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TMCNet:  GSV CAPITAL CORP. - 10-K - Management's Discussion and Analysis of Financial Condition and Results of Operations

[March 14, 2013]

GSV CAPITAL CORP. - 10-K - Management's Discussion and Analysis of Financial Condition and Results of Operations

(Edgar Glimpses Via Acquire Media NewsEdge) Forward-Looking Statements This annual report on Form 10-K 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 annual report on Form 10-K 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 annual report on Form 10-K 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 annual report on Form 10-K 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 annual report on Form 10-K. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this annual report on Form 10-K.

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 annual report on Form 10-K.

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 secondary marketplaces for private companies, negotiations with selling stockholders and direct investments with prospective portfolio companies. 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.

46 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, green technology 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. We anticipate that substantially all of the net proceeds of our most recent follow-on offering, which closed in May 2012, will be used for the above purposes within 12 months, depending on the availability of investment opportunities that are consistent with our investment objectives and market conditions.

We seek to create a low-turnover portfolio that includes investments in companies representing a broad range of investment themes. As of December 31, 2012, we have completed investments in 47 companies for aggregate consideration of approximately $236.5 million (exclusive of transaction fees and costs), or 85.1% of the net proceeds from our initial public offering and subsequent follow-on offerings. We expect that the total number of portfolio companies in which we are invested will increase as our equity capital base grows.

On April 28, 2011, we priced our initial public offering of 3,335,000 shares of our common stock at the offering price of $15.00 per share. The initial public offering closed on May 3, 2011, resulting in net proceeds to GSV Capital Corp.

of approximately $46.5 million. On September 26, 2011, we priced a follow-on offering of 2,185,000 shares of our common stock at an offering price $14.15 per share. The follow-on offering included the full exercise of the underwriters' option to purchase an additional 285,000 shares of our common stock, resulting in net proceeds to GSV Capital Corp. of approximately $29.6 million. On February 10, 2012, we priced a subsequent follow-on equity offering of 6,900,000 shares of our common stock at an offering price of $15.00 per share. The follow-on equity offering included the full exercise of the underwriters' option to purchase an additional 900,000 shares of our common stock, resulting in net proceeds to GSV Capital Corp. of approximately $96.2 million. On May 11, 2012, we priced an additional follow-on equity offering of 6,900,000 shares of our common stock at an offering price of $16.25 per share. The follow-on offering included the full exercise of the underwriters' option to purchase an additional 900,000 shares of our common stock, resulting in net proceeds to GSV Capital Corp. of approximately $105.4 million. Our shares are currently listed on the NASDAQ Capital Market under the symbol ''GSVC''.

Effective May 26, 2011, we changed our name from NeXt Innovation Corp. to GSV Capital Corp.

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 investments made during the year ended December 31, 2012 include: We closed on an investment of $100,000, plus transaction costs, in AlwaysOn, LLC, a social media company, on January 10, 2012.

We closed on an investment of $200,000, plus transaction costs, in Maven Research, Inc., a global knowledge marketplace, on February 28, 2012.

We closed on an investment of $500,000, plus transaction costs, in AltEgo, LLC, an avatar technology and games developer, on February 29, 2012.

We closed on an investment of $4,000,000, plus transaction costs, in Chegg, Inc., an online textbook rental company, on March 7, 2012.

We closed on an investment of $150,000, plus transaction costs, in AlwaysOn, LLC, a social media company, on March 9, 2012.

47 We closed on an investment of $250,000, plus transaction costs, in The Echo System Corp., a social analytics company, on March 21, 2012.

We closed on an investment of $1,000,000, plus transaction costs, in StormWind, LLC, an electronic marketing and business services platform, on March 23, 2012.

We closed on an investment of $855,000, plus transaction costs, in Bloom Energy Corporation, a fuel cell energy company, on March 28, 2012.

We closed on an investment of $2,000,000, plus transaction costs, in CUX, Inc.

(d/b/a CorpU), a corporate education company, on March 29, 2012.

We closed on an investment of $750,000, plus transaction costs, in The Echo System Corp., a social media company, on March 30, 2012.

We closed on an investment of $750,000, plus transaction costs, in The rSmart Group, Inc., a higher education learning platform, on March 30, 2012.

