Horizon Technology Finance Corp
For the period ended Sep 30, 2024. Filed Oct 29, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Oct 29, 2024
HRZN$3.960.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-07-30.
0001437749-24-023921
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-10-29.
0001437749-24-032485
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 148 previous paragraphs and 153 current paragraphs.
90 unchanged; 49 reworded; 12 added; 9 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 40 previous and 40 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (12)
Current report
Comparison of the nine months ended September 30, 2024 and 2023
Current report
Fee income, which includes success fee, other fee and prepayment fee income on debt investments, increased by $0.4 million, or 18.0%, to $2.7 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily due to higher fee income earned on prepayments for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.
Current report
During the three months ended September 30, 2023, we sold 1,186,303 shares of common stock under the 2023 Equity Distribution Agreement and 2021 Equity Distribution Agreement. For the same period, we received total accumulated net proceeds of approximately $13.9 million, including $0.4 million of offering expenses, from these sales.
Current report
During the nine months ended September 30, 2024, we sold 4,279,141 shares of common stock under the 2023 Equity Distribution Agreement. For the same period, we received total accumulated net proceeds of approximately $47.5 million, including $1.0 million of offering expenses, from these sales.
Current report
During the nine months ended September 30, 2023, we sold 2,240,326 shares of common stock under the 2023 Equity Distribution Agreement and 2021 Equity Distribution Agreement. For the same period, we received total accumulated net proceeds of approximately $26.1 million, including $0.7 million of offering expenses, from these sales.
Current report
On October 7, 2024, we funded a $2.5 million debt investment to an existing portfolio company, Standvast Holdings, LLC.
Current report
On October 15, 2025, we funded a $0.6 million debt investment to an existing portfolio company, Swift Health Systems, Inc.
Current report
On October 17, 2024, we entered into a note purchase agreement, by and among us, each purchaser named therein, and the investment adviser named therein, in connection with the issuance and sale of $20,000,000 aggregate principal of our 7.125% Convertible Notes due 2031, par value $25.00 per share (the “Convertible Notes”), in a transaction exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933. We received net proceeds (before expenses) from the sale of the Convertible Notes of approximately $18.6 million.
Current report
The Convertible Notes mature on October 16, 2031, unless earlier converted or repurchased in accordance with their terms. The Convertible Notes bear interest at a rate of 7.125% per year, subject to additional interest or a repurchase obligation upon certain events, payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, beginning on December 31, 2024. The Convertible Notes may be converted into common stock by the holders of the Convertible Notes at any time after April 17, 2025 at a conversion price equal to the greater of: (i) volume-weighted average closing sale price for the five trading days immediately prior to the relevant conversion date and (ii) the most recently report net asset value per share of our common stock.
Current report
On October 18, 2025, we funded a $0.5 million debt investment to an existing portfolio company, Better Place Forests Co.
Current report
On October 22, 2024, Monroe Capital, an affiliate of us and our Advisor, announced that Monroe Capital has entered into a definitive agreement with Wendel Group (Euronext: MF:FP) (“Wendel”) relating to Wendel’s strategic investment in Monroe Capital. The transaction is expected to close in the first quarter of 2025, subject to the satisfaction of customary closing conditions, including the receipt of regulatory clearances and approvals and client consents. In connection with the transaction, we expect to seek approval of a new investment management agreement between us and our Advisor, from our Board and its shareholders, the terms of which are expected to remain substantively similar to the current investment management agreement.
Current report
On October 23, 2024, CAMP NYC, Inc. (“CAMP”) prepaid its outstanding principal balance of $2.0 million on its venture loan, plus interest and end-of-term payment. We continue to hold warrants in CAMP.
Removed paragraphs (9)
Previous report
Comparison of the six months ended June 30, 2024 and 2023
Previous report
During the three months ended June 30, 2023, we sold 448,175 shares of common stock under the 2021 Equity Distribution Agreement. For the same period, we received total accumulated net proceeds of approximately $5.1 million, including $0.1 million of offering expenses, from these sales.
Previous report
During the six months ended June 30, 2024, we sold 2,570,045 shares of common stock under the 2023 Equity Distribution Agreement. For the same period, we received total accumulated net proceeds of approximately $29.1 million, including $0.6 million of offering expenses, from these sales.
Previous report
During the six months ended June 30, 2023, we sold 1,054,023 shares of common stock under the 2021 Equity Distribution Agreement. For the same period, we received total accumulated net proceeds of approximately $12.3 million, including $0.3 million of offering expenses, from these sales.
Previous report
On July 10, 2024, MyForest Foods Co. prepaid its outstanding principal balance of $3.8 million on its venture loan, plus interest, end-of-term payment and prepayment fee. We continue to hold warrants in MyForest Foods Co.
Previous report
On July 11, 2024, Lemongrass Holdings, Inc. prepaid its outstanding principal balance of $6.3 million on its venture loan, plus interest, end-of-term payment and prepayment fee. We continue to hold warrants in Lemongrass Holdings, Inc.
Previous report
On July 12, 2024, Slingshot Aerospace, Inc. prepaid its outstanding principal balance of $20.0 million on its venture loan, plus interest, end-of-term payment and prepayment fee. We continue to hold warrants in Slingshot Aerospace, Inc.
