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 ...

Horizon Technology Finance Announces First Quarter 2024 Financial Results - First Quarter 2024 Net Investment Income per Share of $0.38; NAV per Share of $9.64 - - Debt Portfolio Yield of 15.6% - - HRZN Ends Quarter with Committed Backlog of $168 Million - - Declares Regular Monthly Distributions Totaling $0.33 per Share through September 2024 - Farmington, Connecticut – April 30, 2024 – Horizon Technology Finance Corporation (NASDAQ: HRZN) ("Horizon" or the "Company"), an affiliate of Monroe Capital, and a ...

Klaus VedfeltHorizon Technology Finance Corporation (NASDAQ:HRZN) is a well-managed business development company with a strict focus on technology and life science investments. The BDC’s stock has suffered weakness in 2024 as the market has grown more concerned with investment losses in the sector. With that being said, though, I think that the dividend is well-covered by net investment income and that the BDC makes a much better value proposition today than it did at the end of 2023, primarily because ...

Financial Data and Key Metrics Changes - The company generated net investment income (NII) of $1.98 per share for the full year 2023, exceeding the declared distribution level of $1.37 per share, primarily due to higher interest rates on floating rate debt investments [10][41] - The net asset value (NAV) declined to $9.71 per share as of December 31, 2023, down from $10.41 per share as of September 30, 2023, and $11.47 per share as of December 31, 2022, mainly due to fair value markdowns of investments [23][72] - The company declared monthly distributions of $0.11 per share for April, May, and June 2024, along with a special distribution of $0.05 per share payable in April [24][72] Business Line Data and Key Metrics Changes - The portfolio size decreased slightly to $709 million in the fourth quarter, with new originations of $63 million offset by prepayments and markdowns [25][71] - The debt portfolio yield was 16.8% for the fourth quarter and 16.6% for the full year, one of the highest in the Business Development Company (BDC) industry [13][54] - The company funded six investments totaling $63 million in the fourth quarter, including debt investments to three new and three existing portfolio companies [12] Market Data and Key Metrics Changes - Venture capital investment activity in 2023 was the lowest in four years, with approximately $171 billion invested, reflecting ongoing market issues related to valuations [60] - VC fundraising also hit a six-year low at $67 billion in 2023, as the exit markets remained largely closed [61] - The company expects a gradual increase in demand for venture debt in 2024 as market conditions improve [63] Company Strategy and Development Direction - The company aims to prudently grow its portfolio of debt investments while maximizing the value of its current investments [24][34] - The focus remains on sourcing and originating new debt investments to take advantage of market opportunities, particularly in sectors like AI and life sciences [30][34] - The company plans to maintain a disciplined approach to structuring and pricing transactions to continue generating strong NII [13][41] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging venture capital environment in 2023 but expressed optimism for gradual improvement in 2024, particularly in sectors with strong investor interest [30][99] - The management highlighted the importance of maintaining close relationships with portfolio companies to navigate the uncertain macro environment [59][100] - There are indications of improving market conditions, with an increase in public life science IPOs and some M&A activity observed [99] Other Important Information - The company raised nearly $39 million in net proceeds from a common stock offering in June 2023, strengthening its balance sheet [37] - The debt-to-equity ratio stood at 1.4:1 as of December 31, 2023, with a target leverage of 1.2:1 [68] - The company completed its first co-investment with Monroe Capital in December, which is expected to enhance its ability to originate quality venture debt investments [55] Q&A Session Summary Question: Update on portfolio companies and recent sales - Management confirmed that Nexii is undergoing a restructuring process and is expected to find a new home soon [77] Question: Outlook for leverage ratio and ATM use - The company plans to assess capital needs and activity levels to determine the use of ATM and leverage going forward [80][93] Question: Comments on stressed assets and market dynamics - Management noted that both market-wide issues and idiosyncratic problems within portfolio companies have contributed to the stress observed [96] Question: Potential for G&A cost savings from Monroe acquisition - Management indicated that there may be incremental G&A cost savings from the acquisition of the Monroe platform [101] Question: Consideration of excise tax in spillover distribution - The company considers the excise tax implications when planning spillover distributions, but it is not a significant expense [108]

