Equibles

10-Q

Horizon Technology Finance Corp (HRZN)

10-Q 2023-10-31 For: 2023-09-30
View Original
Added on April 05, 2026

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED September 30, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM _____TO

COMMISSION FILE NUMBER: 814-00802

HORIZON TECHNOLOGY FINANCE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware 27-2114934
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
312 Farmington Avenue
Farmington, CT 06032
(Address of principal executive offices) (Zip Code)

(860) 676‑8654

(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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

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

Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
--- ---

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

The number of shares of the registrant’s common stock traded under the symbol “HRZN” on the Nasdaq Global Select Market, $0.001 par value per share, outstanding as of October 31, 2023 was 33,330,529.

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

Title of each class Ticker symbol(s) Name of each exchange on which registered
Common Stock, par value $0.001 per share HRZN The Nasdaq Stock Market LLC
4.875% Notes due 2026 HTFB The New York Stock Exchange
6.25% Notes due 2027 HTFC The New York Stock Exchange

Table of Contents

HORIZON TECHNOLOGY FINANCE CORPORATION

FORM 10‑Q

TABLE OF CONTENTS

Page
PART I
Item 1 Consolidated Financial Statements. 3
Consolidated Statements of Assets and Liabilities as of September 30, 2023 (unaudited) and December 31, 2022 3
Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022 (unaudited) 4
Consolidated Statements of Changes in Net Assets for the three and nine months ended September 30, 2023 and 2022 (unaudited) 5
Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 (unaudited) 6
Consolidated Schedules of Investments as of September 30, 2023 (unaudited) and December 31, 2022 7
Notes to the Consolidated Financial Statements (unaudited) 22
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 47
Item 3. Quantitative and Qualitative Disclosures About Market Risk 63
Item 4. Controls and Procedures 64
PART II
Item 1. Legal Proceedings 64
Item 1A. Risk Factors 64
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 65
Item 3. Defaults Upon Senior Securities 65
Item 4. Mine Safety Disclosures 65
Item 5. Other Information 65
Item 6. Exhibits 65
Signatures 66
EX‑31.1
EX‑31.2
EX‑32.1
EX‑32.2

2

Table of Contents

PART I: FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Statements of Assets and Liabilities

(Dollars in thousands, except share and per share data)

December 31,
2022
****
Assets **** ****
Non-affiliate investments at fair value (cost of 700,932 and 721,248, respectively) 695,423 $ 720,026
Non-controlled affiliate investments at fair value (cost of 39,666 and 0, respectively) (Note 5) 20,485 —
Controlled affiliate investments at fair value (cost of 14,216 and 0, respectively) (Note 5) 13,145 —
Total investments at fair value (cost of 754,814 and 721,248, respectively) (Note 4) 729,053 720,026
Cash 34,816 20,612
Investments in money market funds 12,457 7,066
Restricted investments in money market funds 2,838 2,788
Interest receivable 14,135 13,573
Other assets 3,945 2,761
Total assets 797,244 $ 766,826
Liabilities **** ****
Borrowings (Note 7) 435,500 $ 434,078
Distributions payable 10,991 9,159
Base management fee payable (Note 3) 1,080 1,065
Incentive fee payable (Note 3) — 1,392
Other accrued expenses 3,098 2,684
Total liabilities 450,669 448,378
Commitments and contingencies (Notes 3 and 8)
Net assets **** ****
Preferred stock, par value 0.001 per share, 1,000,000 shares authorized, zero shares issued and outstanding as of September 30, 2023 and December 31, 2022 — —
Common stock, par value 0.001 per share, 100,000,000 shares authorized, 33,474,423 and 27,920,838 shares issued and 33,306,958 and 27,753,373 shares outstanding as of September 30, 2023 and December 31, 2022, respectively 35 29
Paid-in capital in excess of par 451,722 385,921
Distributable loss (105,182 ) (67,502 )
Total net assets 346,575 318,448
Total liabilities and net assets 797,244 $ 766,826
Net asset value per common share 10.41 $ 11.47

All values are in US Dollars.

See Notes to Consolidated Financial Statements

3

Table of Contents

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Statements of Operations (Unaudited)

(Dollars in thousands, except share and per share data)

For the Three Months Ended For The Nine Months Ended
September 30, September 30,
2023 2022 2023 2022
Investment income **** **** **** ****
From non-affiliate investments:
Interest income $ 23,825 $ 22,745 $ 75,695 $ 54,317
Fee income 124 509 2,255 1,729
Payment-in-kind interest income 3,777 — 5,930 —
From non-controlled affiliate investments:
Interest income 1,246 — 1,246 —
From controlled affiliate investments:
Interest income 8 — 8 —
Payment-in-kind interest income 158 — 158 —
Total investment income 29,138 23,254 85,292 56,046
Expenses **** **** **** ****
Interest expense 7,107 5,339 21,407 12,987
Base management fee (Note 3) 3,213 2,788 9,621 7,555
Performance based incentive fee (Note 3) — 2,784 3,094 6,353
Administrative fee (Note 3) 441 412 1,249 1,147
Professional fees 452 314 1,558 1,163
General and administrative 392 381 1,384 1,088
Total expenses 11,605 12,018 38,313 30,293
Net investment income before excise tax 17,533 11,236 46,979 25,753
Provision for excise tax 179 100 542 306
Net investment income 17,354 11,136 46,437 25,447
Net realized and unrealized loss **** **** **** ****
Net realized loss on non-affiliate investments (11,816 ) (8,665 ) (28,513 ) (8,364 )
Net realized gain on non-controlled affiliate investments — 30 — 30
Net realized gain (loss) on controlled affiliate investments — 50 — (1,150 )
Net realized loss on investments (11,816 ) (8,585 ) (28,513 ) (9,484 )
Net unrealized appreciation (depreciation) on non-affiliate investments 180 3,442 (7,656 ) (281 )
Net unrealized depreciation on non-controlled affiliate investments (19,055 ) — (18,149 ) —
Net unrealized appreciation on controlled affiliate investments 1,357 — 1,357 1,450
Net unrealized (depreciation) appreciation on investments (17,518 ) 3,442 (24,448 ) 1,169
Net realized and unrealized loss (29,334 ) (5,143 ) (52,961 ) (8,315 )
Net (decrease) increase in net assets resulting from operations $ (11,980 ) $ 5,993 $ (6,524 ) $ 17,132
Net investment income per common share $ 0.53 $ 0.43 $ 1.54 $ 1.06
Net (decrease) increase in net assets resulting from operations per common share $ (0.37 ) $ 0.23 $ (0.22 ) $ 0.71
Distributions declared per share $ 0.33 $ 0.30 $ 0.99 $ 0.90
Weighted average shares outstanding 32,451,900 25,738,054 30,155,287 23,995,369

See Notes to Consolidated Financial Statements

4

Table of Contents

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Statements of Changes in Net Assets (Unaudited)

(Dollars in thousands, except share data)

Paid-In Capital **** ****
Common Stock in Excess of Distributable Total Net
Shares Amount Par Earnings (Loss) Assets
Balance at June 30, 2022 24,857,104 $ 26 $ 350,173 (59,594 ) $ 290,605
Issuance of common stock, net of offering costs 1,523,519 1 18,995 — 18,996
Net increase in net assets resulting from operations, net of excise tax:
Net investment income, net of excise tax — — — 11,136 11,136
Net realized loss on investments — — — (8,585 ) (8,585 )
Net unrealized appreciation on investments — — — 3,442 3,442
Issuance of common stock under dividend reinvestment plan 13,150 — 166 — 166
Distributions declared — — — (8,073 ) (8,073 )
Balance at September 30, 2022 26,393,773 27 369,334 (61,674 ) 307,687
Balance at June 30, 2023 32,096,259 34 437,561 (82,176 ) 355,419
Issuance of common stock, net of offering costs 1,186,303 1 13,854 — 13,855
Net increase in net assets resulting from operations, net of excise tax:
Net investment income, net of excise tax — — — 17,354 17,354
Net realized loss on investments — — — (11,816 ) (11,816 )
Net unrealized depreciation on investments — — — (17,518 ) (17,518 )
Issuance of common stock under dividend reinvestment plan 24,396 — 307 — 307
Distributions declared — — — (11,026 ) (11,026 )
Balance at September 30, 2023 33,306,958 $ 35 $ 451,722 $ (105,182 ) $ 346,575
Paid-In Capital **** ****
--- --- --- --- --- --- --- --- --- --- --- --- ---
Common Stock in Excess of Distributable Total Net
Shares Amount Par Earnings (Loss) Assets
Balance at December 31, 2021 21,217,460 $ 22 $ 301,359 $ (56,046 ) $ 245,335
Issuance of common stock, net of offering costs 5,141,920 5 67,519 — 67,524
Net increase in net assets resulting from operations, net of excise tax:
Net investment income, net of excise tax — — — 25,447 25,447
Net realized loss on investments — — — (9,484 ) (9,484 )
Net unrealized appreciation on investments — — — 1,169 1,169
Issuance of common stock under dividend reinvestment plan 34,393 — 456 — 456
Distributions declared — — — (22,760 ) (22,760 )
Balance at September 30, 2022 26,393,773 27 369,334 (61,674 ) 307,687
Balance at December 31, 2022 27,753,373 29 385,921 (67,502 ) 318,448
Issuance of common stock, net of offering costs 5,490,326 6 65,025 — 65,031
Net increase in net assets resulting from operations, net of excise tax:
Net investment income, net of excise tax — — — 46,437 46,437
Net realized loss on investments — — — (28,513 ) (28,513 )
Net unrealized depreciation on investments — — — (24,448 ) (24,448 )
Issuance of common stock under dividend reinvestment plan 63,259 — 776 — 776
Distributions declared — — — (31,156 ) (31,156 )
Balance at September 30, 2023 33,306,958 $ 35 $ 451,722 $ (105,182 ) $ 346,575

See Notes to Consolidated Financial Statements

5

Table of Contents

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)

For the nine months ended September 30,
2023 2022
Cash flows from operating activities: **** ****
Net (decrease) increase in net assets resulting from operations $ (6,524 ) $ 17,132
Adjustments to reconcile net (decrease) increase in net assets resulting from operations to net cash used in operating activities:
Amortization of debt issuance costs 1,433 1,142
Net realized loss on investments 28,513 9,484
Net unrealized depreciation on investments 24,448 (1,169 )
Purchase of investments (154,488 ) (348,347 )
Principal payments received on investments 90,222 114,433
Payment-in-kind interest on investments (6,088 ) —
Proceeds from sale of investments 11,063 49,681
Equity received in settlement of fee income (89 ) —
Warrants received in settlement of fee income (80 ) —
Changes in assets and liabilities:
Decrease (increase) in interest receivable 1,491 (2,175 )
Increase in end-of-term payments (1,960 ) (3,003 )
Decrease in unearned income (2,621 ) (274 )
(Increase) decrease in other assets (837 ) 115
Increase in other accrued expenses 414 193
Increase in base management fee payable 15 1,164
(Decrease) increase in incentive fee payable (1,392 ) 769
Net cash used in operating activities (16,480 ) (160,855 )
Cash flows from financing activities: **** ****
Proceeds from issuance of 2027 Notes — 57,500
Repayment of 2019 Asset-Backed Notes (23,876 ) (27,041 )
Proceeds from issuance of common stock, net of offering costs 65,031 67,525
Advances on Credit Facilities 59,250 119,000
Repayment of Credit Facilities (35,000 ) (47,000 )
Debt issuance costs (732 ) (2,470 )
Distributions paid (28,548 ) (20,752 )
Net cash provided by financing activities 36,125 146,762
Net increase (decrease) in cash, cash equivalents and restricted cash 19,645 (14,093 )
Cash, cash equivalents and restricted cash: **** ****
Beginning of period 30,466 47,281
End of period $ 50,111 $ 33,188
Supplemental disclosure of cash flow information:
Cash paid for interest $ 19,956 $ 11,543
Supplemental non-cash investing and financing activities:
Warrant investments received and recorded as unearned income $ 1,870 $ 2,969
Distributions payable $ 10,991 $ 7,918
End-of-term payments receivable $ 11,743 $ 8,240
Non-cash income $ 12,861 $ 4,504
September 30,
--- --- --- --- ---
2023 2022
Cash $ 34,816 $ 23,839
Investments in money market funds 12,457 7,732
Restricted investments in money market funds 2,838 1,617
Total cash, cash equivalents and restricted cash $ 50,111 $ 33,188

See Notes to Consolidated Financial Statements

6

Table of Contents

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Schedule of Investments (Unaudited)

September 30, 2023

(Dollars in thousands)

Portfolio Company (1)(3) Sector Type of Investment (7) Cash Rate (4) Index Margin Floor Ceiling ETP (10) Maturity Date Principal Amount Cost of Investments (6)(9) Fair Value (9)
Non-Affiliate Investments — 200.7% (8) **** **** **** **** ****
Non-Affiliate Debt Investments — 191.4% (8) **** **** **** **** ****
Non-Affiliate Debt Investments — Life Science — 69.7% (8) **** **** **** **** ****
Castle Creek Biosciences, Inc. (2)(12) Biotechnology Term Loan 13.25 % Prime 4.75 % 9.55 % 13.50 % 5.50 % May 1, 2026 5,000 4,903 4,903
Term Loan 13.25 % Prime 4.75 % 9.55 % 13.50 % 5.50 % May 1, 2026 5,000 4,975 4,975
Term Loan 13.25 % Prime 4.75 % 9.55 % 13.50 % 5.50 % May 1, 2026 3,000 2,985 2,985
Term Loan 13.25 % Prime 4.75 % 9.55 % 13.50 % 5.50 % May 1, 2026 5,000 4,975 4,975
Term Loan 13.25 % Prime 4.75 % 9.55 % 13.50 % 5.50 % May 1, 2026 5,000 4,975 4,975
Term Loan 13.25 % Prime 4.75 % 9.55 % 13.50 % 5.50 % May 1, 2026 3,000 2,985 2,985
Emalex Biosciences, Inc. (2)(12) Biotechnology Term Loan 13.22 % Prime 4.72 % 9.75 % - 5.00 % June 1, 2024 1,979 1,971 1,971
Term Loan 13.22 % Prime 4.72 % 9.75 % - 5.00 % June 1, 2024 1,979 1,972 1,972
Term Loan 13.22 % Prime 4.72 % 9.75 % - 5.00 % November 1, 2025 5,000 4,943 4,943
Term Loan 13.22 % Prime 4.72 % 9.75 % - 5.00 % May 1, 2026 5,000 4,939 4,939
Greenlight Biosciences, Inc. (2)(12) Biotechnology Term Loan 14.25 % Prime 5.75 % 9.00 % - 3.00 % July 1, 2025 3,500 3,399 3,365
Term Loan 14.25 % Prime 5.75 % 9.00 % - 3.00 % July 1, 2025 1,750 1,699 1,684
KSQ Therapeutics, Inc. (2)(12) Biotechnology Term Loan 13.25 % Prime 4.75 % 8.50 % - 5.50 % May 1, 2027 6,250 6,193 6,193
Term Loan 13.25 % Prime 4.75 % 8.50 % - 5.50 % May 1, 2027 6,250 6,193 6,193
Native Microbials, Inc (2)(12) Biotechnology Term Loan 13.75 % Prime 5.25 % 8.50 % - 5.00 % November 1, 2026 3,750 3,716 3,716
Term Loan 13.75 % Prime 5.25 % 8.50 % - 5.00 % November 1, 2026 2,500 2,478 2,478
PDS Biotechnology Corporation (2)(5)(12) Biotechnology Term Loan 14.25 % Prime 5.75 % 9.75 % - 3.75 % September 1, 2026 10,000 9,898 9,898
Term Loan 14.25 % Prime 5.75 % 9.75 % - 3.75 % September 1, 2026 3,750 3,712 3,712
Term Loan 14.25 % Prime 5.75 % 9.75 % - 3.75 % September 1, 2026 3,750 3,712 3,712
Provivi, Inc. (2)(12) Biotechnology Term Loan 13.86 % Prime 5.36 % 9.50 % - 5.50 % December 1, 2024 4,667 4,594 4,594
Term Loan 13.86 % Prime 5.36 % 9.50 % - 5.50 % December 1, 2024 4,667 4,594 4,594
Term Loan 13.86 % Prime 5.36 % 9.50 % - 5.50 % December 1, 2024 2,333 2,286 2,286
Term Loan 13.86 % Prime 5.36 % 9.50 % - 5.50 % December 1, 2024 2,333 2,286 2,286
Term Loan 13.86 % Prime 5.36 % 9.50 % - 5.50 % December 1, 2024 2,333 2,282 2,282
Term Loan 13.86 % Prime 5.36 % 9.50 % - 5.50 % December 1, 2024 2,333 2,282 2,282
Stealth Biotherapeutics Inc. (2)(12) Biotechnology Term Loan 14.00 % Prime 5.50 % 8.75 % - 6.00 % October 1, 2025 4,500 4,434 4,434
Term Loan 14.00 % Prime 5.50 % 8.75 % - 6.00 % October 1, 2025 2,250 2,217 2,217
Tallac Therapeutics, Inc. (2)(12) Biotechnology Term Loan 12.75 % Prime 4.25 % 12.25 % - 4.00 % August 1, 2027 2,500 2,226 2,226
Term Loan 12.75 % Prime 4.25 % 12.25 % - 4.00 % August 1, 2027 2,500 2,455 2,455
Aerobiotix, LLC (2)(12) Medical Device Term Loan 9.00 % Fixed - - - 18.00 % April 1, 2028 2,500 2,466 2,344
Term Loan 9.00 % Fixed - - - 18.00 % April 1, 2028 2,500 2,466 2,344
Term Loan 9.00 % Fixed - - - 18.00 % June 30, 2024 200 200 190
Candesant Biomedical, Inc. (2)(12) Medical Device Term Loan 12.00 % Prime 3.50 % 11.50 % - 5.00 % September 1, 2027 5,000 4,751 4,751
Term Loan 12.00 % Prime 3.50 % 11.50 % - 5.00 % September 1, 2027 2,500 2,451 2,451
Term Loan 12.00 % Prime 3.50 % 11.50 % - 5.00 % September 1, 2027 2,500 2,451 2,451
Ceribell, Inc. (2)(12) Medical Device Term Loan 12.00 % Prime 3.50 % 8.25 % - 5.50 % October 1, 2024 5,000 4,985 4,985
Term Loan 12.00 % Prime 3.50 % 8.25 % - 5.50 % October 1, 2024 5,000 4,985 4,985
Term Loan 12.00 % Prime 3.50 % 8.25 % - 5.50 % October 1, 2024 2,500 2,488 2,488
Term Loan 12.00 % Prime 3.50 % 8.25 % - 5.50 % October 1, 2024 2,500 2,488 2,488
Cognoa, Inc. (2)(12) Medical Device Term Loan 14.00 % Prime 5.50 % 8.75 % - 6.00 % August 1, 2026 4,722 4,678 4,678
Term Loan 14.00 % Prime 5.50 % 8.75 % - 6.00 % August 1, 2026 2,361 2,339 2,339
Conventus Orthopaedics, Inc. (2)(12) Medical Device Term Loan 13.32 % Prime 4.82 % 9.25 % - 10.36 % July 1, 2025 3,960 3,916 3,916
Term Loan 13.32 % Prime 4.82 % 9.25 % - 10.36 % July 1, 2025 3,960 3,916 3,916
CSA Medical, Inc. (2)(12) Medical Device Term Loan 13.59 % Prime 5.09 % 10.00 % - 5.00 % January 1, 2024 750 739 739
Term Loan 13.59 % Prime 5.09 % 10.00 % - 5.00 % January 1, 2024 50 49 49
Term Loan 13.59 % Prime 5.09 % 10.00 % - 5.00 % March 1, 2024 1,067 1,052 1,052
InfoBionic, Inc. (2)(12) Medical Device Term Loan 14.75 % Prime 6.25 % 9.50 % - 4.00 % October 1, 2024 2,771 2,733 2,733
Term Loan 14.75 % Prime 6.25 % 9.50 % - 4.00 % June 1, 2025 1,000 982 982
Magnolia Medical Technologies, Inc. (2)(12) Medical Device Term Loan 13.50 % Prime 5.00 % 9.75 % - 4.00 % March 1, 2025 5,000 4,960 4,960
Term Loan 13.50 % Prime 5.00 % 9.75 % - 4.00 % March 1, 2025 5,000 4,960 4,960
Term Loan 13.50 % Prime 5.00 % 9.75 % - 4.00 % March 1, 2025 5,000 4,956 4,956
Term Loan 13.50 % Prime 5.00 % 9.75 % - 4.00 % March 1, 2025 5,000 4,956 4,956
Term Loan 13.50 % Prime 5.00 % 9.75 % - 4.00 % January 1, 2027 5,000 4,934 4,934
Term Loan 13.50 % Prime 5.00 % 9.75 % - 4.00 % January 1, 2027 5,000 4,934 4,934

See Notes to Consolidated Financial Statements

Table of Contents

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Schedule of Investments (Unaudited)

September 30, 2023

(Dollars in thousands)

Portfolio Company (1)(3) Sector Type of Investment (7) Cash Rate (4) Index Margin Floor Ceiling ETP (10) Maturity Date Principal Amount Cost of Investments (6)(9) Fair Value (9)
Robin Healthcare, Inc. (2)(12)(13) Medical Device Term Loan 14.00 % Prime 5.50 % 10.25 % - 4.00 % November 1, 2026 3,500 3,468 1,749
Term Loan 14.00 % Prime 5.50 % 10.25 % - 4.00 % November 1, 2026 3,500 3,468 1,749
Scientia Vascular, Inc. (2)(12) Medical Device Term Loan 13.25 % Prime 4.75 % 8.50 % - 5.00 % January 1, 2027 3,750 3,663 3,663
Term Loan 13.25 % Prime 4.75 % 8.50 % - 5.00 % January 1, 2027 3,750 3,718 3,718
Term Loan 13.75 % Prime 5.25 % 9.00 % - 5.00 % March 1, 2027 5,000 4,938 4,938
Sonex Health, Inc. (2)(12) Medical Device Term Loan 12.00 % Prime 3.50 % 11.75 % - 8.00 % September 1, 2027 2,500 2,295 2,295
Term Loan 12.00 % Prime 3.50 % 11.75 % - 8.00 % September 1, 2027 2,500 2,471 2,471
Term Loan 12.00 % Prime 3.50 % 11.75 % - 8.00 % September 1, 2027 5,000 4,943 4,943
Term Loan 12.00 % Prime 3.50 % 11.75 % - 8.00 % September 1, 2027 5,000 4,943 4,943
Spineology, Inc. (2)(12) Medical Device Term Loan 15.50 % Prime 7.00 % 10.25 % - 1.00 % October 1, 2025 5,000 4,975 4,975
Term Loan 15.50 % Prime 7.00 % 10.25 % - 1.00 % April 1, 2026 2,500 2,487 2,487
Swift Health Systems Inc. (2)(12) Medical Device Term Loan 13.75 % Prime 5.25 % 9.00 % - 5.00 % July 1, 2027 3,500 3,464 3,464
Term Loan 13.75 % Prime 5.25 % 9.00 % - 5.00 % July 1, 2027 3,500 3,464 3,464
Term Loan 13.75 % Prime 5.25 % 9.00 % - 5.00 % July 1, 2027 3,500 3,453 3,453
Term Loan 13.75 % Prime 5.25 % 9.00 % - 5.00 % July 1, 2027 3,500 3,453 3,453
Total Non-Affiliate Debt Investments — Life Science 245,317 241,576
Non-Affiliate Debt Investments — Sustainability — 23.8% (8)
New Aerofarms, Inc. assignee of Aerofarms, Inc. (2)(12)(15) Other Sustainability Term Loan 15.25 % Prime 6.75 % 10.00 % - 4.33 % December 1, 2026 3,750 3,675 3,675
Term Loan 15.25 % Prime 6.75 % 10.00 % - 4.33 % December 1, 2026 3,750 3,675 3,675
Nexii Building Solutions, Inc. (2)(12)(14) Other Sustainability Term Loan 15.50 % (11) Prime 7.00 % 10.25 % - 2.50 % September 1, 2025 8,102 8,009 6,754
Term Loan 15.50 % (11) Prime 7.00 % 10.25 % - 2.50 % September 1, 2025 8,102 8,009 6,754
Term Loan 15.50 % (11) Prime 7.00 % 10.25 % - 2.50 % September 1, 2025 8,102 8,009 6,754
Term Loan 15.50 % (11) Prime 7.00 % 10.25 % - 2.50 % July 1, 2026 5,402 5,332 4,496
Term Loan 15.50 % (11) Prime 7.00 % 10.25 % - 2.50 % July 1, 2026 5,402 5,332 4,496
Term Loan 15.50 % (11) Prime 7.00 % 10.25 % - 2.50 % September 30, 2023 707 707 596
Term Loan 15.50 % (11) Prime 7.00 % 10.25 % - 2.50 % September 30, 2023 564 564 475
Term Loan 15.50 % (11) Prime 7.00 % 10.25 % - 2.50 % September 30, 2023 281 281 237
Term Loan 15.50 % (11) Prime 7.00 % 10.25 % - 2.50 % September 30, 2023 279 279 235
Term Loan 15.50 % (11) Prime 7.00 % 10.25 % - 2.50 % September 30, 2023 167 167 141
Soli Organic, Inc. (2)(12) Other Sustainability Term Loan 15.25 % Prime 6.75 % 10.00 % - 2.75 % April 1, 2026 5,000 4,951 4,951
Term Loan 15.25 % Prime 6.75 % 10.00 % - 2.75 % April 1, 2026 2,500 2,475 2,475
Term Loan 15.25 % Prime 6.75 % 10.00 % - 2.75 % May 1, 2026 5,000 4,948 4,948
Term Loan 15.25 % Prime 6.75 % 10.00 % - 2.75 % May 1, 2026 2,500 2,474 2,474
Term Loan 14.00 % Prime 5.50 % 11.75 % - 2.75 % December 1, 2026 5,000 4,926 4,926
Term Loan 14.00 % Prime 5.50 % 11.75 % - 2.75 % December 1, 2026 2,500 2,463 2,463
Temperpack Technologies, Inc. (2)(12) Other Sustainability Term Loan 15.25 % Prime 6.75 % 10.00 % - 2.50 % April 1, 2028 3,750 3,678 3,678
Term Loan 15.25 % Prime 6.75 % 10.00 % - 2.50 % April 1, 2028 3,750 3,692 3,692
Term Loan 15.25 % Prime 6.75 % 10.00 % - 2.50 % April 1, 2028 7,500 7,374 7,374
Term Loan 15.25 % Prime 6.75 % 10.00 % - 2.50 % April 1, 2028 3,750 3,687 3,687
Term Loan 15.25 % Prime 6.75 % 10.00 % - 2.50 % April 1, 2028 3,750 3,687 3,687
Total Non-Affiliate Debt Investments — Sustainability 88,394 82,643

See Notes to Consolidated Financial Statements

Table of Contents

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Schedule of Investments (Unaudited)

September 30, 2023

(Dollars in thousands)

Portfolio Company (1)(3) Sector Type of Investment (7) Cash Rate (4) Index Margin Floor Ceiling ETP (10) Maturity Date Principal Amount Cost of Investments (6)(9) Fair Value (9)
Non-Affiliate Debt Investments — Technology — 80.5% (8) **** **** **** **** ****
Axiom Space, Inc. (2)(12) Communications Term Loan 14.50 % Prime 6.00 % 9.25 % - 2.50 % June 1, 2026 6,875 6,840 6,840
Term Loan 14.50 % Prime 6.00 % 9.25 % - 2.50 % June 1, 2026 6,875 6,840 6,840
Term Loan 14.50 % Prime 6.00 % 9.25 % - 2.50 % June 1, 2026 6,875 6,840 6,840
CAMP NYC, Inc. (2)(12) Consumer-related Technologies Term Loan 15.75 % Prime 7.25 % 10.50 % - 3.00 % May 1, 2026 3,500 3,470 3,470
Clara Foods Co. (2)(12) Consumer-related Technologies Term Loan 14.25 % Prime 5.75 % 9.00 % - 5.50 % August 1, 2025 1,833 1,821 1,821
Term Loan 14.25 % Prime 5.75 % 9.00 % - 5.50 % August 1, 2025 1,833 1,821 1,821
Divergent Technologies, Inc. (2)(12) Consumer-related Technologies Term Loan 11.25 % Prime 6.00 % 9.50 % 11.25 % 3.00 % July 1, 2027 3,750 3,605 3,605
Term Loan 11.25 % Prime 6.00 % 9.50 % 11.25 % 3.00 % July 1, 2027 1,250 1,241 1,241
Term Loan 11.25 % Prime 6.00 % 9.50 % 11.25 % 3.00 % July 1, 2027 3,750 3,723 3,723
Term Loan 11.25 % Prime 6.00 % 9.50 % 11.25 % 3.00 % July 1, 2027 1,250 1,241 1,241
Term Loan 11.25 % Prime 6.00 % 9.50 % 11.25 % 3.00 % July 1, 2027 3,750 3,723 3,723
Term Loan 11.25 % Prime 6.00 % 9.50 % 11.25 % 3.00 % July 1, 2027 1,250 1,241 1,241
Term Loan 11.25 % Prime 6.00 % 9.50 % 11.25 % 3.00 % January 1, 2028 3,750 3,709 3,709
Term Loan 11.25 % Prime 6.00 % 9.50 % 11.25 % 3.00 % January 1, 2028 3,750 3,703 3,703
Term Loan 11.25 % Prime 6.00 % 9.50 % 11.25 % 3.00 % April 1, 2028 3,750 3,709 3,709
Term Loan 11.25 % Prime 6.00 % 9.50 % 11.25 % 3.00 % July 1, 2028 3,750 3,705 3,705
Term Loan 11.25 % Prime 6.00 % 9.50 % 11.25 % 3.00 % July 1, 2028 3,750 3,705 3,705
Havenly, Inc. (2)(12) Consumer-related Technologies Term Loan 13.50 % Prime 5.00 % 5.00 % - 4.00 % March 1, 2027 2,000 1,335 1,335
Term Loan 13.50 % Prime 5.00 % 5.00 % - 4.00 % March 1, 2027 3,000 2,003 2,003
Term Loan 12.00 % Prime 3.50 % 10.50 % - 7.78 % February 1, 2028 2,813 2,813 2,813
Term Loan 12.00 % Prime 3.50 % 10.50 % - 7.78 % February 1, 2028 2,813 2,813 2,813
Lyrical Foods, Inc. (2)(12) Consumer-related Technologies Term Loan 11.00 % Prime 2.50 % 8.00 % - - September 1, 2027 2,598 2,589 2,351
MyForest Foods Co. (2)(12) Consumer-related Technologies Term Loan 15.25 % Prime 6.75 % 10.00 % - 3.00 % October 1, 2025 4,000 3,975 3,975
Term Loan 15.25 % Prime 6.75 % 10.00 % - 3.00 % October 1, 2025 2,000 1,987 1,987
NextCar Holding Company, Inc. (2)(12) Consumer-related Technologies Term Loan 14.25 % (11) Prime 5.75 % 9.00 % - 5.25 % October 31, 2023 5,547 5,505 4,894
Term Loan 14.25 % (11) Prime 5.75 % 9.00 % - 5.25 % October 31, 2023 2,219 2,204 1,960
Term Loan 14.25 % (11) Prime 5.75 % 9.00 % - 5.25 % October 31, 2023 2,774 2,759 2,453
Term Loan 14.25 % (11) Prime 5.75 % 9.00 % - 5.25 % October 31, 2023 3,328 3,310 2,943
Term Loan 14.25 % (11) Prime 5.75 % 9.00 % - 5.25 % October 31, 2023 2,774 2,747 2,443
Term Loan 14.25 % (11) Prime 5.75 % 9.00 % - 5.25 % October 31, 2023 2,774 2,747 2,443
Term Loan 14.25 % (11) Prime 5.75 % 9.00 % - 5.25 % October 31, 2023 5,547 5,493 4,884
Term Loan 14.25 % (11) Prime 5.75 % 9.00 % - 5.25 % October 31, 2023 2,774 2,746 2,441
Optoro, Inc. (2)(12) Consumer-related Technologies Term Loan 14.75 % Prime 6.25 % 9.50 % - 4.00 % August 1, 2027 2,500 2,408 2,408
Term Loan 14.75 % Prime 6.25 % 9.50 % - 4.00 % July 1, 2028 1,875 1,783 1,783
Primary Kids, Inc. (2)(12) Consumer-related Technologies Term Loan 15.75 % Prime 7.25 % 10.50 % - 3.00 % March 1, 2025 1,700 1,683 1,683
Term Loan 15.75 % Prime 7.25 % 10.50 % - 3.00 % March 1, 2025 1,700 1,683 1,683
Term Loan 15.75 % Prime 7.25 % 10.50 % - 3.00 % September 1, 2025 2,300 2,277 2,277
Unagi, Inc. (2)(12)(13) Consumer-related Technologies Term Loan 16.25 % (11) Prime 7.75 % 11.00 % - - May 1, 2027 1,108 1,086 872
Term Loan 16.25 % (11) Prime 7.75 % 11.00 % - - May 1, 2027 554 543 436
Term Loan 16.25 % (11) Prime 7.75 % 11.00 % - - May 1, 2027 554 543 436
Liqid, Inc. (2)(12) Networking Term Loan 14.75 % Prime 6.25 % 9.50 % - 4.00 % September 1, 2024 1,833 1,807 1,807
Term Loan 14.75 % Prime 6.25 % 9.50 % - 4.00 % September 1, 2024 1,833 1,807 1,807
Term Loan 14.75 % Prime 6.25 % 9.50 % - 4.00 % September 1, 2024 917 903 903
Term Loan 14.75 % Prime 6.25 % 9.50 % - 4.00 % September 1, 2024 917 903 903
Term Loan 14.75 % Prime 6.25 % 9.50 % - 4.00 % September 1, 2024 917 887 887
BriteCore Holdings, Inc. (2)(12) Software Term Loan 14.00 % Prime 5.50 % 14.00 % - 3.00 % October 1, 2028 5,000 4,857 4,857
Term Loan 14.00 % Prime 5.50 % 14.00 % - 3.00 % October 1, 2028 2,500 2,464 2,464
Term Loan 14.00 % Prime 5.50 % 14.00 % - 3.00 % October 1, 2028 2,500 2,464 2,464
Term Loan 14.00 % Prime 5.50 % 14.00 % - 3.00 % October 1, 2028 2,500 2,464 2,464