Previous report
On July 24, 2024, Nexiican Holdings Inc. and its affiliates (“Nexiican”) and Nexii Building Solutions Inc., and its affiliates (“Nexii”) closed an Asset Purchase Agreement dated as of June 21, 2024 and approved by the Supreme Court of British Columbia in Vancouver on June 28, 2024 pursuant to which Nexiican purchased substantially all of the assets of Nexii, in consideration for, among other things, Nexicaan’s assumption of a portion of Nexii’s obligations to us and its affiliate’s issuance of equity to us, which information we used to fair value our assets as of June 30, 2024 at $10.9 million.
Previous report
On July 30, 2024, we funded a $25.0 million debt investment to a new portfolio company, Hometeam Technologies, Inc.
Reworded paragraphs (49)
Previous wording
We are a specialty finance company that lends to and invests in development-stage companies in the technology, life science, healthcare information and services and sustainability industries, which we refer to as our “Target Industries.” Our investment objective is to maximize our investment portfolio’s total return by generating current income from the debt investments we make and capital appreciation from the warrants we receive when making such debt investments. We are focused on making secured debt investments, which we refer to collectively as “Venture Loans,” to venture capital and private equity backed companies and publicly traded companies in our Target Industries, which we refer to as “Venture Lending.” Our debt investments are typically secured by first liens or first liens behind a secured revolving line of credit, or collectively “Senior Term Loans.” Some of our debt investments may also be subordinated to term debt provided by third parties. As of June 30, 2024, 85.0%, or $517.9 million, of our debt investment portfolio at fair value consisted of Senior Term Loans. Venture Lending is typically characterized by (1) the making of a secured debt investment after a venture capital or equity investment in the portfolio company has been made, which investment provides a source of cash to fund the portfolio company’s debt service obligations under the Venture Loan, (2) the senior priority of the Venture Loan which requires repayment of the Venture Loan prior to the equity investors realizing a return on their capital, (3) the amortization of the Venture Loan and (4) the lender’s receipt of warrants or other success fees with the making of the Venture Loan.
Current wording
We are a specialty finance company that lends to and invests in development-stage companies in the technology, life science, healthcare information and services and sustainability industries, which we refer to as our “Target Industries.” Our investment objective is to maximize our investment portfolio’s total return by generating current income from the debt investments we make and capital appreciation from the warrants we receive when making such debt investments. We are focused on making secured debt investments, which we refer to collectively as “Venture Loans,” to venture capital and private equity backed companies and publicly traded companies in our Target Industries, which we refer to as “Venture Lending.” Our debt investments are typically secured by first liens or first liens behind a secured revolving line of credit, or collectively “Senior Term Loans.” Some of our debt investments may also be subordinated to term debt provided by third parties. As of September 30, 2024, 86.2%, or $546.0 million, of our debt investment portfolio at fair value consisted of Senior Term Loans. Venture Lending is typically characterized by (1) the making of a secured debt investment after a venture capital or equity investment in the portfolio company has been made, which investment provides a source of cash to fund the portfolio company’s debt service obligations under the Venture Loan, (2) the senior priority of the Venture Loan which requires repayment of the Venture Loan prior to the equity investors realizing a return on their capital, (3) the amortization of the Venture Loan and (4) the lender’s receipt of warrants or other success fees with the making of the Venture Loan.
Previous wording
The following table shows total portfolio investment activity as of and for the three and six months ended June 30, 2024 and 2023:
Current wording
The following table shows total portfolio investment activity as of and for the three and nine months ended September 30, 2024 and 2023:
Previous wording
The largest debt investments in our portfolio may vary from period to period as new debt investments are originated and existing debt investments are repaid. Our five largest debt investments at cost represented 24% and 23% of total debt investments outstanding as of June 30, 2024 and December 31, 2023, respectively. Our five largest debt investments at fair value represented 24% and 22% of total debt investments outstanding as of June 30, 2024 and December 31, 2023, respectively. No single debt investment at cost or fair value represented more than 10% of our total debt investments as of June 30, 2024 and December 31, 2023.
Current wording
The largest debt investments in our portfolio may vary from period to period as new debt investments are originated and existing debt investments are repaid. Our five largest debt investments at cost represented 22% and 23% of total debt investments outstanding as of September 30, 2024 and December 31, 2023, respectively. Our five largest debt investments at fair value represented 23% and 22% of total debt investments outstanding as of September 30, 2024 and December 31, 2023, respectively. No single debt investment at cost or fair value represented more than 10% of our total debt investments as of September 30, 2024 and December 31, 2023.
Previous wording
As of June 30, 2024, there were five debt investments with an internal credit rating of 1, with an aggregate cost of $108.4 million and an aggregate fair value of $48.0 million and there were four debt investments with an internal credit rating of 2, with an aggregate cost of $31.1 million and an aggregate fair value of $26.3 million. As of December 31, 2023, there were four debt investments with an internal credit rating of 1, with an aggregate cost of $72.5 million and an aggregate fair value of $27.6 million and there were two debt investments with an internal credit rating of 2, with an aggregate cost of $43.8 million and an aggregate fair value of $39.3 million. The increase in the number of investments with internal credit ratings of 1 or 2 was principally a result of the increase in the risk of loss of principal caused by the portfolio companies low cash positions and the difficult equity fundraising market and/or the underperformance of certain portfolio companies.
