26/15	750,000	15,000	0
	Preferred Stock - Series A *(1)(2)(4)	3/4/15 - 2/18/16	22,500,000	2,250,000	0
					20,746
WRIGHTSPEED, INC. (4.8%) Automotive	Convertible Note Matures December 2019 Interest Rate 12% (1)(3)(4)	12/31/18	100,000	100,000	2,751
	Convertible Note Matures December 2019 Interest Rate 12% (1)(3)(4)	5/1/18	3,700,000	3,700,000	101,787
	Convertible Note Matures December 2019 Interest Rate 12% (1)(3)(4)	6/21/18	2,000,000	2,000,000	55,020
	Convertible Note Matures December 2019 Interest Rate 12% (1)(3)(4)	8/10/18	3,000,000	3,000,000	82,530
	Preferred Stock - Series C *(1)(3)(4)	4/11/13	2,267,659	1,922,975	494,803
	Preferred Stock - Series D *(1)(3)(4)	12/15/14	1,100,978	3,375,887	310,806
	Preferred Stock - Series E *(1)(3)(4)	7/10/15	450,814	1,658,996	136,732
	Preferred Stock - Series F *(1)(3)(4)	8/31/17	90,707	499,995	41,344
	Preferred Stock Warrants - Series F *(1)(3)(4)	12/31/18	200,000	0	90,980
	Preferred Stock Warrants - Series F *(1)(3)(4)	12/31/18	200,000	0	224
	Preferred Stock Warrants - Series F *(1)(3)(4)	4/9/18	13,606	0	22
	Preferred Stock Warrants - Series F *(1)(3)(4)	4/26/18	6,803	0	11
	Preferred Stock Warrants - Series F *(1)(3)(4)	8/10/18	6,000,000	0	2,729,400

All values are in US Dollars.

See accompanying notes to financial statements

Firsthand Technology Value Fund, Inc.

Consolidated Schedule of Investments - continued

DECEMBER 31, 2018

PORTFOLIO<br><br>COMPANY<br><br>(% OF NET<br><br>ASSETS)<br><br>AND INDUSTRY	INVESTMENT TYPE		SHARES/PAR<br>VALUE ()	COST BASIS	VALUE
WRIGHTSPEED, INC. (continued)	Preferred Stock Warrants - Series F *(1)(3)(4)	5/1/18	7,400,000	0	3,366,260
	Preferred Stock Warrants - Series F *(1)(3)(4)	6/21/18	4,000,000	0	1,819,600
	Preferred Stock Warrants - Series F *(1)(3)(4)	8/10/18	6,000,000	0	6,720
	Preferred Stock Warrants - Series F *(1)(3)(4)	5/1/18	7,400,000	0	8,288
	Preferred Stock Warrants - Series F *(1)(3)(4)	6/21/18	4,000,000	0	4,480
	Preferred Stock Warrants - Series F *(1)(3)(4)	8/31/17	18,141	0	29
	Preferred Stock Warrants - Series F *(1)(3)(4)	2/7/18	11,338	0	18
					9,251,805
INVESTMENT COMPANY (0.2%)	Fidelity Investments Money Market Treasury Portfolio - Class I (5)	Various	438,442	438,442	438,442
TOTAL INVESTMENTS (Cost $167,277,338) — 109.5%					209,853,570
LIABILITIES IN EXCESS OF OTHER ASSETS — (9.5)%					(18,235,611	)
NET ASSETS — 100%					191,617,959

All values are in US Dollars.

*	Non-income producing security.
(1)	Restricted security. Fair Value is determined by or under the direction of the Company’s Board of Directors (See note 3). At December 31, 2018, we held $205,157,528 (or 107.07% of net assets) in restricted securities (see Note 2).
---	---
(2)	Controlled Investments.
---	---
(3)	Affiliated issuer.
---	---
(4)	Fair Value Level 3 Security.
---	---
(5)	The Fidelity Investments Money Market Portfolio invests primarily in U.S. Treasury securities.
---	---

See accompanying notes to financial statements

Firsthand Technology Value Fund, Inc.

Consolidated Statements of Operations

	FOR THE YEAR ENDED<br>DECEMBER 31, 2019		FOR THE YEAR ENDED<br>DECEMBER 31, 2018		FOR THE YEAR ENDED<br>DECEMBER 31, 2017
INVESTMENT INCOME
Unaffiliated interest	72,502		6,228		1,522
Affiliated/controlled interest	1,717,149		3,440,610		1,540,089
Affiliated/Controlled loan origination income	—		21,000		24,180
TOTAL INVESTMENT INCOME	1,789,651		3,467,838		1,565,791
EXPENSES
Investment advisory fees (Note 4)	3,405,735		4,128,311		2,975,982
Administration fees	141,714		207,292		187,846
Custody fees	15,070		32,123		22,152
Transfer agent fees	33,353		35,176		33,017
Registration and filing fees	30,700		30,600		23,100
Professional fees	432,337		375,496		535,293
Printing fees	172,820		62,376		195,892
Trustees fees	200,000		200,000		137,500
Compliance fees	118,780		114,648		107,640
Miscellaneous fees	53,513		87,830		174,670
TOTAL GROSS EXPENSES	4,604,022		5,273,852		4,393,092
Incentive fee adjustments (Note 4)	(9,261,847	)	7,570,807		1,691,040
TOTAL NET EXPENSES	(4,657,825	)	12,844,659		6,084,132
NET INVESTMENT INCOME (LOSS), BEFORE TAXES	6,447,476		(9,376,821	)	(4,518,341	)
Deferred tax benefit/(expenses)	(538,914	)	538,915		—
Net investment income (loss), net of deferred taxes	5,908,562		(8,837,906	)	(4,518,341	)
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gains (losses) from security transactions on:
Affiliated/Controlled	(24,091,097	)	(10,658,458	)	5,058,105
Non-affiliated/controlled and other assets	3,004,025		5,432,378		(1,516,161	)
Written options (1)	98,590		231,422		—
Deferred tax benefit	4,623,742		1,192,325		—
Net realized gains (losses), net of deferred taxes	(16,364,740	)	(3,802,333	)	3,541,944
Net change in unrealized appreciation (depreciation) on:
Non-affiliated investments	(6,092,860	)	(5,442,441	)	19,408,570
Affiliated/controlled investments and foreign currency	(52,627,051	)	47,667,121		1,138,114
Affiliated/controlled warrants investments (1)	(7,542,793	)	451,886		6,609,282
Deferred tax benefit/(expenses)	12,190,314		(10,163,798	)	—
Net change in unrealized appreciation (depreciation), net of deferred taxes	(54,072,390	)	32,512,768		27,155,966
Net Realized and Unrealized Gains (Losses) on Investments, Net of Deferred Taxes	(70,437,130	)	28,710,435		30,697,910
Net Increase (Decrease) In Net Assets Resulting From Operations, Net of Deferred Taxes	(64,528,568	)	19,872,529		26,179,569
Net Increase (Decrease) In Net Assets Per Share Resulting From Operations (2)	(8.99	)	2.73		3.59

All values are in US Dollars.

(1)	Primary exposure is equity risk.
(2)	Per share results are calculated based on weighted average shares outstanding for each period.
---	---

See accompanying notes to financial statements

Firsthand Technology Value Fund, Inc.

Consolidated Statements of Cash Flows

	FOR THE YEAR ENDED<br>DECEMBER 31, 2019		FOR THE YEAR ENDED<br>DECEMBER 31, 2018		FOR THE YEAR ENDED<br>DECEMBER 31, 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase (decrease) in Net Assets resulting from operations	(64,528,568	)	19,872,529		26,179,569
Adjustments to reconcile net increase (decrease) in Net Assets derived from operations to net cash provided by (used in) operating activities
Purchases of investments	(29,888,755	)	(83,779,495	)	(30,958,618	)
Proceeds from disposition of investments	41,756,374		85,549,002		34,282,019
Net purchases/sales from short-term investments	(9,819,822	)	898,356		65,833
Increase (decrease) in dividends, interest, and reclaims receivable	(199,349	)	(514,363	)	(973,179	)
Increase (decrease) in receivable in investment sold	1,005		(1,005	)	—
Increase (decrease) in payable for investment purchased	(365,783	)	365,783		(395,532	)
Increase (decrease) in payable to affiliates	1,127,095		1,455,642		82,552
Increase (decrease) in incentive fees payable	(9,261,847	)	7,570,807		1,691,040
Increase (decrease) in other assets	(3,087	)	9,272		528
Increase (decrease) in accrued expenses and other payables	206,693		(39,096	)	(2,101	)
Increase (decrease) in deferred tax benefit/liability	(16,275,142	)	8,432,558		—
Net realized gain (loss) from investments	21,087,072		5,226,080		(3,541,944	)
Net realized gain from written options	(98,590	)	(231,422	)	—
Net unrealized appreciation (depreciation) from investments, other assets, and warrants transactions	66,262,704		(42,676,566	)	(27,155,966	)
Net cash provided by (used in) operating activities	—		2,138,082		(725,799	)
CASH FLOWS FROM FINANCING ACTIVITIES
Cost of shares repurchased	—		(2,002,458	)	(1,098,371	)
Distributions paid from net realized gains	—		(245,701	)	—
Net cash provided by (used in) financing activities	—		(2,248,159	)	(1,098,371	)
Net increase (decrease) in cash	—		(110,077	)	(1,824,170	)
Cash - beginning of year	—		110,077		1,934,247
Cash - end of year	—		—		110,077

All values are in US Dollars.

See accompanying notes to financial statements

Firsthand Technology Value Fund, Inc.

Consolidated Statements of Changes in Net Assets

	FOR THE YEAR ENDED<br>DECEMBER 31, 2019		FOR THE YEAR ENDED<br>DECEMBER 31, 2018		FOR THE YEAR ENDED<br>DECEMBER 31, 2017
FROM OPERATIONS:
Net investment income (loss), net of deferred taxes	5,908,562		(8,837,906	)	(4,518,341	)
Net realized gain (loss) from security transactions, written options and warrants transactions, net of deferred taxes	(16,364,740	)	(3,802,333	)	3,541,944
Net change in unrealized appreciation (depreciation) on investments and warrants transactions, net of deferred taxes	(54,072,390	)	32,512,768		27,155,966
Net increase (decrease) in net assets from operations	(64,528,568	)	19,872,529		26,179,569
DISTRIBUTIONS TO SHAREHOLDERS:	—		(245,701	)	—
FROM CAPITAL SHARE TRANSACTIONS:
Value for shares repurchased	—		(2,002,458	)	(1,098,371	)
Net decrease in net assets from capital share transactions	—		(2,002,458	)	(1,098,371	)
TOTAL INCREASE/(DECREASE) IN NET ASSETS	(64,528,568	)	17,624,370		25,081,198
NET ASSETS:
Beginning of year	191,617,959		173,993,589		148,912,391
End of year	127,089,391		191,617,959		173,993,589
COMMON STOCK ACTIVITY:
Shares repurchased	—		(123,376	)	(128,551	)
Net decrease in shares outstanding	—		(123,376	)	(128,551	)
Shares outstanding, beginning of year	7,178,770		7,302,146		7,430,697
Shares outstanding, end of year	7,178,770		7,178,770		7,302,146

All values are in US Dollars.

See accompanying notes to financial statements

Firsthand Technology Value Fund, Inc.

Consolidated Financial HighlightsSelected per share data and ratios for a share outstanding throughout each year

	FOR THE<br>YEAR ENDED<br>DECEMBER 31,<br>2019		FOR THE<br>YEAR ENDED<br>DECEMBER 31,<br>2018		FOR THE<br>YEAR ENDED<br>DECEMBER 31,<br>2017		FOR THE<br>YEAR ENDED<br>DECEMBER 31,<br>2016		FOR THE<br>YEAR ENDED<br>DECEMBER 31,<br>2015
Net asset value at beginning of period	26.69		23.83		20.04		22.79		24.49
Income from investment operations:
Net investment income (loss), before deferred taxes	0.90	^(1)^	(1.29	)^(1)^	(0.62	)	(0.52	)	(0.06	)^(1)^
Deferred tax benefit	(0.08	)	0.07		—		—		—
Net investment gain (losses)	0.82		(1.22	)	(0.62	)	(0.52	)	(0.06	)
Net realized and unrealized gains (losses) on investments, before deferred taxes	(12.15	)	5.13		4.21		(2.76	)	(1.78	)
Deferred tax expense	2.34		(1.23	)	—		—		—
Net realized and unrealized gains (losses) on investments	(9.81	)	3.90		4.21		(2.76	)	(1.78	)
Total from investment operations	(8.99	)	2.68		3.59		(3.28	)	(1.84	)
Distributions from:
Realized capital gains	—		(0.03	)	—		—		—
Anti-dilutive effect from capital share transactions	—		0.21		0.20		0.53		0.14
Net asset value at end of year	17.70		26.69		23.83		20.04		22.79
Market value at end of year	6.43		11.20		8.96		7.67		8.17
Total return
Based on Net Asset Value	(33.68	)%	12.39	%	18.91	%	(12.07	)%	(6.94	)%
Based on Market Value	(42.59	)%	25.43	%	16.82	%	(6.12	)%	(56.19	)%
Net assets at end of period (millions)	127.1		191.6		174.0		148.9		175.6

All values are in US Dollars.

See accompanying notes to financial statements

Firsthand Technology Value Fund, Inc.

Consolidated Financial Highlights - continuedSelected per share data and ratios for a share outstanding throughout each year - continued

	FOR THE<br><br>YEAR ENDED<br><br>DECEMBER 31,<br><br>2019
Ratio of total expenses to average net assets:
Before tax (benefit)/expense		(2.84	)%^(2)^	6.75	%^(2)^	4.13	%^(2)^	2.90	%	1.36	%^(2)^
Deferred tax (benefit)/expense ^(3)(4)^		(9.91	)%	4.43	%	—		—		—
Total expenses		(12.75	)%^(2)^	11.18	%^(2)^	4.13	%	2.90	%	1.36	%
Total expenses, excluding incentive fees and deferred tax expense		2.80	%	2.77	%	2.98	%	2.90	%	2.68	%
Ratio of net investment income (loss) to average net assets:
Before tax benefit		3.93	%^(2)^	(4.93	)%^(2)^	(3.07	)%	(2.36	)%	(0.24	)%
Deferred tax benefit ^(4)(5)^		(0.33	)%	0.28	%	—		—		—
Net investment income (loss)		3.60	%	(4.65	)%	(3.07	)%	(2.36	)%	(0.24	)%
Portfolio turnover rate		18	%	44	%	22	%	49	%	22	%
(1)	Calculated using average shares outstanding.
---	---
(2)	Amount includes the incentive fee. For the years ended December 31, 2019, December 31, 2018, December 31, 2017 and December 31, 2015 the ratio of the incentive fee to average net assets was (5.64)%, 3.98%, 1.15% and (1.32)%, respectively.
---	---
(3)	Deferred tax expense estimate is derived from net investment income (loss), and realized and unrealized gains (losses).
---	---
(4)	The deferred tax e xp ense and tax benefit are based on average net assets.
---	---
(5)	Deferred tax benefit estimate for the ratio calculation is derived from net investment income (loss) only.
---	---

See accompanying notes to financial statements

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements

DECEMBER 31, 2019

NOTE 1. THE COMPANY

Firsthand Technology Value Fund, Inc. (the “Company,” the “Fund,” “us,” “our,” and “we”), is a Maryland corporation and an externally managed, non-diversified, closed-end management investment company that has elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company acquired its initial portfolio of securities through the reorganization of Firsthand Technology Value Fund, a series of Firsthand Funds, into the Company. The reorganization was completed on April 15, 2011. The Company commenced operations on April 18th, 2011. Under normal circumstances, the Company will invest at least 80% of its assets for investment purposes in technology companies, which are considered to be those companies that derive at least 50% of their revenues from products and/ or services within the information technology sector or the “cleantech” sector. Information technology companies include, but are not limited to, those focused on computer hardware, software, telecommunications, networking, Internet, and consumer electronics. While there is no standard definition of cleantech, it is generally regarded as including goods and services designed to harness renewable energy and materials, eliminate emissions and waste, and reduce the use of natural resources. In addition, under normal circumstances we will invest at least 70% of our assets in privately held companies and in public companies with market capitalizations less than $250 million. Our portfolio is primarily composed of equity and equity derivative securities of technology and cleantech companies (as defined above). These investments generally range between $1 million and $10 million each, although the investment size will vary proportionately with the size of the Company’s capital base. The Company’s shares are listed on the NASDAQ Global Market under the symbol “SVVC.” Firsthand Capital Management, Inc., which was previously known as SiVest Group, Inc. (“FCM” or the “Advisor”), serves as the investment adviser to the Company.

The Company is an investment company and follows accounting and reporting guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946.

CONSOLIDATION OF SUBSIDIARIES. On May 8, 2015, the Board of Directors of the Company approved the formation of a fully owned and controlled subsidiary (as defined by the 1940 Act) of the Company named Firsthand Venture Investors (“FVI”), a California general partnership formed on March 30, 2015. After the close of business on June 30, 2015, the Company contributed substantially all of its assets to FVI in return for a controlling general partner ownership interest in FVI. The transaction was completed on July 1, 2015. Under this structure, we have all or substantially all of our investment activities conducted through our fully owned subsidiary, FVI.

During the fiscal years ended December 31, 2016 and 2017, with the approval of its Board of Directors, the Company organized three separate fully owned and controlled subsidiaries (as defined by the 1940 Act). Each subsidiary was a Cayman Islands corporation and the financial statements of each subsidiary were reported on a consolidated basis with the Company. Each subsidiary was formed for the purpose of holding one or more investments made by the Company, and was treated as a controlled foreign corporation under the Internal Revenue Code not separately subject to U.S. federal income tax. FVI was treated as the sole U.S. shareholder of each subsidiary.

The Board of Directors of the Company approved the liquidation of those three Cayman subsidiaries on November 2, 2018. That liquidation was completed on December 27, 2018.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies followed in the preparation of the Company’s financial statements included in this report:

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

BASIS OF PRESENTATION. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) pursuant to the requirements on Form 10-K. ASC 946, Financial Services—Investment Companies (“ASC 946”), and Articles 6, 10 and 12 of Regulation S-X. In the opinion of management, all adjustments, which are of a normal recurring nature, considered necessary for the fair presentation of the financial statements for the periods presented, have been included.

Under the 1940 Act, ASC 946, and the regulations pursuant to Article 6 of Regulation S-X, we are precluded from consolidating any entity other than another investment company or an operating company which provides substantially all of its services to benefit us. Consequentially, as of December 31, 2018, the Company consolidated some special purpose entities. These special purpose entities only hold investments of the Company and have no other significant asset and liabilities. All significant intercompany transactions and balances have been eliminated in consolidation.

USE OF ESTIMATES. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

PORTFOLIO INVESTMENT VALUATIONS. Investments are stated at “value” as defined in the 1940 Act and in the applicable regulations of the Securities and Exchange Commission and in accordance with GAAP. Value, as defined in Section 2(a)(41) of the 1940 Act, is (i) the market value of those securities for which a market quotation is readily available and (ii) the fair value as determined in good faith by, or under the direction of, the Board of Directors for all other securities and assets. On December 31, 2019, our financial statements include venture capital investments valued at approximately $53.4 million. The fair values of our venture capital investments were determined in good faith by, or under the direction of, the Board. Upon sale of these investments, the values that are ultimately realized may be different from what is presently estimated. The difference could be material. Also see note 6 regarding the fair value of the company’s investments.

CASH AND CASH EQUIVALENTS. The Company considers liquid assets deposited with a bank, investments in money market funds, and certain short-term debt instruments with maturities of three months or less to be cash equivalents. These investments represent amounts held with financial institutions that are readily accessible to pay our expenses or purchase investments. Cash and cash equivalents are valued at cost plus accrued interest, which approximates market value.

RESTRICTED SECURITIES. At December 31, 2019, we held $114,282,924 in restricted securities. At December 31, 2018, we held $205,157,528 in restricted securities.

INCOME RECOGNITION. Dividend income is recorded on the ex-dividend date. Interest income is accrued as earned. Discounts and premiums on securities purchased are amortized over the lives of the respective securities. Other non-cash dividends are recognized as investment income at the fair value of the property received. When debt securities are determined to be non-income producing, the Company ceases accruing interest and writes off any previously accrued interest. These write-offs are recorded as a debit to interest income.

SHARE VALUATION. The net asset value (“NAV”) per share of the Fund is calculated by dividing the sum of the value of the securities held by the Fund, plus cash or other assets, minus all liabilities (including estimated accrued expenses) by the total number of shares outstanding of the Fund, rounded to the nearest cent.

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

REALIZED GAIN OR LOSS AND UNREALIZED APPRECIATION OR DEPRECIATION OF PORTFOLIO INVESTMENTS. A realized gain or loss is recognized when an investment is disposed of and is computed as the difference between the Company’s cost basis in the investment at the disposition date and the net proceeds received from such disposition. Realized gains and losses are calculated on a specific identification basis. Unrealized appreciation or depreciation is computed as the difference between the fair value of the investment and the cost basis of such investment.

INCOME TAXES. The Company provides for state and federal corporate income tax, as appropriate, because it is regarded as a corporation under Subchapter C of the Code. The Company recognizes interest and penalties in income tax expense.

FOREIGN CURRENCY TRANSLATION. The accounting records of the Company are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the foreign exchange rate on the date of valuation. The Company does not isolate that portion of the results of operation resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. The Company’s investments in foreign securities may involve certain risks, including without limitation: foreign exchange restrictions, expropriation, taxation or other political, social, or economic risks, all of which could affect the market and/or credit risk of the investment. In addition, changes in the relationship of foreign currencies to the U.S. dollar can significantly affect the value of these investments and therefore the earnings of the Company.

SECURITIES TRANSACTIONS. Securities transactions are accounted for on the date the transaction for the purchase or sale of the securities is entered into by the Company (i.e., trade date).

CONCENTRATION OF CREDIT RISK. The Company places its cash and cash equivalents with financial institutions and, at times, cash held in checking accounts may exceed the Federal Deposit Insurance Corporation insured limit.

OPTIONS. The Company is subject to equity price risk in the normal course of pursuing its investment objectives and may enter into options written to hedge against changes in the value of equities. The Company may purchase put and call options to attempt to provide protection against adverse price effects from anticipated changes in prevailing prices of securities or stock indices. The Company may also write put and call options. When the Company writes an option, an amount equal to the premium received by the Company is recorded as a liability and is subsequently adjusted to the current fair value of the option written.

Premiums received from writing options that expire unexercised are treated by the Company on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or, if the premium is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security or currency in determining whether the Company has realized a gain or loss. The Company as writer of an option bears the market risk of an unfavorable change in the price of the security underlying the written option.

The average volume of the Company’s derivatives during the year ended December 31, 2019 is as follows:

	PURCHASED OPTIONS<br><br>(CONTRACTS)	WARRANTS<br><br>(NOTIONAL VALUE)	WRITTEN OPTIONS<br><br>(CONTRACTS)
Firsthand Technology Value Fund, Inc.	—	9,792,665	15

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

The average volume of the Company’s derivatives during the year ended December 31, 2018 is as follows:

	PURCHASED OPTIONS<br><br>(CONTRACTS)	WARRANTS<br><br>(NOTIONAL VALUE)	WRITTEN OPTIONS<br><br>(CONTRACTS)
Firsthand Technology Value Fund, Inc.	—	12,674,248	77

NOTE 3. BUSINESS RISKS AND UNCERTAINTIES

We plan to invest a substantial portion of our assets in privately-held companies, the securities of which are inherently illiquid. We also seek to invest in small publicly-traded companies that we believe have exceptional growth potential and to make opportunistic investments in publicly-traded companies, both large and small. In the case of investments in small publicly-traded companies, although these companies are publicly traded, their stock may not trade at high volumes, and prices can be volatile, which may restrict our ability to sell our positions. We may also be subject to contractual restrictions or securities law limits on our ability to sell portfolio holdings because of, for example, our affiliation with a portfolio company or the relative size of our holding in a company. These privately held and publicly traded businesses tend to lack management depth, have limited or no history of operations and typically have not attained profitability. Because of the speculative nature of our investments and the lack of public markets for privately held investments, there is greater risk of loss than is the case with traditional investment securities.

We do not choose investments based on a strategy of diversification. We also do not rebalance the portfolio should one of our portfolio companies increase in value substantially relative to the rest of the portfolio. Therefore, the value of our portfolio may be more vulnerable to events affecting a single sector, industry or portfolio company and, therefore, may be subject to greater volatility than a company that follows a diversification strategy.

Because there is typically no public or readily-ascertainable market for our interests in the small privately-held companies in which we invest, the valuation of those securities is determined in good faith by the Valuation Committee, comprised of all members of the Board who are not “interested persons” of the Company, as such term is defined in Section 2(a)(19) of the 1940 Act, in accordance with our Valuation Procedures and is subject to significant estimates and judgments. The determined value of the securities in our portfolio may differ significantly from the values that would be placed on these securities if a ready market for the securities existed. Any changes in valuation are recorded in our Statement of Operations as “Net increase (decrease) in unrealized appreciation on investments.” Changes in valuation of any of our investments in privately-held companies from one period to another may be volatile.

The Board has engaged an independent valuation firm to provide it with valuation assistance with respect to certain of our portfolio investments. The Company intends to continue to engage an independent valuation firm to provide us with assistance regarding our determination of the fair value of select portfolio investments each quarter unless directed by the Board to cancel such valuation services. The scope of the services rendered by an independent valuation firm is at the discretion of the Board. The Board is ultimately and solely responsible for determining the fair value of the Company’s investments in good faith.

With respect to investments for which market quotations are not readily available or when such market quotations are deemed not to represent fair value, the Board has approved a multi-step valuation process to be followed each quarter, as described below:

(1)	each quarter the valuation process begins with each portfolio company or investment being initially valued by the Adviser Valuation Committee or the independent valuation firm;

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

(2)	the Valuation Committee of the Board on a quarterly basis reviews the preliminary valuation of the Adviser Valuation Committee and that of the independent valuation firms and makes the fair value determination, in good faith, based on the valuation recommendations of the Adviser Valuation Committee and the independent valuation firms; and
(3)	at each quarterly Board meeting, the Board considers the valuations recommended by the Adviser Valuation Committee and the independent valuation firms that were previously submitted to the Valuation Committee of the Board and ratifies the fair value determinations made by the Valuation Committee of the Board.
---	---

NOTE 4. INVESTMENT MANAGEMENT FEE

The Company has entered into an investment management agreement (the “Investment Management Agreement”) with FCM pursuant to which the Company will pay FCM a fee for providing investment management services consisting of two components—a base management fee and an incentive fee.

The incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Management Agreement, as of the termination date), commencing on April 15, 2011, and equals 20% of the Company’s realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fees, provided that the incentive fee determined as of December 31, 2019, will be calculated for a period of shorter than twelve calendar months to take into account any realized gains computed net of all realized capital losses and unrealized capital depreciation from inception. For the year ended December 31, 2019, there was an incentive fee reversal of ($9,261,847). For the year ended December 31, 2018, there was an incentive fee expensed for $7,570,807. For the year ended December 31, 2017, there was an incentive fee expensed for $1,691,040.

NOTE 5. DEBT

The Company currently has no plan to use leverage and does not have any significant outstanding debt obligations (other than normal operating expense accruals).

NOTE 6. FAIR VALUE

Securities traded on stock exchanges, or quoted by NASDAQ, are valued according to the NASDAQ Stock Market, Inc. (“NASDAQ”) official closing price, if applicable, or at their last reported sale price as of the close of trading on the New York Stock Exchange (“NYSE”) (normally 4:00 P.M. Eastern Time). If a security is not traded that day, the security will be valued at its most recent bid price.

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

Securities traded in the over-the-counter market, but not quoted by NASDAQ, are valued at the last sale price (or, if the last sale price is not readily available, at the most recent closing bid price as quoted by brokers that make markets in the securities) at the close of trading on the NYSE.

Securities traded both in the over-the-counter market and on a stock exchange are valued according to the broadest and most representative market.

Securities and other assets that do not have market quotations readily available are valued at their fair value as determined in good faith by the Board in accordance with the Valuation Procedures adopted by the Valuation Committee of the Board.

In pricing illiquid, privately placed securities, the Board of Directors is responsible for (1) determining overall valuation guidelines and (2) ensuring that the investments of the Company are valued within the prescribed guidelines.

The Valuation Committee, comprised of all of the independent Board members, is responsible for determining the valuation of the Company’s assets within the guidelines established by the Board of Directors. The Valuation Committee receives information and recommendations from the Adviser and an independent valuation firm.

The values assigned to these investments are based on available information and do not necessarily represent amounts that might ultimately be realized when that investment is sold, as such amounts depend on future circumstances and cannot reasonably be determined until the individual investments are actually liquidated or become readily marketable.

APPROACHES TO DETERMINING FAIR VALUE. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). In effect, GAAP applies fair value terminology to all valuations whereas the 1940 Act applies market value terminology to readily marketable assets and fair value terminology to other assets.

The main approaches to measuring fair value utilized are the market approach, the income approach, and the asset-based approach. The choice of which approach to use in a particular situation depends on the specific facts and circumstances associated with the company, as well as the purpose for which the valuation analysis is being conducted. Firsthand and the independent valuation firm rely primarily on the market approach. We also considered the income and asset-based approaches in our analysis because certain of the portfolio companies do not have substantial operating earnings relative to the value of their underlying assets.

-	Market Approach (M): The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. For example, the market approach often uses market multiples derived from a set of comparables. Multiples might lie in ranges with a different multiple for each comparable. The selection of where within the range each appropriate multiple falls requires the use of judgment in considering factors specific to the measurement (qualitative and quantitative).
-	Income Approach (I): The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present value amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. Those valuation techniques include present value techniques; option-pricing models, such as the Black-Scholes-Merton formula (a closed-form model) and a binomial model (a lattice model), which incorporate present value techniques; and the multi-period excess earnings method, which is used to measure the fair value of certain assets.
---	---
-	Asset-Based Approach (A): The asset-based approach examines the value of a company’s assets net of its liabilities to derive a value for the equity holders.
---	---

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

FAIR VALUE MEASUREMENT. In accordance with the guidance from the Financial Accounting Standards Board on fair value measurements and disclosures under GAAP, the Company discloses the fair value of its investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements).

The guidance establishes three levels of the fair value hierarchy as follows:

Level 1 -	Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the date of measurement.
Level 2 -	Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument in an inactive market, prices for similar instruments in an active or inactive market, interest rates, prepayment speeds, credit risks, yield curves, default rates, and similar data.
---	---
Level 3 -	Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Company’s own assumptions about the assumptions a market participant would use in valuing the asset or liability based on the best information available.
---	---

The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following is a summary of the inputs used to value the Company’s net assets as of December 31, 2019:

ASSETS	LEVEL 1<br>QUOTED PRICES	LEVEL 2 OTHER<br>SIGNIFICANT<br>OBSERVABLE INPUTS	LEVEL 3 SIGNIFICANT<br>UNOBSERVABLE INPUTS
Common Stocks
Advanced Materials	—	—	834,150
Automotive	—	—	3,980
Equipment Leasing	—	—	28,990
Intellectual Property	—	—	645
Mobile Computing	812,666	—	—
Semiconductor Equipment	—	—	60,843,376
Semiconductors	257,142	—	—
Total Common Stocks	1,069,808	—	61,711,141

All values are in US Dollars.

