Unassociated Document
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q
 
(Mark One)

 
  þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2011
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)
 
Registrant’s telephone number, including area code (860) 676-8654
Securities registered pursuant to Section 12(b) of the Act:
 
Title of Each Class
  
Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share
  
The NASDAQ Global Market
 
     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 þ No ¨ .
 
     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ¨ No ¨
 
     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer þ
Smaller Reporting Company ¨
   
(Do not check if a smaller reporting company)
  
 
     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ .
 
     As of November 9, 2011, the Registrant had 7,626,718 shares of common stock, $0.001 par value, outstanding.

 
 
 
 
HORIZON TECHNOLOGY FINANCE CORPORATION
 
FORM 10-Q
TABLE OF CONTENTS
 
   
Page
 
PART I
  
     
 Item 1.
Financial Statements
  
     
 
Consolidated Statements of Assets and Liabilities as of September 30, 2011 and December 31, 2010 (unaudited)
5
 
Consolidated Statements of Operations for the three and nine months ended September 30, 2011 and 2010 (unaudited)
6
 
Consolidated Statements of Changes in Net Assets for the nine months ended September 30, 2011 and 2010 (unaudited)
7
 
Consolidated Statements of Cash Flows for the nine months ended September 30, 2011 and 2010 (unaudited)
8
 
Consolidated Schedules of Investments as of September 30, 2011 and December 31, 2010 (unaudited)
9
 
Notes to the Consolidated Financial Statements (unaudited)
15
     
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
28
Item 3.
Quantitative And Qualitative Disclosures About Market Risk
38
Item 4.
Controls and Procedures
38
     
 
PART II
  
     
Item 1.
Legal Proceedings
38
Item 1A.  
Risk Factors
39
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
39
Item 3.
Defaults Upon Senior Securities
39
Item 4.
Removed and Reserved
39
Item 5.
Other Information
39
Item 6.
Exhibits
39
 
Signatures
40
EX-31.1
EX-31.2
EX-32.1
EX-32.2
 
 
2
 
 
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 loans and warrants;

 
•
the 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 assets;

 
•
the relative and absolute investment performance and operations of our Advisor;

 
•
the impact of increased competition;

 
•
the impact of investments we intend to make and future acquisitions and divestitures;

 
•
the unfavorable resolution of legal proceedings;

 
•
our business prospects and the prospects of our portfolio companies;

 
•
the impact, extent and timing of technological changes and the adequacy of intellectual property protection;

 
•
our regulatory structure and tax status;

 
•
the adequacy of our cash resources and working capital;

 
•
the timing of cash flows, if any, from the operations of our portfolio companies;

 
•
the impact of interest rate volatility on our results, particularly if we use leverage as part of our investment strategy;

 
•
the ability of our portfolio companies to achieve their objective;

 
•
our ability to cause a subsidiary to become a licensed SBIC;

 
•
the impact of legislative and regulatory actions and reforms and regulatory supervisory or enforcement actions of government agencies relating to us or our Advisor;

 
•
our contractual arrangements and relationships with third parties;

 
3
 
 
 
•
our ability to access capital and any future financings by us;

 
•
the ability of our Advisor to attract and retain highly talented professionals; and

 
•
the impact of changes to tax legislation and, generally, our tax position.
 
     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” in our annual report on Form 10-K for the year ended December 31, 2010 and elsewhere in this quarterly report on Form 10-Q.
 
     We have based the forward-looking statements included in this report on information available to us on the date of this report, 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 SEC, including, future reports on Form 10-Q, current reports on Form 8-K and annual reports on Form 10-K.