Current wording
As of September 30, 2024, there were three debt investments with an internal credit rating of 1, with an aggregate cost of $36.5 million and an aggregate fair value of $21.2 million and there were six debt investments with an internal credit rating of 2, with an aggregate cost of $36.9 million and an aggregate fair value of $33.5 million. As of December 31, 2023, there were four debt investments with an internal credit rating of 1, with an aggregate cost of $72.5 million and an aggregate fair value of $27.6 million and there were two debt investments with an internal credit rating of 2, with an aggregate cost of $43.8 million and an aggregate fair value of $39.3 million. The increase in the number of investments with internal credit ratings of 1 or 2 was principally a result of the increase in the risk of loss of principal caused by the portfolio companies low cash positions and the difficult equity fundraising market and/or the underperformance of certain portfolio companies.
Previous wording
Net (decrease) increase in net assets resulting from operations can vary substantially from period to period for various reasons, including, without limitation, the recognition of realized gains and losses and unrealized appreciation and depreciation on investments. As a result, quarterly comparisons of net increase in net assets resulting from operations may not be meaningful.
Current wording
Net increase (decrease) in net assets resulting from operations can vary substantially from period to period for various reasons, including, without limitation, the recognition of realized gains and losses and unrealized appreciation and depreciation on investments. As a result, quarterly comparisons of net increase in net assets resulting from operations may not be meaningful.
Previous wording
Total investment income decreased by $4.3 million, or 7.7%, to $51.8 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. For the six months ended June 30, 2024, total investment income consisted primarily of $50.5 million in interest income from investments, which included $7.5 million in income from the accretion of origination fees and end of term payments, or ETPs, and $1.3 million in fee income. 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 compared to the six months ended June 30, 2023. Interest income on debt investments for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 decreased primarily due to a decrease of $65.6 million, or 9.4%, in the average earning debt investments, offset by an increase in the Prime Rate which is the base rate for most of our variable rate debt investments. Fee income, which includes success fee, other fee and prepayment fee income on debt investments, decreased by $0.9 million, or 40.0%, to $1.3 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to lower fee income earned on prepayments for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.
Current wording
Total investment income decreased by $4.6 million, or 15.7%, to $24.6 million for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. For the three months ended September 30, 2024, total investment income consisted primarily of $22.8 million in interest income from investments, which included $3.3 million in income from the accretion of origination fees and end of term payments (“ETPs”), $1.4 million in fee income and $0.4 million in PIK income. Interest income on debt investments decreased by $2.3 million, or 9.1%, to $22.8 million, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Interest income on debt investments for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 decreased primarily due to a decrease of $86.6 million, or 12.6%, in the average earning debt investments. The proportion of total investment income that resulted from the portion of ETPs not received in cash for the three months ended September 30, 2024 and 2023 was 4.6% and 5.1%, respectively. The decrease in the proportion of total investment income that resulted from the portion of ETPs not received in cash was a result of a decrease in final payments received in cash from prepayments for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.
Previous wording
We have a limited number of debt investments in our portfolio that contain a PIK provision. Contractual PIK interest, which represents contractually deferred interest added to the loan balance that is generally due at the end of the loan term, is generally recorded on an accrual basis to the extent such amounts are expected to be collected. We will generally cease accruing PIK interest if management does not expect the portfolio company to be able to pay all principal and interest due. For the three months ended June 30, 2024 and 2023, 1.4% and 3.4%, respectively, of total investment income was attributable to non-cash PIK interest. The decrease in PIK interest as a percentage of total investment income was principally the result of a decrease in earning assets that contain a PIK feature for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. For the six months ended June 30, 2024 and 2023, 3.3% and 3.8%, respectively, of total investment income was attributable to non-cash PIK interest. The decrease in PIK interest as a percentage of total investment income was principally the result of a decrease in earning assets that contain a PIK feature for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.
Current wording
PIK income decreased by $3.6 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. For the three months ended September 30, 2024 and 2023, 1.5% and 13.5%, respectively, of total investment income was attributable to non-cash PIK interest. The decrease in PIK income for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 was primarily due to a decrease in earning assets that contain a PIK feature for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.
Previous wording
Investment income, consisting of interest income and fees on debt investments, can fluctuate significantly upon repayment of large debt investments. Interest income from the five largest debt investments at cost in the aggregate accounted for 20% and 23% of investment income for the three months ended June 30, 2024 and 2023, respectively. Interest income from the five largest debt investments at fair value in the aggregate accounted for 24% and 23% of investment income for the three months ended June 30, 2024 and 2023, respectively.
Current wording
Investment income, consisting of interest income and fees on debt investments, can fluctuate significantly upon repayment of large debt investments. Interest income from the five largest debt investments at cost in the aggregate accounted for 21% and 24% of investment income for the three months ended September 30, 2024 and 2023, respectively. Interest income from the five largest debt investments at fair value in the aggregate accounted for 25% and 22% of investment income for the three months ended September 30, 2024 and 2023, respectively.
Previous wording
Total expenses increased by $0.5 million, or 4.6%, to $12.4 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Total expenses for each period consisted of interest expense, base management fee, incentive and administrative fees, professional fees and general and administrative expenses.
