Debt Investments - As of March 31, 2025, 87.5% ($563.3 million) of the debt investment portfolio at fair value consisted of Senior Term Loans[230] - The total debt investments at fair value as of March 31, 2025, were $643.567 million, compared to $638.779 million at the end of 2024[239] - The largest debt investments represented 23% of total debt investments outstanding as of March 31, 2025[239] - Biotechnology sector debt investments increased to $99.806 million (15.5% of total portfolio) as of March 31, 2025, from $80.988 million (12.7%) at the end of 2024[239] - As of March 31, 2025, the company's debt investments had a weighted average credit rating of 3.1, with 24.7% rated 4, 64.5% rated 3, 8.4% rated 2, and 2.4% rated 1[240] - As of March 31, 2025, 99% of the outstanding principal amount of the company's debt investments bore interest at floating rates[334] Investment Performance - The total portfolio value decreased from $697.891 million on December 31, 2024, to $689.553 million on March 31, 2025[237] - Total investment income decreased by $1.6 million, or 6.2%, to $24.5 million for the three months ended March 31, 2025, compared to $26.1 million for the same period in 2024[244] - Interest income on debt investments decreased by $2.4 million, or 9.3%, to $23.5 million for the three months ended March 31, 2025, primarily due to a decrease in the Prime Rate[245] - PIK interest income decreased by $1.1 million, or 79.4%, for the three months ended March 31, 2025, accounting for 1.2% of total investment income[246] - Net unrealized depreciation on investments totaled $32.2 million for the three months ended March 31, 2025, primarily due to the underperformance of portfolio companies[258] New Investments - New debt and equity investments for the three months ended March 31, 2025, amounted to $102.439 million, compared to $34.569 million for the same period in 2024[237] - The net new debt and equity investments for the three months ended March 31, 2025, were $73.689 million, significantly higher than $23.319 million in 2024[237] Cash and Financing Activities - As of March 31, 2025, the company had cash and investments in money market funds totaling $74.0 million, down from $97.5 million as of December 31, 2024[259] - The company reported cash used in operating activities of $13.2 million and cash used in financing activities of $10.2 million for the three months ended March 31, 2025[270] - The company expects to raise additional equity and debt capital opportunistically to support future growth, subject to market conditions[272] - The company believes its current cash, cash generated from operations, and funds available from Credit Facilities will be sufficient to meet working capital and capital expenditure commitments for at least the next 12 months[274] Expenses and Fees - Total expenses increased by $0.3 million, or 2.1%, to $13.4 million for the three months ended March 31, 2025, compared to $13.1 million for the same period in 2024[251] - Interest expense increased by $0.5 million, or 6.4%, to $8.7 million for the three months ended March 31, 2025, due to an increase in average borrowings[252] - The Advisor earned $3.2 million and $3.5 million in base management fees for the three months ended March 31, 2025 and 2024, respectively[308] - The Advisor earned $0.4 million under the Administration Agreement for the three months ended March 31, 2025 and 2024[311] Capital Structure - The company has a stock repurchase program authorized for up to $5.0 million, which allows repurchases at prices below the net asset value per share[265] - The company issued $57.5 million of 4.875% unsecured notes due in 2026, with a maturity date of March 30, 2026[289] - The company issued $50.0 million of 6.25% unsecured notes due in 2027, with a maturity date of June 15, 2027[290] - The company raised $20.0 million from the issuance of 7.125% convertible notes due in 2031, with net proceeds of approximately $18.6 million[291] - As of March 31, 2025, the total outstanding principal balance of the 2031 Convertible Notes was $20.0 million[296] - The company had total contractual obligations of $693.3 million as of March 31, 2025, with $126.5 million due within one year[298] - The company had unfunded commitments of $200.0 million as of March 31, 2025, including $20.0 million of undrawn revolver commitments[299] Regulatory and Taxation - The company has elected to be treated as a RIC under Subchapter M of the Code, which generally exempts it from corporate-level income taxes[231] - The company must distribute at least 90% of its net ordinary income and net short-term capital gains to qualify as a RIC[305] - A portion of distributions may be deemed a return of capital if taxable earnings fall below total distributions made[306] - The company has adopted an "opt out" dividend reinvestment plan (DRIP) for common stockholders, allowing cash distributions to be automatically reinvested unless stockholders opt out[307] Market Conditions and Economic Factors - Inflation is accelerating in the U.S. and globally, driven by supply chain issues, geopolitical events, and rising energy prices, which may impact profit margins of portfolio companies[340] - Economic activity is accelerating, but market volatility is exacerbated by geopolitical tensions and uncertainties surrounding the 2024 U.S. elections[340] - Persistent inflationary pressures and foreign currency exchange volatility could affect profit margins of portfolio companies[340] - The company expects to continue funding investments through borrowings, which may increase costs in periods of elevated interest rates[339] - The interest payable on various facilities is based on different rates plus margins, indicating a complex interest rate environment[336] Interest Rate Sensitivity - The company’s net income is highly dependent on the difference between borrowing rates and investment rates, with potential adverse effects from significant market interest rate changes[339] - A 300 basis point increase in interest rates would result in a net asset change of $17,707,000, while a decrease of 300 basis points would lead to a change of $(6,633,000)[335] - The company has floating interest rate provisions in its credit facilities, with a floor of 0.10% per annum based on a prime rate index[336] - Hedging instruments have been used to protect against interest rate fluctuations, but may limit benefits from lower interest rates on fixed-rate investments[336] Advisor and Management Changes - On March 31, 2025, Momentum US Bidco LLC acquired 75% of the outstanding equity interests of Monroe Capital Intermediate Holdings, LLC, resulting in a change in control of the Advisor[310] - The company has relied on exemptive relief from the SEC since June 30, 2023, allowing greater flexibility for co-investments with other accounts managed by the Advisor[312]

