Core Points - GT Medical Technologies, Inc. has secured a $35 million venture loan facility to support its strategic commercial and clinical expansion plans for GammaTile® [1][2][3] - The initial funding of $15 million has been provided by Horizon Technology Finance Corporation, which will enable the company to enhance access to care for patients with brain tumors [1][2][4] - GammaTile® is a targeted radiation therapy solution designed to reduce tumor recurrence by delivering radiation directly to the tumor cavity, minimizing damage to healthy tissue [4][6] Company Overview - GT Medical Technologies aims to improve the lives of patients with brain tumors and has developed GammaTile®, which is FDA-cleared for treating newly diagnosed and recurrent malignant intracranial neoplasms [6] - Since its market release in March 2020, GammaTile has been adopted by over 100 leading institutions, with ongoing expansion [6] Financial Partnership - The partnership with Horizon Technology Finance Corporation is expected to allow GT Medical Technologies to invest more resources into GammaTile and expand its commercial teams to reach more patients [6][4] - Horizon Technology Finance specializes in providing capital to venture-backed companies in various sectors, including healthcare [7]

Core Viewpoint - Horizon Technology Finance (NASDAQ:HRZN) continues to exhibit an unfavorable risk and reward profile, with deteriorating financial performance and significant challenges in the venture capital ecosystem [3][4][6] Financial Performance - Q2 2024 investment income was $26 million, down from $28 million in the prior year, translating to $0.36 per share compared to $0.54 per share in Q2 2023 [5] - NAV per share declined from $9.65 in Q1 2024 to $9.12 in Q2 2024, driven by high financing costs and a shrinking portfolio size [5] - The portfolio size decreased as loan repayments of $34 million outpaced new debt investments of $11 million during the quarter [5] Market Dynamics - The venture capital market is facing a significant lack of exit opportunities, impacting the ability of VC-backed companies to return capital to investors [5] - Current yield levels for new investments are lower than the overall portfolio yield, with onboarding yields at 13.7%, approximately 220 basis points below the portfolio average [5] Leverage and Risk - HRZN's debt to equity ratio stands at 1.36x, approximately 18% above the sector average, indicating elevated financial risk [5] - The company trades at a premium over NAV with a P/NAV of ~1.24x, allowing for potential share issuance to pay down debt and fund new investments [5] Dividend Coverage - Dividend coverage is at ~109%, providing minimal margin of safety, with expectations that HRZN may need to revisit its dividend policy by the end of 2024 or early 2025 [6]

Jonathan Kitchen Overview Horizon Technology Finance (NASDAQ:HRZN) operates as a business development company that generates its earnings through various forms of debt investments. HRZN has a public inception dating back to 2010, which means we have over a decade of performance to reference. The BDC is externally managed by its advisor Horizon Technology Finance Management and sports a management fee of 2% of gross assets. Looking back over the lifetime of HRZN, we can see that the price has depreciated by ...

What's Next for Horizon Technology Finance? It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $0.37 on $27.94 million in revenues for the coming quarter and $1.48 on $110.4 million in revenues for the current fiscal year. This business development company is expected to post quarterly earnings of $0.53 per share in its upcoming report, which represents a year-over-year change of -8.6%. The consensus EPS ...