Current wording
Total expenses increased by $0.7 million, or 6.4%, to $12.4 million for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. Total expenses for each period consisted of interest expense, base management fee, incentive and administrative fees, professional fees and general and administrative expenses.
Previous wording
Interest expense increased by $0.8 million, or 10.6%, to $7.9 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Interest expense, which includes the amortization of debt issuance costs, increased primarily due to an increase in average borrowings of $7.0 million, or 1.6%, for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 and an increase in our effective cost of debt for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.
Current wording
Interest expense increased by $0.8 million, or 11.8%, to $7.9 million for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. Interest expense, which includes the amortization of debt issuance costs, increased primarily due to an increase in average borrowings of $24.5 million, or 5.9%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 and an increase in our effective cost of debt for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.
Previous wording
Base management fee expense decreased by $0.2 million, or 5.6%, to $3.0 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Base management fee decreased primarily due to a decrease of $44.9 million, or 6.1%, in average gross assets less cash for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.
Current wording
Base management fee expense decreased by $0.2 million, or 7.0%, to $3.0 million for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. Base management fee decreased primarily due to a decrease of $56.2 million, or 7.6%, in average gross assets less cash for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.
Previous wording
There was no performance based incentive fee expense for the three months ended June 30, 2024. Performance based incentive fee expense was $0.1 million for the three months ended June 30, 2023. The incentive fee on pre-incentive fee net investment income was subject to an Incentive Fee Cap and Deferral Mechanism in our Investment Management Agreement of $2.6 million for the three months ended June 30, 2024 compared to $3.1 million for the three months ended June 30, 2023. The Incentive Fee Cap and Deferral Mechanism resulted in $2.6 million of reduced incentive fee expense and increased net investment income for the three months ended June 30, 2024. The incentive fee on pre-incentive fee net investment income was subject to the Incentive Fee Cap for the three months ended June 30, 2024 due to the cumulative incentive fees paid exceeding 20% of cumulative pre-incentive fee net return during the applicable quarter and the 11 preceding full calendar quarters.
Current wording
There was no performance based incentive fee expense for the three months ended September 30, 2024 and 2023. The incentive fee on pre-incentive fee net investment income was subject to an Incentive Fee Cap and Deferral Mechanism in our Investment Management Agreement of $2.4 million for the three months ended September 30, 2024 compared to $3.5 million for the three months ended September 30, 2023. The Incentive Fee Cap and Deferral Mechanism resulted in $2.4 million of reduced incentive fee expense and increased net investment income for the three months ended September 30, 2024. The incentive fee on pre-incentive fee net investment income was subject to the Incentive Fee Cap for the three months ended September 30, 2024 due to the cumulative incentive fees paid exceeding 20% of cumulative pre-incentive fee net return during the applicable quarter and the 11 preceding full calendar quarters.
Previous wording
Administrative fee expense, professional fees and general and administrative expenses were $1.4 million for the three months ended June 30, 2024 and 2023.
Current wording
Administrative fee expense, professional fees and general and administrative expenses were $1.4 million and $1.3 million for the three months ended September 30, 2024 and 2023, respectively.
Previous wording
During the three months ended June 30, 2024, we realized net gains on investments totaling $2.5 million primarily due to the exercise and conversion to equity of one of our warrant investments. During the three months ended June 30, 2023, we realized net losses on investments totaling $16.5 million primarily due to the settlement of three of our debt investments. Such net realized losses were primarily the result of portfolio companies ceasing operations due to their inability to raise additional capital and the sale of their assets for less than the cost of their debt investments.
Current wording
During the three months ended September 30, 2024, we realized net losses on investments totaling $33.9 million primarily due to the settlement of one of our debt investments. During the three months ended September 30, 2023, we realized net losses on investments totaling $11.8 million primarily due to the settlement of one of our debt investments. Such net realized losses were primarily the result of portfolio companies ceasing operations due to their inability to raise additional capital and the sale of their assets for less than the cost of their debt investments.
Previous wording
During the three months ended June 30, 2024, net unrealized depreciation on investments totaled $24.5 million which was primarily due to (1) the unrealized depreciation on three of our debt investments and one of our equity investments and (2) the reversal of previously recorded unrealized appreciation from the exercise and conversion to equity of one of our warrant investments offset by the unrealized appreciation on two of our debt investments. The difficult equity fundraising market and under performance of certain portfolio companies, among other factors, resulted in us reducing the fair market value of the debt investments in such portfolio companies, thus increasing the unrealized depreciation on such debt investments. During the three months ended June 30, 2023, net unrealized appreciation on investments totaled $0.6 million which was primarily due to the reversal of previously recorded unrealized depreciation from the settlement of two of our debt investments offset by (1) the unrealized depreciation on three of our debt investments and (2) the unrealized depreciation on one of our equity investments.
Current wording
During the three months ended September 30, 2024, net unrealized appreciation on investments totaled $29.3 million which was primarily due to (1) the reversal of previously recorded unrealized depreciation from the settlement of one of our debt investments and (2) the unrealized appreciation on one of our debt investments offset by (1) the unrealized depreciation on one of our other investments and (2) the unrealized depreciation on our warrant investments. During the three months ended September 30, 2023, net unrealized depreciation on investments totaled $17.5 million which was primarily due to the unrealized depreciation on two of our debt investments offset by (1) the reversal of previously recorded unrealized depreciation from the settlement of one of our debt investments and (2) the unrealized appreciation on one of our equity investments. The difficult equity fundraising market and under performance of certain portfolio companies, among other factors, resulted in us reducing the fair market value of the debt investments in such portfolio companies, thus increasing the unrealized depreciation on such debt investments.