Core Viewpoint - Horizon Technology Finance Corporation is under investigation for potential securities fraud and unlawful business practices following disappointing financial results [1][3]. Financial Performance - For the fourth quarter and full year ended December 31, 2024, Horizon reported total investment income of $23.5 million, which was below the consensus estimate of $26.1 million and represented a decline both year-over-year and from the previous quarter [3]. - The net asset value per share decreased to $8.43 from $9.06 in the previous quarter, attributed to "stressed investments" by the CEO [3]. Market Reaction - Following the announcement of the financial results, Horizon's stock price fell by $0.96 per share, or 9.95%, closing at $8.65 per share on March 5, 2025 [4].

Company Overview - Horizon Technology Finance Corporation announced its investment portfolio update for the three months ended March 31, 2025[5]. - The company is listed on The Nasdaq Stock Market under the ticker symbol HRZN[3]. - The company has 4.875% Notes due 2026 and 6.25% Notes due 2027 listed on the New York Stock Exchange[3]. - Robert D. Pomeroy, Jr. serves as the Chief Executive Officer of Horizon Technology Finance Corporation[9]. Financial Reporting - The press release regarding the financial results was issued on April 9, 2025[5]. - The report does not indicate any emerging growth company status[4]. - The financial information provided is not deemed "filed" under the Securities Exchange Act of 1934[6]. - The report includes an interactive data file embedded within the Inline XBRL document[7].

Core Viewpoint - Horizon Technology Finance Corporation is under investigation for potential violations of federal securities laws and unlawful business practices, following disappointing financial results that led to a significant drop in stock price [1][2][3]. Financial Performance - For the fourth quarter and full year ended December 31, 2024, Horizon reported total investment income of $23.5 million, which was below the consensus estimate of $26.1 million and represented a decline from both the previous quarter and year-over-year [2]. - The net asset value per share decreased to $8.43 from $9.06 in the previous quarter, attributed to "stressed investments" by the CEO [2]. Stock Market Reaction - Following the announcement of the financial results, Horizon's stock price fell by $0.96 per share, or 9.95%, closing at $8.65 per share on March 5, 2025 [3].

Core Viewpoint - Horizon Technology Finance Corporation is under investigation for potential violations of federal securities laws and unlawful business practices, following disappointing financial results that led to a significant drop in share price [1][3]. Financial Performance - For the fourth quarter and full year ended December 31, 2024, Horizon reported total investment income of $23.5 million, which was below the consensus estimate of $26.1 million and represented a decline both year-over-year and from the previous quarter [3]. - The net asset value per share decreased to $8.43 from $9.06 in the previous quarter, attributed to "stressed investments" by the CEO [3]. - Following the announcement of these results, Horizon's share price fell by $0.95, closing at $8.65 on March 5, 2025, down from $9.60 on March 4, 2025 [3].

