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FIRSTHAND TECHNOLOGY VALUE FUND, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q) –

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FORWARD-LOOKING STATEMENTS

The matters discussed in this report, as well as in future oral and written
statements by management of the Company, include forward-looking statements
based on current management expectations that involve substantial risks and
uncertainties which could cause actual results to differ materially from the
results expressed in, or implied by, these forward-looking statements.
Forward-looking statements related to future events or our future financial
performance. We generally identify forward-looking statements by terminology
such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,”
“intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,”
“predicts,” “potential,” or “continue” or the negative of these terms or other
similar words. Important assumptions include our ability to originate new
investments and to achieve certain margins and levels of profitability and the
availability of additional capital. In light of these and other uncertainties,
the inclusion of a projection or forward-looking statement in this report should
not be regarded as a representation by us that our plans or objectives will be
achieved. The forward-looking statements contained in this report include,
without limitations, statements as to:

? our future operating results;

? our business prospects and the prospects of our prospective portfolio

companies;

? the impact of investments that we expect to make;

? the impact of a protracted decline in the liquidity of the credit markets on

our business;

? our informal relationships with third parties;

? the expected market for venture capital investments and our addressable market;

? the dependence of our future success on the general economy and its impact on

the industries in which we invest;

? our ability to access the equity market;

? the ability of our portfolio companies to achieve their objectives;

? our expected financings and investments;

? our regulatory structure and tax status;

? our ability to operate as a business development company and a regulated

investment company;

? the adequacy of our cash resources and working capital;

? the timing of cash flows, if any, from the operation of our portfolio

companies;

? the timing, form, and amount of any dividend distributions;

? impact of fluctuation of interest rates on our business;

? valuation of any investments in portfolio companies particularly those having

no liquid trading market; and

? our ability to recover unrealized losses.

You should not place undue reliance on these forward-looking statements. The
forward-looking statements made in this report relate only to events as of the
date on which the statements are made. We undertake no obligation to update any
forward-looking statement to reflect events or circumstances occurring after the
date of this report.

The following discussion should be read in conjunction with our consolidated
financial statements and related notes and other financial information appearing
elsewhere in this prospectus. In addition to historical information, the
following discussion and other parts of this prospectus contain forward-looking
information that involves risks and uncertainties. Our actual results could
differ materially from those anticipated by such forward-looking information due
to the factors discussed under “Risk Factors” and “Forward-Looking Statements”
appearing elsewhere herein.



OVERVIEW


We are an externally managed, closed-end, non-diversified management investment
company organized as a Maryland corporation that has elected to be treated as a
BDC under the 1940 Act. As such, we are required to comply with certain
regulatory requirements. For instance, we generally have to invest at least 70%
of our total assets in “qualifying assets,”



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including securities of private or micro-cap public U.S. companies, cash, cash
equivalents, U.S. government securities and high-quality debt investments that
mature in one year or less. In addition, for tax purposes we are treated as a
corporation and are subject to federal and state taxes on our income. FCM serves
as our investment adviser and manages the investment process on a daily basis.

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

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




PORTFOLIO COMPOSITION



We make investments in securities of both public and private companies. Our
portfolio investments consist principally of equity and equity-like securities,
including common and preferred stock, warrants for the purchase of common and
preferred stock, and convertible and term notes. The fair value of our
investment portfolio was approximately $49.3 million as of June 30, 2022, as
compared to approximately $91.1 million as of December 31, 2021.

The following table summarizes the fair value of our investment portfolio by
industry sector as of June 30, 2022, and December 31, 2021.



                                      June 30, 2022 December 31, 2021
Medical Devices                           32.8%           28.6%
Automotive                                30.7%           24.5%
Semiconductor Equipment                   18.6%           32.8%
Aerospace                                 11.1%           5.8%
Equipment Leasing                         2.3%            2.0%
Intellectual Property                     1.7%            1.1%
Advanced Materials                        1.1%            0.7%
Exchange-Traded/Money Market Funds        0.8%            0.7%
Other Assets in Excess of Liabilities     0.9%            3.8%
Net Assets                               100.0%          100.0%




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MATURITY OF PRIVATE COMPANIES IN THE CURRENT PORTFOLIO

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

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



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




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RESULTS OF OPERATIONS


Comparison of the three months ended June 30, 2022, to the three months ended
June 30, 2021.