See Notes to Consolidated Financial Statements

Table of Contents

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Schedule of Investments (Unaudited)

September 30, 2023

(Dollars in thousands)

Portfolio Company (1)(3) Sector Type of Investment (7) Cash Rate (4) Index Margin Floor Ceiling ETP (10) Maturity Date Principal Amount Cost of Investments (6)(9) Fair Value (9)
Dropoff, Inc. (2)(12) Software Term Loan 15.00 % (11) Prime 6.50 % 9.75 % - 3.50 % April 1, 2026 6,550 6,432 6,377
Term Loan 15.00 % (11) Prime 6.50 % 9.75 % - 3.50 % April 1, 2026 6,046 5,937 5,886
Term Loan 15.00 % (11) Prime 6.50 % 9.75 % - 3.50 % August 1, 2026 2,519 2,472 2,451
Engage3, LLC (2)(12) Software Term Loan 14.75 % Prime 6.25 % 9.75 % - 4.50 % July 1, 2027 3,750 3,726 3,726
Term Loan 14.75 % Prime 6.25 % 9.75 % - 4.50 % July 1, 2027 3,750 3,726 3,726
Kodiak Robotics, Inc. (2)(12) Software Term Loan 14.00 % Prime 5.50 % 10.25 % - 4.00 % April 1, 2026 10,000 9,877 9,877
Term Loan 14.00 % Prime 5.50 % 10.25 % - 4.00 % April 1, 2026 10,000 9,877 9,877
Term Loan 14.00 % Prime 5.50 % 10.25 % - 4.00 % April 1, 2026 5,000 4,939 4,939
Term Loan 14.00 % Prime 5.50 % 10.25 % - 4.00 % April 1, 2026 5,000 4,939 4,939
Lemongrass Holdings, Inc. (2)(12) Software Term Loan 15.00 % Prime 6.50 % 9.75 % - 2.50 % March 1, 2026 5,000 4,965 4,965
Term Loan 15.00 % Prime 6.50 % 9.75 % - 2.50 % March 1, 2026 2,500 2,483 2,483
Lytics, Inc. (2)(12) Software Term Loan 14.50 % Prime 6.00 % 14.25 % - 4.00 % November 1, 2026 2,500 2,418 2,350
Term Loan 14.50 % Prime 6.00 % 14.25 % - 4.00 % December 1, 2026 1,250 1,236 1,201
Term Loan 14.50 % Prime 6.00 % 14.25 % - 4.00 % April 1, 2027 1,000 993 966
Mirantis, Inc. (2)(12) Software Term Loan 12.00 % Prime 3.50 % 11.75 % - 4.00 % October 1, 2028 5,000 4,774 4,774
Term Loan 12.00 % Prime 3.50 % 11.75 % - 4.00 % October 1, 2028 5,000 4,910 4,910
Term Loan 12.00 % Prime 3.50 % 11.75 % - 4.00 % October 1, 2028 5,000 4,910 4,910
Term Loan 12.00 % Prime 3.50 % 11.75 % - 4.00 % October 1, 2028 5,000 4,910 4,910
Noodle Partners, Inc. (2)(12) Software Term Loan 13.50 % Prime 5.00 % 12.00 % - 3.00 % March 1, 2027 10,000 9,814 9,814
Term Loan 13.50 % Prime 5.00 % 12.00 % - 3.00 % March 1, 2027 5,000 4,938 4,938
Term Loan 13.50 % Prime 5.00 % 12.00 % - 3.00 % March 1, 2027 5,000 4,939 4,939
Reputation Institute, Inc. (2)(12) Software Term Loan 15.75 % Prime 7.25 % 10.50 % - 3.00 % August 1, 2025 3,833 3,785 3,785
Slingshot Aerospace, Inc. (2)(12) Software Term Loan 14.25 % Prime 5.75 % 9.75 % - 5.00 % August 1, 2026 5,000 4,952 4,952
Term Loan 14.25 % Prime 5.75 % 9.75 % - 5.00 % August 1, 2026 5,000 4,952 4,952
Term Loan 14.25 % Prime 5.75 % 9.75 % - 5.00 % August 1, 2026 5,000 4,952 4,952
Term Loan 14.25 % Prime 5.75 % 9.75 % - 5.00 % August 1, 2026 5,000 4,952 4,952
Supply Network Visibility Holdings LLC (2)(12) Software Term Loan 12.75 % Prime 4.25 % 12.00 % - 2.50 % June 1, 2028 2,500 2,457 2,457
Term Loan 12.75 % Prime 4.25 % 12.00 % - 2.50 % June 1, 2028 3,500 3,489 3,489
Term Loan 12.75 % Prime 4.25 % 12.00 % - 2.50 % June 1, 2028 2,500 2,492 2,492
Term Loan 12.75 % Prime 4.25 % 12.00 % - 2.50 % June 1, 2028 1,500 1,495 1,495
Viken Detection Corporation (2)(12) Software Term Loan 12.50 % Prime 4.00 % 11.75 % - 3.50 % June 1, 2027 5,000 4,768 4,768
Term Loan 12.50 % Prime 4.00 % 11.75 % - 3.50 % June 1, 2027 2,500 2,464 2,464
Term Loan 12.50 % Prime 4.00 % 11.75 % - 3.50 % June 1, 2027 2,500 2,464 2,464
Total Non-Affiliate Debt Investments — Technology 282,962 278,989
Non-Affiliate Debt Investments — Healthcare information and services — 17.4% (8)
Hound Labs inc. (2) (12) Diagnostics Term Loan 14.50 % Prime 6.00 % 9.25 % - 3.50 % June 1, 2026 2,500 2,481 2,481
Term Loan 14.50 % Prime 6.00 % 9.25 % - 3.50 % June 1, 2026 2,500 2,481 2,481
Term Loan 14.50 % Prime 6.00 % 9.25 % - 3.50 % June 1, 2026 5,000 4,962 4,962
BrightInsight, Inc. (2)(12) Software Term Loan 14.00 % Prime 5.50 % 9.50 % - 3.00 % August 1, 2027 7,000 6,677 6,677
Term Loan 14.00 % Prime 5.50 % 9.50 % - 3.00 % August 1, 2027 3,500 3,459 3,459
Term Loan 14.00 % Prime 5.50 % 9.50 % - 3.00 % August 1, 2027 3,500 3,459 3,459
Term Loan 14.00 % Prime 5.50 % 9.50 % - 3.00 % April 1, 2028 2,750 2,708 2,708
Elligo Health Research, Inc. (2)(12) Software Term Loan 12.00 % Prime 3.50 % 11.75 % - 4.00 % October 1, 2027 10,000 9,647 9,647
Term Loan 12.00 % Prime 3.50 % 11.75 % - 4.00 % October 1, 2027 5,000 4,921 4,921
Term Loan 12.00 % Prime 3.50 % 11.75 % - 4.00 % October 1, 2027 5,000 4,921 4,921
Term Loan 12.00 % Prime 3.50 % 11.75 % - 4.00 % October 1, 2027 5,000 4,921 4,921
SafelyYou, Inc. (2)(12) Software Term Loan 11.75 % Prime 3.25 % 11.00 % - 5.00 % June 1, 2027 5,000 4,642 4,642
Term Loan 11.75 % Prime 3.25 % 11.00 % - 5.00 % June 1, 2027 5,000 4,912 4,912
Total Non-Affiliate Debt Investments — Healthcare information and services 60,191 60,191
Total Non- Affiliate Debt Investments 676,864 663,399

See Notes to Consolidated Financial Statements

Table of Contents

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Schedule of Investments (Unaudited)

September 30, 2023

(Dollars in thousands)

Cost of Fair
Portfolio Company (1)(3) Sector Type of Investment (7) Number of Shares Investments (6)(9) Value (9)
Non-Affiliate Warrant Investments — 7.6% (8)
Non-Affiliate Warrants — Life Science — 2.0% (8)
Avalo Therapeutics, Inc. (2)(5)(12) Biotechnology Common Stock Warrant 26,444 311 —
Castle Creek Biosciences, Inc. (2)(12) Biotechnology Preferred Stock Warrant 7,404 214 348
Emalex Biosciences, Inc. (2)(12) Biotechnology Preferred Stock Warrant 110,402 176 269
Imunon, Inc. (2)(5)(12) Biotechnology Common Stock Warrant 19,671 65 —
KSQ Therapeutics, Inc. (2) (12) Biotechnology Preferred Stock Warrant 48,076 50 60
Mustang Bio, Inc. (2)(5)(12) Biotechnology Common Stock Warrant 16,611 146 —
Native Microbials, Inc (2)(12) Biotechnology Preferred Stock Warrant 103,679 64 165
PDS Biotechnology Corporation (2)(5)(12) Biotechnology Common Stock Warrant 299,848 162 667
Provivi, Inc. (2)(12) Biotechnology Preferred Stock Warrant 345,327 487 205
Stealth Biotherapeutics Inc. (2)(12) Biotechnology Common Stock Warrant 318,181 264 127
Tallac Therapeutics, Inc. (2)(12) Biotechnology Preferred Stock Warrant 1,600,002 194 194
vTv Therapeutics Inc. (2)(5)(12) Biotechnology Common Stock Warrant 95,293 44 —
Xeris Pharmaceuticals, Inc. (2)(5)(12) Biotechnology Common Stock Warrant 126,000 72 17
AccuVein Inc. (2)(12) Medical Device Common Stock Warrant 1,175 24 —
Aerin Medical, Inc. (2)(12) Medical Device Preferred Stock Warrant 1,818,183 66 1,210
Aerobiotix, LLC (2)(12) Medical Device Preferred Stock Warrant 8,800 48 10
Canary Medical Inc. (2)(12) Medical Device Preferred Stock Warrant 12,153 86 1,307
Candesant Biomedical, Inc. (2)(12) Medical Device Preferred Stock Warrant 93,336 152 152
Ceribell, Inc. (2)(12) Medical Device Preferred Stock Warrant 145,483 69 213
Cognoa, Inc. (2)(12) Medical Device Preferred Stock Warrant 4,106,174 148 184
Conventus Orthopaedics, Inc. (2)(12) Medical Device Preferred Stock Warrant 7,972,222 218 236
CSA Medical, Inc. (2)(12) Medical Device Preferred Stock Warrant 1,730,746 172 176
CVRx, Inc. (2)(5)(12) Medical Device Common Stock Warrant 47,410 76 272
Infobionic, Inc. (2)(12) Medical Device Preferred Stock Warrant 317,647 124 59
Magnolia Medical Technologies, Inc. (2)(12) Medical Device Preferred Stock Warrant 809,931 194 395
Meditrina, Inc. (2)(12) Medical Device Preferred Stock Warrant 233,993 83 104
Robin Healthcare, Inc. (2)(12) Medical Device Preferred Stock Warrant 86,066 16 —
Scientia Vascular, Inc (2)(12) Medical Device Preferred Stock Warrant 27,036 59 230
Sonex Health, Inc. (2)(12) Medical Device Preferred Stock Warrant 2,637,043 275 304
VERO Biotech LLC (2)(12) Medical Device Preferred Stock Warrant 408 53 1
Swift Health Systems Inc. (2)(12) Medical Device Preferred Stock Warrant 135,484 71 40
Total Non-Affiliate Warrants — Life Science 4,183 6,945

See Notes to Consolidated Financial Statements

Table of Contents

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Schedule of Investments (Unaudited)

September 30, 2023

(Dollars in thousands)

Cost of Fair
Portfolio Company (1)(3) Sector Type of Investment (7) Number of Shares Investments (6)(9) Value (9)
Non-Affiliate Warrants — Sustainability — 0.2% (8)
New Aerofarms, Inc. assignee of Aerofarms, Inc. (2)(12)(15) Other Sustainability Preferred Stock Warrant 400,000 81 81
LiquiGlide, Inc. (2)(12) Other Sustainability Common Stock Warrant 61,359 41 59
Nexii Building Solutions, Inc. (2)(12)(14) Other Sustainability Common Stock Warrant 217,726 490 —
Soli Organic, Inc. (2)(12) Other Sustainability Preferred Stock Warrant 681 214 371
Temperpack Technologies, Inc. (2)(12) Other Sustainability Preferred Stock Warrant 46,311 175 322
Total Non-Affiliate Warrants — Sustainability 1,001 833
Non-Affiliate Warrants — Technology — 4.7% (8)
Axiom Space, Inc. (2)(12) Communications Common Stock Warrant 1,991 46 69
Intelepeer Holdings, Inc. (2)(12) Communications Preferred Stock Warrant 2,936,535 138 3,283
PebblePost, Inc. (2)(12) Communications Preferred Stock Warrant 598,850 92 139
Alula Holdings, Inc. (2)(12) Consumer-related Technologies Preferred Stock Warrant 20,000 93 —
Aterian, Inc. (2)(5)(12) Consumer-related Technologies Common Stock Warrant 76,923 195 —
Caastle, Inc. (2)(12) Consumer-related Technologies Preferred Stock Warrant 268,591 68 1,060
CAMP NYC, Inc. (2)(12) Consumer-related Technologies Preferred Stock Warrant 75,997 22 30
Clara Foods Co. (2)(12) Consumer-related Technologies Preferred Stock Warrant 46,745 31 128
CZV, Inc. (2)(12) Consumer-related Technologies Common Stock Warrant 65,569 81 81
Divergent Technologies, Inc. (2)(12) Consumer-related Technologies Preferred Stock Warrant 37,294 92 279
Havenly, Inc. (2)(12) Consumer-related Technologies Common Stock Warrant 1,312,500 2,945 2,676
MyForest Foods Co. (2)(12) Consumer-related Technologies Preferred Stock Warrant 250 29 63
NextCar Holding Company, Inc. (2)(12) Consumer-related Technologies Preferred and Common Stock Warrant 1,237,370 197 —
Optoro, Inc. (2)(12) Consumer-related Technologies Preferred Stock Warrant 11,550 182 182
Primary Kids, Inc. (2)(12) Consumer-related Technologies Preferred Stock Warrant 553,778 57 596
Quip NYC Inc. (2)(12) Consumer-related Technologies Preferred Stock Warrant 6,191 325 538
Unagi, Inc. (2)(12) Consumer-related Technologies Preferred Stock Warrant 171,081 32 —
Updater, Inc.(2)(12) Consumer-related Technologies Common Stock Warrant 108,333 34 —
CPG Beyond, Inc. (2)(12) Data Storage Preferred Stock Warrant 500,000 242 917
Silk, Inc. (2)(12) Data Storage Preferred Stock Warrant 394,110 175 153
Global Worldwide LLC (2)(12) Internet and Media Preferred Stock Warrant 245,810 75 63
Rocket Lawyer Incorporated (2)(12) Internet and Media Preferred Stock Warrant 261,721 92 336
Skillshare, Inc. (2)(12) Internet and Media Preferred Stock Warrant 139,074 162 1,216
Liqid, Inc. (2)(12) Networking Preferred Stock Warrant 344,102 364 251
Halio, Inc. (2)(12) Power Management Preferred Stock Warrant 5,002,574 1,585 2,901
Avalanche Technology, Inc. (2)(12) Semiconductors Preferred and Common Stock Warrant 6,081 56 —
BriteCore Holdings, Inc. (2)(12) Software Preferred Stock Warrant 161,215 98 147
Dropoff, Inc. (2)(12) Software Common Stock Warrant 516,732 455 54
Mirantis, Inc. (2)(12) Software Common Stock Warrant 948,275 223 223
E La Carte, Inc. (2)(5)(12) Software Common Stock Warrant 147,361 60 —
Everstream Holdings, LLC (2)(12) Software Preferred Stock Warrant 350,000 70 71
Kodiak Robotics, Inc. (2)(12) Software Preferred Stock Warrant 639,918 273 124
Lemongrass Holdings, Inc. (2)(12) Software Preferred Stock Warrant 101,308 32 43
Lotame Solutions, Inc. (2)(12) Software Preferred Stock Warrant 71,305 18 44
Lytics, Inc. (2)(12) Software Preferred Stock Warrant 85,543 43 1
Noodle Partners, Inc. (2)(12) Software Preferred Stock Warrant 84,037 115 79
Reputation Institute, Inc. (2)(12) Software Preferred Stock Warrant 3,731 56 48
Revinate Holdings, Inc. (2)(12) Software Preferred Stock Warrant 682,034 44 103
SIGNiX, Inc. (12) Software Preferred Stock Warrant 186,235 225 —
Slingshot Aerospace, Inc. (2)(12) Software Preferred Stock Warrant 309,208 123 135
Supply Network Visibility Holdings LLC (2)(12) Software Preferred Stock Warrant 682 64 146
Topia Mobility, Inc. (2)(12) Software Preferred Stock Warrant 3,049,607 138 —
Viken Detection Corporation (2)(12) Software Preferred Stock Warrant 345,443 120 122
xAd, Inc. (2)(12) Software Preferred Stock Warrant 4,343,348 177 12
Total Non-Affiliate Warrants — Technology 9,744 16,313

See Notes to Consolidated Financial Statements

Table of Contents

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Schedule of Investments (Unaudited)

September 30, 2023

(Dollars in thousands)

Cost of Fair
Portfolio Company (1)(3) Sector Type of Investment (7) Number of Shares Investments (6)(9) Value (9)
Non-Affiliate Warrants — Healthcare information and services — 0.6% (8)
Hound Labs, Inc (2) (12) Diagnostics Preferred Stock Warrant 171,370 47 15
Kate Farms, Inc. (2)(12) Other Healthcare Preferred Stock Warrant 82,965 102 1,379
BrightInsight, Inc. (2)(12) Software Preferred Stock Warrant 85,066 167 —
Elligo Health Research, Inc. (2)(12) Software Preferred Stock Warrant 652,250 189 191
Medsphere Systems Corporation (2)(12) Software Preferred Stock Warrant 7,097,792 61 346
SafelyYou, Inc. (2)(12) Software Preferred Stock Warrant 150,353 163 167
Total Non-Affiliate Warrants — Healthcare information and services 729 2,098
Total Non-Affiliate Warrants 15,657 26,189
Non-Affiliate Other Investments — Life Science — 0.3% (8)
Lumithera, Inc. (12) Medical Device Royalty Agreement 1,200 1,100
ZetrOZ, Inc. (12) Medical Device Royalty Agreement — —
Total Non-Affiliate Other Investments 1,200 1,100
Non-Affiliate Equity — 1.4% (8)
Cadrenal Therapeutics, Inc. (5) Biotechnology Common Stock 600,000 — 408
Castle Creek Biosciences, Inc. (12) Biotechnology Common Stock 1,162 250 250
Emalex Biosciences, Inc. (12) Biotechnology Common Stock 32,831 355 356
Getaround, Inc. (2)(5) Consumer-related Technologies Common Stock 87,082 253 30
NextCar Holding Company, Inc. (2)(12) Technology Preferred Stock 2,688,971 89 89
SnagAJob.com, Inc. (12) Consumer-related Technologies Common Stock 82,974 9 83
Lumithera, Inc. (12) Medical Device Common Stock 392,651 2,000 1,700
Tigo Energy, Inc. (5) Other Sustainability Common Stock 5,205 111 36
Branded Online, Inc. (2)(5) Software Common Stock 5,398 1,079 3
Decisyon, Inc. (12) Software Preferred Stock 280,000 2,800 1,281
Lotame, Inc. (12) Software Preferred Stock 66,127 4 193
Axiom Space, Inc. (12) Technology Preferred Stock 1,810 261 306
Total Non-Affiliate Equity 7,211 4,735
Total Non-Affiliate Portfolio Investment Assets $ 700,932 $ 695,423

See Notes to Consolidated Financial Statements

Table of Contents

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Schedule of Investments (Unaudited)

September 30, 2023

(Dollars in thousands)

Portfolio Company (1)(3) Sector Type of Investment (7) Cash Rate (4) Index Margin Floor Ceiling ETP (10) Maturity Date Principal Amount Cost of Investments (6)(9) Fair Value (9)
Non-Controlled Affiliate Investments — 5.9% (8) **** **** **** ****
Non-Controlled Affiliate Debt Investments — Life Sciences — 3.5% (8) **** **** **** ****
Evelo Biosciences, Inc. (2)(5)(12)(13) Biotechnology Term Loan 12.75 % Prime 4.25 % 11.00 % - 4.25 % January 1, 2028 7,778 7,672 2,666
Term Loan 12.75 % Prime 4.25 % 11.00 % - 4.25 % January 1, 2028 11,667 11,509 3,997
Term Loan 12.75 % Prime 4.25 % 11.00 % - 4.25 % January 1, 2028 4,681 4,618 1,604
Term Loan 12.75 % Prime 4.25 % 11.00 % - 4.25 % January 1, 2028 4,667 4,603 1,597
Term Loan 12.75 % Prime 4.25 % 11.00 % - 4.25 % January 1, 2028 3,111 3,069 1,068
Term Loan 12.75 % Prime 4.25 % 11.00 % - 4.25 % January 1, 2028 3,111 3,069 1,068
Total Non-Controlled Affiliate Debt Investments 34,540 12,000
Cost of Fair
--- --- --- --- --- --- --- --- ---
Portfolio Company (1)(3) Sector Type of Investment (7) Number of Shares Investments (6)(9) Value (9)
Non-controlled Affiliate Equity — Life Sciences — 2.4% (8)
Aulea Medical, Inc. (12)(16) Medical Device Common Stock 660,537 — —
Evelo Biosciences, Inc. (5) Biotechnology Common Stock 2,164,502 5,000 8,485
Total Non-Controlled Affiliate Equity 5,000 8,485
Non-controlled Affiliate Warrants — Life Sciences — 0.0% (8)
Evelo Biosciences, Inc. (2)(5)(12) Biotechnology Common Stock 23,196 126 —
Total Non-Controlled Affiliate Warrants 126 —
Total Non-Controlled Affiliate Portfolio Investment Assets $ 39,666 $ 20,485
Portfolio Company (1)(3) Sector Type of Investment (7) Cash Rate (4) Index Margin Floor Ceiling ETP (10) Maturity Date Principal Amount Cost of Investments (6)(9) Fair Value (9)
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Controlled Affiliate Investments — 3.8% (8) **** **** **** ****
Controlled Affiliate Debt Investments — Technology — 1.3% (8) **** **** **** ****
Better Place Forests Co. (12) Consumer-related Technologies Term Loan 12.25 % (11) Prime 3.75 % 12.00 % - 2.78 % August 1, 2029 3,604 3,556 3,006
Term Loan 12.25 % (11) Prime 3.75 % 12.00 % - 2.78 % August 1, 2029 1,719 1,695 1,433
Total Controlled Affiliate Debt Investments 5,251 4,439
Cost of Fair
--- --- --- --- --- --- --- --- ---
Portfolio Company (1)(3) Sector Type of Investment (7) Number of Shares Investments (6)(9) Value (9)
Controlled Affiliate Equity — Technology — 0.7% (8)
Better Place Forests Co. (12) Technology Preferred and Common Stock 2,551,596 2,811 2,552
Total Controlled Affiliate Equity 2,811 2,552
Controlled Affiliate Other Investments — Life Sciences — 1.8% (8)
HIMV LLC (12)(17) Biotechnology Other Investment 6,154 6,154
Total Controlled Affiliate Equity 6,154 6,154
Total Controlled Affiliate Portfolio Investment Assets $ 14,216 $ 13,145
Total Portfolio Investment Assets — 210.4% (8) $ 754,814 $ 729,053
(1) All investments of the Company are in entities which are organized under the laws of the United States and have a principal place of business in the United States, unless otherwise noted.
--- ---
(2) Has been pledged as collateral under the revolving credit facility (the “Key Facility”) with KeyBank National Association (“Key”), the Note Funding Agreement (the “NYL Facility”, together with the Key Facility, the "Credit Facilities") with several entities owned or affiliated with New York Life Insurance Company (“NYL Noteholders”), the term debt securitization in connection with which an affiliate of the Company made an offering of $100.0 million in aggregate principal amount of fixed rate asset-backed notes that were issued in conjunction with the $160.0 million securitization of secured loans the Company completed on *August 13, 2019 (*the “2019 Asset-Backed Notes”), and/or the term debt securitization in connection with which an affiliate of the Company made an offering of $100.0 million in aggregate principal amount of fixed rate asset-backed notes that were issued in conjunction with the $157.8 million securitization of secured loans the Company completed on *November 9, 2022 (*the “2022 Asset-Backed Notes”).
--- ---
(3) All non-affiliate investments are investments in which the Company owns less than 5% of the voting securities of the portfolio company. All non-controlled affiliate investments are investments in which the Company owns 5% or more of the voting securities of the portfolio company but not more than 25% of the voting securities of the portfolio company. All controlled affiliate investments are investments in which the Company owns more than 25% of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company (including through a management agreement).
--- ---
(4) All interest is payable in cash due monthly in arrears, unless otherwise indicated, and applies only to the Company’s debt investments. Interest rate is the annual interest rate on the debt investment and does not include end-of-term payments (“ETPs”), and any additional fees related to the investments, such as deferred interest, commitment fees or prepayment fees. Debt investments are at variable rates for the term of the debt investment, unless otherwise indicated. For each debt investment, the current interest rate in effect as of  September 30, 2023 is provided.
--- ---
(5) Portfolio company is a public company.
--- ---

See Notes to Consolidated Financial Statements

Table of Contents

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Schedule of Investments (Unaudited)

September 30, 2023

(Dollars in thousands)

(6) For debt investments, represents principal balance less unearned income.
(7) Warrants, Equity and Other Investments are non-income producing.
--- ---
(8) Value as a percent of net assets.
--- ---
(9) As of September 30, 2023, 4.5% and 3.9% of the Company’s total assets on a cost and fair value basis, respectively, are in non-qualifying assets. Under the 1940 Act, the Company may not acquire any non-qualifying assets unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.
--- ---
(10) ETPs are contractual fixed-interest payments due in cash at the maturity date of the applicable debt investment, including upon any prepayment, and are a fixed percentage of the original principal balance of the debt investments unless otherwise noted. Interest will accrue during the life of the debt investment on each ETP and will be recognized as non-cash income until it is actually paid. Therefore, a portion of the incentive fee the Company may pay its Advisor will be based on income that the Company has not yet received in cash.
--- ---
(11) Debt investment has a payment-in-kind (“PIK”) feature. PIK interest is accrued, added to the principal balance of the debt investment, and payable at maturity.
--- ---
(12) The fair value of the investment was valued using significant unobservable inputs.
--- ---
(13) Debt investment is on non-accrual status as of September 30, 2023.
--- ---
(14) Entity is organized under the laws of Canada and has a principal place of business in Canada.
--- ---
(15) On or about September 13, 2023, in connection with New Aerofarms, Inc. purchase of substantially all of the assets of Aerofarms, Inc.in a bankruptcy process, New Aerofarms, Inc. assumed all of the debt investments of Horizon in Aerofarms, Inc.
--- ---
(16) On July 31, 2023, pursuant to a certain Secured Party Bill of Sale and Transfer Agreement, the Company sold substantially all of the assets of Corinth MedTech, Inc., a borrower of the Company, to Aulea Medical Inc. (“Aulea”) in consideration of 660,537 shares of the common stock of  Aulea.
--- ---
(17) By an Order of the Supreme Court of Nova Scotia made May 1, 2023, as amended and restated by an Order of the CCAA Court made May 5, IMV, Inc. (“IMV”) commenced proceedings  (the “CCAA Proceedings”) under the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended to seek creditor protection for IMV and on June 2, 2023, IMV obtained recognition of the CCAA Proceedings under Chapter 15 of the United States Bankruptcy Code in proceedings before the United States Bankruptcy Court for the District of Delaware. In September 2023, the Company, with its co-lender to IMV, credit-bid and acquired substantially all of the assets of IMV through HIMV LLC, an entity formed to acquire the assets of IMV. HIMV LLC is 70% owned by HRZN and 30% owned by the co-lender.
--- ---

See Notes to Consolidated Financial Statements

Table of Contents

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Schedule of Investments

December 31, 2022

(Dollars in thousands)