Core Viewpoint - Horizon Technology Finance Corporation is under investigation for potential securities fraud and unlawful business practices following disappointing financial results [1][2]. Financial Performance - Horizon reported total investment income of $23.5 million for Q4 and full year 2024, missing the consensus estimate of $26.1 million and showing a decline year-over-year and from the previous quarter [2]. - The net asset value per share decreased to $8.43 from $9.06 in the previous quarter, attributed to "stressed investments" by the CEO [2]. Market Reaction - Following the announcement of the financial results, Horizon's stock price fell by $0.96 per share, or 9.95%, closing at $8.65 per share on March 5, 2025 [3].

Core Viewpoint - Horizon Technology's steep share price selloff presents a significant buying opportunity for long-term investors, with market trends and financial metrics suggesting that its shares have already reached a bottom [1]. Group 1: Market Trends - The current market trends indicate a limited risk of further financial decline for Horizon Technology, making it an attractive option for investors looking for long-term gains [1]. Group 2: Financial Metrics - Financial metrics support the notion that Horizon Technology's shares have bottomed out, reinforcing the potential for recovery and growth in the future [1].

Financial Data and Key Metrics Changes - The company generated net investment income (NII) of $0.27 per share in Q4 2024, down from $0.32 per share in Q3 2024 and $0.45 per share in Q4 2023 [40] - For the full year 2024, NII was $1.32 per share, covering regular monthly distributions of the same amount [10][40] - The net asset value (NAV) decreased to $8.43 per share at year-end 2024, compared to $9.06 per share at the end of Q3 2024 and $9.71 per share at the end of Q4 2023 [44] Business Line Data and Key Metrics Changes - The portfolio grew to $698 million in Q4 2024, up 2% from $684 million at the end of Q3 2024 [33] - The debt portfolio yield was 14.9% for Q4 2024, down from 16.8% in Q4 2023 [38][21] - New originations totaled $61 million in Q4 2024, partially offset by $12 million in scheduled principal payments and $13 million in prepayments [42] Market Data and Key Metrics Changes - Approximately $75 billion was invested in VC-backed companies in Q4 2024, leading to a total investment of $209 billion for the year, which is an increase from 2023 but still below the highs of 2021 and 2022 [25] - The exit value for VC-backed companies in 2024 was $37 billion, indicating a recovery but still below levels from 2019 to 2021 [27] Company Strategy and Development Direction - The company aims to continue growing its portfolio and generating NII that covers distributions, with a strong pipeline of investment opportunities exceeding $1 billion [28][30] - The focus remains on high-quality venture debt investments, particularly in technology and life sciences sectors [28][30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the venture ecosystem recovering, supported by a strong pipeline and active markets for venture debt capital [14][30] - The macro environment is gradually improving, which is expected to enhance the fundraising capabilities of VC-backed companies [30][41] Other Important Information - The company closed a new $100 million senior secured credit facility and raised $20 million through convertible debt offerings, strengthening its balance sheet [12][33] - The advisor agreed to waive a portion of its quarterly income incentive fees if NII falls below declared distributions [12] Q&A Session Summary Question: Key drivers to return to $0.33 dividend rate - Management indicated that prepayments and portfolio growth will be key drivers to return to covering the distribution [48][50] Question: Portfolio marks this quarter - Marks were primarily driven by challenges in fundraising and exit markets for some companies, leading to markdowns mainly on debt investments [56][58] Question: Specific credits and their status - Evelo Biosciences has been moved to a recovery asset category, with future recovery dependent on contractual transactions [60] - Swift Health Systems is still in an extended fundraising process and has not yet resolved its situation [64] Question: Impact of federal government spending cuts - The life sciences sector faces uncertainty due to potential spending cuts, but there are also positive signs such as lower drug development costs and increased IPO activity [68][89] Question: Effect of Fed easings on yields - Fed easings had an impact, with the third quarter rate cut having a larger effect than the fourth quarter [80][82] Question: Share repurchases impact on NAV - Share repurchases added approximately $0.02 to NAV per share [90]