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

ASSETS (continued)	LEVEL 1<br>QUOTED PRICES	LEVEL 2 OTHER<br>SIGNIFICANT<br>OBSERVABLE INPUTS	LEVEL 3 SIGNIFICANT<br>UNOBSERVABLE INPUTS
Preferred Stocks
Aerospace	—	—	2,120,996
Automotive	—	—	10,625,710
Equipment Leasing	—	—	2,490,880
Intellectual Property	—	—	1,529,234
Medical Devices	—	—	702,826
Semiconductor Equipment	—	—	5,873,643
Total Preferred Stocks	—	—	23,343,289
Asset Derivatives *
Equity Contracts	—	—	4,938,350
Total Asset Derivatives	—	—	4,938,350
Convertible Notes
Advanced Materials	—	—	100,000
Aerospace	—	—	1,000,000
Automotive	—	—	4,929,015
Medical Devices	—	—	18,261,129
Total Convertible Notes	—	—	24,290,144
Mutual Funds	5,201,855	—	—
Total	6,271,663	—	114,282,924

All values are in US Dollars.

*	Asset derivatives include warrants.

At the end of each calendar quarter, management evaluates the Level 2 and Level 3 assets and liabilities for changes in liquidity, including but not limited to: whether a broker is willing to execute at the quoted price, the depth and consistency of prices from third party services, and the existence of contemporaneous, observable trades in the market. Additionally, management evaluates the Level 1 and Level 2 assets and liabilities on a quarterly basis for changes in listings or delistings on national exchanges. Transfers in and out of the levels are recognized at the value at the end of the period. There were no transfers between Levels 1 and 2 as of December 31, 2019.

The following is a summary of the inputs used to value the Complany’s net assets as of December 31,2018.

ASSETS	LEVEL 1<br>QUOTED PRICES	LEVEL 2 OTHER<br>SIGNIFICANT<br>OBSERVABLE INPUTS	LEVEL 3 SIGNIFICANT<br>UNOBSERVABLE INPUTS
Common Stocks
Advanced Materials	—	—	748,950
Computer Storage	—	—	—
Consumer Electronics	3,523,600	—	—
Equipment Leasing	—	—	36,470
Intellectual Property	—	—	4,517
Networking	—	—	—

All values are in US Dollars.

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

ASSETS (continued)	LEVEL 1<br>QUOTED PRICES	LEVEL 2 OTHER<br>SIGNIFICANT<br>OBSERVABLE INPUTS	LEVEL 3 SIGNIFICANT<br>UNOBSERVABLE INPUTS
Renewable Energy	—	—	—
Semiconductors	734,000	—	—
Semiconductors Equipment	—	—	112,434,579
Software	—	—	—
Total Common Stocks	4,257,600	—	113,224,516
Preferred Stocks
Advanced Materials	—	—	6,206,549
Aerospace	—	—	1,439,342
Automotive	—	—	983,685
Consumer Electronics	—	—	927,994
Equipment Leasing	—	—	3,491,600
Intellectual Property	—	—	3,179,944
Medical Devices	—	—	13,565,328
Mobile Computing	—	—	19,121,150
Networking	—	—	—
Semiconductor Equipment	—	—	5,923,206
Total Preferred Stocks	—	—	54,838,798
Asset Derivatives *
Equity Contracts	—	—	12,481,143
Total Asset Derivatives	—	—	12,481,143
Convertible Notes
Advanced Materials	—	—	7,002,600
Aerospace	—	—	1,000,000
Automotive	—	—	242,088
Consumer Electronics	—	—	407,254
Medical Devices	—	—	15,961,129
Semiconductor Equipment	—	—	—
Total Convertible Notes	—	—	24,613,071
Mutual Funds	438,442	—	—
Total	4,696,042	—	205,157,528

All values are in US Dollars.

*	Asset derivatives include warrants.

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

Following is a reconciliation of Level 3 assets (at either the beginning or the ending of the period) for which significant unobservable inputs were used to determine fair value.

INVESTMENTS AT FAIR<br><br>VALUE USING SIGNIFICANT<br><br>UNOBSERVABLE INPUTS<br><br>(LEVEL 3)	BALANCE<br>AS OF<br>12/31/18	NET<br>PURCHASES/<br>CONVERSIONS	NET SALES/<br>CONVERSIONS		NET REALIZED<br>GAINS/<br>(LOSSES)		NET<br>UNREALIZED<br>APPRECIATION<br>(DEPRECIATION)(1)		TRANSFERS<br>IN (OUT) OF<br>LEVEL 3		BALANCE<br>AS OF<br>12/31/19
Common Stocks
Advanced Materials	748,950	—	—		—		85,200		—		834,150
Automotive	—	7,460,850	—		—		(7,456,870	)			3,980
Consumer Electronics	—	—	—		(15,000	)	15,000		—		—
Equipment Leasing	36,470	—	—		—		(7,480	)	—		28,990
Intellectual Property	4,517	—	—		—		(3,872	)	—		645
Mobile Computing	19,121,150	—	(1,383,011	)	(4,049,352	)	(12,876,121	)	(812,666	)	—
Semiconductor Equipment	112,434,579	—	(14,689,087	)	2,511,807		(39,413,923	)	—		60,843,376
Preferred Stocks
Advanced Materials	6,206,549	—	—		(11,680,305	)	5,473,756		—		—
Aerospace	1,439,342	3,900,000	—		—		(3,218,346	)	—		2,120,996
Automotive	983,685	13,498,888	(7,460,852	)	—		3,603,989		—		10,625,710
Consumer Electronics	927,994	—	—		(2,250,000	)	1,322,006		—		—
Equipment Leasing	3,491,600	—	(800,000	)	—		(200,720	)	—		2,490,880
Intellectual Property	3,179,944	—	—		—		(1,650,710	)	—		1,529,234
Medical Devices	13,565,328	—	—		—		(12,862,502	)	—		702,826
Semiconductor Equipment	5,923,206	—	—		—		(49,563	)	—		5,873,643
Asset Derivatives
Equity Contracts	12,481,143	—	—		—		(7,542,793	)	—		4,938,350
Convertible Notes
Advanced Materials	7,002,600	2,970,000	—		(9,872,600	)	—		—		100,000
Aerospace	1,000,000	—	—		—		—		—		1,000,000
Automotive	242,088	8,229,015	(12,100,000	)	—		8,557,912		—		4,929,015
Consumer Electronics	407,254	45,000	—		(2,745,000	)	2,292,746		—		—
Medical Devices	15,961,129	2,300,000	—		—		—		—		18,261,129
Total	205,157,528	38,403,753	(36,432,950	)	(28,100,450	)	(63,932,291	)	(812,666	)	114,282,924

All values are in US Dollars.

(1)	The net change in unrealized appreciation (depreciation) from Level 3 instruments held as of December 31, 2019 was $ (68,286,846) .

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

Following is a reconciliation of Level 3 assets (at either the beginning or the ending of the period) for which significant unobservable inputs were used to determine fair value.

INVESTMENTS AT FAIR<br><br>VALUE USING SIGNIFICANT<br><br>UNOBSERVABLE INPUTS<br><br>(LEVEL 3)	BALANCE<br>AS OF<br>12/31/17	NET<br>PURCHASES/<br>CONVERSIONS	NET SALES/<br>CONVERSIONS		NET REALIZED<br>GAINS/<br>(LOSSES)		NET<br>UNREALIZED<br>APPRECIATION<br>(DEPRECIATION)(1)		TRANSFERS<br>IN (OUT) OF<br>LEVEL 3	BALANCE<br>AS OF<br>12/31/18
Common Stocks
Advanced Materials	922,050	—	—		—		(173,100	)	—	748,950
Consumer Electronics	11,650,500	—	(2,312,500	)	(10,108,024	)	770,024		—	—
Equipment Leasing	44,810	—	—		—		(8,340	)	—	36,470
Intellectual Property	16,871	—	—		—		(12,354	)	—	4,517
Semiconductor Equipment	29,908	42,941,781	(6,164,686	)	1,206,006		74,421,570		—	112,434,579
Preferred Stocks
Advanced Materials	19,526,941	24,290,124	(24,290,124	)	(6,319,935	)	(7,000,457	)	—	6,206,549
Aerospace	608,114	3,500,000	—		—		(2,668,772	)	—	1,439,342
Automotive	10,686,932	368,088	(368,088	)	(4,915,008	)	(4,788,239	)	—	983,685
Cloud Computing	8,561,704	—	(5,462,741	)	(4,157,447	)	1,058,484		—	—
Consumer Electronics	937,137	—	—		—		(9,143	)	—	927,994
Equipment Leasing	3,975,200	—	—		—		(483,600	)	—	3,491,600
Intellectual Property	6,059,741	1,658,300	(1,857,030	)	(620,377	)	(2,060,690	)	—	3,179,944
Medical Devices	11,479,677	—	—		—		2,085,651		—	13,565,328
Mobile Computing	12,018,563	9,999,997	(9,999,997	)	(1	)	7,102,588		—	19,121,150
Semiconductor Equipment	40,067,044	11,307,262	(37,505,362	)	(9,075	)	(7,936,663	)	—	5,923,206
Asset Derivatives
Equity Contracts	12,029,324	—	—		(67	)	451,886		—	12,481,143
Convertible Notes
Advanced Materials	2,745,485	9,052,600	(4,795,485	)	—		—		—	7,002,600
Aerospace	—	1,000,000	—		—		—		—	1,000,000
Automotive	—	9,050,000	(250,000	)	—		(8,557,912	)	—	242,088
Consumer Electronics	2,000,673	1,150,000	—		—		(2,743,419	)	—	407,254
Medical Devices	9,500,000	14,461,129	(8,000,000	)	—		—		—	15,961,129
Semiconductor Equipment	2,000,000	3,846,397	(5,846,397	)	—		—		—	—
Water Purification	—	—	(1,000	)	(49,000	)	50,000		—	—
Total	154,860,674	132,625,678	(106,853,410	)	(24,972,928	)	49,497,514		—	205,157,528

All values are in US Dollars.

(1)	The net change in unrealized appreciation from Level 3 instruments held as of December 31, 2018 was $67,774,754.

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

The below chart represents quantitative disclosure about significant unobservable inputs for Level 3 fair value measurements at December 31, 2019:

	FAIR<br><br>VALUE AT<br><br>12/31/19	VALUATION TECHNIQUES^(1)^	UNOBSERVABLE INPUTS	RANGE<br><br>(WEIGHTED AVG.)
Direct venture capital investments: Advanced Materials	$0.9M	Market Comparable Companies<br><br>Discounted Cash Flow<br><br>Option Pricing Model	EBITDA Multiple<br><br>Weighted Average Cost of Capital<br><br>Years to Maturity<br><br>Volatility<br><br>Risk-Free Rate<br><br>Discount for Lack of Marketability	8.8% - 10.5% (9.7%)<br><br>23.1% (23.1%)<br><br>5 years (5 years)<br><br>50.0% (50.0%)<br><br>1.69% (1.69%)<br><br>22.7% (22.7%)
Direct venture capital investments: Aerospace	$8.0M	Prior Transaction<br><br>Analysis<br><br>Option Pricing Model	Years to Maturity<br><br>Volatility<br><br>Risk-Free Rate<br><br>Going Concern Probability	5 years (5 years)<br><br>60.0% (60.0%)<br><br>1.68% (1.68%)<br><br>63% (63%)
Direct venture capital investments: Automotive	$15.7M	Prior Transaction<br><br>Analysis<br><br>Option Pricing Model	Years to Maturity<br><br>Volatility<br><br>Risk-Free Rate<br><br>Discount for Lack of Marketability<br><br>Going Concern Probability	5 years (5 years)<br><br>50.0% (50.0%)<br><br>1.69% (1.69%)<br><br>22.7% (22.7%)<br><br>75% (75%)
Direct venture capital investments: Consumer Electronics	$0.0M	Prior Transaction Analysis<br><br>Option Pricing Model	Years to Maturity<br><br>Volatility<br><br>Risk-Free Rate	5 years (5 years)<br><br>70.0% (70.0%)<br><br>1.69% (1.69%)
Direct venture capital investments: Equipment Leasing	$2.5M	Market Comparable Companies<br><br>Discounted Cash Flow<br><br>Option Pricing Model	EBITDA Multiple<br><br>Weighted Average Cost of Capital<br><br>Years to Maturity<br><br>Volatility<br><br>Risk-Free Rate	3.8% - 8.5% (5.2%)<br><br>20.0% (20.0%)<br><br>5 years (5 years)<br><br>50.0% (50.0%)<br><br>1.69% (1.69%)
Direct venture capital investments: Intellectual Property	$1.5M	Prior Transaction Analysis<br><br>Discounted Cash Flow<br><br>Option Pricing Model	Weighted Average Cost of Capital<br><br>Years to Maturity<br><br>Volatility<br><br>Risk-Free Rate<br><br>Discount for Lack of Marketability<br><br>Adjustment for Market Movement	10.0% (10.0%)<br><br>5 years (5 years)<br><br>55.0% (55.0%)<br><br>1.69% (1.69%)<br><br>0.0% - 24.3% (0.1%)<br><br>-55.0% (-55.0%)

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

continued	FAIR<br><br>VALUE AT<br><br>12/31/19	VALUATION TECHNIQUES^(1)^	UNOBSERVABLE INPUTS	RANGE<br><br>(WEIGHTED AVG.)
Direct venture capital investments: Medical Devices	$19.0M	Market Comparable Companies<br><br>Option Pricing Model	Revenue Multiple<br><br>Years to Maturity<br><br>Volatility<br><br>Risk-Free Rate	3.3x – 4.0x (3.6x)<br><br>4 years (4 years)<br><br>50.0% (50.0%)<br><br>1.66% (1.66%)
Direct venture capital investments:<br><br>Semiconductor<br><br>Equipment	$66.7M	Prior Transaction Analysis<br><br>Option Pricing Model	Years to Maturity<br><br>Volatility<br><br>Risk-Free Rate<br><br>Discount for Lack of Marketability	0 years – 5 years (0.5 years)<br><br>40.0% -50.0% (46.1%)<br><br>1.69% (1.69%)<br><br>0.0% - 12.1% (9.4%)
(1)	As of December 31, 2018, the Fund used Probability-Weighted Expected Return, Market Comparable Companies, and Prior Transaction approaches to value certain common stock and preferred stock investments. As of December 31, 2019, the Fund discontinued use of these approaches in certain cases in which the portfolio companies failed or realized a particular outcome. As of December 31, 2019, the Fund also added a Discounted Cash Flow approach to the valuation of certain preferred stock and common stock investments in order to utilize multiple valuation approaches to provide additional indications of value.
---	---

The below chart represents quantitative disclosure about significant unobservable inputs for Level 3 fair value measurements at December 31, 2018:

	FAIR<br><br>VALUE AT<br><br>12/31/18	VALUATION TECHNIQUES^(1)^	UNOBSERVABLE INPUTS	RANGE<br><br>(WEIGHTED AVG.)
Direct venture capital investments: Advanced Materials	$14.2M	Market Comparable Companies<br><br>Prior Transaction Analysis<br><br>Probability-Weighted Expected Return<br><br>Option Pricing Model	EBITDA Multiple<br><br>Years to Maturity<br><br>Volatility<br><br>Risk-Free Rate<br><br>Going Concern Probability<br><br>Discount for Lack of Marketability	7.8% - 8.7% (8.3%)<br><br>5 years (5 years)<br><br>50.0% (50.0%)<br><br>2.51%<br><br>43%<br><br>0.0% - 22.7% (1.2%)
Direct venture capital investments: Aerospace	$6.7M	Prior Transaction Analysis<br><br>Option Pricing Model	Years to Maturity<br><br>Volatility<br><br>Risk-Free Rate	5 years (5 years)<br><br>60.0% (60.0%)<br><br>2.51% (2.51%)
Direct venture capital investments: Automotive	$9.3M	Prior Transaction Analysis<br><br>Option Pricing Model	Years to Maturity<br><br>Volatility<br><br>Risk-Free Rate	3 years (3 years)<br><br>55.0% (55.0%)<br><br>2.46% (2.46%)

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

continued	FAIR<br><br>VALUE AT<br><br>12/31/18	VALUATION TECHNIQUES^(1)^	UNOBSERVABLE INPUTS	RANGE<br><br>(WEIGHTED AVG.)
Direct venture capital investments: Consumer Electronics	$1.3M	Market Comparable Companies<br><br>Probability-Weighted Expected Return<br><br>Invested Capital (Cost)<br><br>Option Pricing Model	Revenue Multiple<br><br>Going Concern Probability<br><br>Years to Maturity<br><br>Volatility<br><br>Risk-Free Rate	0.9x - 1.6x (1.3x)<br><br>30% (30%)<br><br>1 year (1 year)<br><br>70.0% (70.0%)<br><br>2.63% (2.63%)
Direct venture capital investments: Equipment Leasing	$3.5M	Prior Transaction Analysis<br><br>Option Pricing Model<br><br>Discounted Cash Flow	Years to Maturity<br><br>Volatility<br><br>Risk-Free Rate<br><br>Weighted Average Cost of Capital<br><br>Perpetual Growth Rate	5 years (5 years)<br><br>50.0% (50.0%)<br><br>2.51% (2.51%)<br><br>20% (20%)<br><br>3% (3%)
Direct venture capital investments: Intellectual Property	$3.2M	Prior Transaction Analysis<br><br>Discounted Cash Flow<br><br>Option Pricing Model	Years to Maturity<br><br>Volatility<br><br>Risk-Free Rate<br><br>Discount for Lack of Marketability<br><br>Adjustment for Market Movement<br><br>Weighted Average Cost of Capital<br><br>Long Term Growth Rate<br><br>High Growth Rate	5 years (5 years)<br><br>55.0% (55.0%)<br><br>2.51% (2.51%)<br><br>0.0% - 24.3% (0.1%)<br><br>-61.5% (-61.5%)<br><br>100% (100%)<br><br>3% (3%)<br><br>98.3% (98.3%)
Direct venture capital investments: Medical Devices	$29.5M	Market Comparable Companies<br><br>Option Pricing Model	Revenue Multiple<br><br>Years to Maturity<br><br>Volatility<br><br>Risk-Free Rate	3.1x - 3.5x (3.2x)<br><br>4 years (4 years)<br><br>50.0% (50.0%)<br><br>2.49% (2.49%)
Direct venture capital investments: Mobile Computing	$19.1M	Prior Transaction Analysis	Years to Maturity<br><br>Volatility<br><br>Discount for Lack of Marketability	0.5 years (0.5 years)<br><br>65.0% (65.0%)<br><br>10.3% (10.3%)
Direct venture capital investments: Semiconductor Equipment	$118.4M	Prior Transaction Analysis<br><br>Option Pricing Model	Years to Maturity<br><br>Volatility<br><br>Risk-Free Rate<br><br>Discount for Lack of Marketability	0 years - 5 years (1.4 years)<br><br>40.0% - 50.0% (47.2%)<br><br>2.51% (2.51%)<br><br>0.0% - 15.2% (12.0%)
(1)	As of December 31, 2017, the Fund used Market Comparable Companies, Probability-Weighted Expected Return, and Option Pricing Model approaches to value certain common stock and preferred stock investments. As of December 31, 2018, the Fund discontinued the use of these approaches in certain cases in which equity securities of the issuers had become publicly traded. As of December 31, 2018, the Fund also added a Discounted Cash Flow approach to the valuation of certain preferred stock and common stock investments in order to utilize multiple valuation approaches to provide additional indications of value.
---	---

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

NOTE 7. FEDERAL INCOME TAXES

Beginning in 2018, we were no longer able to qualify as a RIC under Subchapter M of the Code. The increase in value that resulted from the initial public offerings (IPOs) of Pivotal Systems and Revasum meant that we were no longer able to satisfy the diversification requirements for qualification as a RIC. As a result of this change, we were taxed as a corporation for our fiscal year ended December 31, 2018, and will continue to be taxed in that manner for future fiscal years, paying federal and applicable state corporate taxes on our taxable income, unless and until we are able to once again qualify as a RIC, based on changes in the composition of our portfolio. Consequently, at the close of each fiscal quarter beginning with the quarter ended June 30, 2018, we will record a deferred tax liability for any net realized gains and net ordinary income for the year-to-date period plus net unrealized gains as of the end of the quarter.

The reorganization described in Note 1 (the formation of FVI as a fully owned subsidiary for investment activities) was structured to avoid any adverse tax consequences for the Company and its shareholders. For the fiscal years which the Company operates as a RIC, we believe Company’s engaging in investment activities through FVI did not, in our view, jeopardize the Company’s ability to continue to qualify as a RIC under the Code at that time when the Company was eligible to be treated as a RIC.

The following information is based upon the U.S. federal income tax cost of portfolio investments as of December 31, 2019.

	FEDERAL INCOME<br>TAX COST:
Gross unrealized appreciation	40,954,730
Gross unrealized depreciation	(64,641,202	)
Net unrealized appreciation	(23,686,472	)
Federal income tax cost, Investments	144,241,059

All values are in US Dollars.

The Company did not qualify as a regulated investment company pursuant to Subchapter M of the Internal Revenue Code, therefore it is taxed as a corporation. As a corporation, the Company is obligated to pay federal and state income tax on taxable income. The Company’s net deferred tax asset balance was reduced, and continued to be completely offset, by the deferred tax liability. The Company is currently using an estimated tax rate of 21% for Federal and 6.98% for state taxes.

The Company’s income tax provision consists of the following as of December 31, 2019

	2019	2018
Deferred tax (expense)/benefit
Federal	11,989,897	(6,328,940	)
State	4,285,245	(2,103,619	)
Total deferred tax (expense)/benefit	16,275,142	(8,432,559	)

All values are in US Dollars.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Such temporary differences are principally: (i) taxes on unrealized gains/(losses), which are attributable to the temporary difference between fair market value and tax basis, (ii) the net tax effects of temporary differences between the carrying amounts of assets and liabilities for

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

financial reporting and income tax purposes, and (iii) the net tax benefit of accumulated net operating losses and capital loss carryforwards. Deferred tax assets and liabilities are measured using effective tax rates expected to apply to taxable income in the years such temporary differences are realized or otherwise settled.

Components of the Company’s deferred tax assets and liabilities as of December 31, 2019 and 2018 are as follows:

	2019		2018
Deferred tax assets (liabilities):
Net operating loss carryforward	1,292,784		505,323
Capital loss carryforward	7,270,082		1,118,004
Net unrealized losses (gains) on investment securities	6,627,475		(9,530,264	)
Incentive fee	—		2,591,465
Total deferred tax assets (liabilities), net	15,190,341		(5,315,472	)
Valuation allowance	(7,347,758	)	(3,117,087	)
Net	7,842,583		(8,432,559	)

All values are in US Dollars.

For the year ended December 31, 2019, the Company had an effective tax rate of 20.14% and a statutory tax rate of 27.98% with the difference primarily being attributable to the deferred tax benefits recognized during the year.

To the extent the Company has a deferred tax asset or if a portion of the deferred tax liability is offset by a tax asset resulting from net operating losses, consideration is given to whether or not a valuation allowance is required against the deferred tax asset amount. A valuation allowance is required if, based on the evaluation criterion provided by Accounting Standard Codification (“ASC”) 740, Income Taxes (ASC 740), it is more-likely-than-not that some portion or all of the deferred tax asset will not be realized. Among the factors considered in assessing the Company’s valuation allowance are: the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of the statutory carryforward periods, and the associated risks that operating and capital loss carryforwards may expire unused. Based on the Company’s assessment, it has determined that in the future it is more likely than not that the Company will generate the necessary appropriate character of income within the carryforward periods to realize its deferred tax assets.

From time to time, and as new information becomes available, the Company will modify its forecasts, estimates or assumptions regarding its deferred tax liability or asset.

Modifications of the Company’s estimates or assumptions regarding its deferred tax liability and/or asset balances and any applicable valuation allowance, changes in generally accepted accounting principles or related guidance or interpretations thereof, limitations imposed on net operating losses (if any), and changes in applicable tax law could result in increases or decreases in the Company’s NAV, which could be material. Such changes could have a material impact on the Company’s NAV and results of operations with respect to the Company’s shareholders in the period it is recorded, even though the shareholders at such time might not have held shares in the Company at the time the deferred tax asset or liability had been established.

The Company’s policy is to classify interest and penalties associated with underpayment of federal and state income taxes, if any, as income tax expense on its Statement of Operations. As of December 31, 2019, the Company did not have any interest or penalties associated with the underpayment of any income taxes.

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

The Company files income tax returns in the U.S. federal jurisdiction and California. The Company has reviewed all major jurisdictions and concluded that there is no significant impact on the Company’s net assets and no tax liability resulting from unrecognized tax benefits relating to uncertain tax positions expected to be taken on its tax returns. Furthermore, management of the Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next 12 months.

As of December 31, 2019, the Company had net operating loss carryforwards for federal and state of income tax purposes of $4,620,386, which may be carried forward indefinitely.

As of December 31, 2019, the Company had net capital loss carryforwards for federal and state income tax purposes, which may be carried forward for 5 years, as follows:

EXPIRATION DATE	AMOUNT
12/31/23	4,994,658
12/31/24	20,988,480
Total	25,983,138

All values are in US Dollars.

NOTE 8. INVESTMENT TRANSACTIONS

Investment transactions (excluding short-term investments) were as follows for the year ended December 31, 2019.

PURCHASES AND SALES
Purchases of investment securities	29,888,755
Proceeds from sales and maturities of investment securities	(41,756,374	)

All values are in US Dollars.

NOTE 9. SHARE BUYBACKS

SHARE BUYBACKS. On April 26, 2016, the Board of Directors of the Fund approved a discretionary share repurchase plan (the “Plan”). Pursuant to the Plan, the Fund was authorized to purchase in the open market up to $2 million worth of its common stock. The Plan allowed the Fund to acquire its own shares at certain thresholds below its NAV per share, in accordance with the guidelines specified in Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The intent of the Plan was to increase NAV per share and thereby enhance shareholder value. The Fund completed the repurchase plan in September 2016, having repurchased and retired a total of 272,008 shares of stock, at a total cost of approximately $2 million.

On November 10, 2017, the Board of Directors of the Fund approved a discretionary share purchase plan (the “Plan”). Pursuant to the Plan, the Fund was authorized to purchase in the open market up to $2 million worth of its common stock. The Plan allowed the Fund to acquire its own shares in accordance with the guidelines specified in Rule 10b-18 of the Exchange Act. The intent of the Plan was to increase NAV per share and thereby enhance shareholder value. As of December 31, 2017, the Fund had repurchased and retired 128,551 shares of stock at a total cost of approximately $1.1 million. The Fund had 7,302,146 shares outstanding as of December 31, 2017.

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

On August 31, 2018, the Fund announced a plan to repurchase up to $2 million worth of SVVC stock in the open market by March 31, 2019. The Fund completed this open market repurchase plan on October 24, 2018. Through that date, the Fund repurchased 123,376 shares at an average price of $16.21 per share, for total consideration of $2.0 million. As of December 31, 2018, the Fund had 7,178,770 shares outstanding.

TENDER OFFERS. On December 22, 2014, pursuant to our agreement with a shareholder, the Fund commenced a tender offer to purchase up to $20 million of its issued and outstanding common shares for cash at a price per share equal to 95% of the Company’s NAV per share determined as of the close of ordinary trading on the NASDAQ Global Market on December 31, 2014 ($23.2702 per share). The tender offer, which expired on January 22, 2015 at 12:00 midnight, New York City time, was oversubscribed. Because the number of shares tendered exceeded the maximum amount of its offer, the Fund purchased shares from tendering shareholders on a pro-rata basis based on the number of shares properly tendered. Of the 5,044,728 shares properly tendered, the Fund purchased 859,468 shares of common stock pursuant to the tender offer.

NOTE 10. INVESTMENTS IN AFFILIATES AND CONTROLLED INVESTMENTS

Under the 1940 Act, the Company is required to identify investments where it owns greater than 5% (but less than 25%) of the portfolio company’s outstanding voting shares as an affiliate of the Company. Also, under the 1940 Act, the Company is required to identify investments where it owns greater than 25% of the portfolio company’s outstanding voting shares as a controlled investment of the Company. A summary of the Company’s investments in affiliates and controlled investments for the period from December 31, 2018, through December 31, 2019, is noted below:

AFFILIATE/CONTROLLED<br><br>INVESTMENTS*	VALUE AT<br>12/31/18	PURCHASES/<br>MERGER	INTEREST	SALES/<br>MATURITY/<br>EXPIRATION		REALIZED<br>GAIN (LOSS)	CHANGE IN<br>APPRECIATION/<br>DEPRECIATION		VALUE<br>12/31/19
EQX Capital, Inc. Common Stock*	36,470	—	—	—		—	(7,480	)	28,990	100,000
EQX, Inc. Preferred Stock - Series A*	3,491,600	—	—	(800,000	)	—	(200,720	)	2,490,880	3,200,000
Hera Systems, Inc. Series B Preferred*	—	2,400,000	—	—		—	(1,923,600	)	476,400	2,400,000
Hera Systems, Inc. Series A Preferred*	207,977	—	—	—		—	39,337		247,314	3,642,324
Hera Systems, Inc. Convertible Note*	500,000	—	50,694	—		—	—		500,000	500,000
Hera Systems, Inc. Convertible Note*	500,000	—	50,694	—		—	—		500,000	500,000
Hera Systems, Inc. Series B Preferred*	1,231,365	1,500,000	—	—		—	(1,334,083	)	1,397,282	7,039,203
Hera Systems, Inc. Series B Warrants*	155,540	—	—	—		—	(16,632	)	138,908	700,000

All values are in US Dollars.

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

AFFILIATE/CONTROLLED<br><br>INVESTMENTS*	VALUE AT<br>12/31/18	PURCHASES/<br>MERGER	INTEREST		SALES/<br>MATURITY/<br>EXPIRATION		REALIZED<br>GAIN (LOSS)		CHANGE IN<br>APPRECIATION/<br>DEPRECIATION		VALUE<br>12/31/19
Hera Systems, Inc. Series B Warrants*	1,380,956	—	—		—		—		(147,667	)	1,233,289	6,214,922
Hera Systems, Inc. Series B Warrants*	2,721,950	—	—		—		—		(291,060	)	2,430,890	12,250,000
Hera Systems, Inc. Series B Warrants*	—	—	—		—		—		1,041,810		1,041,810	5,250,000
IntraOp Medical Corp. Series C Preferred*	13,565,328	—	—		—		—		(12,862,502	)	702,826	26,856,187
IntraOp Medical Corp. Convertible Note*	—	1,300,000	92,425		—		—		—		1,300,000	1,300,000
IntraOp Medical Corp. Convertible Note*	—	500,000	13,151		—		—		—		500,000	500,000
IntraOp Medical Corp. Convertible Note*	—	500,000	16,850		—		—		—		500,000	500,000
IntraOp Medical Corp. Term Note*	3,000,000	—	240,000		—		—		—		3,000,000	3,000,000
IntraOp Medical Corp. Term Note*	2,000,000	—	160,000		—		—		—		2,000,000	2,000,000
IntraOp Medical Corp. Convertible Note*	10,961,129	—	1,644,845		—		—		—		10,961,129	10,961,129
Phunware, Inc. Common Stock (1)	19,121,150	—	—		(1,383,012	)	(4,049,352	)	(12,876,120	)	812,666	682,913
Pivotal Systems Common Stock*	53,825,978	—	—		(8,267,813	)	1,116,174		(5,004,302	)	41,670,037	45,090,506
QMAT, Preferred Stock Series A*	4,612,549	—	—		—		(9,680,305	)	5,067,756		—	—
QMAT, Preferred Stock Series B*	1,594,000	—	—		—		(2,000,000	)	406,000		—	—
QMAT, Series A Warrant*	112,000	—	—		—		—		(112,000	)	—	—
QMAT, Preferred Stock Warrants - Series C*	81,381	—	—		—		—		(81,381	)	—	—
QMAT, Convertible Note*	7,002,600	500,000	(21,205	)	—		(7,502,600	)	—		—	—
QMAT, Convertible Note*	—	100,000	—		—		(100,000	)	—		—	—
QMAT, Convertible Note*	—	400,000	—		—		(400,000	)	—		—	—

All values are in US Dollars.