We closed on an investment of $1,143,800, plus transaction costs, in Bloom Energy Corporation, a fuel cell energy company, on April 4, 2012.

We closed on an investment of $9,999,996, plus transaction costs, in Violin Memory, Inc., a flash memory company, on April 11, 2012.

We closed on an investment of $4,000,000, plus transaction costs, in Top Hat, Inc., an internet commerce company, on April 13, 2012.

We closed on investments of $2,369,500, $1,277,500 and $350,000, plus transaction costs, in Control4 Corporation, a smart home automation company, on April 18, 2012, April 19, 2012 and April 20, 2012, respectively.

We closed on an investment of $2,999,998, plus transaction costs, in Global Education Learning (Holdings) Ltd., an Asia-focused education technology company, on April 19, 2012.

We closed on investments of $5,312,492, $4,875,010 and $7,312,498, plus transaction costs, in Twitter, Inc., a social communication company, on April 25, 2012, April 27, 2012, and April 30, 2012, respectively.

We closed on an investment of $3,800,000, plus transaction costs, in Silver Spring Networks, Inc., a smart grid company, on May 1, 2012.

We closed on an investment of $1,969,996, plus transaction costs, in Fullbridge, Inc., a business education company, on May 4, 2012.

We closed on investments of $888,384 and $2,674,048, plus transaction costs, in Palantir Technologies, Inc., a cyber-security company, on May 7, 2012 and May 11, 2012, respectively.

We closed on an investment of $10,000,000, plus transaction costs, in Avenues World Holdings LLC, a globally-focused private school, on May 9, 2012.

We closed on an investment of $6,858,500, plus transaction costs, in Dropbox, Inc., an online storage service, on May 11, 2012.

We closed on an investment of $200,000, plus transaction costs, in AltEgo, LLC, an avatar technology and games developer, on May 11, 2012.

We closed on an investment of $280,005, plus transaction costs, in Fullbridge, Inc., a business education company, on May 15, 2012.

We closed on investments of $40,500, $67,500 and $540,000, plus transaction costs, in Palantir Technologies, Inc., a cyber-security company, on May 16, 2012, May 21, 2012 and May 22, 2012, respectively.

We closed on an investment of $4,800,000, plus transaction costs, in Violin Memory, Inc., a flash memory company, on May 22, 2012.

We closed on an investment of $1,000,000, plus transaction costs, in NestGSV, Inc., an entrepreneurial education company, on May 25, 2012.

48 We closed on an investment of $1,900,000, plus transaction costs, in Twitter, Inc., a social communication company, on June 1, 2012.

We closed on an investment of $300,000, plus transaction costs, in AltEgo, LLC, an avatar technology and games developer, on June 15, 2012.

We closed on an investment of $10,000,000, plus transaction costs, in Solexel, Inc., a solar power company, on June 18, 2012.

We closed on investments of $2,400,000 and $1,600,000, plus transaction costs, in Chegg, Inc., an online textbook rental company, on June 20, 2012 and June 25, 2012, respectively.

We closed on an investment of $7,500,000, plus transaction costs, in Kno, Inc., an education software company, on June 27, 2012.

We closed on an investment of $2,000,000, plus transaction costs, in Dailybreak, Inc., a social advertising company, on June 29, 2012.

We closed on an investment of $1,999,999, plus transaction costs, in Dataminr, Inc., a social media analytics company, on July 2, 2012.

We closed on an investment of $1,999,998, plus transaction costs, in Maven Research, Inc., a global knowledge marketplace, on July 2, 2012.

We closed on an investment of $500,000, plus transaction costs, in NestGSV Silicon Valley, LLC, an entrepreneurial education company, on July 10, 2012.

We closed on an investment of $1,202,500, plus transaction costs, in Twitter, Inc., a social communication company, on July 10, 2012.

We closed on an investment of $10,000,000, plus transaction costs, in 2U, Inc.

(f/k/a 2tor, Inc.), an online education company, on July 16, 2012.

We closed on an investment of $5,000,000, plus transaction costs, in Totus Solutions, Inc., an LED lighting company, on July 20, 2012.

We closed on investments of $999,999, $15,228,070 and $135,000, plus transaction costs, in Palantir Technologies, Inc., a cyber-security company, on July 24, 2012, July 27, 2012 and July 31, 2012, respectively.