Debt Investment Portfolio - As of June 30, 2024, the total fair value of the debt investment portfolio is $609.1 million, representing 94.2% of the total portfolio[244] - The largest debt investments at cost represented 24% of total debt investments outstanding as of June 30, 2024[245] - The biotechnology sector accounted for 18.2% of the debt investments at fair value as of June 30, 2024, up from 16.2% as of December 31, 2023[245] - The medical device sector represented 23.0% of the debt investments at fair value as of June 30, 2024, compared to 20.5% at the end of 2023[245] - The company’s debt investments are primarily secured by first liens, with 85.0% of the portfolio consisting of Senior Term Loans as of June 30, 2024[240] - As of June 30, 2024, 99% of the outstanding principal amount of debt investments bore interest at floating rates, compared to 94% as of December 31, 2023[349] Investment Activity - The company made new debt and equity investments totaling $12.1 million for the three months ended June 30, 2024, compared to $46.6 million for the same period in 2023[244] - The company received principal payments of $11.8 million on investments during the three months ended June 30, 2024[244] - The company’s total portfolio investment activity resulted in an ending portfolio value of $646.9 million as of June 30, 2024[244] - Average debt investments at fair value decreased by $45.3 million, or 6.6%, to $642.2 million for the three months ended June 30, 2024 compared to $687.5 million for the same period in 2023[249] - The company funded a $25.0 million debt investment to a new portfolio company, Hometeam Technologies, Inc. on July 30, 2024[345] Financial Performance - Total investment income decreased by $2.4 million, or 8.7%, to $25.7 million for the three months ended June 30, 2024 compared to the same period in 2023[250] - Net investment income for the three months ended June 30, 2024 was $12.9 million, down from $16.1 million in the same period of 2023, reflecting a decrease of 19.5%[249] - Total investment income for the six months ended June 30, 2024 was $51.8 million, down from $56.2 million in the same period of 2023[262] - Total investment income decreased by $4.3 million, or 7.7%, to $51.8 million for the six months ended June 30, 2024, compared to the same period in 2023[263] - Interest income on debt investments decreased by $3.5 million, or 6.5%, to $50.5 million for the six months ended June 30, 2024, primarily due to a decrease of $65.6 million, or 9.4%, in average earning debt investments[263] Expenses and Income - Total expenses increased by $0.5 million, or 4.6%, to $12.4 million for the three months ended June 30, 2024 compared to the same period in 2023[254] - Interest expense increased by $0.8 million, or 10.6%, to $7.9 million for the three months ended June 30, 2024 due to an increase in average borrowings[255] - Total expenses decreased by $1.2 million, or 4.3%, to $25.6 million for the six months ended June 30, 2024[266] - Interest expense increased by $1.8 million, or 12.6%, to $16.1 million for the six months ended June 30, 2024, due to an increase in average borrowings of $11.7 million, or 2.7%[267] Gains and Losses - Net realized gains on investments totaled $2.5 million for the three months ended June 30, 2024, compared to net losses of $16.5 million in the same period of 2023[260] - Net unrealized depreciation on investments totaled $24.5 million for the three months ended June 30, 2024, primarily due to the underperformance of certain portfolio companies[261] - Net realized gains on investments totaled $2.5 million for the six months ended June 30, 2024, compared to net losses of $16.7 million for the same period in 2023[272] - Net unrealized depreciation on investments totaled $28.5 million for the six months ended June 30, 2024, compared to $6.9 million for the same period in 2023[273] Cash and Borrowings - Cash and investments in money market funds increased to $113.7 million as of June 30, 2024, from $73.1 million as of December 31, 2023[274] - As of June 30, 2024, total borrowings outstanding were $715 million, with $442.7 million net after unamortized debt issuance costs[293] - The Key Facility was amended to increase the commitment amount to $150 million and extend the maturity date to June 20, 2029[294] - The NYL Facility had $181 million in notes issued as of June 30, 2024, with an interest rate of 6.34%[301] - The 2022 Asset-Backed Notes had an outstanding principal balance of $100 million as of June 30, 2024, with a fixed interest rate of 7.56%[307] Regulatory and Compliance - The company is regulated as a Business Development Company (BDC) and has elected to be treated as a Regulated Investment Company (RIC) for tax purposes[241] - The company is required to maintain asset coverage of at least 150% as a BDC, limiting the amount it may borrow[290] - The company intends to distribute all or substantially all of its investment company taxable income to remain subject to taxation as a RIC[290] Advisor and Management Fees - The Advisor earned $3.0 million in management fees for the three months ended June 30, 2024, down from $3.3 million in 2023[323] - For the six months ended June 30, 2024, the Advisor's management fees were $6.5 million, compared to $9.5 million in the same period of 2023[323] - Under the Administration Agreement, the Advisor earned $0.4 million for the three months ended June 30, 2024[325] - The Advisor's earnings under the Administration Agreement for the six months ended June 30, 2024, were $0.9 million, slightly up from $0.8 million in 2023[325] Other Financial Metrics - The weighted average credit rating of debt investments was 3.1 as of June 30, 2024, indicating a stable level of risk[246] - The company believes its current cash and cash generated from operations will be sufficient to meet working capital and capital expenditure commitments for at least the next 12 months[291] - Total contractual obligations amount to $599.216 million, with $197.871 million due within one year[314] - Unfunded commitments as of June 30, 2024, stand at $137.5 million, with no undrawn revolver commitments[314] Performance and Market Conditions - The company anticipates continued competition and potential impacts from economic trends, including inflation and supply chain disruptions[235] - The company expects that rising interest rates could materially affect net income due to increased borrowing costs[353] Non-Cash Income - For the three months ended June 30, 2024, 1.4% of total investment income was attributable to non-cash PIK interest, down from 3.4% in the same period of 2023[332] - For the six months ended June 30, 2024, 3.3% of total investment income was attributable to non-cash PIK interest, compared to 3.8% for the same period in 2023[332] - The proportion of total investment income from ETPs not received in cash increased to 6.6% for the three months ended June 30, 2024, from 3.1% in 2023[334] - For the six months ended June 30, 2024, the proportion of total investment income from ETPs not received in cash was 6.7%, up from 4.7% in 2023[334] Recent Transactions - MyForest Foods Co. prepaid its outstanding principal balance of $3.8 million on July 10, 2024, while Lemongrass Holdings, Inc. prepaid $6.3 million on July 11, 2024[342] - Slingshot Aerospace, Inc. prepaid its outstanding principal balance of $20.0 million on July 12, 2024[343] - The company recorded a fair value of $10.9 million for assets related to Nexiican Holdings Inc. following an asset purchase agreement[344]