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

AFFILIATE/CONTROLLED<br><br>INVESTMENTS*	VALUE AT<br>12/31/18	PURCHASES/<br>MERGER	INTEREST	SALES/<br>MATURITY/<br>EXPIRATION		REALIZED<br>GAIN (LOSS)		CHANGE IN<br>APPRECIATION/<br>DEPRECIATION		VALUE<br>12/31/19
QMAT, Convertible Note*	—	200,000	—	—		(200,000	)	—		—	—
QMAT, Convertible Note*	—	100,000	—	—		(100,000	)	—		—	—
QMAT, Convertible Note*	—	200,000	—	—		(200,000	)	—		—	—
QMAT, Convertible Note*	—	100,000	—	—		(100,000	)	—		—	—
QMAT, Convertible Note*	—	220,000	—	—		(220,000	)	—		—	—
QMAT, Convertible Note*	—	100,000	—	—		(100,000	)	—		—	—
QMAT, Convertible Note*	—	200,000	—	—		(200,000	)	—		—	—
QMAT, Convertible Note*	—	400,000	—	—		(400,000	)	—		—	—
QMAT, Convertible Note*	—	150,000	—	—		(150,000	)	—		—	—
QMAT, Convertible Note*	—	200,000	—	—		(200,000	)	—		—	—
QMAT, Convertible Note*	—	40,000	—	—		(40,000	)	—		—	—
Revasum, Common Stock*	58,608,601	—	—	(6,421,274	)	1,395,634		(34,409,622	)	19,173,339	46,834,340
Silicon Genesis Corp., Common Stock *	4,517	—	—	—		—		(3,872	)	645	921,892
Silicon Genesis Corp., Common Warrants*	84	—	—	—		—		(73	)	11	37,982
Silicon Genesis Corp., Common Warrants*	2,000	—	—	—		—		—		2,000	5,000,000
Silicon Genesis Corp., Common Warrants*	1,200	—	—	—		—		—		1,200	3,000,000
Silicon Genesis Corp., Series 1-C Preferred*	25,463	—	—	—		—		(20,306	)	5,157	82,914
Silicon Genesis Corp., Series 1-D Preferred*	68,918	—	—	—		—		(55,219	)	13,699	850,830

All values are in US Dollars.

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

AFFILIATE/CONTROLLED<br><br>INVESTMENTS*	VALUE AT<br>12/31/18	PURCHASES/<br>MERGER	INTEREST		SALES/<br>MATURITY/<br>EXPIRATION	REALIZED<br>GAIN (LOSS)		CHANGE IN<br>APPRECIATION/<br>DEPRECIATION		VALUE<br>12/31/19
Silicon Genesis Corp., Series 1-E Preferred*	1,233,878	—	—		—	—		(588,701	)	645,177	5,704,480
Silicon Genesis Corp., Series 1-F Preferred*	270,816	—	—		—	—		(128,382	)	142,434	912,453
Silicon Genesis Corp., Series 1-G Preferred*	1,443,530	—	—		—	—		(792,072	)	651,458	48,370,793
Silicon Genesis Corp., Series 1-H Preferred*	137,339	—	—		—	—		(66,030	)	71,309	837,942
SVXR, Inc., Preferred Stock Series A	4,923,206	—	—		—	—		(42,083	)	4,881,123	8,219,454
Telepathy Investors, Inc. Convertible Note*	195,700	—	(701,523	)	—	—		(195,700	)	—	2,000,000
Telepathy Investors, Inc. Convertible Note*	29,355	—	(35,486	)	—	—		(29,355	)	—	300,000
Telepathy Investors, Inc. Convertible Note*	14,678	—	(33,557	)	—	—		(14,678	)	—	150,000
Telepathy Investors, Inc. Convertible Note*	48,925	—	(82,848	)	—	—		(48,925	)	—	500,000
Telepathy Investors, Inc. Convertible Note*	29,355	—	(81,433	)	—	—		(29,355	)	—	300,000
Telepathy Investors, Inc. Convertible Note*	48,925	—	(122,132	)	—	—		(48,925	)	—	500,000
Telepathy Investors, Inc. Convertible Note*	19,570	—	3,764		—	—		(19,570	)	—	200,000
Telepathy Investors, Inc. Series A Preferred*	927,994	—	—		—	—		(927,994	)	—	15,238,000
UCT Coatings, Inc.Common Stock	748,950	—	—		—	—		85,200		834,150	1,500,000
Vufine, Inc., Convertible Note*	11,526	—	(266,301	)	—	(1,500,000	)	1,488,474		—	—

All values are in US Dollars.

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

AFFILIATE/CONTROLLED<br><br>INVESTMENTS*	VALUE AT<br>12/31/18	PURCHASES/<br>MERGER	INTEREST		SALES/<br>MATURITY/<br>EXPIRATION		REALIZED<br>GAIN (LOSS)		CHANGE IN<br>APPRECIATION/<br>DEPRECIATION		VALUE<br>12/31/19
Vufine, Inc., Convertible Note*	1,921	—	(36,329	)	—		(250,000	)	248,079		—	—
Vufine, Inc. Convertible Note*	2,305	—	(19,331	)	—		(300,000	)	297,695		—	—
Vufine, Inc. Convertible Note*	768	—	(3,616	)	—		(100,000	)	99,232		—	—
Vufine, Inc. Convertible Note*	1,537	—	(4,077	)	—		(200,000	)	198,463		—	—
Vufine, Inc., Convertible Note*	2,689	—	(38,548	)	—		(350,000	)	347,311		—	—
Vufine, Inc., Convertible Note	—	45,000	—		—		(45,000	)	—		—	—
Vufine, Inc., Common Stock*	—	—	—		—		(15,000	)	15,000		—	—
Vufine, Inc., Series A, Preferred Stock*	—	—	—		—		(2,250,000	)	2,250,000		—	—
Wrightspeed, Inc. , Common Stock*	—	7,460,850	—		—		—		(7,456,870	)	3,980	69,102
Wrightspeed, Inc. , Common Stock Warrants*	—	—	—		—		—		—		—	181
Wrightspeed, Inc. , Convertible Note	—	4,929,015	341,745		—		—		—		4,929,015	4,929,015
Wrightspeed, Inc. , Preferred Stock- Series AA*	—	13,495,889	—		—		—		(2,870,179	)	10,625,710	47,284,219
Wrightspeed, Inc. , Preferred Stock Warrants- Series AA*	—	—	—		—		—		90,242		90,242	609,756
Wrightspeed, Inc., Series C Preferred Stock*	494,803	—	—		(1,922,975	)	—		1,428,172		—	—
Wrightspeed, Inc., Series D Preferred Stock*	310,806	—	—		(3,375,887	)	—		3,065,081		—	—
Wrightspeed, Inc., Series E Preferred Stock*	136,732	—	—		(1,658,996	)	—		1,522,264		—	—
Wrightspeed, Inc., Series F Preferred Stock*	41,344	3,000	—		(502,995	)	—		458,651		—	—
Wrightspeed, Inc. Series F Warrants*	29	—	—		—		—		(29	)	—	—

All values are in US Dollars.

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

AFFILIATE/CONTROLLED<br><br>INVESTMENTS*	VALUE AT<br>12/31/18	PURCHASES/<br>MERGER	INTEREST	SALES/<br>MATURITY/<br>EXPIRATION		REALIZED<br>GAIN (LOSS)	CHANGE IN<br>APPRECIATION/<br>DEPRECIATION		VALUE<br>12/31/19
Wrightspeed, Inc. Convertible Note*	101,787	—	199,185	(3,700,000	)	—	3,598,213		—	—
Wrightspeed, Inc. Convertible Note*	55,020	—	104,667	(2,000,000	)	—	1,944,980		—	—
Wrightspeed, Inc. Convertible Note*	82,530	—	157,000	(3,000,000	)	—	2,917,470		—	—
Wrightspeed, Inc. Convertible Note*	2,751	—	5,233	(100,000	)	—	97,249		—	—
Wrightspeed, Inc. Convertible Note*	—	250,000	12,250	(250,000	)	—	—		—	—
Wrightspeed, Inc. Convertible Note*	—	500,000	18,833	(500,000	)	—	—		—	—
Wrightspeed, Inc. Convertible Note*	—	500,000	17,833	(500,000	)	—	—		—	—
Wrightspeed, Inc. Convertible Note*	—	300,000	9,500	(300,000	)	—	—		—	—
Wrightspeed, Inc. Convertible Note*	—	100,000	2,633	(100,000	)	—	—		—	—
Wrightspeed, Inc. Convertible Note*	—	600,000	12,600	(600,000	)	—	—		—	—
Wrightspeed, Inc. Convertible Note*	—	150,000	2,650	(150,000	)	—	—		—	—
Wrightspeed, Inc. Convertible Note*	—	250,000	3,083	(250,000	)	—	—		—	—
Wrightspeed, Inc. Convertible Note*	—	650,000	3,900	(650,000	)	—	—		—	—
Wrightspeed, Inc. Preferred Stock Warrants - Series A*	90,980	—	—	—		—	(90,980	)	—	—
Wrightspeed, Inc. Preferred Stock Warrants - Series F*	224	—	—	—		—	(224	)	—	—
Wrightspeed, Inc. Preferred Stock Warrants - Series F*	22	—	—	—		—	(22	)	—	—
Wrightspeed, Inc. Preferred Stock Warrants - Series F*	11	—	—	—		—	(11	)	—	—
Wrightspeed, Inc. Preferred Stock Warrants - Series F*	3,366,260	—	—	—		—	(3,366,260	)	—	—
Wrightspeed, Inc. Preferred Stock Warrants - Series F*	1,819,600	—	—	—		—	(1,819,600	)	—	—

All values are in US Dollars.

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

AFFILIATE/CONTROLLED<br><br>INVESTMENTS*	VALUE AT<br>12/31/18	PURCHASES/<br>MERGER	INTEREST	SALES/<br>MATURITY/<br>EXPIRATION	REALIZED<br>GAIN (LOSS)		CHANGE IN<br>APPRECIATION/<br>DEPRECIATION		VALUE<br>12/31/19
Wrightspeed, Inc. Preferred Stock Warrants - Series F*	2,729,400	—	—	—	—		(2,729,400	)	—	—
Wrightspeed, Inc. Preferred Stock Warrants - Series F*	8,288	—	—	—	—		(8,288	)	—	—
Wrightspeed, Inc. Preferred Stock Warrants - Series F*	4,480	—	—	—	—		(4,480	)	—	—
Wrightspeed, Inc. Preferred Stock Warrants - Series F*	6,720	—	—	—	—		(6,720	)	—	—
Wrightspeed, Inc. Preferred Stock Warrants - Series F*	18	—	—	—	—		(18	)	—	—
Total Affiliates and Controlled Investments	204,157,528		1,717,149		(24,091,097	)	(51,048,691	)	113,190,404
Total Affiliates	34,045,111		—		—		43,117		5,715,273
Total Controlled Investments	170,112,417		1,717,149		(24,091,097	)	(51,091,808	)	107,475,131

All values are in US Dollars.

*	Controlled Investments.
(1)	Phunware is no longer an affiliate as of December 31 , 2019. The amounts are not included in the totals.
---	---

As of December 31, 2019, Kevin Landis represented the Company and sat on the board of directors of Hera Systems, Inc.; IntraOp Medical, Inc.; Pivotal Systems, Inc.; Revasum, Inc.; Silicon Genesis Corp.; Telepathy Investors, Inc.; and Wrightspeed, Inc. Serving on boards of directors of portfolio companies may cause conflicts of interest. The Adviser has adopted various procedures to ensure that the Company will not be unfavorably affected by these potential conflicts.

Unconsolidated Significant Subsidiaries

Our investments are generally in small companies in a variety of industries. In accordance with Rules 3-09 and 4-08(g) of Regulation S-X (“Rule 3-09” and “Rule 4-08(g),” respectively), we must determine which of our unconsolidated controlled portfolio companies are considered “significant subsidiaries,” if any. In evaluating these investments, there are three tests utilized to determine if any of our controlled investments are considered significant subsidiaries: the investment test, the asset test, and the income test. Rule 3-09 requires separate audited financial statements of an unconsolidated majority-owned subsidiary in an annual report if any of the three tests exceeds 20%. Rule 4-08(g) requires summarized financial information in an annual report if any of the three tests exceeds 10% and summarized financial information in a quarterly report if any of the three tests exceeds 20%.

As of December 31, 2019, our investment in Pivotal Systems Corp. (“Pivotal”) exceeded the 20% threshold in at least one of the tests under Rule 3-09. Accordingly, we are attaching the audited financial statements of Pivotal to Form 10-K.

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

As of December 31, 2019, our investments in IntraOp Medical Corp., Revasum, Inc. and Wrightspeed, Inc. exceeded the 10% threshold in at least one of the three tests under Rule 4-08(g). Accordingly, summarized financial information is presented below for the unconsolidated significant subsidiaries.

INTRAOP MEDICAL CORP.

BALANCE SHEET DATA AS OF:	12/31/1 9		12/31/1 8
Total Current Assets		4,267,356		5,922,460
Total Non-Current Assets		14,792,156		11,707,060
Total Current Liabilities		27,493,915		1,964,122
Total Non-Current Liabilities		4,909,627		19,037,231
Non-controlling interest		—		—
INCOME STATEMENT DATA FOR THE YEARS ENDED:	12/31/1 9			12/31/1 8			12/31/1 7
---	---	---	---	---	---	---	---	---	---
Revenue		6,870,822			3,985,911			4,943,909
Gross Profit		1,549,316			1,358,774			2,617,202
Income/(loss) from operations		(10,169,009	)		(8,875,718	)		(7,029,910	)
Total net income/(loss) including net income/(loss) attributable to non-controlling interest		(10,053,977	)		(8,934,723	)		(7,043,169	)
Net Income/(loss) attributable to non-controlling interest

REVASUM, INC.

BALANCE SHEET DATA AS OF:	1/5/2020		12/31/2018
Total Current Assets		19,521,000		41,534,000
Total Non-Current Assets		13,106,000		2,672,000
Total Current Liabilities		7,841,000		9,195,000
Total Non-Current Liabilities		3,458,000		18,000
Non-controlling interest		—		—
INCOME STATEMENT DATA FOR THE YEARS ENDED:	1/5/2020			12/31/2018			12/31/2017
---	---	---	---	---	---	---	---	---	---
Revenue		20,507,000			27,277,000			12,518,000
Gross Profits		2,291,000			10,155,000			3,968,000
Income/(loss) from operations		(14,919,000	)		(1,020,000	)		(3,703,000	)
Total net income/(loss) including net income/(loss) attributable to non-controlling interest		(14,946,000	)		(4,355,000	)		(3,751,000	)
Net Income/(loss) attributable to non-controlling interest		—			—			—

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

WRIGHTSPEED, INC.

BALANCE SHEET DATA AS OF:	12/31/19		12/31/18
Total Current Assets		11,538,897		11,821,359
Total Non-Current Assets		1,976,558		3,055,988
Total Current Liabilities		11,807,270		17,665,655
Total Non-Current Liabilities		0		0
Non-controlling interest
INCOME STATEMENT DATA FOR THE YEARS ENDED:	12/31/19			12/31/18			12/31/17
---	---	---	---	---	---	---	---	---	---
Revenue		0			0			0
Gross Profit		(3,221,068	)		(2,741,382	)		(3,577,947	)
Income/(loss) from operations		(8,185,137	)		(8,771,851	)		(10,842,695	)
Total net income/(loss) including net income/(loss) attributable to non-controlling interest		(9,771,652	)		(9,850,477	)		(11,022,278	)
Net Income/(loss) attributable to non-controlling interest
AFFILIATE/CONTROLLED<br><br>INVESTMENTS*	VALUE AT<br>12/31/17	PURCHASES/<br>MERGER	INTEREST	SALES/<br>MATURITY/<br>EXPIRATION		REALIZED<br>GAIN (LOSS)	CHANGE IN<br>APPRECIATION/<br>DEPRECIATION		VALUE<br>12/31/18	SHARES<br><br>HELD AT<br><br>12/31/18
---	---	---	---	---	---	---	---	---	---	---	---
EQX Capital, Inc. Common Stock*	44,810	—	—	—		—	(8,340	)	36,470		100,000
EQX, Inc. Preferred Stock - Series A*	3,975,200	—	—	—		—	(483,600	)	3,491,600		4,000,000
Hera Systems, Inc. Series A Preferred*	154,799	—	—	—		—	53,178		207,977		3,642,324
Hera Systems, Inc. Convertible Note*	—	500,000	48,194	—		—	—		500,000		500,000
Hera Systems, Inc. Convertible Note*	—	500,000	29,861	—		—	—		500,000		500,000
Hera Systems, Inc. Series B Preferred*	453,315	3,500,000	—	—		—	(2,721,950	)	1,231,365		5,539,203
Hera Systems, Inc. Series B Warrants*	155,540	—	—	—		—	—		155,540		700,000
Hera Systems, Inc. Series B Warrants*	1,380,956	—	—	—		—	—		1,380,956		6,214,922
Hera Systems, Inc. Series B Warrants*	—	—	—	—		—	2,721,950		2,721,950		12,250,000
IntraOp Medical Corp. Series C Preferred*	11,479,677	—	—	—		—	2,085,651		13,565,328		26,856,187
IntraOp Medical Corp. Convertible Note*	1,000,000	—	244,142	(1,000,000	)	—	—		—		—

All values are in US Dollars.

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

AFFILIATE/CONTROLLED<br><br>INVESTMENTS*	VALUE AT<br>12/31/17	PURCHASES/<br>MERGER	INTEREST	SALES/<br>MATURITY/<br>EXPIRATION		REALIZED<br>GAIN (LOSS)		CHANGE IN<br>APPRECIATION/<br>DEPRECIATION		VALUE<br>12/31/18
IntraOp Medical Corp. Convertible Note*	1,000,000	—	163,253	(1,000,000	)	—		—		—	—
IntraOp Medical Corp. Convertible Note*	1,500,000	—	233,784	(1,500,000	)	—		—		—	—
IntraOp Medical Corp. Convertible Note*	1,000,000	—	160,603	(1,000,000	)	—		—		—	—
IntraOp Medical Corp. Convertible Note*	—	2,000,000	235,068	(2,000,000	)	—		—		—	—
IntraOp Medical Corp. Convertible Note*	—	1,500,000	67,192	(1,500,000	)	—		—		—	—
IntraOp Medical Corp. Convertible Note*	—	1,000,000	7,397	(1,000,000	)	—		—		—	—
IntraOp Medical Corp. Term Note*	3,000,000	—	240,000	—		—		—		3,000,000	3,000,000
IntraOp Medical Corp. Term Note*	2,000,000	—	160,000	—		—		—		2,000,000	2,000,000
IntraOp Medical Corp. Convertible Note*	—	10,961,129	4,505	—		—		—		10,961,129	10,961,129
Phunware, Inc. Common Stock	—	9,999,997	—	—		(2	)	9,121,155		19,121,150	1,495,113
Phunware, Inc.Preferred Stock - Series E	12,018,563	—	—	(9,999,997	)	—		(2,018,566	)	—	—
Pivotal Systems, Series A Preferred*	8,453,614	—	—	(6,000,047	)	—		(2,453,567	)	—	—
Pivotal Systems, Series B Preferred*	9,270,308	—	—	(6,321,483	)	—		(2,948,825	)	—	—
Pivotal Systems, Series C Preferred*	2,560,254	—	—	(2,657,862	)	—		97,608		—	—
Pivotal Systems, Series D Preferred*	5,009,720	—	—	(3,975,801	)	—		(1,033,919	)	—	—
Pivotal Systems, Series D Warrants*	618,392	—	—	—		—		(618,392	)	—	—
Pivotal Systems, Common Stocks Warrants - Class B*	8,741,172	—	—	—		—		(8,741,172	)	—	—

All values are in US Dollars.

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

AFFILIATE/CONTROLLED<br><br>INVESTMENTS*	VALUE AT<br>12/31/17	PURCHASES/<br>MERGER	INTEREST	SALES/<br>MATURITY/<br>EXPIRATION		REALIZED<br>GAIN (LOSS)		CHANGE IN<br>APPRECIATION/<br>DEPRECIATION		VALUE<br>12/31/18
Pivotal Systems Common Stock*	—	21,869,876	—	(2,914,684	)	491,004		34,379,782		53,825,978	53,758,441
QMAT, Preferred Stock Series A*	17,394,341	24,290,124	—	(24,290,124	)	(6,319,935	)	(6,461,857	)	4,612,549	16,000,240
QMAT, Preferred Stock Series B*	2,132,600	—	—	—		—		(538,600	)	1,594,000	2,000,000
QMAT, Series A Warrant*	1,086,600	—	—	—		—		(974,600	)	112,000	2,000,000
QMAT, Preferred Stock Warrants - Series C*	—	—	—	—		—		81,381		81,381	4,932,208
QMAT, Convertible Note*	—	350,000	3,474	(350,000	)	—		—		—	—
QMAT, Convertible Note*	—	100,000	153	(100,000	)	—		—		—	—
QMAT, Convertible Note*	—	350,000	21,249	(350,000	)	—		—		—	—
QMAT, Convertible Note*	—	3,482,208	225,914	(3,482,208	)	—		—		—	—
QMAT, Convertible Note*	2,745,485	—	31,291	(2,745,485	)	—		—		—	—
QMAT, Convertible Note*	—	7,002,600	27,627	—		—		—		7,002,600	7,002,600
QMAT, Convertible Note*	—	1,000,000	47,781	(1,000,000	)	—		—		—	—
QMAT, Convertible Note*	—	100,000	3,090	(100,000	)	—		—		—	—
QMAT, Convertible Note*	—	100,000	2,696	(100,000	)	—		—		—	—
QMAT, Convertible Note*	—	200,000	4,690	(200,000	)	—		—		—	—
QMAT, Convertible Note*	—	300,000	6,115	(300,000	)	—		—		—	—
QMAT, Convertible Note*	—	350,000	4,910	(350,000	)	—		—		—	—
QMAT, Convertible Note*	—	400,000	3,945	(400,000	)	—		—		—	—
Revasum, Preferred Stock, Series B*	2,550,033	—	—	(2,550,033	)	—		—		—	—
Revasum, Term Note*	1,000,000	—	30,383	(1,000,000	)	—		—		—	—
Revasum, Common Stock*	29,908	21,071,905	—	(3,250,002	)	715,002		40,041,788		58,608,601	53,834,340
Revasum, Common Stock Warrants*	—	500,000	—	(500,000	)	—		—		—	—

All values are in US Dollars.

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

AFFILIATE/CONTROLLED<br><br>INVESTMENTS*	VALUE AT<br>12/31/17	PURCHASES/<br>MERGER	INTEREST	SALES/<br>MATURITY/<br>EXPIRATION		REALIZED<br>GAIN (LOSS)		CHANGE IN<br>APPRECIATION/<br>DEPRECIATION		VALUE<br>12/31/18
Revasum, Convertible Note*	—	1,846,397	30,036	(1,846,397	)	—		—		—	—
Revasum, Convertible Note*	—	365,783	4,590	(365,783	)	—		—		—	—
Revasum, Preferred Stock - Series Seed*	8,966,760	6,725,070	—	(14,000,140	)	(9,075	)	(1,682,615	)	—	—
Revasum, Preferred Stock Series A*	2,256,355	—	—	(1,999,996	)	—		(256,359	)	—	—
Silicon Genesis Corp., Common Stock *	16,871	—	—	—		—		(12,354	)	4,517	921,892
Silicon Genesis Corp., Common Warrants*	357	—	—	—		—		(273	)	84	37,982
Silicon Genesis Corp., Common Warrants*	11,000	—	—	—		—		(9,000	)	2,000	5,000,000
Silicon Genesis Corp., Common Warrants*	6,600	—	—	—		—		(5,400	)	1,200	3,000,000
Silicon Genesis Corp., Series 1-C Preferred*	74,258	—	—	—		—		(48,795	)	25,463	82,914
Silicon Genesis Corp., Series 1-D Preferred*	205,646	—	—	—		—		(136,728	)	68,918	850,830
Silicon Genesis Corp., Series 1-E Preferred*	2,063,310	—	—	(87,402	)	—		(742,030	)	1,233,878	5,704,480
Silicon Genesis Corp., Series 1-F Preferred*	456,318	—	—	(19,285	)	—		(166,217	)	270,816	912,453
Silicon Genesis Corp., Series 1-G Preferred*	3,023,658	1,658,300	—	(1,740,736	)	(620,377	)	(877,315	)	1,443,530	48,370,793
Silicon Genesis Corp., Series 1-H Preferred*	236,551	—	—	(9,607	)	—		(89,605	)	137,339	837,942
SVXR, Inc. Convertible Note	1,000,000	1,000,000	54,521	(2,000,000	)	—		—		—	—

All values are in US Dollars.

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

AFFILIATE/CONTROLLED<br><br>INVESTMENTS*	VALUE AT<br>12/31/17	PURCHASES/<br>MERGER	INTEREST	SALES/<br>MATURITY/<br>EXPIRATION		REALIZED<br>GAIN (LOSS)		CHANGE IN<br>APPRECIATION/<br>DEPRECIATION		VALUE<br>12/31/18
SVXR, Inc., Preferred Stock Series A	1,000,000	3,082,192	—	—		—		841,014		4,923,206	8,219,454
SVXR, Inc. Convertible Note	—	1,000,000	24,658	(1,000,000	)	—		—		—	—
Telepathy Investors, Inc. Convertible Note*	302,140	—	254,793	—		—		(106,440	)	195,700	2,000,000
Telepathy Investors, Inc. Convertible Note*	45,321	—	30,417	—		—		(15,966	)	29,355	300,000
Telepathy Investors, Inc. Convertible Note*	22,661	—	17,377	—		—		(7,983	)	14,678	150,000
Telepathy Investors, Inc. Convertible Note*	75,535	—	55,286	—		—		(26,610	)	48,925	500,000
Telepathy Investors, Inc. Convertible Note*	45,321	—	36,056	—		—		(15,966	)	29,355	300,000
Telepathy Investors, Inc. Convertible Note*	75,535	—	58,858	—		—		(26,610	)	48,925	500,000
Telepathy Investors, Inc. Convertible Note*	—	200,000	6,356	—		—		(180,430	)	19,570	200,000
Telepathy Investors, Inc. Series A Preferred*	937,137	—	—	—		—		(9,143	)	927,994	15,238,000
UCT Coatings, Inc.Common Stock	922,050	—	—	—		—		(173,100	)	748,950	1,500,000
UCT Coatings, Inc.Common Stock Warrants	4	—	—	—		(67	)	63		—	—
Vufine, Inc., Convertible Note*	1,229,280	—	180,000	—		—		(1,217,754	)	11,526	1,500,000
Vufine, Inc., Convertible Note*	204,880	—	30,000	—		—		(202,959	)	1,921	250,000
Vufine, Inc. Convertible Note*	—	300,000	19,332	—		—		(297,695	)	2,305	300,000
Vufine, Inc. Convertible Note*	—	100,000	3,616	—		—		(99,232	)	768	100,000
Vufine, Inc. Convertible Note*	—	200,000	4,077	—		—		(198,463	)	1,537	200,000

All values are in US Dollars.

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

AFFILIATE/CONTROLLED<br><br>INVESTMENTS*	VALUE AT<br>12/31/17	PURCHASES/<br>MERGER	INTEREST	SALES/<br>MATURITY/<br>EXPIRATION		REALIZED<br>GAIN (LOSS)		CHANGE IN<br>APPRECIATION/<br>DEPRECIATION		VALUE<br>12/31/18
Vufine, Inc., Convertible Note*	—	350,000	38,548	—		—		(347,311	)	2,689	350,000
Vufine, Inc., Common Stock*	—	—	—	—		—		—		—	750,000
Vufine, Inc., Series A Preferred Stock*	—	—	—	—		—		—		—	22,500,000
Wrightspeed, Inc., Series C Preferred Stock	5,704,296	368,088	—	(368,088	)	(4,915,008	)	(294,485	)	494,803	2,267,659
Wrightspeed, Inc., Series D Preferred Stock	3,161,018	—	—	—		—		(2,850,212	)	310,806	1,100,978
Wrightspeed, Inc., Series E Preferred Stock	1,350,323	—	—	—		—		(1,213,591	)	136,732	450,814
Wrightspeed, Inc., Series F Preferred Stock	471,295	—	—	—		—		(429,951	)	41,344	90,707
Wrightspeed, Inc. Series F Warrants	28,703	—	—	—		—		(28,674	)	29	18,141
Wrightspeed, Inc. Convertible Note	—	3,700,000	302,167	—		—		(3,598,213	)	101,787	3,700,000
Wrightspeed, Inc. Convertible Note	—	2,000,000	129,333	—		—		(1,944,980	)	55,020	2,000,000
Wrightspeed, Inc. Convertible Note	—	3,000,000	144,000	—		—		(2,917,470	)	82,530	3,000,000
Wrightspeed Convertible Note	—	250,000	6,822	(250,000	)	—		—		—	—
Wrightspeed, Inc. Convertible Note	—	100,000	33	—		—		(97,249	)	2,751	100,000
Wrightspeed, Inc. Convertible Note	—	300,000	2,170	(300,000	)	—		—		—	—
Wrightspeed, Inc. Convertible Note	—	150,000	247	(150,000	)	—		—		—	—
Wrightspeed, Inc. Preferred Stock Warrants - Series F	—	—	—	—		—		90,980		90,980	200,000
Wrightspeed, Inc. Preferred Stock Warrants - Series F	—	—	—	—		—		224		224	200,000
Wrightspeed, Inc. Preferred Stock Warrants - Series F	—	—	—	—		—		22		22	13,606

All values are in US Dollars.

