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SURO CAPITAL CORP. - Quarter Report: 2014 June (Form 10-Q)

  

  

 

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



 

FORM 10-Q



 

 
(Mark One)     
x   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

     FOR THE QUARTERLY PERIOD ENDED June 30, 2014

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

COMMISSION FILE NUMBER: 814-00852



 

GSV Capital Corp.

(Exact name of registrant as specified in its charter)



 

 
Maryland   27-4443543
(State of incorporation)   (I.R.S. Employer Identification No.)

 
2925 Woodside Road
Woodside, CA
  94062
(Address of principal executive offices)   (Zip Code)

(650) 235-4769

(Registrant’s telephone number, including area code)



 

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.Yes x No o

Indicate by check mark whether the registrant 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 (§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).Yes o No o

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 
Large accelerated filer o   Accelerated filer x
Non-accelerated filer o (do not check if a smaller reporting company)   Smaller reporting company o

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

The number of shares of the issuer’s Common Stock, $0.01 par value, outstanding as of August 11, 2014 was 19,320,100.

 

 


 
 

TABLE OF CONTENTS

GSV CAPITAL CORP.
 
TABLE OF CONTENTS

 
  PAGE
PART I. FINANCIAL INFORMATION
        

Item 1.

Financial Statements

    1  
Consolidated Statements of Assets and Liabilities as of June 30, 2014 (unaudited) and December 31, 2013     1  
Consolidated Statements of Operations (unaudited) for the three and six months ended June 30, 2014, and June 30, 2013     2  
Consolidated Statements of Changes in Net Assets (unaudited) for the six months ended June 30, 2014, and June 30, 2013     3  
Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2014, and June 30, 2013     4  
Consolidated Schedule of Investments as of June 30, 2014 (unaudited)     6  
Consolidated Schedule of Investments as of December 31, 2013     13  
Notes to the Consolidated Financial Statements as of June 30, 2014 (unaudited)     19  

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

    38  

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

    52  

Item 4.

Controls and Procedures

    52  
PART II. OTHER INFORMATION
        

Item 1.

Legal Proceedings

    53  

Item 1A.

Risk Factors

    53  

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

    53  

Item 3.

Defaults Upon Senior Securities

    53  

Item 4.

Mine Safety Disclosure

    53  

Item 5.

Other Information

    53  

Item 6.

Exhibits

    53  
Signatures     55  
                                      

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GSV CAPITAL CORP. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

   
  June 30,
2014
  December 31, 2013
ASSETS
    (Unaudited)
          
Investments at fair value:
                 
Investments in controlled securities (cost of $11,301,139 and $0,
respectively)
  $ 12,410,350     $  
Investments in affiliated securities (cost of $75,196,702 and $64,912,527, respectively)     67,776,900       62,740,162  
Investments in non-control/non-affiliated securities (cost of $196,466,367 and $214,796,591, respectively)     286,850,588       292,643,491  
Investments owned and pledged (cost of $9,082,226 and $10,845,236, respectively)     9,102,586       10,865,200  
Investments in United States Treasury Bill (cost of $80,000,445 and $0, respectively)(1)     80,000,000        
Total Investments (cost of $372,046,879 and $290,554,354, respectively)     456,140,424       366,248,853  
Cash     4,194,280       7,219,203  
Restricted cash     22,139       22,264  
Due from GSV Capital Service Company, LLC(1)     35,406       3,039  
Due from portfolio companies     122,251       153,178  
Interest receivable     102       7,304  
Prepaid expenses     61,944       49,739  
Coupon interest receivable           11,141  
Dividend receivable           13,233  
Deferred credit facility fees     189,940       288,249  
Deferred debt issuance costs     3,022,216       3,378,121  
Deferred offering costs     241,010       184,710  
Other assets     334,700       368,524  
Total Assets     464,364,412       377,947,558  
LIABILITIES
                 
Due to GSV Asset Management(1)     9,647       563,978  
Accounts payable     160,068       382,165  
Accrued incentive fees     12,337,837       10,523,552  
Accrued interest payable     1,187,693       1,056,563  
Accrued expenses     188,753        
Payable for securities purchased     72,000,667        
Net deferred tax liability     7,656,143       8,320,561  
Line of Credit     15,141,333        
Convertible senior notes embedded derivative liability     159,000       799,000  
Convertible senior notes payable 5.25% due September 15, 2018     68,397,429       68,335,295  
Total Liabilities     177,238,570       89,981,114  
Commitments and contingencies (Note 6)
                 
Net Assets   $ 287,125,842     $ 287,966,444  
NET ASSETS
                 
Common stock, par value $0.01 per share
(100,000,000 authorized; 19,320,100 issued and outstanding)
  $ 193,201     $ 193,201  
Paid-in capital in excess of par     275,837,514       275,837,514  
Accumulated net investment loss     (25,406,364 )      (19,192,401 ) 
Accumulated net realized loss on investments     (13,256,660 )      (13,660,306 ) 
Accumulated net unrealized appreciation on investments     49,758,151       44,788,436  
Net Assets   $ 287,125,842     $ 287,966,444  
Net Asset Value Per Share   $ 14.86     $ 14.91  

(1) This balance is a related party transaction. Refer to Note 2 for more detail.

 
 
See notes to the Consolidated Financial Statements.

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GSV CAPITAL CORP. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

       
  Three Months Ended June 30,   Six Months Ended June 30,
     2014   2013   2014   2013
INVESTMENT INCOME
                                   
Interest income from control securities   $ 667     $     $ 5,733     $  
Interest income from affiliated securities     68,591             103,453        
Interest income from non-control/non-affiliated securities     27,775             27,775        
Dividend income from affiliated securities                        
Dividend income from non-control/non-affiliated securities           15,723       887       20,258  
Total Investment Income     97,033       15,723       137,848       20,258  
OPERATING EXPENSES
                                   
Investment management fees     1,933,663       1,246,378       3,689,859       2,529,977  
Accrued incentive fees     844,633             1,814,285        
Costs incurred under administration agreement     929,701       709,885       1,838,233       1,597,869  
Directors’ fees     65,000       65,000       130,000       130,250  
Professional fees     402,555       220,978       859,094       457,864  
Interest and credit facility expense     1,533,971             2,713,696        
Insurance expense     60,303       64,062       120,039       117,075  
Investor relations expense     103,384       72,943       158,296       116,505  
Other expenses     22,341       23,388       40,592       25,354  
Gain on fair value adjustment for embedded derivative     (20,000 )            (640,000 )       
Total Operating Expenses     5,875,551       2,402,634       10,724,094       4,974,894  
Benefit for taxes on net investment loss     2,359,369             4,372,283        
Net Investment Loss     (3,419,149 )      (2,386,911 )      (6,213,963 )      (4,954,636 ) 
Net Realized Gain (Loss) on Investments     (7,249,566 )      (6,327,632 )      682,179       (9,674,524 ) 
Benefit/(Provision) for taxes on Net Realized Capital (Gains)/Losses     2,959,998             (278,533 )       
Net Change in Unrealized Appreciation on Investments     11,472,725       12,230,246       8,399,046       10,653,608  
Provision for taxes on Unrealized Appreciation of Investments     (4,684,314 )            (3,429,331 )       
Net Increase (Decrease) in Net Assets Resulting from Operations   $ (920,306 )    $ 3,515,703     $ (840,602 )    $ (3,975,552 ) 
Net Increase (Decrease) in Net Assets Resulting from Operations per Common Share – basic and diluted   $ (0.05 )    $ 0.18     $ (0.04 )    $ (0.21 ) 
Weighted Average Common Shares Outstanding – basic and diluted     19,320,100       19,320,100       19,320,100       19,320,100  

 
 
See notes to the Consolidated Financial Statements.

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GSV CAPITAL CORP. AND SUBSIDIARIES
  
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)

   
  Six months
ended
June 30, 2014
  Six months
ended
June 30, 2013
Decrease in Net Assets Resulting From Operations
                 
Net Investment Loss   $ (6,213,963 )    $ (4,954,636 ) 
Net Realized Gain (Loss) on Investments     682,179       (9,674,524 ) 
Provision for taxes on Net Realized Capital Gains     (278,533 )       
Net Change in Unrealized Appreciation on Investments     8,399,046       10,653,608  
Provision for taxes on Unrealized Appreciation of Investments     (3,429,331 )       
Net Decrease in Net Assets Resulting From Operations     (840,602 )      (3,975,552 ) 
Total Decrease in Net Assets     (840,602 )      (3,975,552 ) 
Net Assets at Beginning of Period     287,966,444       252,582,801  
Net Assets at End of Period   $ 287,125,842     $ 248,607,249  
Capital Share Activity
                 
Shares Issued            
Shares Outstanding at Beginning of Period     19,320,100       19,320,100  
Shares Outstanding at End of Period     19,320,100       19,320,100  

 
 
See notes to the Consolidated Financial Statements.

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GSV CAPITAL CORP. AND SUBSIDIARIES
  

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

   
  Six months
ended
June 30, 2014
  Six months
ended
June 30, 2013
Cash Flows from Operating Activities
                 
Net decrease in net assets resulting from operations   $ (840,602 )    $ (3,975,552 ) 
Adjustments to reconcile net decrease in net assets resulting from operations to net cash used in operating activities:
                 
Net realized (gain) loss on investments     (682,179 )      9,674,524  
Net change in unrealized appreciation on investments     (8,399,046 )      (10,653,608 ) 
Gain on fair value adjustment for embedded derivative     (640,000 )       
Net deferred tax liability     (664,418 )       
Amortization of deferred credit facility fees     98,309        
Amortization of deferred debt issuance costs     418,039        
Amortization of fixed income security premiums and discounts     (27,553 )       
Purchases of investments in:
                 
Portfolio investments     (35,548,349 )      (19,607,661 ) 
United States treasury bill     (160,001,251 )       
Proceeds from sales or redemption of investments in:
                 
Portfolio investments     32,975,438       17,785,344  
United States treasury strips     1,790,785        
United States treasury bill     80,000,584        
Change in operating assets and liabilities:
                 
Due from GSV Asset Management(1)     (32,367 )      3,117  
Due from portfolio companies     30,927       125,747  
Accrued interest     7,202        
Prepaid expenses     (12,205 )      (49,729 ) 
Coupon interest receivable     11,141        
Dividend receivable     13,233       (11,305 ) 
Other assets     33,824       20,890  
Due to GSV Asset Management(1)     (554,331 )      387,654  
Payable for securities purchased     72,000,667        
Accounts payable     (222,097 )      (112,139 ) 
Accrued incentive fees     1,814,285        
Accrued interest payable     131,130        
Accrued expenses     188,753       (271,697 ) 
Net Cash Used in Operating Activities     (18,110,081 )      (6,684,415 ) 
Cash Flows from Financing Activities
                 
Borrowings under credit facility     18,000,000        
Repayments under credit facility     (2,858,667 )       
Deferred offering costs     (56,300 )       
Change in restricted cash     125        
Net Cash Provided by Financing Activities     15,085,158        

 
 
See notes to the Consolidated Financial Statements.

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GSV CAPITAL CORP. AND SUBSIDIARIES
  

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

   
  Six months ended June 30, 2014   Six months ended
June 30, 2013
Total Decrease in Cash Balance     (3,024,923 )      (6,684,415 ) 
Cash Balance at Beginning of Period     7,219,203       11,318,525  
Cash Balance at End of Period   $ 4,194,280     $ 4,634,110  
Non-Cash Operating Items
                 
Transactions in Investments in Portfolio Companies
                 
Convertible notes converted to preferred shares   $ 3,064,135     $  
Term loan converted to preferred shares   $ 503,851     $  
Preferred shares converted to common shares   $ 1,273,125     $ 1,999,997  
Common shares converted to preferred shares   $ 2,006,077     $  
Common membership interest converted to preferred shares   $ 500,000     $  
Decrease in accounts payable   $ (222,097 )    $  
Non-Cash Financing Items
                 
Increase in deferred offering costs   $ 56,300     $  

(1) This balance is a related party transaction. Refer to Note 2 Related Party Arrangements.

 
 
See notes to the Consolidated Financial Statements.

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GSV CAPITAL CORP. AND SUBSIDIARIES
  
CONSOLIDATED SCHEDULE OF INVESTMENTS
June 30, 2014
(Unaudited)

         
Portfolio Investments*   Headquarters/Industry   Shares/Principal   Cost   Fair Value   % of Net Assets
Twitter, Inc.(9)**
                                            
Common shares     San Francisco, CA
Social Communication
      1,900,600     $ 32,991,111     $ 77,867,582       27.12 % 
Palantir Technologies, Inc.
                                            
Common shares, Class A     Palo Alto, CA
Cyber Security
      7,145,690       20,051,479       39,301,295       13.69 % 
Preferred shares, Series G           326,797       1,008,968       1,932,187       0.67 % 
Total                 21,060,447       41,233,482       14.36 % 
Dropbox, Inc.
                                            
Common shares     San Francisco, CA
Online Storage
      760,000       8,641,153       16,304,416       5.68 % 
Preferred shares, Series A-1           552,486       5,015,333       11,852,581       4.13 % 
Total                 13,656,486       28,156,997       9.81 % 
2U, Inc. (f/k/a 2tor, Inc.)(11)**
                                            
Common shares     Landover, MD
Online Education
      1,319,233       10,032,117       19,293,387       6.72 % 
Coursera, Inc.
                                            
Preferred shares, Series B     Mountain View, CA
Online Education
      2,961,399       14,519,443       14,515,149       5.06 % 
Avenues Global Holdings, LLC(3)
                                            
Preferred shares, Junior Preferred Stock     New York, NY
Globally-focused Private
School
      10,014,270       10,151,854       11,258,690       3.92 % 
SugarCRM, Inc.
                                            
Common shares     Cupertino, CA
Customer Relationship
      1,899,799       6,799,392       8,985,863       3.13 % 
Preferred shares, Series E     Manager       373,134       1,500,522       2,111,865       0.74 % 
Total                 8,299,914       11,097,728       3.87 % 
Solexel, Inc.
                                            
Preferred shares, Series C     Milpitas, CA
Solar Power
      5,034,324       11,017,801       11,000,012       3.83 % 
PayNearMe, Inc.(1)
                                            
Preferred shares, Series E     Sunnyvale, CA
Cash Payment Network
      3,914,535       10,000,000       10,000,000       3.48 % 
Declara, Inc.(1)
                                            
Preferred shares, Series A     Palo Alto, CA
Social Cognitive Learning
      5,358,195       9,999,999       9,999,999       3.48 % 
JAMF Holdings, Inc.
                                            
Preferred shares, Series B     Minneapolis, MN
Mobile Device
Management
      73,440       9,999,928       9,999,917       3.48 % 
Curious.com Inc.(1)
                                            
Preferred shares, Series B     Menlo Park, CA
Online Education
      2,839,861       10,000,003       9,998,157       3.48 % 

 
 
See notes to the Consolidated Financial Statements.

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GSV CAPITAL CORP. AND SUBSIDIARIES
  
CONSOLIDATED SCHEDULE OF INVESTMENTS
June 30, 2014
(Unaudited)

         
Portfolio Investments*   Headquarters/Industry   Shares/Principal   Cost   Fair Value   % of Net Assets
Chegg, Inc.(10)**
                                            
Common shares     Santa Clara, CA
Textbook Rental
      1,182,792     $ 14,022,863     $ 8,326,856       2.90 % 
ZocDoc Inc.
                                            
Preferred shares, Series A     New York, NY
Online Medical Scheduling
      200,000       3,563,178       5,000,000       1.74 % 
Common shares           111,866       1,734,878       2,796,650       0.97 % 
Total                 5,298,056       7,796,650       2.71 % 
StormWind, LLC(2)(5)
                                            
Preferred shares, Series B     Scottsdale, AZ
Interactive Learning
      3,279,629       2,019,687       4,066,740       1.42 % 
Preferred shares, Series C              2,132,824       3,000,030       3,012,802       1.05 % 
Preferred shares, Series A              366,666       110,000       196,166       0.07 % 
Preferred Unit Warrants $1.55 strike price, expire 7/6/14              568,753             34,125       0.01 % 
Preferred Unit Warrants $1.76 strike price, expire 1/6/15           646,310                   % 
Total                 5,129,717       7,309,833       2.55 % 
General Assembly Space, Inc.
                                            
Common shares     New York, NY
Online Education
      133,213       2,999,983       2,999,977       1.06 % 
Preferred shares, Series C           126,552       2,999,978       3,035,279       1.04 % 
Total                 5,999,961       6,035,256       2.10 % 
Fullbridge, Inc.(1)
                                            
Preferred shares, Series C     Cambridge, MA
Business Education
      1,728,724       3,193,444       2,823,871       0.98 % 
Preferred shares, Series D              1,655,167       2,956,022       3,111,714       1.08 % 
Common warrants, $0.91 strike price, expire 3/22/2020              714,286       85,779             % 
Common warrants, $0.91 strike price, expire 12/11/2018              82,418       9,799             % 
Common warrants, $0.91 strike price, expire 12/11/2018              412,088       50,970             % 
Common warrants, $0.91 strike price, expire 5/16/2019              192,308       23,244             % 
Common warrants, $0.91 strike price, expire 3/22/2020              186,170       67,021             % 
Common warrants, $0.91 strike price, expire 10/09/2018           82,418       9,901             % 
Total                 6,396,180       5,935,585       2.06 % 
Knewton, Inc.
                                            
Preferred shares, Series E     New York, NY
Online Education
      375,985       4,999,999       5,000,300       1.74 % 
Lyft, Inc.
                                            
Preferred shares, Series D     San Francisco, CA
Peer to Peer Ridesharing
      493,490       5,003,631       4,999,054       1.74 % 

 
 
See notes to the Consolidated Financial Statements.