We closed on an investment of $1,001,000, plus transaction costs, in Gilt Groupe, Inc., an eCommerce platform, on July 27, 2012.

We closed on an investment of $400,000, plus transaction costs, in AltEgo, LLC, an avatar technology and games developer, on August 7, 2012.

We closed on an investment of $500,000, plus transaction costs, in SinoLending Ltd, a Chinese P2P lending platform, on August 7, 2012.

We closed on an investment of $3,589,659, plus transaction costs, in Spotify Technology S.A., a music streaming service, on August 7, 2012.

We closed on an investment of $250,000, plus transaction costs in Neuron Fuel, Inc. (d/b/a Tynker), a computer software company, on August 8, 2012.

We closed on an investment of $1,190,000, plus transaction costs, in Control4 Corporation, a smart home automation company, on August 15, 2012.

We closed on an investment of $174,000, plus transaction costs, in Palantir Technologies, Inc., a cyber-security company, on August 24, 2012.

We closed on an investment of $500,000, plus transaction costs, in Strategic Sports Solutions, LLC, a sports analytics company, on August 31, 2012.

49 We closed on an investment of $1,760,000, plus transaction costs, in Dropbox, Inc., an online storage service, on September 4, 2012.

We closed on an investment of $1,500,000, plus transaction costs, in Whittle Schools, LLC, an affiliate of Avenues World Holdings LLC, on September 6, 2012.

We closed on an investment of $733,493, plus transaction costs, in AlwaysOn, Inc., a social media company, on September 7, 2012.

We closed on an investment of $1,513,750, plus transaction costs, in SugarCRM Inc., a customer relationship management company, on September 12, 2012.

We closed on an investment of $3,000,000, plus transaction costs, in Parchment, Inc., an education data company, on October 1, 2012.

We closed on an investment of $270,000, plus transaction costs, in Palantir Technologies, Inc., a cyber-security company, on October 17, 2012.

We closed on an investment of $735,000, plus transaction costs, in Control4 Corporation, a smart home automation company, on October 19, 2012.

We closed on an investment of $500,000, plus transaction costs, in Ozy Media, Inc., a social media company, on November 2, 2012.

We closed on an investment of $150,000, plus transaction costs, in Top Hat 430, Inc., an internet commerce company, on November 2, 2012.

We closed on an investment of $2,000,000, plus transaction costs, in Starfish Holdings, Inc. (d/b/a YourOffers), a marketing platform, on November 13, 2012.

We closed on an investment of $171,353, plus transaction costs, in SugarCRM Inc., a customer relationship management company, on November 15, 2012.

We closed on an investment of $500,000, plus transaction costs, in S3 Digital Corp. (d/b/a S3i), a sports analytics company, on November 21, 2012.

We closed on an investment of $1,225,000, plus transaction costs, in SugarCRM Inc., a customer relationship management company, on November 27, 2012.

We closed on an investment of $1,500,000, plus transaction costs, in Whittle Schools, LLC, an affiliate of Avenues World Holdings LLC, on December 3, 2012.

We closed on an investment of $1,499,999, plus transaction costs in Grockit Inc., an online test preparation company, on December 19, 2012.

We closed on an investment of $891,062, plus transaction costs, in SugarCRM Inc., a customer relationship management company, on December 28, 2012.

The fair value, as of December 31, 2012, of all of our portfolio investments was $225,397,085. In addition, we held $16,000,000 in two money market funds as of December 31, 2012. We also held $11,318,525 in unrestricted cash on December 31, 2012.

Results of Operations Comparison of the year ended December 31, 2012 and the period from January 6, 2011 (date of inception) to December 31, 2011.

As January 6, 2011 was our date of inception and April 28, 2011 was the date of our initial public offering, the period from January 6, 2011 to December 31, 2011 is not a directly comparable period to the year ended December 31, 2012.

50 Investment Income For the year ended December 31, 2012, we had investment income of $248,077, or $0.02 per share, which consisted of $222,047 of interest income from our portfolio investments and $26,030 of dividend income from our money market investments.

For the period from January 6, 2011 (date of inception) to December 31, 2011, we had investment income of $162,328, or $0.05 per share, which consisted of $158,389 of interest income and $3,939 of dividend income.