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

AFFILIATE/CONTROLLED<br><br>INVESTMENTS*	VALUE AT<br>12/31/17	PURCHASES/<br>MERGER	INTEREST	SALES/<br>MATURITY/<br>EXPIRATION	REALIZED<br>GAIN (LOSS)		CHANGE IN<br>APPRECIATION/<br>DEPRECIATION	VALUE<br>12/31/18
Wrightspeed, Inc. Preferred Stock Warrants - Series F	—	—	—	—	—		11	11	6,803
Wrightspeed, Inc. Preferred Stock Warrants - Series F	—	—	—	—	—		3,366,260	3,366,260	7,400,000
Wrightspeed, Inc. Preferred Stock Warrants - Series F	—	—	—	—	—		1,819,600	1,819,600	4,000,000
Wrightspeed, Inc. Preferred Stock Warrants - Series F	—	—	—	—	—		2,729,400	2,729,400	6,000,000
Wrightspeed, Inc. Preferred Stock Warrants - Series F	—	—	—	—	—		8,288	8,288	7,400,000
Wrightspeed, Inc. Preferred Stock Warrants - Series F	—	—	—	—	—		4,480	4,480	4,000,000
Wrightspeed, Inc. Preferred Stock Warrants - Series F	—	—	—	—	—		6,720	6,720	6,000,000
Wrightspeed, Inc. Preferred Stock Warrants - Series F	—	—	—	—	—		18	18	11,338
Total Affiliates and Controlled Investments	134,648,470		3,440,610		(10,658,458	)	48,119,007	204,157,528
Total Affiliates	24,656,252		663,951		(4,915,077	)	2,421,744	34,045,111
Total Controlled Investments	109,992,218		2,776,659		(5,743,381	)	45,697,263	170,112,417

All values are in US Dollars.

*	Controlled investments.

NOTE 11. RECENT ACCOUNTING PRONOUNCEMENTS

New Accounting Pronouncements—In August 2018, the FASB issued Accounting Standards Update No. 2018-13 “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 eliminates the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the timing of transfers between levels of the fair value hierarchy, and the valuation process for Level 3 fair value measurements. ASU 2018-13 does not eliminate the requirement to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements, and the changes in unrealized gains and losses for recurring Level 3 fair value measurements. ASU 2018-13 requires that information is provided about the measurement uncertainty of Level 3 fair value measurements as of the reporting date. The guidance is effective for

Firsthand Technology Value Fund, Inc.

Notes to Consolidated Financial Statements - continued

DECEMBER 31, 2019

fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Management has evaluated the impact of this change in guidance, and due to the permissibility of early adoption, modified the Funds’ fair value disclosures for the current reporting period

NOTE 12. SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events on the Company through the date the financial statements were issued, and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements.

Item 9. Changes In And Disagreements With Accountants On Accounting And Financial Disclosure

None

Item 9A. Controls and Procedures

DISCLOSURE CONTROLS AND PROCEDURES

Our Chief Executive Officer and Chief Financial Officer performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of December 31, 2019, and, based on that evaluation, have concluded that the disclosure controls and procedures are effective.

REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Internal control over financial reporting is a process designed by, or under the supervision of, our principal executive and financial officer, or persons performing similar functions, and effected by our Board of Directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.

Our management evaluated as of December 31, 2019, the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2019. Our independent registered public accounting firm, Tait, Weller & Baker LLP, issued a report on the effectiveness of our internal control over financial reporting as of December 31, 2019, which appears on page [42] herein.

INHERENT LIMITATIONS OF EFFECTIVENESS OF CONTROLS

Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There have been no changes in our internal control over financial reporting that occurred during our fourth quarter ended December 31, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None

Part III

Item 10. Directors, Executives Officers And Corporate Governance

Information required by this item will be contained in the Company’s proxy statement to be filed with the SEC, in connection with the Company’s annual meeting of shareholders to be held in 2020 (the “2020 Proxy Statement”), which information is incorporated herein by reference.

The Company has adopted a code of ethics that applies to the Company’s chief executive officer, a copy of which is posted on our website http://www.firsthandtvf.com.

Our CEO certifies the accuracy of the financial statements contained in our periodic reports, and so certified in this Form 10-K through the filing of Section 302 certifications as exhibits to this Form 10-K.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s officers and directors, and persons who own more than ten percent of a registered class of the Company’s equity securities, to file with the Securities and Exchange Commission and the Nasdaq Stock Market reports of ownership of the Company’s securities and changes in reported ownership. Officers, directors and greater than ten percent shareholders are required by SEC rules to furnish the Company with copies of all Section 16(a) reports they file.

Based solely on a review of the reports furnished to the Company, or written representations from reporting persons that all reportable transaction were reported, the Company believes that during the fiscal year ended December 31, 2019, the Company’s officers, directors and greater than ten percent owners timely filed all reports they were required to file under Section 16(a).

Item 11. Executive Compensation

Information required by this item will be contained in the 2020 Proxy Statement, which information is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information required by this item will be contained in the 2020 Proxy Statement, which information is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Information required by this item will be contained in the 2020 Proxy Statement, which information is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

Information required by this item will be contained in the 2020 Proxy Statement, which information is incorporated herein by reference.

Part IV

I tem 15. Exhibits, Financial Statements Schedules

1. Financial Statements

The following financial statements of the Company are filed as part of this report:

AUDITED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm	42
Statement of Assets and Liabilities as of December 31, 2019	44
Schedule of Investments as of December 31, 2019	45
Statement of Operations as of December 31, 2019	56
Statement of Cash Flows as of December 31, 2019	57
Statement of Changes in Net Assets as of December 31, 2019	58
Financial Highlights	59
Notes to Financial Statements	61

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		FIRSTHAND TECHNOLOGY VALUE FUND, INC.
Date: March 16, 2020	By:
		Kevin Landis<br><br>President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.

Signatures	Title	Date
/s/ Kevin Landis	Chairman of the Board, Chief Executive Officer, and Chief Financial Officer	March 16, 2020
Kevin Landis

*	Director	March 16, 2020
Greg Burglin

*	Director	March 16, 2020
Kimun Lee
*	Director	March 16, 2020
Nicholas Petredis
*	Director	March 16, 2020
Rodney Yee

* Signed by Kevin Landis pursuant to powers of attorney.

EXHIBIT INDEX

Exhibit Number	Descriptions
3.1	Registrant’s Articles of Amendment and Restatement are incorporated by reference to Exhibit (a)(2) of Pre-Effective Amendment No. 1 to the Registrant’s Registration Statement on Form N-2 (File No. 333-168195) as filed with the Securities and Exchange Commission on September 24, 2010.
3.2	Certificate of Correction to Registrant’s Articles of Amendment and Restatement is incorporated by reference to Exhibit (a)(2) of the Registrant’s Registration Statement on Form N-2 (File No. 333-179606) as filed with the Securities and Exchange Commission on February 21, 2012.
3.3	Registrant’s Amended and Restated Bylaws – is incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K as filed with the Securities and Exchange Commission on October 29, 2019.
4.1	Description of Securities - filed herewith
10.1	Registrant’s Dividend Reinvestment Plan is incorporated by reference to Exhibit (e) of Pre-Effective Amendment to the Registrant’s Registration Statement on Form N-2 (File No. 333-168195) as filed with the Securities and Exchange Commission on September 24, 2010.
10.2	Form of Investment Management Agreement between Registrant and SiVest Group, Inc. (now known as Firsthand Capital Management, Inc.) is incorporated by reference to Exhibit (g) of Pre-Effective Amendment to the Registrant’s Registration Statement on Form N-2 (File No. 333-168195) as filed with the Securities and Exchange Commission on September 24, 2010.
10.3	Form of Custodian Services Agreement between Registrant and PFPC Trust Company is incorporated by reference to Exhibit (j) of Pre-Effective Amendment to the Registrant’s Registration Statement on Form N-2 (File No. 333-168195) as filed with the Securities and Exchange Commission on September 24, 2010.
10.4	Form of Administration and Accounting Agreement between Registrant and BNY Mellon Investment Servicing (US), Inc. is incorporated by reference to Exhibit (k)(1) of Pre-Effective Amendment to the Registrant’s Registration Statement on Form N-2 (File No. 333-168195) as filed with the Securities and Exchange Commission on September 24, 2010.
10.4.1	Form of Amendment to Administration and Accounting Agreement between Registrant and BNY Mellon Investment Servicing (US), Inc. as filed with the Securities and Exchange Commission on March 18, 2019
10.5	Notice of Assignment dated February 9, 2011 by PFPC Trust Company assigning Custodian Services Agreement is incorporated by reference to Exhibit (j)(2) of the Registrant’s Registration Statement on Form N-2 (File No. 333-179606) as filed with the Securities and Exchange Commission on February 21, 2012.
10.6	Form of Transfer Agency Services Agreement between Registrant and BNY Mellon Investment Servicing (US), Inc. is incorporated by reference to Exhibit (k)(2) of Pre-Effective Amendment to the Registrant’s Registration Statement on Form N-2 (File No. 333-168195) as filed with the Securities and Exchange Commission on September 24, 2010.
14.1	Registrant’s Code of Ethics for Principal Executive and Senior Financial Officers is incorporated by reference to Exhibit 14 to the Registrant’s Form 10-K as filed with the Securities and Exchange Commission on March 21, 2012.
14.2	Registrant's Code of Ethics is incorporated by reference to Exhibit 14.2 to the Registrant's form 10-K as filed wioth the<br>Securities and Exchange Commission on March 19, 2019.
24.1	Power of Attorney is incorporated by reference to Exhibit 24 to the Registrant’s Form 10-K as filed with the Securities and Exchange Commission on March 21, 2012.
31.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. – filed herewith
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. – filed herewith
99.1	Separate financial statements of Pivotal Systems Corp. filed pursuant to Rule 3-09 and 4-08(g) of regulation S-X—filed<br>herewith

Privacy Notice

FIRSTHAND TECHNOLOGY VALUE FUND, INC.

FACTS	WHAT DOES FIRSTHAND TECHNOLOGY VALUE FUND, INC. DO WITH YOUR PERSONAL INFORMATION?
Why?	Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.
What?	The types of personal information we collect and share depend on the product or service you have with us. This information can include:<br><br>● Social Security number<br><br>● Banking information<br><br>● Account transactions<br><br>● Retirement assets
How?	All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons Firsthand Capital management, Inc. chooses to share; and whether you can limit this sharing.
Reasons we can share your personal information	Does Firsthand Technology Value Fund, Inc. share?	Can you limit this sharing?
---	---	---
For our everyday business purposes—such as to process your transactions, maintain your account(s), respond to court orders and legal investigations	Yes	No
For our marketing purposes—to offer our products and services to you	No	N/A
For joint marketing with other financial companies	No	N/A
For our affiliates’ everyday business purposes—information about your transactions and experiences	No	N/A
For our affiliates’ everyday business purposes—information about your creditworthiness	No	N/A
For our affiliates to market to you	No	N/A
For nonaffiliates to market to you	No	N/A
Who we are
---	---
Who is providing this notice?	Firsthand Technology Value Fund, Inc. is a publically traded venture capital fund, listed on NASDAQ, that is a business development company under the Investment Company Act of 1940
What we do
---	---
How does Firsthand Technology Value Fund, Inc. protect my personal information?	To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings.
How does Firsthand Technology Value Fund, Inc. collect my personal information?	We collect your personal information, for example, when you<br><br>● open an account or deposit money
Why can’t I limit all sharing?	Federal law gives you the right to limit only<br><br>● sharing for affiliates’ everyday business purposes—information about your creditworthiness<br><br>● affiliates from using your information to market to you<br><br>● sharing for nonaffiliates to market to you<br><br>State laws and individual companies may give you additional rights to limit sharing.
Definitions
---	---
Affiliates	Companies related by common ownership or control. They can be financial and nonfinancial companies.<br><br>● Firsthand Capital Management, Inc. and Firsthand Funds
Nonaffiliates	Companies not related by common ownership or control. They can be financial and nonfinancial companies.<br><br>● BNY Mellon Investment Servicing (U.S.) Inc. (Transfer Agent for Firsthand Technology Value Fund, Inc. and Firsthand Funds)
Joint marketing	A formal agreement between nonaffiliated financial companies that together market financial products or services to you.
Other important information
---
This notice applies to individual consumers who are customers or former customers. This notice replaces all previous notices of our consumer privacy policy, and may be amended at any time. We will keep you informed of changes or amendments as required by law.
Additional Information for California Residents
---
This section supplements the information contained in the other<br>sections of this Privacy Notice and applies solely to clients, visitors, users, and others who reside in the state of California<br>(“consumers” or “you”) and for whom we have data that is subject to the California Consumer Privacy Act<br>of 2018 as may be amended or supplemented from time to time (“CCPA”). This Privacy Notice, including this additional<br>information, is provided to comply with the CCPA and other California privacy laws. Any terms defined in the CCPA have the same<br>meaning when used in this section.<br><br>Depending upon how you interact with us, you may have various rights<br>in connection with our processing of your personal information, each of which is explained below.<br><br>● Access. You may have the right to<br>confirm with us whether your personal information is processed, and if it is, to request access to that personal information<br>including the categories of personal information processed, the purpose of the processing and the recipients or categories of<br>recipients. We do have to consider the interests of others though, so this is not an absolute right and there are additional<br>exceptions under the CCPA. Also, we are not obligated to respond to more than two access requests for the same individual's<br>personal information within a 12-month period.<br><br>● Deletion. You may have the right<br>to ask us to erase personal information concerning you, except we are not obligated to do so if we need to retain such data<br>in order to comply with a legal obligation or to establish, exercise, or defend legal claims or under other exceptions under<br>the CCPA.<br><br>You have a right to receive non-discriminatory treatment for the<br>exercise of the privacy rights conferred by the CCPA.<br><br>To exercise one or more of these rights, please contact us as explained<br>below. Please note that we may need to verify your identity before we can fulfill your request.<br><br>● You can submit your request by calling us at<br>(800) 331-1710.<br><br>When we tell you that we need additional information to<br>verify your identity, you must get us the information within ten (10) calendar days or we may deny your request. We will endeavor<br>to respond to a verified request within 45 days, unless there are grounds for extending our response timeframe by up to an additional<br>45 days. In the event of an extension, we will explain to you why the extension is necessary. In some cases, your ability to access<br>or delete your personal information will be limited, as required or permitted by applicable law, even when the CCPA applies to<br>the personal information we have for you.

Exhibit [4.1]

DESCRIPTION OF REGISTRANT’S SECURITIES

REGISTERED PURSUANT TO SECTION 12 OF

THE SECURITIES EXCHANGE ACT OF 1934

The following is a brief description of the securities of Firsthand Technology Value Fund, Inc. (the “company” “we,” “us,” “our” and “SVVC”), registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This description of the terms of our capital stock does not purport to be complete and is subject to and qualified in its entirety by reference to the applicable provisions of Maryland General Corporation Law, and the full text of our charter and bylaws. As of December 31, 2019 and the date hereof, our common stock is the only class of our securities registered under Section 12 of the Exchange Act.

CAPITAL STOCK

Our authorized capital stock consists of 100,000,000 shares of stock, par value $0.001 per share, all of which is designated as common stock. Our common stock is listed on the NASDAQ Stock Market under the ticker symbol “SVVC”. There are no outstanding options or warrants to purchase our stock. No stock has been authorized for issuance under any equity compensation plans. Under Maryland law, our stockholders generally are not personally liable for our debts or obligations.

Under our charter, our board of directors is authorized to classify and reclassify any unissued shares of stock into other classes or series of stock and authorize the issuance of shares of stock without obtaining stockholder approval. As permitted by the Maryland General Corporation Law, our charter provides that a majority of the board of directors, without any action by our stockholders, may amend the charter from time to time to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we have authority to issue.

Common stock

All shares of our common stock have equal rights as to earnings, assets, distributions, and voting and, when they are issued, will be duly authorized, validly issued, fully paid, and non-assessable. Distributions may be paid to the holders of our common stock if, as, and when authorized by our board of directors and declared by us out of funds legally available therefor. Shares of our common stock have no preemptive, exchange, conversion, or redemption rights and are freely transferable, except where their transfer is restricted by federal and state securities laws or by contract. In the event of our liquidation, dissolution or winding up, each share of our common stock would be entitled to share ratably in all of our assets that are legally available for distribution after we pay all debts and other liabilities and subject to any preferential rights of holders of our preferred stock, if any preferred stock is outstanding at such time. Subject to the exclusive voting rights of any other class or series of stock, if any are issued, each share of our common stock is entitled to one vote on all matters submitted to a vote of stockholders, including the election of directors. Except as provided with respect to any other class or series of stock, if any, the holders of our common stock will possess exclusive voting power. There is no cumulative voting in the election of directors, which means that holders of a majority of the outstanding shares of common stock can elect all of our directors.

The provisions of the Investment Company Act of 1940, as amended (the “1940 Act”), generally require that the public offering price of common stock of a business development company (less underwriting commissions and discounts) must equal or exceed the net asset value of such company's common stock (calculated within 48 hours of pricing), unless such sale is made with the consent of a majority of the company's outstanding common stockholders. Any sale of common stock by us will be subject to the requirements of the 1940 Act.

Preferred stock

Our charter authorizes our board of directors to classify and reclassify any unissued shares of stock into one or more classes or series of stock, including preferred stock, without the approval of the holders of our common stock. Holders of common stock have no preemptive right to purchase any preferred stock that may be issued.

Prior to issuance of shares of each class or series, the board of directors is required by Maryland law and by our charter to set the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications, and terms or conditions of redemption for each class or series. Thus, the board of directors could authorize the issuance of shares of preferred stock with terms and conditions that could have the effect of delaying, deferring, or preventing a transaction or a change in control that might involve a premium price for holders of our common stock or otherwise be in their best interests. You should note, however, that any issuance of preferred stock must comply with the requirements of the 1940 Act.

LIMITATION ON LIABILITY OF DIRECTORS AND OFFICERS; INDEMNIFICATION AND ADVANCE OF EXPENSES

Maryland law permits a Maryland corporation to include in its charter a provision limiting the liability of its directors and officers to the corporation and its stockholders for money damages except for liability resulting from (1) actual receipt of an improper benefit or profit in money, property or services or (2) active and deliberate dishonesty established by a final judgment as being material to the cause of action. Our charter contains such a provision which eliminates directors’ and officers’ liability to the maximum extent permitted by Maryland law, subject to the requirements of the 1940 Act.

Our charter authorizes us and our bylaws obligate us, to the maximum extent permitted by Maryland law and subject to the requirements of the 1940 Act, to indemnify any present or former director or officer or any individual who, while a director or officer and at our request, serves or has served another corporation, real estate investment trust, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise as a director, officer, partner, member, manager, or trustee, and who is made, or threatened to be made, a party to the proceeding by reason of his or her service in that capacity, from and against any claim or liability to which that individual may become subject or which that individual may incur by reason of his or her service in such capacity and to pay or reimburse their reasonable expenses in advance of final disposition of a proceeding without requiring a preliminary determination of the director’s or officer’s ultimate entitlement to indemnification. The charter and bylaws also permit us to indemnify and advance expenses to any individual who served a predecessor of us in any of the capacities described above and any of our employees or agents or any employees or agents of our predecessor. In accordance with the 1940 Act, we will not indemnify any person for any liability to which such person would be subject by reason of such person’s willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office.

Maryland law requires a corporation (unless its charter provides otherwise, which our charter does not) to indemnify a director or officer who has been successful, on the merits or otherwise, in the defense of any proceeding to which he or she is made, or threatened to be made, a party by reason of his or her service in that capacity. Maryland law permits a corporation to indemnify its present and former directors and officers, among others, against judgments, penalties, fines, settlements, and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made, or are threatened to be made, a party by reason of their service in those or other capacities unless it is established that (1) the act or omission of the director or officer was material to the matter giving rise to the proceeding and (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty, (2) the director or officer actually received an improper personal benefit in money, property or services or (3) in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. However, under Maryland law, a Maryland corporation may not indemnify for an adverse judgment in a suit by or in the right of the corporation or for a judgment of liability on the basis that a personal benefit was improperly received, unless in either case a court orders indemnification, and then only for expenses. In addition, Maryland law permits a corporation to pay or reimburse reasonable expenses to a director or officer in advance of the final disposition of a proceeding upon the corporation’s receipt of (1) a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by the corporation and (2) a written undertaking by him or her or on his or her behalf to repay the amount paid or reimbursed by the corporation if it is ultimately determined that the standard of conduct was not met.

PROVISIONS OF THE MARYLAND GENERAL CORPORATION LAW AND OUR CHARTER AND BYLAWS

The Maryland General Corporation Law and our charter and bylaws contain provisions that could make it more difficult for a potential acquiror to acquire us by means of a tender offer, proxy contest, or otherwise. These provisions are expected to discourage certain coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to negotiate first with our board of directors. We believe that the benefits of these provisions outweigh the potential disadvantages of discouraging any such acquisition proposals because, among other things, the negotiation of such proposals may improve their terms.

Classified board of directors

Our board of directors is divided into three classes of directors serving staggered three-year terms. The current terms of the first, second and third classes will expire at the annual meeting of stockholders in 2021, 2022, and 2020, respectively, and when their successors are duly elected and qualify. Upon expiration of their current terms, directors of each class will be elected to serve until the third annual meeting following their election and until their respective successors are duly elected and qualify and each year one class of directors will be elected by the stockholders. A classified board may render a change in control of us or removal of our incumbent management more difficult. We believe, however, that the longer time required to elect a majority of a classified board of directors will help to ensure the continuity and stability of our management and policies.

Election of directors

Our bylaws provide that (subject to the rights of holders of our preferred stock, if any) directors are elected by a majority of the votes entitled to be cast in contested elections and by a plurality of the votes cast in uncontested elections.

Number of directors; vacancies; removal

Our charter provides that the number of directors will be set only by the board of directors in accordance with our bylaws. Our bylaws provide that a majority of our entire board of directors may at any time increase or decrease the number of directors. However, the number of directors may never be less than the minimum number required by the Maryland General Corporation Law, which is one, nor more than fifteen, unless our bylaws are amended. We have elected in our charter to be subject to the provision of Subtitle 8 of Title 3 of the Maryland General Corporation Law regarding the filling of vacancies on the board of directors. Accordingly, except as may be provided by the board of directors in setting the terms of any class or series of preferred stock, any and all vacancies on the board of directors may be filled only by the affirmative vote of a majority of the remaining directors in office, even if the remaining directors do not constitute a quorum, and any director elected to fill a vacancy will serve for the remainder of the full term of the directorship in which the vacancy occurred and until a successor is elected and qualifies, subject to any applicable requirements of the 1940 Act.

Our charter provides that (subject to any rights which may be granted to holders of one or more classes of preferred stock) a director may be removed only for cause, as defined in our charter, and then only by the affirmative vote of at least two-thirds of the votes entitled to be cast in the election of directors.

Action by stockholders

Under the Maryland General Corporation Law, stockholder action can be taken only at an annual or special meeting of stockholders or, unless the charter provides for a lesser percentage (which our charter does not for common stock) by unanimous written consent in lieu of a meeting. These provisions, combined with the requirements of our bylaws regarding the calling of a stockholder-requested special meeting of stockholders discussed below, may have the effect of delaying consideration of a stockholder proposal until the next annual meeting of stockholders.

Advance notice provisions for stockholder nominations and stockholder proposals

Our bylaws provide that with respect to an annual meeting of stockholders, nominations of individuals for election to the board of directors and the proposal of business to be considered by stockholders may be made only (1) pursuant to our notice of the meeting, (2) by or at the direction of the board of directors, or (3) by a stockholder who was a stockholder of record at the record date set by the board for purposes of determining stockholders entitled to vote at the meeting, at the time of giving of notice by the stockholder and at the time of the annual meeting, who is entitled to vote at the meeting and who has complied with the advance notice procedures of the bylaws. With respect to special meetings of stockholders, only the business specified in our notice of the meeting may be brought before the meeting. Nominations of individuals for election to the board of directors at a special meeting may be made only (1) by, or at the direction of, the board of directors, or (2) provided that the special meeting has been duly called for the purpose of electing directors, by a stockholder who is a stockholder of record at the record date set by the board for purposes of determining stockholders entitled to vote at the meeting, at the time of giving of notice and at the time of the special meeting, who is entitled to vote at the meeting and who has complied with the advance notice provisions of the bylaws.

The purpose of requiring stockholders to give us advance notice of nominations and other business is to afford our board of directors a meaningful opportunity to consider the qualifications of the proposed nominees and the advisability of any other proposed business and, to the extent deemed necessary or desirable by our board of directors, to inform stockholders and make recommendations about such qualifications or business, as well as to provide a more orderly procedure for conducting meetings of stockholders. Although our bylaws do not give our board of directors any power to disapprove stockholder nominations for the election of directors or proposals recommending certain action, they may have the effect of precluding a contest for the election of directors or the consideration of stockholder proposals if proper procedures are not followed and of discouraging or deterring a third party from conducting a solicitation of proxies to elect its own slate of directors or to approve its own proposal without regard to whether consideration of such nominees or proposals might be harmful or beneficial to us and our stockholders.

Calling of special meetings of stockholders

Our bylaws provide that special meetings of stockholders may be called by our board of directors, the chairman of our board or our president. Additionally, our bylaws provide that, subject to the satisfaction of certain procedural and informational requirements by the stockholders requesting the meeting, a special meeting of stockholders will be called by the secretary of the corporation upon the written request of stockholders entitled to cast not less than a majority of all the votes entitled to be cast at such meeting.

Approval of extraordinary corporate action; amendment of charter and bylaws

Under Maryland law, a Maryland corporation generally cannot dissolve, amend its charter, merge, convert, sell all or substantially all of its assets, engage in a share exchange, or engage in similar transactions outside the ordinary course of business, unless approved by the affirmative vote of stockholders entitled to be cast at least two-thirds of the votes entitled to be cast on the matter. However, a Maryland corporation may provide in its charter for approval of these matters by a lesser percentage, but not less than a majority of all of the votes entitled to be cast on the matter. Our charter generally provides for approval of charter amendments and extraordinary transactions by the stockholders entitled to cast at least a majority of the votes entitled to be cast on the matter. Our charter also provides that (1) our liquidation or dissolution or any amendment to our charter to effect such liquidation or dissolution; (2) any merger, consolidation, share exchange, or sale or exchange of all or substantially all of our assets that requires the approval of our stockholders under the Maryland General Corporation Law; (3) certain transactions between us and any person or group of persons acting together and any person controlling, controlled by or under common control with any such person or member of such group, that may exercise or direct the exercise of 10% or more of our voting power in the election of directors; (4) any amendment to our charter that would make our common stock a redeemable security, or convert us, whether by merger or otherwise, from a closed-end company to an open-end company; and (5) any amendment to certain provisions of our charter, including the provisions relating to our purpose, the number, qualifications, classification, removal of directors and the vote required to amend any of items (1) through (5), requires the approval of the stockholders entitled to cast at least 80% of the votes entitled to be cast on such matter. The requirement for an 80% vote is a greater percentage than required by the 1940 Act and Maryland law. The effect is to make it harder for stockholders to implement these changes. However, if such a proposal is approved by at least two-thirds of our Continuing Directors (defined below), in addition to approval by the full Board, such proposal may be approved by the stockholders entitled to cast a majority of the votes entitled to be cast on such matter or, in the case of transactions with a group described above in (3), by the vote, if any, of the stockholders required by applicable law or by our charter or bylaws. The “Continuing Directors” are defined in our charter as (a) our current Directors (b) those Directors whose nomination for election by the stockholders or whose election by the Directors to fill vacancies is approved by a majority of our current Directors who are then on the Board, and (c) any successor directors whose nomination for election by the stockholders or whose election by the directors to fill vacancies is approved by a majority of the Continuing Directors then in office. These provisions could make it more difficult for certain extraordinary transactions to be approved if they are opposed by the Continuing Directors, and discourage proxy contests for control of our Board by persons wishing to cause such transactions to take place.

Our charter and bylaws provide that the board of directors will have the exclusive power to adopt, alter, or repeal any provision of our bylaws and to make new bylaws.

No appraisal rights

As permitted by the Maryland General Corporation Law, our charter provides that stockholders will not be entitled to exercise appraisal rights.

Control share acquisitions

The Maryland Control Share Acquisition Act provides that a holder of control shares of a Maryland corporation acquired in a control share acquisition has no voting rights with respect to those shares except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquiror, by officers, or by directors who are employees of the corporation are excluded from shares entitled to vote on the matter. Control shares are voting shares of stock which, if aggregated with all other shares of stock owned by the acquiror or in respect of which the acquiror is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquiror to exercise voting power in electing directors within one of the following ranges of voting power:

•	one-tenth or more but less than one-third,
•	one-third or more but less than a majority, or
---	---
•	a majority or more of all voting power.
---	---

The requisite stockholder approval must be obtained each time an acquiror crosses one of the thresholds of voting power set forth above. Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. A control share acquisition generally means the acquisition of issued and outstanding control shares, subject to certain exceptions.

A person who has made or proposes to make a control share acquisition may compel the board of directors of the corporation to call a special meeting of stockholders to be held within 50 days of demand to consider the voting rights of the shares. The right to compel the calling of a special meeting is subject to the satisfaction of certain conditions, including an undertaking to pay the expenses of the meeting. If no request for a meeting is made, the corporation may itself present the question at any stockholders meeting.

If voting rights are not approved at the meeting or if the acquiring person does not deliver an acquiring person statement as required by the statute, then the corporation may repurchase for fair value any or all of the control shares, except those for which voting rights have previously been approved. The right of the corporation to repurchase control shares is subject to certain conditions and limitations, including, as provided in our bylaws, compliance with the 1940 Act. Fair value is determined, without regard to the absence of voting rights for the control shares, as of the date of the last control share acquisition by the acquiror or of any meeting of stockholders at which the voting rights of the shares are considered and not approved. If voting rights for control shares are approved at a stockholders meeting and the acquiror becomes entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise appraisal rights. The fair value of the shares as determined for purposes of appraisal rights may not be less than the highest price per share paid by the acquiror in the control share acquisition.

The Control Share Acquisition Act does not apply (1) to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or (2) to acquisitions approved or exempted by the charter or bylaws of the corporation.

Our bylaws contain a provision exempting from the Maryland Control Share Acquisition Act any and all acquisitions by any person of our shares of stock. There can be no assurance that such provision will not be amended or eliminated at any time in the future. However, we will amend our bylaws to be subject to the Maryland Control Share Acquisition Act only if (i) the board of directors determines that it would be in our best interests based, in part, on our determination that our being subject to the Maryland Control Share Acquisition Act does not conflict with the 1940 Act; and (ii) the SEC staff does not object to our determination that our being subject to the Maryland Control Share Acquisition Act does not conflict with the 1940 Act.

Business combinations

Under Maryland law, “business combinations” between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. An interested stockholder is defined as:

•	any person who beneficially owns 10% or more of the voting power of the corporation’s shares; or
•	an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of the then outstanding voting stock of the corporation.
---	---

A person is not an interested stockholder under this statute if the board of directors approved in advance the transaction by which the person otherwise would have become an interested stockholder. However, in approving a transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board.

After the five-year prohibition, any business combination between the corporation and an interested stockholder generally must be recommended by the board of directors of the corporation and approved by the affirmative vote of at least:

•	80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation, and
•	two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested stockholder.
---	---

These super-majority vote requirements do not apply if the corporation’s common stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares.