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GSV CAPITAL CORP. AND SUBSIDIARIES
  
CONSOLIDATED SCHEDULE OF INVESTMENTS
June 30, 2014
(Unaudited)

         
Portfolio Investments*   Headquarters/Industry   Shares/Principal   Cost   Fair Value   % of Net Assets
Spotify Technology S.A.**
                                            
Common shares     Stockholm, Sweden
Music Streaming Service
      3,658     $ 3,598,472     $ 4,814,292       1.68 % 
Global Education Learning (Holdings) Ltd.(1)**
                                            
Preferred shares, Series A     Hong Kong
Education Technology
      2,126,475       4,335,671       4,600,727       1.60 % 
Whittle Schools, LLC(1)(4)
                                            
Preferred shares, Series B     New York, NY
Globally-focused Private
School
      3,000,000       3,000,000       3,000,000       1.04 % 
Common shares           229       1,577,097       1,500,000       0.53 % 
Total                 4,577,097       4,500,000       1.57 % 
Bloom Energy Corporation
                                            
Common shares     Sunnyvale, CA
Fuel Cell Energy
      201,589       3,855,601       4,470,054       1.56 % 
Gilt Groupe, Inc.
                                            
Common shares     New York, NY
e-Commerce Flash Sales
      248,600       6,594,433       4,338,580       1.51 % 
Dataminr, Inc.
                                            
Preferred shares, Series B     New York, NY
Social Media Analytics
      904,977       2,063,356       3,040,723       1.06 % 
Preferred shares, Series C           301,369       1,100,912       1,144,627       0.40 % 
Total                 3,164,268       4,185,350       1.46 % 
Parchment, Inc.
                                            
Preferred shares, Series D     Scottsdale, AZ
E-Transcript Exchange
      3,200,512       4,000,862       4,020,940       1.40 % 
Ozy Media, Inc.(1)
                                            
Preferred shares, Series A     Mountain View, CA
Daily News and
Information Site
      1,090,909       3,000,200       3,000,000       1.04 % 
Preferred shares, Series Seed           500,000       500,000       865,000       0.31 % 
Total                 3,500,200       3,865,000       1.35 % 
Learnist Inc. (f/k/a Grockit, Inc.)(1)
                                            
Preferred shares, Series D     San Francisco, CA
Online Learning Platform
      2,728,252       2,005,945       2,073,472       0.72 % 
Preferred shares, Series E           1,731,501       1,503,670       1,499,999       0.52 % 
Total                 3,509,615       3,573,471       1.24 % 
NestGSV, Inc.(2)
                                            
Preferred shares, Series C     Redwood City, CA
Incubator
      1,561,625       2,005,730       2,082,161       0.73 % 
Preferred shares, Series A              1,000,000       1,021,778       806,000       0.28 % 
Preferred shares, Series B              450,000       605,500       443,700       0.15 % 
Preferred warrants, Series C – $1.33 strike price, expire 4/9/2019           187,500             54,375       0.02 % 
Total                 3,633,008       3,386,236       1.18 % 

 
 
See notes to the Consolidated Financial Statements.

8


 
 

TABLE OF CONTENTS

GSV CAPITAL CORP. AND SUBSIDIARIES
  
CONSOLIDATED SCHEDULE OF INVESTMENTS
June 30, 2014
(Unaudited)

         
Portfolio Investments*   Headquarters/Industry   Shares/Principal   Cost   Fair Value   % of Net Assets
CUX, Inc. (d/b/a CorpU)(1)
                                            
Convertible preferred shares, Series C     San Francisco, CA
Corporate Education
      615,763     $ 2,006,077     $ 2,484,026       0.87 % 
Convertible preferred shares, Series D              169,033       778,607       801,563       0.27 % 
Preferred warrants, $4.59 strike price, expire 02/25/2018           16,903             18,424       0.01 % 
Total                 2,784,684       3,304,013       1.15 % 
TrueCar, Inc.(12)
                                            
Common shares     Santa Monica, CA
Online Marketplace
      251,572       2,015,023       3,067,543       1.07 % 
SharesPost, Inc.(1)(6)
                                            
Preferred shares, Series B     San Bruno, CA
Online Marketplace
Finance
      1,771,653       2,259,717       2,232,283       0.77 % 
Common warrants, $0.13 strike price, expire 6/15/2018           770,934       23,128       192,734       0.07 % 
Total                 2,282,845       2,425,017       0.84 % 
DreamBox Learning, Inc.
                                            
Preferred shares, Series A-1     Bellevue, WA
Education Technology
      7,159,221       1,502,362       1,584,894       0.55 % 
Preferred shares, Series A           3,579,610       758,017       792,447       0.28 % 
Total                 2,260,379       2,377,341       0.83 % 
Maven Research, Inc.(1)
                                            
Preferred shares, Series C     San Francisco, CA
Knowledge Networks
      318,979       2,000,447       1,999,998       0.69 % 
Preferred shares, Series B           49,505       217,206       249,703       0.09 % 
Total                 2,217,653       2,249,701       0.78 % 
Circle Media (f.k.a. S3 Digital Corp. (d/b/a S3i)(1)
                                            
Preferred shares, Class A1     New York, NY
Sports Analytics
      1,110,639       1,079,058       1,295,005       0.45 % 
Term Loan, 12%, 09/30/15***            $ 272,500       283,901       272,500       0.09 % 
Preferred warrants, $1.166 strike price, expire 09/30/2020              500,000       31,354       185,000       0.07 % 
Preferred warrants, $1.00 strike price, expire 11/21/2017              160,806             69,147       0.02 % 
Preferred warrants, $1.16 strike price, expire 6/21/2021           38,594             14,280         % 
Total                 1,394,313       1,835,932       0.63 % 
Dailybreak, Inc.(1)
                                            
Preferred shares, Series A-1     Boston, MA
Social Advertising
      1,878,129       2,430,950       1,070,534       0.37 % 
Preferred shares, Series A-2           347,666       451,236       415,618       0.15 % 
Total                 2,882,186       1,486,152       0.52 % 

 
 
See notes to the Consolidated Financial Statements.

9


 
 

TABLE OF CONTENTS

GSV CAPITAL CORP. AND SUBSIDIARIES
  
CONSOLIDATED SCHEDULE OF INVESTMENTS
June 30, 2014
(Unaudited)

         
Portfolio Investments*   Headquarters/Industry   Shares/Principal   Cost   Fair Value   % of Net Assets
Totus Solutions, Inc.(1)
                                            
Preferred shares, Series B     Carrollton, TX
LED Lighting
      11,111,110     $ 1,000,000     $ 1,000,400       0.35 % 
Convertible Promissory Note 6%, expire, 4/01/2016            $ 76,110       76,110       76,110       0.02 % 
Preferred shares, Series A              8,692,652       2,183,582       17,893       0.01 % 
Common Shares           11,307,348       2,840,591             % 
Total                 6,100,283       1,094,403       0.38 % 
AlwaysOn, Inc.(2)
                                            
Preferred shares, Series A-1     Woodside, CA
Social Media
      4,465,925       876,023       850,000       0.30 % 
Preferred shares, Series A              1,141,626       1,027,391       203,011       0.07 % 
Preferred warrants Series A-1, $0.19 strike price, expire 12/31/2014              1,313,508             26,270       0.01 % 
Preferred warrants Series A, $1.00 strike price, expire 1/9/2017           109,375                   % 
Total                 1,903,414       1,079,281       0.38 % 
Strategic Data Command, LLC(1)(7)
                                            
Common shares     Sunnyvale, CA
Software Development
      800,000       1,001,650       1,000,000       0.35 % 
AliphCom, Inc. (d/b/a Jawbone)
                                            
Common shares     San Francisco, CA
Smart Device Company
      150,000       793,152       900,000       0.31 % 
DianRong (fka SinoLending Ltd.)**
                                            
Preferred shares, Class A     Shanghai, China
Chinese P2P Lending
      6,414,368       503,235       577,293       0.20 % 
Preferred shares, Class B           2,333,108       250,491       250,000       0.09 % 
Total                 753,726       827,293       0.29 % 
Cricket Media (fka ePals Inc.)**(1)(8)
                                            
Common shares     Herndon, VA
Online Education
      33,333,333       2,446,284       825,000       0.29 % 
GSV Sustainability Partners(2)
                                            
Preferred shares, Class A     Woodside, CA
Clean Technology
      1,250,000       625,000       625,000       0.22 % 
Common shares           100,000       10,000       10,000       % 
                635,000       635,000       0.22 % 
The rSmart Group, Inc.(1)
                                            
Preferred shares, Series B     Scottsdale, AZ
Higher Education Learning Platform
      1,201,923       1,267,240       580,386       0.20 % 
EdSurge, Inc.(1)
                                            
Preferred shares, Series A     Burlingame, CA
Education Media Platform
      494,365       500,801       503,356       0.18 % 
New Zoom, Inc
                                            
Preferred shares, Series A     San Francisco, CA
Retail Machines
      1,250,000       260,476       336,408       0.12 % 

 
 
See notes to the Consolidated Financial Statements.

10


 
 

TABLE OF CONTENTS

GSV CAPITAL CORP. AND SUBSIDIARIES
  
CONSOLIDATED SCHEDULE OF INVESTMENTS
June 30, 2014
(Unaudited)

         
Portfolio Investments*   Headquarters/Industry   Shares/Principal   Cost   Fair Value   % of Net Assets
Neuron Fuel, Inc.
                                            
Preferred shares, Series AAI     San Jose, CA
Computer Software
      250,000     $ 262,530     $ 287,082       0.10 % 
4C Insights (f.k.a The Echo Systems Corp.)
                                            
Preferred shares, Series A     Chicago, IL
Social Data Platform
      512,365       1,436,404       245,423       0.09 % 
Earlyshares.com
                                            
Preferred shares, Series A     Miami, FL
Equity Crowd Funding
      149,144       234,159       224,999       0.08 % 
Odesk Corporation
                                            
Common Shares     Redwood City, CA
Online Workplace Platform
      30,000       183,269       174,223       0.06 % 
Total Portfolio Investments                 282,964,208       367,037,838       127.83 % 
U.S. Treasury
                                            
U.S. Treasury Bill, 0%, due 7/3/2014            $ 80,000,000       80,000,445       80,000,000       27.86 % 
U.S. Treasury Strips(13)
                                            
United States Treasury Strip Coupon, 0.00% due 08/15/2016            $ 1,851,000       1,821,805       1,830,233       0.64 % 
United States Treasury Strip Coupon, 0.00% due 02/15/2016            $ 1,834,000       1,818,002       1,825,270       0.64 % 
United States Treasury Strip Coupon, 0.00% due 08/15/2015            $ 1,823,000       1,816,053       1,819,536       0.63 % 
United States Treasury Strip Coupon, 0.00% due 02/15/2015            $ 1,816,000       1,813,612       1,814,692       0.63 % 
United States Treasury Strip Coupon, 0.00% due 08/15/2014         $ 1,813,000       1,812,754       1,812,855       0.63 % 
Total                 9,082,226       9,102,586       3.17 % 
Total Investments               $ 372,046,879     $ 456,140,424       158.86 % 

* All portfolio investments are non-control/non-affiliated and non-income producing, unless identified. Equity investments are subject to lock-up restrictions upon their initial public offering.
** Indicates assets that GSV Capital Corp. believes do not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940, as amended.
*** Investment is income producing.
(1) Denotes an Affiliate Investment. “Affiliate Investments” are investments in those companies that are “Affiliated Companies” of GSV Capital Corp., as defined in the Investment Company Act of 1940. A company is deemed to be an “Affiliate” of GSV Capital Corp. if GSV Capital Corp. owns 5% or more of the voting securities of such company.
(2) Denotes a Control Investment. “Control Investments” are investments in those companies that are “Controlled Companies” of GSV Capital Corp., as defined in the Investment Company Act of 1940. A company is deemed to be a “Controlled Company” of GSV Capital Corp. if GSV Capital Corp. owns 25% or more of the voting securities of such company.
(3) GSV Capital Corp.’s investment in Avenues Global Holdings, LLC is held through its wholly-owned subsidiary GSVC AV Holdings, Inc.

 
 
See notes to the Consolidated Financial Statements.

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GSV CAPITAL CORP. AND SUBSIDIARIES
  
CONSOLIDATED SCHEDULE OF INVESTMENTS
June 30, 2014
(Unaudited)

(4) GSV Capital Corp.’s investment in Whittle Schools, LLC is held through its wholly-owned subsidiary GSVC WS Holdings, Inc. Whittle Schools, LLC is an investment whose economics are derived from the value of Avenues Global Holdings LLC.
(5) GSV Capital Corp.’s investment in StormWind, LLC is held through its wholly-owned subsidiary GSVC SW Holdings, Inc.
(6) GSV Capital Corp.’s investment in SharesPost, Inc. is held through its wholly-owned subsidiary SPNPM Holdings, LLC.
(7) GSV Capital Corp.’s investment in Strategic Data Command, LLC is held through its wholly-owned subsidiary GSVC SVDS Holdings, Inc.
(8) On October 22, 2013, Cricket Media (fka ePals Inc.), priced its initial public offering, selling 40,267,333 shares at a price of CAD $0.075 per share. GSV Capital Corp.’s shares in Cricket Media (fka ePals Inc.), are subject to a lock-up agreement which expired on February 23, 2014. At June 30, 2014, GSV Capital Corp. valued Cricket Media (fka ePals Inc.), based on its June 30, 2014 closing price less 17.5%. GSV Capital Corp.’s Chief Executive Officer, Michael Moe is a Board member of Cricket Media (fka ePals Inc.), which subjects GSV Capital Corp. to insider trading restrictions under Canadian securities law. As such, the Company has applied a 17.5% discount to reflect the aforementioned trading restrictions.
(9) On November 6, 2013, Twitter, Inc., priced its initial public offering, selling 70,000,000 shares at a price of $26 per share. GSV Capital Corp.’s shares in Twitter, Inc. are subject to a lock-up agreement which expired on May 5, 2014. At June 30, 2014, GSV Capital Corp. valued Twitter, Inc., based on its June 30, 2014 closing price.
(10) On November 12, 2013, Chegg, Inc., priced its initial public offering, selling 14,400,000 shares at a price of $12.50 per share. GSV Capital Corp.’s shares in Chegg, Inc. are subject to a lock-up agreement which expired on May 11, 2014. At June 30, 2014, GSV Capital Corp. valued Chegg, Inc., based on its June 30, 2014 closing price.
(11) On March 28, 2014, 2U, Inc. (f/k/a 2tor, Inc.) priced its initial public offering, selling 9,175,000 shares at a price of $13 per share. GSV Capital Corp.’s shares in 2U, Inc. (f/k/a 2tor, Inc.) are subject to a lock-up agreement which expires on September 24, 2014. At June 30, 2014, GSV Capital Corp. valued 2U, Inc. (f/k/a 2tor, Inc.), based on its June 30, 2014 closing price, adjusted for a discount due to lack of marketability of 13.0%. Michael Moe is a Board member of 2U, Inc. (f/k/a 2tor, Inc.).
(12) On May 15, 2014, TrueCar, Inc. priced its initial public offering, selling 7,775,000 shares at a price of $14 per share. GSV Capital Corp.’s shares in TrueCar, Inc. are subject to a lock-up agreement which expires on Novemenber 11, 2014. At June 30, 2014, GSV Capital Corp. valued TrueCar, Inc., based on its June 30, 2014 closing price, adjusted for a discount due to lack of marketability of 17.5%.
(13) Refer to Note 9 — Long Term Liabilities. In accordance with the terms of its Convertible Senior Notes payable, the Company deposited $10,867,500 in an escrow account with the trustee. These funds were used to purchase $10,845,236 of government securities. The cost of the US Treasury Strips approximates their fair value at June 30, 2014. On February 15, 2014, 1 US Treasury Strip with a cost of $1,790,785 matured and the proceeds were used by the trustee in accordance with the terms of the escrow agreement.

 
 
See notes to the Consolidated Financial Statements.

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GSV CAPITAL CORP. AND SUBSIDIARIES
 
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2013

         
Portfolio Investments*   Headquarters/Industry   Shares   Cost   Fair Value   % of Net Assets
Twitter, Inc.(11)**
                                            
Common shares     San Francisco, CA
Social Communication
      1,900,600     $ 32,991,111     $ 102,822,460       35.71 %  
Palantir Technologies, Inc.
                                            
Common shares, Class A     Palo Alto, CA
Cyber Security
      7,145,690       20,051,479       32,119,877       11.15 %  
Preferred shares, Series G           326,797       1,008,968       1,718,953       0.60 %  
Total                 21,060,447       33,838,830       11.75 %  
Dropbox, Inc.
                                            
Common share     San Francisco, CA
Online Storage
      760,000       8,641,153       9,181,012       3.19 %  
Preferred shares, Series A-1           552,486       5,015,333       6,674,185       2.32 %  
Total                 13,656,486       15,855,197       5.51 %  
Coursera, Inc.
                                            
Preferred shares, Series B     Mountain View, CA
Online Education
      2,961,399       14,519,443       14,519,443       5.04 %  
Control4 Corporation(8)**
                                            
Common shares     Salt Lake City, UT
Home Automation
      782,789       7,010,762       13,300,129       4.62 %  
2U, Inc. (f/k/a 2tor, Inc.)
                                            
Common shares     Landover, MD
Online Education
      1,151,802       8,758,193       9,875,206       3.43 %  
Preferred shares, Series A           167,431       1,273,125       1,435,503       0.50 %  
Total                 10,031,318       11,310,709       3.93 %  
Solexel, Inc.
                                            
Preferred shares, Series C     Milpitas, CA
Solar Power
      5,034,324       11,017,561       11,286,628       3.92 %  
Avenues Global Holdings, LLC(2)
                                            
Preferred shares, Junior Preferred Stock     New York, NY
Globally Focused Private
School
      10,014,270       10,150,484       10,014,270       3.48 %  
Curious.com Inc.(1)
                                            
Preferred shares, Series B     Menlo Park, CA
Online Education
      2,839,861       10,000,003       10,000,003       3.47 %  
PayNearMe, Inc.(1)
             3,914,535       10,000,001       10,000,000       3.47 %  
Preferred shares, Series E     Sunnyvale, CA
Cash Payment Network
                                     
Facebook, Inc.**                                             
Common Shares, Class A     Menlo Park, CA
Social Networking
      175,000       5,236,147       9,563,750       3.32 %  
SugarCRM, Inc.
                                            
Common shares     Cupertino, CA
Customer Relationship
Manager
      1,899,799       6,799,272       7,219,236       2.51 %  
Preferred shares, Series E           373,134       1,500,522       2,160,437       0.75 %  
Total                 8,299,794       9,379,673       3.26 % 

 
 
See notes to the Consolidated Financial Statements.