Portfolio Company (1)(3) Sector Type of Investment (7) Cash Rate (4) Index Margin Floor Ceiling ETP (10) Maturity Date Principal Amount Cost of Investments (6)(9) Fair Value (9)
Non-Affiliate Investments — 226.1% (8) **** **** **** **** ****
Non-Affiliate Debt Investments — 215.5% (8) **** **** **** **** ****
Non-Affiliate Debt Investments — Life Science — 99.7% (8) **** **** **** **** ****
Avalo Therapeutics, Inc. (2)(5)(12) Biotechnology Term Loan 13.75 % Prime 6.25 % 9.50 % - 3.00 % January 1, 2025 $ 2,885 $ 2,853 $ 2,777
Term Loan 13.75 % Prime 6.25 % 9.50 % - 3.00 % January 1, 2025 2,885 2,823 2,750
Term Loan 13.75 % Prime 6.25 % 9.50 % - 3.00 % January 1, 2025 1,442 1,411 1,374
Term Loan 13.75 % Prime 6.25 % 9.50 % - 3.00 % February 1, 2025 2,885 2,821 2,748
Term Loan 13.75 % Prime 6.25 % 9.50 % - 3.00 % February 1, 2025 2,885 2,821 2,748
Term Loan 13.75 % Prime 6.25 % 9.50 % - 3.00 % April 1, 2025 1,442 1,408 1,371
Term Loan 13.75 % Prime 6.25 % 9.50 % - 3.00 % April 1, 2025 1,442 1,408 1,371
Castle Creek Biosciences, Inc. (2)(12) Biotechnology Term Loan 12.50 % Prime 6.05 % 9.55 % 13.50 % 5.50 % May 1, 2026 5,000 4,891 4,891
Term Loan 12.50 % Prime 6.05 % 9.55 % 13.50 % 5.50 % May 1, 2026 5,000 4,963 4,963
Term Loan 12.50 % Prime 6.05 % 9.55 % 13.50 % 5.50 % May 1, 2026 3,000 2,978 2,978
Term Loan 12.50 % Prime 6.05 % 9.55 % 13.50 % 5.50 % May 1, 2026 5,000 4,963 4,963
Term Loan 12.50 % Prime 6.05 % 9.55 % 13.50 % 5.50 % May 1, 2026 5,000 4,963 4,963
Term Loan 12.50 % Prime 6.05 % 9.55 % 13.50 % 5.50 % May 1, 2026 3,000 2,978 2,978
Emalex Biosciences, Inc. (2)(12) Biotechnology Term Loan 12.07 % Libor 7.90 % 9.75 % - 5.00 % June 1, 2024 1,979 1,962 1,962
Term Loan 12.07 % Libor 7.90 % 9.75 % - 5.00 % June 1, 2024 1,979 1,963 1,963
Term Loan 12.07 % Libor 7.90 % 9.75 % - 5.00 % November 1, 2025 5,000 4,923 4,923
Term Loan 12.07 % Libor 7.90 % 9.75 % - 5.00 % May 1, 2026 5,000 4,912 4,912
Evelo Biosciences, Inc. (2)(5)(12) Biotechnology Term Loan 11.75 % Prime 4.75 % 11.00 % - 4.25 % January 1, 2028 10,000 9,872 9,872
Term Loan 11.75 % Prime 4.75 % 11.00 % - 4.25 % January 1, 2028 15,000 14,808 14,808
Term Loan 11.75 % Prime 4.75 % 11.00 % - 4.25 % January 1, 2028 6,000 5,923 5,923
Term Loan 11.75 % Prime 4.75 % 11.00 % - 4.25 % January 1, 2028 6,000 5,923 5,923
Term Loan 11.75 % Prime 4.75 % 11.00 % - 4.25 % January 1, 2028 4,000 3,949 3,949
Term Loan 11.75 % Prime 4.75 % 11.00 % - 4.25 % January 1, 2028 4,000 3,949 3,949
F-Star Therapeutics, Inc. (2)(5)(12) Biotechnology Term Loan 13.25 % Prime 6.25 % 9.50 % - 4.00 % April 1, 2025 2,500 2,476 2,476
Term Loan 13.25 % Prime 6.25 % 9.50 % - 4.00 % July 1, 2025 2,500 2,473 2,473
Greenlight Biosciences, Inc. (2)(5)(12) Biotechnology Term Loan 13.25 % Prime 5.75 % 9.00 % - 3.00 % July 1, 2025 5,000 4,857 4,857
Term Loan 13.25 % Prime 5.75 % 9.00 % - 3.00 % July 1, 2025 2,500 2,430 2,430
IMV Inc. (2)(5)(12)(14) Biotechnology Term Loan 13.25 % Prime 5.75 % 9.00 % - 5.00 % July 1, 2025 5,000 4,946 4,946
Term Loan 13.25 % Prime 5.75 % 9.00 % - 5.00 % July 1, 2025 2,500 2,473 2,473
Term Loan 13.25 % Prime 5.75 % 9.00 % - 5.00 % January 1, 2026 5,000 4,947 4,947
Term Loan 13.25 % Prime 5.75 % 9.00 % - 5.00 % January 1, 2026 5,000 4,947 4,947
KSQ Therapeutics, Inc. (2) (12) Biotechnology Term Loan 12.25 % Prime 4.75 % 8.50 % - 5.50 % May 1, 2027 6,250 6,077 6,077
Term Loan 12.25 % Prime 4.75 % 8.50 % - 5.50 % May 1, 2027 6,250 6,177 6,177
Native Microbials, Inc (2) (12) Biotechnology Term Loan 12.75 % Prime 5.25 % 8.50 % - 5.00 % November 1, 2026 3,750 3,630 3,630
Term Loan 12.75 % Prime 5.25 % 8.50 % - 5.00 % November 1, 2026 2,500 2,469 2,469
PDS Biotechnology Corporation (2)(5)(12) Biotechnology Term Loan 13.25 % Prime 5.75 % 9.75 % - 3.75 % September 1, 2026 10,000 9,701 9,701
Term Loan 13.25 % Prime 5.75 % 9.75 % - 3.75 % September 1, 2026 3,750 3,697 3,697
Term Loan 13.25 % Prime 5.75 % 9.75 % - 3.75 % September 1, 2026 3,750 3,697 3,697
Provivi, Inc. (2)(12) Biotechnology Term Loan 12.67 % Libor 8.50 % 9.50 % - 5.50 % December 1, 2024 4,667 4,597 4,597
Term Loan 12.67 % Libor 8.50 % 9.50 % - 5.50 % December 1, 2024 4,667 4,597 4,597
Term Loan 12.67 % Libor 8.50 % 9.50 % - 5.50 % December 1, 2024 2,333 2,280 2,280
Term Loan 12.67 % Libor 8.50 % 9.50 % - 5.50 % December 1, 2024 2,333 2,280 2,280
Term Loan 12.67 % Libor 8.50 % 9.50 % - 5.50 % December 1, 2024 2,333 2,274 2,274
Term Loan 12.67 % Libor 8.50 % 9.50 % - 5.50 % December 1, 2024 2,333 2,274 2,274
Stealth Biotherapeutics Inc. (2)(12) Biotechnology Term Loan 13.00 % Prime 5.50 % 8.75 % - 6.00 % October 1, 2025 5,000 4,914 4,914
Term Loan 13.00 % Prime 5.50 % 8.75 % - 6.00 % October 1, 2025 2,500 2,457 2,457
Aerobiotix, LLC (2)(12) Medical Device Term Loan 13.75 % Prime 6.25 % 9.50 % - 6.00 % April 1, 2026 2,500 2,463 2,364
Term Loan 13.75 % Prime 6.25 % 9.50 % - 6.00 % April 1, 2026 2,500 2,463 2,364
Canary Medical Inc. (2)(12) Medical Device Term Loan 12.75 % Prime 5.75 % 9.00 % - 7.00 % November 1, 2024 2,500 2,475 2,475
Term Loan 12.75 % Prime 5.75 % 9.00 % - 7.00 % November 1, 2024 2,500 2,489 2,489
Term Loan 12.75 % Prime 5.75 % 9.00 % - 7.00 % November 1, 2024 2,500 2,473 2,473
Ceribell, Inc. (2)(12) Medical Device Term Loan 10.50 % Prime 3.50 % 8.25 % - 5.50 % October 1, 2024 5,000 4,973 4,973
Term Loan 10.50 % Prime 3.50 % 8.25 % - 5.50 % October 1, 2024 5,000 4,973 4,973
Term Loan 10.50 % Prime 3.50 % 8.25 % - 5.50 % October 1, 2024 2,500 2,478 2,478
Term Loan 10.50 % Prime 3.50 % 8.25 % - 5.50 % October 1, 2024 2,500 2,478 2,478
Cognoa, Inc. (2)(12) Medical Device Term Loan 13.00 % Prime 5.50 % 8.75 % - 6.00 % August 1, 2026 2,500 2,466 2,466
Term Loan 13.00 % Prime 5.50 % 8.75 % - 6.00 % August 1, 2026 5,000 4,932 4,932
Conventus Orthopaedics, Inc. (2)(12) Medical Device Term Loan 12.17 % Libor 8.00 % 9.25 % - 10.36 % July 1, 2025 3,960 3,898 3,898
Term Loan 12.17 % Libor 8.00 % 9.25 % - 10.36 % July 1, 2025 3,960 3,898 3,898

See Notes to Consolidated Financial Statements

Table of Contents

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Schedule of Investments

December 31, 2022

(Dollars in thousands)

Portfolio Company (1)(3) Sector Type of Investment (7) Cash Rate (4) Index Margin Floor Ceiling ETP (10) Maturity Date Principal Amount Cost of Investments (6)(9) Fair Value (9)
Corinth Medtech, Inc. (2)(12) Medical Device Term Loan 12.25 % Prime 5.25 % 8.50 % - 20.00 % September 15, 2022 2,500 2,500 2,500
Term Loan 12.25 % Prime 5.25 % 8.50 % - 20.00 % September 15, 2022 2,500 2,500 2,500
CSA Medical, Inc. (2)(12) Medical Device Term Loan 12.37 % Libor 8.20 % 10.00 % - 5.00 % January 1, 2024 1,625 1,610 1,610
Term Loan 12.37 % Libor 8.20 % 10.00 % - 5.00 % January 1, 2024 108 107 107
Term Loan 12.37 % Libor 8.20 % 10.00 % - 5.00 % March 1, 2024 2,000 1,983 1,983
Embody, Inc. (2)(12) Medical Device Term Loan 14.00 % Prime 6.50 % 9.75 % - 28.00 % August 1, 2026 2,500 2,482 2,482
InfoBionic, Inc. (2)(12) Medical Device Term Loan 13.25 % Prime 6.25 % 9.50 % - 4.00 % October 1, 2024 3,208 3,143 3,143
Term Loan 13.25 % Prime 6.25 % 9.50 % - 4.00 % June 1, 2025 1,000 974 974
Magnolia Medical Technologies, Inc. (2)(12) Medical Device Term Loan 12.00 % Prime 5.00 % 9.75 % - 4.00 % March 1, 2025 5,000 4,939 4,939
Term Loan 12.00 % Prime 5.00 % 9.75 % - 4.00 % March 1, 2025 5,000 4,939 4,939
Term Loan 12.00 % Prime 5.00 % 9.75 % - 4.00 % March 1, 2025 5,000 4,933 4,933
Term Loan 12.00 % Prime 5.00 % 9.75 % - 4.00 % March 1, 2025 5,000 4,933 4,933
Term Loan 12.50 % Prime 5.00 % 9.75 % - 4.00 % January 1, 2027 5,000 4,913 4,913
Term Loan 12.50 % Prime 5.00 % 9.75 % - 4.00 % January 1, 2027 5,000 4,913 4,913
Robin Healthcare, Inc. (2)(12) Medical Device Term Loan 13.00 % Prime 5.50 % 10.25 % - 4.00 % November 1, 2026 3,500 3,360 3,360
Term Loan 13.00 % Prime 5.50 % 10.25 % - 4.00 % November 1, 2026 3,500 3,460 3,460
Scientia Vascular, Inc. (2)(12) Medical Device Term Loan 11.75 % Prime 4.75 % 8.50 % - 5.00 % January 1, 2027 3,750 3,597 3,597
Term Loan 11.75 % Prime 4.75 % 8.50 % - 5.00 % January 1, 2027 3,750 3,706 3,706
Sonex Health, Inc. (2)(12) Medical Device Term Loan 13.50 % Prime 6.50 % 9.75 % - 8.00 % June 1, 2025 2,500 2,476 2,476
Term Loan 13.50 % Prime 6.50 % 9.75 % - 8.00 % June 1, 2025 2,500 2,476 2,476
Term Loan 13.50 % Prime 6.50 % 9.75 % - 8.00 % June 1, 2025 2,500 2,476 2,476
Term Loan 13.50 % Prime 6.50 % 9.75 % - 8.00 % April 1, 2026 2,500 2,453 2,453
Term Loan 13.50 % Prime 6.50 % 9.75 % - 8.00 % May 1, 2026 2,500 2,455 2,455
Spineology, Inc. (2)(12) Medical Device Term Loan 14.50 % Prime 7.00 % 10.25 % - 1.00 % October 1, 2025 5,000 4,966 4,966
Term Loan 14.50 % Prime 7.00 % 10.25 % - 1.00 % April 1, 2026 2,500 2,481 2,481
Swift Health Systems Inc. (2)(12) Medical Device Term Loan 12.25 % Prime 5.25 % 9.00 % - 5.00 % July 1, 2027 3,500 3,349 3,349
Term Loan 12.25 % Prime 5.25 % 9.00 % - 5.00 % July 1, 2027 3,500 3,454 3,454
Total Non-Affiliate Debt Investments — Life Science 318,172 317,568
Non-Affiliate Debt Investments — Sustainability — 26.3% (8)
Aerofarms, Inc. (2)(12) Other Sustainability Term Loan 14.25 % Prime 6.75 % 10.00 % - 3.00 % April 1, 2026 3,750 3,699 3,699
Term Loan 14.25 % Prime 6.75 % 10.00 % - 3.00 % April 1, 2026 3,750 3,699 3,699
Nexii Building Solutions, Inc. (2)(12)(14) Other Sustainability Term Loan 14.50 % Prime 7.00 % 10.25 % - 2.50 % September 1, 2025 7,500 7,371 7,371
Term Loan 14.50 % Prime 7.00 % 10.25 % - 2.50 % September 1, 2025 7,500 7,371 7,371
Term Loan 14.50 % Prime 7.00 % 10.25 % - 2.50 % September 1, 2025 7,500 7,371 7,371
Term Loan 14.50 % Prime 7.00 % 10.25 % - 2.50 % July 1, 2026 5,000 4,903 4,903
Term Loan 14.50 % Prime 7.00 % 10.25 % - 2.50 % July 1, 2026 5,000 4,903 4,903
Soli Organic, Inc. (2)(12) Other Sustainability Term Loan 14.25 % Prime 6.75 % 10.00 % - 2.75 % April 1, 2026 2,500 2,463 2,463
Term Loan 14.25 % Prime 6.75 % 10.00 % - 2.75 % April 1, 2026 5,000 4,927 4,927
Term Loan 14.25 % Prime 6.75 % 10.00 % - 2.75 % May 1, 2026 5,000 4,924 4,924
Term Loan 14.25 % Prime 6.75 % 10.00 % - 2.75 % May 1, 2026 2,500 2,462 2,462
Term Loan 13.00 % Prime 5.50 % 10.00 % - 2.75 % December 1, 2026 5,000 4,900 4,900
Term Loan 13.00 % Prime 5.50 % 10.00 % - 2.75 % December 1, 2026 2,500 2,450 2,450
Temperpack Technologies, Inc. (2)(12) Other Sustainability Term Loan 14.25 % Prime 6.75 % 10.00 % - 2.50 % June 1, 2025 3,750 3,697 3,697
Term Loan 14.25 % Prime 6.75 % 10.00 % - 2.50 % June 1, 2025 3,750 3,717 3,717
Term Loan 14.25 % Prime 6.75 % 10.00 % - 2.50 % October 1, 2025 7,500 7,424 7,424
Term Loan 14.25 % Prime 6.75 % 10.00 % - 2.50 % October 1, 2025 3,750 3,712 3,712
Term Loan 14.25 % Prime 6.75 % 10.00 % - 2.50 % October 1, 2025 3,750 3,712 3,712
Total Non-Affiliate Debt Investments — Sustainability 83,705 83,705
Non-Affiliate Debt Investments — Technology — 81.4% (8)
Axiom Space, Inc. (2)(12) Communications Term Loan 13.00 % Prime 6.00 % 9.25 % - 2.50 % June 1, 2026 7,500 7,455 7,455
Term Loan 13.00 % Prime 6.00 % 9.25 % - 2.50 % June 1, 2026 7,500 7,455 7,455
Term Loan 13.00 % Prime 6.00 % 9.25 % - 2.50 % June 1, 2026 7,500 7,455 7,455
Convertible Note 3.00 % July 1, 2023 250 250 306
Alula Holdings, Inc. (2)(12) Consumer-related Technologies Term Loan 13.75 % Prime 6.75 % 10.00 % - 3.00 % January 1, 2025 5,000 4,966 4,966
Term Loan 13.75 % Prime 6.75 % 10.00 % - 3.00 % January 1, 2025 5,000 4,966 4,966
Term Loan 13.75 % Prime 6.75 % 10.00 % - 3.00 % January 1, 2025 3,000 2,979 2,979
Term Loan 13.75 % Prime 6.75 % 10.00 % - 3.00 % December 1, 2025 1,000 976 976
Term Loan 13.75 % Prime 6.75 % 10.00 % - 3.00 % February 1, 2026 1,000 977 977
Better Place Forests Co. (2)(12)(13) Consumer-related Technologies Term Loan 13.75 % Prime 6.25 % 9.50 % - 1.85 % July 1, 2025 5,000 4,951 3,834
Term Loan 13.75 % Prime 6.25 % 9.50 % - 1.85 % October 1, 2025 2,500 2,474 1,916
CAMP NYC, Inc. (2)(12) Consumer-related Technologies Term Loan 14.75 % Prime 7.25 % 10.50 % - 3.00 % May 1, 2026 3,500 3,461 3,461
Clara Foods Co. (2)(12) Consumer-related Technologies Term Loan 12.75 % Prime 5.75 % 9.00 % - 5.50 % August 1, 2025 2,500 2,482 2,482
Term Loan 12.75 % Prime 5.75 % 9.00 % - 5.50 % August 1, 2025 2,500 2,482 2,482

See Notes to Consolidated Financial Statements

Table of Contents

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Schedule of Investments

December 31, 2022

(Dollars in thousands)

Portfolio Company (1)(3) Sector Type of Investment (7) Cash Rate (4) Index Margin Floor Ceiling ETP (10) Maturity Date Principal Amount Cost of Investments (6)(9) Fair Value (9)
Divergent Technologies, Inc. (2)(12) Consumer-related Technologies Term Loan 11.25 % Prime 6.00 % 9.50 % 11.25 % 3.00 % July 1, 2027 3,750 3,478 3,478
Term Loan 11.25 % Prime 6.00 % 9.50 % 11.25 % 3.00 % July 1, 2027 1,250 1,238 1,238
Term Loan 11.25 % Prime 6.00 % 9.50 % 11.25 % 3.00 % July 1, 2027 3,750 3,715 3,715
Term Loan 11.25 % Prime 6.00 % 9.50 % 11.25 % 3.00 % July 1, 2027 1,250 1,238 1,238
Term Loan 11.25 % Prime 6.00 % 9.50 % 11.25 % 3.00 % July 1, 2027 3,750 3,715 3,715
Term Loan 11.25 % Prime 6.00 % 9.50 % 11.25 % 3.00 % July 1, 2027 1,250 1,238 1,238
Term Loan 11.25 % Prime 6.00 % 9.50 % 11.25 % 3.00 % January 1, 2028 3,750 3,698 3,698
Term Loan 11.25 % Prime 6.00 % 9.50 % 11.25 % 3.00 % January 1, 2028 3,750 3,698 3,698
Havenly, Inc. (2)(12) Consumer-related Technologies Term Loan 12.50 % Prime 5.00 % 5.00 % - 4.00 % March 1, 2027 2,000 1,082 1,082
Term Loan 12.50 % Prime 5.00 % 5.00 % - 4.00 % March 1, 2027 3,000 1,623 1,623
Term Loan 11.00 % Prime 3.50 % 10.50 % - 7.78 % February 1, 2028 2,813 2,813 2,813
Term Loan 11.00 % Prime 3.50 % 10.50 % - 7.78 % February 1, 2028 2,813 2,813 2,813
Interior Define, Inc. (2)(12)(13) Consumer-related Technologies Term Loan 13.50 % Prime 6.50 % 9.75 % - 4.00 % January 1, 2026 3,210 3,151 —
Term Loan 13.50 % Prime 6.50 % 9.75 % - 4.00 % January 1, 2026 2,963 2,886 —
Lyrical Foods, Inc. (2)(12) Consumer-related Technologies Term Loan 10.00 % Prime 6.75 % 10.00 % - - September 1, 2027 2,500 2,588 2,279
MyForest Foods Co. (2)(12) Consumer-related Technologies Term Loan 14.25 % Prime 6.75 % 10.00 % - 3.00 % October 1, 2025 5,000 4,954 4,954
Term Loan 14.25 % Prime 6.75 % 10.00 % - 3.00 % October 1, 2025 2,500 2,477 2,477
NextCar Holding Company, Inc. (2)(12) Consumer-related Technologies Term Loan 12.75 % Prime 5.75 % 9.00 % - 2.00 % December 30, 2022 5,000 4,943 4,715
Term Loan 12.75 % Prime 5.75 % 9.00 % - 2.00 % December 30, 2022 2,000 1,981 1,890
Term Loan 12.75 % Prime 5.75 % 9.00 % - 2.00 % December 30, 2022 2,500 2,477 2,363
Term Loan 12.75 % Prime 5.75 % 9.00 % - 2.00 % December 30, 2022 3,000 2,971 2,835
Term Loan 12.75 % Prime 5.75 % 9.00 % - 2.00 % December 30, 2022 2,500 2,459 2,345
Term Loan 12.75 % Prime 5.75 % 9.00 % - 2.00 % December 30, 2022 2,500 2,459 2,345
Term Loan 12.75 % Prime 5.75 % 9.00 % - 2.00 % December 30, 2022 5,000 4,914 4,688
Term Loan 12.75 % Prime 5.75 % 9.00 % - 2.00 % December 30, 2022 2,500 2,456 2,342
Optoro, Inc. (2)(12) Consumer-related Technologies Term Loan 13.25 % Prime 6.25 % 9.50 % - 4.00 % August 1, 2027 2,500 2,347 2,347
Primary Kids, Inc. (2)(12) Consumer-related Technologies Term Loan 14.25 % Prime 7.25 % 10.50 % - 3.00 % March 1, 2025 2,700 2,673 2,673
Term Loan 14.25 % Prime 7.25 % 10.50 % - 3.00 % March 1, 2025 2,700 2,673 2,673
Term Loan 14.25 % Prime 7.25 % 10.50 % - 3.00 % September 1, 2025 3,000 2,967 2,967
Unagi, Inc. (2)(12) Consumer-related Technologies Term Loan 15.25 % Prime 7.75 % 11.00 % - - July 1, 2025 2,500 2,473 2,473
Term Loan 15.25 % Prime 7.75 % 11.00 % - - July 1, 2025 1,250 1,236 1,236
Term Loan 15.25 % Prime 7.75 % 11.00 % - - July 1, 2025 1,250 1,236 1,236
Liqid, Inc. (2)(12) Networking Term Loan 13.25 % Prime 6.25 % 9.50 % - 4.00 % September 1, 2024 3,333 3,286 3,286
Term Loan 13.25 % Prime 6.25 % 9.50 % - 4.00 % September 1, 2024 3,333 3,286 3,286
Term Loan 13.25 % Prime 6.25 % 9.50 % - 4.00 % September 1, 2024 1,667 1,641 1,641
Term Loan 13.25 % Prime 6.25 % 9.50 % - 4.00 % September 1, 2024 1,667 1,641 1,641
Term Loan 13.25 % Prime 6.25 % 9.50 % - 4.00 % September 1, 2024 1,667 1,613 1,613
BriteCore Holdings, Inc. (2)(12) Software Term Loan 13.75 % Prime 6.75 % 10.00 % - 5.00 % March 1, 2026 2,500 2,421 2,421
Term Loan 13.75 % Prime 6.75 % 10.00 % - 5.00 % March 1, 2026 2,500 2,487 2,487
Decisyon, Inc. (12) Software Term Loan 16.93 % Prime 9.43 % 12.68 % - 50.43 % December 31, 2022 3,295 3,295 3,295
Dropoff, Inc. (2)(12) Software Term Loan 14.00 % Prime 6.50 % 9.75 % - 3.50 % April 1, 2026 6,500 6,347 6,347
Term Loan 14.00 % Prime 6.50 % 9.75 % - 3.50 % April 1, 2026 6,000 5,859 5,859
Term Loan 14.00 % Prime 6.50 % 9.75 % - 3.50 % August 1, 2026 2,500 2,436 2,436
Engage3, LLC (2)(12) Software Term Loan 13.25 % Prime 6.25 % 9.75 % - 4.50 % July 1, 2027 3,750 3,678 3,678
Term Loan 13.25 % Prime 6.25 % 9.75 % - 4.50 % July 1, 2027 3,750 3,718 3,718
Groundspeed Analytics, Inc. (2)(12) Software Term Loan 13.00 % Prime 5.50 % 11.00 % 18.00 % 3.00 % December 1, 2026 5,000 4,798 4,798
Term Loan 13.00 % Prime 5.50 % 11.00 % 18.00 % 3.00 % December 1, 2026 5,000 4,948 4,948
Kodiak Robotics, Inc. (2)(12) Software Term Loan 13.00 % Prime 5.50 % 10.25 % - 4.00 % April 1, 2026 10,000 9,826 9,826
Term Loan 13.00 % Prime 5.50 % 10.25 % - 4.00 % April 1, 2026 10,000 9,826 9,826
Term Loan 13.00 % Prime 5.50 % 10.25 % - 4.00 % April 1, 2026 5,000 4,913 4,913
Term Loan 13.00 % Prime 5.50 % 10.25 % - 4.00 % April 1, 2026 5,000 4,913 4,913
Lemongrass Holdings, Inc. (2)(12) Software Term Loan 14.00 % Prime 6.50 % 9.75 % - 2.50 % March 1, 2026 5,000 4,947 4,947
Term Loan 14.00 % Prime 6.50 % 9.75 % - 2.50 % March 1, 2026 2,500 2,474 2,474
Lytics, Inc. (2)(12) Software Term Loan 13.00 % Prime 6.00 % 9.25 % - 3.00 % July 1, 2025 2,500 2,396 2,396
Term Loan 13.00 % Prime 6.00 % 12.25 % - 3.00 % December 1, 2026 1,250 1,231 1,231
Reputation Institute, Inc. (2)(12) Software Term Loan 14.25 % Prime 7.25 % 10.50 % - 3.00 % August 1, 2025 5,000 4,932 4,932
Slingshot Aerospace, Inc. (2)(12) Software Term Loan 13.25 % Prime 5.75 % 9.75 % - 5.00 % August 1, 2026 5,000 4,870 4,870
Term Loan 13.25 % Prime 5.75 % 9.75 % - 5.00 % August 1, 2026 5,000 4,933 4,933
Term Loan 13.25 % Prime 5.75 % 9.75 % - 5.00 % August 1, 2026 5,000 4,933 4,933
Term Loan 13.25 % Prime 5.75 % 9.75 % - 5.00 % August 1, 2026 5,000 4,933 4,933
Supply Network Visibility Holdings LLC (2)(12) Software Term Loan 13.50 % Prime 6.50 % 9.75 % - 4.00 % February 1, 2025 3,500 3,472 3,472
Term Loan 13.50 % Prime 6.50 % 9.75 % - 4.00 % February 1, 2025 3,500 3,472 3,472
Term Loan 13.50 % Prime 6.50 % 9.75 % - 4.00 % December 1, 2025 2,500 2,472 2,472
Term Loan 13.50 % Prime 6.50 % 9.75 % - 4.00 % December 1, 2025 2,500 2,472 2,472
Total Non-Affiliate Debt Investments — Technology 268,468 259,366
Non-Affiliate Debt Investments — Healthcare information and services — 8.1% (8) **** **** **** **** ****
Hound Labs inc. (2) (12) Diagnostics Term Loan 13.50 % Prime 6.00 % 9.25 % - 3.50 % June 1, 2026 2,500 2,385 2,385
Term Loan 13.50 % Prime 6.00 % 9.25 % - 3.50 % June 1, 2026 2,500 2,473 2,473
Term Loan 13.50 % Prime 6.00 % 9.25 % - 3.50 % June 1, 2026 5,000 4,946 4,946
Secure Transfusion Services, Inc. (2)(12)(13) Other Healthcare Term Loan 13.25 % Prime 5.75 % 9.00 % - 4.00 % October 1, 2025 4,943 4,943 1,668
Term Loan 13.25 % Prime 5.75 % 9.00 % - 4.00 % December 31, 2025 2,500 2,467 832
BrightInsight, Inc. (2)(12) Software Term Loan 12.50 % Prime 5.50 % 9.50 % - 3.00 % August 1, 2027 7,000 6,619 6,619
Term Loan 12.50 % Prime 5.50 % 9.50 % - 3.00 % August 1, 2027 3,500 3,448 3,448
Term Loan 12.50 % Prime 5.50 % 9.50 % - 3.00 % August 1, 2027 3,500 3,448 3,448
Total Non-Affiliate Debt Investments — Healthcare information and services 30,729 25,819
Total Non- Affiliate Debt Investments 701,074 686,458

See Notes to Consolidated Financial Statements

Table of Contents

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Schedule of Investments

December 31, 2022

(Dollars in thousands)