Previous wording
The following table shows consolidated results of operations for the six months ended June 30, 2024 and 2023:
Current wording
The following table shows consolidated results of operations for the nine months ended September 30, 2024 and 2023:
Previous wording
Net (decrease) increase in net assets resulting from operations can vary substantially from period to period for various reasons, including, without limitation, the recognition of realized gains and losses and unrealized appreciation and depreciation on investments. As a result, quarterly comparisons of net increase in net assets resulting from operations may not be meaningful.
Current wording
Net increase (decrease) in net assets resulting from operations can vary substantially from period to period for various reasons, including, without limitation, the recognition of realized gains and losses and unrealized appreciation and depreciation on investments. As a result, quarterly comparisons of net increase in net assets resulting from operations may not be meaningful.
Previous wording
Total investment income decreased by $2.4 million, or 8.7%, to $25.7 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. For the three months ended June 30, 2024, total investment income consisted primarily of $24.7 million in interest income from investments, which included $4.1 million in income from the accretion of origination fees and end of term payments (“ETPs”) and $1.0 million in fee income. Interest income on debt investments decreased by $2.0 million, or 7.3%, to $24.7 million, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. Interest income on debt investments for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 decreased primarily due to a decrease of $81.6 million, or 11.8%, in the average earning debt investments, offset by an increase in the Prime Rate which is the base rate for most of our variable rate debt investments. Fee income, which includes success fee, other fee and prepayment fee income on debt investments, decreased by $0.5 million, or 32.4%, to $1.0 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 primarily due to lower fee income earned on prepayments for the three months ended June 30, 2024 compared to the three months ended June 30, 2023.
Current wording
Total investment income decreased by $8.9 million, or 10.5%, to $76.4 million for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. For the nine months ended September 30, 2024, total investment income consisted primarily of $71.6 million in interest income from investments, which included $10.8 million in income from the accretion of origination fees and end of term payments, $2.7 million in fee income and $2.1 million in PIK income. Interest income on debt investments decreased by $5.4 million, or 7.0%, to $71.6 million, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. Interest income on debt investments for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 decreased primarily due to a decrease of $71.5 million, or 10.3%, in the average earning debt investments, offset by an increase in the Prime Rate which is the base rate for most of our variable rate debt investments. The proportion of total investment income that resulted from the portion of ETPs not received in cash for the nine months ended September 30, 2024 and 2023 was 6.0% and 4.9%, respectively. The increase in the proportion of total investment income that resulted from the portion of ETPs not received in cash was a result of a decrease in earning assets for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.
Previous wording
The following table shows our dollar-weighted annualized yield for the six months ended June 30, 2024 and 2023:
Current wording
The following table shows our dollar-weighted annualized yield for the nine months ended September 30, 2024 and 2023:
Previous wording
Investment income, consisting of interest income and fees on debt investments, can fluctuate significantly upon repayment of large debt investments. Interest income from the five largest debt investments at cost in the aggregate accounted for 18% and 23% of investment income for the six months ended June 30, 2024 and 2023, respectively. Interest income from the five largest debt investments at fair value in the aggregate accounted for 22% and 23% of investment income for the six months ended June 30, 2024 and 2023, respectively.
Current wording
Investment income, consisting of interest income and fees on debt investments, can fluctuate significantly upon repayment of large debt investments. Interest income from the five largest debt investments at cost in the aggregate accounted for 21% and 23% of investment income for the nine months ended September 30, 2024 and 2023, respectively. Interest income from the five largest debt investments at fair value in the aggregate accounted for 23% and 21% of investment income for the nine months ended September 30, 2024 and 2023, respectively.
Previous wording
Total expenses decreased by $1.2 million, or 4.3%, to $25.6 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. Total expenses for each period consisted of interest expense, base management fee, incentive and administrative fees, professional fees and general and administrative expenses.
Current wording
Total expenses decreased by $0.4 million, or 1.1%, to $37.9 million for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. Total expenses for each period consisted of interest expense, base management fee, incentive and administrative fees, professional fees and general and administrative expenses.
Previous wording
Interest expense increased by $1.8 million, or 12.6%, to $16.1 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. Interest expense, which includes the amortization of debt issuance costs, increased primarily due to an increase in average borrowings of $11.7 million, or 2.7%, for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 and an increase in our effective cost of debt for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.
Current wording
Interest expense increased by $2.6 million, or 12.3%, to $24.0 million for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. Interest expense, which includes the amortization of debt issuance costs, increased primarily due to an increase in average borrowings of $16.0 million, or 3.7%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 and an increase in our effective cost of debt for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.
Previous wording
Base management fee expense decreased by $0.2 million, or 3.4%, to $6.2 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. Base management fee decreased primarily due to a decrease of $27.3 million, or 3.7%, in average gross assets less cash for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.
Current wording
Base management fee expense decreased by $0.4 million, or 4.6%, to $9.2 million for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. Base management fee decreased primarily due to a decrease of $37.0 million, or 5.0%, in average gross assets less cash for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.