13


 
 

TABLE OF CONTENTS

GSV CAPITAL CORP. AND SUBSIDIARIES
 
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2013

         
Portfolio Investments*   Headquarters/Industry   Shares   Cost   Fair Value   % of Net Assets
Chegg, Inc.(12)**
                                            
Common shares     Santa Clara, CA
Textbook Rental
      1,182,792     $ 14,022,863     $ 8,551,589       2.97 %  
ZocDoc Inc.
                                            
Preferred shares, Series A     New York, NY
Online Medical
Scheduling
      200,000       3,563,178       3,926,702       1.36 %  
Common Stock           111,866       1,734,878       2,196,322       0.76 %  
Total                 5,298,056       6,123,024       2.12 %  
Knewton, Inc.
                                            
Preferred shares, Series E     New York, NY
Education Technology
Company
      375,985       4,999,999       4,999,999       1.74 %  
JAMF Holdings, Inc.
                                            
Preferred shares, Series B     Minneapolis, MN
Mobile Device
Management
      36,720       4,999,964       4,999,964       1.74 %  
Whittle Schools, LLC(1)(3)
                                            
Preferred shares, Series B     New York, NY
Globally-focused Private
School
      3,000,000       3,000,000       3,000,000       1.04 %  
Common shares           229       1,531,734       1,500,000       0.52 %  
Total                 4,531,734       4,500,000       1.56 %  
Spotify Technology S.A.**
                                            
Common shares     Stockholm, Sweden
Music Streaming Service
      3,658       3,598,472       4,443,409       1.54 %  
Global Education Learning (Holdings) Ltd.(1)**
                                            
Preferred shares, Series A     Hong Kong
Education Technology
      2,126,475       4,335,671       4,338,009       1.51 %  
StormWind, LLC(1)(5)
                                            
Preferred shares, Series B     Scottsdale, AZ
Interactive Learning
Platform
      3,279,629       2,019,687       4,205,142       1.46 %  
Violin Memory, Inc.(9)**
                                            
Common Shares     Mountain View, CA
Memory Flash
      1,247,498       14,819,618       4,204,068       1.46 %  
Dataminr, Inc.
                                            
Preferred shares, Series B     New York, NY
Social Media Analytics
      904,977       2,063,356       2,934,840       1.02 %  
Preferred shares, Series C           301,369       1,100,909       1,099,997       0.38 %  
Total                 3,164,265       4,034,837       1.40 %  
Gilt Groupe, Inc.
                                            
Common shares     New York, NY
e-Commerce Flash Sales
      248,600       6,594,433       4,024,389       1.40 %  
Parchment, Inc.
                                            
Preferred shares, Series D     Scottsdale, AZ
E-Transcript Exchange
      3,200,512       4,000,862       4,000,640       1.39 % 

 
 
See notes to the Consolidated Financial Statements.

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CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2013

         
Portfolio Investments*   Headquarters/Industry   Shares/
Principal
  Cost   Fair Value   % of Net Assets
Ozy Media, Inc.(1)
                                            
Preferred shares, Series A     Mountain View, CA
Daily News and
Information Site
      1,090,909     $ 3,000,200     $ 3,000,000       1.04 %  
Preferred shares, Series Seed           500,000       500,000       865,000       0.30 %  
Total                 3,500,200       3,865,000       1.34 %  
Totus Solutions, Inc.(1)
                                            
Common shares     Carrollton, TX
LED Lighting
      11,307,348       2,840,391       576,675       0.20 %  
Preferred shares, Series A              8,692,652       2,183,582       2,173,163       0.75 %  
Preferred shares, Series B           11.111,110       1,000,000       1,001,001       0.35 %  
Total                 6,023,973       3,750,839       1.30 %  
Fullbridge, Inc.(1)
                                            
Preferred shares, Series C     Cambridge, MA
Business Education
      1,728,724       3,193,444       3,114,120       1.08 %  
Term Loan, 10%, 3/31/14***            $ 250,000       262,612       250,000       0.09 %  
Term Loan, 10%, 3/31/14***            $ 250,000       241,239       250,000       0.09 %  
Common warrants, $0.91 strike price, expire 3/22/2020              186,170       67,021       126,362       0.04 %  
Common warrants, $0.91 strike price, expire 10/09/2018              82,418       9,901             — %  
Common warrants, $0.91 strike price, expire 12/10/2018           82,418       9,799             — %  
Total                 3,784,016       3,740,482       1.30 %  
Bloom Energy Corporation
                                            
Common shares     Sunnyvale, CA
Fuel Cell Energy
      201,589       3,855,601       3,731,264       1.30 %  
Learnist Inc. (f/k/a Grockit, Inc.)(1)(11)
                                            
Preferred shares, Series D     San Francisco, CA
Online Learning Platform
      2,728,252       2,005,945       2,073,472       0.72 %  
Preferred shares, Series E           1,731,501       1,503,670       1,499,999       0.52 %  
Total                 3,509,615       3,573,471       1.24 %  
CUX, Inc. (d/b/a CorpU)(1)
                                            
Common Stock     San Francisco, CA
Corporate Education
      615,763       2,006,077       2,229,678       0.77 %  
Convertible preferred shares, Series D              169,033       778,607       697,041       0.24 %  
Preferred warrants, $4.59 strike price, expire 02/25/2018           16,903                   — %  
Total                 2,784,684       2,926,719       1.01 %  
SharesPost, Inc.(6)
                                      
Preferred shares, Series B     San Bruno, CA
Online Marketplace
Finance
      1,771,653       2,259,716       2,232,283       0.78 %  
Common warrants, $0.13 strike price, expire 6/15/2018           770,934       23,128       115,640       0.04 %  
Total                 2,282,844       2,347,923       0.82 %  
TrueCar, Inc.
                                            
Common shares     Santa Monica, CA
Online Marketplace
      377,358       2,014,863       2,299,997       0.80 %  
DreamBox Learning, Inc.
                                            
Preferred shares, Series A-1     Bellevue, WA
Education Technology
      7,159,221       1,502,362       1,503,436       0.52 %  
Preferred shares, Series A           3,579,610       758,017       751,718       0.26 %  
Total                 2,260,379       2,255,154       0.78 % 

 
 
See notes to the Consolidated Financial Statements.

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CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2013

         
Portfolio Investments*   Headquarters/Industry   Shares/
Principal
  Cost   Fair Value   % of Net Assets
Maven Research, Inc.(1)
                                            
Preferred shares, Series C     San Francisco, CA
Knowledge Networks
      318,979     $ 2,000,447     $ 1,999,998       0.69 %  
Preferred shares, Series B           49,505       217,206       249,505       0.09 %  
Total                 2,217,653       2,249,503       0.78 %  
Silver Spring Networks, Inc.**
                                            
Common shares     Redwood City, CA
Smart Grid
      102,028       5,145,271       2,142,588       0.74 %  
NestGSV, Inc.(1)
                                            
Preferred shares, Series A     Redwood City, CA
Incubator
      1,000,000       1,021,778       1,188,137       0.41 %  
Preferred shares, Series B           450,000       605,500       594,068       0.21 %  
Total                 1,627,278       1,782,205       0.62 %  
ePals Inc.**(1)(10)
                                            
Common shares     Herndon, VA
Online Education
      33,333,333       2,444,759       1,666,667       0.58 %  
Common warrants, 0.075 CAD strike price, expire 4/30/2014           11,111,111             33,333       0.01 %  
Total                 2,444,759       1,700,000       0.59 %  
Circle Media (f.k.a. S3 Digital Corp. (d/b/a S3i)(1)
                                            
Preferred shares, Class A1     New York, NY
Sports Analytics
      1,033,452       989,058       1,168,847       0.41 %  
Preferred warrants, $1.00 strike price, expire 11/21/2017              500,000       31,354       150,000       0.05 %  
Term Loan, 12%, 09/30/15***            $ 250,000       261,030       250,000       0.09 %  
Preferred warrants, $1.166 strike price, expire 09/30/2020           160,806             64,322       0.02 %  
Total                 1,281,442       1,633,169       0.57 %  
Dailybreak, Inc.(1)
                                            
Preferred shares, Series A-1     Boston, MA
Social Advertising
      1,878,129       2,430,950       1,211,393       0.42 %  
Strategic Data Command, LLC(1)(7)                                             
Common shares     Sunnyvale, CA
Software Development
      800,000       1,001,650       1,046,830       0.36 %  
The rSmart Group, Inc.(1)
                                            
Preferred shares, Series B     Scottsdale, AZ
Higher Education
Learning Platform
      1,201,923       1,267,240       857,302       0.30 %  
SinoLending Ltd.**
                                            
Preferred shares, Class A     Shanghai, China
Chinese P2P Lending
      6,414,368       503,235       577,293       0.20 %  
Preferred shares, Class B           2,333,108       250,491       247,163       0.09 %  
Total                 753,726       824,456       0.29 %  
AlwaysOn, Inc.(1)
                                            
Preferred shares, Series A-1     Woodside, CA
Social Media
      3,152,417       624,783       600,000       0.21 %  
Preferred shares, Series A           1,066,626       1,027,391       203,011       0.07 %  
Total                 1,652,174       803,011       0.28 %  
AliphCom, Inc. (d/b/a Jawbone)
                                            
Common Stock     San Francisco, CA
Smart Device Company
      150,000       793,152       782,189       0.27 % 

 
 
See notes to the Consolidated Financial Statements.

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CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2013

         
Portfolio Investments*   Headquarters/Industry   Shares/
Principal
  Cost   Fair Value   % of Net Assets
NestGSV Silicon Valley, LLC(1)(4)
                                            
Common membership interest     Redwood City, CA
Incubator
    $ 500,000     $ 500,000     $ 557,084       0.19 %  
New Zoom, Inc
                                            
Preferred shares, Series A     San Francisco, CA
Retail Machines
      1,250,000       260,476       308,660       0.11 %  
Neuron Fuel, Inc.
                                            
Preferred shares, Series AAI     San Jose, CA
Computer Software
      250,000       262,530       264,941       0.09 %  
4C Insights (f.k.a The Echo Systems Corp.)
                                            
Preferred shares, Series A     Chicago, IL
Social Data Platform
      512,365       1,436,404       229,234       0.08 %  
Preferred warrants, $0.20 strike price, expire 11/14/2016           68,359       75,988             — %  
Total                 1,512,392       229,234       0.08 %  
Odesk Corporation
                                            
Common Shares     Redwood City, CA
Online Workplace
Platform
      30,000       183,269       184,077       0.06 %  
Total Portfolio Investments                 279,709,118       355,383,653       123.41 % 
United States Treasury Strip 02/15/2014            $ 1,791,000       1,790,785       1,790,839       0.62 %  
United States Treasury Strip 02/15/2015            $ 1,816,000       1,810,625       1,811,987       0.63 %  
United States Treasury Strip 02/15/2016            $ 1,834,000       1,810,323       1,816,540       0.63 %  
United States Treasury Strip 08/15/2014            $ 1,813,000       1,811,187       1,812,094       0.63 %  
United States Treasury Strip 08/15/2015            $ 1,823,000       1,811,205       1,813,411       0.63 %  
United States Treasury Strip 08/15/2016            $ 1,851,000       1,811,111       1,820,329       0.63 %  
Total                 10,845,236       10,865,200       3.77 %  
Total Investments               $ 290,554,354     $ 366,248,853       127.18 % 

* All portfolio investments are non-control/non-affiliated and non-income producing, unless identified. Equity investments are subject to lock-up restrictions upon their initial public offering.
** Indicates assets that GSV Capital Corp. believes do not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940, as amended.
*** Investment is income producing.
(1) Denotes an Affiliate Investment. “Affiliate Investments” are investments in those companies that are “Affiliated Companies” of GSV Capital Corp., as defined in the Investment Company Act of 1940. A company is deemed to be an “Affiliate” of GSV Capital Corp. if GSV Capital Corp. owns 5% or more of the voting securities of such company.
(2) GSV Capital Corp.’s investment in Avenues Global Holdings, LLC is held through its wholly-owned subsidiary GSVC AV Holdings, Inc.
(3) GSV Capital Corp.’s investment in Whittle Schools, LLC is held through its wholly-owned subsidiary GSVC WS Holdings, Inc. Whittle Schools, LLC is a derivative investment with economics linked to Avenues Global Holdings LLC.
(4) GSV Capital Corp.’s investment in NestGSV Silicon Valley, LLC is held through its wholly-owned subsidiary GSVC NG Holdings, Inc.
(5) GSV Capital Corp.’s investment in StormWind, LLC is held through its wholly-owned subsidiary GSVC SW Holdings, Inc.

 
 
See notes to the Consolidated Financial Statements.

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CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2013

(6) GSV Capital Corp.’s investment in SharesPost, Inc. is held through its wholly-owned subsidiary SPNPM Holdings, LLC.
(7) GSV Capital Corp.’s investment in Strategic Data Command, LLC is held through its wholly-owned subsidiary GSVC SVDS Holdings, Inc.
(8) On August 2, 2013, Control4 Corporation priced its initial public offering, selling 4,000,000 shares at a price of $16 per share. GSV Capital Corp.’s shares in Control4 are subject to a lock-up agreement which expired on January 29, 2014. At December 31, 2013, GSV Capital Corp. valued Control4 Corporation based on its December 31, 2013 closing price, adjusted for a discount due to lack of marketability of 4%.
(9) On September 27, 2013, Violin Memory Inc. priced its initial public offering, selling 18,000,000 shares at a price of $9 per share. GSV Capital Corp.’s shares in Violin Memory Inc. are subject to a lock-up agreement which expired on March 26, 2014. At December 31, 2013, GSV Capital Corp. valued Violin Memory Inc., based on its December 31, 2013 closing price, adjusted for a discount due to lack of marketability of 15%.
(10) On October 22, 2013, ePals, Inc. priced its initial public offering, selling 40,267,333 shares at a price of CAD $0.075 per share. GSV Capital Corp.’s shares in ePals, Inc. are subject to a lock-up agreement which expired on February 23, 2014. At December 31, 2013, GSV Capital Corp. valued ePals, Inc., based on its December 31, 2013 closing price, adjusted for a discount due to lack of marketability of 8%.
(11) On November 6, 2013, Twitter, Inc. priced its initial public offering, selling 70,000,000 shares at a price of $26 per share. GSV Capital Corp.’s shares in Twitter, Inc. are subject to a lock-up agreement which expired on May 5, 2014. At December 31, 2013, GSV Capital Corp. valued Twitter, Inc., based on its December 31, 2013 closing price, adjusted for a discount due to lack of marketability of 15%.
(12) On November 12, 2013, Chegg, Inc. priced its initial public offering, selling 14,400,000 shares at a price of $12.50 per share. GSV Capital Corp.’s shares in Chegg, Inc. are subject to a lock-up agreement which expired on May 11, 2014. At December 31, 2013, GSV Capital Corp. valued Chegg, Inc., based on its December 31, 2013 closing price, adjusted for a discount due to lack of marketability of 15%.
(13) Refer to Note 9 — Long Term Liabilities. In accordance with the terms of its Convertible Senior Notes payable, the Company deposited $10,867,500 in an escrow account with the trustee. These funds were used to purchase $10,845,236 of government securities. The cost of the US Treasury Strips approximates their fair value at December 31, 2013.

 
 
See notes to the Consolidated Financial Statements.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014

NOTE 1 — NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

GSV Capital Corp. (the “Company”, “we”, “our” or “GSV Capital”) was formed in September 2010 as a Maryland corporation structured as an externally managed, non-diversified closed-end management investment company. The Company has elected to be treated as a business development company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company is managed by GSV Asset Management, LLC (“GSV Asset Management”).

The Company’s date of inception is January 6, 2011, which is the date it commenced its development stage activities. The Company’s shares are currently listed on the NASDAQ Capital Market under the symbol “GSVC”. The Company began its investment operations during the second quarter.

On April 13, 2012, the Company formed a wholly-owned subsidiary, GSV Capital Lending, LLC (“GCL”), a Delaware limited liability company, which was formed to originate portfolio loan investments within the state of California.

On November 28, 2012, the Company formed the following wholly-owned subsidiaries: GSVC AE Holdings, Inc. (“GAE”), GSVC AV Holdings, Inc. (“GAV”), GSVC NG Holdings, Inc. (“GNG”), GSVC SW Holdings, Inc. (“GSW”) and GSVC WS Holdings, Inc. (“GWS”). On July 12, 2013, the Company formed a wholly-owned subsidiary, SPNPM Holdings LLC (“SPNPM”). On August 13, 2013, the Company formed a wholly-owned subsidiary, GSVC SVDS Holdings, Inc. (“SVDS”). Collectively, these entities are known as the “GSVC Holdings”, all Delaware corporations, formed to hold portfolio investments.

The Company’s investment objective is to maximize our portfolio’s total return, principally by seeking capital gains on our equity investments. The Company invests principally in the equity securities of venture capital-backed and rapidly growing emerging companies. The Company may also invest on an opportunistic basis in select publicly-traded equity securities of rapidly growing companies that otherwise meet its investment criteria.

Summary of Significant Accounting Policies

Basis of Presentation

The interim consolidated financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X. In the opinion of management, all adjustments, all of which were of a normal recurring nature, considered necessary for the fair presentation of financial statements for the interim period have been included. The results of operations for the current period are not necessarily indicative of results that ultimately may be achieved for any other interim period or for the year ending December 31, 2014. The interim unaudited consolidated financial statements and notes hereto should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Basis of Consolidation

Under Article 6 of Regulation S-X and the American Institute of Certified Public Accountants’ Audit and Accounting Guide for Investment Companies, we are precluded from consolidating any entity other than another investment company, a controlled operating company which provides substantially all of its services and benefits to us and certain entities established for tax purposes where we hold a 100% interest. Accordingly, our financial statements include our accounts and the accounts of the GSVC Holdings and GCL, our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. We began consolidating the GSVC Holdings during the quarter ended September 30, 2012.

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GSV CAPITAL CORP. AND SUBSIDIARIES
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014

NOTE 1 — NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES  – (continued)

Use of Estimates

The preparation of consolidated financial statements requires the Company to make a number of significant estimates. These include estimates of fair value of certain assets and liabilities and other estimates that affect the reported amounts of certain assets and liabilities as of the date of the consolidated financial statements and the reported amounts of certain revenues and expenses during the reported period. It is likely that changes in these estimates will occur in the near term. Our estimates are inherently subjective in nature and actual results could differ from our estimates and the differences could be material.

Investments

The Company applies fair value accounting in accordance with GAAP. The Company generally values its assets on a quarterly basis, or more frequently if required under the 1940 Act. Securities for which market quotations are readily available on an exchange are valued at the closing price of such security on the valuation date; however, if they are subject to restrictions upon sale (such as to lock-up restrictions), they are discounted accordingly. The Company may also obtain quotes with respect to certain of its investments from pricing services or brokers or dealers in order to value assets. When doing so, the Company determines whether the quote obtained is sufficient according to GAAP to determine the fair value of the security. If determined adequate, the Company uses the quote obtained.

Securities for which reliable market quotations are not readily available or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of GSV Asset Management, the Board or the Valuation Committee of the Board (the “Valuation Committee”), does not represent fair value, shall each be valued as follows:

1. The quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals responsible for the portfolio investment;
2. Preliminary valuation conclusions are then documented and discussed with GSV Asset Management senior management;
3. An independent third-party valuation firm is engaged by, or on behalf of, the Valuation Committee to conduct independent appraisals and review management’s preliminary valuations and make their own independent assessment, for all material investments;
4. The Valuation Committee discusses valuations and recommends the fair value of each investment in the portfolio in good faith based on the input of GSV Asset Management and the independent third-party valuation firm; and,
5. The Board then discusses the valuations and determines in good faith the fair value of each investment in the portfolio based upon input of GSV Asset Management, estimates from the independent valuation firm and the recommendations of the Valuation Committee.