INVESTMENT INCOME



For the three months ended June 30, 2022, we had investment income of
$(3,812,911) primarily attributable to an adjustment to interest accrued on
convertible/term note investments with IntraOp Medical, Hera Systems and
Wrightspeed.

For the three months ended June 30, 2021, we had investment income of $1,401,275
primarily attributable to our interest accrued on convertible/term note
investments with IntraOp Medical, Hera Systems and Wrightspeed.

The lower level of investment income in the three months ended June 30, 2022,
compared to the three months ended June 30, 2021, was due to an adjustment to
interest income during the three months ended June 30, 2022



OPERATING EXPENSES


Net operating expenses totaled approximately $680,146 during the three months
ended June 30, 2022, and $847,367 during the three months ended June 30, 2021.



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Significant components of net operating expenses for the three months ended June
30, 2022, were management fee expense of $386,024, and professional fees (audit,
legal, and consulting) of $116,483. Significant components of operating expenses
for the three months ended June 30, 2021, were management fee expense of
$580,572, and professional fees (audit, legal, and consulting) of $101,667.

The lower level of net operating expenses for the three months ended June 30,
2022, compared to the three months ended June 30, 2021, is primarily
attributable to a decrease in our total assets, on which the investment advisory
fees are based.

NET INVESTMENT INCOME/(LOSS)

The net investment income/(loss) before taxes was $(4,493,057) for the three
months ended June 30, 2022, and $553,908 for the three months ended June 30,
2021.

The lower net investment income in the three months ended June 30, 2022,
compared to the three months ended June 30, 2021, is primarily attributable to a
decrease in interest income due to an adjustment for the three months ended June
30, 2022.

NET INVESTMENT REALIZED GAINS AND LOSSES AND UNREALIZED APPRECIATION AND
DEPRECIATION

A summary of the net realized and unrealized gains and losses on investments for
the three-month periods ended June 30, 2022, and June 30, 2021, is shown below.



                                                        Three Months Ended
                                                          June 30, 2022
Realized losses                                        $         (5,114,349 )
Net change in unrealized depreciation on investments            (28,001,081 )

Net realized and unrealized losses on investments $ (33,115,430 )




                                                             As of
                                                         June 30, 2022

Gross unrealized appreciation on portfolio investments $ 2,024,675
Gross unrealized depreciation on portfolio investments (92,865,713 )
Net unrealized depreciation on portfolio investments $ (90,841,038 )




                                                        Three Months Ended
                                                          June 30, 2021
Realized gains                                         $          4,548,597
Net change in unrealized depreciation on investments            (10,187,066 )

Net realized and unrealized losses on investments $ (5,638,469 )




                                                             As of
                                                         June 30, 2021

Gross unrealized appreciation on portfolio investments $ 29,477,352
Gross unrealized depreciation on portfolio investments (61,782,963 )
Net unrealized depreciation on portfolio investments $ (32,305,611 )

During the three months ended June 30, 2022, we recognized net realized losses
of $(5,114,349).



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During the three months ended June 30, 2022, net unrealized depreciation on
total investments increased by $28,001,081. The change in net unrealized
appreciation and depreciation of our private investments is based on portfolio
asset valuations determined in good faith by our Board of Directors. This change
in net unrealized depreciation was primarily composed of a decrease in the
valuations of our Wrightspeed, Pivotal Systems , IntraOp Medical, Hera Systems
and Revasum holdings.

During the three months ended June 30, 2021, we recognized net realized gains of
$4,548,597.

During the three months ended June 30, 2021, net unrealized depreciation on
total investments increased by $10,187,066. The change in net unrealized
appreciation and depreciation of our private investments is based on portfolio
asset valuations determined in good faith by our Board of Directors. This change
in net unrealized depreciation was primarily composed of a decrease in the
valuations of our Wrightspeed, SVXR and Revasum holdings.

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

For the three months ended June 30, 2022, the net decrease in net assets
resulting from operations (net of deferred taxes) totaled $(37,608,487), and
basic and fully diluted net change in net assets per share for the three months
ended June 30, 2022, was $(5.45).