Investment Strategy and Portfolio Management - The company intends to invest at least 80% of the value of its total assets in technology-related companies within its Target Industries[36] - The company employs a disciplined underwriting process that includes extensive financial analysis and validation from multiple sources to mitigate risks[39] - The company aims to balance its investment portfolio to reduce risks associated with market cycles by regularly reviewing investment criteria[39] - The company has a robust direct origination capability, sourcing transactions from various industry contacts and referrals[39] - The company’s ability to achieve its investment objectives depends on the Advisor's origination capabilities and disciplined underwriting process[160] - The investment strategy focuses on development-stage companies, which are typically rated below "investment grade" and may face significant volatility and competition[177] 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[71] - The incentive fee is 20.00% of Pre-Incentive Fee Net Investment Income exceeding a hurdle rate of 1.75%[72] - The incentive fee includes a "catch-up" provision, allowing the Advisor to receive 100.00% of the Pre-Incentive Fee Net Investment Income above the hurdle rate[75] - Cumulative incentive compensation accrued and/or paid since July 1, 2014, amounts to $9,000,000[84] - Pre-Incentive Fee Net Investment Income is 2.10%, exceeding the hurdle rate of 1.75%[85] - An incentive fee of 0.35% is applicable as Pre-Incentive Fee Net Investment Income exceeds the hurdle rate but does not fully satisfy the "catch-up" provision[85] - 20.0% of cumulative net increase in net assets resulting from operations since July 1, 2014 is $10,000,000[86] Regulatory Compliance and Governance - The company is regulated as a BDC under the 1940 Act, adhering to specific regulatory requirements[100] - The company must ensure that qualifying assets represent at least 70% of total assets at the time of acquisition[106] - The company must distribute dividends at least equal to 90% of ordinary income and realized net short-term capital gains to maintain RIC status[128] - To avoid a 4% nondeductible federal excise tax, the company must distribute dividends equal to 98% of ordinary income and 98.2% of capital gains[128] - If the company qualifies as a RIC and satisfies the Annual Distribution Requirement, it will not be subject to entity-level income taxes on distributed investment company taxable income[129] - The company has adopted written policies and procedures to prevent violations of federal securities laws and designated a chief compliance officer[105] - The company intends to comply with Nasdaq corporate governance regulations and monitor compliance with future listing standards[123] - The company must derive at least 90% of its gross income from qualified sources to maintain its status as a BDC[130] Risks and Challenges - The company is exposed to risks associated with changes in interest rates, which could impact investment returns[138] - The company may face challenges in raising additional capital, which is essential for growth[138] - The lack of liquidity in investments may adversely affect the company's ability to meet obligations[138] - Economic downturns may lead to increased non-performing assets and decreased portfolio value, potentially resulting in financial losses and reduced revenues[174] - The company may not be able to manage future growth effectively, which could adversely affect its business and financial condition[160] - The unpredictable borrowing needs of portfolio companies may exceed expected funding requirements, impacting the company's reputation and lending activity[191] Portfolio Company Characteristics and Risks - The company’s portfolio companies typically require substantial additional financing, which may not be readily available, increasing the risk of loss[170] - Portfolio companies may incur debt that ranks equally with or senior to the company's investments, affecting repayment priority[186] - Portfolio companies in the technology industry are subject to intense competition and rapid technological changes, which may affect their ability to innovate and meet user needs[197] - Life science portfolio companies must navigate extensive government regulations and face risks related to product development, including the need for significant R&D and regulatory approvals[200] - Intellectual property rights are crucial for portfolio companies, and failure to protect these rights could harm business prospects and investment value[213] Advisor and Management Relationships - The company has developed strong relationships with venture capital and private equity investors, enhancing its competitive position in the market[41] - The Advisor maintains a "hands on" approach, contacting portfolio companies at least quarterly for operational and financial updates[61] - The Advisor's allocation policy may limit the company's ability to invest in certain issuers, potentially restricting investment opportunities[155] - The company relies heavily on the Advisor's referral relationships to generate investment opportunities, and failure to maintain these relationships could adversely affect its business[162] Investment Characteristics and Valuation - The company may invest in foreign portfolio companies, which could involve greater risks such as less publicly available information and varying levels of governmental regulation[217] - The company is subject to risks associated with investments having original issue discount (OID) and payment-in-kind (PIK) features, which may reflect increased credit risk and unreliable valuations[221][222] - The value of collateral securing debt investments may decrease, leading to potential losses upon foreclosure[180] - A substantial portion of assets securing investments may be in intellectual property, which could lose value if rights are challenged[181]