In making our good faith determination of the fair value of investments, we consider valuation methodologies consistent with industry practice. Valuation methods, among other measures and as applicable, may include comparisons to prices from secondary market transactions and recent venture capital financings, analysis of financial ratios and valuation metrics of the portfolio companies that issued such private equity securities to peer companies that are public, analysis of the portfolio companies’ most recent financial statements and forecasts, and the markets in which the portfolio company does business, and other relevant factors. The Company assigns a weighting based upon the relevance of each factor to determine the fair value of each investment.

When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Company will consider the pricing indicated by the external event to corroborate the private equity

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014

NOTE 1 — NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES  – (continued)

valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.

Fair value is defined 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. GAAP establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:

Level 1.  Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access (examples include active exchange-traded equity securities, exchange-traded derivatives, and most U.S. Government and agency securities).

Level 2.  Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:

a) Quoted prices for similar assets or liabilities in active markets;
b) Quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds, which trade infrequently);
c) Pricing models whose inputs are observable for substantially the full term of the asset or liability (examples include most over-the-counter derivatives, including foreign exchange forward contracts); and,
d) Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability.

Level 3.  Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability (examples include certain of our private equity investments).

When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Therefore gains and losses for such assets and liabilities categorized within the Level 3 table set forth in Note 3 may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3).

A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in/out of the Level 3 category as of the beginning of the quarter in which the reclassifications occur.

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GSV CAPITAL CORP. AND SUBSIDIARIES
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014

NOTE 1 — NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES  – (continued)

Valuation of Financial Instruments

The carrying amounts of our financial instruments, consisting of cash, receivables, accounts payable, and accrued expenses, approximate fair value due to their short-term nature. The embedded derivative liability is carried at fair value.

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). Securities transactions outside conventional channels, such as private transactions, are recorded as of the date the Company obtains the right to demand the securities purchased or to collect the proceeds from a sale, and incurs an obligation to pay for securities purchased or to deliver securities sold, respectively.

Portfolio Company Investment Classification

We are a non-diversified company within the meaning of the 1940 Act. We classify our investments by level of control. As defined in the 1940 Act, control investments are those where there is the power to exercise a controlling influence over the management or policies of a company. Control is generally deemed to exist when a company or individual directly or indirectly owns beneficially more than 25% of the voting securities of an investee company. Affiliated investments and affiliated companies are defined by a lesser degree of influence and are deemed to exist when a company or individual directly or indirectly owns, controls or holds the power to vote 5% or more of the outstanding voting securities of another person. Refer to the Consolidated Schedules of Investments as of June 30, 2014 and December 31, 2013, respectively, for details regarding the nature and composition of the Company’s portfolio.

Cash

The Company places its cash with U.S. Bank, N.A. First Republic Bank, N.A., and Silicon Valley Bank, and at times, cash held in these accounts may exceed the Federal Deposit Insurance Corporation insured limit. The Company may invest a portion of its cash in money market funds, within limitations of the 1940 Act.

Restricted Cash

Restricted Cash consists of excess funds remaining in escrow from the purchase of the government securities that will be used to make the scheduled interest payments on the Convertible Senior Notes. See Note 9 for further detail. As of June 30, 2014, and December 31, 2013, respectively, the Company had Restricted Cash of $22,139 and $22,264 which is included on the Consolidated Statements of Assets and Liabilities.

Revenue Recognition

The Company’s revenue recognition policies are as follows:

Sales:  Gains or losses on the sale of investments are determined using the specific identification method.

Interest:  Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis.

Dividends:  Dividend income is recognized on the ex-dividend date.

Investment Transaction Costs and Escrow Deposits

Commissions and other costs associated with an investment transaction, including legal expenses not reimbursed by the issuer, are included in the cost basis of purchases and deducted from the proceeds of sales. The Company makes certain acquisitions on the secondary markets which may involve making deposits to

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014

NOTE 1 — NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES  – (continued)

escrow accounts until certain conditions are met including the underlying private company’s right of first refusal. If the underlying private company does not exercise or assign its right of first refusal and all other conditions are met, then the funds in the escrow account are delivered to the seller and the account is closed. These transactions are reflected on the Statement of Assets and Liabilities as Escrow deposits. At June 30, 2014, and December 31, 2013, the Company had $0 in Escrow deposits.

Unrealized Appreciation or Depreciation on Investments

Unrealized appreciation or depreciation is calculated as the difference between the fair value of the investment and the cost basis of such investment.

U.S. Federal and State Income Taxes

The Company was taxed as a regular corporation (a “C corporation”) under subchapter C of the Internal Revenue Code of 1986, as amended, for its 2012 taxable year. The Company uses the asset and liability method of accounting for income taxes. Deferred tax assets and liabilities are recorded for tax loss carryforwards and temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, using statutory tax rates in effect for the year in which the temporary differences are expected to reverse. Certain tax attributes may be subject to limitations on timing and usage. A valuation allowance is provided against deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Beginning with its 2013 taxable year, the Company may elect to be treated as a regulated investment company (“RIC”) under subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), if the Company is able to satisfy the requirements under subchapter M of the Code. If we are not certified by the SEC as “principally engaged in the furnishing of capital to other corporations which are principally engaged in the development or exploitation of inventions, technological improvements, new processes, or products not previously generally available” for our 2013 taxable year, we will not be eligible to elect to be treated as a RIC for our 2013 taxable year. Although we have filed an application with the SEC for this certification, there can be no assurance that we will receive it, or that we will otherwise qualify as a RIC for our 2013 taxable year. If we are unable to qualify as a RIC, we will continue to be taxed as a C corporation under the Code for our 2013 taxable year. To that end, for purposes of our financial statements, we have accrued taxes as though we were a C Corporation for the 2013 taxable year, in the event we are unable to obtain this certification. In order to qualify as a RIC, among other things, the Company is required to distribute to its stockholders on a timely basis at least 90% of investment company taxable income, as defined by the Code, for each year, and meet certain asset diversification requirements on a quarterly basis. So long as the Company qualifies and maintains its status as a RIC, it generally will not pay corporate-level U.S. federal and state income taxes on any ordinary income or capital gains that it distributes at least annually to its stockholders as dividends. Rather, any tax liability related to income earned by the RIC will represent obligations of the Company’s investors and will not be reflected in the consolidated financial statements of the Company. Included in the Company’s consolidated financial statements, the GSVC Holdings are taxable subsidiaries of the RIC. These taxable subsidiaries are not consolidated for income tax purposes and may generate income tax expenses as a result of their ownership of the portfolio companies. Such income tax expenses and deferred taxes, if any, will be reflected in the Company’s consolidated financial statements. At the present time, the Company cannot assure you that it will be eligible to elect to be taxed as a RIC for its 2013 taxable year. If it is not treated as a RIC for 2013, the Company will be taxed as a C corporation under the Code for the 2013 taxable year. Until such time as it qualifies and elects to be taxed as a RIC, GSV will provide for income taxes, if any, as a C Corp. The Company intends to elect to be taxed as a RIC for its 2014 taxable year, if management determines that it is in the Company’s best interests to do so.

The Company evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more-likely-than-not” of being

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014

NOTE 1 — NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES  – (continued)

sustained by the applicable tax authority. The Company recognizes the tax benefits of uncertain tax positions only where the position has met the “more-likely-than-not” threshold. The Company classifies penalties and interest associated with income taxes, if any, as income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, ongoing analyses of tax laws, regulations and interpretations thereof.

Deferred Credit Facility Fees

On December 31, 2013, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Silicon Valley Bank, pursuant to which Silicon Valley Bank agreed to provide the Company with a new $18 million credit facility (the “Credit Facility”). The Company incurred $288,249 of legal costs and other fees in connection with opening the Credit Facility. As of June 30, 2014, of the total costs of $288,249 incurred, $189,940 remains to be amortized and is included within deferred credit facility fees on the Consolidated Statements of Assets and Liabilities.

Offering Costs

Offering costs include legal fees and other costs pertaining to public offerings. In accordance with ASC 340-10, the Company deferred offering costs of $241,010 associated with the registration statement filed on September 23, 2013 on form N-2 with the Securities and Exchange Commission (the “SEC”) to register the Company’s common stock, preferred stock, subscription rights, debt securities, and warrants under the Securities Act of 1933, as amended. If the registration statement is declared effective by the SEC and the Company’s securities are offered pursuant to the registration statement, the Company will reclassify the deferred offering costs into additional paid-in capital for equity offerings and will amortize the offering costs related to any debt securities issued.

Per Share Information

Basic earnings (loss) per common share, is computed using the weighted average number of shares outstanding for the period presented. Diluted earnings per share is computed by dividing net income (loss) for the period by the weighted average number of common shares outstanding plus any potentially dilutive shares outstanding during the period. The Company used the if-converted method to determine the number of potentially dilutive shares outstanding. Refer to footnote 5 for further detail.

Capital Accounts

Certain capital accounts including undistributed net investment income or loss, accumulated net realized gain or loss, net unrealized appreciation or depreciation, and paid-in capital in excess of par, are adjusted, at least annually, for permanent differences between book and tax. In addition, the character of income and gains to be distributed is determined in accordance with income tax regulations that may differ from GAAP. GAAP requires that certain components of net assets relating to permanent differences are to be reclassified between financial statement reporting and tax reporting. These reclassifications have no effect on the net assets or net asset value per share and are intended to enable the Company’s stockholders to determine the amount of accumulated and undistributed earnings they potentially could receive in the future and on which they could be taxed.

NOTE 2 — RELATED PARTY ARRANGEMENTS

Investment Advisory Agreement

The Company entered into an investment advisory agreement with GSV Asset Management (the “Advisory Agreement”) in connection with its initial public offering. Pursuant to the Advisory Agreement, GSV Asset Management will be paid a base annual fee of 2% of gross assets, and an annual incentive fee equal to the lesser of (i) 20% of the Company’s realized capital gains during each calendar year, if any,

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014

NOTE 2 — RELATED PARTY ARRANGEMENTS  – (continued)

calculated on an investment-by-investment basis, subject to a non-compounded preferred return, or “hurdle,” and a “catch-up” feature, and (ii) 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. GSV Asset Management earned $1,933,663 and $3,689,859 in base management fees and $0 in incentive fees for the three and six months ended June 30, 2014, respectively. GSV Asset Management earned $1,246,378 and $2,529,977 in base management fees and $0 in incentive fees for the three and six months ended June 30, 2013, respectively. For the three and six months ended June 30, 2014, respectively, we accrued incentive fees of $844,633, and $1,814,285, in accordance with the AICPA’s TPA (TIS 6910.2) which considers the hypothetical liquidation value of our investment portfolio as of the measurement date.

As of June 30, 2014, we were owed $35,406 from GSV Capital Service Company, LLC, for the prepayment of overhead expenses as well as California Franchise Board fees. In addition as of June 30, 2014, we owed GSV Asset Management $9,647, which relates to the reimbursement of expenses paid for by GSV Asset Management that were the responsibility of the Company.

As of December 31, 2013, we were owed $3,039 from GSV Capital Service Company, LLC for reimbursement of expenses paid for by us that were the responsibility of GSV Asset Management. In addition as of December 31, 2013, we owed GSV Asset Management $563,978, which relates to the reimbursement of expenses paid for by GSV Asset Management that were the responsibility of the Company.

Administration Agreement

The Company entered into an administration agreement with GSV Capital Service Company (the “Administration Agreement”) to provide administrative services, including furnishing the Company with office facilities, equipment, clerical, bookkeeping, record keeping services and other administrative services, in connection with its initial public offering and ongoing operations. The Company reimburses GSV Capital Service Company an allocable portion of overhead and other expenses in performing its obligations under the Administration Agreement. There were $929,701 and $1,838,233 in such costs incurred under the Administration Agreement for the three and six months ended June 30, 2014, respectively. There were $709,885 and $1,597,869 in such costs incurred under the Administration Agreement for the three and six months ended June 30, 2013, respectively.

License Agreement

The Company entered into a license agreement with GSV Asset Management pursuant to which GSV Asset Management has agreed to grant the Company a non-exclusive, royalty-free license to use the name “GSV.” Under this agreement, the Company has the right to use the GSV name for so long as the Advisory Agreement with GSV Asset Management is in effect. Other than with respect to this limited license, the Company has no legal right to the “GSV” name.

NOTE 3 — PORTFOLIO INVESTMENTS AND FAIR VALUE

The Company’s investments in portfolio companies consist primarily of equity securities (such as common stock, preferred stock and warrants to purchase common and preferred stock) and to a lesser extent, debt securities, issued by private and publicly traded companies. The Company may from time to time, invest in U.S. Treasury Securities. At June 30, 2014, Investments in United States Treasury Bill and Payable for securities purchased, relate to the purchase of the United States Treasury Bill on margin that settled on June 30, 2014. The payable was subsequently repaid on July 3, 2014 when the United States Treasury Bill matured and the $8.0 million margin deposit which was posted as collateral was returned. The following table summarizes the composition of the Company’s investment portfolio by security type at cost and fair value as of June 30, 2014 and December 31, 2013.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014

NOTE 3 — PORTFOLIO INVESTMENTS AND FAIR VALUE  – (continued)

       
  June 30, 2014 (Unaudited)   December 31, 2013
     Cost   Fair Value   Cost   Fair Value
Private Portfolio Companies:
                                   
Common Stock   $ 60,681,150     $ 87,595,350     $ 70,404,617     $ 81,410,161  
Preferred Stock     160,114,453       169,119,155       126,151,898       129,925,500  
Common Membership Interest                 500,000       557,084  
Term Loans     360,011       348,610       764,881       750,000  
Warrants     301,196       594,355       217,191       489,657  
Subtotal – Private Portfolio
Companies
    221,456,810       257,657,470       198,038,587       213,132,402  
Publicly Traded Portfolio Companies:
                                   
Common Stock     61,507,398       109,380,368       81,670,531       142,251,251  
Total Private and Publicly Traded Portfolio Companies:     282,964,208       367,037,838       279,709,118       355,383,653  
Non-Portfolio Investments     89,082,671       89,102,586       10,845,236       10,865,200  
Total Investments   $ 372,046,879     $ 456,140,424     $ 290,554,354     $ 366,248,853  

The fair values of our investments disaggregated into the three levels of the fair value hierarchy based upon the lowest level of significant input used in the valuation as of June 30, 2014 and December 31, 2013 are as follows:

       
  As of June 30, 2014 (Unaudited)
     Quoted Prices in Active Markets for Identical Securities (Level 1)   Significant Other Observable
Inputs (Level 2)
  Significant Unobservable Inputs (Level 3)   Total
Assets:
                                   
Private Portfolio Companies:
                                   
Common Stock   $     $     $ 87,595,350     $ 87,595,350  
Preferred Stock                 169,119,155       169,119,155  
Term Loans                 348,610       348,610  
Warrants                 594,355       594,355  
Subtotal – Private Portfolio Companies                 257,657,470       257,657,470  
Publicly Traded Portfolio Companies:
                                   
Common Stock     86,194,438       23,185,930             109,380,368  
Total Private and Publicly Traded Portfolio Companies:     86,194,438       23,185,930       257,657,470       367,037,838  
U.S. Treasury Bill     80,000,000                   80,000,000  
U.S. Treasury Strips     9,102,586                   9,102,586  
Total Assets at Fair Value   $ 175,297,024     $ 23,185,930     $ 257,657,470     $ 456,140,424  
Liabilities:
                                   
Embedded Derivative                 159,000       159,000  
Total Liabilities at Fair Value   $     $     $ 159,000     $ 159,000  
                                                                                            

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014

NOTE 3 — PORTFOLIO INVESTMENTS AND FAIR VALUE  – (continued)

       
  As of December 31, 2013
     Quoted Prices in Active Markets for Identical Securities (Level 1)   Significant Other Observable
Inputs (Level 2)
  Significant Unobservable Inputs (Level 3)   Total
Assets:
                                   
Private Portfolio Companies:
                                   
Common Stock   $     $     $ 81,410,161     $ 81,410,161  
Preferred Stock                 129,925,500       129,925,500  
Common Membership Interest                 557,084       557,084  
Term Loans                 750,000       750,000  
Warrants                 489,657       489,657  
Subtotal – Private Portfolio Companies                 213,132,402       213,132,402  
Publicly Traded Portfolio Companies:
                                   
Common Stock     11,706,338       130,544,913             142,251,251  
Total Private and Publicly Traded Portfolio Companies:     11,706,338       130,544,913       213,132,402       355,383,653  
U.S. Treasury Strip     10,865,200                   10,865,200  
Total Assets at Fair Value   $ 22,571,538     $ 130,544,913     $ 213,132,402     $ 366,248,853  
Liabilities:
                                   
Embedded Derivative                 799,000       799,000  
Total Liabilities at Fair Value   $     $     $ 799,000     $ 799,000  

The table below presents the valuation techniques and the nature of significant inputs used to determine the fair values of our Level 3 investments and embedded derivative as of June 30, 2014.

       
Asset   Fair Value   Valuation Techniques   Unobservable inputs   Range (Average)
Common stock in private companies   $ 87,595,350       Market approach       Precedent transactions       N/A  
             Income approach       Revenue multiples       1.6x – 5.0x(3.2x)  
                         EBIT multiples       10.30x – 35.00x(17.4x)  
                         Discount rate       30% – 35%(33%)  
Preferred stock in private companies     169,119,155       Market approach       Precedent transactions       N/A  
             Income approach       Revenue multiples       2.0x – 6.2x(4.4x)  
                         EBIT multiples       9.0x – 35.0x(22.9x)  
                         Discount rate       35% – 45%(39%)  
Term Loans     348,610       Market approach       Precedent transactions       N/A  
Warrants     594,355       Option pricing model       Term to expiration       0.50 – 3.66(2.21)  
                         Stock price       0.13 – 4.59(1.42)  
                         Volatility       30% – 50%(41%)  
Embedded Derivative     159,000       Binomial Lattice Model       Strike Price       16.26  
                         Volatility       50%  
                         Annual risk rate       15%  

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014

NOTE 3 — PORTFOLIO INVESTMENTS AND FAIR VALUE  – (continued)

The significant unobservable inputs used in determining the fair value of the assets and liabilities are shown above. Increases (decreases) in revenue multiples, EBIT multiples, time to expiration, and stock price/strike price would result in higher (lower) fair values all else equal. Decreases (increases) in discount rates, volatility, and annual risk rates, would result in higher fair values all else equal.