Group 1 - Horizon Technology Finance reported quarterly earnings of $0.27 per share, missing the Zacks Consensus Estimate of $0.33 per share, and down from $0.45 per share a year ago, representing an earnings surprise of -18.18% [1] - The company posted revenues of $23.55 million for the quarter ended December 2024, missing the Zacks Consensus Estimate by 6.59%, and down from $28.18 million year-over-year [2] - Horizon Technology Finance shares have increased by approximately 8.7% since the beginning of the year, while the S&P 500 has declined by -0.5% [3] Group 2 - The current consensus EPS estimate for the upcoming quarter is $0.33 on revenues of $25.2 million, and for the current fiscal year, it is $1.33 on revenues of $107.58 million [7] - The Zacks Industry Rank for Financial - SBIC & Commercial Industry is currently in the top 33% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] Group 3 - The estimate revisions trend for Horizon Technology Finance is mixed, resulting in a Zacks Rank 3 (Hold), suggesting the stock is expected to perform in line with the market in the near future [6]

Investment Strategy and Focus - The company has originated, underwritten, and managed Venture Loans with an aggregate original principal amount exceeding $3.0 billion to more than 330 companies since 2004[37]. - The company expects to invest at least 80% of its total assets in technology-related companies within its Target Industries under normal market conditions[35]. - The company focuses on structured investments in development-stage companies, providing secured loans that minimize downside risk compared to equity investments[34]. - The company emphasizes direct origination of transactions with technology, life science, healthcare, and sustainability companies, leveraging strong relationships with venture capital and private equity firms[34]. - The company requires prospective portfolio companies to have received at least their first round of venture capital or private equity financing before considering investment[42]. - The company assesses the enterprise value of prospective portfolio companies to ensure it substantially exceeds the principal balance of debt borrowed[48]. - The company may invest up to 100% of its assets in securities acquired directly from issuers in privately negotiated transactions[105]. - The company is classified as a non-diversified investment company, allowing it to invest a significant proportion of its assets in a single issuer without strict limitations[169]. Risk Management and Underwriting - The company utilizes a disciplined underwriting process that includes extensive financial analysis and validation from multiple sources to mitigate risks[41]. - The company maintains a robust investment process that includes thorough due diligence and a structured approval process involving its investment committee[60]. - The Advisor employs a proprietary internal credit rating system to assess debt investment quality, rating portfolio companies on a scale of 1 to 4, with 3 indicating standard risk and 4 indicating improved credit quality[63]. - Portfolio companies rated 1 or 2 are closely monitored for adverse developments, with regular contact maintained to discuss strategic initiatives[64]. - The Advisor's internal credit rating system helps identify unexpected developments in portfolio companies' financial performance, allowing for timely interventions[62]. - The company must diversify its holdings to meet regulatory requirements, ensuring no more than 25% of assets are invested in any one issuer[133]. Financial Performance and Fees - The base management fee is set at an annual rate of 2.00% of the Company's gross assets, decreasing to 1.60% for assets exceeding $250 million[72]. - The incentive fee is 20.00% of Pre-Incentive Fee Net Investment Income exceeding a hurdle rate of 1.75%, with a "catch-up" provision for amounts above 2.1875%[73]. - The incentive fee structure allows for potential payments even in quarters with net losses, as long as Pre-Incentive Fee Net Investment Income exceeds the hurdle rate[75]. - Cumulative incentive compensation accrued and/or paid since July 1, 2014, amounts to $9,000,000[86]. - Pre-Incentive Fee Net Investment Income is 2.10%, exceeding the hurdle rate of 1.75%[87]. - An incentive fee of 0.35% is payable based on Pre-Incentive Fee Net Investment Income[87]. - 20.0% of cumulative net increase in net assets resulting from operations since July 1, 2014, is $10,000,000[88]. Regulatory Compliance - The company is regulated as a BDC under the 1940 Act and must adhere to specific regulatory requirements[103]. - The company must maintain at least 70% of its total assets in qualifying assets as defined by the 1940 Act[109]. - The company must distribute at least 90% of its ordinary income and realized net short-term capital gains to maintain its RIC status[131]. - The company is subject to periodic SEC examinations for compliance with the 1940 Act[107]. - The company has adopted written policies to prevent violations of federal securities laws and designated a chief compliance officer for oversight[108]. - The company must review its compliance with the Sarbanes-Oxley Act and take necessary actions to ensure adherence[125]. - The company intends to comply with Nasdaq corporate governance regulations