- Debt Portfolio Yield of 15.9% - "We were also pleased to add in the quarter a new $100 million credit facility led by a large U.S.-based insurance company, which further strengthens our balance sheet and positions us well to execute on new originations," added Mr. Pomeroy. "Moving ahead, we look forward to building our portfolio through select, quality investments and continuing to focus on maximizing NAV." The Company's dollar-weighted annualized yield on average debt investments for the quarter ended Ju ...

Core Viewpoint - Horizon Technology Finance (NASDAQ:HRZN) has underperformed the BDC market by approximately 15% since December last year, primarily due to deteriorating fundamentals and risk exposures [1][2] Financial Performance - In Q1 2024, HRZN generated investment income of $26 million, down from $28 million in the prior period, driven by spread compression [3] - Interest expenses increased to $8.2 million from $7.1 million in Q1 2023, attributed to higher financing costs rather than increased debt volumes [3] - Net investment income for Q1 2024 was $0.38 per share, a decline from $0.45 per share in Q4 2023 and $0.46 per share in Q1 2023 [3] - Net Asset Value (NAV) decreased from $9.71 per share in the prior quarter to $9.64 per share [3] Investment Activity - HRZN closed $37 million in new loan commitments and approvals in Q1 2024, funding $32 million, which exceeded $20 million in total prepaid principal from existing loans [3] - The onboarding yield for Q1 investments was 13.4%, significantly lower than the total portfolio debt yield of 15.6% [3] Market Conditions - The current venture capital (VC) transaction environment is challenging, with new loan origination expected to progress slowly [3] - Despite some improvement in M&A and IPO markets, VC deal volumes remain low, potentially leading to negative net investment volumes in upcoming quarters [3] Portfolio Quality - The proportion of "category 1" investments, indicating deteriorating credit quality, increased from 4.1% to 7.6% of total portfolio value [3] - The likelihood of writing off these investments poses a significant risk to HRZN's net investment income generation [3] Investment Outlook - HRZN's current yield of 11.7% is considered insufficient given the associated risks, especially when compared to the sector average BDC yield of 11.6% [4] - The overall assessment indicates that there are better risk-reward opportunities in the BDC sector than investing in Horizon Technology Finance [4]