The statute permits various exemptions from its provisions, including business combinations that are exempted by the board of directors before the time that the interested stockholder becomes an interested stockholder. Our board of directors has adopted a resolution that any business combination between us and any other person is exempted from the provisions of the Maryland Business Combination Act, provided that the business combination is first approved by our board of directors, including a majority of the directors who are not interested persons as defined in the 1940 Act. This resolution, however, may be altered or repealed in whole or in part at any time. If this resolution is repealed, or the board of directors does not otherwise approve a business combination, the statute may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer.

Exclusive Forum

Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or, if that court does not have jurisdiction, the United States District Court for the District of Maryland, Northern Division, will be the sole and absolute forum for (a) any Internal Corporate Claim, as such term is defined in Section 1-101(p) of the MGCL, (b) any derivative action or proceeding brought on our behalf other than actions arising under the federal securities laws, (c) any action asserting a claim of breach of any duty owed by any of our directors, officers or other employees to us or to our stockholders, (d) any action asserting a claim against us or any of our directors, officers or other employees arising pursuant to any provision of the MGCL or our charter or bylaws or (e) any action asserting a claim against us or any of our directors, officers or other employees that is governed by the internal affairs doctrine and no such action may be brought in any court sitting out of the State of Maryland unless we consent in writing to such court.

Conflict with 1940 Act

Our bylaws provide that, if and to the extent that any provision of the Maryland General Corporation Law, including the Maryland Control Share Acquisition Act (if we amend our bylaws to be subject to such Act) and the Maryland Business Combination Act, or any provision of our charter or bylaws conflicts with any provision of the 1940 Act, the applicable provision of the 1940 Act will control.

CERTIFICATION

I, Kevin Landis, Chief Executive Officer of the Company, certify that:

I have reviewed this annual report on Form 10-K of Firsthand Technology Value Find, Inc. (the “registrant”) for the fiscal year ended December 31, 2017;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 16, 2020	By:	/s/ Kevin Landis
		Kevin Landis
		Chief Executive Officer
		(Principal Executive Officer)

CERTIFICATION

I, Omar Billawala, Chief Financial Officer of the Company, certify that:

I have reviewed this annual report on Form 10-K of Firsthand Technology Value Find, Inc. (the “registrant”) for the fiscal year ended December 31, 2017;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 16, 2020	By:	/s/ Omar Billawala
		Omar Billawala
		Chief Financial Officer
		(Principal Financial Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Annual Report on Form 10-K of Firsthand Technology Value Fund, Inc. (the “Company”) for the fiscal year ended December 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kevin Landis, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 16, 2020	By:	/s/ Kevin Landis
		Kevin Landis
		Chief Executive Officer
		(Principal Executive Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Annual Report on Form 10-K of Firsthand Technology Value Fund, Inc. (the “Company”) for the fiscal year ended December 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Omar Billawala, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

(1) the Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 16, 2020	By:	/s/ Omar Billawala
		Omar Billawala
		Chief Financial Officer
		(Principal Financial Officer)

Appendix 4E and Annual Financial Report

for the Year Ended 31 December 2019

1.	Company Details

Name of entity: Pivotal Systems Corporation

ARBN: 626 346 325

Reporting period: Year ended 31 December 2019

Previous Corresponding Period: Year ended 31 December 2018

2.	Results for Announcement to the Market
	2019<br><br>US$’000	2018<br><br>US$’000	Up/Down %
---	---	---	---
Revenue from ordinary activities	15,309	20,328	Down 25%
Gross Profit	1,730	6,130	Down 72%
Operating Loss	(9,906)	(4,051)	Up 145%
Loss from ordinary activities after tax attributable to members of the parent entity	(9,955)	(66,103)	Down 85%
3.	Review of Operations and Financial Results
---	---

Refer to the accompanying Annual Financial Report for the Consolidated Statement of Profit or Loss and Other Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flows and accompanying notes.

Also refer to the Directors’ Report in the accompanying Annual Financial Report for further details and commentary on the results.

4.	Dividends

No dividends have been paid or are proposed to be paid by Pivotal Systems Corporation for the financial year 2019 (2018: $Nil).

5.	Net Tangible Assets per share:
	2019	2018
---	---	---
Net tangible assets per share * (US$ per share)	0.10	0.20
*	Right of use asset in respect to property leases have<br>been excluded from the calculation of net tangible assets.
---	---
6.	Control Gained or Lost Over Entities
---	---

There were no changes in control over entities by Pivotal Systems Corporation or its subsidiaries (“Group”) during the financial year.

7.	Details of Associates and Joint Venture Entities

The Group has no investments in associates or joint ventures during the reporting period.

Appendix 4E and Annual Financial Report

for the Year Ended 31 December 2019

8.	Accounting Standards

The Annual Financial Report has been compiled using Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (“AASB”).

9.	Audit Status

The Pivotal Systems Corporation Annual Financial Report for the year ended 31 December 2019 has been subject to audit by our external auditors, BDO East Coast Partnership. A copy of the independent audit report to the owners of Pivotal Systems Corporation is included within the Annual Financial Report.

John Hoffman (Director)

27 February 2020 (Fremont PST), 28 February 2020 (Sydney AEST)

PIVOTAL SYSTEMS CORPORATION

a DELAWARE cORPORATION

ARBN 626 346 325

ANNUAL FINANCIAL REPORT

FOR THE YEAR ENDED

31 DECEMBER 2019

Table of Contents

Corporate Directory	2
Chairman’s Letter	3
Directors’ Report	5
Consolidated Statement of Profit or Loss and Other Comprehensive Income	16
Consolidated Statement of Financial Position	17
Consolidated Statement of Changes in Equity	18
Consolidated Statement of Cash Flows	19
Notes to the Consolidated Financial Statements	20
Directors’ Declaration	59
Independent Auditor’s Report	60
Additional Shareholder Information	64
Pivotal Systems Corporation	1
---	---

Corporate Directory

Company
Pivotal Systems Corporation
48389 Fremont Blvd, Suite 100
Fremont CA, 94538 USA
Phone: +1 (510) 770 9125

Fax: +1 (510) 770 9126

Website: www.pivotalsys.com

Directors

John Hoffman	Executive Chairman and Chief Executive Officer
Dr. Joseph Monkowski	Executive Director and Chief Technical Officer
Ryan Benton	Independent Non-Executive Director
Kevin Landis	Non-Executive Director
David Michael	Non-Executive Director
Peter McGregor	Independent Non-Executive Director

Australian Securities Exchange Representative

Naomi Dolmatoff

United States Registered Office

c/o Incorporating Services Ltd

3500 South Dupont Highway

Dover, Delaware 19901 USA

Australian Registered Office

c/o Company Matters Pty Limited

Level 12, 680 George Street

Sydney, NSW 2000 Australia

United States Legal Adviser

Fenwick & West LLP

801 California Street

Mountain View, California 94041 USA

Australian Legal Adviser

Maddocks

Angel Place Level 27

123 Pitt Street

Sydney, NSW 2000 Australia

Share Registry

Link Market Services		American Stock Transfer and Trust Company, LLC
Level 12, 680 George Street		6201, 15^th^ Avenue
Sydney, NSW 2000 Australia		Brooklyn, NY 11219 USA
Telephone:	+61 1300 554 474	Telephone:	+1 (718) 921 8386
Facsimile:	+61 2 9287 0303

Securities Exchange Listing

Pivotal Systems Corporation (ASX code: PVS).

Chess Depository Interests (“CDIs”) over shares of the Company’s common stock are quoted on the Australian Securities Exchange. One CDI represents one fully paid share in the Company.

Pivotal Systems Corporation	2

Chairman’s Letter

Dear Fellow Shareholders,

On behalf of the Board of Directors, I am pleased to present our Annual Report for the year ended 31 December 2019, which was marked by significant market share gains and commercial achievements.

2019 represented both a challenging and opportunistic operating environment for Pivotal Systems. While global semiconductor capital spending was down significantly (Est 10% globally and almost 50% in Korea) Pivotal was able to work even more closely with the leading Original Equipment Manufacturers (“OEMS”) on a number of strategic projects to qualify our latest technology. In 2018, over 95% of Pivotal’s revenue was driven by either retrofits or new process equipment going to Korea. In 2019, we focused efforts on diversifying our revenue into new regions which enabled the 2019 market share growth in non-Korea based accounts. These efforts provided solid returns as Pivotal was named a “Preferred Supplier” for a leading US-based OEM and was able to fully qualify the standard low flow and the remote GFC with a leading Japan based OEM. At the same time, Pivotal was able to maintain or improve its significant market share with its existing accounts. In the 4^th^ Quarter, using the Smartstik architecture, Pivotal was able to penetrate, qualify and receive multiple repeat orders from a Korean Etch OEM for the standard GFC. Many Shareholders will remember that one of the strategic reasons we decided to list as a public company was to raise the capital required to expand our operations into the new geographic regions used for semiconductor production. These regions include Japan, Europe, Taiwan, China, North America and Korea. In 2H2019, the company received purchased orders from all the major OEMs, and in Q42019, for the first time ever, the company received purchase orders for Integrated Device Manufacturers (“IDM’s”) end-users in Europe, Korea, Japan, China, Taiwan and the United States.

The Company ended the year with a cash position of US$5.4 million with US$2.8 million of debt, and a backlog of confirmed orders awaiting shipment of $US3.1 million. Revenue for 2019 was US$15.3 million, down 25% from last year, due to the industry downturn Consolidated Gross Margin was US$1.7 million, down 72% from 2018 due to a lower proportion of higher gross margin IDM business, one-time charges incurred in 1H2019 and increased Q4’19 manufacturing costs as we temporarily transitioned certain manufacturing activities back to Fremont, California from Korea. Expenses increased from US$10.2 million last year to US$11.6 million in 2019. Our strong research and development spending once again enabled the company to take advantage of new opportunities brought forward by our world class customers. Our R&D expenditure was US$3.5 million as we invested in development projects with strategic customers around the world. Net Operating Loss for the year was US$9.9 million. Full-time headcount ended the year at 45.

In the area of products, Pivotal was able to further distance our superior performance from our competitors in speed and pressure insensitivity. Pivotal introduced new software algorithms and improved the speed of the control loop on the entire GFC and FRC family of products. In that regard, Pivotal has accelerated our device capability to both monitor and control at the microsecond. Previously, Pivotal software was ten times faster than our nearest competitor’s performance, with our new capability, we are now up to one hundred times faster. Pivotal is now able to demonstrate under ten millisecond turn on time and turn off times. This also means that the standard GFC can monitor pressure change and temperature change in the surrounding gas stick ten times faster and thereby operate more accurately in dynamic wafer processing conditions. This also enables the GFC family of products to enable even more product throughput for our customers. These technology improvements have not been demonstrated with existing thermal or pressure-based mass flow controllers. It has become clear to the industry that the preferred partner for leading flow control innovation is Pivotal Systems. Along these lines, the Remote GFC for High Temperature applications was developed and brought to market through a large Japanese OEM. This product was qualified in 3Q 2019 and we received multiple repeat purchase orders in 4Q2019. The Remote GFC solves a number of industry problems associated with high temperature applications. The new High Flow GFC, introduced in 2018, has received rapid market acceptance by both OEMs as well as IDMs. The High Flow GFC provides improved performance or the large and growing deposition market. To date, our customers have told us that our product is the fastest deposition flow controller as well the most accurate. We continue to be optimistic in growing our market share in this critical area of the market. Finally, the three channel Flow Ratio Controller (FRC) continues to perform well with a leading Korean IDM and Pivotal received a repeat order for this product in 2019. At the same time, Pivotal entered into an agreement with a US-based OEM for the development of a two channel FRC. We expect to deliver the first unit for OEM qualification in 1H2020.

Pivotal Systems Corporation	3

Chairman’s Letter

Pivotal Systems continues to build on well-established relationships with semiconductor industry leaders as we work in unison to solve the exciting challenges our industry faces. We constantly strive to improve our existing products while expanding our product portfolio to gain a greater foothold across a very large and constantly evolving global market. Our strategy has been, and continues to be, to take market share at the leading edge and strong growth will follow. On behalf of our Board of Directors, I would like to thank our team around the world who have worked diligently for the success we achieved in 2019 and importantly, for our ongoing success into the future. I would also particularly like to thank our shareholders for their outstanding support of the Company.

Sincerely,

John Hoffman

Executive Chairman and Chief Executive Officer

Pivotal Systems Corporation

Pivotal Systems Corporation	4

Directors’ Report

The directors present their report for Pivotal Systems Corporation (“Pivotal” or “Company”) together with the financial statements on the Consolidated Entity (referred to hereafter as the “Consolidated Entity” or “Group”) consisting of the Company and its subsidiaries for the financial year ended 31 December 2019 and the auditor’s report thereon.

DIRECTORS

The following persons were directors of the Company during the whole of the financial year and up to the date of this report, unless otherwise stated:

John Hoffman	Executive Chairman and Chief Executive Officer
Dr. Joseph Monkowski	Executive Director and Chief Technical Officer
Ryan Benton	Independent Non-Executive Director
Kevin Landis	Non-Executive Director
David Michael	Non-Executive Director
Peter McGregor	Independent Non-Executive Director

PRINCIPAL ACTIVITIES

Pivotal designs, develops, manufactures and sells high-performance gas flow controllers (GFC). Pivotal provides high quality gas flow monitoring and control technology platform for the global semiconductor industry. The Company’s proprietary hardware and software utilizes advanced machine learning to enable preventative diagnostic capability resulting in an order of magnitude increase in fab productivity and capital efficiency for existing and future technology nodes.

Pivotal is incorporated in Delaware, United States and has offices in Fremont California, USA (headquarters) and third party contracted manufacturing and assembling facilities in Shenzhen, China and Dongtan, South Korea.

No significant change in the nature of these activities occurred during the financial year.

REVIEW OF OPERATIONS AND FINANCIAL RESULTS

Financial results

Revenue for the financial year ended 31 December 2019 decreased 25% to $15.31 million (2018: $20.33 million). This was as a result of a decrease in shipments due to a challenging macro-environment.

The Group’s gross profit for FY19 decreased 72% to $1.73 million (2018: $6.13 million). This decrease is in part due to the decrease in revenue – several of the costs of goods sold are fixed, and as such, the lower revenue has had a negative impact on margins. Furthermore, the Group saw a decrease of sales to integrated device manufacture (IDM) customers to $3.21 million, which represented 21% of sales in 2019 (2018: $7.15 million, 35% of sales). These sales are generally at a higher margin.

Margins were also adversely impacted as the Group has had to temporarily transition certain manufacturing activities back to Fremont. This resulted in final product transformation activities and product shipments from Pivotal's Fremont facility. The Fremont facility has sufficient capacity to meet expected customer demand for Pivotal's GFC commensurate with continued improvement in the semiconductor manufacturing equipment sector for the 1H2020.

The Group has already implemented cost reduction measures and will continue to closely monitor profit margin.

Pivotal Systems Corporation	5

Directors’ Report

REVIEW OF OPERATIONS AND FINANCIAL RESULTS (CONTINUED)

Financial results (continued)

Pivotal is on schedule to establish a repair and upgrade center in Korea. The facility will be operated but not owned by Pivotal and is expected to commence operations in the first half of 2020. This facility will provide both repair and software upgrades to both IDM and OEM customers globally.

Total operating expenses for the year increased by 14% to $11.64 million (2018: $10.18 million). This increase is largely due to payroll, as well as planned increases in research and development as the Group scales.

The $9.91 million operating loss represented an increase of 145% compared to the prior period (2018: $4.05 million).

Key achievements

During the financial year, Pivotal achieved Preferred Supplier Status for both the Standard GFC and High Flow GFC at a leading US based Original Equipment Manufacturer (OEM).

Record bookings (new orders) were achieved from China for both the Standard GFC and the High Flow GFC at a leading Chinese Integrated Device Manufacturer (IDM).

In addition to this, the Company achieved qualification and multiple repeat orders for the High Temperature GFC with a leading Japanese OEM.

During the financial year, the Group successfully qualified the standard GFC at a leading European foundry. Successful qualification and multiple repeat orders were also obtained at a Japanese Logic IDM.

Pivotal successfully qualified and received multiple repeat orders for both deposition and etch at a leading Taiwanese IDM.

The Company also shipped a second Flow Ratio Controller (“FRC”) to a leading Korean IDM.

The Company passed ISO 9001:2015 recertification.

The Company once again demonstrated a new architecture for the existing etch gas stick commonly used by the OEMs. This architecture is called SmartStik as it leverages all of the intelligent signals of the standard GFC, while operating at the microsecond (up to 1,000 times faster than standard GFC millisecond speeds). This design also includes the insertion of a Teflon coating to the GFC valve, enabling a positive shutoff capability. This new architecture potentially enables the elimination of costly components used on traditional etch gas sticks as the SmartStik makes them redundant.

Post year end, Pivotal is also intending to release a derivative of the High Flow GFC, which is expected to materially enhance metal-organic chemical vapour deposition techniques (“MOCVD”) used in the production of solar, LED and flat panel markets. The combination of these product initiatives is expected to increase Pivotal’s total addressable market to over US$1 billion. The development and testing per specific application continued during the period, which is expected to be completed in the next six to twelve months.

Pivotal Systems Corporation	6

Directors’ Report

GOING CONCERN

This financial report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and settlement of liabilities in the normal course of business.

During the period ended 31 December 2019, the Group incurred a loss after income tax of $9.95 million (2018: $66.1 million) and the Group’s net cash outflows from operating activities for the period ended 31 December 2019 were $11.5 million (2018: $3.7 million).

The Directors believe that there are reasonable grounds to conclude that the Group will continue as a going concern, after consideration of the following factors:

•	The securing of a $10 million debt financing<br>facility with Bridge Bank on 27 August 2019 comprising of a $3 million term loan line of credit and an $7 million working capital<br>revolving credit line (refer note 13).
•	The securing of $13 million<br>Revenue Based Redeemable Preferred Stock (RBI) with Anzu on 30 January 2019. The initial funding of $10 million was received by<br>Pivotal on 20 February 2020 for the issue of 10,000 RBI’s of $0.00001 par value per share, at a purchase price of USD$1,000<br>per share. A subsequent funding of $3 million is available at Pivotal’s option in conjunction with the replacement of Pivotal’s<br>Bridge Bank senior term loan line of credit.
---	---
•	The expansion of market opportunities<br>as a result of the development and production of new products.
---	---

Accordingly, the directors believe the Group will be able to continue as a going concern and that it is appropriate to adopt the going concern basis in the preparation of the consolidated financial report.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

There were no significant changes in the state of affairs of the Group during the financial year.

DIVIDENDS

No dividends were paid or declared during the year ended 31 December 2019 and the Company does not intend to pay any dividends for the year ended 31 December 2019 (2018: $Nil).

PRESENTATION CURRENCY

The functional and presentation currency of the Group is United States Dollars (US Dollars). The financial report is presented in US Dollars with all references to dollars, cents or $’s in these financial statements presented in US currency, unless otherwise stated.

ROUNDING OF AMOUNTS

Unless otherwise stated, amounts in this report have been rounded to the nearest thousand United States Dollars.

JURISDICTION OF INCORPORATION

The Company is incorporated in the State of Delaware, United States of America and is a registered foreign entity in Australia. As a foreign company registered in Australia, the Company is subject to different reporting and regulatory regimes than Australian companies.

Pivotal Systems Corporation	7

Directors’ Report

DELAWARE LAW, CERTIFICATE OF INCORPORATION AND BYLAWS

As a foreign company registered in Australia, the Company is not subject to Chapters 6, 6A, 6B and 6C of the Corporations Act dealing with the acquisition of shares (including substantial shareholdings and takeovers). Under the provisions of Delaware General Corporation Law (“DGCL”), shares are freely transferable subject to restrictions imposed by US federal or state securities laws, by the Company’s certificate of incorporation or bylaws, or by an agreement signed with the holders of the shares at issue. The Company’s amended and restated certificate of incorporation and bylaws do not impose any specific restrictions on transfer. However, provisions of the DGCL, the Company’s Certificate of Incorporation and the Company’s Bylaws could make it more difficult to acquire the Company by means of a tender offer (takeover), a proxy contest or otherwise, or to remove incumbent officers and Directors of the Company. These provisions could discourage certain types of coercive takeover practices and takeover bids that the Board may consider inadequate and to encourage persons seeking to acquire control of the Company to first negotiate with the Board. The Company believes that the benefits of increased protection of its ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure the Company outweigh the disadvantages of discouraging takeover or acquisition proposals because, among other things, negotiation of these proposals could result in an improvement of their terms.

Also refer to section 15 of the Additional Shareholder Information section of this Annual Report for further specific details on restrictions to registration of transfers in the Company’s Bylaws.

MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR

RBI financing

On 30 January 2020, the Group announced the dispatch of a Notice of Special Meeting of Shareholders and the signing of a definitive preferred stock investment agreement (RBI financing) with Anzu Industrial RBI USA LLC, a fund organized by Anzu Partners LLC (“Anzu”), which provides Pivotal with up to US$13 million in additional funding required to grow and expand the business. Anzu is a venture capital and private equity firm that invests in breakthrough industrial technologies and currently manages approximately US$350 million in capital commitments. Anzu is an investor in Pivotal and remains the Company’s second largest shareholder with 12.1% of the issued capital^1^. David Michael (a Director of Pivotal) is also a Managing Director of Anzu Partners LLC.

On 12 February 2020, the shareholders at the Special Meeting of Shareholders, approved the amendment of Pivotal’s Certificate of Incorporation and the RBI financing. The funding of US$13.0 million is available to be drawn down by Pivotal in two tranches: an initial funding of US$10.0 million for the issue of 10,000 Revenue Based Redeemable Preferred Stock (RBI) which was drawn down and paid to Pivotal on 20 February 2020 with an additional amount of US$3.0 million for the issue of 3,000 RBI being available at Pivotal’s option in conjunction with the replacement of Pivotal’s Bridge Bank senior term loan line of credit. Each RBI has an issue price of US$1,000 per share. Beyond typical contractual covenants pertaining to liquidation of Pivotal, there are no other financial covenants, no personal guarantees from founders or investors, no warrant or option coverage and the issue of RBI is not dilutive to current common stock/CDI holders.

On 20 February 2020 the Company received the first tranche of the RBI financing for US$10 million in exchange of 10,000 RBI of $0.00001 par value per share, at a purchase price of US$1,000 per share. In accordance with the directions of the Board (as defined below), the Company will use the proceeds from the sale of the shares to grow and expand the business. As of the date of this report, the Company has not determined the date of the closing of the second tranche of the RBI financing.

Due to the receipt of this financing, the Company is in compliance with the financial covenants as agreed with Bridge Bank.

^1^	Based on an aggregate of 113,269,313 shares on common<br>stock (equivalent to 113,269,313 CDIs)
Pivotal Systems Corporation	8
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Directors’ Report

Other subsequent matters

On 22 January 2020, 250,000 shares were issued on the exercise of options issued pursuant to the Company’s equity incentive plan.

Other than the above, no other matter or circumstance has arisen since 31 December 2019 that has significantly affected, or may significantly affect the Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS

The Group’s core growth strategy involves continuing its strong customer-driven product development focus in order to continue to increase the market share. The Group’s growth strategy also includes:

1.	Expanding the product portfolio which in turn increases the total addressable market size; and
2.	Establishing relationships with key technology and industry partners in order to improve our product<br>offering and delivery capabilities.
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ENVIRONMENTAL REGULATION

The Group is not subject to any significant environmental regulation under United States of America legislation. The Group is committed to the sustainable management of environmental, health, and safety (EHS) concerns as a core business principle. This includes ensuring compliance with all applicable government standards and regulations and providing a safe and healthy workplace, while reducing our environmental footprint. We integrate health, safety, and environmental considerations into all aspects of our business, including product design and services, to provide productive and responsible solutions by:

•	Striving for zero accidents through the<br>application of an EHS Management System.
•	Implementing pollution prevention control<br>strategies.
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•	Committing to continual improvement for<br>our customers, Company, and Group’s personnel.
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The Board of Directors considers that adequate systems are in place to manage the Group’s obligations and is not aware of any breach of environmental requirements as they relate to the Group.

CORPORATE GOVERNANCE

During FY19, the Company, as a Delaware incorporated corporation, sought to achieve substantive compliance with the governance recommendations set out in the ‘Corporate Governance Principles and Recommendations 3^rd^ Edition’, published by the ASX Corporate Governance Council (the ASX Principles). The Company’s Corporate Governance Statement can be viewed at www.pivotalsys.com/investors/. The Corporate Governance Statement sets out the extent to which Pivotal has followed the ASX Corporate Governance Council’s 29 Recommendations during the year ended 31 December 2019.

SHARE OPTIONS

Options to acquired shares in the Company were granted during the financial year. The number of options outstanding as at the date of this reports, and all other movements in share options, are disclosed in Note 18 to the financial statements.

Pivotal Systems Corporation	9

Directors’ Report

SECURITIES ON ISSUE

The Company had the following securities on issue as at 31 December 2019:

	Common Stock	CDI equivalent
Shares of common stock	113,269,313	113,269,313
Options over shares of common stock	14,469,242	-

INFORMATION ON DIRECTORS

John Hoffman Executive Chairman and Chief Executive Officer

John Hoffman has over 25 years of global high technology management experience building growth organizations in both the semiconductor and information technology markets.

Prior to joining Pivotal Systems, John was a Senior VP with Spencer Trask Ventures, a New York based venture capital firm. While at Spencer Trask, John was primarily involved in the solar and integrated circuit efforts of the firm. Prior to Spencer Trask, John was the Chief Executive Officer of RagingWire Enterprise Solutions, an Inc 500 fastest growing private company. John reorganized the company and enabled record growth in revenue and profitability during his tenure. Prior to RagingWire, John worked in various general manager roles at Applied Materials for 18 years. He was the President of the billion dollar “Etch Product Business Group”, VP and GM of the Process Control and Diagnostic Business Group and the General Manager of the Customer Service Division which grew by over 300% during his tenure.

Special responsibilities:	Chairman of the Board
Other directorships:	None
Dr. Joseph Monkowski	Executive Director and Chief Technical Officer
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Joseph Monkowski has extensive experience in the semiconductor industry focused on providing process equipment and metrology solutions for next generation device manufacturing.

Prior to joining Pivotal, Monkowski was the SVP of Business Development for Advanced Energy Industries, where he led the company’s M&A strategy to expand its product portfolio and position the company as a market leader in the semiconductor subsystems space. Previously, he held senior executive positions at Pacific Scientific, Photon Dynamics and Lam Research, where he served as EVP and CTO. During his career, Monkowski led efforts to design and build a number of leading CVD and plasma etch systems, winning the R&D 100 award and multiple Semiconductor International Best Product awards. He has authored numerous patents and publications.

Special responsibilities:	None
Other directorships:	None
Pivotal Systems Corporation	10
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Directors’ Report

INFORMATION ON DIRECTORS (continued)

Ryan Benton	Independent Non-Executive Director

Ryan joined the Board in 2015 bringing over 25 years of finance, operations, and transaction experience. Ryan is the CFO of Revasum, Inc. and previously served as CFO of BrainChip Holdings Ltd (ASX: BRN) and CEO and Board Member at Exar Corporation (NYSE: EXAR), which was acquired by MaxLinear Corporation (NASDAQ: MXL) in May 2017. Previous roles included senior and consulting positions at ASM International NV (NASDAQ: ASMI), and eFunds Corporation (NASDAQ: EFDS).

Special responsibilities:	Chairman of the Audit and Risk Management Committee Member of the Remuneration and Nomination Committee
Other directorships:	Executive director of Revasum, Inc. (ASX: RVS)
Kevin Landis	Non-Executive Director
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Kevin joined the Board in 2012 and is the CEO and CIO of Firsthand Capital Management, an investment management firm he founded in 1994. Firsthand Capital Management is the investment adviser to Firsthand Technology Value Fund, Inc. (NASDAQ: SVVC), a publicly traded venture capital fund. Kevin has over two decades of experience in engineering, market research, product management and investing in the technology sector. Kevin is Firsthand’s nominee director to the board of Pivotal Systems Corporation.

Special responsibilities:	Member of the Audit and Risk Management Committee Member of the Remuneration and Nomination Committee
Other directorships:	Non-executive director - Revasum, Inc. (ASX: RVS), Hera Systems, Inc., IntraOp Medical Corp., QMAT, Inc. and Silicon Genesis Corp. and Wrightspeed, Inc.
David Michael	Non-Executive Director
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David Michael is Managing Director at Anzu Partners, an investment partnership which invests in innovative industrial technology companies. In addition to his role at Pivotal Systems, he is also Board member of Nuburu (industrial lasers), and Terapore (nanofiltration membranes for ultrapure water and other applications.

Mr. Michael was formerly Senior Partner and Managing Director of The Boston Consulting Group (BCG), where his career spanned numerous leadership roles across the firm. He formerly led BCG’s Greater China business and their Asia Technology Practice. He served a range of clients in semiconductors, components, hardware, software, and services. He was based for 7 years in Silicon Valley and for 16 years in Greater China. He remains a Senior Advisor to the firm.

Special responsibilities:	Member of the Audit and Risk Management Committee Member of the Remuneration and Nomination Committee
Other directorships:	Non-executive director - Taiwan Cement Corporation (XTAI:1101), Nuburu, Axsun, and Terapore
Pivotal Systems Corporation	11
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Directors’ Report

INFORMATION ON DIRECTORS (continued)

Peter McGregor	Independent Non-Executive<br>Director

Peter McGregor was appointed a non-executive director on 23 August 2018 and has over 30 years’ experience in senior finance and management roles, including having been Chief Executive Officer of technology company, Think Holdings, Chief Financial Officer of the ASX50 transport company, Asciano, and a partner in the Investment Banking firm of Goldman Sachs JBWere.

He also spent time as a Managing Director within the Institutional Banking & Markets division of Commonwealth Bank and was Chief Operating Officer of ASX-listed Australian Infrastructure Fund. Peter is an experienced company Director, having served as Chairman of the Port of Geelong and as a Director of Melbourne, Gold Coast and Darwin Airports.

Special responsibilities:	Chairman of the Remuneration and Nomination Committee Member of the Audit and Risk Management Committee
Other directorships:	Non-executive Director - Imricor Medical Systems, Inc.

SECURITIES HELD BY DIRECTORS AND KEY MANAGEMENT PERSONNEL

The directors and key management personnel of the Company are shown together with their holdings of common shares and options, held directly or indirectly as at 31 December 2019:

	Common Stock	Options	Common Stock	Options
	Direct		Indirect
John Hoffman	1,441,870	3,269,325	-	-
Dr. Joseph Monkowski	1,445,683	3,264,089	-	-
Ryan Benton	195,000	201,000	-	-
Kevin Landis ^(1)^	-	-	231,535	-
David Michael	-	-	-	-
Peter McGregor	-	100,000	-	-
	3,082,553	6,834,414	231,535	-
^(1)^	Common stock held by Silicon Valley Investor Holdings Pty Ltd,<br>of which Kevin Landis is the majority shareholder.
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REMUNERATION REPORT

EXECUTIVE COMPENSATION

This section discusses the principles underlying our policies and decisions with respect to the compensation of our named executive officers, and all material factors relevant to an analysis of these policies and decisions. Our named executive officers for the year ended 31 December 2019 were:

John Hoffman	Executive Chairman, President and Chief Executive Officer;
Dr Joseph Monkowski	Executive Director and Chief Technical Officer; and
Omesh Sharma	Chief Financial Officer (resigned 5 June 2019).
Pivotal Systems Corporation	12
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Directors’ Report

REMUNERATION REPORT (continued)

COMPONENTS OF EXECUTIVE COMPENSATION

The principal components of our executive compensation are base salary, cash bonuses and long-term incentives. Our Remuneration and Nomination Committee considers that each component of executive compensation must be evaluated and determined with reference to competitive market data, individual and corporate performance, our recruiting and retention goals and other information we deem relevant.