Cost of Fair
Portfolio Company (1)(3) Sector Type of Investment (7) Number of Shares Investments (6)(9) Value (9)
Non-Affiliate Warrant Investments — 9.4% (8)
Non-Affiliate Warrants — Life Science — 3.1% (8)
Avalo Therapeutics, Inc. (2)(5)(12) Biotechnology Common Stock Warrant 26,442 311 —
Castle Creek Biosciences, Inc. (2)(12) Biotechnology Preferred Stock Warrant 7,404 214 335
Corvium, Inc. (2)(12) Biotechnology Preferred Stock Warrant 661,956 53 —
Emalex Biosciences, Inc. (2)(12) Biotechnology Preferred Stock Warrant 110,402 176 263
Evelo Biosciences, Inc. (2)(5)(12) Biotechnology Common Stock Warrant 463,915 126 125
F-Star Therapeutics, Inc. (2)(5)(12) Biotechnology Common Stock Warrant 21,120 35 —
Greenlight Biosciences, Inc. (2)(5)(12) Biotechnology Common Stock Warrant 47,452 366 —
Imunon, Inc. (2)(5)(12) Biotechnology Common Stock Warrant 16,502 66 —
IMV Inc. (2)(5)(12)(14) Biotechnology Common Stock Warrant 39,774 67 —
KSQ Therapeutics, Inc. (2) (12) Biotechnology Preferred Stock Warrant 48,077 51 60
Mustang Bio, Inc. (2)(5)(12) Biotechnology Common Stock Warrant 252,161 146 —
Native Microbials, Inc (2) (12) Biotechnology Preferred Stock Warrant 103,679 64 162
PDS Biotechnology Corporation (2)(5)(12) Biotechnology Common Stock Warrant 299,848 160 3,024
Provivi, Inc. (2)(12) Biotechnology Preferred Stock Warrant 203,017 399 648
Rocket Pharmaceuticals Corporation (5)(12) Biotechnology Common Stock Warrant 7,051 17 14
Stealth Biotherapeutics Inc. (2)(12) Biotechnology Common Stock Warrant 318,181 264 37
vTv Therapeutics Inc. (2)(5)(12) Biotechnology Common Stock Warrant 95,293 44 —
Xeris Pharmaceuticals, Inc. (2)(5)(12) Biotechnology Common Stock Warrant 126,000 72 3
AccuVein Inc. (2)(12) Medical Device Common Stock Warrant 1,175 24 —
Aerin Medical, Inc. (2)(12) Medical Device Preferred Stock Warrant 1,818,183 64 1,200
Aerobiotix, LLC (2)(12) Medical Device Preferred Stock Warrant 27,330 48 31
Canary Medical Inc. (2)(12) Medical Device Preferred Stock Warrant 12,153 84 1,864
Ceribell, Inc. (2)(12) Medical Device Preferred Stock Warrant 145,483 69 209
Cognoa, Inc. (2)(12) Medical Device Preferred Stock Warrant 775,000 148 179
Conventus Orthopaedics, Inc. (2)(12) Medical Device Preferred Stock Warrant 7,972,222 221 226
CSA Medical, Inc. (2)(12) Medical Device Preferred Stock Warrant 1,375,727 153 150
CVRx, Inc. (2)(5)(12) Medical Device Common Stock Warrant 47,410 76 394
Infobionic, Inc. (2)(12) Medical Device Preferred Stock Warrant 317,647 124 113
Magnolia Medical Technologies, Inc. (2)(12) Medical Device Preferred Stock Warrant 809,931 194 385
Meditrina, Inc. (2)(12) Medical Device Preferred Stock Warrant 233,993 83 101
Robin Healthcare, Inc. (2)(12) Medical Device Preferred Stock Warrant 86,066 16 16
Scientia Vascular, Inc (2)(12) Medical Device Preferred Stock Warrant 19,662 40 46
Sonex Health, Inc. (2)(12) Medical Device Preferred Stock Warrant 605,313 98 123
VERO Biotech LLC (2)(12) Medical Device Preferred Stock Warrant 408 53 1
Swift Health Systems Inc. (2)(12) Medical Device Preferred Stock Warrant 135,484 71 83
Total Non-Affiliate Warrants — Life Science 4,197 9,792
Non-Affiliate Warrants — Sustainability — 0.6% (8)
Aerofarms, Inc. (2)(12) Other Sustainability Preferred Stock Warrant 201,537 61 74
LiquiGlide, Inc. (2)(12) Other Sustainability Common Stock Warrant 61,539 39 55
Nexii Building Solutions, Inc. (2)(12)(14) Other Sustainability Common Stock Warrant 204,832 488 1,061
Soli Organic, Inc. (2)(12) Other Sustainability Preferred Stock Warrant 681 214 361
Temperpack Technologies, Inc. (2)(12) Other Sustainability Preferred Stock Warrant 35,906 126 268
Total Non-Affiliate Warrants — Sustainability 928 1,819

See Notes to Consolidated Financial Statements

Table of Contents

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Schedule of Investments

December 31, 2022

(Dollars in thousands)

Cost of Fair
Portfolio Company (1)(3) Sector Type of Investment (7) Number of Shares Investments (6)(9) Value (9)
Non-Affiliate Warrants — Technology — 5.1% (8)
Axiom Space, Inc. (2)(12) Communications Common Stock Warrant 1,991 46 67
Intelepeer Holdings, Inc. (2)(12) Communications Preferred Stock Warrant 2,936,535 139 3,265
PebblePost, Inc. (2)(12) Communications Preferred Stock Warrant 598,850 92 173
Alula Holdings, Inc. (2)(12) Consumer-related Technologies Preferred Stock Warrant 20,000 93 64
Aterian, Inc. (2)(5)(12) Consumer-related Technologies Common Stock Warrant 76,923 195 —
Better Place Forests Co. (2)(12) Consumer-related Technologies Preferred Stock Warrant 10,690 26 —
Caastle, Inc. (2)(12) Consumer-related Technologies Preferred Stock Warrant 268,591 68 1,069
CAMP NYC, Inc. (2)(12) Consumer-related Technologies Preferred Stock Warrant 17,605 20 61
Clara Foods Co. (2)(12) Consumer-related Technologies Preferred Stock Warrant 46,745 30 125
Divergent Technologies, Inc. (2)(12) Consumer-related Technologies Preferred Stock Warrant 31,966 56 233
Havenly, Inc. (2)(12) Consumer-related Technologies Common Stock Warrant 1,312,500 2,947 2,947
Interior Define, Inc. (2)(12) Consumer-related Technologies Preferred Stock Warrant 553,710 103 —
MyForest Foods Co. (2)(12) Consumer-related Technologies Preferred Stock Warrant 143 29 37
NextCar Holding Company, Inc. (2)(12) Consumer-related Technologies Preferred Stock Warrant 1,261,253 197 17
Optoro, Inc. (2)(12) Consumer-related Technologies Preferred Stock Warrant 6,600 104 104
Primary Kids, Inc. (2)(12) Consumer-related Technologies Preferred Stock Warrant 553,778 57 429
Quip NYC Inc. (2)(12) Consumer-related Technologies Preferred Stock Warrant 6,191 325 534
Unagi, Inc. (2)(12) Consumer-related Technologies Preferred Stock Warrant 171,081 32 22
Updater, Inc.(2)(12) Consumer-related Technologies Common Stock Warrant 108,333 34 42
CPG Beyond, Inc. (2)(12) Data Storage Preferred Stock Warrant 500,000 242 909
Silk, Inc. (2)(12) Data Storage Preferred Stock Warrant 442,110 234 407
Global Worldwide LLC (2)(12) Internet and Media Preferred Stock Warrant 245,810 75 —
Rocket Lawyer Incorporated (2)(12) Internet and Media Preferred Stock Warrant 261,721 92 357
Skillshare, Inc. (2)(12) Internet and Media Preferred Stock Warrant 139,074 162 802
Liqid, Inc. (2)(12) Networking Preferred Stock Warrant 344,102 364 243
Halio, Inc. (2)(12) Power Management Preferred Stock Warrant 5,002,574 1,585 2,610
Avalanche Technology, Inc. (2)(12) Semiconductors Preferred and Common Stock Warrants 6,081 56 —
BriteCore Holdings, Inc. (2)(12) Software Preferred Stock Warrant 77,828 21 69
Decisyon, Inc. (12) Software Common Stock Warrant 82,967 46 —
Dropoff, Inc. (2)(12) Software Common Stock Warrant 516,732 455 197
E La Carte, Inc. (2)(5)(12) Software Common Stock Warrant 147,361 60 3
Groundspeed Analytics, Inc. (2)(12) Software Preferred Stock Warrant 86,300 6 6
Kodiak Robotics, Inc. (2)(12) Software Preferred Stock Warrant 639,918 273 296
Lemongrass Holdings, Inc. (2)(12) Software Preferred Stock Warrant 101,308 34 41
Lotame Solutions, Inc. (2)(12) Software Preferred Stock Warrant 288,115 22 312
Lytics, Inc. (2)(12) Software Preferred Stock Warrant 80,197 40 44
Reputation Institute, Inc. (2)(12) Software Preferred Stock Warrant 3,731 56 39
Revinate Holdings, Inc. (2)(12) Software Preferred Stock Warrant 682,034 46 99
Riv Data Corp. (2)(12) Software Preferred Stock Warrant 321,428 12 296
SIGNiX, Inc. (12) Software Preferred Stock Warrant 186,235 225 —
Skyword, Inc. (12) Software Preferred and Common Stock Warrants 301,055 48 1
Slingshot Aerospace, Inc. (2)(12) Software Preferred Stock Warrant 309,208 123 133
Supply Network Visibility Holdings LLC (2)(12) Software Preferred Stock Warrant 682 64 83
Topia Mobility, Inc. (2)(12) Software Preferred Stock Warrant 3,049,607 138 —
xAd, Inc. (2)(12) Software Preferred Stock Warrant 4,343,348 177 12
Total Non-Affiliate Warrants — Technology 9,249 16,148
Non-Affiliate Warrants — Healthcare information and services — 0.6% (8)
Hound Labs, Inc (2) (12) Diagnostics Preferred Stock Warrant 159,893 47 54
Kate Farms, Inc. (2)(12) Other Healthcare Preferred Stock Warrant 82,965 102 1,370
Secure Transfusion Services, Inc. (2)(12) Other Healthcare Preferred Stock Warrant 77,690 47 —
BrightInsight, Inc. (2)(12) Software Preferred Stock Warrant 80,544 160 170
Medsphere Systems Corporation (2)(12) Software Preferred Stock Warrant 7,097,792 60 359
Total Non-Affiliate Warrants — Healthcare information and services 416 1,953
Total Non-Affiliate Warrants 14,790 29,712
Non-Affiliate Other Investments — 0.4% (8)
Lumithera, Inc. (2) Medical Device Royalty Agreement 1,200 1,100
ZetrOZ, Inc. (12) Medical Device Royalty Agreement — 200
Total Non-Affiliate Other Investments 1,200 1,300
Non-Affiliate Equity — 0.8% (8)
Castle Creek Biosciences, Inc. (12) Biotechnology Common Stock 1,162 250 250
Emalex Biosciences, Inc. (2)(12) Biotechnology Common Stock 32,831 356 356
Getaround, Inc. (2)(5) Consumer-related Technologies Common Stock 87,082 253 57
SnagAJob.com, Inc. (12) Consumer-related Technologies Common Stock 82,974 8 83
Lumithera, Inc. (2) Medical Device Common Stock 392,651 2,000 1,700
Tigo Energy, Inc. (2) Other Sustainability Preferred 22,313 8 27
Branded Online, Inc. (2)(5) Software Common Stock 108,004 1,079 83
Decisyon, Inc. (12) Software Preferred and Common Stock 72,638,663 230 —
Total Non-Affiliate Equity 4,184 2,556
Total Non-Affiliate Portfolio Investment Assets $ 721,248 $ 720,026
Total Portfolio Investment Assets — 226.1% (8) $ 721,248 $ 720,026
(1) All investments of the Company are in entities which are organized under the laws of the United States and have a principal place of business in the United States, unless otherwise noted.
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(2) Has been pledged as collateral under the Key Facility, the NYL Facility the 2019 Asset-Backed Notes and/or the 2022 Asset-Backed Notes.
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See Notes to Consolidated Financial Statements

Table of Contents

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Schedule of Investments

December 31, 2022

(Dollars in thousands)

(3) All non-affiliate investments are investments in which the Company owns less than 5% of the voting securities of the portfolio company. All non-controlled affiliate investments are investments in which the Company owns 5% or more of the voting securities of the portfolio company but not more than 25% of the voting securities of the portfolio company. All controlled affiliate investments are investments in which the Company owns more than 25% of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company (including through a management agreement).
(4) All interest is payable in cash due monthly in arrears, unless otherwise indicated, and applies only to the Company’s debt investments. Interest rate is the annual interest rate on the debt investment and does not include ETPs, and any additional fees related to the investments, such as deferred interest, commitment fees or prepayment fees. Debt investments are at variable rates for the term of the debt investment, unless otherwise indicated. All debt investments based on the LIBOR are based on one-month LIBOR. For each debt investment, the current interest rate in effect as of  December 31, 2022 is provided.
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(5) Portfolio company is a public company.
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(6) For debt investments, represents principal balance less unearned income.
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(7) Warrants, Equity and Other Investments are non-income producing.
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(8) Value as a percent of net assets.
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(9) As of December 31, 2022, 6.5% and 6.6% of the Company's total assets on a cost and fair value basis, respectively, are in non-qualifying assets. Under the 1940 Act, the Company may not acquire any non-qualifying assets unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company’s total assets.
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(10) ETPs are contractual fixed-interest payments due in cash at the maturity date of the applicable debt investment, including upon any prepayment, and are a fixed percentage of the original principal balance of the debt investments unless otherwise noted. Interest will accrue during the life of the debt investment on each ETP and will be recognized as non-cash income until it is actually paid. Therefore, a portion of the incentive fee the Company may pay its Advisor will be based on income that the Company has not yet received in cash.
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(11) Debt investment has a PIK feature.
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(12) The fair value of the investment was valued using significant unobservable inputs.
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(13) Debt investment is on non-accrual status as of December 31, 2022.
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(14) Entity is organized under the laws of Canada and has a principal place of business in Canada.

See Notes to Consolidated Financial Statements

Table of Contents

Horizon Technology Finance Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Note 1. Organization

Horizon Technology Finance Corporation (the “Company”) was organized as a Delaware corporation on March 16, 2010 and is an externally managed, non-diversified, closed-end investment company. The Company has elected to be regulated as a business development company (“BDC”) under the 1940 Act. In addition, for tax purposes, the Company has elected to be treated as a regulated investment company (“RIC”) as defined under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Company generally is not subject to corporate-level federal income tax on the portion of its taxable income (including net capital gains) the Company distributes to its stockholders. The Company primarily makes secured debt investments to development-stage companies in the technology, life science, healthcare information and services and sustainability industries. All of the Company’s debt investments consist of loans secured by all of, or a portion of, the applicable debtor company’s tangible and intangible assets.

On October 28, 2010, the Company completed an initial public offering (“IPO”) and its common stock trades on the Nasdaq Global Select Market under the symbol “HRZN”.

Horizon Credit II LLC (“Credit II”) was formed as a Delaware limited liability company on June 28, 2011, with the Company as its sole equity member. Credit II is a special purpose bankruptcy-remote entity and is a separate legal entity from the Company. Any assets conveyed to Credit II are not available to creditors of the Company or any other entity other than Credit II’s lenders.

The Company formed Horizon Funding 2019‑1 LLC (“2019‑1 LLC”) as a Delaware limited liability company on May 2, 2019 and Horizon Funding Trust 2019‑1 on May 15, 2019 (“2019‑1 Trust” and, together with the 2019‑1 LLC, the “2019‑1 Entities”). The 2019‑1 Entities are special purpose bankruptcy remote entities and are separate legal entities from the Company. The Company formed the 2019‑1 Entities for purposes of securitizing the 2019 Asset-Backed Notes.

Horizon Funding I, LLC (“HFI”) was formed as a Delaware limited liability company on May 9, 2018, with Horizon Secured Loan Fund I LLC, a Delaware limited liability company (“HSLFI”) as its sole member. HFI is a special purpose bankruptcy-remote entity and is a separate legal entity from HSLFI. Any assets conveyed to HFI are not available to creditors of HSLFI or any other entity other than HFI’s lenders. As of April 21, 2020, HSLFI and its subsidiary, HFI, are consolidated by the Company.

The Company formed Horizon Funding 2022‑1 LLC (“2022‑1 LLC”) as a Delaware limited liability company on September 30, 2022and Horizon Funding Trust 2022‑1 on October 18, 2022 ( “2022‑1 Trust” and, together with the 2022‑1 LLC, the “2022‑1 Entities”). The 2022‑1 Entities are special purpose bankruptcy remote entities and are separate legal entities from the Company. The Company formed the 2022‑1 Entities for purposes of securitizing the 2022 Asset-Backed Notes.

The Company has established wholly owned subsidiaries, which are structured as Delaware limited liability companies, either to hold assets of portfolio companies acquired in connection with a foreclosure or bankruptcy or to hold equity in portfolio companies which the Company may control. Such wholly-owned subsidiaries are separate legal entities from the Company.

The Company, together with its co-lender to IMV, established HIMV LLC, a Delaware limited liability company to purchase and sell the assets of IMV, a borrower of the Company. HIMV LLC is 70% owned by the Company and 30% owned by the co-lender.

The Company’s investment strategy is to maximize the investment portfolio’s return by generating current income from the debt investments the Company makes and capital appreciation from the warrants the Company receives when making such debt investments. The Company has entered into an investment management agreement (the “Investment Management Agreement”) with Horizon Technology Finance Management LLC (the “Advisor”) under which the Advisor manages the day-to-day operations of, and provides investment advisory services to, the Company.

Table of Contents

Horizon Technology Finance Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Note 2. Basis of presentation and significant accounting policies

The consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and pursuant to the requirements for reporting on Form 10‑Q and Articles 6 and 10 of Regulation S-X (“Regulation S-X”) under the Securities Act of 1933, as amended (the “Securities Act”). In the opinion of management, the consolidated financial statements reflect all adjustments and reclassifications, consisting solely of normal recurring accruals, that are necessary for the fair presentation of financial results as of and for the periods presented. All intercompany balances and transactions have been eliminated. The current period’s results of operations are not necessarily indicative of results that ultimately may be achieved for the year. Therefore, the unaudited financial statements and notes should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2022.

Principles of consolidation

As required under GAAP and Regulation S-X, the Company will generally consolidate its investment in a company that is an investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated the results of the Company’s wholly-owned subsidiaries in its consolidated financial statements.

Assets related to transactions that do not meet Accounting Standards Codification (“ASC”) Topic 860, Transfers and Servicing requirements for accounting sale treatment are reflected in the Company’s Consolidated Statements of Assets and Liabilities as investments. Those assets are owned by special purpose entities, including 2019‑1 Entities and 2022-1 Entities, that are consolidated in the Company’s consolidated financial statements. The creditors of the special purpose entities have received security interests in such assets, and such assets are not intended to be available to the creditors of the Company (or any affiliate of the Company).

Use of estimates

In preparing the consolidated financial statements in accordance with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, as of the date of the balance sheet and income and expenses for the period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the valuation of investments.

Fair value

The Company records all of its investments at fair value in accordance with relevant GAAP, which establishes a framework used to measure fair value and requires disclosures for fair value measurements. The Company has categorized its investments carried at fair value, based on the priority of the valuation technique, into a three-level fair value hierarchy as more fully described in Note 6. Fair value is a market-based measure considered from the perspective of the market participant who holds the financial instrument rather than an entity specific measure. Therefore, when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that management believes market participants would use in pricing the financial instrument at the measurement date.

The availability of observable inputs can vary depending on the financial instrument and is affected by a wide variety of factors, including, for example, the type of product, whether the product is new, whether the product is traded on an active exchange or in the secondary market and the current market conditions. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for financial instruments classified as Level 3.

See Note 6 for additional information regarding fair value.

Table of Contents

Horizon Technology Finance Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Segments

The Company has determined that it has a single reporting segment and operating unit structure. The Company lends to and invests in portfolio companies in various technology, life science, healthcare information and services and sustainability industries. The Company separately evaluates the performance of each of its lending and investment relationships. However, because each of these debt investments and investment relationships has similar business and economic characteristics, they have been aggregated into a single lending and investment segment.

Investments

Investments are recorded at fair value. Pursuant to the amended SEC Rule 2a-5 of the 1940 Act, on July 29, 2022, the Company's board of directors (the “Board”) designated the Advisor as the Company’s “valuation designee.” The valuation designee determines the fair value of the Company’s portfolio investments and the Board oversees the valuation designee. The Company has the intent to hold its debt investments for the foreseeable future or until maturity or payoff.

Interest on debt investments is accrued and included in income based on contractual rates applied to principal amounts outstanding. Interest income is determined using a method that results in a level rate of return on principal amounts outstanding. Generally, when a debt investment becomes 90 days or more past due, or if the Company otherwise does not expect to receive interest and principal repayments, the debt investment is placed on non-accrual status and the recognition of interest income may be discontinued. Interest payments received on non-accrual debt investments may be recognized as income, on a cash basis, or applied to principal depending upon management’s judgment at the time the debt investment is placed on non-accrual status. As of September 30, 2023, there were three investments on nonaccrual status with a cost of $43.6 million and a fair value of $17.2 million. As of December 31, 2022, there were three investments on non-accrual status with a cost of $20.9 million and a fair value of $8.3 million. For the three and nine months ended September 30, 2023 and 2022, the Company did not recognize any interest income received from debt investments on non-accrual status.

The Company has a limited number of debt investments in its portfolio that contain a PIK provision. Contractual PIK interest, which represents contractually deferred interest added to the loan balance that is generally due at the end of the loan term, is generally recorded on an accrual basis to the extent such amounts are expected to be collected. The Company will generally cease accruing PIK interest if there is insufficient value to support the accrual or management does not expect the portfolio company to be able to pay all principal and interest due. The Company recorded $3.9 million and $6.1 million in PIK interest income during the three and nine months ended September 30, 2023, respectively. The Company recorded no PIK interest income during the three and nine months ended September 30, 2022.

The Company receives a variety of fees from borrowers in the ordinary course of conducting its business, including advisory fees, commitment fees, amendment fees, non-utilization fees, success fees and prepayment fees. In a limited number of cases, the Company may also receive a non-refundable deposit earned upon the termination of a transaction. Debt investment origination fees, net of certain direct origination costs, are deferred and, along with unearned income, are amortized as a level-yield adjustment over the respective term of the debt investment. All other income is recognized when earned. Fees for counterparty debt investment commitments with multiple debt investments are allocated to each debt investment based upon each debt investment’s relative fair value. When a debt investment is placed on non-accrual status, the amortization of the related fees and unearned income is discontinued until the debt investment is returned to accrual status.

Certain debt investment agreements also require the borrower to make an ETP, that is accrued into interest receivable and taken into income over the life of the debt investment to the extent such amounts are expected to be collected. The Company will generally cease accruing the income if there is insufficient value to support the accrual or the Company does not expect the borrower to be able to pay the ETP when due. The proportion of the Company’s total investment income that resulted from the portion of ETPs not received in cash for the three months ended  September 30, 2023 and 2022 was 5.1% and 7.0%, respectively. The proportion of the Company’s total investment income that resulted from the portion of ETPs not received in cash for the nine months ended  September 30, 2023 and 2022 was 4.9% and 7.5%, respectively.

In connection with substantially all lending arrangements, the Company receives warrants to purchase shares of stock from the borrower. The warrants are recorded as assets at estimated fair value on the grant date using the Black-Scholes valuation model. The warrants are considered loan fees and are recorded as unearned income on the grant date. The unearned income is recognized as interest income over the contractual life of the related debt investment in accordance with the Company’s income recognition policy. Subsequent to debt investment origination, the fair value of the warrants is determined using the Black-Scholes valuation model. Any adjustment to fair value is recorded through earnings as net unrealized appreciation or depreciation on investments. Gains and losses from the disposition of the warrants or stock acquired from the exercise of warrants are recognized as realized gains and losses on investments.

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Horizon Technology Finance Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Realized gains or losses on the sale of investments, or upon the determination that an investment balance, or portion thereof, is not recoverable, are calculated using the specific identification method. The Company measures realized gains or losses by calculating the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment. Net change in unrealized appreciation or depreciation reflects the change in the fair values of the Company’s portfolio investments during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.

Debt issuance costs

Debt issuance costs are fees and other direct incremental costs incurred by the Company in obtaining debt financing from its lenders and issuing debt securities. The unamortized balance of debt issuance costs as of  September 30, 2023 and  December 31, 2022 was $6.4 million and $7.1 million, respectively. These amounts are amortized and included in interest expense in the consolidated statements of operations over the life of the borrowings. The accumulated amortization balances as of September 30, 2023 and  December 31, 2022 were $6.3 million and $4.8 million, respectively. The amortization expense for the three months ended  September 30, 2023 and 2022 was $0.5 million and $0.4 million, respectively. The amortization expense for the nine months ended  September 30, 2023 and 2022 was $1.4 million and $1.1 million, respectively.

Income taxes

As a BDC, the Company has elected to be treated as a RIC under Subchapter M of the Code and operates in a manner so as to qualify for the tax treatment applicable to RICs. In order to qualify as a RIC and to avoid the imposition of corporate-level income tax on the portion of its taxable income distributed to stockholders, among other things, the Company is required to meet certain source of income and asset diversification requirements and to timely distribute dividends out of assets legally available for distribution to its stockholders of an amount generally at least equal to 90% of its investment company taxable income, as defined by the Code and determined without regard to any deduction for dividends paid, for each tax year. The Company, among other things, has made and intends to continue to make the requisite distributions to its stockholders, which generally relieves the Company from corporate-level U.S. federal income taxes. Accordingly, no provision for federal income tax has been recorded in the financial statements. Differences between taxable income and net increase in net assets resulting from operations either can be temporary, meaning they will reverse in the future, or permanent. In accordance with ASC Topic 946, Financial Services—Investment Companies, as amended, of the Financial Accounting Standards Board (“FASB”), permanent tax differences, such as non-deductible excise taxes paid, are reclassified from distributions in excess of net investment income and net realized loss on investments to paid-in-capital at the end of each fiscal year. These permanent book-to-tax differences are reclassified on the consolidated statements of changes in net assets to reflect their tax character but have no impact on total net assets.

Depending on the level of taxable income earned in a tax year, the Company may choose to carry forward taxable income in excess of current year distributions into the next tax year and incur a 4% U.S. federal excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year distributions, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned. For the three months ended September 30, 2023 and 2022, $0.2 million and $0.1 million, respectively, was accrued for U.S. federal excise tax. For the nine months ended September 30, 2023 and 2022, $0.5 million and $0.3 million, respectively, was accrued for U.S. federal excise tax.

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Horizon Technology Finance Corporation and Subsidiaries

Notes to Consolidated Financial Statements

The Company evaluates tax positions taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority in accordance with ASC Topic 740, Income Taxes, as modified by ASC Topic 946. Tax benefits of positions not deemed to meet the more-likely-than-not threshold, or uncertain tax positions, would be recorded as a tax expense in the current year. It is the Company’s policy to recognize accrued interest and penalties related to uncertain tax benefits in income tax expense. The Company had no material uncertain tax positions at September 30, 2023 and  December 31, 2022. The Company’s income tax returns for the 2022, 2021 and 2020 tax years remain subject to examination by U.S. federal and state tax authorities.

Distributions

Distributions to common stockholders are recorded on the declaration date. The amount to be paid out as distributions is determined by the Board. Net realized capital gains, if any, may be distributed, although the Company may decide to retain such net realized gains for investment.

The Company has adopted a dividend reinvestment plan that provides for reinvestment of cash distributions on behalf of its stockholders, unless a stockholder elects to receive cash. As a result, if the Board declares a cash distribution, then stockholders who have not “opted out” of the dividend reinvestment plan will have their cash distributions automatically reinvested in additional shares of the Company’s common stock, rather than receiving the cash distribution. The Company may issue new shares or purchase shares in the open market to fulfill its obligations under the plan.

Stockholders’ Equity

On August 2, 2021, the Company entered into an At-The-Market (“ATM”) sales agreement (the “2021 Equity Distribution Agreement”), with Goldman Sachs & Co. LLC and B. Riley FBR, Inc. (each a “Sales Agent” and, collectively, the “Sales Agents”). The 2021 Equity Distribution Agreement provides that the Company may offer and sell its shares from time to time through the Sales Agents up to $100.0 million worth of its common stock, in amounts and at times to be determined by the Company.

On September 22, 2023, the Company terminated the 2021 Equity Distribution Agreement and entered into a new ATM sales agreement (the “2023 Equity Distribution Agreement”), with the Sales Agents. The remaining shares available under the 2021 Equity Distribution Agreement are no longer available for issuance. The 2023 Equity Distribution Agreement provides that the Company may offer and sell its shares from time to time through the Sales Agents up to $150.0 million worth of its common stock, in amounts and at times to be determined by the Company. Sales of the Company’s common stock, if any, may be made in negotiated transactions or transactions that are deemed to be “at-the-market,” as defined in Rule 415 under the Securities Act, including sales made directly on the Nasdaq or similar securities exchange or sales made to or through a market maker other than on an exchange, at prices related to the prevailing market prices or at negotiated prices.

During the three months ended September 30, 2023, the Company sold 1,186,303 shares of common stock under the 2023 Equity Distribution Agreement and the 2021 Equity Distribution Agreement. For the same period, the Company received total accumulated net proceeds of approximately $13.9 million, including $0.4 million of offering expenses, from these sales.

During the three months ended September 30, 2022, the Company sold 1,523,519 shares of common stock under the 2021 Equity Distribution Agreement. For the same period, the Company received total accumulated net proceeds of approximately $19.0 million, including $0.4 million of offering expenses, from these sales.

During the nine months ended September 30, 2023, the Company sold 2,240,326 shares of common stock under the 2023 Equity Distribution Agreement and the 2021 Equity Distribution Agreement. For the same period, the Company received total accumulated net proceeds of approximately $26.1 million, including $0.7 million of offering expenses, from these sales.

During the nine months ended September 30, 2022, the Company sold 2,641,920 shares of common stock under the 2021 Equity Distribution Agreement. For the same period, the Company received total accumulated net proceeds of approximately $33.2 million, including $0.6 million of offering expenses, from these sales.

The Company generally uses net proceeds from these sales to make investments, to pay down liabilities and for general corporate purposes. As of September 30, 2023, shares representing approximately $146.8 million of its common stock remain available for issuance and sale under the 2023 Equity Distribution Agreement.

On  *March 14, 2022,*the Company completed a follow-on public offering of 2,500,000 shares of its common stock at a public offering price of $14.35 per share, for total net proceeds to the Company of $34.3 million, after deducting underwriting commission and discounts and other offering expenses.

On  *June 2, 2023,*the Company completed a follow-on public offering of 3,250,000 shares of its common stock at a public offering price of $12.50 per share, for total net proceeds to the Company of $38.9 million, after deducting underwriting commission and discounts and other offering expenses.

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Horizon Technology Finance Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Stock Repurchase Program

On April 28, 2023, the Board extended a previously authorized stock repurchase program which allows the Company to repurchase up to $5.0 million of its common stock at prices below the Company’s net asset value per share as reported in its most recent consolidated financial statements. Under the repurchase program, the Company may, but is not obligated to, repurchase shares of its outstanding common stock in the open market or in privately negotiated transactions from time to time. Any repurchases by the Company will comply with the requirements of Rule 10b‑18 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and any applicable requirements of the 1940 Act. Unless extended by the Board, the repurchase program will terminate on the earlier of June 30, 2024 or the repurchase of $5.0 million of the Company’s common stock. During the three and nine months ended September 30, 2023 and 2022, the Company did not make any repurchases of its common stock. From the inception of the stock repurchase program through September 30, 2023, the Company repurchased 167,465 shares of its common stock at an average price of $11.22 on the open market at a total cost of $1.9 million.

Transfers of financial assets

Assets related to transactions that do not meet the requirements under ASC Topic 860, Transfers and Servicing for sale treatment under GAAP are reflected in the Company’s consolidated statements of assets and liabilities as investments. Those assets are owned by special purpose entities that are consolidated in the Company’s financial statements. The creditors of the special purpose entities have received security interests in such assets and such assets are not intended to be available to the creditors of the Company (or any other affiliate of the Company).

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company — put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the transferor does not maintain effective control over the transferred assets through either (a) an agreement that both entitles and obligates the transferor to repurchase or redeem the assets before maturity or (b) the ability to unilaterally cause the holder to return specific assets, other than through a cleanup call.