 
4
 
 
Horizon Technology Finance Corporation and Subsidiaries
 
Consolidated Statements of Assets and Liabilities (Unaudited)
 (In thousands, except share data)
 
   
September 30,
2011
    
December 31,
2010
  
ASSETS
            
Non-affiliate investments at fair value (cost of $179,651 and $133,494, respectively) (Note 4)
   $ 180,186     $ 136,810  
Cash and cash equivalents
     32,598       76,793  
Interest receivable
     2,477       1,938  
Other assets (Note 2)
     1,610       664  
                 
Total assets
   $ 216,871     $ 216,205  
                 
LIABILITIES
                
Borrowings (Note 6)
   $ 81,885     $ 87,425  
Base management fee payable (Note 3)
     362       360  
Incentive fee payable (Note 3)
     1,453       414  
Other accrued expenses
     792       811  
                 
Total liabilities
     84,492       89,010  
                 
Net assets
                
Common stock, par value $0.001 per share, 100,000,000 shares authorized, 7,626,718 shares outstanding as of September 30, 2011 and 7,593,421 shares outstanding as of December 31, 2010
     8       8  
Paid-in capital in excess of par
     124,361       123,836  
Accumulated undistributed (distributions in excess of) net investment income
     1,507       (143 )
Net unrealized appreciation on investments
     508       3,043  
Net realized gain on investments
     5,995       451  
                 
Total net assets
     132,379       127,195  
                 
Total liabilities and net assets
   $ 216,871     $ 216,205  
                 
Net asset value per common share
   $ 17.36     $ 16.75  
 
See Notes to Consolidated Financial Statements

 
5
 
 
Horizon Technology Finance Corporation and Subsidiaries
 
Consolidated Statements of Operations (Unaudited)
 (In thousands, except share data)
 
         
Pre-IPO Prior
to
          
Pre-IPO Prior
to
  
   
Post-IPO as a
    
Becoming a
    
Post-IPO as a
    
Becoming a
  
   
Business
    
Business
    
Business
    
Business
  
   
Development
    
Development
    
Development
    
Development
  
   
Company
    
Company
    
Company
    
Company
  
   
Three Months
Ended
    
Three Months
Ended
    
Nine Months
Ended
    
Nine Months
Ended
  
   
September 30,
2011
    
September 30,
2010
    
September 30,
2011
    
September 30,
2010
  
Investment income
                        
Interest income on non-affiliate investments
   $ 6,129     $ 4,955     $ 16,911     $ 12,852  
Interest income on cash and cash equivalents
     2       25       90       53  
Fee income on non-affiliate investments
     310       209       870       345  
                                 
Total investment income
     6,441       5,189       17,871       13,250  
                                 
Expenses
                                
Interest expense
     725       1,189       2,093       3,282  
Base management fee (Note 3)
     1,091       675       3,229       1,816  
Performance based incentive fee (Note 3)
     561       —       2,701       —  
Administrative fee (Note 3)
     355       —       873       —  
Professional fees
     489       7       1,034       110  
General and administrative
     227       61       740       164  
                                 
Total expenses
     3,448       1,932       10,670       5,372  
                                 
Net investment income
     2,993       3,257       7,201       7,878  
                                 
Credit for loan losses
     —       320       —       739  
                                 
Net realized and unrealized gain on investments
                                
Net realized (loss) gain on investments
     (17 )     —       5,544       (2 )
Net unrealized (depreciation) appreciation on investments
     (217 )     1,711       (2,535 )     1,549  
                                 
Net realized and unrealized (loss) gain on investments
     (234 )     1,711       3,009       1,547  
                                 
Net increase in net assets resulting from operations
   $ 2,759     $ 5,288     $ 10,210     $ 10,164  
                                 
Net investment income per common share (1)
   $ 0.39     $ N/A     $ 0.95     $ N/A  
                                 
Change in net assets per common share (1)
   $ 0.36     $ N/A     $ 1.34     $ N/A  
                                 
Weighted average shares outstanding (1)
     7,617,972       N/A       7,604,345       N/A  
 
(1)
For the three and nine months ended September 30, 2010, the Company did not have common shares outstanding or an equivalent and, therefore, earnings per share and weighted average shares outstanding information for this period is not provided.
 