The Company applied the binomial lattice model to value the embedded derivative using a “with-and-without method,” where the value of the convertible senior notes including the embedded derivative, is defined as the “with”, and the value of the convertible senior notes excluding the embedded derivative, is defined as the “without”. This method estimates the value of the embedded derivative by looking at the difference in the values between the convertible senior notes with the embedded derivative and the value of the convertible senior notes without the embedded derivative. The lattice model requires the following inputs: (i) strike price; (ii) estimated stock volatility; and (iii) annual risk rate.

The aggregate values of Level 3 portfolio investments and embedded derivative changed during the six months ended June 30, 2014 and the year ended December 31, 2013 as follows:

             
  Six months ended June 30, 2014 (Unaudited)
     Common Stock   Preferred Stock   Common Membership Interest   Term Loan   Warrants   Embedded Derivative   Total
Assets:
                                                              
Fair value as of December 31, 2013   $ 81,410,161     $ 129,925,500     $ 557,084     $ 750,000     $ 489,657     $     $ 213,132,402  
Purchases of investments     1,782,541       30,522,699             3,163,116       159,993             35,628,349  
Sales of investments                             (75,988 )            (75,988 ) 
Exercises, conversions and assignments – In(1)     1,273,125       6,074,063                               7,347,188  
Exercises, conversions and assignments – Out(1)     (2,006,077 )      (1,273,125 )      (500,000 )      (3,567,986 )                  (7,347,188 ) 
Change in unrealized appreciation (depreciation) included in earnings     23,059,356       3,870,018       (57,084 )      3,480       20,693             26,896,463  
Transfers Out of Level 3     (17,923,756 )                                    (17,923,756 ) 
Fair Value as of June 30,
2014
  $ 87,595,350     $ 169,119,155     $     $ 348,610     $ 594,355     $     $ 257,657,470  
Change in unrealized appreciation (depreciation) on Level 3 investments still held as of June 30, 2014   $ 17,534,404     $ 5,393,478     $ (57,084 )    $ 3,480     $ 20,693     $     $ 22,894,971  
Liabilities:
                                                              
Fair Value of December 31, 2013   $     $     $     $     $     $ 799,000     $ 799,000  
Gain on fair value adjustment for embedded derivative                                   (640,000 )      (640,000 ) 
Fair Value as of June 30,
2014
  $     $     $     $     $     $ 159,000     $ 159,000  

(1) During the six months ended June 30, 2014, the Company’s portfolio investments had the following corporate actions which are reflected above:

   
Portfolio Company   Transfer from   Transfer to
2U, Inc. (f/k/a 2tor, Inc.)   Preferred shares, Series A   Common Stock
Fullbridge, Inc.   Term loan, 10%, 3/31/15   Preferred shares, Series D
CUX, Inc. (d/b/a CorpU)   Common Stock   Convertible preferred shares,
Series C
NestGSV Silicon Valley, LLC   Common Membership Interest   Preferred shares, Series C

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014

NOTE 3 — PORTFOLIO INVESTMENTS AND FAIR VALUE  – (continued)

   
Portfolio Company   Transfer from   Transfer to
NestGSV, Inc.   Convertible Promissory Note,
12%, 6/30/14
  Preferred shares, Series C
NestGSV, Inc.   Convertible Promissory Note,
12%, 6/30/14
  Preferred shares, Series C
Fullbridge, Inc.   Convertible Promissory Note,
10%, 2/16/15
  Preferred shares, Series D

             
  Year ended December 31, 2013
     Common Stock   Preferred Stock   Common Membership Interest   Term Loans   Warrants   Embedded Derivative   Total
Assets:
                                                              
Fair value as of December 31, 2012   $ 112,855,675     $ 100,853,882     $ 500,000     $     $ 223,062     $     $ 214,432,619  
Purchases of investments     8,248,157       59,273,379             1,242,325       19,700             68,783,561  
Exercises, conversions and assignments – In(1)     26,442,820       (26,509,841 )                  67,021              
Sales and settlements           10,091,058             (459,799 )                  9,631,259  
Realized loss included in
earnings
    (953,811 )      (27,463,851 )            (15,488 )                        (28,433,150 ) 
Exercises, conversions and assignments – Out(1)     (2,000,000 )      2,000,000                                
Change in unrealized appreciation (depreciation) included in earnings     62,256,476       19,839,371       57,084       (17,038 )      179,874                82,315,767  
Transfers Out of Level 3     (125,439,156 )      (8,158,498 )                              (133,597,654 ) 
Fair Value as of December 31, 2013   $ 81,410,161     $ 129,925,500     $ 557,084     $ 750,000     $ 489,657     $     $ 213,132,402  
Change in unrealized appreciation (depreciation) on Level 3 investments still held as of December 31, 2013   $ (75,011,491 )    $ (2,524,084 )    $ 57,084     $ (3,371 )    $ (179,874 )    $     $ (77,661,736 ) 
Liabilities:
                                                              
Fair Value of December 31,
2012
  $     $     $     $     $     $     $  
Embedded derivative from issuance of convertible senior notes                                   700,000       700,000  
Loss on fair value adjustment for embedded derivative                                   99,000       99,000  
Fair Value as of December 31, 2013   $     $     $     $     $     $ 799,000     $ 799,000  

(1) During the year ended December 31, 2013, the Company’s portfolio investments had the following corporate actions which are reflected above:

   
Portfolio Company   Transfer from   Transfer to
CUX, Inc. (d/b/a CorpU)   Convertible preferred shares, Series D   Common Shares
Chegg, Inc.,   Preferred shares, Series F   Common Shares
Twitter, Inc.   Preferred shares, Series A   Common Shares
Violin Memory, Inc.   Preferred shares, Series B   Common Shares
Violin Memory, Inc.   Preferred shares, Series D   Common Shares
Totus Solutions Inc.   Preferred shares, Series A   Common Shares
Totus Solutions Inc.   Preferred shares, Series B   Common Shares

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014

NOTE 3 — PORTFOLIO INVESTMENTS AND FAIR VALUE  – (continued)

The portfolio companies in which the Company invests periodically offer their shares in initial public offerings, (“IPO’s”). The Company’s shares in the portfolio companies are typically subject to lock-up agreements for 180 days following the IPO. Upon the IPO date, the Company transfers its investment from level 3 to level 2 due to the presence of an active market, limited by the lock-up agreement. The Company prices the investment at the closing price on a public exchange as of the measurement date subject to a discount for a lack of marketability, (“DLOM”). The DLOM for each portfolio company investment is based upon the market value of publicly traded put options with similar terms as the lock-up. Once the lock-up expires, the Company typically transfers the investment from level 2 to level 1 and prices the investment based on the closing price on a public exchange as of the measurement date. In situations where the lock-up has expired, but other factors restrict the sale of the investment, the Company will continue to classify the investment as level 2 and apply a DLOM appropriate to reflect the restrictions upon sale.

During the six months ended June 30, 2014, the following transfers between levels occurred as a result of the IPO’s of several portfolio companies, as well as the expiration of lock-up agreements described in the table below.

       
Portfolio Company   Corporate Action   IPO/ Lock-up Expiration Date   Transfer from   June 30, 2014
Valuation Method
Twitter, Inc.   Lock-up Expiration   5/5/2014   Level 2 to Level 1   Exchange Traded
Price, 0% DLOM
Chegg, Inc.   Lock-up Expiration   5/11/2014   Level 2 to Level 1   Exchange Traded
Price, 0% DLOM
TrueCar, Inc.   IPO   5/15/2014   Level 3 to Level 2   Exchange Traded
Price, 17.5% DLOM
Control4 Corporation   Lock-up Expiration   1/29/2014   Level 2 to Level 1   Exchange Traded
Price, 0% DLOM
Violin Memory, Inc.   Lock-up Expiration   3/26/2014   Level 2 to Level 1   Exchange Traded
Price, 0% DLOM
2U, Inc. (f/k/a 2tor, Inc.)   IPO   3/28/2014   Level 3 to Level 2   Exchange Traded
Price, 17.5% DLOM

During the year ended December 31, 2013, the following transfers between levels occurred as a result of the IPO’s of several portfolio companies, as well as the expiration of lock-up agreements described in the table below.

       
Portfolio Company   Corporate Action   IPO/ Lock-up Expiration Date   Transfer from   December 31, 2013 Valuation Method
Silver Spring Networks, Inc.   IPO   3/12/2013   Level 3 to Level 2   Exchange Traded
Price, 7% DLOM
Silver Spring Networks, Inc.   Lock-up Expiration   9/8/2013   Level 2 to Level 1   Exchange Traded
Price, 0% DLOM
Control4 Corporation   IPO   8/2/2013   Level 3 to Level 2   Exchange Traded
Price, 4% DLOM
Violin Memory, Inc.   IPO   9/27/2013   Level 3 to Level 2   Exchange Traded
Price, 15% DLOM
Twitter, Inc.   IPO   11/6/2013   Level 3 to Level 2   Exchange Traded
Price, 15% DLOM
Chegg, Inc.   IPO   12/12/2013   Level 3 to Level 2   Exchange Traded
Price, 15% DLOM

During the year ended December 31, 2013, the Company wrote-off its investments in Top Hat 430, Inc., Serious Energy, Inc., AltEgo, LLC, and Starfish Holdings, Inc. and recorded realized losses.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014

NOTE 4 — EQUITY OFFERINGS AND RELATED EXPENSES

The table below details the equity offerings and related expenses incurred by the Company since inception. The proceeds raised, the related underwriting fees, the offering expenses and the prices at which these shares were issued are as follows:

         
Issuances of Common Stock   Number of Shares   Gross Proceeds Raised   Underwriting Fees   Offering Expenses   Offering Price
February 28, 2011     100     $ 1,500     $     $     $ 15.00  
April 28, 2011     3,335,000       50,025,000       3,501,750       527,166 (1)      15.00  
September 27, 2011     2,185,000       30,917,750       1,267,300       531,122 (2)      14.15  
February 10, 2012     6,900,000       103,500,000       7,245,000       326,077       15.00  
May 11, 2012     6,900,000       112,125,000       6,727,500       412,620 (3)      16.25  

(1) Includes $3,585 of offering expenses that were accrued as of September 30, 2011.
(2) Amount was reduced by $18,878 after actual expenses for the offering were determined as of December 31, 2011.
(3) Includes $960 of offering expenses that were accrued as of September 30, 2012.

NOTE 5 — NET INCREASE (DECREASE) IN NET ASSETS PER COMMON SHARE — BASIC AND DILUTED

The Company considered the potential dilutive effects of the convertible senior notes on earnings per share in accordance with the requirement of ASC 260-10, using the if-converted method. The effect of the assumed conversion of the convertible senior notes would have been to increase earnings per share. As such, the Company has excluded the effects of the assumed conversion of the convertible senior notes from the diluted EPS calculation. The following information sets forth the computation of basic and diluted net increase (decrease) in net assets resulting from operations per common share for the three and six months ended June 30, 2014 and June 30, 2013.

       
  Three months ended June 30,   Six months ended June 30,
     2014   2013   2014   2013
     (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
Net increase (decrease) in net assets per common share – basic and diluted:
                                   
Net increase (decrease) in net assets resulting from operations   $ (920,306 )    $ 3,515,703     $ (840,602 )    $ (3,975,552 ) 
Weighted average common shares     19,320,100       19,320,100       19,320,100       19,320,100  
Net increase (decrease) in net assets per common share – basic and diluted:   $ (0.05 )    $ 0.18     $ (0.04 )    $ (0.21 ) 

NOTE 6 — LEGAL CONTINGENCIES

The Company is currently not subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our business, financial condition or results of operations.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014

NOTE 7 — FINANCIAL HIGHLIGHTS

   
  Three months ended
June 30,
2014
(Unaudited)
  Three months
ended
June 30,
2013
(Unaudited)
Per Share Data:
                 
Net asset value at beginning of period   $ 14.91     $ 12.69  
Net investment loss     (0.18 )(1)      (0.12 )(1) 
Net realized loss     (0.38 )(1)      (0.33 )(1) 
Benefit for taxes on Net Realized Capital Losses     0.15 (1)      (1) 
Net change in Unrealized Appreciation of Investments     0.60 (1)      0.63 (1) 
Provision for taxes on Unrealized Appreciation of Investments     (0.24 )(1)      (1) 
Net asset value at end of period   $ 14.86     $ 12.87  
Per share market value at end of period   $ 10.57     $ 7.86  
Total return based on market value     4.24 %(6)      (4.84 )%(6) 
Total return based on net asset value     (0.34 )%(6)      1.42 %(6) 
Shares outstanding at end of period     19,320,100       19,320,100  
Ratio/Supplemental Data:
                 
Net assets at end of period   $ 287,125,842     $ 248,607,249  
Average net assets   $ 275,480,154     $ 244,629,431  
Annualized ratio of gross operating expenses to
average net assets(8)
    8.55 %      3.98 % 
Annualized ratio of net operating expenses to
average net assets(8)
    8.55 %      3.98 % 
Annualized ratio of net investment income to average net assets(8)     (4.98 )%      (3.96 )% 

   
  Six months
ended
June 30,
2014
(Unaudited)
  Six months
ended
June 30,
2013
(Unaudited)
Per Share Data:
                 
Net asset value at beginning of period   $ 14.91     $ 13.07  
Net investment loss     (0.32 )(1)      (0.25 )(1) 
Net realized gain (loss)     0.04 (1)      (0.50 )(1) 
Provision for taxes on Net Realized Capital Gains     (0.01 )(1)      (1) 
Net change in Unrealized Appreciation of Investments     0.43 (1)      0.55 (1) 
Provision for taxes on Unrealized Appreciation of Investments     (0.19 )(1)      (1) 
Net asset value at end of period   $ 14.86     $ 12.87  
Per share market value at end of period   $ 10.57     $ 7.86  
Total return based on market value     (12.57 )%(6)      (6.76 )%(6) 
Total return based on net asset value     (0.34 )%(6)      (1.53 )%(6) 
Shares outstanding at end of period     19,320,100       19,320,100  
Ratio/Supplemental Data:
                 
Net assets at end of period   $ 287,125,842     $ 248,607,249  
Average net assets   $ 281,410,486     $ 248,710,453  
Annualized ratio of gross operating expenses to average net assets(8)     7.68 %      4.03 % 
Annualized ratio of net operating expenses to
average net assets(8)
    7.68 %      4.03 % 
Annualized ratio of net investment income to
average net assets(8)
    (4.45 )%      (4.02 )% 

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014

NOTE 7 — FINANCIAL HIGHLIGHTS  – (continued)

     
  Year ended December 31,
2013
  Year ended December 31,
2012
  For the period from January 6, 2011
(date of inception) to December 31,
2011
Per Share Data:
                          
Net asset value at beginning of year/period   $ 13.07     $ 12.95     $  
Issuance of common shares           1.91 (3)      14.67 (4) 
Underwriters’ discount           (0.72 )(2)      (0.86 )(2) 
Offering costs           (0.04 )(2)      (0.19 )(2) 
Net investment loss     (0.46 )(1)      (0.51 )(1)      (0.37 )(2) 
Net realized loss     (1.12 )(1)      (0.09 )(1)       
Benefit for taxes on Net Realized Capital Losses     0.49              
Net Change in Unrealized Appreciation (Depreciation) of Investments     4.53 (1)      (0.43 )(5)      (0.30 )(2) 
Provision for taxes on Unrealized Appreciation of Investments     (1.60 )             
Net asset value at end of period     14.91     $ 13.07     $ 12.95  
Per share market value at end of year/period   $ 12.09     $ 8.43     $ 13.95  
Total return based on market value     43.42 %(6)      (39.57 )%(6)      (7.00 )%(7) 
Total return based on net asset value     14.08 %(6)      0.93 %(6)      (13.67 )%(7) 
Shares outstanding at end of period     19,320,100       19,320,100       5,520,100  
Ratio/Supplemental Data:
                          
Net assets at end of year/period   $ 287,966,444     $ 252,582,801     $ 71,503,248  
Average net assets   $ 250,121,052     $ 208,050,344     $ 44,532,523  
Annualized ratio of gross operating expenses to average net assets(8)     8.83 %      4.10 %      5.01 % 
Annualized ratio of net operating expenses to average net assets(8)     8.83 %      4.10 %      5.01 % 
Annualized ratio of net investment loss to average net assets(8)     (3.04 )%      (3.98 )%      (4.64 )% 

(1) Based on weighted average number of shares outstanding for the year/period.
(2) Based on shares outstanding at end of period.
(3) Issuance of common shares for the year ended December 31, 2012 is based on the change in net asset value from the secondary offerings on February 10, 2012 and May 11, 2012.
(4) Issuance of common shares for the period from January 6, 2011 (date of inception) to December 31, 2011 is based on the weighted average offering price for the shares issued during the period.
(5) Includes the impact of the different share amounts as a result of calculating certain per share data based on the weighted average basic shares outstanding during the period and certain per share data based on the shares outstanding as of a period end or transaction date.
(6) Total return based on market value is based on the change in market price per share between the opening and ending market values per share in the period. Total return based on net asset value is based upon the change in net asset value per share between the opening and ending net asset values per share and the issuance of common shares in the period. The percentage returns noted above are based on the increase in our net asset value attributable to issuances of our common stock at a premium to our net asset value per share, rather than investment returns. Such issuances of our common stock at a premium to net asset value per share are not typical, and may not occur in the future. The total returns are not annualized.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014

NOTE 7 — FINANCIAL HIGHLIGHTS  – (continued)

(7) Total return based on market value is based on the change in market price per share assuming an investment at the initial public offering price of $15.00 per share. Total return based on net asset value is based upon the change in net asset value per share between the opening and ending net asset values per share and the issuance of common shares in the period. The total returns are not annualized.
(8) Financial Highlights for periods of less than one year are annualized and the ratios of operating expenses to average net assets and net investment loss to average net assets are adjusted accordingly. Non-recurring expenses were not annualized. For the year-end December 31, 2013, December 31, 2012, and for the period from January 6, 2011 (date of inception) to December 31, 2011, the Company incurred $0, $0, and $198,831 of organizational expenses, respectively, which were deemed to be non-recurring. For the period from January 6, 2011 (date of inception) to December 31, 2011, average net assets were calculated starting from the issuance of 100 shares on February 28, 2011. Because the ratios are calculated for the Company’s common stock taken as a whole, an individual investor’s ratios may vary from these ratios.

NOTE 8 — INCOME TAX

The Company and its wholly-owned subsidiaries are currently taxable as C Corporations and subject to federal and state corporate income taxes. These subsidiaries hold certain pass-through companies in connection with the Company’s proposed qualification as a RIC.

For the three months and six months ended June 30, 2014, neither the Company nor its subsidiaries recorded a current income tax expense or benefit since they had net operating loss and capital loss carryforwards from prior years and a net operating loss for these periods. For the three and six months ended June 30, 2013, the Company did not recognize a current income tax expense or benefit for the same reasons.