and monitor future listing standards[126]. - The company is subject to corporate-level federal income tax on all taxable income if it fails to qualify as a RIC, which would adversely affect financial performance[138]. Investment Risks - The company faces risks related to political, social, and economic uncertainty, which could materially affect its business and financial condition[141]. - The company relies on key personnel from its Advisor for investment management, and loss of these individuals could disrupt operations[142]. - The incentive fee structure may encourage the Advisor to pursue riskier investments, potentially leading to higher investment losses[152]. - Elevated interest rates may negatively impact portfolio companies, making it harder for them to raise capital and potentially leading to failures[173]. - Portfolio companies typically require substantial additional financing, which may not be readily available, increasing the risk of loss[175]. - The company may face challenges in making follow-on investments in portfolio companies, which could impair the value of its investments[176]. - Legislative changes regarding taxes could negatively impact the company's ability to qualify for tax treatment as a RIC, affecting stockholders[163]. - Economic downturns may lead to increased non-performing assets and decreased portfolio value, potentially resulting in financial losses and reduced revenues[179]. - The company may face challenges in recovering investments if the collateral securing debt investments decreases in value or becomes difficult to appraise[186]. - The lack of liquidity in investments may hinder the ability to sell at favorable prices, resulting in potential losses[189]. - The unpredictable borrowing needs of portfolio companies may exceed expected funding requirements, impacting the company's reputation and lending activity[197]. - The company may hold debt securities of leveraged companies that could experience bankruptcy or financial distress, leading to uncertainty regarding the recovery of investments[198]. - Bankruptcy proceedings can result in significant administrative costs that are paid out of the debtor's estate before any return to creditors, adversely affecting investment returns[199]. Portfolio Company Characteristics - The company focuses on investments in development-stage companies, which are typically rated below "investment grade" and may face significant risks including volatility and intense competition[183]. - The average selling prices of products from development-stage companies have historically decreased, adversely affecting their operating results and cash flow[184]. - The ability of portfolio companies to commercialize their technologies and products is crucial for investment returns, with failure to do so potentially leading to declines in value[217]. - Portfolio companies in the technology industry face intense competition and rapid changes, which could affect their ability to innovate and maintain market relevance[203]. - Life science companies require significant research and development, and the success of new products depends on various factors including regulatory approvals and market acceptance[209]. - Portfolio companies in the sustainability sector are subject to operational risks such as underestimated costs and potential litigation, which could adversely affect their financial condition[213]. - Changes in government regulations could impact the business and industries of portfolio companies, leading to potential penalties and claims that may adversely affect operations[215]. - Portfolio companies may rely on licenses for intellectual property, which can complicate ownership and claims in bankruptcy situations[218]. - Litigation regarding intellectual property rights can result in substantial costs and resource diversion, negatively affecting the portfolio company's ability to service debt investments[221]. - The company does not expect to control any of its portfolio companies, which may lead to risks if those companies make decisions that do not align with the company's interests as debt investors[223]. - Investments in foreign portfolio companies may involve greater risks, including less publicly available information and varying levels of governmental regulation[224]. Management and Operational Structure - The company does not have employees; all executive officers are employees of the Advisor, which manages day-to-day investment operations[69]. - The Advisor's services are not exclusive, allowing it to provide similar services to other entities while ensuring its obligations to the Company are met[70]. - The Advisor is reimbursed for expenses incurred while providing managerial assistance to portfolio companies, which may include operational monitoring and strategic guidance[68]. - The Advisor can resign with 60 days' notice, potentially disrupting operations and affecting financial conditions if a suitable replacement is not found[167]. - The Advisor's referral relationships are crucial for generating investment opportunities; failure to maintain these could adversely affect the company's growth[166]. - The valuation process for portfolio holdings may create conflicts of interest, as the Advisor's management fee is partially based on gross assets and unrealized appreciation[160].