See Notes to Consolidated Financial Statements

 
6
 
 
Horizon Technology Finance Corporation and Subsidiaries
 
Consolidated Statements of Changes in Net Assets (Unaudited)
(In thousands, except share data)
 
                        
Accumulated
              
                       
Undistributed
              
       
Accumulated
          
Paid-In
  
(distributions
in excess of)
  
Net Unrealized
  
Net
      
       
Other
          
Capital in
  
Net
  
Appreciation
  
Realized
      
   
Members’
  
Comprehensive
  
Common Stock
  
Excess of
  
Investment
  
on
  
Gain on
  
Total
  
   
Capital
  
Loss
  
Shares
  
Amount
  
Par
  
Income
  
Investments
  
Investments
  
Net Assets
  
Balance at December 31, 2009
   $ 60,260   $ (768 )   —   $ —   $ —   $ —   $ —   $ —   $ 59,492  
                                                         
Comprehensive income:
                                                        
                                                         
Net income
     10,164     —     —     —     —     —     —     —     10,164  
Unrealized loss on interest rate swaps
     —     409     —     —     —     —     —     —     409  
                                                         
Total comprehensive income
     —     —     —     —     —     —     —     —     10,573  
                                                         
Balance at September 30, 2010
   $ 70,424   $ (359 )   —   $ —   $ —   $ —   $ —   $ —   $ 70,065  
                                                         
Balance at December 31, 2010
   $ —   $ —     7,593,421   $ 8   $ 123,836   $ (143 ) $ 3,043   $ 451   $ 127,195  
Net increase in net assets from operations
     —     —     —     —     —     7,201     (2,535 )   5,544     10,210  
Issuance of common stock as stock dividend
     —     —     33,297     —     525                       525  
Dividends declared
     —     —     —     —     —     (5,551 )   —     —     (5,551 )
Balance at September 30, 2011
   $ —   $ —     7,626,718   $ 8   $ 124,361   $ 1,507   $ 508   $ 5,995   $ 132,379  
 
See Notes to Consolidated Financial Statements

 
7
 
 
Horizon Technology Finance Corporation and Subsidiaries
 
Consolidated Statements of Cash Flows (Unaudited)
 (In thousands)
 
   
 
    
Pre-IPO Prior
to
  
   
Post-IPO as a
    
becoming a
  
   
Business
Development
    
Business
Development
  
   
Company
    
Company
  
   
Nine Months
Ended
    
Nine Months
Ended
  
   
September 30,
2011
    
September 30,
2010
  
Cash flows from operating activities:
            
Net increase in net assets resulting from operations
   $ 10,210     $ 10,164  
Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities:
                
Credit for loan losses
     —       (739 )
Amortization of debt issuance costs
     227       871  
Net realized (gain) loss on investments
     (5,799 )     2  
Net change in unrealized depreciation (appreciation) on investments
     2,535       (1,549 )
Purchase of investments
     (78,156 )     (64,608 )
Principal payments received on investments
     32,574       41,333  
Proceeds from sale of investments
     5,887       —  
Stock received in settlement of fee income
     (544 )     —  
Changes in assets and liabilities:
                
Increase in interest receivable
     (539 )     (498 )
Decrease in unearned loan income
     (331 )     (302 )
Decrease (increase) in other assets
     247       (251 )
Increase in other accrued expenses
     226       91  
Increase in base management fee payable
     2       35  
Increase in incentive fee payable
     1,039       —  
                 
Net cash used in operating activities
     (32,422 )     (15,451 )
                 
Cash flows from financing activities:
                
Net (decrease) increase in revolving borrowings
     (5,540 )     24,778  
Dividends paid
     (5,026 )     —  
Capitalized debt issuance costs
     (1,207 )     —  
                 
Net cash (used in) provided by financing activities
     (11,773 )     24,778  
Net (decrease) increase in cash and cash equivalents
     (44,195 )     9,327  
Cash and cash equivalents:
                
Beginning of period
     76,793       9,892  
End of period
   $ 32,598     $ 19,219  
                 
Cash paid for interest
   $ 1,738     $ 2,366  
Supplemental non-cash investing and financing activities:
                
Warrant investments received & recorded as unearned loan income
   $ 1,129     $ 1,212  
Receivables resulting from sales of investments
   $ 213     $ —  
Decrease in interest rate swap liability
   $ (245 )   $ (409 )
 
See Notes to Consolidated Financial Statements

 
8
 
 
Horizon Technology Finance Corporation and Subsidiaries
 
Consolidated Schedule of Investments
September 30, 2011
(In thousands)

        
Type of
  
Interest
      
Cost of
        
Portfolio Company
  
Sector
  
Investment(3)
  
Rate(4)
  
Maturity
  
Investment(6)
    
Fair Value
  
Debt Investments
                            
Debt Investments — Life Science — 41.2%
                        
ACT Biotech, Inc.
  