The Company and its wholly-owned subsidiaries recorded deferred income tax benefits and expenses for the three and six months ended June 30, 2014, which consisted primarily of temporary differences related to certain expenses, net operating losses, capital losses and temporary differences arising from differences between the tax basis and financial reporting basis in underlying investments. For the three and six months ended June 30, 2014, the Company recorded net deferred income tax benefits of $635,053 and $664,419, respectively.

For federal and state purposes, a portion of the Company’s net operating loss carryforwards and basis differences may be subject to limitations on annual utilization in case of a change in ownership, as defined by federal and state law. The amount of such limitations, if any, has not been determined. Accordingly, the amount of such tax attributes available to offset future profits may be significantly less than the actual amounts of the tax attributes.

The Company may elect to be treated for federal income tax purposes as a RIC effective for the 2013 tax year. The Company will not be eligible to elect to be treated as a RIC for the 2013 taxable year unless it is certified by the SEC as “principally engaged in the furnishing of capital to other corporations which are principally engaged in the development or exploitation of inventions, technological improvements, new processes, or products not previously generally available” (an “SEC Certification”) for the 2013 taxable year. Although the Company filed an application with the SEC for an SEC Certification for the 2013 taxable year, there can be no assurance that it will receive an SEC Certification. In the event that it does not receive such SEC Certification, the Company will be taxed as a C Corporation for the 2013 taxable year. To that end, for purposes of our financial statements, we have accrued taxes as though we were a C Corporation for the 2013 taxable year, in the event we are unable to obtain this certification.

As a RIC, the Company generally will not pay corporate-level U.S. federal income taxes on any net ordinary income or capital gains that the Company distributes to its stockholders as dividends and claims dividends paid deductions to compute taxable income. A RIC will not be eligible to utilize net operating losses. However, the net operating losses may become available should the Company disqualify as a RIC and

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GSV CAPITAL CORP. AND SUBSIDIARIES
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014

NOTE 8 — INCOME TAX  – (continued)

become a C corporation in the future. In the event that the Company qualifies as a RIC, the Company itself will no longer be required to recognize deferred tax assets or liabilities.

In addition to meeting other requirements, the Company must generally distribute at least 90% of its investment company taxable income to qualify for the special treatment accorded to a RIC and maintain its RIC status. As part of maintaining RIC status, undistributed taxable income (subject to a 4% excise tax) pertaining to a given fiscal year may be distributed up to 12 months subsequent to the end of that fiscal year, provided such dividends are declared prior to the later of (1) the fifteenth day of the ninth month following the close of that fiscal year or (2) the extended due date for filing the federal income tax return for that fiscal year.

The Company did not have any unrecognized tax benefits as of the period presented herein. The Company identified its major tax jurisdictions as U.S. federal and California. For the three and six months ended June 30, 2014, no income tax expenses or related liabilities for uncertain tax positions were recognized for the Company’s open tax years from inception through 2014. The Company is not aware of any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will change significantly in the next 12 months.

NOTE 9 — LONG TERM LIABILITIES

Convertible senior notes payable

On September 17, 2013, the Company issued $69,000,000 aggregate principal amount of the Convertible Senior Notes (the “Convertible Senior Notes”) (including $9,000,000 aggregate principal amount issued pursuant to the exercise of the initial purchasers’ option to purchase additional Convertible Senior Notes). The Convertible Senior Notes bear interest at a fixed rate of 5.25% per year, payable semi-annually in arrears on March 15 and September 15 of each year, commencing on March 15, 2014. The Convertible Senior Notes are convertible into shares of our common stock based on an initial conversion rate of 61.5091 shares of the Company’s common stock per $1,000 principal amount of Convertible Senior Notes, which is equivalent to an initial conversion price of approximately $16.26 per share of common stock. The Convertible Senior Notes mature on September 15, 2018, unless previously purchased or converted in accordance with their terms. The Company does not have the right to redeem the Convertible Senior Notes prior to maturity.

The terms of the offering require the Company to place a portion of the proceeds of the offering in an escrow account (the “Interest Escrow”) with U.S. Bank National Association (the “Trustee”) under the indenture pursuant to which the notes are issued. Funds in the escrow account will be invested in government securities and will be used to make the first six scheduled interest payments on the notes, unless the Company elects to make the interest payments from the Company’s available funds. The interest payments on the Convertible Senior Notes will be secured by a pledge of the Company’s interest in the escrow account. In accordance with the Interest Escrow, the Company deposited $10,867,500 in an escrow account with the Trustee. These funds were used to purchase $10,845,236 of government securities. On February 15, 2014, 1 US Treasury Strip with a cost of $1,790,785 matured and the proceeds were used by the trustee in accordance with the terms of the escrow agreement. At June 30, 2014, the remaining government securities are shown on the Consolidated Schedule of Investments and have an amortized cost of $9,082,226. The excess funds of $22,139 remaining from the purchase of government securities held in escrow will be used to secure the payment of the notes and is included on the Consolidated Statements of Assets and Liabilities. Proceeds from the issuance of the Convertible Senior Notes were offset by offering costs of approximately $3,585,929 that are being amortized over the term of the notes in accordance with ASC 470 Debt. As of June 30, 2014, of the total offering costs of $3,585,929 incurred, $3,022,216 remains to be amortized and is included within deferred debt issuance costs on the Consolidated Statements of Assets and Liabilities.

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GSV CAPITAL CORP. AND SUBSIDIARIES
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014

NOTE 9 — LONG TERM LIABILITIES  – (continued)

As of June 30, 2014, the principal amount of the Convertible Senior Notes exceeded the value of the underlying shares multiplied by the per share closing price of the Company’s common stock.

The Convertible Senior Notes are the Company’s senior, unsecured obligations and rank senior in right of payment to any future indebtedness that is expressly subordinated in right of payment to the Convertible Senior Notes, equal in right of payment to any future unsecured indebtedness that is not so subordinated to the Convertible Senior Notes, junior (other than to the extent of the interest escrow) to any future secured indebtedness to the extent of the value of the assets securing such indebtedness, and structurally junior to all future indebtedness (including trade payables) incurred by our subsidiaries.

Embedded Derivative

The Convertible Senior Notes contain an interest make-whole payment provision pursuant to which holders who convert their notes prior to September 15, 2016 will receive, in addition to a number of shares of our common stock calculated at the applicable conversion rate for principal amount of notes being converted, the cash proceeds from sale by the escrow agent of the portion of the government securities in the escrow account that are remaining with respect to any of the first six interest payments that have not been made on the notes being converted. Under ASC 815-10-15-74(a), the interest make-whole payment is considered an embedded derivative and is separated from the host contract, the Convertible Senior Notes, and carried at fair value.

The Company used a binomial lattice model to estimate the fair value of the embedded derivative in the Convertible Senior Notes. A binomial lattice model generates potential outcomes at various points in time, starting from the date of valuation until the expiration date of the embedded derivative. The estimated fair value of the embedded derivative as of June 30, 2014 is $159,000 as shown on the Consolidated Statement of Assets and Liabilities. The $640,000 decrease in the estimated fair value of the embedded derivative between December 31, 2013 and June 30, 2014 represents a gain from change in the fair value of embedded derivative as shown on the Consolidated Statement of Operations and Consolidated Statement of Cash Flows.

Credit Facility

The Company entered into the Loan Agreement, effective December 31, 2013, with Silicon Valley Bank to provide the Company with the new $18 million Credit Facility. Under the Credit Facility, the Company is permitted to borrow an amount equal to the lesser of $18 million or 20% of the Company’s then-current net asset value.

The Credit Facility, among other things, matures on December 31, 2016, and bears interest at a per annum rate equal to the greater of (i) the prime rate plus 4.75% and (ii) 8.0%. In addition, a fee of $180,000 per annum (1.0% of the $18 million revolving line of credit) is charged under the Loan Agreement. Under the Loan Agreement, the Company has made certain customary representations and warranties and the Company is required to comply with various covenants, reporting requirements, and other customary requirements for similar credit facilities. The Loan Agreement includes usual and customary events of default for credit facilities of this nature, including, without limitation, nonpayment, misrepresentation of representations and warranties in a material respect, breach of covenant, cross-default to certain other indebtedness, bankruptcy, change of control, and the occurrence of a material adverse effect.

The Credit Facility is secured by all of the Company’s property and assets, except for its assets pledged to secure certain obligations in connection with the issuance, in September 2013, of the Convertible Senior Notes and, as provided for in the Loan Agreement, as may be pledged in connection with any future issuance by the Company of convertible senior notes on substantially similar terms.

Borrowing under the Credit Facility is subject to the leverage restrictions contained in the Investment Company Act of 1940, as amended. In addition, under the Loan Agreement, and as provided for therein, the Company has agreed not to incur certain additional permitted indebtedness in an aggregate amount exceeding 50% of the Company’s then-applicable net asset value.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2014

NOTE 10 — SUBSEQUENT EVENTS

From June 30, 2014 through August 11, 2014, the Company did not sell any investments. From June 30, 2014 through August 11, 2014, the Company closed on investments of $4,025,995 plus transaction costs as shown in following table:

     
Portfolio Company   Industry   Transaction Date   Gross Payments
StormWind, LLC     Interactive Learning       3-Jul-14     $ 999,997  
NestGSV, Inc     Incubator       8-Jul-14       1,000  
Solexel, Inc.     Solar Power       11-Jul-14       2,999,999  
Earlyshares.com     Equity Crowd Funding       18-Jul-14       24,999  
Total Gross Payments               $ 4,025,995  

The Company is presently in the final stages of negotiations with respect to a handful of private company investments that it anticipates entering into within the next 30 to 60 days, subject to satisfaction of applicable closing conditions. In the case of secondary market transactions, such closing conditions may include approval of the issuer, waiver or failure to exercise rights of first refusal by the issuer and/or its stockholders and termination rights by the seller or the Company. Equity investments made through the secondary market may involve making deposits in escrow accounts until the applicable closing conditions are satisfied, at which time the escrow accounts will close and such equity investments will be effectuated. From June 30, 2014 through August 11, 2014, the Company has not made any such escrow deposits.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about GSV Capital, our current and prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking statements.

The forward looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties, including statements as to:

our future operating results;
our business prospects and the prospects of our portfolio companies;
the impact of investments that we expect to make;
our contractual arrangements and relationships with third parties;
the dependence of our future success on the general economy and its impact on the industries in which we invest;
the ability of our portfolio companies to achieve their objectives;
our expected financings and investments;
the adequacy of our cash resources and working capital; and
the timing of cash flows, if any, from the operations of our portfolio companies.

These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:

an economic downturn could impair our portfolio companies’ ability to continue to operate, which could lead to the loss of some or all of our equity investments in such portfolio companies,
an economic downturn could disproportionately impact the market sectors in which a significant portion of our portfolio is concentrated, causing us to suffer losses in our portfolio,
an inability to access the equity markets could impair our investment activities,
interest rate volatility could adversely affect our results, particularly if we opt to use leverage as part of our investment strategy, and
the risks, uncertainties and other factors we identify in “Risk Factors” and elsewhere in this quarterly report on Form 10-Q and in our filings with the SEC.

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this quarterly report on Form 10-Q should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in “Risk Factors” and elsewhere in this quarterly report on Form 10-Q. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this quarterly report on Form 10-Q.

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The following analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes thereto contain elsewhere in this quarterly report on Form 10-Q.

Overview

We are an externally managed, non-diversified closed-end management investment company that has elected to be treated as a business development company under the 1940 Act. Our investment objective is to maximize our portfolio’s total return, principally by seeking capital gains on our equity and equity-related investments. We invest principally in the equity securities of what we believe to be rapidly growing venture capital-backed emerging companies. We acquire our investments through direct investments with prospective portfolio companies, secondary marketplaces for private companies and negotiations with selling stockholders. We may also invest on an opportunistic basis in select publicly-traded equity securities or certain non-U.S. companies that otherwise meet our investment criteria. Our investment activities are managed by GSV Asset Management, and GSV Capital Service Company provides the administrative services necessary for us to operate.

Our investment philosophy is premised on a disciplined approach of identifying high-growth emerging companies across several key industry themes which may include, among others, social mobile, cloud computing and big data, internet commerce, sustainability and education technology. Our investment adviser’s investment decisions are based on a disciplined analysis of available information regarding each potential portfolio company’s business operations, focusing on the company’s growth potential, the quality of recurring revenues and cash flow and cost structures, as well as an understanding of key market fundamentals. Many of the companies that our investment adviser evaluates have financial backing from top tier venture capital funds or other financial or strategic sponsors.

We seek to deploy capital primarily in the form of non-controlling equity and equity-related investments, including common stock, warrants, preferred stock and similar forms of senior equity, which may or may not be convertible into a portfolio company’s common equity, and convertible debt securities with a significant equity component.

Investments

The fair value of our investments can be expected to fluctuate in future periods due to changes in our investments and changes in the fair value of the investments. The following table summarizes the investments we made during the six months ended June 30, 2014.

     
Portfolio Company   Industry   Transaction Date   Gross Payments
StormWind, LLC     Interactive Learning       7-Jan-14     $ 2,984,530  
StormWind, LLC     Interactive Learning       25-Feb-14       107,725  
NestGSV, Inc.     Incubator       29-Jan-14       198,000  
NestGSV, Inc.     Incubator       4-Mar-14       99,000  
Dailybreak, Inc.     Social Advertising       11-Feb-14       430,000  
AlwaysOn, Inc.     Social Media       14-Feb-14       232,104  
EdSurge, Inc.     Education Media
Platform
      18-Feb-14       482,146  
Fullbridge, Inc.     Business Education       19-Feb-14       1,280,000  
JAMF Holdings, Inc.     Mobile Device
Management
      28-Feb-14       4,996,044  
General Assembly Space, Inc.     Online Education       6-Mar-14       2,995,658  
General Assembly Space, Inc.     Online Education       21-Mar-14       2,995,983  
Lyft, Inc.     Peer to Peer
Ridesharing
      21-Mar-14       4,999,991  
Totus Solutions, Inc.     LED Lighting       1-Apr-14       75,000  
Fullbridge, Inc.     Business Education       3-Apr-14       749,040  
NestGSV, Inc.     Incubator       4-Apr-14       238,077  

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Portfolio Company   Industry   Transaction Date   Gross Payments
GSV Sustainability Partners     Clean Technology       15-Apr-14       225,250  
NestGSV, Inc.     Incubator       17-Apr-14       348,039  
Declara, Inc.     Social Cognitive
Learning
      17-Apr-14       9,973,479  
Earlyshares.com     Equity Crowd
Funding
      1-May-14       224,999  
GSV Sustainability Partners     Clean Technology       15-May-14       371,300  
NestGSV, Inc.     Incubator       16-May-14       559,133  
Fullbridge, Inc.     Business Education       20-Jun-14       150,001  
Circle Media (f.k.a.S3 Digital Corp. (d/b/a S3i) (1)     Sports Analytics       26-Jun-14       90,000  
Total Gross Payments               $ 34,805,499  

The following table summarizes the investments we disposed of during the six months ended June 30, 2014.

       
Portfolio Company   Transaction Date   Shares   Share Price   Net Proceeds
Control4 Corporation     5-Feb-14       6,000     $ 21.11     $ 126,655  
Control4 Corporation     6-Feb-14       4,000       21.00       83,991  
Control4 Corporation     7-Feb-14       30,000       21.55       646,432  
Control4 Corporation     10-Feb-14       10,000       21.00       210,008  
Control4 Corporation     12-Feb-14       50,000       23.16       1,157,940  
Control4 Corporation     12-Feb-14       50,000       24.10       1,205,224  
Control4 Corporation     13-Mar-14       10,000       22.80       228,000  
Control4 Corporation     18-Mar-14       10,000       23.00       229,989  
Control4 Corporation     19-Mar-14       10,000       22.21       222,144  
Control4 Corporation     20-Mar-14       10,000       22.33       223,290  
Control4 Corporation     21-Mar-14       10,000       22.44       224,420  
Control4 Corporation     24-Mar-14       3,700       22.15       81,946  
Control4 Corporation     11-Apr-14       10,000       19.58       195,831  
Control4 Corporation     11-Apr-14       10,000       20.14       201,439  
Control4 Corporation     15-Apr-14       10,000       20.59       205,938  
Control4 Corporation     17-Apr-14       10,000       19.82       198,151  
Control4 Corporation     23-Apr-14       10,000       18.62       186,200  
Control4 Corporation     23-Apr-14       10,000       18.70       186,965  
Control4 Corporation     24-Apr-14       10,000       19.29       192,854  
Control4 Corporation     28-Apr-14       10,000       19.47       194,690  
Control4 Corporation     29-Apr-14       10,000       19.25       192,508  
Control4 Corporation     29-Apr-14       10,000       18.94       189,353  
Control4 Corporation     11-Jun-14       15,000       18.86       282,903  
Control4 Corporation     12-Jun-14       5,100       18.49       94,309  
Control4 Corporation     12-Jun-14       7,663       18.71       143,413  
Control4 Corporation     20-Jun-14       600       18.47       11,083  
Control4 Corporation     20-Jun-14       40,976       18.09       741,182  
Control4 Corporation     25-Jun-14       50,000       18.01       900,560  
Control4 Corporation     25-Jun-14       46,100       18.09       834,152  
Control4 Corporation     25-Jun-14       285,386       18.43       5,258,463  
Control4 Corporation     25-Jun-14       24,264       18.08       438,810  
Facebook, Inc.     3-Feb-14       25,000       60.02       1,500,599  
Facebook, Inc.     5-Feb-14       50,000       61.17       3,058,437  
Facebook, Inc.     6-Feb-14       25,000       61.05       1,526,163  
Facebook, Inc.     19-Feb-14       25,000       65.05       1,626,232  

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Portfolio Company   Transaction Date   Shares   Share Price   Net Proceeds
Facebook, Inc.     27-Feb-14       25,000       70.00       1,750,095  
Facebook, Inc.     16-Jun-14       25,000       64.11       1,602,665  
Violin Memory, Inc.     11-Apr-14       58,862       4.01       235,966  
Violin Memory, Inc.     11-Apr-14       1,188,636       3.97       4,719,254  
Silver Spring Networks, Inc.     15-Apr-14       28,500       15.37       438,084  
Silver Spring Networks, Inc.     17-Apr-14       40,000       15.27       610,902  
Silver Spring Networks, Inc.     17-Apr-14       15,400       15.02       231,281  
Silver Spring Networks, Inc.     23-Apr-14       9,100       14.28       129,958  
Silver Spring Networks, Inc.     23-Apr-14       9,028       14.93       134,759  
Total Net Proceeds                     $ 32,853,238  

The fair value, as of June 30, 2014, of all of our portfolio investments, excluding U.S. Treasury Bills and Strips, was $367,037,838. We also held $4,194,280 of unrestricted cash and $22,139 restricted cash on June 30, 2014.