For the three months ended June 30, 2021, the net decrease in net assets
resulting from operations (net of deferred taxes) totaled $(5,084,561), and
basic and fully diluted net change in net assets per share for the three months
ended June 30, 2021, was $(0.74).

The greater decrease in net assets resulting from operations for the three
months ended June 30, 2022, as compared to the three months ended June 30, 2021,
is due primarily to a decrease in the valuation of certain of our investments,
primarily our Wrightspeed, Pivotal Systems, IntraOp Medical, Hera Systems and
Revasum holdings.

The following information is a comparison for the six months ended June 30,
2022, and the six months ended June 30, 2021.




INVESTMENT INCOME



For the six months ended June 30, 2022, we had investment income of $(1,876,621)
primarily attributable to interest accrued/adjustments on convertible/term note
investments with IntraOp Medical, Hera Systems and Wrightspeed.

For the six months ended June 30, 2021, we had investment income of $2,692,732
primarily attributable to interest accrued on convertible/term note investments
with IntraOp Medical, Hera Systems and Wrightspeed.

The lower level of investment income in the six months ended June 30, 2022,
compared to the six months ended June 30, 2021, is primarily attributable to a
decrease in interest income due to an interest adjustment for the six months
ended June 30, 2022.



OPERATING EXPENSES


Net operating expenses totaled approximately $1,413,011 during the six months
ended June 30, 2022, and $1,630,989 during the six months ended June 30, 2021.

Significant components of net operating expenses for the six months ended June
30, 2022, were management fee expense of $875,796 and professional fees (audit,
legal, and consulting) of $185,705. Significant components of operating expenses
for the six months ended June 30, 2021, were management fee expense of
$1,139,157 and professional fees (audit, legal, and consulting) of $169,519.

The lower level of net operating expenses for the six months ended June 30,
2022, compared to the six months ended June 30, 2021, is primarily attributable
to a decrease in our total assets, on which the investment advisory fees are
based.




NET INVESTMENT INCOME



The net investment income/(loss) was $(3,289,632) for the six months ended June
30, 2022, and $1,061,743 for the six months ended June 30, 2021.



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The lower net investment income/(loss) in the six months ended June 30, 2022,
compared to the six months ended June 30, 2021, is primarily attributable to a
decrease in interest income due to an interest adjustment for the six months
ended June 30, 2022.

NET INVESTMENT REALIZED GAINS AND LOSSES AND UNREALIZED APPRECIATION AND
DEPRECIATION

A summary of the net realized and unrealized gains and loss on investments for
the six-month periods ended June 30, 2022, and June 30, 2021, is shown below.



                                                        Six Months Ended
                                                         June 30, 2022
Realized losses                                        $       (4,927,776 )

Net change in unrealized depreciation on investments (36,741,021 )
Net realized and unrealized losses on investments $ (41,668,797 )




                                                             As of
                                                         June 30, 2022

Gross unrealized appreciation on portfolio investments $ 2,024,675
Gross unrealized depreciation on portfolio investments (92,865,713 )
Net unrealized depreciation on portfolio investments $ (90,841,038 )




                                                        Six Months Ended
                                                         June 30, 2021
Realized gains                                         $        4,548,624
Net change in unrealized depreciation on investments             (409,840 )

Net realized and unrealized gains on investments $ 4,138,784




                                                             As of
                                                         June 30, 2021

Gross unrealized appreciation on portfolio investments $ 29,477,352
Gross unrealized depreciation on portfolio investments (61,782,963 )
Net unrealized depreciation on portfolio investments $ (32,305,611 )

During the six months ended June 30, 2022, we recognized net realized losses of
$(4,927,776) from the sale of investments.

During the six months ended June 30, 2022, net unrealized depreciation on total
investments increased by $36,741,021. The change in net unrealized appreciation
and depreciation of our private investments is based on portfolio asset
valuations determined in good faith by our Board of Directors. This change in
net unrealized depreciation was primarily caused by a decrease in the valuations
of our Wrightspeed, Hera Systems, Pivotal Systems, IntraOp Medical and Revasum
holdings.

During the six months ended June 30, 2021, we recognized net realized gains of
$4,548,624 from the sale of investments. Realized gains were higher than those
in the year-ago period due to the sale of our Pivotal Systems shares.