Biotechnology
  
Term Loan(1)
     13.10 %
12/1/2013
   $ 905     $ 905  
       
Term Loan(1)
     13.01 %
12/1/2013
     905       905  
       
Term Loan(1)
     13.01 %
12/1/2013
     1,371       1,371  
Ambit Biosciences Corporation
  
Biotechnology
  
Term Loan(1)
     12.25 %
10/1/2013
     5,066       5,066  
Anacor Pharmaceuticals, Inc.(5)
  
Biotechnology
  
Term Loan(2)
     9.41 %
4/1/2015
     3,206       3,206  
GenturaDx, Inc.
  
Biotechnology
  
Term Loan(2)
     11.25 %
4/1/2014
     1,903       1,903  
N30 Pharmaceuticals, LLC
  
Biotechnology
  
Term Loan(1)
     11.25 %
9/1/2014
     2,412       2,412  
Pharmasset, Inc.(5)
  
Biotechnology
  
Term Loan(1)
     12.00 %
1/1/2012
     379       379  
       
Term Loan(1)
     12.50 %
10/1/2012
     1,453       1,453  
Revance Therapeutics, Inc.
  
Biotechnology
  
Convertible Note(1)
     8.00 %
2/10/2013
     62       62  
Supernus Pharmaceuticals, Inc.
  
Biotechnology
  
Term Loan(2)
     11.00 %
8/1/2014
     2,947       2,947  
Tranzyme, Inc.(5)
  
Biotechnology
  
Term Loan(1)
     10.75 %
1/1/2014
     4,538       4,538  
Xcovery Holding Company, LLC
  
Biotechnology
  
Term Loan(2)
     12.00 %
10/1/2013
     1,494       1,494  
       
Term Loan(2)
     12.00 %
7/1/2014
     1,477       1,477  
Concentric Medical, Inc.
  
Medical Device
  
Term Loan(1)
     12.04 %
9/1/2013
     6,676       6,676  
OraMetrix, Inc.
  
Medical Device
  
Term Loan(1)
     11.50 %
4/1/2014
     4,669       4,669  
PixelOptics, Inc.
  
Medical Device
  
Term Loan(2)
     10.75 %
11/1/2014
     9,910       9,910  
Tengion, Inc.(5)
  
Medical Device
  
Term Loan(2)
     11.75 %
1/1/2014
     4,948       4,588  
ViOptix, Inc.
  
Medical Device
  
Term Loan(1)
     13.55 %
11/1/2011
     656       656  
                                   
Total Debt Investments — Life Science
                       54,977       54,617  
                               
Debt Investments — Technology — 36.2%
                              
OpenPeak, Inc.
  
Communications
  
Term Loan(1)
     11.86 %
12/1/2013
     6,016       5,647  
Starcite, Inc.
  
Consumer-related Technologies
  
Term Loan(1)
     12.05 %
9/1/2012
     1,604       1,604  
Tagged, Inc.
  
Consumer-related Technologies
  
Term Loan(1)
     12.78 %
5/1/2012
     671       671  
       
Term Loan(1)
     11.46 %
8/1/2012
     300       300  
Xtera Communications, Inc.
  
Semiconductors
  
Term Loan(2)
     11.50 %
12/1/2014
     9,739       9,739  
Vette Corp.
  
Data Storage
  
Term Loan(1)
     11.75 %
7/1/2014
     4,928       4,928  
IntelePeer, Inc.
  
Networking
  
Term Loan(1)
     12.43 %
4/1/2012
     238       238  
       
Term Loan(1)
     12.33 %
6/1/2012
     315       315  
       
Term Loan(1)
     12.33 %
10/1/2012
     729       729  
Construction Software Technologies, Inc.
  