Core Viewpoint - Horizon Technology Finance (NASDAQ:HRZN) has seen a price decline of nearly 10% since the last coverage, prompting a reassessment of its investment potential, particularly in light of its high dividend yield and changing credit quality [1][3][29] Financial Performance - The current dividend yield for HRZN is 11.4%, with monthly distributions appealing to income-focused investors, especially those nearing retirement [3][21] - HRZN reported a net investment income (NII) per share of $0.38 for Q1, with total investment income at $26.1 million, indicating a coverage rate of 115% for its dividend [9][21] - The net asset value (NAV) per share has decreased from $11.34 in Q1 2023 to $9.64, attributed to a reduction in portfolio companies and an increase in non-accruals [12][29] Portfolio Composition - HRZN's portfolio consists of $711.1 million in debt investments, with an annualized yield of 15.6%, and over 90% of the portfolio is in senior secured debt, providing a layer of risk mitigation [5][8] - The largest industry exposures are in life sciences (39%) and technology (38%), with a focus on software, medical devices, and biotech [6][8] - The company has funded five loans totaling $33.5 million in Q1, which may contribute to future interest income and NAV growth [12] Interest Rate Environment - HRZN has capitalized on the higher interest rate environment by focusing on floating rate debt investments, which can increase income as rates rise [7][29] - However, the rising interest rates have also strained portfolio companies, leading to a decline in credit quality, with investments rated at the lowest quality (1) increasing from 4.1% to 7.6% [15][16] Valuation and Market Position - The share price has decreased from around $13 to the $11.50 range, currently trading at a premium to NAV of nearly 20%, which is more attractive compared to previous premiums [26][29] - The average Wall Street price target for HRZN is $10.54, indicating a potential downside of 8.8% to fair value, with the highest target at $15 and the lowest at $8.75 [28] Investment Outlook - Despite the drop in credit quality, HRZN continues to support its monthly distributions, and the current price presents a more favorable entry point for potential investors [29] - Current shareholders are advised to hold, while new investors should exercise caution due to the increased vulnerability of HRZN's investments in a prolonged high-interest rate environment [29]

Financial Data and Key Metrics Changes - The company's net investment income (NII) for Q1 2024 was $0.38 per share, down from $0.45 per share in Q4 2023 and $0.46 per share in Q1 2023 [41] - The debt portfolio yield was 15.6% for Q1 2024, compared to 16.3% for the same quarter last year [38] - Total expenses for the quarter were $13.1 million, a decrease from $14.8 million in Q1 2023 [39] Business Line Data and Key Metrics Changes - The company funded five debt investments totaling $33 million in Q1 2024, all to existing portfolio companies [21] - The committed backlog at the end of the quarter was $168 million, down from $218 million at the end of Q4 2023 [8] - The portfolio size grew slightly to $711 million, with 90% of the fair value consisting of three and four rated debt investments [20][23] Market Data and Key Metrics Changes - Approximately $37 billion was invested in VC-backed companies in Q1 2024, maintaining the pace seen in much of the previous year [11] - VC investment in later-stage companies declined by 36% from the same period in 2023, indicating ongoing concerns about overvaluation [11] - The venture capital exit activity remained low at $18 billion in Q1, but successful IPOs of companies like Reddit and Astera Labs provided some optimism [3] Company Strategy and Development Direction - The company aims to continue sourcing and originating new venture loans to high-quality companies while navigating the challenging environment [9] - The focus remains on credit quality and supporting portfolio companies to ensure optimal outcomes [48] - The company is positioned to take advantage of the improving IPO market and lower interest rates in the second half of 2024 [25] Management's Comments on Operating Environment and Future Outlook - Management noted that while the venture lending environment is challenging, there are signs of recovery and opportunities for growth [18] - The company expects modest prepayments in Q2 2024, driven by IPOs and M&A activity, although these remain below normal levels [4] - The management team expressed confidence in their ability to generate solid NII and build long-term shareholder value despite current market conditions [48] Other Important Information - The company had $91 million in available liquidity as of March 31, 2024, consisting of $71 million in cash and $20 million in funds available to be drawn [36] - The debt-to-equity ratio stood at 1.37 to 1, with net leverage at 1.16 to 1, indicating a stable financial position [37] - The NAV as of March 31, 2024, was $9.64 per share, down from $9.71 as of December 31, 2023 [66] Q&A Session Summary Question: Can you discuss the net unrealized losses for the quarter, particularly regarding the Evelo investment? - Management indicated that the Evelo investment was marked down due to a failed clinical trial, but there are significant opportunities for value recovery as they work closely with the company [53][54] Question: What is the status of the non-accruals, particularly Mexie and Mexcar? - Management stated that they are working to maximize the value of both non-accruals and noted some interest in their assets, with a potential recovery expected in the coming quarters [57][58] Question: Can you clarify the mix of the backlog between existing and new companies? - The backlog consists entirely of committed amounts to existing borrowers, primarily milestone-based [61] Question: How is the company competing in the current venture debt market? - Management emphasized their ability to compete on price and noted that they are not seeing direct competition from other lenders, as they focus on quality investments [82][84]

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 MARCH 31, 2024 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) (Sta ...