Previous wording
Performance based incentive fee expense decreased by $2.8 million, or 90.5%, to $0.3 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. This decrease was due to an Incentive Fee Cap and Deferral Mechanism in our Investment Management Agreement of $4.9 million for the six months ended June 30, 2024 compared to $3.3 million for the six months ended June 30, 2023. The Incentive Fee Cap and Deferral Mechanism resulted in $4.9 million and $3.3 million of reduced incentive fee expense and increased net investment income for the six months ended June 30, 2024 and 2023, respectively. The incentive fee on pre-incentive fee net investment income was subject to the Incentive Fee Cap for the six months ended June 30, 2024 due to the cumulative incentive fees paid exceeding 20% of cumulative pre-incentive fee net return during the applicable quarter and the 11 preceding full calendar quarters.
Current wording
Performance based incentive fee expense decreased by $2.8 million, or 90.5%, to $0.3 million for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. This decrease was due to an Incentive Fee Cap and Deferral Mechanism in our Investment Management Agreement of $7.2 million for the nine months ended September 30, 2024 compared to $6.8 million for the nine months ended September 30, 2023. The Incentive Fee Cap and Deferral Mechanism resulted in $7.2 million and $6.8 million of reduced incentive fee expense and increased net investment income for the nine months ended September 30, 2024 and 2023, respectively. The incentive fee on pre-incentive fee net investment income was subject to the Incentive Fee Cap for the nine months ended September 30, 2024 due to the cumulative incentive fees paid exceeding 20% of cumulative pre-incentive fee net return during the applicable quarter and the 11 preceding full calendar quarters.
Previous wording
Administrative fee expense, professional fees and general and administrative expenses were $3.0 million and $2.9 million for the six months ended June 30, 2024 and 2023, respectively.
Current wording
Administrative fee expense, professional fees and general and administrative expenses were $4.4 million and $4.2 million for the nine months ended September 30, 2024 and 2023, respectively.
Previous wording
During the six months ended June 30, 2024, we realized net gains on investments totaling $2.5 million primarily due to the exercise and conversion to equity of one of our warrant investments. During the six months ended June 30, 2023, we realized net losses on investments totaling $16.7 million primarily due to the settlement of three of our debt investments. Such net realized losses were primarily the result of portfolio companies ceasing operations due to their inability to raise additional capital and the sale of their assets for less than the cost of their debt investments.
Current wording
During the nine months ended September 30, 2024, we realized net losses on investments totaling $31.4 million primarily due to the settlement of one of our debt investments. During the nine months ended September 30, 2023, we realized net losses on investments totaling $28.5 million primarily due to the settlement of four of our debt investments. Such net realized losses were primarily the result of portfolio companies ceasing operations due to their inability to raise additional capital and the sale of their assets for less than the cost of their debt investments.
Previous wording
During the six months ended June 30, 2024, net unrealized depreciation on investments totaled $28.5 million which was primarily due to (1) the unrealized depreciation on four of our debt investments and one of our equity investments and (2) the reversal of previously recorded unrealized appreciation from the exercise and conversion to equity of one of our warrant investments offset by the unrealized appreciation on one of our debt investments. The difficult equity fundraising market and under performance of certain portfolio companies, among other factors, resulted in us reducing the fair market value of the debt investments in such portfolio companies, thus increasing the unrealized depreciation on such debt investments. During the six months ended June 30, 2023, net unrealized depreciation on investments totaled $6.9 million which was primarily due to (1) the unrealized depreciation on three of our debt investments and (2) the unrealized depreciation on one of our equity investments offset by the reversal of previously recorded unrealized depreciation from the settlement of two of our debt investments.
Current wording
During the nine months ended September 30, 2024, net unrealized appreciation on investments totaled $0.9 million which was primarily due to (1) the reversal of previously recorded unrealized depreciation from the settlement of one of our debt investments and (2) the unrealized appreciation on one of our other investments partially offset by (1) the unrealized depreciation on four of our debt investments and (2) the unrealized depreciation on our warrant and equity investments. During the nine months ended September 30, 2023, net unrealized depreciation on investments totaled $24.4 million which was primarily due to (1) the unrealized depreciation on four of our debt investments and (2) the unrealized depreciation on two of our equity investments offset by (1) the reversal of previously recorded unrealized depreciation from the settlement of three of our debt investments and (2) the unrealized appreciation on one of our equity investments. The difficult equity fundraising market and under performance of certain portfolio companies, among other factors, resulted in us reducing the fair market value of the debt investments in such portfolio companies, thus increasing the unrealized depreciation on such debt investments.
Previous wording
As of June 30, 2024 and December 31, 2023, we had cash and investments in money market funds of $113.7 million and $73.1 million, respectively. Cash and investments in money market funds are available to fund new investments, reduce borrowings, pay expenses, repurchase common stock and pay distributions. In addition, as of June 30, 2024 and December 31, 2023, we had $3.2 million and $2.6 million, respectively, of restricted investments in money market funds. Restricted investments in money market funds may be used to make monthly interest and principal payments on our 2022 Asset-Backed Notes, our NYL Facility or our Nuveen Facility. Our primary sources of capital have been from our public equity offerings, use of our revolving credit facility (the “Key Facility”) with KeyBank National Association (“Key”), the Note Funding Agreement (the “NYL Facility”), with several entities owned or affiliated with New York Life Insurance Company and the Nuveen Note Funding Agreement (the “Nuveen Facility”, together with the Key Facility and the NYL Facility, the “Credit Facilities”) with several entities owned or affiliated with Nuveen Alternative Advisors LLC, and issuance of our public and private debt securities.