Recently issued accounting pronouncement

In June 2022, the FASB issued Accounting Standards Update No. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”). ASU 2022-03 clarifies the guidance when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of the security. The amendments in ASU 2022-03 are effective for public companies for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The Company is currently assessing the impact of ASU 2022-03 on its consolidated financial statements.

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Horizon Technology Finance Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Note 3. Related party transactions

Investment Management Agreement

On October 28, 2022, the Board unanimously approved the renewal of the Investment Management Agreement dated as of *March 7, 2019 (*the “2019 Investment Management Agreement”). At a meeting of the stockholders convened on May 25, 2023 and reconvened on June 28, 2023, the stockholders approved a new Investment Management Agreement which became effective on *June 30, 2023 (*the “New Investment Management Agreement” and collectively with the 2019 Investment Management Agreement, the “Investment Management Agreement”) upon the closing of the acquisition of the Advisor by MCH Holdco LLC, an affiliate of Monroe Capital LLC. The New Investment Management Agreement replaced the previously effective 2019 Investment Management Agreement on June 30, 2023. The 2019 Investment Management and the New Investment Management Agreement contain the same economic terms. Under the terms of the Investment Management Agreement, the Advisor determines the composition of the Company’s investment portfolio, the nature and timing of the changes to the investment portfolio and the manner of implementing such changes; identifies, evaluates and negotiates the structure of the investments the Company makes (including performing due diligence on the Company’s prospective portfolio companies); and closes, monitors and administers the investments the Company makes, including the exercise of any voting or consent rights.

The Advisor’s services under the Investment Management Agreement are not exclusive to the Company, and the Advisor is free to furnish similar services to other entities so long as its services to the Company are not impaired. The Advisor is a registered investment adviser with the SEC. The Advisor receives fees for providing services to the Company under the Investment Management Agreement, consisting of two components, a base management fee and an incentive fee.

The base management is calculated at an annual rate of 2.00% of the Company’s gross assets (less cash and cash equivalents) including any assets acquired with the proceeds of leverage; provided, that, to the extent the Company’s gross assets (less cash and cash equivalents) exceed $250 million, the base management fee on the amount of such excess over $250 million will be calculated at an annual rate of 1.60% of the Company’s gross assets (less cash and cash equivalents) including any assets acquired with the proceeds of leverage. The base management fee is payable monthly in arrears and is prorated for any partial month.

The base management fee payable at September 30, 2023 and  December 31, 2022 was $1.1 million. The base management fee expense was $3.2 million and $2.8 million for the three months ended September 30, 2023 and 2022, respectively. The base management fee expense was $9.6 million and $7.6 million for the nine months ended September 30, 2023 and 2022, respectively.

The incentive fee has two parts, as follows:

The first part, which is subject to the Incentive Fee Cap and Deferral Mechanism, as defined below, is calculated and payable quarterly in arrears based on the Company’s Pre-Incentive Fee Net Investment Income for the immediately preceding calendar quarter. For this purpose, “Pre-Incentive Fee Net Investment Income” means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees received from portfolio companies) accrued during the calendar quarter, minus expenses for the quarter (including the base management fee, expenses payable under the Administration Agreement (as defined below), and any interest expense and any dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with PIK interest and zero coupon securities), accrued income the Company has not yet received in cash. The incentive fee with respect to the Pre-Incentive Fee Net Investment Income is 20.00% of the amount, if any, by which the Pre-Incentive Fee Net Investment Income for the immediately preceding calendar quarter exceeds a hurdle rate of 1.75% (which is 7.00% annualized) of the Company’s net assets at the end of the immediately preceding calendar quarter, adjusted for any share issuances or repurchases during the relevant quarter, subject to a “catch-up” provision measured as of the end of each calendar quarter. Under this provision, in any calendar quarter, the Advisor receives no incentive fee until the Pre-Incentive Fee Net Investment Income equals the hurdle rate of 1.75%, but then receives, as a “catch-up,” 100.00% of the Pre-Incentive Fee Net Investment Income with respect to that portion of such Pre-Incentive Fee Net Investment Income, if any, that exceeds the hurdle rate but is less than 2.1875% quarterly (which is 8.75% annualized). The effect of this “catch-up” provision is that, if Pre-Incentive Fee Net Investment Income exceeds 2.1875% in any calendar quarter, the Advisor will receive 20.00% of the Pre-Incentive Fee Net Investment Income as if the hurdle rate did not apply.

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Horizon Technology Finance Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. Because of the structure of the incentive fee, it is possible that the Company may pay an incentive fee in a quarter in which the Company incurs a loss. For example, if the Company receives Pre-Incentive Fee Net Investment Income in excess of the quarterly minimum hurdle rate, the Company will pay the applicable incentive fee up to the Incentive Fee Cap, defined below, even if the Company has incurred a loss in that quarter due to realized and unrealized capital losses. The Company’s net investment income used to calculate this part of the incentive fee is also included in the amount of the Company’s gross assets used to calculate the 2.00% base management fee. These calculations are appropriately prorated for any period of less than three months and adjusted for any share issuances or repurchases during the current quarter.

The incentive fee on Pre-Incentive Fee Net Investment Income is subject to a fee cap and deferral mechanism which is determined based upon a look-back period of up to three years and is expensed when incurred. For this purpose, the look-back period for the incentive fee based on Pre-Incentive Fee Net Investment Income (the “Incentive Fee Look-back Period”) includes the relevant calendar quarter and the 11 preceding full calendar quarters. Each quarterly incentive fee payable on Pre-Incentive Fee Net Investment Income is subject to a cap (the “Incentive Fee Cap”) and a deferral mechanism through which the Advisor may recoup a portion of such deferred incentive fees (collectively, the “Incentive Fee Cap and Deferral Mechanism”). The Incentive Fee Cap is equal to (a) 20.00% of Cumulative Pre-Incentive Fee Net Return (as defined below) during the Incentive Fee Look-back Period less (b) cumulative incentive fees of any kind paid to the Advisor during the Incentive Fee Look-back Period. To the extent the Incentive Fee Cap is zero or a negative value in any calendar quarter, the Company will not pay an incentive fee on Pre-Incentive Fee Net Investment Income to the Advisor in that quarter. To the extent that the payment of incentive fees on Pre-Incentive Fee Net Investment Income is limited by the Incentive Fee Cap, the payment of such fees will be deferred and paid in subsequent calendar quarters up to three years after their date of deferment, subject to certain limitations, which are set forth in the Investment Management Agreement. The Company only pays incentive fees on Pre-Incentive Fee Net Investment Income to the extent allowed by the Incentive Fee Cap and Deferral Mechanism. “Cumulative Pre-Incentive Fee Net Return” during any Incentive Fee Look-back Period means the sum of (a) Pre-Incentive Fee Net Investment Income and the base management fee for each calendar quarter during the Incentive Fee Look-back Period and (b) the sum of cumulative realized capital gains and losses, cumulative unrealized capital appreciation and cumulative unrealized capital depreciation during the applicable Incentive Fee Look-back Period.

The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or, upon termination of the Investment Management Agreement, as of the termination date), and equals 20.00% of the Company’s realized capital gains, if any, on a cumulative basis from the date of the election to be a BDC through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis through the end of such year, less all previous amounts paid in respect of the capital gain incentive fee. However, in accordance with GAAP, the Company is required to include the aggregate unrealized capital appreciation on investments in the calculation and accrue a capital gain incentive fee on a quarterly basis, as if such unrealized capital appreciation were realized, even though such unrealized capital appreciation is not permitted to be considered in calculating the fee actually payable under the Investment Management Agreement.

There was no performance based incentive fee expense for the three months ended September 30, 2023. The performance based incentive fee expense was $2.8 million for the three months ended September 30, 2022. The performance based incentive fee expense was $3.1 million and $6.4 million for the nine months ended September 30, 2023 and 2022, respectively. The incentive fee on Pre-Incentive Fee Net Investment Income was subject to the Incentive Fee Cap and Deferral Mechanism for the three and nine months ended September 30, 2023, which resulted in $3.5 million and $6.8 million of reduced expense and additional net investment income. This deferral represents a contingent future liability and is not accrued until the amount can be reasonably estimated and payment is probable. The remaining deferred amount may be paid up to three years after the date of deferment. The total contingent future liability as of September 30, 2023was $7.8 million, of which $1.0 million expires on December 31, 2025, $0.2 million expires on March 31, 2026, $3.1 million expires on June 30, 2026, and $3.5 million expires on September 30, 2026, respectively. The incentive fee on Pre-Incentive Fee Net Investment Income was not subject to the Incentive Fee Cap and Deferral Mechanism for the three and nine months ended September 30, 2022. There was no performance based incentive fee payable as of September 30, 2023. The performance based incentive fee payable as of  December 31, 2022 was $1.4 million. The entire incentive fee payable as of  December 31, 2022 represented part one of the incentive fee.

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Horizon Technology Finance Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Administration Agreement

The Company entered into an administration agreement (the “Administration Agreement”) with the Advisor to provide administrative services to the Company. For providing these services, facilities and personnel, the Company reimburses the Advisor for the Company’s allocable portion of overhead and other expenses incurred by the Advisor in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions and the Company’s allocable portion of the costs of compensation and related expenses of the Company’s Chief Financial Officer and Chief Compliance Officer and their respective staffs. The administrative fee expense was $0.4 million for the three months ended September 30, 2023 and 2022. The administrative fee expense was $1.2 million and $1.1 million for the nine months ended September 30, 2023 and 2022, respectively.

Note 4. Investments

The following table shows the Company’s investments as of September 30, 2023 and  December 31, 2022:

September 30, 2023 December 31, 2022
Cost Fair Value Cost Fair Value
(In thousands)
Investments
Debt $ 716,655 $ 679,838 $ 701,074 $ 686,458
Warrants 15,783 26,189 14,790 29,712
Other 7,354 7,254 1,200 1,300
Equity 15,022 15,772 4,184 2,556
Total investments $ 754,814 $ 729,053 $ 721,248 $ 720,026

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Horizon Technology Finance Corporation and Subsidiaries

Notes to Consolidated Financial Statements

The following table shows the Company’s investments by industry sector as of September 30, 2023 and  December 31, 2022:

September 30, 2023 December 31, 2022
Cost Fair Value Cost Fair Value
(In thousands)
Life Science
Biotechnology $ 158,953 $ 139,935 $ 193,372 $ 195,006
Medical Device 140,172 139,039 132,803 135,960
Technology
Communications 21,057 24,317 22,892 26,176
Consumer-Related 110,245 106,559 121,961 114,050
Data Storage 417 1,070 476 1,316
Internet and Media 329 1,615 329 1,159
Networking 6,671 6,558 11,831 11,710
Power Management 1,585 2,901 1,585 2,610
Semiconductors 56 — 56 —
Software 164,903 161,258 120,157 118,716
Sustainability
Energy Efficiency 111 36 8 27
Other Sustainability 89,395 83,476 84,633 85,524
Healthcare Information and Services
Diagnostics 9,971 9,939 9,851 9,858
Other 102 1,379 7,559 3,870
Software 50,847 50,971 13,735 14,044
Total investments $ 754,814 $ 729,053 $ 721,248 $ 720,026

Note 5. Transactions with affiliated companies

A non-controlled affiliated company is generally a portfolio company in which the Company owns 5% or more of such portfolio company’s voting securities but not more than 25% of such portfolio company’s voting securities.

Transactions related to investments in non-controlled affiliated companies for the three months ended September 30, 2023 were as follows:

Three months ended September 30, 2023
Fair value at Transfers Net Fair value at
Portfolio June 30, Principal in/(out) at Discount unrealized Net realized September 30, Interest
Company 2023 Purchases Payments fair value accretion gain/(loss) gain/(loss) 2023 income
(In thousands)
Aulea Medical, Inc. $ — $ — $ — $ — $ — $ — $ — $ — $ —
Cadrenal Therapeutics, Inc. (1) 906 — — (906 ) — — — — —
Evelo Biosciences, Inc. — — — 7,665 8 (5,007 ) — 2,666 277
— — — 11,496 11 (7,510 ) — 3,997 415
— — — 4,612 5 (3,013 ) — 1,604 166
— — — 4,598 3 (3,004 ) — 1,597 163
— — — 3,067 4 (2,003 ) — 1,068 114
— — — 3,067 4 (2,003 ) — 1,068 111
— — — 5,000 — 3,485 — 8,485 —
Total non-controlled affiliates $ 906 $ — $ — $ 38,599 $ 35 $ (19,055 ) $ — $ 20,485 $ 1,246
(1) As of September 30, 2023, the Company no longer owns 5% or more of the portfolio company.
--- ---

Transactions related to investments in non-controlled affiliated companies for the nine months ended  September 30, 2023 were as follows:

Nine months ended September 30, 2023
Fair value at Transfers Net Fair value at
Portfolio December 31, Principal in/(out) at Discount unrealized Net realized September 30, Interest
Company 2022 Purchases Payments fair value accretion gain/(loss) gain/(loss) 2023 income
(In thousands)
Aulea Medical, Inc. $ — $ — $ — $ — $ — $ — $ — $ — $ —
Cadrenal Therapeutics, Inc. (1) — — — (906 ) — 906 — — —
Evelo Biosciences, Inc. — — — 7,665 8 (5,007 ) — 2,666 277
— — — 11,496 11 (7,510 ) — 3,997 415
— — — 4,612 5 (3,013 ) — 1,604 166
— — — 4,598 3 (3,004 ) — 1,597 163
— — — 3,067 4 (2,003 ) — 1,068 114
— — — 3,067 4 (2,003 ) — 1,068 111
— — — 5,000 — 3,485 — 8,485 —
Total non-controlled affiliates $ — $ — $ — $ 38,599 $ 35 $ (18,149 ) $ — $ 20,485 $ 1,246
(1) As of September 30, 2023, the Company no longer owns 5% or more of the portfolio company.
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Notes to Consolidated Financial Statements

Transactions related to investments in non-controlled affiliated companies for the three months ended September 30, 2022were as follows:

**** **** **** **** Three months ended September 30, 2022 **** **** **** **** **** ****
Fair value at **** **** **** **** **** Transfers **** **** Net **** **** Fair value at **** ****
Portfolio June 30, **** **** **** **** **** in/(out) at Discount unrealized Net realized September 30, Interest
Company 2022 Purchases Sales fair value Accretion gain/(loss) gain/(loss) 2022 income
(In thousands)
MVI (ABC) LLC fka StereoVision, Inc. — — (30 ) — — — 30 — —
Total non-controlled affiliates $ — $ — $ (30 ) $ — $ — $ — $ 30 $ — $ —

Transactions related to investments in non-controlled affiliated companies for the nine months ended September 30, 2022were as follows:

**** **** **** **** Nine months ended September 30, 2022 **** **** **** **** **** ****
Fair value at **** **** **** **** **** Transfers **** **** Net **** **** Fair value at **** ****
Portfolio December 31, **** **** **** **** **** in/(out) at Discount unrealized Net realized September 30, Interest
Company 2021 Purchases Sales fair value Accretion gain/(loss) gain/(loss) 2022 income
(In thousands)
MVI (ABC) LLC fka StereoVision, Inc. — — (30 ) — — — 30 — —
Total non-controlled affiliates $ — $ — $ (30 ) $ — $ — $ — $ 30 $ — $ —

A controlled affiliated company is generally a portfolio company in which the Company owns more than 25% of such portfolio company’s voting securities or has the power to exercise control over management or policies of such portfolio company (including through a management agreement).

Transactions related to investments in controlled affiliated companies for the three months ended  September 30, 2023 were as follows:

Three months ended September 30, 2023
Fair value at Transfers Net Fair value at
Portfolio June 30, Principal in/(out) at Discount unrealized Net realized September 30, Interest
Company 2023 Purchases Payments PIK fair value accretion gain/(loss) gain/(loss) 2023 income
(In thousands)
Better Place Forests Co. $ — $ 59 $ — $ 105 $ 1,759 $ 2 $ 1,080 $ — $ 3,005 $ 111
— — — 53 844 1 536 — 1,434 55
— — — — 2,061 — — — 2,061 —
— 750 — — — — (259 ) — 491 —
HIMV LLC — — — — 6,154 — — — 6,154 —
Total controlled affiliates $ — $ 809 $ — $ 158 $ 10,818 $ 3 $ 1,357 $ — $ 13,145 $ 166

Transactions related to investments in controlled affiliated companies for the nine months ended  September 30, 2023 were as follows:

Nine months ended September 30, 2023
Fair value at Transfers Net Fair value at
Portfolio December 31, Principal in/(out) at Discount unrealized Net realized September 30, Interest
Company 2022 Purchases Payments PIK fair value accretion gain/(loss) gain/(loss) 2023 income
(In thousands)
Better Place Forests Co. $ — $ 59 $ — $ 105 $ 1,759 $ 2 $ 1,080 $ — $ 3,005 $ 111
— — — 53 844 1 536 — 1,434 55
— — — — 2,061 — — — 2,061 —
— 750 — — — — (259 ) — 491 —
HIMV LLC — — — — 6,154 — — — 6,154 —
Total controlled affiliates $ — $ 809 $ — $ 158 $ 10,818 $ 3 $ 1,357 $ — $ 13,145 $ 166

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Horizon Technology Finance Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Transactions related to investments in controlled affiliated companies for the three months ended September 30, 2022were as follows:

Three months ended September 30, 2022
Fair value at **** Transfers Net Fair value at
Portfolio June 30, **** in/(out) at Discount unrealized Net realized September 30, Interest
Company 2022 Purchases Sales fair value Accretion gain/(loss) gain/(loss) 2022 income
(In thousands)
HESP LLC — — (50 ) — — — 50 — —
Total controlled affiliates $ — $ — $ (50 ) $ — $ — $ — $ 50 $ — $ —

Transactions related to investments in controlled affiliated companies for the nine months ended September 30, 2022 were as follows:

Nine months ended September 30, 2022 ****
Fair value at **** Transfers Net **** Fair value at
Portfolio December 31, in/(out) at Discount unrealized Net realized September 30, Interest
Company 2021 Purchases Sales fair value accretion gain/(loss) gain/(loss) 2022 income
(In thousands)
HESP LLC — — (300 ) — — 1,450 (1,150 ) — —
Total controlled affiliates $ — $ — $ (300 ) $ — $ — $ 1,450 $ (1,150 ) $ — $ —

Note 6. Fair value

Prior to July 30, 2022, the Board determined the fair value of the Company’s investments. Pursuant to the amended SEC Rule 2a-5 of the 1940 Act, on July 29, 2022, the Board designated the Advisor as the Company’s “valuation designee.” The Board is responsible for oversight of the valuation designee. The valuation designee has established a Valuation Committee to determine in good faith the fair value of the Company’s investments, based on input from the Advisor’s management and personnel and independent valuation firms which are engaged at the direction of the Valuation Committee to assist in the valuation of certain portfolio investments lacking a readily available market quotation at least once during a trailing twelve-month period. The Valuation Committee determines fair values pursuant to a valuation policy approved by the Board and pursuant to a consistently applied valuation process. This valuation process is conducted at the end of each fiscal quarter, with at least 25% (based on fair value) of the Company’s valuation of portfolio companies lacking readily available market quotations subject to review by an independent valuation firm.

The Company uses fair value measurements made by the valuation designee to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Fair value is 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. Fair value is best determined based upon quoted market prices. However, in certain instances, there are no quoted market prices for certain assets or liabilities. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the asset or liability.

Fair value measurements focus on exit prices in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment.

The Company’s fair value measurements are classified into a fair value hierarchy in accordance with ASC Topic 820, Fair Value Measurement, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. The three categories within the hierarchy are as follows:

Level 1 Quoted prices in active markets for identical assets and liabilities.
Level 2 Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not active, and model-based valuation techniques for which all significant inputs are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
--- ---
Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
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Horizon Technology Finance Corporation and Subsidiaries

Notes to Consolidated Financial Statements

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 Company’s investments may fluctuate from period to period. Additionally, the fair value of the Company’s investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that the Company may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If the Company was required to liquidate a portfolio investment in a forced or liquidation sale, the Company could realize significantly less than the value at which the Company has recorded such portfolio investment.

Cash and interest receivable: The carrying amount is a reasonable estimate of fair value. These financial instruments are not recorded at fair value on a recurring basis and are categorized as Level 1 within the fair value hierarchy described above.

Money market funds:  The carrying amounts are valued at their net asset value as of the close of business on the day of valuation. These financial instruments are recorded at fair value on a recurring basis and are categorized as Level 2 within the fair value hierarchy described above as these funds can be redeemed daily.

Debt investments: The fair value of debt investments is estimated by discounting the expected future cash flows using the period end rates at which similar debt investments would be made to borrowers with similar credit ratings and for the same remaining maturities. Significant increases (decreases) in this unobservable input would result in a significantly lower (higher) fair value measurement. These assets are recorded at fair value on a recurring basis and are categorized as Level 3 within the fair value hierarchy described above.

Under certain circumstances, the Company  may use an alternative technique to value debt investments that better reflects its fair value such as the use of multiple probability weighted cash flow models when the expected future cash flows contain elements of variability.

Warrant investments: The Company values its warrants using the Black-Scholes valuation model incorporating the following material assumptions:

● Underlying asset value of the issuer is estimated based on information available, including any information regarding the most recent rounds of borrower funding. Significant increases (decreases) in this unobservable input would result in a significantly higher (lower) fair value measurement.
● Volatility, or the amount of uncertainty or risk about the size of the changes in the warrant price, is based on indices of publicly traded companies similar in nature to the underlying company issuing the warrant. A total of seven such indices are used. Significant increases (decreases) in this unobservable input would result in a significantly higher (lower) fair value measurement.
--- ---
● The risk-free interest rates are derived from the U.S. Treasury yield curve. The risk-free interest rates are calculated based on a weighted average of the risk-free interest rates that correspond closest to the expected remaining life of the warrant.
--- ---
● Other adjustments, including a marketability discount on private company warrants, are estimated based on management’s judgment about the general industry environment.
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Horizon Technology Finance Corporation and Subsidiaries

Notes to Consolidated Financial Statements

● Historical portfolio experience on cancellations and exercises of the Company’s warrants are utilized as the basis for determining the estimated time to exit of the warrants in each financial reporting period. Warrants may be exercised in the event of acquisitions, mergers or initial public offerings, and cancelled due to events such as bankruptcies, restructuring activities or additional financings. These events cause the expected remaining life assumption to be shorter than the contractual term of the warrants. Significant increases (decreases) in this unobservable input would result in significantly higher (lower) fair value measurement.

Under certain circumstances the Company may use an alternative technique to value warrants that better reflects the warrants’ fair value, such as an expected settlement of a warrant in the near term or a model that incorporates a put feature associated with the warrant. The fair value may be determined based on the expected proceeds to be received from such settlement or based on the net present value of the expected proceeds from the put option.

The fair value of the Company’s warrants held in publicly traded companies is determined based on inputs that are readily available in public markets or can be derived from information available in public markets. Therefore, the Company has categorized these warrants as Level 2 within the fair value hierarchy described above. The fair value of the Company’s warrants held in private companies is determined using both observable and unobservable inputs and represents management’s best estimate of what market participants would use in pricing the warrants at the measurement date. Therefore, the Company has categorized these warrants as Level 3 within the fair value hierarchy described above. These assets are recorded at fair value on a recurring basis.

Equity investments: The fair value of an equity investment in a privately held company is initially the face value of the amount invested. The Company adjusts the fair value of equity investments in private companies upon the completion of a new third-party round of equity financing. The Company may make adjustments to fair value, absent a new equity financing event, based upon positive or negative changes in a portfolio company’s financial or operational performance. Significant increases (decreases) in this unobservable input would result in a significantly higher (lower) fair value measurement. The Company has categorized these equity investments as Level 3 within the fair value hierarchy described above. The fair value of an equity investment in a publicly traded company is based upon the closing public share price on the date of measurement. Therefore, the Company has categorized these equity investments as Level 1 within the fair value hierarchy described above. These assets are recorded at fair value on a recurring basis.

Other investments: Other investments are valued based on the facts and circumstances of the underlying contractual agreement. The Company currently values these contractual agreements using a multiple probability weighted cash flow model as the contractual future cash flows contain elements of variability. Significant changes in the estimated cash flows and probability weightings would result in a significantly higher or lower fair value measurement. The Company has categorized these other investments as Level 3 within the fair value hierarchy described above. These other investments are recorded at fair value on a recurring basis.

The following tables detail the investments that are carried at fair value and measured at fair value on a recurring basis as of September 30, 2023 and  December 31, 2022 and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine the fair value:

September 30, 2023
Level 1 Level 2 Level 3 Total
(In thousands)
Debt investments $ — $ — $ 679,838 $ 679,838
Warrant investments — 956 25,233 26,189
Other investments — — 7,254 7,254
Equity investments 8,962 — 6,810 15,772
Total investments $ 8,962 $ 956 $ 719,135 $ 729,053
December 31, 2022
--- --- --- --- --- --- --- --- ---
Level 1 Level 2 Level 3 Total
(In thousands)
Debt investments $ — $ — $ 686,458 $ 686,458
Warrant investments — 3,567 26,145 29,712
Other investments — — 1,300 1,300
Equity investments 140 — 2,416 2,556
Total investments $ 140 $ 3,567 $ 716,319 $ 720,026

The following tables provide a summary of quantitative information about the Company’s Level 3 fair value measurements of the Company’s investments as of September 30, 2023 and  December 31, 2022. In addition to the techniques and inputs noted in the table below, according to the Company’s valuation policy, the Company may also use other valuation techniques and methodologies when determining its fair value measurements.

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Horizon Technology Finance Corporation and Subsidiaries

Notes to Consolidated Financial Statements

The following table is not intended to be all-inclusive, but rather provides information on the significant Level 3 inputs as they relate to the Company’s fair value measurements as of September 30, 2023:

September 30, 2023
Fair Valuation Techniques/ Unobservable Weighted
Investment Type Value Methodologies Input Range Average(1)
(Dollars in thousands, except per share data) ****
Debt investments $ 607,193 Discounted Expected Future Cash Flows Hypothetical Market Yield 11% – 20% 14 %
72,645 Multiple Probability Weighted Cash Flow Model Probability Weighting 20% - 100% 50 %
Warrant investments 25,171 Black-Scholes Valuation Model Price Per Share 0.000 –1,89999 $ 58.11
Average Industry Volatility 28% 28 %
Marketability Discount 20% 20 %
Estimated Time to Exit (in years) 1 to 5 3
62 Expected Proceeds Price Per Share $0.25 $ 0.25
Other investments 7,254 Multiple Probability Weighted Cash Flow Model Discount Rate 25% 25 %
Probability Weighting 30% – 100% 83 %
Equity investments 6,810 Last Equity Financing Price Per Share 0.033 –215.0303 $ 18.30
Total Level 3 investments $ 719,135
(1) Weighted average is calculated by multiplying (a) the unobservable input for each investment in the investment type by (b) (1) the fair value of the related investment in the investment type divided by (2) the total fair value of the investment type.
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The following table is not intended to be all-inclusive, but rather provides information on the significant Level 3 inputs as they relate to the Company’s fair value measurements as of December 31, 2022:

December 31, 2022
Fair Valuation Techniques/ Unobservable Weighted
Investment Type Value Methodologies Input Range Average(1)
(Dollars in thousands, except per share data) ****
Debt investments $ 669,617 Discounted Expected Future Cash Flows Hypothetical Market Yield 3% – 22% 14 %
16,545 Multiple Probability Weighted Cash Flow Model Probability Weighting 10% - 75% 31 %
296 Convertible Note Analysis Price Per Share $168.93 $ 168.93
Warrant investments 26,145 Black-Scholes Valuation Model Price Per Share 0.000 –1.8989 $ 58.52
Average Industry Volatility 28% 28 %
Marketability Discount 20% 20 %
Estimated Time to Exit (in years) 1 to 5 3
Other investments 1,300 Multiple Probability Weighted Cash Flow Model Discount Rate 25% 25 %
Probability Weighting 100% 100 %
Equity investments 2,416 Last Equity Financing Price Per Share $1.00– $215.03 $ 26.93
Total Level 3 investments $ 716,319
(1) Weighted average is calculated by multiplying (a) the unobservable input for each investment in the investment type by (b) (1) the fair value of the related investment in the investment type divided by (2) the total fair value of the investment type.
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Borrowings: The Key Facility and the NYL Facility approximate fair value due to the variable interest rate of the facilities and are categorized as Level 2 within the fair value hierarchy described above. Additionally, the Company considers its creditworthiness in determining the fair value of such borrowings. The fair value of the fixed-rate 2026 Notes (as defined in Note 7) is based on the closing public share price on the date of measurement. On September 30, 2023, the closing price of the 2026 Notes on the New York Stock Exchange was $23.60 per note and had an aggregate fair value of $54.3 million. Therefore, the Company has categorized this borrowing as Level 1 within the fair value hierarchy described above. The fair value of the fixed-rate 2027 Notes (as defined in Note 7) is based on the closing public share price on the date of measurement. On September 30, 2023, the closing price of the 2027 Notes on the New York Stock Exchange was $24.18 per note and had an aggregate fair value of $55.6 million. Therefore, the Company has categorized this borrowing as Level 1 within the fair value hierarchy described above. Based on market quotations on September 30, 2023, the 2019 Asset-Backed Notes were trading at par value, or $18.7 million, and are categorized as Level 3 within the fair value hierarchy described above. Based on market quotations on September 30, 2023, the 2022 Asset-Backed Notes were trading at par value, or $100.0 million, and are categorized as Level 3 within the fair value hierarchy described above. These borrowings are not recorded at fair value on a recurring basis.

Off-balance-sheet instruments: Fair values for off-balance-sheet lending commitments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standings. Therefore, the Company has categorized these instruments as Level 3 within the fair value hierarchy described above.

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Horizon Technology Finance Corporation and Subsidiaries

Notes to Consolidated Financial Statements

The following table shows a reconciliation of the beginning and ending balances for Level 3 assets measured at fair value on a recurring basis for the three months ended September 30, 2023:

Three months ended September 30, 2023
Debt Warrant Equity Other ****
Investments Investments Investments Investments Total
(In thousands)
Level 3 assets, beginning of period $ 683,309 $ 24,376 $ 4,259 $ 1,300 $ 713,244
Purchase of investments 66,185 — 750 — 66,935
Warrants received and classified as Level 3 — 1,294 — — 1,294
Principal payments received on investments (25,726 ) — — — (25,726 )
Payment-in-kind interest on investments 3,934 — — — 3,934
Proceeds from sale of investments (2,528 ) (23 ) (6 ) — (2,557 )
Net realized (loss) gain on investments (11,440 ) (118 ) 6 — (11,552 )
Unrealized depreciation included in earnings (18,877 ) (296 ) (1,349 ) (200 ) (20,722 )
Transfer out of Level 3 (5,000 ) — — — (5,000 )
Transfer out of debt investments (9,304 ) — 3,150 6,154 —
Other (715 ) — — — (715 )
Level 3 assets, end of period $ 679,838 $ 25,233 $ 6,810 $ 7,254 $ 719,135

During the three months ended September 30, 2023, there was one transfer out of Level 3. The one transfer out of Level 3 related to debt investments held in one portfolio company with an aggregate fair value of $5.0 million that were transferred to Level 1 upon the conversion into shares of common stock of a public company.