Software
  
Term Loan(2)
     11.75 %
12/1/2014
     3,940       3,940  
       
Term Loan
     11.75 %
6/1/2014
     1,969       1,969  
Courion Corporation
  
Software
  
Term Loan(1)
     11.45 %
9/1/2014
     6,889       6,889  
Recondo Technology, Inc.
  
Software
  
Term Loan
     11.50 %
4/1/2015
     1,923       1,923  
Seapass Solutions, Inc.
  
Software
  
Term Loan(2)
     11.75 %
11/1/2014
     4,924       4,924  
StreamBase Systems, Inc.
  
Software
  
Term Loan(1)
     12.51 %
11/1/2013
     3,115       3,115  
       
Term Loan(1)
     12.50 %
6/1/2014
     960       960  
                                   
Total Debt Investments — Technology
                       48,260       47,891  
                               
Debt Investments — Cleantech — 22.9%
                              
Cereplast, Inc.(5)
  
Waste Recycling
  
Term Loan(1)
     12.00 %
4/1/2014
     2,448       2,448  
   
Waste Recycling
  
Term Loan(1)
     12.00 %
6/1/2014
     2,441       2,441  
Enphase Energy, Inc.
  
Energy Efficiency
  
Term Loan(1)
     12.60 %
10/1/2013
     5,697       5,697  
       
Term Loan
     10.75 %
4/1/2015
     1,968       1,968  
       
Term Loan
     10.75 %
4/1/2015
     2,938       2,938  
Satcon Technology Corporation(5)
  
Energy Efficiency
  
Term Loan(1)
     12.58 %
1/1/2014
     8,521       8,521  
Tigo Energy, Inc.
  
Energy Efficiency
  
Term Loan(1)
     11.00 %
8/1/2014
     3,422       3,422  
       
Revolver(2)
     10.75 %
1/1/2014
     2,933       2,933  
           
(Prime + 7.50
 %)                  
Total Debt Investments — Cleantech
                       30,368       30,368  
 
See Notes to Consolidated Financial Statements

 
9
 
 
Horizon Technology Finance Corporation and Subsidiaries
 
Consolidated Schedule of Investments
September 30, 2011 — (Continued)
(In thousands)

       
Type of
  
Interest
      
Cost of
      
Portfolio Company
  
Sector
  
Investment(3)
  
Rate(4)
  
Maturity
  
Investment(6)
  
Fair Value
  
Debt Investments — Healthcare information and services — 31.4%
                  
BioScale, Inc.
  
Diagnostics
  
Term Loan(1)
     12.00 %
8/1/2012
     1,351     1,351  
       
Term Loan(1)
     11.51 %
1/1/2014
     4,941     4,941  
Precision Therapeutics, Inc.
  
Diagnostics
  
Term Loan
     10.25 %
12/1/2014
     6,952     6,952  
Radisphere National Radiology Group, Inc.
  
Diagnostics
  
Term Loan(1)
     12.75 %
1/1/2014
     9,340     9,340  
Aperio Technologies, Inc.
  
Other Healthcare
  
Term Loan
     9.64 %
5/1/2015
     4,929     4,929  
Patientkeeper, Inc.
  
Other Healthcare
  
Term Loan
     10.50 %
12/1/2014
     5,222     5,222  
Singulex, Inc.
  
Other Healthcare
  
Term Loan(1)
     11.00 %
3/1/2014
     2,968     2,968  
       
Term Loan(1)
     11.00 %
3/1/2014
     1,978     1,978  
Talyst, Inc.
  
Other Healthcare
  
Term Loan(1)
     12.10 %
12/1/2013
     1,924     1,924  
       
Term Loan(1)
     12.05 %
12/1/2013
     1,921     1,921  
       
     
                        
Total Debt Investment — Healthcare information and services
               41,526     41,526  
       
     
                        
Total Debt Investments
      
     
               175,131     174,402  
       
     
                        
Warrant Investments
      
     
                        
Warrants — Life Science — 1.3%
  
     
                        
ACT Biotech, Inc.
  