Current wording
As of September 30, 2024 and December 31, 2023, we had cash and investments in money market funds of $83.4 million and $73.1 million, respectively. Cash and investments in money market funds are available to fund new investments, reduce borrowings, pay expenses, repurchase common stock and pay distributions. In addition, as of September 30, 2024 and December 31, 2023, we had $3.3 million and $2.6 million, respectively, of restricted investments in money market funds. Restricted investments in money market funds may be used to make monthly interest and principal payments on our 2022 Asset-Backed Notes, our NYL Facility or our Nuveen Facility. Our primary sources of capital have been from our public equity offerings, use of our revolving credit facility (the “Key Facility”) with KeyBank National Association (“Key”), the Note Funding Agreement (the “NYL Facility”), with several entities owned or affiliated with New York Life Insurance Company and the Nuveen Note Funding Agreement (the “Nuveen Facility”, together with the Key Facility and the NYL Facility, the “Credit Facilities”) with several entities owned or affiliated with Nuveen Alternative Advisors LLC, and issuance of our public and private debt securities.
Previous wording
During the three months ended June 30, 2024, we sold 1,516,249 shares of common stock under the 2023 Equity Distribution Agreement. For the same period, we received total accumulated net proceeds of approximately $17.1 million, including $0.4 million of offering expenses, from these sales.
Current wording
During the three months ended September 30, 2024, we sold 1,709,096 shares of common stock under the 2023 Equity Distribution Agreement. For the same period, we received total accumulated net proceeds of approximately $18.4 million, including $0.4 million of offering expenses, from these sales.
Previous wording
On April 26, 2024, our Board extended a previously authorized stock repurchase program which allows us to repurchase up to $5.0 million of our common stock at prices below our net asset value (“NAV”) per share as reported in our most recent consolidated financial statements. Under the repurchase program, we may, but are not obligated to, repurchase shares of our outstanding common stock in the open market or in privately negotiated transactions from time to time. Any repurchases by us will comply with the requirements of Rule 10b‑18 under the Exchange Act and any applicable requirements of the 1940 Act. Unless extended by our Board, the repurchase program will terminate on the earlier of June 30, 2025 or the repurchase of $5.0 million of our common stock. During the three and six months ended June 30, 2024 and 2023, we did not make any repurchases of our common stock. From the inception of the stock repurchase program through June 30, 2024, we repurchased 167,465 shares of our common stock at an average price of $11.22 on the open market at a total cost of $1.9 million.
Current wording
On April 26, 2024, our Board extended a previously authorized stock repurchase program which allows us to repurchase up to $5.0 million of our common stock at prices below our net asset value (“NAV”) per share as reported in our most recent consolidated financial statements. Under the repurchase program, we may, but are not obligated to, repurchase shares of our outstanding common stock in the open market or in privately negotiated transactions from time to time. Any repurchases by us will comply with the requirements of Rule 10b‑18 under the Exchange Act and any applicable requirements of the 1940 Act. Unless extended by our Board, the repurchase program will terminate on the earlier of June 30, 2025 or the repurchase of $5.0 million of our common stock. During the three and nine months ended September 30, 2024 and 2023, we did not make any repurchases of our common stock. From the inception of the stock repurchase program through September 30, 2024, we repurchased 167,465 shares of our common stock at an average price of $11.22 on the open market at a total cost of $1.9 million.
Previous wording
At June 30, 2024 there was no outstanding principal balance under our Key Facility. At December 31, 2023, the outstanding principal balance under our Key Facility was $70.0 million. As of June 30, 2024 and December 31, 2023, we had borrowing capacity under the Key Facility of $150.0 million and $80.0 million, respectively. At June 30, 2024 and December 31, 2023, $14.0 million and $25.0 million, respectively, was available for borrowing under the Key Facility, subject to existing terms and advance rates.
Current wording
At September 30, 2024 there was no outstanding principal balance under our Key Facility. At December 31, 2023, the outstanding principal balance under our Key Facility was $70.0 million. As of September 30, 2024 and December 31, 2023, we had borrowing capacity under the Key Facility of $150.0 million and $80.0 million, respectively. At September 30, 2024 and December 31, 2023, $13.3 million and $25.0 million, respectively, was available for borrowing under the Key Facility, subject to existing terms and advance rates.
Previous wording
At June 30, 2024 and December 31, 2023, the outstanding principal balance under the NYL Facility was $181.0 million. As of June 30, 2024 and December 31, 2023, we had borrowing capacity under the NYL Facility of $69.0 million. At June 30, 2024 and December 31, 2023, $17.9 million and $17.4 million, respectively, was available for borrowing under the NYL Facility, subject to existing terms and advance rates.