Results of Operations

Comparison of the three months ended June 30, 2014 and June 30, 2013

       
  June 30, 2014
(Unaudited)
  June 30, 2013
(Unaudited)
     Total   Per Basic Share(1)   Total   Per Basic Share(1)
Total Investment Income   $ 97,033       0.01     $ 15,723       0.00  
Interest Income     96,935       0.01              
Dividend income     98       0.00       15,723       0.00  
Total Operating Expenses     5,875,551       0.30       2,402,634       0.12  
Investment management fees     1,933,663       0.10       1,246,378       0.06  
Incentive Fees     844,633       0.04              
Costs incurred under our administration agreement     929,701       0.05       709,885       0.04  
Directors’ fees     65,000       0.00       65,000       0.00  
Professional fees     402,555       0.02       220,978       0.01  
Interest Expense     1,533,971       0.08              
Insurance Expense     60,303       0.00       64,062       0.00  
Investor Relations Expense     103,384       0.01       72,943       0.00  
Other expenses     22,341       0.00       23,388       0.00  
Gain on fair value adjustment for embedded derivative     (20,000 )      (0.00 )             
Benefit for taxes on net investment loss     2,359,369       0.12              
Net Investment Loss     (3,419,149 )      (0.18 )      (2,386,911 )      (0.12 ) 
Realized Loss on Investments     (7,249,566 )      (0.38 )      (6,327,632 )      (0.33 ) 
Benefit for taxes on Net Realized Capital Losses     2,959,998       0.15              
Change in Unrealized Appreciation on Investments     11,472,725       0.59       12,230,246       0.63  
Provision for taxes on Unrealized Appreciation of Investments     (4,684,314 )      (0.24 )             
Net Increase (Decrease) in Net Assets Resulting From Operations     (920,306 )      (0.05 )      3,515,703       0.18  

(1) The basic per share figures noted above are based on a weighted-average of 19,320,100 and 19,320,100 shares outstanding for the three months ended June 30, 2014 and June 30, 2013, respectively.

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Investment Income

Investment income increased from $15,723 for the three months ended June 30, 2013 to $97,033, for the three months ended June 30, 2014. The increase was primarily due to the addition of several new term loans during the quarter ended June 30, 2014.

Operating Expenses

Total operating expenses increased from $2,402,634 for the three months ended June 30, 2013 to $5,875,551, for the three months ended June 30, 2014. The increase was primarily due to increases in interest expense, incentive fees, and investment management fees. The increases in interest expense resulted from the Convertible Senior Notes and the Credit Facility. These borrowings have enabled us to increase our portfolio and continue to invest in emerging companies. Refer to “Overview” for a further discussion of our investment philosophy. The incentive fees result from the significant appreciation in our portfolio for the three months ended June 30, 2014 relative to the three months ended June 30, 2013. The increased management fees are a result of the growth of our investment portfolio for the three months ended June 30, 2014 relative to the three months ended June 30, 2013.

Net Realized Losses on Investments

Net realized losses on investments increased from $6,327,632 for the three months ended June 30, 2013 to $7,249,566, for the three months ended June 30, 2014. The increase was primarily due to the sales of our shares of Violin Memory, Inc. and Silver Spring Networks, Inc. These losses were partially offset by gains from the sales of our shares in Control4Corporation.

Net Change in Unrealized Appreciation of Investments

Net change in unrealized appreciation of investments decreased from $12,230,246 for the three months ended June 30, 2013 to $11,472,725, for the three months ended June 30, 2014. The following table summarizes the significant changes in unrealized appreciation (depreciation) of the Company’s investment portfolio for the three months ended June 30, 2014 by Portfolio Company.

             
             
  June 30, 2014 (Unaudited)   March 31, 2014 (Unaudited)   Change in Unrealized Appreciation (Depreciation)
Portfolio Company   Cost   Fair Value   Unrealized Appreciation (Depreciation)   Cost   Fair Value   Unrealized Appreciation (Depreciation)
Twitter, Inc.   $ 32,991,111     $ 77,867,582     $ 44,876,471     $ 32,991,111     $ 80,717,912     $ 47,726,801     $ (2,850,330 ) 
Palantir Technologies, Inc.     21,060,447       41,233,482       20,173,035       21,060,448       42,447,871       21,387,423       (1,214,388 ) 
Dropbox, Inc.     13,656,486       28,156,997       14,500,511       13,656,486       25,068,483       11,411,997       3,088,514  
2U, Inc. (f/k/a 2tor, Inc.)     10,032,117       19,293,387       9,261,270       10,031,837       14,856,213       4,824,376       4,436,894  
ZocDoc Inc.     5,298,056       7,796,650       2,498,594       5,298,056       5,649,417       351,361       2,147,233  
Avenues Global Holdings, LLC     10,151,854       11,258,690       1,106,836       10,151,854       10,220,061       68,207       1,038,629  
Silver Spring Networks, Inc.                       5,145,271       1,773,247       (3,372,024 )      3,372,024  
Violin Memory, Inc.                       14,820,178       4,989,992       (9,830,186 )      9,830,186  
Control4 Corporation                       5,257,705       12,282,478       7,024,773       (7,024,773 ) 
Totus Solutions, Inc.     6,100,283       1,094,403       (5,005,880 )      6,023,973       3,627,332       (2,396,641 )      (2,609,239 ) 
Other(1)     272,756,525       269,439,233       (3,317,292 )      260,055,782       255,480,515       (4,575,267 )      1,257,975  
Totals   $ 372,046,879     $ 456,140,424     $ 84,093,545     $ 384,492,701     $ 457,113,521     $ 72,620,820     $ 11,472,725  

(1) Other represents all investments (including U.S. Treasury Bills and U.S. Treasury Strips) whose individual change in unrealized appreciation (depreciation) was less than $1,000,000 for the three months ended June 30, 2014.

Net Increase (Decrease) in Net Assets

Net increase (decrease) in net assets resulting from operations was $(920,306), and $3,515,703, respectively, for the three months ended June 30, 2014 and June 30, 2013. The decrease was the result of

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increased operating expenses, and the provision for taxes on unrealized appreciation of investments. These items were partially offset by the benefit for taxes on net investment loss and the benefit for taxes on net realized capital losses.

Comparison of the six months ended June 30, 2014 and June 30, 2013

       
  June 30, 2014 (Unaudited)   June 30, 2013 (Unaudited)
     Total   Per Basic Share(1)   Total   Per Basic Share(1)
Total Investment Income   $ 137,848       0.01     $ 20,258       0.00  
Interest Income     109,186       0.01              
Dividend income     28,662       0.00       20,258       0.00  
Total Operating Expenses     10,724,094       0.56       4,974,894       0.26  
Investment management fees     3,689,859       0.19       2,529,977       0.13  
Incentive Fees     1,814,285       0.09              
Costs incurred under our administration agreement     1,838,233       0.10       1,597,869       0.08  
Directors’ fees     130,000       0.01       130,250       0.01  
Professional fees     859,094       0.04       457,864       0.02  
Interest Expense     2,713,696       0.14              
Insurance Expense     120,039       0.01       117,075       0.01  
Investor Relations Expense     158,296       0.01       116,505       0.01  
Other expenses     40,592       0.00       25,354       0.00  
Gain on fair value adjustment for embedded derivative     (640,000 )      (0.03 )             
Benefit for taxes on net investment loss     4,372,283       0.23              
Net Investment Loss     (6,213,963 )      (0.32 )      (4,954,636 )      (0.26 ) 
Realized Gain (Loss) on Investments     682,179       0.04       (9,674,524 )      (0.50 ) 
Provision for taxes on Net Realized Capital Gains     (278,533 )      (0.01 )             
Change in Unrealized Appreciation on Investments     8,399,046       0.43       10,653,608       0.55  
Provision for taxes on Unrealized Appreciation of investments     (3,429,331 )      (0.18 )             
Net Increase (Decrease) in Net Assets Resulting From Operations     (840,602 )      (0.04 )      (3,975,552 )      (0.21 ) 

(1) The basic per share figures noted above are based on a weighted-average of 19,320,100 and 19,320,100 shares outstanding for the six months ended June 30, 2014 and June 30, 2013, respectively.

Investment Income

Investment income increased from $20,258 for the six months ended June 30, 2013 to $137,848, for the six months ended June 30, 2014. The increase was primarily due to the addition of several new term loans during the six months ended June 30, 2014.

Operating Expenses

Total operating expenses increased from $4,974,894 for the six months ended June 30, 2013 to $10,724,094, for the six months ended June 30, 2014. The increase was primarily due to increases in interest expense, incentive fees, and investment management fees. The increases in interest expense resulted from the

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Convertible Senior Notes and the Credit Facility. These borrowings have enabled us to increase our portfolio and continue to invest in emerging companies. Refer to “Overview” for a further discussion of our investment philosophy. The incentive fees result from the appreciation in our portfolio for the six months ended June 30, 2014 relative to the six months ended June 30, 2013. The increased management fees are a result of the growth in our total assets, which primarily results from the growth of our investment portfolio for the six months ended June 30, 2014 relative to the six months ended June 30, 2013.

Net Realized Gains and (Losses) on Investments

For the six months ended June 30, 2014, we had $682,179 of realized capital gains, which represents a significant increase from the six months ended June 30, 2013, during which we incurred $9,674,524 of realized capital losses. The increase was primarily due to gains from the sales of our shares of Control4 Corporation and Facebook, Inc., which were offset by losses resulting from the sales of Violin Memory, Inc. and Silver Springs Networks, Inc.

Net Change in Unrealized Appreciation of Investments

Net change in unrealized appreciation of investments decreased from $10,653,608 for the six months ended June 30, 2013 to $8,399,046, for the six months ended June 30, 2014. The following table summarizes the significant changes in unrealized appreciation (depreciation) of the Company’s investment portfolio company for the six months ended June 30, 2014 by Portfolio Company.

             
             
  June 30, 2014 (Unaudited)   December 31, 2013   Change in Unrealized Appreciation (Depreciation)
Portfolio Company   Cost   Fair Value   Unrealized Appreciation (Depreciation)   Cost   Fair Value   Unrealized Appreciation (Depreciation)
Twitter, Inc.   $ 32,991,111     $ 77,867,582     $ 44,876,471     $ 32,991,111     $ 102,822,460     $ 69,831,349     $ (24,954,878 ) 
Palantir Technologies, Inc.     21,060,447       41,233,482       20,173,035       21,060,447       33,838,830       12,778,383       7,394,652  
Dropbox, Inc.     13,656,486       28,156,997       14,500,511       13,656,486       15,855,197       2,198,711       12,301,800  
2U, Inc. (f/k/a 2tor, Inc.)     10,032,117       19,293,387       9,261,270       10,031,318       11,310,709       1,279,391       7,981,879  
SugarCRM, Inc.     8,299,914       11,097,728       2,797,814       8,299,794       9,379,673       1,079,879       1,717,935  
ZocDoc Inc.     5,298,056       7,796,650       2,498,594       5,298,056       6,123,024       824,968       1,673,626  
Avenues Global Holdings, LLC     10,151,854       11,258,690       1,106,836       10,150,484       10,014,270       (136,214 )      1,243,050  
Facebook, Inc.                       5,236,147       9,563,750       4,327,603       (4,327,603 ) 
Silver Spring Networks, Inc.                       5,145,271       2,142,588       (3,002,683 )      3,002,683  
Violin Memory, Inc.                       14,819,618       4,204,068       (10,615,550 )      10,615,550  
Control4 Corporation                       7,010,762       13,300,129       6,289,367       (6,289,367 ) 
Totus Solutions, Inc.     6,100,283       1,094,403       (5,005,880 )      6,023,973       3,750,839       (2,273,134 )      (2,732,746 ) 
Other(1)     264,456,611       258,341,505       (6,115,106 )      150,830,887       143,943,316       (6,887,571 )      772,465  
Totals   $ 372,046,879     $ 456,140,424     $ 84,093,545     $ 290,554,354     $ 366,248,853     $ 75,694,499     $ 8,399,046  

(1) Other represents all investments (including U.S. Treasury Bills and U.S. Treasury Strips) whose individual change in unrealized appreciation (depreciation) was less than $1,000,000 for the six months ended June 30, 2014.

Net Decrease in Net Assets

Net decrease in net assets resulting from operations was 840,602, and $3,975,552, respectively, for the six months ended June 30, 2014 and June 30, 2013. This was the result of increased realized capital gains, the benefit for taxes on net investment loss, offset by increased operating expenses, a decrease change in unrealized appreciation of investments and the provision for taxes on unrealized appreciation of investments.

Liquidity and Capital Resources

At June 30, 2014, we had portfolio company investments with costs totaling $282,964,208; U.S. Treasury Strips of $9,082,226, unrestricted cash of $4,194,280, and restricted cash of $22,139. The Company’s portfolio investments are pledged first to secure the payment of both principal and interest on the 2013 Convertible Senior Notes, thereafter the portfolio investments are pledged as collateral to secure any borrowings under the Credit Facility.

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On September 17, 2013, we issued $69,000,000 aggregate principal amount of the Convertible Senior Notes (the “Convertible Notes”) (including $9,000,000 aggregate principal amount issued pursuant to the exercise of the initial purchasers’ option to purchase additional Convertible Notes). The Convertible Notes bear interest at a fixed rate of 5.25% per year, payable semi-annually in arrears on March 15 and September 15 of each year, commencing on March 15, 2014. The Convertible Notes are convertible into shares of our common stock based on an initial conversion rate of 61.5091 shares of our common stock per $1,000 principal amount of Convertible Notes, which is equivalent to an initial conversion price of approximately $16.26 per share of common stock. The Convertible Notes mature on September 15, 2018, unless previously purchased or converted in accordance with their terms. We do not have the right to redeem the Convertible Notes prior to maturity.

We entered into a Loan and Security Agreement (the “Loan Agreement”), effective December 31, 2013, with Silicon Valley Bank to provide us with a new $18 million credit facility (the “Credit Facility”). Under the Credit Facility, we are permitted to borrow an amount equal to the lesser of $18 million or 20% of our then-current net asset value.

The Credit Facility, among other things, matures on December 31, 2016, and bears interest at a per annum rate equal to the greater of (i) the prime rate plus 4.75% and (ii) 8.0%. In addition, a fee of $180,000 per annum (1.0% of the $18 million revolving line of credit) is charged under the Loan Agreement.

As of June 30, 2014, we had $15,141,333 in borrowings outstanding under the Credit Facility.

Our primary use of cash is to make investments and to pay our operating expenses. We used substantially all of the proceeds of the offerings to invest in portfolio companies as of June 30, 2014, except for amounts retained for purposes of funding our ongoing expenses. For the six months ended June 30, 2014, cash used in operating activities, consisting primarily of investment activity, was approximately $18.1 million.

Our current policy is to maintain cash reserves and liquid securities in an amount sufficient to pay our operating expenses, including investment management fees and costs incurred under the administration agreement, for approximately two years. For a description of the investment advisory and administration services we receive, see “Related Party Transactions and Certain Relationships”. We incurred $844,633 and $1,814,285 in accrued incentive fees, $1,933,663 and $3,689,859 in investment management fees and $929,701 and $1,838,233 in costs incurred under the administration agreement for three and six months ended June 30, 2014, respectively. We incurred approximately $1,246,378 and $2,529,977 in investment management fees and $709,885 and $1,597,869 in costs incurred under the administration agreement for the three and six months ended June 30, 2013, respectively.

As of June 30, 2014, the fair value of our level 1 portfolio investments, which are not subject to lock-up, was $86,194,438.

As of June 30, 2014, the fair value of our portfolio investments was $367.0 million. Fair value adjustments may include subsequent financing rounds, discounts due to lack of marketability, senior management changes or any other developments that factor into our valuations. The fair value of our investments can be expected to fluctuate in future periods due to changes in our investments and changes in the fair value of the investments. The Company’s portfolio investments are pledged first to secure the payment of both principal and interest on the 2013 Convertible Senior Notes, thereafter the portfolio investments are pledged as collateral to secure any borrowings under the Credit Facility.

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Contractual Obligations

         
  Payments Due By Period (dollars in millions)
     Total   Less than
1 year
  1 – 3 years   3 – 5 years   More than 5 years
Payable for securities purchased(1)   $ 72.0       72.0                             
Convertible Senior Notes   $ 69.0     $     $     $ 69.0     $  
Credit Facility(2)(3)     18.0             18.0              
Total   $ 159.0     $ 72.0     $ 18.0     $ 69.0     $  

(1) Payable for securities purchased relates to the purchase of the United States Treasury Bill on margin that settled on June 30, 2014. The payable was subsequently repaid on July 3, 2014 when the United States Treasury Bill matured and the $8.0 million margin deposit which was posted as collateral was returned.
(2) Total unused amount of the credit facility at June 30, 2014 was $2,858,667.
(3) The weighted average interest rate incurred under the credit facility was 8.00% for the six months ended June 30, 2014.

Off-Balance Sheet Arrangements

As of June 30, 2014, we had no off-balance sheet arrangements, including any risk management of commodity pricing or other hedging practices. However, we may employ hedging and other risk management techniques in the future.

Distribution Policy

The timing and amount of our dividends, if any, will be determined by our board of directors. Any dividends to our stockholders will be declared out of assets legally available for distribution. We intend to focus on making capital gains-based investments from which we will derive primarily capital gains. As a consequence, we do not anticipate that we will pay dividends on a quarterly basis or become a predictable distributor of dividends, and we expect that our dividends, if any, will be much less consistent than the dividends of other business development companies that primarily make debt investments. However, if there are earnings or realized capital gains to be distributed, we intend to declare and pay a dividend at least annually.

We are currently taxable as a C corporation and subject to federal and state corporation income taxes. We may elect to be treated as a RIC under Subchapter M of the Code, beginning with our 2013 taxable year if the Company is able to satisfy the requirements to be treated as a RIC. However, if we are not certified by the SEC as “principally engaged in the furnishing of capital to other corporations which are principally engaged in the development or exploitation of inventions, technological improvements, new processes, or products not previously generally available” for our 2013 taxable year, we will not be eligible to elect to be treated as a RIC for our 2013 taxable year. Although we have filed an application with the SEC for this certification, there can be no assurance that we will receive it. If we are unable to qualify as a RIC, we will continue to be taxed as a C corporation under the Code for our 2013 taxable year. To that end, for purposes of our financial statements, we have accrued taxes as though we were a C Corporation for the 2013 taxable year, in the event we are unable to obtain this certification. We intend to elect to be treated as a RIC for our 2014 taxable year, if management determines that it is in our best interests to do so. To obtain and maintain RIC tax treatment, we must, among other things, 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, for each taxable year. See “Material U.S. Federal Income Tax Considerations.” There is no assurance that we will achieve results that will permit the payment of any cash distributions and, to the extent that we issue senior securities, we will be prohibited from making distributions if doing so causes us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or if distributions are limited by the terms of any of our borrowings.