Biotechnology
  
Preferred Stock Warrants(1)
     —     —     58     67  
Ambit Biosciences, Inc.
  
Biotechnology
  
Preferred Stock Warrants(1)
     —     —     143     98  
Anacor Pharmaceuticals, Inc.(5)
  
Biotechnology
  
Common Stock Warrants(2)
     —     —     42     22  
Anesiva, Inc.(5)
  
Biotechnology
  
Common Stock Warrants(1)
     —     —     18     —  
GenturaDx, Inc.
  
Biotechnology
  
Preferred Stock Warrants(2)
     —     —     63     60  
N30 Pharmaceuticals, LLC
  
Biotechnology
  
Preferred Stock Warrants(1)
     —     —     59     46  
Novalar Pharmaceuticals, Inc.
  
Biotechnology
  
Preferred Stock Warrants(1)
     —     —     69     —  
Revance Therapeutics, Inc.
  
Biotechnology
  
Preferred Stock Warrants(1)
     —     —     224     489  
Supernus Pharmaceuticals, Inc.
  
Biotechnology
  
Preferred Stock Warrants(2)
     —     —     16     15  
Tranzyme, Inc.(5)
  
Biotechnology
  
Common Stock Warrants(1)
     —     —     1     —  
Concentric Medical, Inc.
  
Medical Device
  
Preferred Stock Warrants(1)
     —     —     84     875  
EnteroMedics, Inc.(5)
  
Medical Device
  
Common Stock Warrants(1)
     —     —     347     2  
OraMetrix, Inc.
  
Medical Device
  
Preferred Stock Warrants(1)
     —     —     78     67  
PixelOptics, Inc.
  
Medical Device
  
Preferred Stock Warrants(2)
     —     —     96     46  
Tengion, Inc.(5)
  
Medical Device
  
Common Stock Warrants(2)
     —     —     62     —  
ViOptix, Inc.
  
Medical Device
  
Preferred Stock Warrants(1)
     —     —     13     —  
       
     
                          
Total Warrants — Life Science
      
     
                 1,373     1,787  
       
     
                          
Warrants — Technology — 1.5%
  
     
                          
OpenPeak, Inc.
  
Communications
  
Preferred Stock Warrants(1)
     —     —     89     —  
Everyday Health, Inc.
  
Consumer-related technologies
  
Preferred Stock Warrants(1)
     —     —     69     116  
SnagAJob.com, Inc.
  
Consumer-related technologies
  
Preferred Stock Warrants(1)
     —     —     23     270  
Starcite, Inc.
  
Consumer-related technologies
  
Preferred Stock Warrants(1)
     —     —     24     27  
Tagged, Inc.
  
Consumer-related technologies
  
Preferred Stock Warrants(1)
     —     —     17     27  
 
See Notes to Consolidated Financial Statements
 
 
10
 
 
Horizon Technology Finance Corporation and Subsidiaries
 
Consolidated Schedule of Investments
September 30, 2011 — (Continued)
(In thousands)

   
      
Type of
  
Interest
      
Cost of
      
Portfolio Company  
  
Sector  
  
Investment(3)
  
Rate(4)
  
Maturity
  
Investment(6)
  
Fair Value
  
Xtera Communications, Inc.
  
Semiconductors  
  
Preferred Stock Warrants
     —     —     206     242  
Vette Corp.  
  
Data Storage  
  
Preferred Stock Warrants(1)
     —     —     75     48  
XIOtech, Inc.  
  
Data Storage  
  
Preferred Stock Warrants(1)
     —     —     22     80  
Cartera Commerce, Inc.  
  
Internet and media  
  
Preferred Stock Warrants(1)
     —     —     16     30  
Grab Networks, Inc.  
  
Networking  
  
Preferred Stock Warrants(1)
     —     —     74     —  
IntelePeer, Inc.  
  
Networking  
  
Preferred Stock Warrants(1)
     —     —     39     524  
Motion Computing, Inc.  
  