Our executive officers are also eligible to participate in our 401(k) retirement plan as well as medical and other benefit plans.

The terms of each named executive officer’s compensation are derived from the employment agreements the Company has entered into with them.

The components of the executive compensation packages for our named executive officers for the year ended 31 December 2019 are as follows:

John Hoffman	Executive Chairman, President and Chief Executive Officer

Mr. Hoffman received a fixed remuneration package of $325,000 and is eligible to participate in various customary employee benefit plans of Pivotal. Pursuant to Mr. Hoffman’s Retention Agreement, dated 11 May 2018, if Mr. Hoffman is terminated by the Company without cause or if he resigns for good reason and Mr. Hoffman signs a general release of claims in favor of the Company and complies with certain other requirements, the Company must pay Mr. Hoffman severance in an amount equal to twelve months of his base salary, twelve months of health insurance cover and 100% of his annual target bonus for the period in which termination occurs. All of Mr. Hoffman’s unvested Options are subject to acceleration of vesting upon a change of control of the Company, and certain of his Options vest only subject to achievement of specified performance metrics and a time-based vesting schedule.

Dr. Joseph Monkowski	Executive Director and Chief Technical Officer

Dr. Monkowski received a fixed remuneration package of $275,000 and is eligible to participate in various customary employee benefit plans of Pivotal. Pursuant to Dr. Monkowski’s Retention Agreement, dated 11 May 2018, if Dr. Monkowski is terminated by the Company without cause or if he resigns for good reason and Mr. Hoffman signs a general release of claims in favor of the Company and complies with certain other requirements, the Company must pay Dr. Monkowski severance in an amount equal to twelve months of his base salary, twelve months of health insurance cover and 100% of his annual target bonus for the period in which termination occurs. All of Dr. Monkowski’s unvested Options are subject to acceleration of vesting upon a change of control of the Company, and certain of his Options vest only subject to achievement of specified performance metrics and a time-based vesting schedule.

Omesh Sharma	Chief Financial Officer (resigned 5 June 2019)

Mr. Sharma received a fixed remuneration package of $255,000 and was eligible to participate in various customary employee benefit plans of Pivotal. Pursuant to Mr. Sharma’s Retention Agreement, dated 11 May 2018, and upon his resignation, Mr. Sharma executed a general release of claims in favor of the Company and certain other requirements resulting in severance payment by the Company to Mr. Sharma in an amount equal to twelve months of his base salary, twelve months of health insurance cover and 100% of his annual target bonus for the period in which termination occurs.

Pivotal Systems Corporation	13

Directors’ Report

REMUNERATION REPORT (continued)

NON-EXECUTIVE COMPENSATION

The Board is responsible for determining and reviewing compensation arrangements for each non-executive director. The non-executive directors for the year ended 31 December 2019 were as follows:

Ryan Benton

Kevin Landis

David Michael

Peter McGregor

The Company has entered into a non-executive director agreement with Mr. Benton whereby he is entitled to receive US$70,000 per annum for his role as a non-executive director, and a further US$15,000 per annum as chair of the Audit and Risk Committee.

The Company has also entered into a non-executive director agreement with Mr. McGregor whereby he is entitled to receive US$70,000 per annum as a non-executive director, and a further US$15,000 per annum as chair of the Remuneration and Nomination Committee.

Mr. Landis and Mr. Michael do not receive compensation for their services as a non-executive director.

REMUNERATION TABLE

Remuneration earned by key management personnel during the year is summarized as follows:

2019	Salary and<br><br>fees	Cash bonus<br><br>(2)	401k & other<br><br>benefits	Share based payment	Total
	US$	US$	US$	US$	US$
John Hoffman	362,500	-	30,308	9,260	402,068
Joseph Monkowski	312,000	-	25,552	7,834	345,386
Ryan Benton	85,000	-	-	31,009	116,009
Kevin Landis	-	-	-	-	-
David Michael	-	-	-	-	-
Peter McGregor	85,000	-	-	-	85,000
Omesh Sharma (1)	459,325	-	20,120	-	479,445
	1,303,825	-	75,980	48,103	1,427,908
(1)	Remuneration is reported for Mr Sharma up to his resignation<br>date of 5 June 2019. He continued to work with the company until 31 July 2019.
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(2)	No cash bonuses were awarded during the current year.
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END OF REMUNERATION REPORT

Pivotal Systems Corporation	14

Directors’ Report

MEETINGS ATTENDED BY BOARD

The number of meetings of directors (including meetings of committees of directors) held during the year and the number of meetings attended by each director was as follows:

	Board of<br><br>Directors		Audit & Risk Management Committee		Remuneration & Nomination Committee
	Eligible	Attendance	Eligible	Attendance	Eligible	Attendance
John Hoffman	12	12	-	-	-	-
Joseph Monkowski	11	11	-	-	-	-
Ryan Benton	12	12	3	3	4	4
Kevin Landis	11	10	3	3	4	4
David Michael	11	11	3	3	4	4
Peter McGregor	11	10	2	1	4	4

INDEMNITY AND INSURANCE OF DIRECTORS AND OFFICERS

The Company has entered into customary indemnification agreements under which it has indemnified directors and officers of the Company for losses incurred, or claims made and associated expenses incurred, in their capacity as a director or officer, for which they may be held personally liable, subject to certain limitations and exceptions.

INDEMNITY AND INSURANCE OF AUDITOR

The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the Company or any related entity against a liability incurred by the auditor.

During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company or any related entity.

NON-AUDIT SERVICES

Details of amounts paid or payable to the auditor for non-audit services provided during the year are outlined in Note 23 to the financial statements.

PROCEEDINGS ON BEHALF OF THE COMPANY

No proceedings have been brought or intervened in on behalf of the Company.

On behalf of the directors

John Hoffman

Director and Chief Executive Officer

27 February 2020 (Fremont PST), 28 February 2020 (Sydney AEST)

Pivotal Systems Corporation	15

Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the year ended 31 December 2019

	Note	2019 US$’000	2018 US$’000
Revenue	2	15,309	20,328
Cost of goods sold		(13,579)	(14,198)
Gross profit		1,730	6,130
Expenses
Research & development	3	(3,521)	(3,139)
Selling & marketing	3	(3,180)	(3,175)
General & administrative	3	(4,935)	(3,867)
Total expenses		(11,636)	(10,181)
Operating loss		(9,906)	(4,051)
Finance income	4	168	76
Finance expenses	4	(217)	(152)
Other expenses	4	-	(61,976)
Net loss before income tax expense		(9,955)	(66,103)
Income tax expense	5	-	-
Net loss for the year		(9,955)	(66,103)
Other comprehensive income
Other comprehensive income for the year, net of tax		-	-
Total comprehensive loss for the year attributable to the members of Pivotal Systems Corporation.		(9,955)	(66,103)
Loss per share attributable to the members of Pivotal Systems Corporation		US$ per share	US$ per share
Basic and diluted loss per share	6	(0.09)	(1.04)

The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.

Pivotal Systems Corporation	16

Consolidated Statement of Financial Position

As at 31 December 2019

	Note	2019<br><br>US$’000	2018<br><br>US$’000
Assets
Current assets
Cash and cash equivalents	8	5,446	17,489
Trade and other receivables	13	5,823	3,870
Inventories	9	8,746	6,347
Other assets	10	314	334
Total current assets		20,329	28,040
Non-current assets
Property, plant and equipment	11	307	302
Intangible assets	12	10,304	9,078
Right of use assets	1	1,192	-
Other assets		23	9
Total non-current assets		11,826	9,389
Total assets		32,155	37,429
Liabilities
Current liabilities
Trade and other payables	13	4,970	5,336
Employee benefits	14	443	423
Provisions	15	189	110
Borrowings	13	2,756	-
Lease liabilities	1	225	-
Total current liabilities		8,583	5,869
Non-current liabilities
Lease liabilities	1	1,031	-
Total non-current liabilities		1,031
Total liabilities		9,614	5,869
Net assets		22,541	31,560
Contributed equity	16	171,315	170,818
Reserves	18	1,719	1,280
Accumulated losses		(150,493)	(140,538)
Total equity		22,541	31,560

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

Pivotal Systems Corporation	17

Consolidated Statement of Changes in Equity

For the year ended 31 December 2019

	Contributed equity<br><br>US$’000	Reserves US$’000	Accumulated losses<br><br>US$’000	Total equity<br><br>US$’000
Balance at 1 January 2018	43,263	1,179	(74,435)	(29,993)
Loss after income tax expense for the year	-	-	(66,103)	(66,103)
Other comprehensive loss for the year, net of tax	-	-	-	-
Total comprehensive loss for the year	-	-	(66,103)	(66,103)
Transactions with owners in their capacity as owners:
Shares issued on conversion of preferred stock and warrants, net of cost (note 16)	102,730	-	-	102,730
Issue of listed ordinary share capital (note 16)	26,586	-	-	26,586
Share issue costs	(1,761)	-	-	(1,761)
Share-based payments (note 18)	-	101	-	101
Balance at 31 December 2018	170,818	1,280	(140,538)	31,560
Balance at 1 January 2019	170,818	1,280	(140,538)	31,560
Loss after income tax expense for the year	-	-	(9,955)	(9,955)
Other comprehensive loss for the year, net of tax	-	-	-	-
Total comprehensive loss for the year	-	-	(9,955)	(9,955)
Transactions with owners in their capacity as owners:
Shares issue on exercise of options (note 16)	502	-	-	502
Share issue costs	(5)			(5)
Share-based payments (note 18)	-	439	-	439
Balance at 31 December 2019	171,315	1,719	(150,493)	22,541

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

Pivotal Systems Corporation	18

Consolidated Statement of Cash Flows

For the year ended 31 December 2019

	Note	2019 US$’000	2018 US$’000
Cash flows used in operating activities
Receipts from customers		13,066	19,321
Payments to suppliers and employees		(24,562)	(22,587)
Interest received		161	-
Interest paid		(162)	(152)
Payment related to the exercise of put option of warrants related to debt discount		-	(315)
Net cash used in operating activities	8	(11,497)	(3,733)
Cash flows used in investing activities
Payments for property, plant and equipment		(112)	(288)
Payments for capitalized development expenses		(3,484)	(3,478)
Net cash used in investing activities		(3,596)	(3,766)
Cash flows from financing activities
Proceeds from the issue of common stock		-	39,540
Payment to selling shareholders, net of costs		-	(12,954)
Payment of share issue costs	16	-	(1,761)
Proceeds from the issue of preferred stock		-	2,000
Proceeds from the exercise of options		473	61
Proceeds from the exercise of warrants		-	1
Proceeds from bank loans	13	3,000	1,917
Repayment of bank loans	13	(250)	(4,925)
Transaction costs related to the loans and borrowings		(26)	(120)
Reduction in Lease liabilities	1	(154)	-
Net cash from financing activities		3,043	23,759
Net (decrease) increase in cash and cash equivalents		(12,050)	16,260
Cash and cash equivalents at the beginning of the financial year		17,489	1,148
Net effect of foreign exchange		7	81
Cash and cash equivalents at the end of the year	8	5,446	17,489

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

Pivotal Systems Corporation	19

Notes to the Consolidated Financial Statements

Note 1. Significant accounting policies

The principal accounting policies adopted in the preparation of the consolidated financial statements are set out either in the respective notes or below. These policies have been consistently applied to all the periods presented, unless otherwise stated. The financial statements are for the Group including Pivotal Systems Corporation and its subsidiaries, referred to as “Pivotal”, “Company” or “Group”.

Basis of preparation

These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (“AASB”). The financial statements also comply with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. The financial statements comprise the consolidated financial statements of the Group which is a for-profit entity for financial reporting purposes under Australian Accounting Standards.

Historical cost convention

The consolidated financial statements, except for the cash flow information, have been prepared on an accrual basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities.

Critical accounting estimates

The preparation of the consolidated financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed throughout the financial statements.

Basis of consolidation

The consolidated financial statements comprise the financial statements of the Group as at the end of the reporting period. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:

•	Power over the investee (i.e. existing<br>rights that give it the current ability to direct the relevant activities of the investee);
•	Exposure, or rights, to variable returns<br>from its involvement with the investee; and
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•	The ability to use its power over the<br>investee to affect its returns.
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When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

•	The contractual arrangement with the other<br>vote holders of the investee;
•	Rights arising from other contractual<br>arrangements; and
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•	The Group’s voting rights and potential<br>voting rights.
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The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of profit and loss and other comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary.

Pivotal Systems Corporation	20

Notes to the Consolidated Financial Statements

Note 1. Significant accounting policies (continued)

Basis of consolidation (continued)

Profit or loss and each component of other comprehensive income are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra- Group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

Rounding of amounts

Amounts in this report have been rounded off to the nearest thousand United States dollars unless otherwise stated.

Functional currency

The financial statements are presented in US dollars, which is the functional and presentational currency of the Group. There has been no change in the functional and presentational currency of the Group.

Foreign currency transactions

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items held at fair value are reported at the exchange rate at the date when the fair values were determined.

Exchange differences arising on the translation of monetary items are recognized in profit or loss.

Exchange differences arising on the translation of non-monetary items are recognized directly in other comprehensive income to the extent that the underlying gain or loss is directly recognized in other comprehensive income; otherwise the exchange difference is recognized in profit or loss.

Going Concern

The Directors believe that there are reasonable grounds to conclude that the Group will continue as a going concern, after consideration of the following factors:

•	The securing of a $10.0 million debt financing<br>facility with Bridge Bank on 27 August 2019 comprising of a $3.0 million term loan line of credit and an $7.0 million working capital<br>revolving credit line (refer note 13).
•	The securing of $13.0<br>million Revenue Based Redeemable Preferred Stock (RBI) with Anzu on 30 January 2020. The initial funding of $10.0 million was received<br>on 20 February 2020 for the issue of 10,000 RBI’s of $0.00001 par value per share, at a purchase price of USD$1,000 per share.<br>A subsequent funding of $3.0 million is available in conjunction with the replacement of Pivotal’s Bridge Bank senior term<br>loan line of credit.
---	---
•	The expansion of market opportunities<br>as a result of the development and production of new products.
---	---
Pivotal Systems Corporation	21
---	---

Notes to the Consolidated Financial Statements

Note 1. Significant accounting policies (continued)

Going Concern (continued)

Current and non-current classification

Assets and liabilities are presented in the statement of financial position based on current and non-current classification.

An asset is current when it is expected to be realized or intended to be sold or consumed in normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realized within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current.

A liability is current when it is expected to be settled in normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current.

Deferred tax assets and liabilities are always classified as non-current.

Financial Assets

The Company’s financial assets are comprised by Accounts Receivable and Other Receivables which are initially measured at fair value and subsequently measured at amortized cost. Financial assets are derecognized when the rights to receive cash flows have expired which is generally when payment has been received. When there is no reasonable expectation of recovering part of all of a financial asset, its carrying value is written off.

The Company recognizes a loss allowance for expected credit losses of financial assets. The measurement of the loss allowance depends on the Company’s assessment of credit risk at the end of each reporting period based on reasonable and supportable information that is available without undue cost of effort to obtain.

Where there has not been a significant increase in exposure to credit risk since initial recognition, the Company evaluates if a 12-month expected credit loss allowance shall be estimated.

New, revised or amended Accounting Standards and Interpretations adopted

The Group has adopted all of the new, revised or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) and the International Financial Reporting Interpretations Committee (IFRIC) that are relevant to its operations and effective for the year commencing 1 January 2019. The nature and effect of these changes are disclosed below.

AASB 16 Leases

AASB 16 Leases supersedes AASB 117 Leases, AASB16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for most leases under a single on-balance sheet model.

The Group, as lessee, is required to recognize its leases in the statement of financial position, as the distinction between ‘operating’ and ‘finance’ leases has been removed. The lease liability is measured as the present value of the unavoidable future lease payments to be made over the lease term.

The Group adopted AASB 16 using the modified retrospective method of adoption with the date of initial application of 1 January 2019. Under this method, the standard is applied retrospectively with the cumulative effect of initially applying the standard recognised at the date of initial application.

Pivotal Systems Corporation	22

Notes to the Consolidated Financial Statements

Note 1. Significant accounting policies (continued)

AASB 16 Leases (continued)

The Group elected to use the transition practical expedients allowing a) the standard to be applied only to contracts that were previously identified as leases applying AASB 117, and b) the measuring the right-of-use asset on transition as being equal to the amount of the lease liability initially recognised on transition minus accrued payments.

The Group also elected to use the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option (‘short-term leases’), and lease contracts for which the underlying asset is of low value (‘low-value assets’).

The effect of adoption of AASB 16 is as follows:

The impact on the consolidated statement of financial position as at 1 January 2019 is an increase in right-of-use assets of $276,105, an increase in the lease liability of $289,285 and the recognition of deferred rent of $13,180.

The lease liabilities as at 1 January 2019 can be reconciled to the operating lease commitments as of 31 December 2018 as follows:

	US$’000
Non-cancellable lease commitments as at 31 December 2018 (undiscounted)	294
Reduction from discounting future, undiscounted lease payments to their net present value at the Groups incremental borrowing rate	(5)
Lease liabilities as at 1 January 2019	289
(i)	Nature and effect of adoption of AASB 16
---	---

The Group has lease contracts for its office premises. Before the adoption of AASB 16, the Group classified each of its leases (as lessee) at the inception date as an operating lease (as it held no finance leases). In an operating lease, the leased property was not capitalised, and the lease payments were recognised as an expense in the consolidated statement of profit or loss and other comprehensive income on a straight-line basis over the lease term. Prepaid or accrued rent was recognised under prepaid expenses and accounts payable and accrued liabilities, respectively.

Upon adoption of AASB 16, the Group applied a single recognition and measurement approach for all leases where it is the lessee, except for short-term leases and leases of low-value assets. The Group recognised lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. In accordance with the modified retrospective method of adoption, the Group applied AASB 16 at the date of initial application by measuring the right-of-use assets based on the amount equal to the lease liabilities. Lease liabilities were recognised based on the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of initial application.

(ii)	Summary of new accounting policy

Right-of-use assets

The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated amortization and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are amortized according to the pattern in which the asset’s future economic benefits are expected to be consumed by the Group over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment.

Pivotal Systems Corporation	23

Notes to the Consolidated Financial Statements

Note 1. Significant accounting policies (continued)

AASB 16 Leases (continued)

(ii)	Summary of new accounting policy (continued)

Lease liabilities

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term.

The present value of the lease liability presented in the financial statements refers to the lease of the Group’s headquarters in Fremont, California. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees.

The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.

Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to its short-term office premises leases i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value (i.e., below $5,000). Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.

Significant judgement in determining the lease term of contracts with renewal options

The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. When the Group has the option to lease the assets for additional terms, it applies judgement in evaluating whether it is reasonably certain to exercise the option to renew, considering all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew.

Pivotal Systems Corporation	24

Notes to the Consolidated Financial Statements

Note 1. Significant accounting policies (continued)

AASB 16 Leases (continued)

(iii)	Amounts recognised in the statement of financial position<br>and profit and loss

Set out below, are the carrying amounts of the Group’s right-of-use assets and lease liabilities and the movements during the period:

	Right-of-use asset	Lease<br><br>Liability
	US$’000	US$’000
As at 31 December 2018	-	-
Initial adoption of AASB 16	276	289
Additions	1,121	1,121
Amortization expense	(205)	-
Payments that reduce the present value of the lease liability (1)	-	(154)
As at 31 December 2019	1,192	1,256
(1)	Total cash outflows for lease payments is $232,496. This amount includes $78,101 interest expense<br>accrual due to discounting the lease liability at the Group’s incremental borrowing rate (See Note 4). Payments of interest<br>are classified as cash flows for operating activities in the statement of cash flows.
---	---

Set out below are the amounts recognised in profit and loss for the year ended 31 December 2019:

	31 Dec 2019
	US$’000
Amortization expense of right-of-use asset	205
Interest expense on lease liabilities	78
Total amount recognised in profit or loss	283
Disclosure of Lease liabilities:
Current	225
Non-current	1,031
Total Lease liabilities	1,256
Pivotal Systems Corporation	25
---	---

Notes to the Consolidated Financial Statements

Note 1. Significant accounting policies (continued)

New, revised or amended Accounting Standards and Interpretations adopted (continued)

AASB Interpretation 23 Uncertainty over Income Tax Treatment

The Interpretation clarifies the application of the recognition and measurement criteria in AASB 112 Income Taxes when there is uncertainty over income tax treatments. The Interpretation specifically addresses the following:

•	Whether an entity considers uncertain tax treatments<br>separately;
•	The assumptions an entity makes about the examination<br>of tax treatments by taxation authorities;
---	---
•	How an entity determines taxable profit (tax loss), tax<br>bases, unused tax losses, unused tax credits and tax rates; and
---	---
•	How an entity considers changes in facts and circumstances.
---	---

An entity has to determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments. The approach that better predicts the resolution of the uncertainty needs to be followed. The Group applies significant judgement in identifying uncertainties over income tax treatments.

The Group assessed whether the Interpretation had an impact on its consolidated financial statements. Upon adoption of the Interpretation, the Group concluded that the only uncertain tax positions it has are related to federal and California R&D credits. There are no interest and penalties on the uncertain tax positions as there would be nothing owed to the federal or CA taxing authorities if the R&D credit carryforwards were reduced considering that there was no past tax that was offset by R&D credits. The interpretation did not have an impact on the consolidated financial statements of the Group.

New standards and interpretations not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2019 reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new standards and interpretations is set out below.

Amendment to Conceptual Framework for Financial Reporting

The revised Conceptual Framework includes some new concepts, provides updated definitions and recognition criteria for assets and liabilities and clarifies some important concepts. It is arranged in eight chapters, as follows:

► Chapter 1 – The objective of financial reporting

► Chapter 2 – Qualitative characteristics of useful financial information

► Chapter 3 – Financial statements and the reporting entity

► Chapter 4 – The elements of financial statements

► Chapter 5 – Recognition and derecognition

► Chapter 6 – Measurement

► Chapter 7 – Presentation and disclosure

► Chapter 8 – Concepts of capital and capital maintenance

AASB 2019-1 has also been issued, which sets out the amendments to Australian Accounting Standards, Interpretations and other pronouncements in order to update references to the revised Conceptual Framework. The changes to the Conceptual Framework may affect the application of accounting standards in situations where no standard applies to a particular transaction or event.

Pivotal Systems Corporation	26

Notes to the Consolidated Financial Statements

Note 1. Significant accounting policies (continued)

New standards and interpretations not yet adopted (continued)

In addition, relief has been provided in applying AASB 3 and developing accounting policies for regulatory account balances using AASB 108, such that entities must continue to apply the definitions of an asset and a liability (and supporting concepts) in the Framework for the Preparation and Presentation of Financial Statements (July 2004), and not the definitions in the revised Conceptual Framework.

The amendments apply prospectively on or after 1 January 2020, with no material effect to the Group.

Amendments to AASB 3: Definition of a Business

The Standard amends the definition of a business in AASB 3 Business Combinations. The amendments clarify the minimum requirements for a business, remove the assessment of whether market participants are capable of replacing missing elements, add guidance to help entities assess whether an acquired process is substantive, narrow the definitions of a business and of outputs, and introduce an optional fair value concentration test.

Since the amendments apply prospectively to transactions or other events that occur on or after the date of first application, being 1 January 2020, the Group will not be affected by these amendments on the date of transition and on foreseeable future transactions.

Amendments to AASB 101: Definition of Material

This Standard amends AASB 101 Presentation of Financial Statements and AAS 108 Accounting Policies, Changes in Accounting Estimates and Errors to align the definition of ‘material’ across the standards and to clarify certain aspects of the definition. The amendments clarify that materiality will depend on the nature or magnitude of information. An entity will need to assess whether the information, either individually or in combination with other information, is material in the context of the financial statements. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users.

The amendments apply prospectively on or after 1 January 2020, with no material effect to the Group.

Note 2. Revenue from contracts with customers

	2019 US$’000	2018 US$’000
Product revenue (recognised at a point in time)	15,564	20,371
Provision for sales returns	(255)	(43)
Net revenue from contracts with customers	15,309	20,328

The following table reflects net revenue by type of customer:

	2019 US$’000	2018 US$’000
Integrated device manufacturer (IDM)	3,214	7,150
Original equipment manufacturer (OEM)	12,095	13,178
Net revenue from contracts with customers	15,309	20,328
Pivotal Systems Corporation	27
---	---

Notes to the Consolidated Financial Statements

Note 2. Revenue from contracts with customers (continued)

Accounting policy for revenue recognition

The Group earns revenue from contracts with customers, primarily through the design, development, manufacture and sale of gas flow controllers. Our contracts are priced based on the specific negotiations with each customer.

Pivotal accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

Pivotal recognizes revenue from product sales when the customer obtains control of the Group’s product, which occurs at a point in time, typically upon delivery to the customer. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues. The Group expenses incremental costs of obtaining a contract as and when incurred because the expected amortization period of the asset that the Group would have recognized is one year or less.

Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established and which result from discounts, returns, and other allowances that are offered within contracts between the Group and its customers.

Revenue is disaggregated by type of customer and by geography as we believe it best depicts how the nature, amount, timing, and uncertainty of our revenue and cash flows are affected by economic factors. Revenues by geography are based on the shipping address of the customer. Refer to Note 7 Operating segment for disaggregation of revenue by geography.

The timing of revenue recognition may differ from the time of billing to the customers. Generally, the payment terms of the Group’s offerings range from 30 to 90 days of the invoice date. Receivables primarily relate to the Groups right to consideration for performance obligations completed and billed at the reporting date for which Pivotal has an unconditional right to consideration before it invoices the customer. Such amounts are commonly referred to as trade receivables. Refer to Note 13 Financial assets and liabilities. When another party is involved in the provision of goods or services to a customer, Pivotal is generally the principal in its transactions and therefore reports gross revenue based on the billed amounts to its customers.

Contract liabilities consist of advance consideration received from customers and billings in excess of revenue recognized and deferred revenue, which precede the Group’s satisfaction of the associated performance obligation(s). The Group’s contract liabilities primarily result from customer payments received upfront for performance obligations that are satisfied at a point in time. Contract liabilities are recognized as revenue when the goods are delivered to our customer. The Group does not have contract liabilities as of 31 December 2019 (2018: Nil).

Due to the relationship between the Group’s performance and the customer’s payment, Pivotal typically does not have conditional rights to consideration in exchange for goods or services transferred to a customer. Generally, Pivotal has the right to bill the customer as goods are delivered and services are provided, which results in the Group’s right to payment being unconditional. Therefore, our balance sheet does not present contract assets.

Due to the nature of the product, each contract with a customer has distinct performance obligations that are capable of being distinct on their own and within the context of the contract. Additionally, based on the contract terms, which generally include performance obligations subject to cancellation terms, the Group does not have material unsatisfied performance obligations as of 31 December 2019 (2018: Nil).

Pivotal Systems Corporation	28

Notes to the Consolidated Financial Statements

Note 2. Revenue from contracts with customers (continued)

Accounting policy for revenue recognition (continued)

Determination of transaction price

Transaction price includes estimates of variable consideration which may result from discounts, returns and other allowances for which reserves are established. When applicable, these reserves are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable. Where appropriate, these estimates take into consideration a range of possible outcomes that are probability-weighted for relevant factors such as Pivotal’s historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. The amount of variable consideration that is included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from the Group’s estimates. If actual results in the future vary from the Group’s estimates, Pivotal will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.

Note 3. Expenses

Net Loss before income tax includes the following specific expenses:

	2019 US$’000	2018 US$’000
Research & development
Amortization of capitalized development costs (Note 12)	2,281	2,799
Salary and benefits	776	250
Impairment of capitalized development costs (Note 12)	22	-
Other	442	90
	3,521	3,139
Selling & marketing
Salary and benefits	1,265	787
Commissions and bonuses	733	1,451
Travel and outside services	752	499
Other	430	438
	3,180	3,175
General & administrative
Salary and benefits	1,725	1,213
Travel and outside services	1,613	1,397
IPO costs	-	725
Bad debt expense	600	-
Other	997	532
	4,935	3,867
Pivotal Systems Corporation	29
---	---

Notes to the Consolidated Financial Statements

Note 3. Expenses (continued)

Accounting policy for expenses

Research costs

Expenditure on research activities, undertaken with the prospect of obtaining new technical knowledge and understanding, is recognized in the statement of profit or loss and other comprehensive income as an expense when it is incurred.

Commissions and Bonuses

Commissions and Bonuses are mainly comprised of commissions paid for the initial contract with a customer and for contract renewals and are classified as selling and marketing expenses in the consolidated statement of profit or loss and other comprehensive income. Renewal commissions are considered to be commensurate with the initial contract commissions. As a result, Pivotal amortizes the commission costs, for a new contract or a contract renewal, over the initial contract term, which is less than a year. Additionally, Pivotal applies the practical expedient of expensing sales commissions as incurred considering that the amortization period is one year or less.

Other expenses

Other expenses classified according to their function, as selling & marketing or general &administrative, include expenses mainly related with facilities, materials, depreciation, and share-based payment transactions.

Pivotal Systems Corporation	30

Notes to the Consolidated Financial Statements

Note 4. Other Income and Expenses

	2019 US$’000	2018 US$’000
Finance income
Interest income	161	-
Foreign exchange gains	7	76
	168	76
Finance expense
Interest expense (1)	(217)	(152)
Other expenses
Loss from financial liabilities measured at fair value through the profit or loss (2)	-	(61,976)
(1)	As of 31 December 2019, interest expense included $78,101 implicit<br>interest paid for the lease liability, according to the incremental borrowing rate under AASB 16, $101,431 related to borrowings<br>and $38,000 for penalties paid for the cancellation of Certificates of Deposits (CDs) held in financial institutions prior to maturity.<br>As of 31 December 2018, the Group classified its leases (as lessee) as an operating lease, therefore the implicit interest paid<br>was not required to be recognized in the consolidated statement of profit and loss and other comprehensive income.
---	---
(2)	The Group’s preferred shares and warrant liabilities, designated<br>at fair value through profit or loss, were converted to common stock on 2 July 2018. The financial effect of fair value remeasurement<br>prior to conversion is reflected in the statement of profit or loss and other comprehensive income in the prior year.
---	---

Accounting policy for finance income and expense

Finance income

Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.

Finance Expense

Finance costs that are attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period in which they are incurred.

Pivotal Systems Corporation	31

Notes to the Consolidated Financial Statements

Note 5. Income tax expense

	2019 US$’000	2018<br><br>US$’000
Deferred tax	-	-
Current tax	-	-
Aggregate income tax expense	-	-
Effective tax rate:	0.00%	0.00%
Net Loss before income tax expense	(9,955)	(66,103)
Tax at the statutory tax rate of 21% (2018: 21%)	(2,091)	(13,882)
Tax effect amounts which are not deductible/(taxable) in calculating<br>taxable income:
Temporary differences	(34)	(166)
Permanent differences	104	24
Disallowable expenses	-	12,899
Unutilized losses carried forward	2,021	1,125
Effect on unutilized losses of future reduction in tax rate to 21%	-	-
Income tax expense	-	-

Based on historical losses and the expectation of future losses, management cannot conclude that it is more likely than not that the net deferred tax assets will be fully realizable. Accordingly, the Group has provided a full valuation allowance against its net deferred tax assets for the financial years ended 31 December 2019 and 31 December 2018.