Our current intention is to make any distributions out of assets legally available therefrom in additional shares of our common stock under our dividend reinvestment plan, unless you elect to receive your dividends and/or long-term capital gains distributions in cash. Under the dividend reinvestment plan, if a stockholder owns shares of common stock registered in its own name, the stockholder will have all cash distributions (net of any withholding) automatically reinvested in additional shares of common stock unless the stockholder opts

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out of our dividend reinvestment plan by delivering a written notice to our dividend paying agent prior to the record date of the next dividend or distribution. See “Dividend Reinvestment Plan.” Any distributions reinvested under the plan will nevertheless remain taxable to the U.S. stockholder, although no cash distribution has been made. As a result, if you do not elect to opt out of the dividend reinvestment plan, you will be required to pay applicable federal, state and local taxes on any reinvested dividends even though you will not receive a corresponding cash distribution. In addition, reinvested dividends have the effect of increasing our gross assets, which may correspondingly increase the management fee payable to our investment adviser. If you hold shares in the name of a broker or financial intermediary, you should contact the broker or financial intermediary regarding your election to receive distributions in cash.

Borrowings

Convertible senior notes payable

On September 17, 2013, the Company issued $69,000,000 aggregate principal amount of the Convertible Senior Notes (including $9,000,000 aggregate principal amount issued pursuant to the exercise of the initial purchasers’ option to purchase additional Convertible Senior Notes). The Convertible Senior Notes bear interest at a fixed rate of 5.25% per year, payable semi-annually in arrears on March 15 and September 15 of each year, commencing on March 15, 2014. The Convertible Senior Notes are convertible into shares of our common stock based on an initial conversion rate of 61.5091 shares of our common stock per $1,000 principal amount of Convertible Senior Notes, which is equivalent to an initial conversion price of approximately $16.26 per share of common stock. The Convertible Senior Notes mature on September 15, 2018, unless previously purchased or converted in accordance with their terms. The Company does not have the right to redeem the Convertible Senior Notes prior to maturity.

The terms of the offering require the Company to place a portion of the proceeds of the offering in an escrow account (the “Interest Escrow”) with U.S. Bank National Association, (the “trustee”) under the indenture pursuant to which the notes are issued. Funds in the escrow account will be invested in government securities and will be used to make the first six scheduled interest payments on the notes, unless the Company elects to make the interest payments from the Company’s available funds. The interest payments on the Convertible Senior Notes will be secured by a pledge of the Company’s interest in the escrow account. In accordance with the Interest Escrow, the Company placed $10,845,236 of government securities in an escrow account with the Trustee. As of June 30, 2014, 1 US Treasury Strip with a cost of $1,790,785 matured and the proceeds were used by the trustee in accordance with the terms of the escrow agreement. These government securities are shown on the consolidated schedule of investments.

As of June 30, 2014, the principal amount of the Convertible Senior Notes exceeded the value of the underlying shares multiplied by the per share closing price of the Company’s common stock.

The Convertible Senior Notes are the Company’s senior, unsecured obligations and rank senior in right of payment to any future indebtedness that is expressly subordinated in right of payment to the Convertible Senior Notes, equal in right of payment to any future unsecured indebtedness that is not so subordinated to the Convertible Senior Notes, junior (other than to the extent of the interest escrow) to any future secured indebtedness to the extent of the value of the assets securing such indebtedness, and structurally junior to all future indebtedness (including trade payables) incurred by our subsidiaries.

The Convertible Senior Notes contain an interest make-whole payment provision pursuant to which holders who convert their notes prior to September 15, 2016 will receive, in addition to a number of shares of our common stock calculated at the applicable conversion rate for principal amount of notes being converted, the cash proceeds from sale by the escrow agent of the portion of the government securities in the escrow account that are remaining with respect to any of the first six interest payments that have not been made on the notes being converted. Under ASC 815-10-15-74(a), the interest make-whole payment is considered an embedded derivative and is separated from the host contract, the Convertible Senior Notes, and carried at fair value.

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Credit Facility

We entered into the Loan Agreement, effective December 31, 2013, with Silicon Valley Bank to provide us with the new $18 million Credit Facility. Under the Credit Facility, we are permitted to borrow an amount equal to the lesser of $18 million or 20% of our then-current net asset value.

The Credit Facility, among other things, matures on December 31, 2016, and bears interest at a per annum rate equal to the greater of (i) the prime rate plus 4.75% and (ii) 8.0%. In addition, a fee of $180,000 per annum (1.0% of the $18 million revolving line of credit) is charged under the Loan Agreement. Under the Loan Agreement, we have made certain customary representations and warranties and we are required to comply with various covenants, reporting requirements, and other customary requirements for similar credit facilities. The Loan Agreement includes usual and customary events of default for credit facilities of this nature, including, without limitation, nonpayment, misrepresentation of representations and warranties in a material respect, breach of covenant, cross-default to certain other indebtedness, bankruptcy, change of control, and the occurrence of a material adverse effect.

The Credit Facility is secured by all of our property and assets, except for our assets pledged to secure certain obligations in connection with our issuance, in September 2013, of the Convertible Senior Notes and, as provided for in the Loan Agreement, as may be pledged in connection with any future issuance by us of convertible senior notes on substantially similar terms.

Borrowing under the Credit Facility is subject to the leverage restrictions contained in the Investment Company Act of 1940, as amended. In addition, under the Loan Agreement, and as provided for therein, we have agreed not to incur certain additional permitted indebtedness in an aggregate amount exceeding 50% of our then-applicable net asset value.

Share Repurchase Program

GSV Capital’s Board of Directors has authorized a share repurchase program of GSVC stock of up to $10 million over the next 12 months. Under the repurchase program, the Company may repurchase its outstanding common stock in the open market provided that the Company complies with the prohibitions under its Insider Trading policies and procedures and the guidelines specified in Rule 10b-18 of the Securities Exchange Act of 1934.

Related Party Transactions

We entered into an investment advisory agreement with GSV Asset Management (the “Advisory Agreement”) in connection with our initial public offering. Pursuant to the Advisory Agreement, GSV Asset Management will be paid a base annual fee of 2.00% of gross assets, and an annual incentive fee equal to the lesser of (i) 20% of GSV Capital’s realized capital gains during each calendar year, if any, calculated on an investment-by-investment basis, subject to a non-compounded preferred return, or “hurdle,” and a “catch-up” feature, and (ii) 20% of GSV Capital’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.

GSV Asset Management earned $1,933,663 and $3,689,859 in base management fees and $0 in incentive fees for the three and six months ended June 30, 2014, respectively. For the three and six months ended June 30, 2014, respectively, we accrued incentive fees of $844,633, and $1,814,285, in accordance with the AICPA’s TPA (TIS 6910.2) which considers the hypothetical liquidation value of our investment portfolio as of the measurement date.

GSV Asset Management earned $1,246,378 and $2,529,977 in base management fees and $0 in incentive fees for the three and six months ended June 30, 2013, respectively. For the three and six months ended June 30, 2013, respectively, we accrued incentive fees of $0, and $0, in accordance with the AICPA’s TPA (TIS 6910.2) which considers the hypothetical liquidation value of our investment portfolio as of the measurement date.

As of June 30, 2014, we were owed $35,406 from GSV Capital Service Company, LLC, for the prepayment of overhead expenses as well as California Franchise Board fees. In addition as of June 30, 2014,

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we owed GSV Asset Management $9,647, which relates to the reimbursement of expenses paid for by GSV Asset Management that were the responsibility of the Company.

As of December 31, 2013, we were owed $3,039 from GSV Capital Service Company, LLC for reimbursement of expenses paid for by us that were the responsibility of GSV Asset Management. In addition as of December 31, 2013, we owed GSV Asset Management $563,978, which relates to the reimbursement of expenses paid for by GSV Asset Management that were the responsibility of the Company.

We entered into an Administration Agreement with GSV Capital Service Company (the “Administration Agreement”) to provide administrative services, including furnishing us with office facilities, equipment, clerical, bookkeeping services and other administrative services, in connection with our initial public offering. We reimburse GSV Capital Service Company an allocable portion of overhead and other expenses in performing its obligations under the Administration Agreement. There were $929,701 and $1,838,233 in such costs incurred under the Administration Agreement for the three and six months ended June 30, 2014, respectively. There were $709,885 and $1,597,869 in such costs incurred under the Administration Agreement for the three and six months ended June 30, 2013, respectively.

We also adopted a Code of Ethics which applies to, among others, our senior officers, including our Chief Executive Officer and Chief Financial Officer, as well as all of our officers, directors and employees. Our Code of Ethics requires that all employees and directors avoid any conflict, or the appearance of a conflict, between an individual’s personal interests and our interests. Pursuant to our Code of Ethics, each employee and director must disclose any conflicts of interest, or actions or relationships that might give rise to a conflict, to our Chief Compliance Officer. Our board of directors is charged with approving any waivers under our Code of Ethics. As required by the NASDAQ corporate governance listing standards, the Audit Committee of our board of directors is also required to review and approve any transactions with related parties (as such term is defined in Item 404 of Regulation S-K).

Critical Accounting Policies

Basis of Presentation

The financial statements included herein are expressed in United States dollars and have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

In accordance with Regulation S-X under the Securities Act of 1933 and Securities Exchange Act of 1934, the Company does not consolidate portfolio company investments.

Valuation of Investments at Fair Value

We carry our investments at fair value, as determined in good faith by our board of directors, in accordance with GAAP. Fair value is the price that one would receive upon selling an investment or pay to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market for the investment or liability. GAAP emphasizes that valuation techniques should maximize the use of observable market inputs and minimize the use of unobservable inputs. Observable inputs are based on market data obtained from sources independent of the entity and should not be limited to information that is only available to the entity making the fair value determination, or to a small group of users. Observable market inputs should be readily available to participants in that market. In addition, observable market inputs should include a level of transparency that is reliable and verifiable.

GAAP fair value measurement guidance classifies the inputs used to measure these fair values into the following hierarchy:

Level 1.  Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that we have the ability to access.

Level 2.  Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:

a) Quoted prices for similar assets or liabilities in active markets;

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b) Quoted prices for identical or similar assets or liabilities in non-active markets;
c) Pricing models whose inputs are observable for substantially the full term of the asset or liability; and
d) Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability.

Level 3.  Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.

An asset’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Securities that are publicly traded are generally valued at the close price on the valuation date; however, if they remain subject to lock-up restrictions they are discounted accordingly. Securities that are not publicly traded or for which there are no readily available market quotations are valued at fair value as determined in good faith by our board of directors.

In connection with that determination, portfolio company valuations are prepared using the most currently available data. As appropriate, we obtain updates on each portfolio company’s financial performance, including information such as economic and industry trends, new product development, and other operational issues.

In making our good faith determination of the fair value of investments, we consider valuation methodologies consistent with industry practice, including but not limited to (i) publicly available information regarding the valuation of the securities based on recent sales in comparable transactions of private companies, (ii) when management believes there are comparable companies that are publicly traded, a review of these publicly traded companies and applicable market multiples of their equity securities and, (iii) an income approach that estimates value based on the expectation of future cash flows that an asset or business will generate.

We engage independent valuation firms to perform valuations of our investments that are not publicly traded or for which there are no readily available market quotations. We also engage independent valuation firms to perform valuations of any securities that trade on private secondary markets, but are not otherwise publicly traded, where there is a lack of appreciable trading or a wide disparity in recently reported trades. We consider the independent valuations provided by the valuation firms, among other factors, in making our fair value determinations.

U.S. Federal and State Income Taxes

The Company was taxed as a regular corporation (a “C corporation”) under subchapter C of the Internal Revenue Code of 1986, as amended, for its 2012 taxable year. The Company uses the liability method of accounting for income taxes. Deferred tax assets and liabilities are recorded for tax loss carryforwards and temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, using statutory tax rates in effect for the year in which the temporary differences are expected to reverse. Certain tax attributes may be subject to limitations on timing and usage. A valuation allowance is provided against deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Beginning with its 2013 taxable year, the Company may elect to be treated as a regulated investment company (“RIC”) under subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), if the Company is able to satisfy the requirements under subchapter M of the Code. If we are not certified by the SEC as “principally engaged in the furnishing of capital to other corporations which are principally engaged in the development or exploitation of inventions, technological improvements, new processes, or products not previously generally available” for our 2013 taxable year, we will not be eligible to elect to be treated as a RIC for our 2013 taxable year. Although we have filed an application with the SEC for this certification, there can be no assurance that we will receive it, or that we will otherwise qualify as a RIC for

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our 2013 taxable year. If we are unable to qualify as a RIC, we will continue to be taxed as a C corporation under the Code for our 2013 taxable year. To that end, for purposes of our financial statements, we have accrued taxes as though we were a C Corporation for the 2013 taxable year, in the event we are unable to obtain this certification. In order to qualify as a RIC, among other things, the Company is required to distribute to its stockholders on a timely basis at least 90% of investment company taxable income, as defined by the Code, for each year, and meet certain asset diversification requirements on a quarterly basis. So long as the Company qualifies and maintains its status as a RIC, it generally will not pay corporate-level U.S. federal and state income taxes on any ordinary income or capital gains that it distributes at least annually to its stockholders as dividends. Rather, any tax liability related to income earned by the RIC will represent obligations of the Company’s investors and will not be reflected in the consolidated financial statements of the Company. Included in the Company’s consolidated financial statements, the GSVC Holdings are taxable subsidiaries of the RIC. These taxable subsidiaries are not consolidated for income tax purposes and may generate income tax expenses as a result of their ownership of the portfolio companies. Such income tax expenses and deferred taxes, if any, will be reflected in the Company’s consolidated financial statements. At the present time, the Company cannot assure you that it will be eligible to elect to be taxed as a RIC for its 2013 taxable year. If it is not treated as a RIC for 2013, the Company will be taxed as a C corporation under the Code for the 2013 taxable year. Until such time as it qualifies and elects to be taxed as a RIC, the Company will provide for income taxes, if any, as a C Corp. The Company intends to elect to be taxed as a RIC for its 2014 taxable year, if management determines that it is in the Company’s best interests to do so.

The Company evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. The Company recognizes the tax benefits of uncertain tax positions only where the position has met the “more-likely-than-not” threshold. The Company classifies penalties and interest associated with income taxes, if any, as income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, ongoing analyses of tax laws, regulations and interpretations thereof. The Company did not have any unrecognized tax benefits as of the period presented herein. The Company has identified its major tax jurisdictions as U.S. federal and California, and is not aware of any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will change significantly in the next 12 months.

Recently Adopted Accounting Standards

In June 2013, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2013-08, Financial Services — Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements (“ASU 2013-08”). ASU 2013-08 amends the criteria that define an investment company, clarifies the measurement guidance and requires certain additional disclosures. Public companies are required to apply ASU 2013-08 prospectively for interim and annual reporting periods beginning after December 15, 2013.

The Company does not believe that the adoption of any recently issued accounting standards will have a material impact on its current financial position and results of operations.

Recent Developments

From June 30, 2014 through August 11, 2014, the Company did not sell any investments. From June 30, 2014 through August 11, 2014, the Company closed on investments for $4,025,995 plus transaction costs as shown in following table:

     
Portfolio Company   Industry   Transaction Date   Gross Payments
StormWind, LLC     Interactive Learning       3-Jul-14     $ 999,997  
NestGSV, Inc     Incubator       8-Jul-14       1,000  
Solexel, Inc.     Solar Power       11-Jul-14       2,999,999  
Earlyshares.com     Equity Crowd Funding       18-Jul-14       24,999  
Total Gross Payments               $ 4,025,995  

The Company is presently in the final stages of negotiations with respect to a handful of private company investments that it anticipates entering into within the next 30 to 60 days, subject to satisfaction of applicable

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closing conditions. In the case of secondary market transactions, such closing conditions may include approval of the issuer, waiver or failure to exercise rights of first refusal by the issuer and/or its stockholders and termination rights by the seller or the Company. Equity investments made through the secondary market may involve making deposits in escrow accounts until the applicable closing conditions are satisfied, at which time the escrow accounts will close and such equity investments will be effectuated. From June 30, 2014 through August 11, 2014, the Company has not made any such escrow deposits.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are subject to financial market risks, which could include; to the extent we utilize leverage, changes in interest rates. As we invest primarily in equity rather than debt instruments, we would not expect fluctuations in interest rates to directly impact our return on our portfolio investments, although any significant change in market interest rates could potentially have an indirect effect on the business, financial condition and results of operations of the portfolio companies in which we invest.

Item 4. Controls and Procedures

As of June 30, 2014, we, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures.

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that occurred during the quarter ended June 30, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II: OTHER INFORMATION

Item 1. Legal Proceedings

None of us, our investment adviser or administrator, is currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us, or against our investment adviser or administrator. From time to time, we, our investment adviser or administrator, may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our business, financial condition or results of operations.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, which could materially affect our business, financial condition and/or operating results. The risks described in our Annual Report on Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results. There have been no material changes during the three months ended June 30, 2014 to the risk factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2013.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosure

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC:

 
  3.1   Articles of Amendment and Restatement*
  3.2   Articles of Amendment**
  3.3   Bylaws*
  4.1   Form of Common Stock Certificate*
10.1   Form of Dividend Reinvestment Plan*
10.2   Amended and Restated Investment Advisory Agreement by and between Registrant and GSV Asset Management, LLC ***
10.3   Amended and Restated Administration Agreement by and between Registrant and GSV Capital Service Company, LLC ***
10.4   Form of Indemnification Agreement by and between Registrant and each of its directors*
10.5   Form of Custody Agreement by and between Registrant and U.S. Bank National Association*
10.6   Form of Trademark License Agreement by and between Registrant and GSV Asset Management, LLC**
31.1   Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended
31.2   Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.

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32.1   Certification of Chief Executive Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.
32.2   Certification of Chief Financial Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.

* Previously filed in connection with Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement on Form N-2 (File No. 333-171578) filed on January 17, 2014.
** Previously filed in connection with Current Report on Form 8-K (File No. 814-00852) filed on April 10, 2014.
*** Previously filed in connection with Annual Report for the fiscal year ended December 31, 2013 on Form 10-K (File No. 814-00852), filed on September 31, 2013.

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PART IV

SIGNATURES

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

 
  GSV CAPITAL CORP.
Date: August 11, 2014  

By:

/s/ Michael T. Moe

Michael T. Moe
Chief Executive Officer, President and
Chairman of the Board of Directors
(Principal Executive Officer)

Date: August 11, 2014  

By:

/s/ William Tanona

William Tanona
Chief Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)

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