Networking  
  
Preferred Stock Warrants(1)
     —     —     7     334  
Impinj, Inc.  
  
Semi-conductor  
  
Preferred Stock Warrants(1)
     —     —     7     —  
Clarabridge, Inc.  
  
Software  
  
Preferred Stock Warrants(1)
     —     —     27     24  
Construction Software Technologies, Inc.  
  
Software  
  
Preferred Stock Warrants(2)
     —     —     45     44  
Courion Corporation  
  
Software  
  
Preferred Stock Warrants(1)
     —     —     85     100  
DriveCam, Inc.  
  
Software  
  
Preferred Stock Warrants(1)
     —     —     20     7  
Netuitive, Inc.  
  
Software  
  
Preferred Stock Warrants(1)
     —     —     27     21  
Recondo Technology, Inc.
  
Software  
  
Preferred Stock Warrants(1)
     —     —     47     47  
Seapass Solutions, Inc.  
  
Software  
  
Preferred Stock Warrants(2)
     —     —     43     42  
StreamBase Systems, Inc.  
  
Software  
  
Preferred Stock Warrants(1)
     —     —     67     68  
   
      
     
                          
Total Warrants — Technology  
      
     
                 1,029     2,051  
   
      
     
                          
Warrants — Cleantech — 0.2%  
      
     
                          
Cereplast, Inc.(5)  
  
Waste Recycling  
  
Common Stock Warrants(1)
     —     —     112     28  
Enphase Energy, Inc.  
  
Energy Efficiency  
  
Preferred Stock Warrants(1)
     —     —     175     136  
Satcon Technology Corporation(5)  
  
Energy Efficiency  
  
Common Stock Warrants(1)
     —     —     285     5  
Tigo Energy, Inc.  
  
Energy Efficiency  
  
Preferred Stock Warrants(1)
     —     —     101     79  
   
      
     
                          
Total Warrants — Cleantech  
      
     
                 673     248  
   
      
     
                          
Warrants — Healthcare information and services — 0.8%
                          
BioScale, Inc.  
  
Diagnostics  
  
Preferred Stock Warrants(1)
     —     —     54     62  
Precision Therapeutics, Inc.  
  
Diagnostics  
  
Preferred Stock Warrants
     —     —     73     158  
Radisphere National Radiology Group, Inc.  
  
Diagnostics  
  
Preferred Stock Warrants(1)
     —     —     167     372  
Aperio Technologies, Inc.
  
Other Healthcare  
  
Preferred Stock Warrants
     —     —     35     34  
Patientkeeper, Inc.  
  
Other Healthcare  
  
Preferred Stock Warrants
     —     —     269     266  
Singulex, Inc.  
  
Other Healthcare  
  
Preferred Stock Warrants(1)
     —     —     40     31  
Talyst, Inc.  
  
Other Healthcare  
  
Preferred Stock Warrants(1)
     —     —     100     82  
   
                                  
Total Warrants — Healthcare information and services      
                     738     1,005  
   
                                  
Total Warrants  
                         3,813     5,091  
   
                                  
Equity — 0.5%  
                                  
Insmed Incorporated(5)  
  
Biotechnology  
  
Common Stock(1)
     —     —     227     169  
Overture Networks Inc.  
  
Communications  
  
Preferred Stock(1)
     —     —     480     524  
   
      
     
                          
Total Equity  
      
     
                 707     693  
   
      
     
                          
Total Investments Assets  
      
     
               $ 179,651   $ 180,186  
   
      
     
                          
Investment Liabilities  
      
     
                          
Derivative Agreement  
      
     
                          
WestLB, AG
  
Interest rate swap — pay fixed/receive floating,
Notional Amount $10 million
     3.58 %
10/14/2011
     —     13  
   
  
       
  
     
                          
Total Investment Liabilities  
  
       
  
     
               $ —   $ 13  
 
(1)
Has been pledged as collateral under the WestLB Facility.
(2)
Has been pledged as collateral under the Wells Facility.
(3)
All investments are less than 5% ownership of the class and ownership of the portfolio company.
(4)
All interest is payable in cash due monthly in arrears, unless otherwise indicated and applies only to the Company’s debt investments. Amount is the annual interest rate on the debt investment and does not include any additional fees related to the investment, such as deferred interest, commitment fees or prepayment fees. The majority of the debt investments are at fixed rates for the term of the loan. For each debt investment, we have provided the current interest rate in effect as of September 30, 2011.
(5)
Portfolio company is a public company.
(6)
For debt investments, represents principal balance less unearned income.
 