The following table shows a reconciliation of the beginning and ending balances for Level 3 assets measured at fair value on a recurring basis for the three months ended September 30, 2022:

Three months ended September 30, 2022
Debt Warrant Equity Other ****
Investments Investments Investments Investments Total
(In thousands)
Level 3 assets, beginning of period $ 551,560 $ 25,167 $ 453 $ 200 $ 577,380
Purchase of investments 94,627 — — — 94,627
Warrants received and classified as Level 3 — 964 — — 964
Principal payments received on investments (26,929 ) — — (31 ) (26,960 )
Proceeds from sale of investments (6,088 ) (38 ) — — (6,126 )
Net realized (loss) gain on investments (8,492 ) 266 — 31 (8,195 )
Unrealized appreciation (depreciation) included in earnings 8,095 (3,348 ) (420 ) (100 ) 4,227
Transfer out of Level 3 — (1,117 ) — — (1,117 )
Transfer out of debt investments (3,200 ) — 2,000 1,200 —
Other (541 ) — — — (541 )
Level 3 assets, end of period $ 609,032 $ 21,894 $ 2,033 $ 1,300 $ 634,259

During the three months ended September 30, 2022, there were two transfers out of Level 3 . One transfer out of Level 3 related to warrants held in one portfolio company with an aggregate fair value of $0.04 million that was transferred to Level 2 upon the portfolio company becoming a public company. One transfer out of Level 3 related to warrants held in one portfolio company with an aggregate fair value of $1.1 million that was transferred to Level 1 upon the portfolio company becoming a public company.

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Horizon Technology Finance Corporation and Subsidiaries

Notes to Consolidated Financial Statements

The following table shows a reconciliation of the beginning and ending balances for Level 3 assets measured at fair value on a recurring basis for the nine months ended September 30, 2023:

Nine months ended September 30, 2023
Debt Warrant Equity Other ****
Investments Investments Investments Investments Total
(In thousands)
Level 3 assets, beginning of period $ 686,458 $ 26,145 $ 2,416 $ 1,300 $ 716,319
Purchase of investments 153,728 — 760 — 154,488
Warrants and equity received and classified as Level 3 — 1,950 89 — 2,039
Principal payments received on investments (90,222 ) — — — (90,222 )
Payment-in-kind interest on investments 6,088 — — — 6,088
Proceeds from sale of investments (9,564 ) (1,493 ) (6 ) — (11,063 )
Net realized (loss) gain on investments (29,105 ) 1,028 (121 ) — (28,198 )
Unrealized depreciation included in earnings (21,325 ) (2,392 ) (2,467 ) (200 ) (26,384 )
Transfer out of Level 3 (5,000 ) — (111 ) — (5,111 )
Transfer out of debt investments (12,399 ) (5 ) 6,250 6,154 —
Other 1,179 — — — 1,179
Level 3 assets, end of period $ 679,838 $ 25,233 $ 6,810 $ 7,254 $ 719,135

During the nine months ended September 30, 2023, there were two transfers out of Level 3. One transfer out of Level 3 related to equity held in one portfolio company with an aggregate fair value of $0.1 million that was transferred to Level 1 upon the portfolio company becoming a public company. One transfer related to debt investments held in one portfolio company with an aggregate fair value of $5.0 million that were transferred to Level 1 upon the conversion into shares of common stock of a public company.

The change in unrealized depreciation included in the consolidated statement of operations attributable to Level 3 investments still held at September 30, 2023 includes $33.6 million in unrealized depreciation on debt and other investments, $2.1 million in unrealized depreciation on warrant investments and $1.6 million in unrealized depreciation on equity investments.

The following table shows a reconciliation of the beginning and ending balances for Level 3 assets measured at fair value on a recurring basis for the nine months ended September 30, 2022:

Nine months ended September 30, 2022
Debt Warrant Equity Other ****
Investments Investments Investments Investments Total
(In thousands)
Level 3 assets, beginning of period $ 437,317 $ 19,837 $ 203 $ 200 $ 457,557
Purchase of investments 348,097 — 250 — 348,347
Warrants received and classified as Level 3 — 2,441 — — 2,441
Principal payments received on investments (114,120 ) — — (313 ) (114,433 )
Proceeds from sale of investments (49,088 ) (464 ) — — (49,552 )
Net realized (loss) gain on investments (8,492 ) 535 — (1,137 ) (9,094 )
Unrealized appreciation (depreciation) included in earnings 1,128 662 (420 ) 1,350 2,720
Transfer out of Level 3 — (1,117 ) — — (1,117 )
Transfer out of debt investments (3,200 ) — 2,000 1,200 —
Other (2,610 ) — — — (2,610 )
Level 3 assets, end of period $ 609,032 $ 21,894 $ 2,033 $ 1,300 $ 634,259

During the nine months ended September 30, 2022, there were two transfers out of Level 3 . One transfer out of Level 3 related to warrants held in one portfolio company with an aggregate fair value of $0.04 million that was transferred to Level 2 upon the portfolio company becoming a public company. One transfer out of Level 3 related to warrants held in one portfolio company with an aggregate fair value of $1.1 million that was transferred to Level 1 upon the portfolio company becoming a public company.

The change in unrealized appreciation included in the consolidated statement of operations attributable to Level 3 investments still held at September 30, 2022 includes $3.5 million in unrealized depreciation on debt and other investments, $1.2 million in unrealized appreciation on warrant investments and $0.4 million in unrealized depreciation on equity investments.

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Horizon Technology Finance Corporation and Subsidiaries

Notes to Consolidated Financial Statements

The Company discloses fair value information about financial instruments, whether or not recognized in the consolidated statement of assets and liabilities, for which it is practicable to estimate that value. Certain financial instruments are excluded from the disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

The fair value amounts have been measured as of the reporting date and have not been reevaluated or updated for purposes of these financial statements subsequent to that date. As such, the fair values of these financial instruments subsequent to the reporting date may be different than amounts reported.

As of September 30, 2023 and  December 31, 2022, all of the balances of all the Company’s financial instruments were recorded at fair value, except for the Company’s borrowings, as previously described.

Market risk

The Company assumes interest rate risk (the risk that general interest rate levels will change) as a result of its normal operations. As a result, the fair values of the Company’s financial instruments will change when interest rate levels change, and that change may be either favorable or unfavorable to the Company. Management attempts to match maturities of assets and liabilities to the extent believed necessary to minimize interest rate risk. Management monitors rates and maturities of assets and liabilities and attempts to minimize interest rate risk by adjusting terms of new debt investments and by investing in securities with terms that mitigate the Company’s overall interest rate risk.

Note 7. Borrowings

The following table shows the Company’s borrowings as of September 30, 2023 and  December 31, 2022:

September 30, 2023 December 31, 2022
Total Balance Unused Total Balance Unused
Commitment Outstanding Commitment Commitment Outstanding Commitment
(In thousands)
Key Facility $ 150,000 $ 25,000 $ 125,000 $ 125,000 $ 5,000 $ 120,000
NYL Facility 250,000 181,000 69,000 200,000 176,750 23,250
2019 Asset-Backed Notes 18,696 18,696 — 42,573 42,573 —
2022 Asset-Backed Notes 100,000 100,000 — 100,000 100,000 —
2027 Notes 57,500 57,500 — 57,500 57,500 —
2026 Notes 57,500 57,500 — 57,500 57,500 —
Total before debt issuance costs 633,696 439,696 194,000 582,573 439,323 143,250
Unamortized debt issuance costs attributable to term borrowings — (4,196 ) — — (5,245 ) —
Total borrowings outstanding, net $ 633,696 $ 435,500 $ 194,000 $ 582,573 $ 434,078 $ 143,250

As of September 30, 2023, with certain limited exceptions, the Company, as a BDC, is only allowed to borrow amounts such that the Company’s asset coverage, as defined in the 1940 Act, is at least 150% after such borrowings. As of September 30, 2023, the asset coverage for borrowed amounts was 179%.

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Horizon Technology Finance Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Credit Facilities

Key Facility

The Company entered into the Key Facility with Key effective November 4, 2013. On June 29, 2023, the Company amended the Key Facility, among other things, to increase the commitment amount to $150 million and to increase the amount of the accordion feature which now allows for the potential increase in the total commitment amount to $300 million. The Key Facility is collateralized by all debt investments and warrants held by Credit II and permits an advance rate of up to 60% of eligible debt investments held by Credit II. The Key Facility contains covenants that, among other things, require the Company to maintain a minimum net worth and to restrict the debt investments securing the Key Facility to certain criteria for qualified debt investments and includes portfolio company concentration limits as defined in the related loan agreement. The Company may request advances under the Key Facility through June 22, 2024and the Key Facility is scheduled to mature on June 22, 2026. The interest rate on the Key Facility is based on the rate of interest published in The Wall Street Journal as the prime rate in the United States plus 0.25%, with a prime rate floor of 4.25%. The prime rate was 8.50% and 7.50% on September 30, 2023 and  December 31, 2022, respectively. The average interest rate on the Key Facility for the three months ended September 30, 2023 and 2022 was 8.68% and 5.60%, respectively. The average interest rate on the Key Facility for the nine months ended September 30, 2023 and 2022 was 8.34% and 4.75%, respectively. The Key Facility requires the payment of an unused line fee in an amount up to 0.50% on an annualized basis of any unborrowed amount available under the facility. As of September 30, 2023 and  December 31, 2022, the Company had borrowing capacity under the Key Facility of $125.0 million and $120.0 million, respectively. At September 30, 2023 and  December 31, 2022, $38.3 million and $40.2 million, respectively, was available for borrowing, subject to existing terms and advance rates.

NYL Facility

On April 21, 2020, the Company purchased all of the limited liability company interests in HSLFI. HFI entered into the NYL Facility with the NYL Noteholders for an aggregate purchase price of up to $100.0 million, with an accordion feature of up to $200.0 million at the mutual discretion and agreement of HSLFI and the NYL Noteholders. On June 1, 2018, HSLFI sold or contributed to HFI certain secured loans made to certain portfolio companies pursuant to the Sale and Servicing Agreement. Any notes issued by HFI are collateralized by all investments held by HFI and permit an advance rate of up to 67% of the aggregate principal amount of eligible debt investments. The notes were issued pursuant to the Indenture. The interest rate on the notes issued under the NYL Facility was based on the three year USD mid-market swap rate plus a margin of between 3.55% and 5.15% with an interest rate floor, depending on the rating of such notes at the time of issuance.

On February 25, 2022, the Company amended its NYL Facility to, among other things, reduce the applicable margin used to calculate the credit facility’s interest rate on the Company’s borrowings above $100.0 million. Such borrowings were priced at the three-year USD mid-market swap rate plus 3.00%.

On May 24, 2023, the Company amended its NYL Facility to, among other things, increase the commitment by $50.0 million to enable its wholly-owned subsidiary to issue up to $250.0 million of secured notes. The amendment to the NYL Facility extends the investment period to June 2024 and the maturity date of all advances to June 2029. In addition, the amendment amended the interest rate for advances made after May 24, 2023, fixing the interest rate at the greater of (i) 4.60% and (ii) the Three Year I Curve plus 3.50%, with the interest rate to be reset on any advance date.

There were $181.0 million and $176.8 million in advances made by the NYL Noteholders as of September 30, 2023 and  December 31, 2022. The interest rate as of September 30, 2023 and  December 31, 2022 was 5.85% and 5.57%, respectively. As of September 30, 2023 and  December 31, 2022, the Company had borrowing capacity under the NYL Facility of $69.0 million and $23.2 million, respectively. At September 30, 2023 and  December 31, 2022, $5.1 million and $23.2 million, respectively, was available for borrowing, subject to existing terms and advance rates.

Under the terms of the NYL Facility, the Company is required to maintain a reserve cash balance, which may be used to pay monthly interest and principal payments on the NYL Facility. The Company has segregated these funds and classified them as restricted investments in money market funds. At  September 30, 2023 and December 31, 2022, there were approximately $1.3 million and $1.0 million, respectively, of restricted investments.

Securitizations

2019 Asset-Backed Notes

On August 13, 2019, the Company completed a term debt securitization in connection with which an affiliate of the Company made an offering of the 2019 Asset-Backed Notes. The 2019 Asset-Backed Notes were rated A+(sf) by Morningstar Credit Ratings, LLC. There has been no change in the rating since August 13, 2019.

The 2019 Asset-Backed Notes were issued by the 2019‑1 Trust pursuant to a note purchase agreement, dated as of August 13, 2019, by and among the Company and Keybanc Capital Markets Inc. as Initial Purchaser, and are backed by a pool of loans made to certain portfolio companies of the Company and secured by certain assets of those portfolio companies and are to be serviced by the Company. Interest on the 2019 Asset-Backed Notes will be paid, to the extent of funds available, at a fixed rate of 4.21% per annum. The reinvestment period of the 2019 Asset-Backed Notes ended July 15, 2021 and the maturity date is September 15, 2027.

As of September 30, 2023 and  December 31, 2022, the 2019 Asset-Backed Notes had an outstanding principal balance of $18.7 million and $42.6 million, respectively.

Under the terms of the 2019 Asset-Backed Notes, the Company is required to maintain a reserve cash balance, funded through proceeds from the sale of the 2019 Asset-Backed Notes, which may be used to pay monthly interest and principal payments on the 2019 Asset-Backed Notes. The Company has segregated these funds and classified them as restricted investments in money market funds. At September 30, 2023 and  December 31, 2022, there were approximately $0.4 million and $0.6 million of restricted investments, respectively.

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Horizon Technology Finance Corporation and Subsidiaries

Notes to Consolidated Financial Statements

2022 Asset-Backed Notes

On November 9, 2022, the Company completed a term debt securitization in connection with which an affiliate of the Company made an offering of the 2022 Asset-Backed Notes. The 2022 Asset-Backed Notes were rated A by DBRS, Inc. There has been no change in the rating since November 9, 2022.

The 2022 Asset-Backed Notes were issued by the 2022‑1 Trust pursuant to a note purchase agreement, dated as of November 9, 2022, by and among the Company and Keybanc Capital Markets Inc. as Initial Purchaser, and are backed by a pool of loans made to certain portfolio companies of the Company and secured by certain assets of those portfolio companies and are to be serviced by the Company. Interest on the 2022 Asset-Backed Notes will be paid, to the extent of funds available, at a fixed rate of 7.56% per annum. The reinvestment period of the 2022 Asset-Backed Notes ends November 15, 2024 and the maturity date is November 15, 2030.

As of  September 30, 2023 and  December 31, 2022, the 2022 Asset-Backed Notes had an outstanding principal balance of $100.0 million.

Under the terms of the 2022 Asset-Backed Notes, the Company is required to maintain a reserve cash balance, funded through proceeds from the sale of the 2022 Asset-Backed Notes, which may be used to pay monthly interest and principal payments on the 2022 Asset-Backed Notes. The Company has segregated these funds and classified them as restricted investments in money market funds. At  September 30, 2023 and  December 31, 2022, there were approximately $1.2 million of restricted investments.

Unsecured Notes

2026 Notes

On March 30, 2021, the Company issued and sold an aggregate principal amount of $57.5 million of 4.875% notes due in 2026 (the “2026 Notes”). The amount of 2026 Notes issued and sold included the full exercise by the underwriters of their option to purchase $7.5 million in aggregate principal of additional notes. The 2026 Notes have a stated maturity of March 30, 2026 and may be redeemed in whole or in part at the Company’s option at any time or from time to time on or after March 30, 2023 at a redemption price of $25 per security plus accrued and unpaid interest. The 2026 Notes bear interest at a rate of 4.875% per year, payable quarterly on March 30, June 30, September 30 and December 30 of each year. The 2026 Notes are the Company’s direct unsecured obligations and (i) rank equally in right of payment with the Company’s current and future unsecured indebtedness; (ii) are senior in right of payment to any of the Company’s future indebtedness that expressly provides it is subordinated to the 2026 Notes; (iii) are effectively subordinated to all of the Company’s existing and future secured indebtedness (including indebtedness that is initially unsecured to which the Company subsequently grants security), to the extent of the value of the assets securing such indebtedness, and (iv) are structurally subordinated to all existing and future indebtedness and other obligations of any of the Company’s subsidiaries. As of September 30, 2023, the Company was in material compliance with the terms of the 2026 Notes. The 2026 Notes are listed on the New York Stock Exchange under the symbol “HTFB”.

2027 Notes

On June 15, 2022, the Company issued and sold an aggregate principal amount of $50.0 million of 6.25% notes due in 2027 and on July 11, 2022, pursuant to the underwriters’ 30 day option to purchase additional notes, the Company sold an additional $7.5 million of such notes (collectively, the “2027 Notes”). The 2027 Notes have a stated maturity of June 15, 2027 and may be redeemed in whole or in part at the Company’s option at any time or from time to time on or after June 15, 2024 at a redemption price of $25 per security plus accrued and unpaid interest. The 2027 Notes bear interest at a rate of 6.25% per year, payable quarterly on March 30, June 30, September 30 and December 30 of each year, commencing on September 30, 2022. The 2027 Notes are the Company’s direct unsecured obligations and (i) rank equally in right of payment with the Company’s current and future unsecured indebtedness; (ii) are senior in right of payment to any of the Company’s future indebtedness that expressly provides it is subordinated to the 2027 Notes; (iii) are effectively subordinated to all of the Company’s existing and future secured indebtedness (including indebtedness that is initially unsecured to which the Company subsequently grants security), to the extent of the value of the assets securing such indebtedness, and (iv) are structurally subordinated to all existing and future indebtedness and other obligations of any of the Company’s subsidiaries. As of September 30, 2023, the Company was in material compliance with the terms of the 2027 Notes. The 2027 Notes are listed on the New York Stock Exchange under the symbol “HTFC”.

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Horizon Technology Finance Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Note 8. Financial instruments with off-balance-sheet risk

In the normal course of business, the Company is party to financial instruments with off-balance-sheet risk to meet the financing needs of its borrowers. These financial instruments include commitments to extend credit and involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated statement of assets and liabilities. The Company attempts to limit its credit risk by conducting extensive due diligence and obtaining collateral where appropriate.

The balance of unfunded commitments to extend credit was $181.8 million and $190.0 million as of September 30, 2023 and  December 31, 2022, respectively. Commitments to extend credit consist principally of the unused portions of commitments that obligate the Company to extend credit, often subject to financial or non-financial milestones and other conditions to borrow that must be achieved before the commitment can be drawn. In addition, the commitments generally have fixed expiration dates or other termination clauses. Since commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

The following table provides the Company’s unfunded commitments by portfolio company as of September 30, 2023 and December 31, 2022:

September 30, 2023 December 31, 2022
Fair Value of Fair Value of
Unfunded Unfunded
Principal Commitment Principal Commitment
Balance Liability Balance Liability
(In thousands) (In thousands)
BrightInsight, Inc. $ 18,250 $ 241 $ 21,000 $ 278
Britecore Holdings, Inc. 5,000 72 5,000 66
Candesant Biomedical Corporation 10,000 151 — —
Castle Creek Biosciences 4,000 72 4,000 72
Divergent Technologies, Inc. 11,250 118 22,500 236
Elligo Healthcare Research, Inc. 15,000 194 — —
Engage3, LLC — — 8,000 40
Groundspeed Analytics, Inc. — — 15,000 150
Hound Labs, Inc. — — 7,500 88
KSQ Therapeutics, Inc. — — 10,000 100
Lytics, Inc. 4,000 52 5,000 65
Mirantis, Inc. 15,000 136 — —
Native Microbials, Inc. — — 7,500 72
Noodle Partners, Inc. 5,000 61 — —
Optoro, Inc. 6,250 — 15,000 38
PDS Biotechnology Corporation — — 10,000 158
Robin Healthcare, Inc. — — 10,000 100
SafelyYou, Inc. 20,000 270 — —
Scientia Vascular, Inc. 5,000 55 10,000 110
Slingshot Aerospace, Inc. — — 5,000 64
Sonex Health, Inc. 15,000 176 — —
Supply Network Visibility Holdings, LLC 10,000 35 — —
Swift Health Systems Inc. 11,500 — 25,500 105
Tallac Therapeutics, Inc. 10,000 229 — —
Temperpack Technologies, Inc. 6,500 14 9,000 19
Viken Detection Corporation 10,000 160 — —
Total $ 181,750 $ 2,036 $ 190,000 $ 1,761

The table above also provides the fair value of the Company’s unfunded commitment liability as of September 30, 2023 and December 31, 2022, which totaled $2.0 million and $1.8 million, respectively. The fair value at inception of the delay draw credit agreements is equal to the fees and/or warrants received to enter into these agreements, taking into account the remaining terms of the agreements and the counterparties’ credit profile. The unfunded commitment liability reflects the fair value of these future funding commitments and is included in the Company’s consolidated statement of assets and liabilities.

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Horizon Technology Finance Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Note 9. Concentrations of credit risk

The Company’s debt investments consist primarily of loans to development-stage companies at various stages of development in the technology, life science, healthcare information and services and sustainability industries. Many of these companies may have relatively limited operating histories and also may experience variation in operating results. Many of these companies conduct business in regulated industries and could be affected by changes in government regulations. Most of the Company’s borrowers will need additional capital to satisfy their continuing working capital needs and other requirements, and in many instances, to service the interest and principal payments on the loans.

The Company’s largest debt investments may vary from period to period as new debt investments are recorded and existing debt investments are repaid. The Company’s five largest debt investments at cost represented 23% of total debt investments outstanding as of September 30, 2023 and  December 31, 2022. The Company’s five largest debt investments at fair value represented 22% and 23% of total debt investments outstanding as of September 30, 2023 and  December 31, 2022, respectively. No single debt investment represented more than 10% of the total debt investments at cost or fair value as of September 30, 2023 and  December 31, 2022. Investment income, consisting of interest and fees, can fluctuate significantly upon repayment of large debt investments. Interest income from the five largest debt investments at cost accounted for 24% and 18% of total interest and fee income on investments for the three months ended September 30, 2023 and 2022, respectively. Interest income from the five largest debt investments at fair value accounted for 22% and 18% of total interest and fee income on investments for the three months ended September 30, 2023 and 2022, respectively. Interest income from the five largest debt investments at cost accounted for 23% and 18% of total interest and fee income on investments for the nine months ended September 30, 2023 and 2022, respectively. Interest income from the five largest debt investments at fair value accounted for 21% and 18% of total interest and fee income on investments for the nine months ended September 30, 2023 and 2022, respectively.

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Horizon Technology Finance Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Note 10. Distributions

The Company’s distributions are recorded on the declaration date. The following table summarizes the Company’s distribution activity for the nine months ended September 30, 2023 and for the year ended December 31, 2022:

DRIP DRIP
Date Amount Cash Shares Share
Declared Record Date Payment Date Per Share Distribution Issued Value
(In thousands, except share and per share data)
Nine Months Ended September 30, 2023
7/28/2023 11/17/23 12/15/23 $ 0.11 $ — — $ —
7/28/2023 10/18/23 11/15/23 0.11 — — —
7/28/2023 9/19/23 10/16/23 0.11 3,445 15,067 184
4/28/2023 8/17/23 9/15/23 0.11 3,458 8,665 106
4/28/2023 7/18/23 8/15/23 0.11 3,427 8,307 105
4/28/2023 6/16/23 7/14/23 0.11 3,434 7,424 96
2/23/2023 5/18/23 6/14/23 0.11 3,087 7,128 86
2/23/2023 4/18/23 5/16/23 0.11 3,068 6,705 84
2/23/2023 3/17/23 4/14/23 0.11 3,035 6,894 81
$ 0.99 $ 22,954 60,190 $ 742
Year Ended December 31, 2022
10/28/2022 2/17/23 3/15/23 $ 0.11 $ 3,040 6,764 $ 75
10/28/2022 1/18/23 2/15/23 0.11 3,021 5,754 74
10/28/2022 12/19/22 1/13/23 0.11 2,978 5,618 69
10/28/2022 11/17/22 12/15/22 0.05 1,319 2,171 27
7/29/2022 11/17/22 12/15/22 0.10 2,638 4,341 57
7/29/2022 10/18/22 11/15/22 0.10 2,580 4,621 60
7/29/2022 9/19/22 10/14/22 0.10 2,558 7,703 81
4/29/2022 8/18/22 9/15/22 0.10 2,528 4,925 60
4/29/2022 7/19/22 8/16/22 0.10 2,484 3,939 55
4/29/2022 6/17/22 7/15/22 0.10 2,434 4,286 51
2/25/2022 5/18/22 6/15/22 0.10 2,378 4,428 50
2/25/2022 4/19/22 5/16/22 0.10 2,349 4,088 49
2/25/2022 3/18/22 4/14/22 0.10 2,352 3,221 46
$ 1.28 $ 32,659 61,859 $ 754

On October 27, 2023, the Board declared monthly distributions per share and a special distribution per share, payable as set forth in the following table:

Monthly distributions

Ex-Dividend Date Record Date Payment Date Distributions Declared
February 15, 2024 February 16, 2024 March 15, 2024 $ 0.11
January 17, 2024 January 18, 2024 February 14, 2024 $ 0.11
December 18, 2023 December 19, 2023 January 16, 2024 $ 0.11

Special distribution

Ex-Dividend Date Record Date Payment Date Distributions Declared
November 16, 2023 November 17, 2023 December 15, 2023 $ 0.05

After paying distributions of $0.33 per share and earning net investment income of $0.53 per share for the quarter, the Company’s undistributed spillover income as of September 30, 2023 was $1.23 per share. Spillover income includes any ordinary income and net capital gains from the preceding tax years that were not distributed during such tax years.

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Horizon Technology Finance Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Note 11. Financial highlights

The following table shows financial highlights for the Company:

Nine months ended September 30,
2023 2022
(In thousands, except share and per share data)
Per share data: **** ****
Net asset value at beginning of period $ 11.47 $ 11.56
Net investment income 1.54 1.06
Realized loss (0.95 ) (0.40 )
Unrealized (depreciation) appreciation on investments (0.81 ) 0.05
Net increase in net assets resulting from operations (0.22 ) 0.71
Distributions declared ^(1)^ (0.99 ) (0.90 )
From net investment income (0.99 ) (0.90 )
From net realized gain on investments — —
Return of capital — —
Other ^(2)^ 0.15 0.29
Net asset value at end of period $ 10.41 $ 11.66
Per share market value, beginning of period $ 11.60 $ 15.92
Per share market value, end of period $ 11.88 $ 10.01
Total return based on a market value ^(3)^ 10.9 % (31.5 )%
Shares outstanding at end of period 33,306,958 26,393,773
Ratios to average net assets: **** ****
Expenses without incentive value ^(4)^ 14.0 % 11.4 %
Incentive fees ^(4)^ 1.2 % 3.0 %
Net expenses ^(4)^ 15.2 % 14.4 %
Net investment income with incentive fees ^(4)^ 18.5 % 12.1 %
Net assets at the end of the period $ 346,575 $ 307,687
Average net asset value $ 335,531 $ 280,904
Average debt per share $ 14.29 $ 13.32
Portfolio turnover ratio 10.0 % (5) 14.9 % (5)
(1) Distributions are determined based on taxable income calculated in accordance with income tax regulations, which may differ from amounts determined under GAAP due to (i) changes in unrealized appreciation and depreciation, (ii) temporary and permanent differences in income and expense recognition, and (iii) the amount of spillover income carried over from a given tax year for distribution in the following tax year. The final determination of taxable income for each tax year, as well as the tax attributes for distributions in such tax year, will be made after the close of the tax year.
--- ---
(2) Includes the impact of the different share amounts as a result of calculating 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. The issuance of common stock on a per share basis reflects the incremental net asset value changes as a result of the issuance of common stock in the Company’s continuous public offering and pursuant to the Company’s distribution reinvestment plan. The issuance of common stock at an offering price, net of sales commissions and dealer manager fees, that is greater than the net asset value per share results in an increase in net asset value per share.
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(3) The total return equals the change in the ending market value over the beginning of period price per share plus distributions paid per share during the period, divided by the beginning price.
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(4) Annualized.
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(5) Calculated by dividing the lesser of purchases or the sum of (1) principal prepayments and (2) maturities by the monthly average debt investment balance.
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Horizon Technology Finance Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Note 12. Subsequent Events

On  October 27, 2023 , Evelo Biosciences, Inc. (“Evelo”) paid down $11.0 million of the principal amount of its loans outstanding under that certain Venture Loan and Security Agreement by and among the Company, the other lender parties therein and Evelo, dated as of  *December 15, 2022,*as amended.

As of October 30, 2023, the fair value of the Company’s equity investment in Evelo is $1.1 million, compared to the fair value of $8.5 million shown on the Schedule of Investments as of September 30, 2023 above.

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

In this quarterly report on Form 10‑Q, except where the context suggests otherwise, the terms “we,” “us,” “our” and “Horizon Technology Finance” refer to Horizon Technology Finance Corporation and its consolidated subsidiaries. The information contained in this section should be read in conjunction with our consolidated financial statements and related notes thereto appearing elsewhere in this quarterly report on Form 10‑Q.

Forward-looking statements

This quarterly report on Form 10‑Q, including the Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains statements that constitute forward-looking statements, which relate to future events or our future performance or financial condition. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our industry, our beliefs and our assumptions. 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, including the performance of our existing debt investments, warrants and other investments;
● the introduction, withdrawal, success and timing of business initiatives and strategies;
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● general economic and political trends and other external factors, including continuing supply chain disruptions, increased inflation and a general slowdown in economic activity;
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● the relative and absolute investment performance and operations of our Advisor;
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● the impact of increased competition;
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● the impact of investments we intend to make and future acquisitions and divestitures;
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● the unfavorable resolution of legal proceedings;
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● our business prospects and the prospects of our portfolio companies, including our and their ability to achieve our respective objectives as a result of the COVID-19 pandemic;
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● geopolitical turmoil, including the military dispute between Ukraine and Russia and Chinese aggression in the Taiwan Strait, and the potential for volatility in energy prices and disruptions to global supply chains resulting from such turmoil and its impact on the industries in which we invest;
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● the impact, extent and timing of technological changes and the adequacy of intellectual property protection;
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● our regulatory structure and tax status;
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● changes in the general interest rate environment;
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● our ability to qualify and maintain qualification as a RIC and as a BDC;
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● the adequacy of our cash resources and working capital;
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● any losses or operations disruptions caused by us, our Advisor or our portfolio companies holding cash balances at financial institutions that exceed federally insured limits or by disruptions in the financial services industry;
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● the timing of cash flows, if any, from the operations of our portfolio companies, and the resulting effect on our portfolio companies' decisions to make payment-in-kind ("PIK") interest payments or ability to make end of term payments;
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● the impact of interest rate volatility on our results, particularly if we use leverage as part of our investment strategy;
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● the ability of our portfolio companies to achieve their objective;
● the impact of legislative and regulatory actions and reforms and regulatory supervisory or enforcement actions of government agencies relating to us or our Advisor;
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● our contractual arrangements and relationships with third parties;
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● our ability to access capital and any future financings by us;
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● our use of financial leverage;
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● the ability of our Advisor to attract and retain highly talented professionals;
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● the impact of changes to tax legislation and, generally, our tax position; and
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● our ability to fund unfunded commitments.
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We use words such as “anticipates,” “believes,” “expects,” “intends,” “seeks” and similar expressions to identify forward-looking statements. Undue influence should not be placed on the forward looking statements as our actual results could differ materially from those projected in the forward-looking statements for any reason, including the factors in “Risk Factors” and elsewhere in our annual report on Form 10‑K for the year ended December 31, 2022, and elsewhere in this quarterly report on Form 10‑Q.