The increase in investment income for the year ended December 31, 2012 relative to the period from January 6, 2011 (date of inception) to December 31, 2011, was primarily due to us holding more fixed income investments during the year ended December 31, 2012.

Operating Expenses For the year ended December 31, 2012, we had $8,530,958 in total operating expenses consisting primarily of investment management fees and administration fees, in addition to legal, audit and consulting fees. The investment advisory fee for the year ended December 31, 2012, was $4,419,345, representing the base management fee as provided in our investment advisory agreement. Our base management fee was significantly higher than during the period from January 6, 2011 (date of inception) to December 31, 2011 as a result of the increase in our gross assets. Costs incurred under our administration agreement for the year ended December 31, 2012, were $2,384,764. Professional fees, consisting of legal, valuation, audit and consulting fees, were approximately $959,604 for the year ended December 31, 2012.

For the period from January 6, 2011 (date of inception) to December 31, 2011, we had $2,196,192 in total operating expenses consisting primarily of legal, audit and consulting fees, in addition to organizational expenses, investment management fees and administration fees. The investment advisory fee for the period from January 6, 2011 (date of inception) to December 31, 2011, was $618,865, representing the base fee as provided for in our investment advisory agreement. Costs incurred under our administration agreement for the period from January 6, 2011 (date of inception) to December 31, 2011, were $554,232.

Professional fees, consisting of legal, valuation, audit, and consulting fees, were approximately $409,983 for the period from January 6, 2011 (date of inception) to December 31, 2011.

The increase in our total operating expenses for the year ended December 31, 2012 as compared to the period from January 6, 2011 (date of inception) to December 31, 2011 is primarily a result of increased investment management fees and administration fees due to the growth of our portfolio.

Net Decrease in Net Assets For the year ended December 31, 2012, we had a net change in unrealized depreciation of $10,170,850, or $0.63 per share. The change in unrealized depreciation is primarily a result of our investments in Top Hat 430, Inc., Silver Spring Networks, Inc., Gilt Groupe, Inc., Zynga, Inc., and Facebook, Inc.

We had a net realized loss of $1,380,519, or $0.09 per share, resulting primarily from our investment in PJB Fund LLC, which resulted from fluctuating share prices of Zynga, Inc. Net investment loss was $8,282,881, or $0.51 per share, for the year ended December 31, 2012, resulting primarily from operating expenses incurred during the year. Net decrease in net assets resulting from operations was $19,834,250, or $1.23 per share, for the year ended December 31, 2012.

For the period from January 6, 2011 (date of inception) to December 31, 2011, we had a net change in unrealized depreciation of $1,579,800, or $0.47 per share.

Net investment loss was $2,033,864, or $0.60 per share, for the period from January 6, 2011 (date of inception) to December 31, 2011, resulting primarily from operating expenses incurred during the period. Net decrease in net assets resulting from operations was $3,613,664, or $1.07 per share, for the period from January 6, 2011 (date of inception) to December 31, 2011.

The per share figures noted above are based on a weighted-average of 16,096,330 and 3,377,429 shares outstanding for the year ended December 31, 2012 and for the period from January 6, 2011 (date of inception) to December 31, 2011, respectively.

Liquidity and Capital Resources At December 31, 2012, we had investments in 47 portfolio companies with costs totaling $237,147,735, two money market funds totaling $16,000,000 and cash in the amount of $11,318,525.

51 On February 10, 2012, we priced a follow-on equity offering of 6,900,000 shares of our common stock at an offering price of $15.00 per share. The follow-on equity offering included the full exercise of the underwriters' option to purchase an additional 900,000 shares of our common stock, resulting in net proceeds to GSV Capital Corp. of approximately $96.2 million. On May 11, 2012, we priced a subsequent follow-on equity offering of 6,900,000 shares of our common stock at an offering price of $16.25 per share. The follow-on equity offering included the full exercise of the underwriters' option to purchase an additional 900,000 share of our common stock, resulting in net proceeds to GSV Capital Corp. of approximately $105.4 million. Our shares are currently listed on the NASDAQ Capital Market under the symbol ''GSVC''.

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 December 31, 2012, except for amounts retained for purposes of funding our ongoing expenses. For the year ended December 31, 2012, cash used in operating activities, consisting primarily of investment activity, was approximately $190.0 million.