See Notes to Consolidated Financial Statements

 
11
 
 
Horizon Technology Finance Corporation and Subsidiaries
 
Consolidated Schedule of Investments
December 31, 2010
(In thousands)

        
Type of
  
Interest
  
   
  
Cost of
        
Portfolio Company
  
Sector
  
Investment(2)
  
Rate(3)
  
Maturity
  
Investment(5)
    
Fair Value
  
Debt Investments
          
 
 
   
            
Debt Investments — Life Science — 39.3%
      
 
 
   
            
ACT Biotech, Inc.
  
Biotechnology
  
Term Loan(1)
     12.10 %
  6/1/2013
   $ 958     $ 958  
       
Term Loan(1)
     12.01 %
  6/1/2013
     957       957  
       
Term Loan(1)
     12.01 %
  6/1/2013
     1,478       1,478  
Ambit Biosciences, Inc.
  
Biotechnology
  
Term Loan(1)
     12.25 %
  10/1/2013
     5,898       5,898  
GenturaDx, Inc.
  
Biotechnology
  
Term Loan
     11.25 %
  4/1/2014
     1,917       1,917  
Novalar Pharmaceuticals, Inc.
  
Biotechnology
  
Term Loan(1)
     12.00 %
  6/1/2012
     3,146       3,146  
Pharmasset, Inc.(4)
  
Biotechnology
  
Term Loan(1)
     12.00 %
  8/1/2011
     868       868  
       
Term Loan(1)
     12.00 %
  1/1/2012
     1,448       1,448  
       
Term Loan(1)
     12.50 %
  10/1/2012
     2,422       2,422  
Revance Therapeutics, Inc.
  
Biotechnology
  
Term Loan(1)
     10.50 %
  12/1/2011
     1,445       1,445  
       
Term Loan(1)
     10.50 %
  3/1/2013
     3,478       3,478  
Tranzyme, Inc.
  
Biotechnology
  
Term Loan(1)
     10.75 %
  1/1/2014
     4,966       4,966  
Xcovery Holding Company, LLC
  
Biotechnology
  
Term Loan
     12.00 %
  10/1/2013
     1,490       1,490  
Concentric Medical, Inc.
  
Medical Device
  
Term Loan(1)
     12.04 %
  9/1/2013
     6,887       6,887  
OraMetrix, Inc.
  
Medical Device
  
Term Loan(1)
     11.50 %
  4/1/2014
     4,887       4,887  
PixelOptics, Inc.
  
Medical Device
  
Term Loan(1)
     13.00 %
  1/1/2013
     4,221       4,221  
Tengion, Inc.(4)
  
Medical Device
  
Term Loan(1)
     12.26 %
  9/1/2011
     2,740       2,740  
ViOptix, Inc.
  
Medical Device
  
Term Loan(1)
     13.55 %
  11/1/2011
     885       837  
                 
   
                
Total Debt Investments — Life Science
                
   
     50,091       50,043  
                 
   
                
Debt Investments — Technology — 24.4%
            
   
                
Hatteras Networks, Inc.
  
Communications
  
Term Loan(1)
     12.40 %
  2/1/2011
     1,042       1,042  
OpenPeak, Inc.
  
Communications
  
Term Loan(1)
     11.86 %
  12/1/2013
     6,549       6,549  
Starcite, Inc.
  
Consumer-related technologies
  
Term Loan(1)
     12.05 %
  9/1/2012
     2,679       2,679  
Tagged, Inc.
  
Consumer-related technologies
  
Term Loan(1)
     12.78 %
  5/1/2012
     1,284       1,284  
       
Term Loan(1)
     11.46