We have based the forward-looking statements included in this quarterly report on Form 10-Q on information available to us on the date of this quarterly report on Form 10-Q, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements in this quarterly report on Form 10‑Q, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the U.S. Securities and Exchange Commission, or the SEC, including periodic reports on Form 10‑Q and Form 10‑K and current reports on Form 8‑K.

Overview

We are a specialty finance company that lends to and invests in development-stage companies in the technology, life science, healthcare information and services and sustainability industries, which we refer to as our “Target Industries.” Our investment objective is to maximize our investment portfolio’s total return by generating current income from the debt investments we make and capital appreciation from the warrants we receive when making such debt investments. We are focused on making secured debt investments, which we refer to collectively as “Venture Loans,” to venture capital and private equity backed companies and publicly traded companies in our Target Industries, which we refer to as “Venture Lending.” Our debt investments are typically secured by first liens or first liens behind a secured revolving line of credit, or collectively “Senior Term Loans.” Some of our debt investments may also be subordinated to term debt provided by third parties. As of September 30, 2023, 87.4%, or $594.1 million, of our debt investment portfolio at fair value consisted of Senior Term Loans. Venture Lending is typically characterized by (1) the making of a secured debt investment after a venture capital or equity investment in the portfolio company has been made, which investment provides a source of cash to fund the portfolio company’s debt service obligations under the Venture Loan, (2) the senior priority of the Venture Loan which requires repayment of the Venture Loan prior to the equity investors realizing a return on their capital, (3) the amortization of the Venture Loan and (4) the lender’s receipt of warrants or other success fees with the making of the Venture Loan.

We are an externally managed, closed-end, non-diversified management investment company that has elected to be regulated as a BDC under the Investment Company Act of 1940, as amended, or the 1940 Act. In addition, for U.S. federal income tax purposes, we have elected to be treated as a RIC under Subchapter M of the Code. As a BDC, we are required to comply with regulatory requirements, including limitations on our use of debt. We are permitted to, and expect to, finance our investments through borrowings subject to a 150% asset coverage test. As defined in the 1940 Act, asset coverage of 150% means that for every $100 of net assets a BDC holds, it may raise up to $200 from borrowing and issuing senior securities. The amount of leverage that we may employ will depend on our assessment of market conditions and other factors at the time of any proposed borrowing. As a RIC, we generally are not subject to corporate-level income taxes on our investment company taxable income, determined without regard to any deductions for dividends paid, and our net capital gain that we distribute as dividends for U.S. federal income tax purposes to our stockholders as long as we meet certain source-of-income, distribution, asset diversification and other requirements.

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We were formed in March 2010 and completed an initial public offering.

Our investment activities, and our day-to-day operations, are managed by our Advisor and supervised by our Board, of which a majority of the members are independent of us. Under the Investment Management Agreement, we have agreed to pay our Advisor a base management fee and an incentive fee for its advisory services to us. We have also entered into the Administration Agreement with our Advisor under which we have agreed to reimburse our Advisor for our allocable portion of overhead and other expenses incurred by our Advisor in performing its obligations under the Administration Agreement.

Portfolio composition and investment activity

The following table shows our portfolio by type of investment as of September 30, 2023 and December 31, 2022:

September 30, 2023 December 31, 2022
Percentage of Percentage of
Number of Fair Total Number of Fair Total
Investments Value Portfolio Investments Value Portfolio
(Dollars in thousands)
Debt investments 56 $ 679,838 93.2 % 60 $ 686,458 95.3 %
Warrants 85 26,189 3.6 90 29,712 4.1
Other investments 3 7,254 1.0 2 1,300 0.2
Equity 14 15,772 2.2 8 2,556 0.4
Total $ 729,053 100.0 % $ 720,026 100.0 %

The following table shows total portfolio investment activity as of and for the three and nine months ended September 30, 2023 and 2022:

For the three months ended For the nine months ended
September 30, September 30,
2023 2022 2023 2022
(In thousands)
Beginning portfolio $ 715,391 $ 577,492 $ 720,026 $ 458,075
New debt and equity investments 89,435 94,627 186,988 348,347
Less refinanced debt balances (22,500 ) — (32,500 ) (25,000 )
Net new debt and equity investments 66,935 94,627 154,488 323,347
Principal payments received on investments (9,121 ) (4,960 ) (22,011 ) (11,916 )
Payment-in-kind interest on investments 3,934 — 6,088 —
Early pay-offs and principal paydowns (16,605 ) (22,000 ) (68,211 ) (77,517 )
Accretion of debt investment fees 1,925 1,980 5,018 4,533
New debt investment fees (1,595 ) (1,474 ) (2,397 ) (4,259 )
Warrants and equity received in settlement of fee income 80 — 169 —
Proceeds from sale of investments (2,557 ) (6,255 ) (11,063 ) (49,681 )
Net loss on investments (11,816 ) (8,228 ) (28,513 ) (9,127 )
Net unrealized (depreciation) appreciation on investments (17,518 ) 3,442 (24,448 ) 1,169
Other — — (93 ) —
Ending portfolio $ 729,053 $ 634,624 $ 729,053 $ 634,624

We receive payments on our debt investments based on scheduled amortization of the outstanding balances. In addition, we receive repayments of some of our debt investments prior to their scheduled maturity date. The frequency or volume of these repayments may fluctuate significantly from period to period.

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The following table shows our debt investments by industry sector as of September 30, 2023 and December 31, 2022:

September 30, 2023 December 31, 2022
Debt Percentage of Debt Percentage of
Investments at Total Investments at Total
Fair Value Portfolio Fair Value Portfolio
(Dollars in thousands)
Life Science
Biotechnology $ 122,230 18.0 % $ 189,729 27.6 %
Medical Device 131,346 19.3 127,839 18.6
Technology
Communications 20,520 3.0 22,671 3.3
Consumer-Related 98,172 14.4 108,226 15.8
Networking 6,307 0.9 11,467 1.7
Software 158,429 23.3 117,002 17.0
Sustainability
Other Sustainability 82,643 12.2 83,705 12.2
Healthcare Information and Services
Diagnostics 9,924 1.5 9,804 1.4
Other Healthcare — — 2,500 0.4
Software 50,267 7.4 13,515 2.0
Total $ 679,838 100.0 % $ 686,458 100.0 %

The largest debt investments in our portfolio may vary from period to period as new debt investments are originated and existing debt investments are repaid. Our five largest debt investments at cost represented 23% of total debt investments outstanding as of September 30, 2023 and December 31, 2022. Our five largest debt investments at fair value represented 22% and 23% of total debt investments outstanding as of September 30, 2023 and December 31, 2022, respectively. No single debt investment at cost or fair value represented more than 10% of our total debt investments as of September 30, 2023 and December 31, 2022.

Debt investment asset quality

We use an internal credit rating system which rates each debt investment on a scale of 4 to 1, with 4 being the highest credit quality rating and 3 being the rating for a standard level of risk. A rating of 2 represents an increased level of risk and, while no loss is currently anticipated for a 2‑rated debt investment, there is potential for future loss of principal. A rating of 1 represents a deteriorating credit quality and a high degree of risk of loss of principal. Our internal credit rating system is not a national credit rating system. As of September 30, 2023 and December 31, 2022, our debt investments had a weighted average credit rating of 3.1. The following table shows the classification of our debt investment portfolio by credit rating as of September 30, 2023 and December 31, 2022:

September 30, 2023 December 31, 2022
Debt Percentage Debt Percentage
Number of Investments at of Debt Number of Investments at of Debt
Investments Fair Value Investments Investments Fair Value Investments
(Dollars in thousands)
Credit Rating **** ****
4 12 $ 150,882 22.2 % 8 $ 93,832 13.7 %
3 37 437,158 64.3 47 557,554 81.2
2 5 76,298 11.2 2 26,822 3.9
1 2 15,500 2.3 3 8,250 1.2
Total 56 $ 679,838 100.0 % 60 $ 686,458 100.0 %

As of September 30, 2023, there were two debt investments with an internal credit rating of 1, with an aggregate cost of $41.5 million and an aggregate fair value of $15.5 million. As of December 31, 2022, there were three debt investments with an internal credit rating of 1, with an aggregate cost of $20.9 million and an aggregate fair value of $8.3 million.

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Consolidated results of operations

As a BDC and a RIC, we are subject to certain constraints on our operations, including limitations imposed by the 1940 Act and the Code. The consolidated results of operations described below may not be indicative of the results we report in future periods.

Comparison of the three months ended September 30, 2023 and 2022

The following table shows consolidated results of operations for the three months ended September 30, 2023 and 2022:

For the three months ended
September 30,
2023 2022
(In thousands)
Total investment income $ 29,138 $ 23,254
Total expenses 11,605 12,018
Net investment income before excise tax 17,533 11,236
Provision for excise tax 179 100
Net investment income 17,354 11,136
Net realized loss (11,816 ) (8,585 )
Net unrealized (depreciation) appreciation on investments (17,518 ) 3,442
Net (decrease) increase in net assets resulting from operations $ (11,980 ) $ 5,993
Average debt investments, at fair value $ 679,763 $ 583,184
Average gross assets less cash $ 740,836 $ 634,614
Average borrowings outstanding $ 417,220 $ 364,714

Net (decrease) increase in net assets resulting from operations can vary substantially from period to period for various reasons, including, without limitation, the recognition of realized gains and losses and unrealized appreciation and depreciation on investments. As a result, quarterly comparisons of net increase in net assets resulting from operations may not be meaningful.

Investment income

Total investment income increased by $5.9 million, or 25.3%, to $29.1 million for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. For the three months ended September 30, 2023, total investment income consisted primarily of $29.0 million in interest income from investments, which included $4.7 million in income from the accretion of origination fees and end of term payments, or ETPs, and $0.1 million in fee income. Interest income on debt investments increased by $6.3 million, or 27.6%, to $29.0 million, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. Interest income on debt investments for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022 increased primarily due to an increase of $96.6 million, or 16.6%, in the average size of our debt investment portfolio and an increase in the prime rate which is the base rate for most of our variable rate debt investments. Fee income, which includes success fee, other fee and prepayment fee income on debt investments, decreased by $0.4 million, or 75.6%, to $0.1 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 primarily due to lower fee income earned on prepayments for the three months ended September 30, 2023 compared to the three months ended September 30, 2022.

The following table shows our dollar-weighted annualized yield for the three months ended September 30, 2023 and 2022:

For the three months ended
September 30,
Investment type: 2023 2022
Debt investments^(1)^ 17.1 % 15.9 %
All investments^(1)^ 16.1 % 15.3 %
(1) We calculate the dollar-weighted annualized yield on average investment type for any period as (1) total related investment income during the period divided by (2) the average of the fair value of the investment type outstanding on (a) the last day of the calendar month immediately preceding the first day of the period and (b) the last day of each calendar month during the period. The dollar-weighted annualized yield on average investment type is higher than what investors will realize because it does not reflect our expenses or any sales load paid by investors.
--- ---

Investment income, consisting of interest income and fees on debt investments, can fluctuate significantly upon repayment of large debt investments. Interest income from the five largest debt investments at cost in the aggregate accounted for 24% and 18% of investment income for the three months ended September 30, 2023 and 2022, respectively. Interest income from the five largest debt investments at fair value in the aggregate accounted for 22% and 18% of investment income for the three months ended September 30, 2023 and 2022, respectively.

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Expenses

Total expenses decreased by $0.4 million, or 3.4%, to $11.6 million for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. Total expenses for each period consisted of interest expense, base management fee, incentive and administrative fees, professional fees and general and administrative expenses.

Interest expense increased by $1.8 million, or 33.1%, to $7.1 million for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. Interest expense, which includes the amortization of debt issuance costs, increased primarily due to an increase in average borrowings of $52.5 million, or 14.4%, for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022 and an increase in our effective cost of debt for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022.

Base management fee expense increased by $0.4 million, or 15.2%, to $3.2 million for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. Base management fee increased primarily due to an increase of $96.6 million, or 16.6%, in average debt investments for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022.

There was no performance based incentive fee expense for the three months ended September 30, 2023. Performance based incentive fee expense decreased by $2.8 million for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. This decrease was due to an Incentive Fee Cap and Deferral Mechanism in our Investment Management Agreement of $3.5 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. The Incentive Fee Cap and Deferral Mechanism resulted in $3.5 million of reduced incentive fee expense and increased net investment income for the three months ended September 30, 2023. The incentive fee on Pre-Incentive Fee Net Investment Income was subject to the Incentive Fee Cap for the three months ended September 30, 2023 due to the cumulative incentive fees paid exceeding 20% of cumulative pre-incentive fee net return during the applicable quarter and the 11 preceding full calendar quarters.

Administrative fee expense, professional fees and general and administrative expenses were $1.3 million and $1.1 million for the three months ended September 30, 2023 and 2022, respectively.

Net realized gains and losses and net unrealized appreciation and depreciation

Realized gains or losses on investments are measured by the difference between the net proceeds from the repayment or sale and the cost basis of our investments without regard to unrealized appreciation or depreciation previously recognized. Realized gains or losses on investments include investments charged off during the period, net of recoveries. The net change in unrealized appreciation or depreciation on investments primarily reflects the change in portfolio investment fair values during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.

During the three months ended September 30, 2023, we realized net losses on investments totaling $11.8 million primarily due to the settlement of one of our debt investments. Such net realized losses were primarily the result of portfolio companies ceasing operations due to their inability to raise additional capital and the sale of their assets for less than the cost of their debt investments. During the three months ended September 30, 2022, we realized net losses on investments totaling $8.6 million primarily due to the settlement of one of our debt investments.

During the three months ended September 30, 2023, net unrealized depreciation on investments totaled $17.5 million which was primarily due to the unrealized depreciation on two of our debt investments offset by (1) the reversal of previously recorded unrealized depreciation from the settlement of one of our debt investments and (2) the unrealized appreciation on one of our equity investments. During the three months ended September 30, 2022, net unrealized appreciation on investments totaled $3.4 million which was primarily due the reversal of previously recorded unrealized depreciation from the settlement of one of our debt investments partially offset by the unrealized depreciation on our warrant and equity investments.

Comparison of the nine months ended September 30, 2023 and 2022

The following table shows consolidated results of operations for the nine months ended September 30, 2023 and 2022:

For the nine months ended
September 30,
2023 2022
(In thousands)
Total investment income $ 85,292 $ 56,046
Total expenses 38,313 30,293
Net investment income before excise tax 46,979 25,753
Provision for excise tax 542 306
Net investment income 46,437 25,447
Net realized loss (28,513 ) (9,484 )
Net unrealized (depreciation) appreciation on investments (24,448 ) 1,169
Net (decrease) increase in net assets resulting from operations $ (6,524 ) $ 17,132
Average debt investments, at fair value $ 685,171 $ 521,661
Average gross assets less cash $ 739,268 $ 567,019
Average borrowings outstanding $ 430,974 $ 319,623

Net (decrease) increase in net assets resulting from operations can vary substantially from period to period for various reasons, including, without limitation, the recognition of realized gains and losses and unrealized appreciation and depreciation on investments. As a result, quarterly comparisons of net increase in net assets resulting from operations may not be meaningful.

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Investment income

Total investment income increased by $29.2 million, or 52.2%, to $85.3 million for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. For the nine months ended September 30, 2023, total investment income consisted primarily of $83.0 million in interest income from investments, which included $12.1 million in income from the accretion of origination fees and ETPs and $2.3 million in fee income. Interest income on debt investments increased by $28.7 million, or 52.9%, to $83.0 million, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. Interest income on debt investments for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 increased primarily due to an increase of $163.5 million, or 31.3%, in the average size of our debt investment portfolio and an increase in the prime rate which is the base rate for most of our variable rate debt investments. Fee income, which includes success fee, other fee and prepayment fee income on debt investments, increased by $0.5 million, or 30.4%, to $2.3 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 primarily due to higher fee income earned on prepayments for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

The following table shows our dollar-weighted annualized yield for the nine months ended September 30, 2023 and 2022:

For the nine months ended
September 30,
Investment type: 2023 2022
Debt investments^(1)^ 16.5 % 14.3 %
All investments^(1)^ 15.7 % 13.7 %
(1) We calculate the dollar-weighted annualized yield on average investment type for any period as (1) total related investment income during the period divided by (2) the average of the fair value of the investment type outstanding on (a) the last day of the calendar month immediately preceding the first day of the period and (b) the last day of each calendar month during the period. The dollar-weighted annualized yield on average investment type is higher than what investors will realize because it does not reflect our expenses or any sales load paid by investors.
--- ---

Investment income, consisting of interest income and fees on debt investments, can fluctuate significantly upon repayment of large debt investments. Interest income from the five largest debt investments at cost in the aggregate accounted for 23% and 18% of investment income for the nine months ended September 30, 2023 and 2022, respectively. Interest income from the five largest debt investments at fair value in the aggregate accounted for 21% and 18% of investment income for the nine months ended September 30, 2023 and 2022, respectively.

Expenses

Total expenses increased by $8.0 million, or 26.5%, to $38.3 million for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. Total expenses for each period consisted of interest expense, base management fee, incentive and administrative fees, professional fees and general and administrative expenses.

Interest expense increased by $8.4 million, or 64.8%, to $21.4 million for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. Interest expense, which includes the amortization of debt issuance costs, increased primarily due to an increase in average borrowings of $111.4 million, or 34.8%, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 and an increase in our effective cost of debt for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.

Base management fee expense increased by $2.1 million, or 27.3%, to $9.6 million for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. Base management fee increased primarily due to an increase of $163.5 million, or 31.3%, in average debt investments for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.

Performance based incentive fee expense decreased by $3.3 million, or 51.3%, to $3.1 million for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. This decrease was due to an Incentive Fee Cap calculated based on the Incentive Fee Cap and Deferral Mechanism in our Investment Management Agreement of $6.8 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The Incentive Fee Cap and Deferral Mechanism resulted in $6.8 million of reduced incentive fee expense and increased net investment income for the nine months ended September 30, 2023. The incentive fee on Pre-Incentive Fee Net Investment Income was subject to the Incentive Fee Cap for the nine months ended September 30, 2023 due to the cumulative incentive fees paid exceeding 20% of cumulative pre-incentive fee net return during the applicable quarter and the 11 preceding full calendar quarters.

Administrative fee expense, professional fees and general and administrative expenses were $4.2 million and $3.4 million for the nine months ended September 30, 2023 and 2022, respectively.

Net realized gains and losses and net unrealized appreciation and depreciation

Realized gains or losses on investments are measured by the difference between the net proceeds from the repayment or sale and the cost basis of our investments without regard to unrealized appreciation or depreciation previously recognized. Realized gains or losses on investments include investments charged off during the period, net of recoveries. The net change in unrealized appreciation or depreciation on investments primarily reflects the change in portfolio investment fair values during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.

During the nine months ended September 30, 2023, we realized net losses on investments totaling $28.5 million primarily due to the settlement of four of our debt investments. Such net realized losses were primarily the result of portfolio companies ceasing operations due to their inability to raise additional capital and the sale of their assets for less than the cost of their debt investments. During the nine months ended September 30, 2022, we realized net losses on investments totaling $9.5 million primarily due the settlement of one of our debt investments and the settlement of one of our other investments.

During the nine months ended September 30, 2023, net unrealized depreciation on investments totaled $24.4 million which was primarily due to (1) the unrealized depreciation on four of our debt investments and (2) the unrealized depreciation on two of our equity investments offset by (1) the reversal of previously recorded unrealized depreciation from the settlement of three of our debt investments and (2) the unrealized appreciation on one of our equity investments. During the nine months ended September 30, 2022, net unrealized appreciation on investments totaled $1.2 million which was primarily due to the reversal of previously recorded unrealized depreciation from the settlement of one of our debt investments and the settlement of one of our other investments partially offset by (1) the unrealized depreciation on one of our debt investments and (2) the unrealized depreciation on our equity investments.

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Liquidity and capital resources

As of September 30, 2023 and December 31, 2022, we had cash and investments in money market funds of $47.3 million and $27.7 million, respectively. Cash and investments in money market funds are available to fund new investments, reduce borrowings, pay expenses, repurchase common stock and pay distributions. In addition, as of September 30, 2023 and December 31, 2022, we had $2.8 million of restricted investments in money market funds. Restricted investments in money market funds may be used to make monthly interest and principal payments on our 2019 Asset-Backed Notes, 2022 Asset-Backed Notes, or our NYL Facility. Our primary sources of capital have been from our public and private equity offerings, use of our revolving credit facility (the “Key Facility”) with KeyBank National Association (“Key”) and the Note Funding Agreement (the “NYL Facility”, together with the Key Facility, the “Credit Facilities”) with several entities owned or affiliated with New York Life Insurance Company, and issuance of our public debt securities. In the current economic environment, such avenues for liquidity may not be available, or may be available on less attractive terms.

On August 2, 2021, we entered into an At-The-Market (“ATM”) sales agreement (the “2021 Equity Distribution Agreement”) with Goldman Sachs & Co. LLC and B. Riley FBR, Inc., (each a “Sales Agent” and, collectively, the “Sales Agents”). The 2021 Equity Distribution Agreement provides that we may offer and sell our shares from time to time through the Sales Agents up to $100.0 million worth of our common stock, in amounts and at times to be determined by us.

On September 22, 2023, we terminated the 2021 Equity Distribution Agreement and entered into a new ATM sales agreement (the “2023 Equity Distribution Agreement”) with the Sales Agents. The remaining shares available under the 2021 Equity Distribution Agreement are no longer available for issuance. The 2023 Equity Distribution Agreement provides that we may offer and sell our shares from time to time through the Sales Agents up to $150.0 million worth of our common stock, in amounts and at times to be determined by us. Sales of our common stock, if any, may be made in negotiated transactions or transactions that are deemed to be “at-the-market,” as defined in Rule 415 under the Securities Act, including sales made directly on the NASDAQ or similar securities exchange or sales made to or through a market maker other than on an exchange, at prices related to the prevailing market prices or at negotiated prices.

During the three months ended September 30, 2023, we sold 1,186,303 shares of common stock under the 2023 Equity Distribution Agreement and the 2021 Equity Distribution Agreement. For the same period, we received total accumulated net proceeds of approximately $13.9 million, including $0.4 million of offering expenses, from these sales.

During the three months ended September 30, 2022, we sold 1,523,519 shares of common stock under the 2021 Equity Distribution Agreement. For the same period, we received total accumulated net proceeds of approximately $19.0 million, including $0.4 million of offering expenses, from these sales.

During the nine months ended September 30, 2023, we sold 2,240,326 shares of common stock under the 2023 Equity Distribution Agreement and the 2021 Equity Distribution Agreement. For the same period, we received total accumulated net proceeds of approximately $26.1 million, including $0.7 million of offering expenses, from these sales.

During the nine months ended September 30, 2022, we sold 2,641,920 shares of common stock under the 2021 Equity Distribution Agreement. For the same period, we received total accumulated net proceeds of approximately $33.2 million, including $0.6 million of offering expenses, from these sales.

On March 14, 2022, we completed a follow-on public offering of 2,500,000 shares of our common stock at a public offering price of $14.35 per share, for total net proceeds to us of $34.3 million, after deducting underwriting commission and discounts and other offering expenses.

On June 2, 2023, we completed a follow-on public offering of 3,250,000 shares of our common stock at a public offering price of $12.50 per share, for total net proceeds to us of $38.9 million, after deducting underwriting commission and discounts and other offering expenses.

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On April 28, 2023, our Board extended a previously authorized stock repurchase program which allows us to repurchase up to $5.0 million of our common stock at prices below our net asset value (“NAV”) per share as reported in our most recent consolidated financial statements. Under the repurchase program, we may, but are not obligated to, repurchase shares of our outstanding common stock in the open market or in privately negotiated transactions from time to time. Any repurchases by us will comply with the requirements of Rule 10b‑18 under the Exchange Act and any applicable requirements of the 1940 Act. Unless extended by our Board, the repurchase program will terminate on the earlier of June 30, 2024 or the repurchase of $5.0 million of our common stock. During the three and nine months ended September 30, 2023 and 2022, we did not make any repurchases of our common stock. From the inception of the stock repurchase program through September 30, 2023, we repurchased 167,465 shares of our common stock at an average price of $11.22 on the open market at a total cost of $1.9 million.

At September 30, 2023 and December 31, 2022, the outstanding principal balance under our Key Facility was $25.0 million and $5.0 million, respectively. As of September 30, 2023 and December 31, 2022, we had borrowing capacity under the Key Facility of $125.0 million and $120.0 million, respectively. At September 30, 2023 and December 31, 2022, $38.3 million and $40.2 million, respectively, was available, subject to existing terms and advance rates.

At September 30, 2023 and December 31, 2022, the outstanding principal balance under the NYL Facility was $181.0 million and $176.8 million, respectively. As of September 30, 2023 and December 31, 2022, we had borrowing capacity under the NYL Facility of $69.0 million and $23.2 million, respectively. At September 30, 2023 and December 31, 2022, $5.1 million and $23.2 million, respectively, was available, subject to existing terms and advance rates.

Our operating activities used cash of $16.5 million for the nine months ended September 30, 2023, and our financing activities provided cash of $36.1 million for the same period. Our operating activities used cash to purchase investments in portfolio companies partially offset by principal payments received on our debt investments. Our financing activities provided cash primarily from the completion of a follow-on public offering of 3.25 million shares of common stock for net proceeds of $38.9 million, after deducting underwriting commission and discounts and other offering expenses, the sale of shares through our ATM for net proceeds of $26.1 million, and advances on our Credit Facilities, partially offset by cash used to repay our 2019 Asset-Backed Notes, to repay the outstanding principal balance under our Key Facility and to pay distributions to our stockholders.

Our operating activities used cash of $160.9 million for the nine months ended September 30, 2022, and our financing activities provided cash of $146.8 million for the same period. Our operating activities used cash to purchase investments in portfolio companies partially offset by principal payments received on our debt investments. Our financing activities provided cash primarily from the issuance of the 2027 Notes (as defined below), the completion of a follow-on public offering of 2.5 million shares of common stock for net proceeds of $34.3 million, after deducting underwriting commission and discounts and other offering expenses and advances on our Credit Facilities, partially offset by cash used to repay a portion of the outstanding principal under our Key Facility, to repay our 2019 Asset-Backed Notes and to pay distributions to our stockholders.

Our primary use of available funds is to make debt investments in portfolio companies and for general corporate purposes. We expect to raise additional equity and debt capital opportunistically as needed and, subject to market conditions, to support our future growth to the extent permitted by the 1940 Act.

In order to remain subject to taxation as a RIC, we intend to distribute to our stockholders all or substantially all of our investment company taxable income. In addition, as a BDC, we are required to maintain asset coverage of at least 150%. This requirement limits the amount that we may borrow.

We believe that our current cash, cash generated from operations, and funds available from our Credit Facilities will be sufficient to meet our working capital and capital expenditure commitments for at least the next 12 months.

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Current borrowings

The following table shows our borrowings as of September 30, 2023 and December 31, 2022:

September 30, 2023 December 31, 2022
Total Balance Unused Total Balance Unused
Commitment Outstanding Commitment Commitment Outstanding Commitment
(In thousands)
Key Facility $ 150,000 $ 25,000 $ 125,000 $ 125,000 $ 5,000 $ 120,000
NYL Facility 250,000 181,000 69,000 200,000 176,750 23,250
2019 Asset-Backed Notes 18,696 18,696 — 42,573 42,573 —
2022 Asset-Backed Notes 100,000 100,000 — 100,000 100,000 —
2027 Notes 57,500 57,500 — 57,500 57,500 —
2026 Notes 57,500 57,500 — 57,500 57,500 —
Total before debt issuance costs 633,696 439,696 194,000 582,573 439,323 143,250
Unamortized debt issuance costs attributable to term borrowings — (4,196 ) — — (5,245 ) —
Total borrowings outstanding, net $ 633,696 $ 435,500 $ 194,000 $ 582,573 $ 434,078 $ 143,250

Credit Facilities

Key Facility

We entered into the Key Facility effective November 4, 2013. The interest rate on the Key Facility is based on the rate of interest published in The Wall Street Journal as the prime rate in the United States plus 0.25%, with a prime rate floor of 4.25%. The prime rate was 8.50% and 7.50% as of September 30, 2023 and December 31, 2022, respectively. The interest rates in effect were 8.75% and 7.75% as of September 30, 2023 and December 31, 2022, respectively. The Key Facility requires the payment of an unused line fee in an amount equal to 0.50% of any unborrowed amount available under the facility annually.

On June 29, 2023, we amended the Key Facility to, among other things, increase the commitment amount to $150 million and to increase the amount of the accordion feature which now allows the potential increase in the total commitment amount to $300 million. The Key Facility is collateralized by debt investments held by Credit II and permits an advance rate of up to sixty percent (60%) of eligible debt investments held by Credit II. The Key Facility contains covenants that, among other things, require us to maintain a minimum net worth, to restrict the debt investments securing the Key Facility to certain criteria for qualified debt investments and to comply with portfolio company concentration limits as defined in the related loan agreement. After the period during which we may request advances under the Key Facility (or the “Revolving Period”), we may not request new advances, and we must repay the outstanding advances under the Key Facility as of such date, at such times and in such amounts as are necessary to maintain compliance with the terms and conditions of the Key Facility, particularly the condition that the principal balance of the Key Facility not exceed sixty percent (60%) of the aggregate principal balance of our eligible debt investments to our portfolio companies. The Revolving Period ends on June 22, 2024 and the maturity date of the Key Facility, the date on which all outstanding advances under the Key Facility are due and payable, is June 22, 2026.

NYL Facility

On April 21, 2020, we purchased all of the limited liability company interests in HSLFI. HFI is a wholly-owned subsidiary of HSLFI. HFI entered into the NYL Facility with the NYL Noteholders for an aggregate purchase price of up to $100.0 million, with an accordion feature of up to $200.0 million at the mutual discretion and agreement of HSLFI and the NYL Noteholders. On June 1, 2018, HSLFI sold or contributed to HFI certain secured loans made to certain portfolio companies pursuant to the Sale and Servicing Agreement. Any notes issued by HFI are collateralized by all investments held by HFI and permit an advance rate of up to 67% of the aggregate principal amount of eligible debt investments.

On February 25, 2022, we amended the NYL Facility to, among other things, reduce the applicable margin used to calculate the NYL Facility’s interest rate on our borrowings above $100 million. Such borrowings were priced at the three-year USD mid-market swap rate plus 3.00%.

On May 24, 2023, we amended the NYL Facility to, among other things, increase the commitment by $50.0 million to enable our wholly-owned subsidiary to issue up to $250.0 million of secured notes. The amendment to the NYL Facility extends the investment period to June 2024 and the maturity date of all advances to June 2029. In addition, the amendment amended the interest rate for advances made after May 24, 2023, fixing the interest rate at the greater of (i) 4.60% and (ii) the Three Year I-Curve plus 3.50% with the interest rate to be reset on any advance date.

Under the terms of the NYL Facility, we are required to maintain a reserve cash balance, which may be used to pay monthly interest and principal payments on the NYL Facility. We have segregated these funds and classified them as restricted investments in money market funds. At September 30, 2023, and December 31, 2022, there were approximately $1.3 million and $1.0 million, respectively, of restricted investments.