Financial Data and Key Metrics Changes - The company reported net investment income (NII) of $0.53 per share for Q3 2023, an increase from $0.43 per share in Q3 2022 [101] - The net asset value (NAV) decreased to $10.41 per share as of September 30, 2023, down from $11.07 per share as of June 30, 2023 [104] - Total investment income for the third quarter was $29 million, a 25% increase compared to the prior year period [14] Business Line Data and Key Metrics Changes - The loan portfolio yield was 17.1% for Q3 2023, compared to 15.9% for the same period last year [15] - New originations totaled $88 million during the quarter, with a total investment portfolio of $729 million at the end of Q3 [16][25] - The company maintained a healthy pipeline with a committed and approved backlog of $202 million, up from $159 million at the end of Q2 [88] Market Data and Key Metrics Changes - VC-backed companies faced challenges in raising new capital, with only $9 billion raised in Q3 2023, marking a nine-year low [98] - The exit market for VC-backed companies remained largely closed, impacting the ability of companies to fund operations and growth [9][28] - M&A activity in the life sciences market is expected to increase as big pharma companies seek new drugs, potentially leading to significant acquisitions [99] Company Strategy and Development Direction - The company plans to remain selective in originating new debt investments due to the challenging macro environment [6][11] - Focus on preserving the value and quality of the current portfolio while seeking high-quality new investments [12][29] - The company aims to generate solid NII for shareholders and additional long-term shareholder value through disciplined investment strategies [12][95] Management's Comments on Operating Environment and Future Outlook - Management expressed a cautious outlook, anticipating continued challenges in the investment environment into early 2024 [99] - The company is focused on credit quality and providing support to portfolio companies to navigate the current market conditions [4][12] - Management noted that the ability of VC-backed companies to raise capital is under significant stress, impacting their operational decisions [9][76] Other Important Information - The company raised an additional $14 million through its ATM program, enhancing its investment capacity [13] - Interest expense increased to $7.1 million from $5.3 million in the previous year due to higher average borrowings and interest rates [15] - The company has a potential new investment capacity of $241 million as of September 30, 2023 [14] Q&A Session Summary Question: Update on NextCar and Nexii Building investments - Management indicated that NextCar continues to raise capital but is facing challenges due to closed exit markets [35][36] - Nexii is also internally funded and has overseas contracts, but is seeking better exit opportunities [42] Question: Incremental investments in Evelo - No incremental investments were made in Evelo in Q4, and the company received an additional $11 million paydown following disappointing trial results [40][41] Question: Fair value decline for NextCar and Nexii - The decline in fair values for both companies was attributed to deteriorating exit opportunities rather than operational issues [64][76] Question: Lessons learned from Evelo investment - Management emphasized the importance of a broad-based technology platform and multiple drug candidates when underwriting life science companies [68][70] Question: Selectivity in new investments - The company is remaining selective due to market dynamics, with current leverage levels below target [71][72]

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) ...

Horizon Technology Finance Corporation (NASDAQ:HRZN) Q2 2023 Earnings Conference Call August 2, 2023 9:00 AM ET Company Participants Megan Bacon - Director, IR & Marketing Robert Pomeroy - Chairman & CEO Gerald Michaud - President & Director Daniel Trolio - EVP, CFO & Treasurer Conference Call Participants Bryce Rowe - B. Riley Securities Christopher Nolan - Ladenburg Thalmann Ryan Lynch - KBW Operator Greetings, and welcome to Horizon Technology Finance Corporation Second Quarter 2023 Earnings Call. [Opera ...

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 JUNE 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) (Stat ...

in, Corbel Bld., 16 pt., Bright Blue Investor Presentation – First Quarter 2023 NASDAQ: HRZN www.horizontechfinance.com ©2023 Horizon. Confidential and proprietary. ―Future operating results, including the performance of our existing loans and warrants; ―Introduction, withdrawal, success and timing of business initiatives and strategies; ―Changes in political, economic or industry conditions, the interest rate environment or financial and capital markets, which could result in changes in the value of our as ...