As of 31 December 2019, the Group had federal and state net operating loss carry forwards of approximately $39.1 million and $5.2 million (2018: $30.2 million and $4.8 million), respectively, available to reduce future taxable income, if any. The net operating loss carry forwards will expire beginning 2032 through 2039 for California income tax purposes. Beginning in 2018 Federal net operating losses are carried forward indefinitely.

As of 31 December 2019, the Group had federal and state research credit carry forwards of $0.4 million (2018: $0.4 million) and $1.2 million (2018: $1.0 million). Federal tax credits begin to expire in 2037. The state tax credits have no expiration date.

Utilization of the net operating loss carry forwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.

Accounting policy for Income tax

The income tax expense for the year comprises current income tax expenses and deferred tax expenses.

Current income tax expense charged to the profit or loss in the tax payable on taxable income for the current period. Current tax liabilities are measured as the amounts expected to be paid to the relevant tax authority using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.

Pivotal Systems Corporation	32

Notes to the Consolidated Financial Statements

Note 5. Income tax expense (continued)

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realized, or the liability is settled, and their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability.

Deferred tax assets relating to temporary differences and unused tax losses are only recognized to the extent that it is probably that future taxable profit will be available against which the benefits of the deferred tax asset can be utilized.

Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.

Critical accounting judgements, estimates and assumptions

The Group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Group recognizes liabilities for anticipated tax audit issues based on the Group's current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made.

Note 6. Net loss per share

Basic net loss per share has been computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is calculated by dividing net loss by the weighted-average number of shares of common stock and potential dilutive securities outstanding during the period.

Because the Group is in a net loss position, diluted net loss per share excludes the effects of common stock equivalents consisting of stock options, preferred shares and warrants, which are all anti-dilutive. The total number of shares subject to stock options were excluded from consideration in the calculation of diluted net loss per share.

	2019<br><br>US$’000	2018<br><br>US$’000
Net loss attributable to ordinary equity holders of Pivotal Systems Corporation used in calculating basic and diluted loss per share:	(9,955)	(66,103)
	Number	Number
---	---	---
Weighted average number of ordinary shares for basic and diluted loss per share	111,132,123	63,574,081
	US$	US$
---	---	---
Basic and diluted loss per share	(0.09)	(1.04)
Pivotal Systems Corporation	33
---	---

Notes to the Consolidated Financial Statements

Note 7. Operating segments

For operating purposes, the Group is organized into one main operating segment, focused on the technological design, development, manufacture and sale of high-performance gas flow controllers.

All the activities of the Group are interrelated, and each activity is dependent on the others. Accordingly, all significant operating disclosures are based upon analysis of the Group as one segment. The financial results from this segment are equivalent to the financial statements of the Group as a whole.

Pivotal Systems Corporation derives all of the revenue of the Group and maintains the majority of the assets in the United States.

Geographically, the Group has the following revenue information based on the location of its customers:

	2019 US$’000	2018 US$’000
Asia	9,533	15,540
North America	5,776	4,788
	15,309	20,328
The following customers accounted for more than 10% of revenues:
Customer A	48%	47%
Customer B	15%	34%
Customer C	28%	15%
	91%	96%

Note 8. Current assets - cash and cash equivalents

	2019 US$’000	2018 US$’000
Cash at bank	5,446	17,489
Cash and cash equivalents	5,446	17,489

Minimum cash requirement

Pursuant to the credit facility, the Company is required to maintain $2 million minimum cash balance in the bank account with Bridge Bank. There are no restrictions or other limitations on the use of cash and cash equivalents.

Accounting policy for cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less or that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Pivotal Systems Corporation	34

Notes to the Consolidated Financial Statements

Note 8. Current assets - cash and cash equivalents (continued)

Reconciliation of Cash Outflow from Operating Activities with Net Loss for the year

	2019 US$’000	2018 US$’000
Loss for the year	(9,955)	(66,103)
Depreciation expense	256	342
Amortization expense for development costs and patents	2,289	2,818
Amortization expense for ROU Assets	205	-
Impairment of capitalized development costs	22	-
Share based payment expense reported as operating activities	439	70
Fair value remeasurement of financial liabilities	-	61,976
Put option reported as operating activity	-	(315)
Interest paid reported as financing activity	-	120
Loss on sale of equipment	3	-
Foreign exchange gain	(7)	(81)
Change in operating assets and liabilities
Increase in trade and other receivables	(1,954)	(1,307)
Increase in inventories	(2,474)	(1,660)
Increase in other current assets	(20)	(215)
(Decrease)/Increase in trade and other payables	(401)	889
Increase in employee benefits	20	82
Increase/(decrease) in provisions	80	(349)
Net Cash Outflow from operating activities	(11,497)	(3,733)

Non-cash transactions:

Non-cash Financing activities in the Consolidated Statement of Cashflows in the prior year includes $102.14 million relating to the conversion of preferred shares and warrants into common stock as a result of the Group’s Initial Public Offering.

Note 9. Current assets - inventories

	2019 US$’000	2018 US$’000
Raw materials	7,394	5,187
Work in progress	1,054	845
Finished goods	827	804
Inventories - gross	9,275	6,836
Less: Provision for impairment	(529)	(489)
Inventories - net	8,746	6,347
Pivotal Systems Corporation	35
---	---

Notes to the Consolidated Financial Statements

Note 9. Current assets - inventories (continued)

Accounting policy for inventories

Raw materials, work in progress and finished goods are stated at the lower of cost and net realizable value on a 'first in first out' basis. Cost comprises of direct materials and delivery costs, direct labor, import duties and other taxes, an appropriate proportion of variable and fixed overhead expenditure based on normal operating capacity. Costs of purchased inventory are determined after deducting rebates and discounts received or receivable.

The Group’s inventories are concentrated in high-technology parts and components that may be specialized in nature or subject to rapid technological obsolescence. These factors are considered in estimating required reserves to state inventories at the lower of cost or net realizable value.

Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Critical accounting judgements, estimates and assumptions

The provision for impairment of inventories assessment requires a degree of estimation and judgement. The level of the provision is assessed by taking into account the recent sales experience, the ageing of inventories and other factors that affect inventory obsolescence.

Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are in included in cost of goods sold.

Note 10. Current assets - other assets

	2019 US$’000	2018 US$’000
Prepaid expenses	314	325
Other assets	-	9
	314	334
Pivotal Systems Corporation	36
---	---

Notes to the Consolidated Financial Statements

Note 11. Non-current assets - property, plant and equipment

	2019 US$’000	2018 US$’000
Leasehold improvements - at cost	61	31
Less: Accumulated depreciation	(21)	(13)
Net book value leasehold improvements	40	18
Plant and equipment - at cost	1,813	1,553
Less: Accumulated depreciation	(1,546)	(1,269)
Net book value plant and equipment	267	284
Net book value property, plant and equipment	307	302
	Leasehold improvements<br><br>US$’000	Plant & equipment<br><br>US$’000	Total<br><br>US$’000
---	---	---	---
Balance at 1 January 2018	-	341	341
Additions	20	323	343
Costs of assets impaired		(123)	(123)
Accumulated depreciation of assets impaired	-	120	120
Depreciation expense	(2)	(377)	(379)
Balance at 31 December 2018	18	284	302
Additions	30	266	296
Cost of disposals	-	(5)	(5)
Accumulated depreciation of assets disposed of	-	2	2
Depreciation expense	(8)	(280)	(288)
Balance at 31 December 2019	40	267	307
Reconciliation of depreciation expense		2019 US$’000	2018 US$’000
Depreciation allocated to capitalized development costs		31	37
Depreciation expensed to research & development costs		14	4
Depreciation expensed to selling & marketing		127	4
Depreciation expensed to general & administrative		33	15
Depreciation expensed to cost of goods sold		83	319
Total depreciation expense		288	379
Pivotal Systems Corporation	37
---	---

Notes to the Consolidated Financial Statements

Note 11. Non-current assets - property, plant and equipment (continued)

Accounting policy for property, plant and equipment

Plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the assets carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

Plant and equipment are depreciated, and leasehold improvements are amortized, over their estimated useful lives using the straight-line method.

The expected useful lives of the assets are as follows:

Plant & equipment	2-5 years
Leasehold improvements	over the remaining lease term

The residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date or when there is an indication that they have changed.

A carrying amount is written down immediately to its recoverable amount if the carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the statement profit or loss and other comprehensive income.

Critical accounting judgements, estimates and assumptions

Estimation of useful lives of assets

The Group determines the estimated useful lives and related depreciation and amortization charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortization charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down.

Pivotal Systems Corporation	38

Notes to the Consolidated Financial Statements

Note 12. Non-current assets - intangible assets

		2019 US$’000	2018 US$’000
Patent – at cost		50	50
Less: Accumulated amortization		(50)	(42)
		-	8
Capitalized development – at cost		22,361	18,845
Less: Accumulated amortization		(12,057)	(9,775)
		10,304	9,070
Net written down value intangible assets		10,304	9,078
	Patent<br><br>US$’000	Capitalized Development<br><br>US$’000	Total US$’000
Balance at 1 January 2018	27	8,322	8,349
Additions	-	3,547	3,547
Amortization expense	(19)	(2,799)	(2,818)
Balance at 31 December 2018	8	9,070	9,078
Additions	-	3,537	3,537
Impairment of costs	-	(22)	(22)
Amortization expense	(8)	(2,281)	(2,289)
Balance at 31 December 2019	-	10,304	10,304

Accounting policy for intangible assets

Development costs

Development costs on an individual project are recognized as an intangible asset when the Group can demonstrate:

•	The technical feasibility of completing<br>the intangible asset so that the asset will be available for use or sale.
•	Its intention to complete and its ability<br>and intention to use or sell the asset.
---	---
•	How the asset will generate future economic<br>benefits.
---	---
•	The availability of resources to complete<br>the asset.
---	---
•	The ability to measure reliably the expenditure<br>during the development.
---	---
Pivotal Systems Corporation	39
---	---

Notes to the Consolidated Financial Statements

Note 12. Non-current assets - intangible assets (continued)

The costs that are eligible for capitalization of development costs are the following:

•	Hardware and Software engineers’<br>compensation for time directly attributable to coding the software.
•	An allocated amount of direct costs, such<br>as overhead related to programmers and the facilities they occupy.
---	---
•	Costs associated with testing the software<br>for market (i.e. alpha, beta tests).
---	---
•	Borrowing costs.
---	---
•	Patents acquisition and registration costs<br>(patents, application fees, and legal fees).
---	---
•	Other direct developing costs that are<br>incurred to bring the hardware with embedded software to market.
---	---

Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortization and accumulated impairment losses. Amortization of the asset begins when development is complete and the asset is available for use. Development costs are amortized on a straight-line basis over the finite life based on the period of expected future sales from the related project which is 5 years. Amortization is recorded in profit or loss.

During the period of development, the asset is tested for impairment annually. At the end of the year, the Group has considered indicators of impairment of the intangible assets and determined there were none.

Patents and trademarks

Significant costs associated with patents and trademarks are deferred and amortized on a straight-line basis over the period of their expected benefit, being their finite life of 5 years.

Critical accounting judgements, estimates and assumptions

Capitalized development costs

The Group capitalizes development costs for a project in accordance with the accounting policy. Initial capitalization of cost is based on management’s judgement that technological and economic feasibility is confirmed. In determining the amounts to be capitalized, management makes assumptions regarding the expected future cash generation of the project, discount rates to be applied and the expected period of the benefits.

Impairment of intangible assets

The Group assesses impairment of intangible assets other than goodwill at each reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions.

Pivotal Systems Corporation	40

Notes to the Consolidated Financial Statements

Note 13. Financial assets and liabilities

Set out below is an overview of financial assets (other than cash and short term deposits) and financial liabilities held by the Group as at 31 December 2019:

	2019 US$’000	2018 US$’000
Financial assets
Trade and other receivables	6,423	3,870
Less: Credit loss allowance	(600)	-
Total financial assets	5,823	3,870
Current	5,823	3,870
Non-current	-	-
Total financial assets	5,823	3,870
Financial liabilities
Trade and other payables	4,970	5,336
Borrowings (1)	2,756	-
	7,726	5,336
Current	7,726	5,336
Non-current	-	-
Total financial liabilities	7,726	5,336
(1)	Bridge Bank Loan
---	---
	Bridge Bank<br><br>US$’000	Total US$’000
---	---	---
Balance as at 1 January 2018	3,008	3,008
Financial liability with Bridge Bank (1)	1,917	1,917
Interest accrued on facility	152	152
Interest paid on facility	(152)	(152)
Repayment of facility (1)	(4,925)	(4,925)
Balance as at 31 December 2018	-	-
Financial liability with Bridge Bank (2)	3,000	3,000
Interest accrued on facility	55	55
Interest paid on facility	(49)	(49)
Repayment of facility	(250)	(250)
Balance as at 31 December 2019	2,756	2,756
Pivotal Systems Corporation	41
---	---

Notes to the Consolidated Financial Statements

Note 13. Financial assets and liabilities (continued)

(1)	Bridge Bank Loan

On 31 March 2017, the Company entered into a Debt Facility Agreement with Bridge Bank for a first tranche of US$2.5 million and an additional amount of US$925,000 subject to the achievement of certain funding milestones which were completed in September 2017. Interest accrued at a per annum rate equal to 2% above the Prime Rate.

The Company also held a US $1.5million AR line of credit with Bridge Bank with an interest rate of the Bank’s prime rate plus 1.25%. The facility term provided interest only payments until 31 August 2017 with repayments of principal and interest for 24 months thereafter.

On 8 January 2018, the Company amended the loan agreement with Bridge Bank, allowing the Company to borrow an aggregate of US $4.0 million. An additional advance of US $1.9 million was made to the Company on 9 January 2018. The amended agreement acknowledged the Company was not in compliance with their financial covenants as of 30 November 2017 and offered a waiver on the default.

The Bridge Bank loan was secured over all personal property of the Company, whether presently existing or hereafter created or acquired, as per the loan agreement.

The loan was repaid on 31 July 2018 and incurred an early payment fee of US$0.12 million.

(2)	Bridge Bank Loan

On 27 August 2019, the Company closed a US$10.0 million business financing agreement with Bridge Bank, a division of Western Alliance Bank (NYSE: WAL). The facility is secured by all the assets of the Company and is comprised of:

•	US$7.0 million working capital revolving<br>credit line (“Revolving Credit Line”); and
•	US$3.0 million term loan line of credit<br>(“Term Loan”).
---	---

The amount of liquidity available under the US$7.0 million Revolving Credit Line is based upon the Company’s balances and composition of eligible customer receivables and inventory, as well as other factors. Amounts borrowed under the Revolving Credit Line mature and become due and payable in 24 months, unless extended by the parties. The Revolving Credit Line bears interest at a rate equal to 1% above the Prime Rate, floating on the average outstanding balance.

The US$3.0 million Term Loan provides funds for capital expenditures and other corporate purposes and is payable in thirty-six (36) equal monthly installments of principal, plus all accrued interest commencing in October 2019. The term loan bears interest at a rate equal to 1.5% above the Prime Rate, floating on the average outstanding balance and has a US$75,000 fee payable upon the earlier of payoff or final principal payment.

The Prime Rate for both, the Revolving Credit Line and the Term Loan, has a floor of 5.25%. The transaction costs payable upon execution of the facility were US$25,000.

On 3 September 2019, the Company drew down the Term Loan for US$3.0 million. As of 31 December 2019, $0.25 million of the Term Loan has been repaid and the Revolving Credit Line was not utilized.

The Company has not complied with the financial covenants of its borrowing facilities outstanding as of 31 December 2019 to the extent of the adjusted current ratio which was 1.10:1.00, instead of 1.25:1.00, including the liquidity covenant for which Pivotal’s unrestricted cash and cash equivalents maintained with lender should not be less than US$2.0 million at any time.

The facility is secured by all the assets of the Company.

Pivotal Systems Corporation	42

Notes to the Consolidated Financial Statements

Note 13. Financial assets and liabilities (continued)

On 30 January 2020, Bridge Bank provided a waiver of the defaults, and a forbearance from exercising its remedies under the financing agreement upon achievement of equity financing of at least US$10.0 million, subject to a forbearance period ended on February 28, 2020, the achieving of the bona fide equity event, or the occurrence of any new default or certain event of default under the financing agreement, whichever occurs first.

On 20 February 2020 the Company achieved the equity financing and received US$10.00 million. Due to this financing, the Company is in compliance with the financial covenants agreed with Bridge Bank. Had the Company received a waiver on or before 31 December 2019, US$1.76 million of current borrowings would have been classified as non-current. Refer to Note 22: Events after the reporting period.

Accounting policy for trade and other receivables

Trade receivables and other receivables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method, less any provision for expected credit loss. Trade receivables generally have 30 to 90-day payment terms.

Collectability of trade receivables is reviewed on an ongoing basis in accordance with the expected credit loss (“ECL”) model. The Group applies the AASB 9 simplified approach to measuring expected credit loses which uses a lifetime expected loss allowance for all trade receivables and other receivables. Payment is usually received between 45 and 90 days. No interest is charged on outstanding trade and other receivables.

The ECL assessment completed by the Group as at 31 December 2019 has resulted in a credit loss of $600,000 which has been recognized in the consolidated statement of profit or loss and other comprehensive (2018: $Nil).

The Group also write-off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery (e.g. when the debtor has been placed under liquidation or has entered into bankruptcy proceedings, or when the trade receivable are over two years past due, whichever occurs earlier).

Accounting policy for trade and other payables

These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortized cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition.

Accounting policy for Borrowings

Loans and borrowings are initially recognized at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortized cost using the effective interest method.

Borrowing costs are capitalized as part of the cost of a qualifying asset when it takes a substantial period of time to get ready for its intended use or sale. The Group capitalized borrowing costs for an internally generated intangible asset in the development phase since 2015. The interest capitalization rate is applied only to costs that themselves have been capitalized as development costs.

For all the borrowings, the fair values are not materially different from their carrying amounts, since the interest payable on those borrowings are close to current market rates.

Pivotal Systems Corporation	43

Notes to the Consolidated Financial Statements

Note 13. Financial assets and liabilities (continued)

Fair value hierarchy.

The Group classified the fair value of the financial instruments according to the following fair value hierarchy based on the amount of observable inputs used to value the instruments:

•	Level 1 – Values based on unadjusted<br>quoted prices available in active markets for identical assets or liabilities as of the reporting date.
•	Level 2 – Values based on inputs,<br>including quoted prices, time value and volatility factors, which can be substantially observed or corroborated in the marketplace.<br>Prices in Level 2 are either directly or indirectly observable as of the reporting date.
---	---
•	Level 3 – Values based on prices<br>or valuation techniques that are not based on observable market data.
---	---

Note 14. Current provisions - employee benefits

	2019 US$’000	2018 US$’000
Provision for annual leave	443	423
	443	423
Movement in provision for annual leave:
Opening balance	423	341
Additions	276	201
Leave taken	(256)	(119)
Closing balance	443	423

Accounting policy for employee benefits

Provisions for wages and salaries, including non-monetary benefits and annual leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the balances are settled.

Note 15. Current provisions - warranty provision

	2019 US$’000	2018 US$’000
Provision for warranty	189	110
	189	110
Movement in provision for warranty:
Opening balance	110	459
Additions	189	110
Expired warranties	(110)	(459)
Closing balance	189	110
Pivotal Systems Corporation	44
---	---

Notes to the Consolidated Financial Statements

Note 15. Current provisions - warranty provision

Accounting policy for provisions

The provision represents the estimated warranty claims in respect of products sold which are still under warranty at the reporting date. The provision is estimated based on historical warranty claim information, sales levels and any recent trends that may suggest future claims could differ from historical amounts.

Critical accounting judgements, estimates and assumptions

In determining the level of provision required for warranties the Group has made judgements in respect of the expected performance of the products, the number of customers who will actually claim under the warranty and how often, and the costs of fulfilling the conditions of the warranty. The provision is based on estimates made from historical warranty data associated with similar products and services.

Note 16. Equity - Contributed equity

	2019 Number	2019 US$’000	2018 Number	2018 US$’000
Shares of Common Stock	113,269,313	171,315	110,998,864	170,818
	113,269,313	171,315	110,998,864	170,818
(a)	Movements in Shares of Common Stock
---	---
	Shares Number	US$’000
---	---	---
Balance as at 1 January 2018	15,056,268	43,263
Shares issued on exercise of warrants	1,418,734	532
Shares issued on exercise of options (Note 18)	274,424	61
Shares issued on conversion of warrant prior to IPO	20,833,567	28,614
Shares issued on conversion of preferred stock prior to IPO	54,061,032	73,523
	91,644,025	145,993
New shares issued on completion of IPO	19,354,839	26,586
Share issue costs related to listing on the ASX	-	(1,761)
Balance as at 31 December 2018	110,998,864	170,818
Shares issued on exercise of options (Note 18)	2,270,449	502
Share issue costs related to listing on the ASX	-	(5)
Balance as at 31 December 2019	113,269,313	171,315
Pivotal Systems Corporation	45
---	---

Notes to the Consolidated Financial Statements

Note 16. Equity - Contributed equity

Terms and conditions of contributed equity

Ordinary Shares (Common Stock)

The holders of ordinary shares participate in dividends and the proceeds on the winding up of the Company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have a par value of $0.00001 and the Company has a limited amount of authorized capital of 370,000,000 shares, 250,000,000 of which are designated “Common Stock” and 120,000,000 of which are designated “Common Prime Stock”.

On a show of hands the holders of Common Stock are entitled for one vote for each share of common stock held at the meetings of stockholders (and written actions in lieu of meetings). There shall be no cumulative voting. They are also entitled to receive, when, as and if declared by the Board, out of any assets of the Company legally available therefor, any dividends as may be declared from time to time by the Board.

The holders of Common Prime Stock are not entitled to any voting rights or powers, except as otherwise required by law. They are also not entitled to share in any dividends or other distributions of cash, property or shares of the Company as may be declared by the Board on the Common Stock.

In connection with the Company’s IPO of CDIs which were issued on 2 July 2018, with each CDI representing an interest in one share of Common Stock, certain stockholders entered into an escrow agreement with the Company under which the stockholder agreed, among other things, to certain restrictions and prohibitions for a period of time (the “Lock-Up Period”), from engaging in transactions in the shares of Common Stock (including Common Stock in the form of CDIs), shares of Common Stock that may be acquired upon exercise of a stock option, warrant or other right, and shares of Common Stock that arise from such Common Stock (collectively, the “Restricted Securities”). The Restricted Securities shall automatically be converted into shares of Common Prime Stock, on a one for one basis if the Company determines, in its sole discretion, that the stockholder breached any term of the stockholder’s escrow agreement or breached the official listing rules of the ASX relating to the Restricted Securities. Any shares of Common Stock converted to Common Prime Stock under these terms should be automatically converted back into shares of Common Stock, on a one for one basis, upon the earlier to occur of (i) the expiration of the Lock-Up Period in the escrow agreement or the (ii) breach of the listing rules being remedied, as applicable.

Accounting policy for contributed equity

Shares of common stock are classified as equity.

Incremental costs directly attributable to the issue of new shares, warrants or options are shown in equity as a deduction, net of tax, from the proceeds.

Note 17. Capital management

Capital managed by the Board comprises contributed equity totaling $171.32 million (2018: $170.82 million). When managing capital, management’s objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity. Managed capital is disclosed on the face of the statement of financial position and comprises contributed equity and reserves.

Pivotal Systems Corporation	46

Notes to the Consolidated Financial Statements

Note 17. Capital management (continued)

Management may adjust the capital structure to take advantage of favorable costs of capital or higher returns on assets. As the market is constantly changing, management may issue new shares or sell assets to raise cash, change the amount of dividends to be paid to shareholders (if at all) or return capital to shareholders.

During the financial year ending 31 December 2019, management did not pay a dividend and does not expect to pay a dividend in the foreseeable future.

The Company encourages employees to be shareholders through the Long Term Incentive Plan.

There were no changes in the Group’s approach to capital management during the year. Risk management policies and procedures are established with regular monitoring and reporting.

Neither the Group nor its subsidiaries are subject to externally imposed capital requirements.

Note 18. Share-based payments

Share based payment reserve

The reserve is used to recognize the value of equity benefits provided to employees, consultants and directors as part of their remuneration, and other parties as part of their compensation for services.

	WAEP<br><br>$	Share options<br><br>Number	Share Based Payment Reserve<br><br>US$’000
Opening reserve 1 January 2018	0.26	13,831,980	1,179
Expense in the period		-	101
Granted	0.76	1,684,000	-
Exercised	0.22	(274,424)	-
Forfeited	0.31	(350,222)	-
Expired	0.26	(119,947)	-
Closing reserve 31 December 2018	0.31	14,771,387	1,280
Expense in the period		-	439
Granted	1.07	2,705,000	-
Exercised	0.22	(2,270,449)	-
Forfeited	0.40	(727,498)	-
Expired	4.62	(9,198)	-
Closing reserve 31 December 2019	0.46	14,469,242	1,719
Pivotal Systems Corporation	47
---	---

Notes to the Consolidated Financial Statements

Note 18. Share-based payments (continued)

Share based payment expense:

	2019 US$’000	2018 US$’000
Options issued to directors, employee and consultants	439	101
	439	101

The Company grants stock options to its employees, directors, and consultants for a fixed number of shares with an exercise price equal to or greater than the fair value of the common stock at the date of grant and expire no later than 10 years from the date of grant.

The 2003 Equity Incentive Plan expired in 2012 however 18,409 (2018: 27,607) unexercised options are still outstanding as at 31 December 2019.

The 2012 Equity Incentive Plan (the “Plan”) adopted on 29 June 2012 last amended on June 20, 2019 authorized the Company to grant incentive stock options and non-statutory stock options to employees, directors, and consultants for up to 22,226,575 (2018: 20,220,222) shares of common stock. Incentive Stock Options (ISO) may be granted only to employees. Nonqualified stock options may be granted to employees, directors and consultants. The Company issues new shares of common stock upon the exercise of stock options.

The Share Plan grants are based on employee’s contribution and commitment to the Company over a period of several years plus the ability of the employees to impact and influence the outcome and direction of the organization in the future. The shares under the Share Plan which are not yet vested will be accounted for as non-cash expense over the remainder of the vesting period.

Option Pricing Model

The fair value of the equity-settled share options granted throughout the year is estimated as at the date of grant using a Black Scholes Option Pricing Model. The following tables list the inputs to the models used for the valuation of options granted in the years ended 31 December 2019 and 2018.

	Grant date
	15-Apr-19	1-Aug-19	1-Aug-19	2-Sep-19
Number of options issued	100,000	955,000	1,640,000	10,000
Fair value at measurement date US$	0.30	0.41	0.40	0.382
Share price at grant date US$	1.08	0.99	0.99	0.99
Exercise price US$	1.33	1.10	1.10	1.02
Expected volatility	76%	66%	66%	66%
Vesting conditions	Type 6	Type 1	Type 2	Type 1
Pivotal Systems Corporation	48
---	---

Notes to the Consolidated Financial Statements

Note 18. Share-based payments (continued)

	Grant date
	15-Feb-18	28-Feb-18	28-Feb-18	29-Mar-18	15-Apr-18	15-Apr-18	1-Oct-18
Number of options issued	25,000	800,000	150,000	84,000	170,000	60,000	395,000
Fair value at measurement date US$	0.158	0.141	0.141	0.216	0.158	0.216	0.79
Share price at grant date US$	0.37	0.37	0.37	0.37	0.37	0.37	2.05
Exercise price US$	0.37	0.37	0.37	0.37	0.37	0.37	2.05
Expected volatility	46%	46%	46%	46%	46%	46%	45%
Vesting conditions	Type 1	Type 4	Type 5	Type 3	Type 1	Type 2	Type 1
Vesting conditions
---	---
Type 1	25% of the options vest 12 months from vesting date, with the remaining 75% vesting on a monthly basis over the following 36 months.
Type 2	Options vest on a monthly basis over 48 months from vesting start date.
Type 3	Options vest on a monthly basis over 36 months from vesting start date.
Type 4	Options vest in four equal tranches<br>subject to (a) the achievement individually of Milestones and (b) each tranche vesting 25% per year on each anniversary of the<br>grant date, and subject to Single-Trigger change of control conditions.
Type 5	Options vest in two equal tranches subject to achievement of certain Milestones and each tranche vesting 25% per year on each anniversary of the grant date.
Type 6	Options vest on a quarterly basis over the three-year period from vesting start date.

The weighted average remaining contractual life for the share options outstanding at 31 December 2019 is 6.01 years (2018: 6.34 years). The weighted average fair value of options granted during the year was $0.39 (2018: $0.31). The range of exercise prices for options outstanding at the end of the current and prior year was $0.1 to $38.35.

The expected dividend yield for all options granted during these periods was nil. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome.

Pivotal Systems Corporation	49

Notes to the Consolidated Financial Statements

Note 18. Share-based payments (continued)

Accounting policy for share-based payments

The Company provides benefits to employees (including Directors) in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions) via the 2017 Omnibus Incentive Plan (“the Plan”).

The terms of the share options are as determined by the Board. The cost of these equity-settled transactions to employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by using a Black & Scholes model.

In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of the shares of the Company (market conditions) if applicable.

The cost of equity-settled transactions is recognized, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled (the vesting period), ending on the date on which the relevant employees become fully entitled to the award (the vesting date).

At each subsequent reporting date until vesting, the cumulative charge to the statement of profit or loss and other comprehensive income is the product of (i) the grant date fair value of the award; (ii) the current best estimate of the number of awards that will vest, taking into account such factors as the likelihood of employee turnover during the vesting period and the likelihood of non-market performance conditions being met; and (iii) the expired portion of the vesting period.

The charge to the statement of profit or loss and other comprehensive income for the period is the cumulative amount as calculated above less the amounts already charged in previous periods. There is a corresponding credit to equity.

Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards vest than were originally anticipated to do so. Any award subject to a market condition is considered to vest irrespective of whether or not the market condition is fulfilled, provided that all other conditions are satisfied.

If a non-vesting condition is within the control of the Company or the employee, the failure to satisfy the condition is treated as a cancellation. If a non-vesting condition within the control of neither the Company nor employee is not satisfied during the vesting period, any expense for the award not previously recognized is recognized over the remaining vesting period, unless the award is forfeited.

Critical accounting judgements, estimates and assumptions

The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using the Black Scholes option pricing model, using the assumptions noted above. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities in the next annual reporting period but may impact expenses and equity.

Note 19. Contingent liabilities and contingent assets

The Group has no material contingent liabilities or contingent assets as at 31 December 2019 (2018: Nil).

Pivotal Systems Corporation	50

Notes to the Consolidated Financial Statements

Note 20. Financial Risk Management

The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, price risk and interest rate risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the financial performance of the Group. The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate and other price risks, ageing analysis for credit risk and liquidity risk.