There were $181.0 million and $176.8 million in notes issued to the NYL Noteholders as of September 30, 2023 and December 31, 2022 at an interest rate of 5.85% and 5.57%, respectively. As of September 30, 2023 and December 31, 2022, we had borrowing capacity under the NYL Facility of $69.0 million and $23.3 million, respectively. At September 30, 2023 and December 31, 2022, $5.1 million and $23.2 million, respectively, was available for borrowing, subject to existing terms and advance rates.

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Securitizations

2019 Asset-Backed Notes

On August 13, 2019, the 2019 Asset-Backed Notes were issued by the 2019‑1 Trust pursuant to a note purchase agreement, dated as of August 13, 2019, by and among us and Keybanc Capital Markets Inc. as Initial Purchaser, and are backed by a pool of loans made to certain portfolio companies of ours and secured by certain assets of those portfolio companies and are to be serviced by us. Interest on the 2019 Asset-Backed Notes will be paid, to the extent of funds available, at a fixed rate of 4.21% per annum. The 2019 Asset-Backed Notes had a two-year reinvestment period and a stated maturity of September 15, 2027. The 2019 Asset-Backed Notes were rated A+(sf) by Morningstar Credit Ratings, LLC on August 13, 2019. There has been no change in the rating since August 13, 2019.

At September 30, 2023, and December 31, 2022, the 2019 Asset-Backed Notes had an outstanding principal balance of $18.7 million and $42.6 million, respectively.

Under the terms of the 2019 Asset-Backed Notes, we are required to maintain a reserve cash balance, funded through proceeds from the sale of the 2019 Asset-Backed Notes, which may be used to pay monthly interest and principal payments on the 2019 Asset-Backed Notes. We have segregated these funds and classified them as restricted investments in money market funds. At September 30, 2023, and December 31, 2022, there were approximately $0.4 million and $0.6 million, respectively, of restricted investments.

2022 Asset-Backed Notes

On November 9, 2022, the 2022 Asset-Backed Notes were issued by the 2022‑1 Trust pursuant to a note purchase agreement, dated as of November 9, 2022, by and among us and Keybanc Capital Markets Inc. as Initial Purchaser, and are backed by a pool of loans made to certain portfolio companies of ours and secured by certain assets of those portfolio companies and are to be serviced by us. Interest on the 2022 Asset-Backed Notes will be paid, to the extent of funds available, at a fixed rate of 7.56% per annum. The 2022 Asset-Backed Notes have a two-year reinvestment period and a stated maturity of November 15, 2030. The 2022 Asset-Backed Notes were rated A by Morningstar Credit Ratings, LLC on November 9, 2022. There has been no change in the rating since November 9, 2022.

At September 30, 2023 and December 31, 2022, the 2022 Asset-Backed Notes had an outstanding principal balance of $100.0 million.

Under the terms of the 2022 Asset-Backed Notes, we are required to maintain a reserve cash balance, funded through proceeds from the sale of the 2022 Asset-Backed Notes, which may be used to pay monthly interest and principal payments on the 2022 Asset-Backed Notes. We have segregated these funds and classified them as restricted investments in money market funds. At September 30, 2023, and December 31, 2022, there were approximately $1.2 million of restricted investments.

Unsecured Notes

2026 Notes

On March 30, 2021, we issued and sold an aggregate principal amount of $57.5 million of 4.875% notes due in 2026, or the 2026 Notes. The amount of 2026 Notes issued and sold included the full exercise by the underwriters of their option to purchase $7.5 million in aggregate principal of additional notes. The 2026 Notes have a stated maturity of March 30, 2026 and may be redeemed in whole or in part at our option at any time or from time to time on or after March 30, 2023 at a redemption price of $25 per security plus accrued and unpaid interest. The 2026 Notes bear interest at a rate of 4.875% per year, payable quarterly on March 30, June 30, September 30 and December 30 of each year. The 2026 Notes are our direct unsecured obligations and (i) rank equally in right of payment with our current and future unsecured indebtedness; (ii) are senior in right of payment to any of our future indebtedness that expressly provides it is subordinated to the 2026 Notes; (iii) are effectively subordinated to all of our existing and future secured indebtedness (including indebtedness that is initially unsecured to which we subsequently grant security), to the extent of the value of the assets securing such indebtedness, and (iv) are structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries. As of September 30, 2023, we were in material compliance with the terms of the 2026 Notes. The 2026 Notes are listed on the New York Stock Exchange under the symbol “HTFB”.

2027 Notes

On June 15, 2022, we issued and sold an aggregate principal amount of $50.0 million of 6.25% notes due in 2027 and on July 11, 2022, pursuant to the underwriters’ 30 day option to purchase additional notes, we sold an additional $7.5 million of such notes (collectively, the “2027 Notes”). The 2027 Notes have a stated maturity of June 15, 2027 and may be redeemed in whole or in part at our option at any time or from time to time on or after June 15, 2024 at a redemption price of $25 per security plus accrued and unpaid interest. The 2027 Notes bear interest at a rate of 6.25% per year, payable quarterly on March 30, June 30, September 30 and December 30 of each year, commencing on September 30, 2022. The 2027 Notes are our direct unsecured obligations and (i) rank equally in right of payment with our current and future unsecured indebtedness; (ii) are senior in right of payment to any of our future indebtedness that expressly provides it is subordinated to the 2027 Notes; (iii) are effectively subordinated to all of our existing and future secured indebtedness (including indebtedness that is initially unsecured to which we subsequently grant security), to the extent of the value of the assets securing such indebtedness, and (iv) are structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries. As of September 30, 2023, we were in material compliance with the terms of the 2027 Notes. The 2027 Notes are listed on the New York Stock Exchange under the symbol “HTFC”.

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Other assets

As of September 30, 2023 and December 31, 2022, other assets were $3.9 million and $2.8 million, respectively, which was primarily comprised of debt issuance costs and prepaid expenses.

Contractual obligations and off-balance sheet arrangements

The following table shows our significant contractual payment obligations and off-balance sheet arrangements as of September 30, 2023:

Payments due by period
Less than 1 – 3 3 – 5 After 5
Total 1 year Years Years years
(In thousands)
Borrowings $ 439,696 $ 66,281 $ 233,868 $ 139,547 $ —
Unfunded commitments 181,750 134,250 47,500 — —
Incentive fee deferral 7,846 — 7,846 — —
Total $ 629,292 $ 200,531 $ 289,214 $ 139,547 $ —

In the normal course of business, we are party to financial instruments with off-balance sheet risk. These consist primarily of unfunded commitments to extend credit, in the form of loans, to our portfolio companies. Unfunded commitments to provide funds to portfolio companies are not reflected on our balance sheet. Our unfunded commitments may be significant from time to time. As of September 30, 2023, we had unfunded commitments of $181.8 million. This includes no undrawn revolver commitments. These commitments are subject to the same underwriting and ongoing portfolio maintenance requirements as are the financial instruments that we hold on our balance sheet. In addition, these commitments are often subject to financial or non-financial milestones and other conditions to borrowing that must be achieved before the commitment can be drawn. Since these commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. We regularly monitor our unfunded commitments and anticipated refinancings, maturities and capital raising, to ensure that we have sufficient liquidity to fund unfunded commitments. As of September 30, 2023, we reasonably believed that our assets would provide adequate financial resources to satisfy all of our unfunded commitments.

In addition to the Credit Facilities, we have certain commitments pursuant to our Investment Management Agreement entered into with our Advisor. We have agreed to pay a fee for investment advisory and management services consisting of two components (1) a base management fee equal to a percentage of the value of our gross assets less cash or cash equivalents, and (2) a two-part incentive fee. We have also entered into a contract with our Advisor to serve as our administrator. Payments under the Administration Agreement are equal to an amount based upon our allocable portion of our Advisor’s overhead in performing its obligations under the agreement, including rent, fees and other expenses inclusive of our allocable portion of the compensation of our Chief Financial Officer and Chief Compliance Officer and their respective staffs. See Note 3 to our consolidated financial statements for additional information regarding our Investment Management Agreement and our Administration Agreement.

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The incentive fee on Pre-Incentive Fee Net Investment Income is subject to a fee cap and deferral mechanism which is determined based upon a look-back period of up to three years and is expensed when incurred. For this purpose, the Incentive Fee Look-back Period includes the relevant calendar quarter and the 11 preceding full calendar quarters. Each quarterly incentive fee payable on Pre-Incentive Fee Net Investment Income is subject to the Incentive Fee Cap and Deferral Mechanism. The Incentive Fee Cap is equal to (a) 20.00% of Cumulative Pre-Incentive Fee Net Return during the Incentive Fee Look-back Period less (b) cumulative incentive fees of any kind paid to our Advisor during the Incentive Fee Look-back Period. To the extent the Incentive Fee Cap is zero or a negative value in any calendar quarter, we will not pay an incentive fee on Pre-Incentive Fee Net Investment Income to our Advisor in that quarter. To the extent that the payment of incentive fees on Pre-Incentive Fee Net Investment Income is limited by the Incentive Fee Cap, the payment of such fees will be deferred and paid in subsequent calendar quarters up to three years after their date of deferment, subject to certain limitations, which are set forth in the Investment Management Agreement. During the three and nine months ended September 30, 2023, the Incentive Fee Cap and Deferral Mechanism resulted in deferral of $3.5 million and $6.8 million, respectively, of incentive fee which may become subject to payment up to three years after the date of deferment. As of September 30, 2023, the total amount subject to recoupment was $7.8 million.

Distributions

In order to qualify and be subject to tax as a RIC, we must meet certain source-of-income, asset diversification and annual distribution requirements. Generally, in order to qualify as a RIC, we must derive at least 90% of our gross income for each tax year from dividends, interest, payments with respect to certain securities, loans, gains from the sale or other disposition of stock, securities or foreign currencies, income derived from certain publicly traded partnerships, or other income derived with respect to our business of investing in stock or other securities. We must also meet certain asset diversification requirements at the end of each quarter of each tax year. Failure to meet these diversification requirements on the last day of a quarter may result in us having to dispose of certain investments quickly in order to prevent the loss of RIC status. Any such dispositions could be made at disadvantageous prices or times, and may cause us to incur substantial losses.

In addition, in order to be subject to tax as a RIC and to avoid the imposition of corporate-level tax on the income and gains we distribute to our stockholders in respect of any tax year, we are required under the Code to distribute as dividends to our stockholders out of assets legally available for distribution each tax year an amount generally at least equal to 90% of the sum of our net ordinary income and net short-term capital gains in excess of net long-term capital losses, if any. Additionally, in order to avoid the imposition of a U.S. federal excise tax, we are required to distribute, in respect of each calendar year, dividends to our stockholders of an amount at least equal to the sum of 98% of our calendar year net ordinary income (taking into account certain deferrals and elections); 98.2% of our capital gain net income (adjusted for certain ordinary losses) for the one year period ending on October 31 of such calendar year; and any net ordinary income and capital gain net income for preceding calendar years that were not distributed during such calendar years and on which we previously did not incur any U.S. federal income tax. If we fail to qualify as a RIC for any reason and become subject to corporate tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions. Such a failure would have a material adverse effect on us and our stockholders. In addition, we could be required to recognize unrealized gains, incur substantial taxes and interest and make substantial distributions in order to re-qualify as a RIC. We cannot assure stockholders that they will receive any distributions.

To the extent our taxable earnings in a tax year fall below the total amount of our distributions made to stockholders in respect of such tax year, a portion of those distributions may be deemed a return of capital to our stockholders for U.S. federal income tax purposes. Thus, the source of a distribution to our stockholders may be the original capital invested by the stockholder rather than our income or gains. Stockholders should review any written disclosure accompanying a distribution payment carefully and should not assume that the source of any distribution is our ordinary income or gains.

We have adopted an “opt out” dividend reinvestment plan, or DRIP, for our common stockholders. As a result, if we declare a distribution, then stockholders’ cash distributions will be automatically reinvested in additional shares of our common stock unless a stockholder specifically “opts out” of our DRIP. If a stockholder opts out, that stockholder will receive cash distributions. Although distributions paid in the form of additional shares of our common stock will generally be subject to U.S. federal, state and local taxes, stockholders participating in our DRIP will not receive any corresponding cash distributions with which to pay any such applicable taxes. If our common stock is trading above NAV, a stockholder receiving distributions in the form of additional shares of our common stock will be treated as receiving a distribution of an amount equal to the fair market value of such shares of our common stock. We may use newly issued shares to implement the DRIP, or we may purchase shares in the open market in connection with our obligations under the DRIP.

Related party transactions

We have entered into the Investment Management Agreement with our Advisor. Our Advisor is registered as an investment adviser under the Investment Advisers Act of 1940, as amended. Our investment activities are managed by our Advisor and supervised by our Board, the majority of whom are independent directors. Under the Investment Management Agreement, we have agreed to pay our Advisor a base management fee as well as an incentive fee. During the three months ended September 30, 2023 and 2022, our Advisor earned $3.2 million and $5.6 million, respectively, pursuant to the Investment Management Agreement. During the nine months ended September 30, 2023 and 2022, our Advisor earned $12.7 million and $13.9 million, respectively, pursuant to the Investment Management Agreement.

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On February 22, 2023, our Advisor, Horizon Technology Finance Principals LLC f/k/a Horizon Technology Finance, LLC (“HTF Principals”) and Horizon Technology Finance Employees LLC (“HTF Employees”) entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with MCH Holdco LLC (“MCH Holdco”), an affiliate of Monroe Capital LLC (“Monroe Capital”), and Monroe Capital Investment Holdings, L.P., an affiliate of Monroe Capital and the sole stockholder of MCH Holdco. On June 30, 2023, pursuant to the Purchase Agreement, HTF Principals and HTF Employees sold all of their membership interests in our Advisor (which constitute one hundred percent (100%) of the membership interests of our Advisor) to MCH Holdco and our Advisor became a direct wholly owned subsidiary of MCH Holdco and an affiliate of Monroe Capital. Pursuant to the Purchase Agreement, a significant portion of the consideration payable by Monroe Capital to HTF Principals and HTF Employees is in the form of earnout payments contingent upon our performance in 2023, 2024, and 2025, aligning the incentives of our Advisor’s current officers with our stockholders.

We have also entered into the Administration Agreement with our Advisor. Under the Administration Agreement, we have agreed to reimburse our Advisor for our allocable portion of overhead and other expenses incurred by our Advisor in performing its obligations under the Administration Agreement, including rent and our allocable portion of the costs of compensation and related expenses of our Chief Financial Officer and Chief Compliance Officer and their respective staffs. In addition, pursuant to the terms of the Administration Agreement our Advisor provides us with the office facilities and administrative services necessary to conduct our day-to-day operations. During the three months ended September 30, 2023 and 2022, our Advisor earned $0.4 million pursuant to the Administration Agreement. During the nine months ended September 30, 2023 and 2022, our Advisor earned $1.2 million and $1.1 million, respectively, pursuant to the Administration Agreement.

In connection with the Purchase Agreement, HTF Principals sold MCH Holdco its trademark interest in “Horizon Technology Finance” subject to our non-exclusive, royalty-free license to use the name “Horizon Technology Finance.”

We believe that we derive substantial benefits from our relationship with our Advisor. Our Advisor may manage other investment vehicles, or Advisor Funds, with the same investment strategy as us, which now may include investment vehicles managed by affiliates of Monroe Capital. Our Advisor may provide us an opportunity to co-invest with the Advisor Funds. Under the 1940 Act, absent receipt of exemptive relief from the SEC, we and our affiliates are precluded from co-investing in negotiated investments. On November 27, 2017, we were granted exemptive relief from the SEC which permits us to co-invest with the Advisor Funds, subject to certain conditions.

Critical accounting policies

The discussion of our financial condition and results of operation is based upon our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these consolidated financial statements requires 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 describe our significant accounting policies in the notes to our consolidated financial statements.

We have identified the following items as critical accounting policies.

Valuation of investments

Investments are recorded at fair value. Prior to July 30, 2022, our Board determined the fair value of our investments. Pursuant to the amended SEC Rule 2a-5 of the 1940 Act, on July 29, 2022, our Board designated our Advisor as our “valuation designee.” Our Board is responsible for oversight of the valuation designee. The valuation designee has established a Valuation Committee to determine in good faith the fair value of our investments, based on input of our Advisor’s management and personnel and independent valuation firms which are engaged at the direction of the Valuation Committee to assist in the valuation of certain portfolio investments lacking a readily available market quotation at least once during a trailing twelve-month period. The Valuation Committee determines fair values pursuant to a valuation policy approved by our Board and pursuant to a consistently applied valuation process. This valuation process is conducted at the end of each fiscal quarter, with at least 25% (based on fair value) of our valuation of portfolio companies lacking readily available market quotations subject to review by an independent valuation firm. We apply fair value to substantially all of our investments in accordance with Topic 820, Fair Value Measurement, of the Financial Accounting Standards Board’s, or FASB’s, Accounting Standards Codification as amended, or ASC, which establishes a framework used to measure fair value and requires disclosures for fair value measurements. We have categorized our investments carried at fair value, based on the priority of the valuation technique, into a three-level fair value hierarchy. Fair value is a market-based measure considered from the perspective of the market participant who holds the financial instrument rather than an entity specific measure. Therefore, when market assumptions are not readily available, our own assumptions are set to reflect those that we believe market participants would use in pricing the financial instrument at the measurement date.

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The availability of observable inputs can vary depending on the financial instrument and is affected by a wide variety of factors, including, for example, the type of product, whether the product is new, whether the product is traded on an active exchange or in the secondary market and the current market conditions. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. The three categories within the hierarchy are as follows:

Level 1 Quoted prices in active markets for identical assets and liabilities.
Level 2 Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not active and model-based valuation techniques for which all significant inputs are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
--- ---
Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
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Income recognition

Interest on debt investments is accrued and included in income based on contractual rates applied to principal amounts outstanding. Interest income is determined using a method that results in a level rate of return on principal amounts outstanding. Generally, when a debt investment becomes 90 days or more past due, or if we otherwise do not expect to receive interest and principal repayments, the debt investment is placed on non-accrual status and the recognition of interest income may be discontinued. Interest payments received on non-accrual debt investments may be recognized as income, on a cash basis, or applied to principal depending upon management’s judgment at the time the debt investment is placed on non-accrual status. For the three and nine months ended September 30, 2023 and 2022, we did not recognize any interest income from debt investments on non-accrual status.

We receive a variety of fees from borrowers in the ordinary course of conducting our business, including advisory fees, commitment fees, amendment fees, non-utilization fees, success fees and prepayment fees. In a limited number of cases, we may also receive a non-refundable deposit earned upon the termination of a transaction. Debt investment origination fees, net of certain direct origination costs, are deferred, and along with unearned income, are amortized as a level yield adjustment over the respective term of the debt investment. All other income is recorded into income when earned. Fees for counterparty debt investment commitments with multiple debt investments are allocated to each debt investment based upon each debt investment’s relative fair value. When a debt investment is placed on non-accrual status, the amortization of the related fees and unearned income is discontinued until the debt investment is returned to accrual status.

Certain debt investment agreements also require the borrower to make an ETP that is accrued into income over the life of the debt investment to the extent such amounts are expected to be collected. We will generally cease accruing the income if there is insufficient value to support the accrual or if we do not expect the borrower to be able to pay all principal and interest due.

In connection with substantially all lending arrangements, we receive warrants to purchase shares of stock from the borrower. We record the warrants as assets at estimated fair value on the grant date using the Black-Scholes valuation model. We consider the warrants as loan fees and record them as unearned income on the grant date. The unearned income is recognized as interest income over the contractual life of the related debt investment in accordance with our income recognition policy. Subsequent to origination, the warrants are also measured at fair value using the Black-Scholes valuation model. Any adjustment to fair value is recorded through earnings as net unrealized gain or loss on investments. Gains and losses from the disposition of the warrants or stock acquired from the exercise of warrants are recognized as realized gains and losses on investments.

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Realized gains or losses on the sale of investments, or upon the determination that an investment balance, or portion thereof, is not recoverable, are calculated using the specific identification method. We measure realized gains or losses by calculating the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment. Net change in unrealized appreciation or depreciation reflects the change in the fair values of our portfolio investments during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.

Income taxes

We have elected to be treated as a RIC under Subchapter M of the Code and operate in a manner so as to qualify for the tax treatment applicable to RICs. In order to qualify as a RIC and to avoid the imposition of corporate-level U.S. federal income tax on the amounts we distribute to our stockholders, among other things, we are required to meet certain source of income and asset diversification requirements, and we must timely distribute dividends to our stockholders out of assets legally available for distribution each tax year of an amount generally equal to at least 90% of our investment company taxable income, as defined by the Code and determined without regard to any deduction for dividends paid. We, among other things, have made and intend to continue to make the requisite distributions to our stockholders, which will generally relieve us from incurring any material liability for U.S. federal income taxes.

Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current year distributions into the next tax year and incur a 4% excise tax on such income, as required. To the extent that we determine that our estimated current year annual taxable income will be in excess of estimated current year distributions, we will accrue excise tax, if any, on estimated excess taxable income as taxable income is earned.

We evaluate tax positions taken in the course of preparing our tax returns to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority in accordance with ASC Topic 740, Income Taxes, as modified by ASC Topic 946, Financial Services — Investment Companies. Tax benefits of positions not deemed to meet the more-likely-than-not threshold, or uncertain tax positions, are recorded as a tax expense in the current year. It is our policy to recognize accrued interest and penalties related to uncertain tax benefits in income tax expense. We had no material uncertain tax positions at September 30, 2023 and December 31, 2022.

Recent developments

On October 27, 2023*,* Evelo Biosciences, Inc. (“Evelo”) paid down $11.0 million of the principal amount of its loans outstanding under that certain Venture Loan and Security Agreement by and among the Company, the other lender parties therein and Evelo, dated as of December 15, 2022, as amended.

As of October 30, 2023, the fair value of our equity investment in Evelo is $1.1 million, compared to the fair value of $8.5 million shown on the Schedule of Investments as of September 30, 2023 above.

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Recently issued accounting pronouncement

In June 2022, the FASB issued Accounting Standards Update No. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, or ASU 2022-03. ASU 2022-03 clarifies the guidance when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of the security. The amendments in ASU 2022-03 are effective for public companies for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. We are currently assessing the impact of ASU 2022-03 on our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are subject to financial market risks, including changes in interest rates. During the periods covered by our financial statements, the interest rates on the debt investments within our portfolio were primarily at floating rates. We expect that our debt investments in the future will primarily have floating interest rates. As of September 30, 2023 and December 31, 2022, 95% and 100%, respectively, of the outstanding principal amount of our debt investments bore interest at floating rates. New commitments to lend to our portfolio companies are typically based on the Prime Rate as published in The Wall Street Journal.

Based on our September 30, 2023 consolidated statement of assets and liabilities (without adjustment for potential changes in the credit market, credit quality, size and composition of assets on the consolidated statement of assets and liabilities or other business developments that could affect net income) and the base index rates at September 30, 2023, the following table shows the annual impact on the change in net assets resulting from operations of changes in interest rates, which assumes no changes in our investments and borrowings:

Investment Interest Change in Net
Change in basis points Income Expense Assets(1)
(In thousands)
Up 300 basis points $ 18,739 $ 761 $ 17,978
Up 200 basis points $ 12,497 $ 507 $ 11,990
Up 100 basis points $ 6,281 $ 254 $ 6,027
Down 300 basis points $ (15,277 ) $ (761 ) $ (14,516 )
Down 200 basis points $ (10,632 ) $ (507 ) $ (10,125 )
Down 100 basis points $ (5,327 ) $ (254 ) $ (5,073 )
(1) Excludes the impact of incentive fees based on Pre-Incentive Fee Net Investment Income.
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While our 2027 Notes, our 2026 Notes, our 2019 Asset-Backed Notes and our 2022 Asset-Backed Notes bear interest at a fixed rate, our Credit Facilities have a floating interest rate provision. The Key Facility is subject to an interest rate floor of 0.25% per annum, based on a prime rate index which resets monthly, and the interest payable on NYL Facility is based on the Three Year I Curve rate plus a margin of 3.50% with an interest rate floor and resets on any advance date. Any other credit facilities into which we enter in the future may have floating interest rate provisions. We have used hedging instruments in the past to protect us against interest rate fluctuations, and we may use them in the future. Such instruments may include caps, swaps, futures, options and forward contracts. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of lower interest rates with respect to the investments in our portfolio with fixed interest rates. Engaging in commodity interest transactions such as swap transactions or futures contracts on our behalf may cause our Advisor to fall within the definition of “commodity pool operator” under the Commodity Exchange Act (the “CEA”), and related Commodity Futures Trading Commission (the "CFTC"), regulations. On January 31, 2020, our Advisor claimed an exclusion from the definition of the term “commodity pool operator” under the CEA and the CFTC regulations in connection with its management of us and, therefore, is not subject to CFTC registration or regulation under the CEA as a commodity pool operator with respect to its management of us.

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Because we currently fund, and expect to continue to fund, our investments with borrowings, our net income is dependent upon the difference between the rate at which we borrow funds and the rate at which we invest the funds borrowed. Accordingly, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net income. In periods of rising interest rates, our cost of funds could increase, which would reduce our net investment income.

Inflation and Supply Chain Risk

Economic activity has continued to accelerate across sectors and regions. Nevertheless, due to global supply chain issues, geopolitical events, a rise in energy prices and strong consumer demand as economies continue to reopen, inflation is showing signs of acceleration in the U.S. and globally. Inflation is likely to continue in the near to medium-term, particularly in the U.S., with the possibility that monetary policy may tighten in response. Persistent inflationary pressures could affect our portfolio companies’ profit margins.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures

As of September 30, 2023, 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 Exchange Act). Based on that evaluation, our management, including our 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.

(b) Changes in internal controls over financial reporting.

There have been no material changes in our internal control over financial reporting (as defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act) during our most recently completed fiscal quarter, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

Item 1: Legal Proceedings.

We are not currently subject to any material legal proceedings, nor, to our knowledge, are 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. Our business is also subject to extensive regulation, which may result in regulatory proceedings against us. While the outcome of any such future legal or regulatory proceedings cannot be predicted with certainty, we do not expect that any such future proceedings will have a material effect upon our financial condition or results of operations.

Item 1A: Risk Factors.

In addition to other information set forth in this quarterly report on Form 10-Q, you should carefully consider the factors set forth in “Item 1A Risk Factors” in our annual report on Form 10‑K for the year ended December 31, 2022, which could materially affect our business, financial condition and/or operating results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially affect our business, financial condition and/or operating results. There have been no material changes during the nine months ended September 30, 2023 to the risk factors set forth in “Item 1A. Risk Factors” of our annual report on Form 10-K for the year ended December 31, 2022, except as set forth below.

We, our Advisor, and our portfolio companies may maintain cash balances at financial institutions that exceed federally insured limits and may otherwise be materially affected by adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties

Our cash and our Advisor’s cash is held in accounts at U.S. banking institutions that we believe are of high quality. Cash held by us, our Advisor and by our portfolio companies in non-interest-bearing and interest-bearing operating accounts may exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. If such banking institutions were to fail, we, our Advisor, or our portfolio companies could lose all or a portion of those amounts held in excess of such insurance limitations. In addition, actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems, which could adversely affect our, our Advisor’s and our portfolio companies’ business, financial condition, results of operations, or prospects.

Although we and our Advisor assess our and our portfolio companies’ banking relationships as we believe necessary or appropriate, our and our portfolio companies’ access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our respective current and projected future business operations could be significantly impaired by factors that affect us, our Advisor or our portfolio companies, the financial institutions with which we, our Advisor or our portfolio companies have arrangements directly, or the financial services industry or economy in general. These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry. These factors could involve financial institutions or financial services industry companies with which we, our Advisor or our portfolio companies have financial or business relationships, but could also include factors involving financial markets or the financial services industry generally.

In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us, our Advisor, or our portfolio companies to acquire financing on acceptable terms or at all.

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

None.

Item 3: Defaults Upon Senior Securities

None.

Item 4: Mine Safety Disclosures

Not applicable

Item 5: Other Information

None.

Item 6: Exhibits

EXHIBIT INDEX

Exhibit <br> No. Description
10.1 Equity Distribution Agreement. Dated September 22, 2023, by and among Horizon Technology Finance Corporation, Horizon Technology Finance Management, LLC, Goldman Sachs & Co. LLC and B. Riley Securities, Inc. (Incorporated by reference to Exhibit 1.1 of the Company’s Current Report on Form 8 K, filed on September 22, 2023).
31.1* Certifications by Chief Executive Officer pursuant to Exchange Act Rule 13a‑14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended
31.2* Certifications by Chief Financial Officer pursuant to Exchange Act Rule 13a‑14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended
32.1* Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended
32.2* Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended
101.INS Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*         Filed herewith

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Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Quarterly Report on Form 10‑Q to be signed on its behalf by the undersigned, thereunto duly authorized.

HORIZON TECHNOLOGY FINANCE CORPORATION
Date: October 31, 2023 By: /s/ Robert D. Pomeroy, Jr.
Name: Robert D. Pomeroy, Jr.
Title: Chief Executive Officer and Chairman of the Board
Date: October 31, 2023 By: /s/ Daniel R. Trolio
Name: Daniel R. Trolio
Title: Chief Financial Officer

66

ex_566079.htm

EXHIBIT 31.1

CERTIFICATION PURSUANT TO EXCHANGE ACT

RULES 13a-14 AND 15d-14, AS ADOPTED PURSUANT

TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

CHIEF EXECUTIVE OFFICER CERTIFICATION

I, Robert D. Pomeroy, Jr., as Chief Executive Officer and Chairman of the Board of Horizon Technology Finance Corporation, certify that:

  1. I have reviewed this Quarterly Report on Form 10-Q of Horizon Technology Finance Corporation;

  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

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

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

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

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

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

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

Date: October 31, 2023

By: /s/ Robert D. Pomeroy, Jr.
Chief Executive Officer and
Chairman of the Board

ex_566080.htm

EXHIBIT 31.2

CERTIFICATION PURSUANT TO EXCHANGE ACT

RULES 13a-14 AND 15d-14, AS ADOPTED PURSUANT

TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

CHIEF FINANCIAL OFFICER CERTIFICATION

I, Daniel R. Trolio, as Chief Financial Officer of Horizon Technology Finance Corporation, certify that:

  1. I have reviewed this Quarterly Report on Form 10-Q of Horizon Technology Finance Corporation;

  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

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

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

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

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

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

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

Date: October 31, 2023

By: /s/ Daniel R. Trolio
Daniel R. Trolio
Chief Financial Officer

ex_566081.htm

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

In connection with the Quarterly Report on Form 10-Q of Horizon Technology Finance Corporation (the “Company”) for the quarterly period ended September 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert D. Pomeroy, Jr., as Chief Executive Officer and Chairman of the Board, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002, as amended, that to my knowledge:

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

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

/s/ Robert D. Pomeroy, Jr.
Name: Robert D. Pomeroy, Jr.
Title: Chief Executive Officer and Chairman of the Board
Date: October 31, 2023

ex_566082.htm

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

In connection with the Quarterly Report on Form 10-Q of Horizon Technology Finance Corporation (the “Company”) for the quarterly period ended September 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel R. Trolio, as Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002, as amended, that to my knowledge:

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

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

/s/ Daniel R. Trolio
Name: Daniel R. Trolio
Title: Chief Financial Officer
Date: October 31, 2023

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