Our current policy is to maintain cash reserves 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 approximately $4,419,345 in investment management fees and $2,384,764 in costs incurred under the administration agreement for the year ended December 31, 2012.

As of December 31, 2012, the fair value of our portfolio investments was $225.4 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.

Off-Balance Sheet Arrangements As of December 31, 2012, 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; however, we intend to elect to be treated, and intend to qualify annually thereafter, as a RIC under Subchapter M of the Code, beginning with our 2013 taxable year. 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. In addition, in order to avoid certain excise taxes imposed on RICs, we currently intend to distribute during each calendar year an amount at least equal to the sum of (1) 98% of our ordinary income for the calendar year, (2) 98.2% of our capital gains in excess of capital losses for the one-year period ending on October 31 of the calendar year and (3) any ordinary income and net capital gains for preceding years that were not distributed during such years. Although we currently intend to distribute realized net capital gains (i.e., net long-term capital gains in excess of net short-term capital losses), if any, at least annually, we may in the future decide to retain such capital gains for investment but designate the retained net capital gain as a "deemed distribution". If this happens, you will be treated as if you received an actual distribution of the capital gains we retain and reinvested the net after-tax proceeds in us. You also may be eligible to claim a tax credit (or, in certain circumstances, a tax refund) equal to your allocable share of the tax we paid on the capital gains deemed distributed to you. 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.

52 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 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 We had no borrowings outstanding as of December 31, 2012.

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 $4,419,345 and $618,865 in base fees and $0 in incentive fees for the year ended December 31, 2012 and for the period from January 6, 2011 (date of inception) to December 31, 2011, respectively.

As of December 31, 2012, we were owed $5,723 from GSV Asset Management for reimbursement of expenses paid for by us that were the responsibility of GSV Asset Management.

In addition as of December 31, 2012, we owed GSV Asset Management $51,194 for management fees and reimbursement of other expenses.

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 $2,384,764 and $554,232 in such costs incurred under the Administration Agreement for the year ended December 31, 2012 and for the period from January 6, 2011 (date of inception) to December 31, 2011, 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).

In February 2013, Mark Moe, who is the brother of our Chief Executive Officer, Michael Moe, joined NestGSV, Inc. as a Vice President of Business Development, Global Expansion.

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'').

53 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; 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, among other factors, in making our fair value determinations.

54 Recently Adopted Accounting Standards In May 2011, the Financial Accounting Standards Board (''FASB'') issued guidance clarifying how to measure and disclose fair value. This guidance amends the application of the ''highest and best use'' concept to be used only in the measurement of fair value of nonfinancial assets, clarifies that the measurement of the fair value of equity-classified financial instruments should be performed from the perspective of a market participant who holds the instrument as an asset, clarifies that an entity that manages a group of financial assets and liabilities on the basis of its net risk exposure can measure those financial instruments on the basis of its net exposure to those risks, and clarifies when premiums and discounts should be taken into account when measuring fair value.

The fair value disclosure requirements also were amended. This accounting standard is effective prospectively for interim and annual reporting periods beginning after December 15, 2011. The adoption of this accounting standard did not have a significant impact on our financial statements.

Recent Developments On January 17, 2013 and January 18, 2013, the Company sold its investment in Groupon, Inc. for $209,590 and $207,712, respectively.

On January 28, 2013, January 29, 2013, January 31, 2013, and February 1, 2013, the Company sold its investment in Zynga, Inc. for $120,654, $121,443, $121,962, and $1,003,983, respectively.

On March 8, 2013, the Board reapproved the Advisory Agreement and the Administration Agreement. These agreements will remain in effect for a period of one year from the date they were approved.

Subsequent to December 31, 2012, the Company closed on investments of $2.4 million, plus transaction costs as follows: The Company closed on an investment of $1,499,999, plus transaction costs, in SugarCRM Inc., a customer relationship management company, on January 16, 2013.

The Company closed on an investment of $200,000, plus transaction costs, in AlwaysOn, Inc., a social media company, on February 4, 2013.

The Company closed on an investment of $517,244, plus transaction costs, in CUX, Inc. (d/b/a CorpU), a corporate education company, on February 25, 2013.

The Company closed on an investment of $200,000, plus transaction costs, in AlwaysOn, Inc., a social media company, on February 28, 2013.

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. Subsequent to December 31, 2012, the Company has not made any such escrow deposits.

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