During the six months ended June 30, 2021, net unrealized depreciation on total
investments increased by $409,840. The change in net unrealized appreciation and
depreciation of our private investments is based on portfolio asset valuations
determined in good faith by our Board of Directors. This change in net
unrealized depreciation was primarily caused by a decrease in the valuations of
our Wrightspeed, SVXR and Revasum holdings.



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

For the six months ended June 30, 2022, the net decrease in net assets resulting
from operations (net of deferred taxes) totaled $(44,958,429) and basic and the
fully diluted net change in net assets per share for the six months ended June
30, 2022 was $(6.52).

For the six months ended June 30, 2021, the net increase in net assets resulting
from operations (net of deferred taxes) totaled $5,200,527 and basic and the
fully diluted net change in net assets per share for the six months ended June
30, 2021 was $0.75.

The greater decrease in net assets resulting from operations for the six months
ended June 30, 2022, as compared to the six months ended June 30, 2021, is due
primarily to unrealized losses on our investments, primarily Pivotal Systems,
Revasum, Wrightspeed, Hera Systems and IntraOp Medical, during the period.



DISTRIBUTION POLICY


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



CONTRACTUAL OBLIGATIONS


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

OFF-BALANCE SHEET ARRANGEMENTS

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



CRITICAL ACCOUNTING POLICIES


This discussion of our financial condition and results of operations is based
upon our financial statements, which are prepared in accordance with accounting
principles generally accepted in the United States of America, or GAAP. The
preparation of these financial statements will require management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues, and expenses. Changes in the economic environment,
financial markets, and any other parameters used in determining such estimates
could cause actual results to differ. In addition to the discussion below, we
will describe our critical accounting policies in the notes to our future
financial statements.

Valuation of Portfolio Investments

As a business development company, we generally invest in illiquid equity and
equity derivatives of securities of venture capital stage technology companies.
Under written procedures established by our board of directors, securities
traded on stock exchanges, or quoted by NASDAQ, are valued according to the
NASDAQ Stock Market, Inc. (“NASDAQ”) official closing price, if applicable, or
at their last reported sale price as of the close of trading on the New York
Stock Exchange (“NYSE”) (normally 4:00 P.M. Eastern Time). If a security is not
traded that day, the security will be valued at its most recent bid price.
Securities traded in the over-the-counter market, but not quoted by NASDAQ, are
valued at the last sale price (or, if the last sale price is not readily
available, at the most recent closing bid price as quoted by brokers that make
markets in the securities) at the close of trading on the NYSE. Securities
traded both in the over-the-counter market and on a stock exchange are valued
according to the broadest and most representative market. We obtain these market
values from an independent pricing service or at the mean between the bid and
ask prices obtained from at least two brokers or dealers (if available,
otherwise by a principal market maker or a primary market dealer). In addition,
a large percentage of our portfolio investments are in the form of securities
that are not publicly traded. The fair value of securities and other investments
that are not publicly traded may not be readily determinable. We value these
securities quarterly at fair value as determined in good faith by our board of
directors. Our board of directors may use the services of a nationally
recognized independent valuation firm to aid it in determining the fair value of
these securities.



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The methods for valuing these securities may include: fundamental analysis
(sales, income, or earnings multiples, etc.), discounts from market prices of
similar securities, purchase price of securities, subsequent private
transactions in the security or related securities, or discounts applied to the
nature and duration of restrictions on the disposition of the securities, as
well as a combination of these and other factors. Because such valuations, and
particularly valuations of private securities and private companies, are
inherently uncertain, may fluctuate over short periods of time, and may be based
on estimates, our determinations of fair value may differ materially from the
values that would have been used if a ready market for these securities existed.
Our net asset value could be adversely affected if our determinations regarding
the fair value of our investments were materially higher than the values that we
ultimately realize upon the disposal of such securities.



Revenue Recognition


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

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

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

Recently Issued Accounting Standards

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



Inflation


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




SUBSEQUENT EVENTS



Subsequent to the close of the fiscal quarter on June 30, 2022, and through the
date of the issuance of the financial statements included herein, a number of
material events related to our portfolio of investments occurred, consisting
primarily of the purchase and sale of public and private securities. Since that
date, we have purchased private securities with an aggregate cost of
approximately $600 thousand and sold public securities with an aggregate value
of approximately $1.8 million.




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