Risk management is carried out by senior finance executives (“Finance”). Risk management includes identification and analysis of the risk exposure of the Group and appropriate procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within the Group’s operating units. Finance reports to the Board on a quarterly basis.

The Group financial instruments consist mainly of deposits with banks, accounts receivables and payables, lease liabilities and borrowings.

	2019 US$’000	2018 US$’000
Financial assets
Cash and cash equivalents	5,446	17,489
Trade and other receivables	5,823	3,870
	11,269	21,359
Financial liabilities
Trade and other payables	4,970	5,336
Lease liabilities	1,256	-
Borrowings	2,756	-
	8,982	5,336

Interest rate risk

The Group’s exposure to interest rate risk occurs through its deposits and borrowings with banks which are exposed to variable interest rates. The Group does not use derivatives to mitigate this exposure. The Group adopts a policy of ensuring that as far as possible it maintains excess cash and cash equivalents in interest bearing accounts. The average interest rate on cash balances is 1.4% (2018: 0.01%).

Pivotal Systems Corporation	51

Notes to the Consolidated Financial Statements

Note 20. Financial Risk Management (continued)

2019	Less than 6 months<br><br>US$’000	6 to 12 months<br><br>US$’000	Between 1 and 2 years<br><br>US$’000	Greater than 2 years<br><br>US$’000	Total contractual cashflow<br><br>US$’000
Trade and other payables	4,970	-	-	-	4,970
Lease Liabilities	107	117	558	474	1,256
Borrowings	500	500	1,000	756	2,756
	5,577	617	1,558	1,230	8,982
2018	Less than 6 months<br><br>US$’000	6 to 12 months<br><br>US$’000	Between 1 and 2 years<br><br>US$’000	Greater than 2 years<br><br>US$’000	Total contractual cashflow<br><br>US$’000
---	---	---	---	---	---
Trade and other payables	5,336	-	-	-	5,336
	5,336	-	-	-	5,336

Credit Risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group’s cash and cash equivalents and receivables from customers.

Cash and cash equivalents

The Group limits its exposure to credit risk by only investing in liquid securities and only with counterparties that have an acceptable credit rating.

Trade and other receivables

The Group operates primarily in developing, manufacturing and selling of high-performance gas flow controllers and has trade receivables. There is risk that these receivables may not be recovered and the Group monitors its receivables balances and collections on a monthly basis to mitigate any risk. The Group monitors the expected credit loss model and values trade and other receivables accordingly (see Note 13).

Set out below is the information about the credit risk exposure on the Group’s trade and other receivables.

	Trade and other receivables
2019	<30 days	30-60 days	61-90 days	>91 days	Total
Estimated total gross carrying amount	4,474	582	6	761	5,823
2018
Estimated total gross carrying amount	1,335	1,295	639	601	3,870
Pivotal Systems Corporation	52
---	---

Notes to the Consolidated Financial Statements

Note 20. Financial Risk Management (continued)

The expected credit losses on trade and other receivables was estimated using a provision matrix by reference to past default experience of the debtor and an analysis if the debtor’s current financial position, adjusted for factors that are specific to the debtors and the general economic conditions of the industry in which the debtors operate. The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for each group. These assumptions include recent sales experience and historical collection rates. As of at 31 December 2019, the expected credit loss is $600,000 (2018: Nil) which is related to a specific new client.

Currency Risk

The Group is exposed to fluctuations in foreign currencies arising from the purchase of goods and services in currencies other than the transacting entity’s functional currency.

Operations commenced in the Republic of Korea near the end of the prior year resulting in transactions being incurred in South Korean Won. As a result, the Group’s statement of financial position can be affected by movements in the USD/KRW exchange rate when translating to the USD functional currency, however this is considered negligible.

Note 21. Related party transactions

Subsidiaries

The Consolidated financial statements include the financial statements of Pivotal Systems Corporation and the following subsidiaries:

Name	Country of incorporation	Beneficial interest
		2019	2018
Pivotal Systems Korea, Ltd	Republic of Korea	100%	100%
Pivotal SaleCo, Inc.	United States of America	100%	100%

On 20 August 2019, the Board authorized the voluntary dissolution of Pivotal SaleCo, Inc. and the distribution of the remaining assets of Pivotal SaleCo, Inc. to Pivotal Systems Corporation.

Key management personnel

The following persons were identified as key management personnel of Pivotal during the financial year ended 31 December 2019:

John Hoffman	Executive Chairman and Chief Executive Officer
Dr. Joseph Monkowski	Executive Director and Chief Technical Officer
Ryan Benton	Independent Non-Executive Director
Kevin Landis	Non-Executive Director
David Michael	Non-Executive Director
Peter McGregor	Independent Non-Executive Director
Omesh Sharma	Chief Financial Officer (resigned 5 June 2019)
Pivotal Systems Corporation	53
---	---

Notes to the Consolidated Financial Statements

Note 21. Related party transactions (continued)

Compensation

The aggregate compensation made to key management personnel of the Group is set out below:

	Short term employee benefits<br><br>(Salary and fees)	Post employee benefits<br><br>(401k & other benefits)	Share based payment	Total
2019	US$	US$	US$	US$
John Hoffman	362,500	30,308	9,260	402,068
Dr. Joseph Monkowski	312,000	25,552	7,834	345,386
Ryan Benton	85,000	-	31,009	116,009
Kevin Landis	-	-	-	-
David Michael	-	-	-	-
Peter McGregor	85,000	-	-	85,000
Omesh Sharma	459,325	20,120	-	479,445
	1,303,825	75,980	48,103	1,427,908
	Short term employee benefits<br><br>(Salary and fees)	Post employee benefits<br><br>(401k & other benefits)	Share based payment	Total
2018	US$	US$	US$	US$
John Hoffman	325,000	45,613	10,379	380,992
Dr. Joseph Monkowski	275,000	38,171	10,379	323,550
Ryan Benton	50,000	-	14,119	64,119
Kevin Landis	-	-	-	-
David Michael	-	-	-	-
Peter McGregor	23,975	-	-	23,975
Omesh Sharma	255,000	45,510	6,919	307,429
	928,975	129,294	41,796	1,100,065
Pivotal Systems Corporation	54
---	---

Notes to the Consolidated Financial Statements

Note 21. Related party transactions (continued)

Shares and other equity instruments held by key management personnel

The table below notes the common shares and options held directly or indirectly by the directors and other key management personnel of the Company:

	Common Stock	Options	Common Stock	Options
	Direct		Indirect
John Hoffman	1,441,870	3,269,325	-	-
Dr. Joseph Monkowski	1,445,683	3,264,089	-	-
Ryan Benton	195,000	201,000	-	-
Kevin Landis ^(1)^	-	-	231,535	-
David Michael	-	-	-	-
Peter McGregor	-	-	-	-
Omesh Sharma^(2)^	1,041,870	1,708,859	-	-
	4,124,423	8,443,273	231,535	-
^(1)^	Common stock held by Silicon Valley Investor Holdings Pty Ltd,<br>of which Kevin Landis is the majority shareholder.
---	---
^(2)^	Common stock and options outstanding held as of 31 July 2019,<br>Mr. Sharma’s last date of employment.
---	---

Share options granted to key management personnel

	Class of underlying shares	2019 Number Granted	2018 Number Granted
John Hoffman	Ordinary	-	300,000
Dr. Joseph Monkowski	Ordinary	-	300,000
Ryan Benton	Ordinary	-	84,000
Omesh Sharma	Ordinary	-	200,000
Peter McGregor	Ordinary	100,000	-
		100,000	884,000

Other related partiesOther related parties identified by the Group comprise:

-	Firsthand Venture Investors, a substantial shareholder of the Company, represented on the board of directors by its nominee,<br>Kevin Landis;
-	Anzu Partners LLC, a company of which David Michael is a partner and director;
---	---
-	Anzu Pivotal, LLC, a substantial shareholder of the Company, and Anzu Industrial Capital Partners LP, both of which David Michael<br>is a partner and director; and
---	---
-	Silicon Valley Investor Holdings Pty Ltd, a company which is controlled by Kevin Landis.
---	---

Transactions with related parties

Anzu Partners, LLC, an entity of which David Michael is a director, provided US based public relation services to the Group totaling US$17,250 during the current year (2018: US$30,250).

Pivotal Systems Corporation	55

Notes to the Consolidated Financial Statements

Note 21. Related party transactions (continued)

Transactions with related parties (continued)

Anzu Partners, LLC, purchased 3 million shares from Firsthand Venture Investors on 8 April 2019.

Other than the compensation of key management personnel, there were no other transactions with related parties.

Receivable from and payable to related parties

As at 31 December 2019, payables of US$21,250 were owed to Ryan Benton (2018: US$25,000) and US$21,250 to Peter Mc Gregor (2018: Nil).

There were no other trade receivables from or trade payables to related parties at the current and previous reporting dates.

Loans to/from related parties

There were no loans to or from related parties at the current and previous reporting dates.

Note 22. Events after the reporting period

RBI Financing

On 30 January 2020, the Group announced the dispatch of the Notice of Special Meeting of Shareholders and the signing of a definitive preferred stock investment agreement (RBI financing) with Anzu Industrial RBI USA LLC, a fund organized by Anzu Partners LLC (“Anzu”), which provides Pivotal up to US$13.0 million in additional funding required to grow and expand the business. Anzu is a venture capital and private equity firm that invests in breakthrough industrial technologies and currently manages approximately US$350 million in capital commitments. Anzu is an investor in Pivotal and remains the Company’s second largest shareholder with 12.1% of the issued capital. David Michael (a Director of Pivotal) is also a Managing Director of Anzu Partners LLC.

On 12 February 2020, the shareholders at the Special Meeting of Shareholders, approved the amendment of Pivotal’s Certificate of Incorporation and the RBI financing. The funding of US$13.0 million is available to be drawn down by Pivotal in two tranches: an initial funding of US$10.0 million for the issue of 10,000 Revenue Based Redeemable Preferred Stock (RBI) which was drawn down and paid to Pivotal on 20 February 2020 with an additional amount of US$3.0 million for the issue of 3,000 RBI being available at Pivotal’s option in conjunction with the replacement of Pivotal’s Bridge Bank senior term loan line of credit (as announced to ASX on 28 August 2019). Each RBI has an issue price of US$1,000 per share. Beyond typical contractual covenants pertaining to liquidation of Pivotal, there are no other financial covenants, no personal guarantees from founders or investors, no warrant or option coverage and the issue of RBI is not dilutive to current common stock/CDI holders.

On 20 February 2020 the Company received the first tranche of the RBI financing for US$10 million in exchange of 10,000 RBI of $0.00001 par value per share, at a purchase price of US$1,000 per share. In accordance with the directions of the Board, the Company will use the proceeds from the sale of the shares to grow and expand the business. As of the date of this report, the Company has not determined the date of the closing of the second tranche of the RBI financing.

Due to receipt of this financing, the Company is in compliance with the financial covenants as agreed with Bridge Bank.

Pivotal Systems Corporation	56

Notes to the Consolidated Financial Statements

Note 22. Events after the reporting period (continued)

Other subsequent events

On 22 January 2020, 250,000 shares were issued on the exercise of options issued pursuant to the Company’s equity incentive plan.

Note 23. Auditor’s remuneration

During the financial year, the following fees were paid or payable for audit and other services provided by BDO East Coast Partnership and BDO affiliates.

	2019 US$	2018 US$
Audit services
Audit or review of the financial statements	129,373	123,834
Non-audit services
Due diligence services related to Initial Public Offering	-	209,216
	129,373	333,050
Services provided by BDO affiliates:
Taxation services	41,433	8,906
	170,806	341,956
Pivotal Systems Corporation	57
---	---

Notes to the Consolidated Financial Statements

Note 24. Parent Entity Information

	2019<br><br>US$’000	2018<br><br>US$’000
Current assets	20,329	28,040
Non-current assets	11,826	9,389
Total assets	32,155	37,429
Current liabilities	8,583	5,869
Non-current liabilities	1,031	-
Total liabilities	9,614	5,869
Net assets	22,541	31,560
Contributed equity	171,315	170,818
Reserves	1,719	1,280
Accumulated losses	(150,493)	(140,538)
Total shareholders’ equity	22,541	31,560
Loss of the parent entity	(9,955)	(66,103)
Total comprehensive income of the parent entity	(9,955)	(66,103)

The parent entity has no contingent liabilities at the end of the financial year (2018: Nil).

No guarantees have been entered into by the parent entity in relation to the debts of its subsidiaries as a 31 December 2019 (2018: Nil).

Pivotal Systems Corporation	58

Directors’ Declaration

In accordance with a resolution of the directors of Pivotal Systems Corporation, the directors of the Company declare that:

1.	The financial statements and notes thereto, comply with Australian Accounting Standards;
2.	The financial statements and notes thereto, give a true and fair view of the Group’s financial<br>position as at 31 December 2019 and of the performance for the year ended on that date; and
---	---
3.	In the directors’ opinion there are reasonable grounds to believe that Pivotal Systems Corporation<br>will be able to pay its debts as and when they become due and payable.
---	---

On behalf of the directors

John Hoffman

Executive Chairman and Chief Executive Officer

27 February 2020 (Fremont PST), 28 February 2020 (Sydney AEST)

Pivotal Systems Corporation	59

Independent Auditors’ Report

	Tel: +61 2 9251 4100	Level 11, 1 Margaret St
	Fax: +61 2 9240 9821	Sydney NSW 2000
	www.bdo.com.au	Australia

INDEPENDENT AUDITOR'S REPORT

To the members of Pivotal Systems Corporation

Report on the Audit of the Financial Report

Opinion

We have audited the financial report of Pivotal Systems Corporation (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 31 December 2019, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies and the directors’ declaration.

In our opinion the accompanying financial report presents fairly, in all material respects, the Group’s financial position as at 31 December 2019 and of its financial performance and its cash flows for the year then ended in accordance with Australian Accounting Standards.

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

BDO East Coast Partnership ABN 83 236 985 726 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO East Coast Partnership and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation.

Pivotal Systems Corporation	60

Independent Auditors’ Report

Revenue Recognition

Key audit matter

How the matter was addressed in our audit

As disclosed in the revenue recognition accounting policy in Note 2, the Group’s revenue is derived primarily from the sale of gas flow controllers with revenue being recognised at a point in time when the customer obtains control of the Group’s product which typically occurs upon delivery to the customer. The recognition of revenue was considered a key audit matter as it is a key performance indicator to the users of the financial statements and as such is of high interest to stakeholders.

To determine whether revenue was appropriately accounted for and disclosed within the financial statements, we undertook, amongst others, the following audit procedures: • Critically evaluated the revenue recognition policies for all material sources of revenue and from our detailed testing performed, ensured that revenue was being recognised appropriately, in line with Australian Accounting Standards and policies disclosed within the financial statements. This included ensuring that revenue was recognised in accordance with the requirements of AASB 15: Revenue from Contracts with Customers. • Substantively tested a sample of revenue transactions throughout the financial year, tracing sales invoices to supporting sales documentation, shipping documentation and cash receipts. • Performing detailed cut-off testing to ensure that revenue transactions around the year end had been recorded in the correct period including obtaining customer confirmations where required.

Going Concern

Key audit matter	How the matter was addressed in our audit
For the financial year ended 31 December<br>2019, the Group incurred a loss after<br>income tax of $9.95 million and a net cash<br>outflows from operating activities of $11.5<br>million. In note 1 ‘Going Concern’ of the<br>financial report, the Directors have<br>documented their considerations regarding<br>their conclusion that the Going Concern<br>basis of preparation of the financial report<br>is appropriate.<br><br>The assessment of Going Concern is largely<br>based on forecasts which include assumptions about future cash flows which<br>are uncertain in timing and amounts. Due<br>to this factor and the degree of auditor<br>effort required in assessing the Going<br>Concern basis of preparation of the<br>financial report, we considered this area to<br>be a key audit matter.	To determine the appropriateness of the Going<br>Concern basis of preparation of the financial report,<br>we undertook, amongst others, the following audit<br>procedures:<br><br>- Obtained and evaluated<br>management’s<br>assessment of the Group’s ability to continue<br>as a going concern.<br><br>- Evaluated the cash flow<br>forecasts prepared by management and challenged the assumptions therein to ensure consistency with management’s<br>stated future business and operational objectives and applying sensitivities to key inputs including new products sales,<br>staff, operating costs and funding/repayment obligations.<br><br>- Reviewed<br>the conditions of the business financing agreement in place with Western Alliance Bank and the Revenue Based Redeemable<br>Preferred Stock (RBI) Preferred Stock and their adequacy in meeting the Group’s cash flow requirements.
Pivotal Systems Corporation	61
---	---

Independent Auditors’ Report

Other information

The directors are responsible for the other information. The other information comprises the information in the Group’s annual report for the year ended 31 December 2019, but does not include the financial report and the auditor’s report thereon.

Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the directors for the Financial Report

The directors of the Company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error.

In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.

A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at: http://www.auasb.gov.au/auditors responsibilities/ar1.pdf

Pivotal Systems Corporation	62

Independent Auditors’ Report

This description forms part of our auditor’s report.

BDO East Coast Partnership

Martin Coyle

Partner

Sydney, 28 February 2020

Pivotal Systems Corporation	63

Pivotal Systems Corporation

Additional Shareholder’s Information

SHAREHOLDER INFORMATION AS AT 10 FEBRUARY 2020

Additional Shareholder Information required by the Australian Securities Exchange (ASX) Listing Rules is set out below.

In accordance with the ASX Corporate Governance Council’s, Corporate Governance Principles and Recommendations (3^rd^ edition), the 2019 Corporate Governance Statement, as approved by the Board, is available on the Company’s website at: https://www.pivotalsys.com/investors. The Corporate Governance Statement sets out the extent to which Pivotal has followed the ASX Corporate Governance Council’s 29 Recommendations (3rd edition) during the 2019 financial year.

The Company’s securities have been listed for quotation in the form of CHESS Depositary Interests, or CDIs, on the ASX and trade under the symbol “PVS” since 2 July 2018. Legal title to the shares of common stock (Shares) underlying the CDIs is held by CHESS Depositary Nominees Pty Ltd (CDN), a wholly owned subsidiary of the ASX. Each Share is equivalent to 1 CDI.

As at the date of this report, 41,135,936 CDIs are issued and held by 401 CDI holders which represents 41,135,936 underlying Shares. 72,383,377 Shares are held by 55 shareholders who have not elected to hold Company securities in the form of CDIs.

Assuming all Shares were held as CDIs, the Company would have 113,519,313 CDIs on issue.

1.	Substantial shareholders

The number of CDIs (assuming all Shares are held as CDIs) held by substantial shareholders and their associates as advised to the ASX are set out below:

Name	Number CDIs	% of total CDIs
LHC Capital Partners Pty Ltd	15,786,363	13.90
Anzu Partners, LLC	13,725,588	12.1
Firsthand Venture Investors	44,888,679	39.54
2.	Number of security holders and securities on issue
---	---

Pivotal has issued the following securities:

(a)	72,383,377 fully paid ordinary shares held by 55 shareholders;
(b)	41,135,936 CDIs held by 401 CDI holders;
---	---
(c)	14,469,242 unlisted options exercisable at various prices held by 50 option holders.
---	---

On 30 January 2020, the Company entered into a Preferred Stock Investment Agreement with Anzu Industrial RBI USA LLC which provides the Company with up to US$13 million in funding on issuance of up to 13,000 unlisted Redeemable RBI Preferred Stock in the Company. The issue of Redeemable RBI Preferred Stock is subject to shareholder approval in general meeting being held in February 2020. If issued, the Redeemable RBI Preferred Stock will be held by one (1) holder.

Details of the Top 20 Shareholders are set out in section 6 below.

Pivotal Systems Corporation	64

Pivotal Systems Corporation

3.	Voting rights

Shares of common stock

At a meeting of the Company’s stockholders, every stockholder present, in person or by proxy is entitled to one vote for each share of common stock held on the record date for the meeting on all matters submitted to a vote of stockholders.

CDIs

CDI holders are entitled to one vote for every one CDI they hold. To vote, holders of CDIs must instruct CDN, as the legal owner of the CDIs, to vote the shares of common stock underlying their CDIs in a particular manner.

Options

Option holders do not have any voting rights on the options held by them. Shares of common stock issued to option holders on exercise of their options will have the same voting rights as the holder of shares of common stock.

Redeemable RBI Preferred Stock

RBI Preferred Stockholders will not be entitled to vote at any general meeting of the Company except in the following circumstances:

•	On a proposal:
o	that affects rights attached to RBI Preferred Stock;
---	---
o	to wind up the Company; or
---	---
o	for the disposal of the whole of the property, business and undertaking of the Company;
---	---
•	On a resolution to approve:
---	---
o	the terms of a share buy-back agreement;
---	---
o	a reduction of the share capital of the Company, other than a resolution to approve<br>a buy-back or reduction of capital with respect to RBI Preferred Stock;
---	---
•	During a period in which a dividend or<br>part of a dividend in respect of an RBI Preferred Stock is in arrears; or
---	---
•	During the winding-up of the Company.
---	---

At a general meeting of the Company at which RBI Preferred Stockholders may vote, they are entitled:

•	to one vote on a show of hands; and
•	to one vote for each RBI Preferred Stock<br>on a poll.
---	---

RBI Preferred Stockholders will have the same rights as holders of shares of Common Stock/CDIs in the Company to receive notices, reports and audited accounts from the Company and to attend general meetings.

Pivotal Systems Corporation	65

Pivotal Systems Corporation

4.	Distribution schedules of security holders
Category	Fully Paid Shares of Common Stock
---	---	---	---
	Total Shareholders	Number of Shares	%
1 - 1,000	140	62,795	0.15
1,001 - 5,000	130	342,969	0.8
5,001 - 10,000	70	521,781	1.22
10,001 - 100,000	81	2,348,821	4.12
100,001 and over	35	110,242,947	93.71
Total	456	113,519,313	100
Category	Chess Depositary Interests (CDIs)
---	---	---	---
	Total CDI Holders	Number of CDIs	%
1 - 1,000	125	61,757	0.15
1,001 - 5,000	126	330,322	0.80
5,001 - 10,000	67	500,845	1.22
10,001 - 100,000	68	1,696,507	4.12
100,001 and over	15	38,546,505	93.71
Total	401	41,135,936	100.00
Category	Unquoted Options
---	---	---	---
	Total Option Holders	Number of Options	%
1 - 1,000	0	-	0.00
1,001 - 5,000	1	5,000	0.03
5,001 - 10,000	5	40,563	0.28
10,001 - 100,000	23	1,193,751	8.25
100,001 and over	21	13,229,928	91.44
Total	50	14,469,242	100.00

Note that the Unquoted Options as stated above have various exercise prices and expiry dates.

5.	Unmarketable parcel of shares

The number of CDI Holders holding less than a marketable parcel of CDIs (being A$500) is 35 based on the Company’s closing CDI price of A$1.65, on 10 February 2020.

Pivotal Systems Corporation	66

Pivotal Systems Corporation

6.	Twenty largest shareholders of quoted equity securities

Chess Depositary Interests only

Details of the 20 largest CDI Holders by registered CDI holding are as follows.

	Name	No. of CDIs	%
1	NATIONAL NOMINEES LIMITED	8,539,616	20.76
2	UBS NOMINEES PTY LTD	8,465,279	20.58
3	HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2	5,948,942	14.46
4	HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED	3,463,294	8.42
5	CS THIRD NOMINEES PTY LIMITED	3,370,000	8.19
6	ANZU INDUSTRIAL CAPITAL PARTNERS LP	2,432,100	5.91
7	BNP PARIBAS NOMINEES PTY LTD	1,867,953	4.54
8	ENTERPRISE PARTNERS MANAGEMENT LLC	1,535,425	3.73
9	J P MORGAN NOMINEES AUSTRALIA PTY LIMITED	1,254,435	3.05
10	AICP I LIMITED	567,900	1.38
11	BNP PARIBAS NOMINEES PTY LTD	325,000	0.79
12	TOKYO ELECTRON EUROPE LIMITED	268,818	0.65
13	SILICON VALLEY INVESTOR HOLDINGS PTY LTD	231,535	0.56
14	WASHINGTON H SOUL PATTINSON AND COMPANY LIMITED	141,462	0.34
15	TRIPLE IMAGE FILMS PTY LIMITED	134,746	0.33
16	NETWEALTH INVESTMENTS LIMITED	72,583	0.18
17	RADELL PTY LTD	72,491	0.18
18	RACT SUPER PTY LTD	63,423	0.15
19	DR PANINI RANJITA WIKRAMANAYAKE	60,000	0.15
20	BACKYARD CRICKET PTY LIMITED	55,000	0.13
	Total	38,870,002	94.49
	Balance of register	2,265,934	5.51
	Grand total	41,135,936	100.00
Pivotal Systems Corporation	67
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Pivotal Systems Corporation

Fully Paid Ordinary Shares of Common Stock and CDIs combined

Details of the 20 largest Shareholders by registered shareholding on the basis that all shares of common stock on issue are held as CDIs are as follows.

	Name	No. of Shares	%
1	FIRSTHAND VENTURE INVESTORS	44,888,679	39.54%
2	ANZU PIVOTAL LLC	7,178,753	6.32%
3	ENTERPRISE PARTNERS MANAGEMENT LLC	6,141,700	5.41%
4	ANZU INDUSTRIAL CAPITAL PARTNERS LP	2,875,420	2.53%
5	OMESH SHARMA	2,746,568	2.42%
6	JOSEPH MONKOWSKI	1,445,683	1.27%
7	JOHN HOFFMAN	1,441,870	1.27%
8	MARK F FITZGERALD	1,393,140	1.23%
9	MICHAEL FITZGERALD	946,266	0.83%
10	AICP I LIMITED	671,415	0.59%
11	HOSEUNG CHANG HS INC 13	388,670	0.34%
12	JIUYI CHENG	250,000	0.22%
13	RYAN BENTON	195,000	0.17%
14	SANFORD MICHAEL JOHNSON	175,893	0.15%
15	ADAM MONKOWSKI AND	170,972	0.15%
16	RAJBINDER BAINS	170,000	0.15%
17	SURINDERPAL BAINS	170,000	0.15%
18	TYLER D HEERWAGEN	161,458	0.14%
19	SOPHIA L SHTILMAN	150,000	0.13%
20	CARTER CRUM	134,955	0.12%
	Total	71,696,442	63.16%
	Balance of register	41,822,871	36.84%
	Grand total	113,519,313	100.00%

Subject to rounding

7.	The name of the entity’s secretary (in the case of a trust, the name of the responsible entity and its secretary).

The Company has not formally appointed a Company Secretary but has appointed Company Matters Pty Ltd to provide it with general company secretarial services. Ms Naomi Dolmatoff has been appointed as the Company’s ASX Representative pursuant to ASX Listing Rule 12.6.

8.	The address and telephone number of the Company’s registered office in Australia; and of its principal administrative<br>office.

The Company is incorporated in Delaware, United States.

The Company’s registered office in the USA is:

C/- Incorporating Services Ltd, 3500 South Dupont Highway, Dover, Delaware 19901 USA

The Company’s Principal place of business is:

Suite 100, 48389 Fremont Blvd, Fremont, CA 94538 USA.

T: +1 (510) 770 9125

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Pivotal Systems Corporation

The Company’s registered Australian office is:

Company Matters Pty Ltd

Level 12, 680 George Street, Sydney NSW 2000
T: +61 (02) 8280 7355

9.	The address and telephone number of each office at which a register of securities, register of depositary receipts or other<br>facilities for registration of transfers is kept.

American Stock Transfer and Trust Company, LLC

6201, 15th Avenue

Brooklyn, NY 11219 USA

Telephone: +1 (718) 921 8386

Link Market Services

Level 12, 680 George Street

Sydney NSW 2000 Australia
T: +61 1300 554 474

10.	The Company’s securities are not traded on any other exchange other than the ASX.
11.	The number and class of restricted securities or securities subject to voluntary escrow that are on issue and the date that<br>the escrow period ends is set out as follows:
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Class	Number of Securities	Escrow Period
---	---	---
ASX Restricted – shares	40,905,438	To be held in escrow for 24 months from the date of commencement of official quotation.
ASX Restricted – unquoted options	6,888,748	To be held in escrow for 24 months from the date of commencement of official quotation.
Voluntary Restricted – shares<br><br><br><br>Voluntary Restricted – unquoted options	18,119,972<br><br><br><br>3,492,125	Securities to be held in escrow until the day following the release of the Company's Appendix 4E preliminary financial results for the year ended 31 December 2019.
Voluntary Restricted - shares	1,041,870	Subject to escrow for a period of 24 months commencing on the date on which official quotation by ASX of the Company's CDIs commences.
Voluntary Restricted – unquoted options	2,021,357	Subject to escrow for a period of 24 months commencing on the date on which official quotation by ASX of the Company's CDIs commences.

Note: Official quotation of the Company’s CDIs occurred on July 2, 2018.

12.	Review of operations and activities

A detailed review of operations and activities is reported in the 2019 Annual Report.

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Pivotal Systems Corporation

13.	On market buy-back

There is no current on market buy-back.

14.	Statement regarding use of cash and assets.

During the period between 1 January 2019 and 31 December 2019, the Company has used its cash and assets readily convertible to cash that it had at the time of ASX admission in a way consistent with its business objectives set out in the Prospectus dated June 22, 2018.

15.	Other

Pivotal is not subject to Chapters 6, 6A, 6B and 6C of the Corporations Act 2001 (Cth) dealing with the acquisition of its shares (including substantial holdings and takeovers).

Anti-takeover provisions of Delaware Law, Certificate of Incorporation and Bylaws

Provisions of the Delaware General Corporation Law, the Company’s Certificate of Incorporation and the Company’s Bylaws could make it more difficult to acquire the Company by means of a tender offer (takeover), a proxy contest or otherwise, or to remove incumbent officers and Directors of the Company. These provisions (summarised below) could discourage certain types of coercive takeover practices and takeover bids that the Board may consider inadequate and to encourage persons seeking to acquire control of the Company to first negotiate with the Board. The Company believes that the benefits of increased protection of its ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure the Company outweigh the disadvantages of discouraging takeover or acquisition proposals because, among other things, negotiation of these proposals could result in an improvement of their terms.

The Company’s bylaws do not contain any limitations on the acquisition of securities, except that clause 9 of Article XI, Section 11.1. of the bylaws provides as follows:

“The Corporation may refuse to acknowledge or register any transfer of shares of the Corporation’s capital stock (including shares in the form of CDIs) held or acquired by a stockholder (including shares of the Corporation’s capital stock that may be acquired upon exercise of a stock option, warrant or other right) or shares of the Corporation’s capital stock which attach to or arise from such shares which are not made:

a.	in accordance with the provisions of Regulation S of the Securities Act of 1933 (U.S.), as amended<br>to date and the rules and regulations promulgated thereunder (the “U.S. Securities Act”) (Rule 901 through Rule 905<br>and preliminary notes);
b.	pursuant to registration under the U.S. Securities Act; or
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c.	pursuant to an available exemption from registration.”
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Pivotal Systems Corporation	70
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Firsthand Technology Value Fund, Inc 10-K, filed Mar 16, 2020

About this 10-K