Current wording
At September 30, 2024 and December 31, 2023, the outstanding principal balance under the NYL Facility was $181.0 million. As of September 30, 2024 and December 31, 2023, we had borrowing capacity under the NYL Facility of $69.0 million. At September 30, 2024 and December 31, 2023, $8.2 million and $17.4 million, respectively, was available for borrowing under the NYL Facility, subject to existing terms and advance rates.
Previous wording
At June 30, 2024, the outstanding principal balance under the Nuveen Facility was $50.0 million. As of June 30, 2024, we had borrowing capacity under the Nuveen Facility of $50.0 million. At June 30, 2024, $14.1 million was available for borrowing under the Nuveen Facility, subject to existing terms and advance rates. The Nuveen Facility was not outstanding at December 31, 2023.
Current wording
At September 30, 2024, the outstanding principal balance under the Nuveen Facility was $50.0 million. As of September 30, 2024, we had borrowing capacity under the Nuveen Facility of $50.0 million. At September 30, 2024, $29.9 million was available for borrowing under the Nuveen Facility, subject to existing terms and advance rates. The Nuveen Facility was not outstanding at December 31, 2023.
Previous wording
Our operating activities provided cash of $58.3 million for the six months ended June 30, 2024, and our financing activities used cash of $17.2 million for the same period. Our operating activities provided cash from principal payments received on our debt investments partially offset by cash used to purchase investments in portfolio companies. Our financing activities used cash primarily to repay our Key Facility and to pay distributions to our stockholders, partially offset from an advance on our Nuveen Facility and the sale of shares through our ATM for net proceeds of $29.1 million.
Current wording
Our operating activities provided cash of $30.1 million for the nine months ended September 30, 2024, and our financing activities used cash of $19.1 million for the same period. Our operating activities provided cash from principal payments received on our debt investments partially offset by cash used to purchase investments in portfolio companies. Our financing activities used cash primarily to repay our Key Facility, to repay our 2022 Asset-Backed Notes and to pay distributions to our stockholders, partially offset from an advance on our Nuveen Facility and the sale of shares through our ATM for net proceeds of $47.5 million.
Previous wording
Our operating activities provided cash of $7.2 million for the six months ended June 30, 2023, and our financing activities provided cash of $15.5 million for the same period. Our operating activities provided cash from principal payments received on our debt investments partially offset by cash used to purchase investments in portfolio companies. Our financing activities provided cash primarily from the completion of a follow-on public offering of 3.25 million shares of common stock for net proceeds of $38.9 million, after deducting underwriting commission and discounts and other offering expenses and the sale of shares through our ATM for net proceeds of $12.3 million, partially offset by cash used to repay our 2019 Asset-Backed Notes, to repay the outstanding principal balance under our Key Facility and to pay distributions to our stockholders.
Current wording
Our operating activities used cash of $16.5 million for the nine months ended September 30, 2023, and our financing activities provided cash of $36.1 million for the same period. Our operating activities used cash to purchase investments in portfolio companies partially offset by principal payments received on our debt investments. Our financing activities provided cash primarily from the completion of a follow-on public offering of 3.25 million shares of common stock for net proceeds of $38.9 million, after deducting underwriting commission and discounts and other offering expenses, the sale of shares through our ATM for net proceeds of $26.1 million, and advances on our Credit Facilities, partially offset by cash used to repay our 2019 Asset-Backed Notes, to repay the outstanding principal balance under our Key Facility and to pay distributions to our stockholders.
Previous wording
We entered into the Key Facility effective November 4, 2013. On June 20, 2024, we amended the Key Facility, among other things, (i) to extend the date on which we may request advances under the Key Facility to June 20, 2027 and to extend the maturity date to June 20, 2029 and (ii) to amend the interest rate to be based on the rate of interest published in The Wall Street Journal as the prime rate in the United States plus 0.10%, with a prime rate floor of 4.10%. Prior to June 20, 2024, the interest rate on the Key Facility was based on Prime plus 0.25%, with a prime rate floor of 4.25%. The prime rate was 8.50% as of June 30, 2024 and December 31, 2023. The interest rate in effect was 8.60% and 8.75% as of June 30, 2024 and December 31, 2023, respectively. The Key Facility requires the payment of an unused line fee in an amount up to 0.50% of any unborrowed amount available under the facility annually.
Current wording
We entered into the Key Facility effective November 4, 2013. On June 20, 2024, we amended the Key Facility, among other things, (i) to extend the date on which we may request advances under the Key Facility to June 20, 2027 and to extend the maturity date to June 20, 2029 and (ii) to amend the interest rate to be based on the rate of interest published in The Wall Street Journal as the prime rate in the United States plus 0.10%, with a prime rate floor of 4.10%. Prior to June 20, 2024, the interest rate on the Key Facility was based on Prime plus 0.25%, with a prime rate floor of 4.25%. The prime rate was 8.00% and 8.50% as of September 30, 2024 and December 31, 2023, respectively. The interest rate in effect was 8.10% and 8.75% as of September 30, 2024 and December 31, 2023, respectively. The Key Facility requires the payment of an unused line fee in an amount up to 0.50% of any unborrowed amount available under the facility annually.
Previous wording
Under the terms of the NYL Facility, we are required to maintain a reserve cash balance, which may be used to pay monthly interest and principal payments on the NYL Facility. We have segregated these funds and classified them as restricted investments in money market funds. At June 30, 2024 and December 31, 2023, there were approximately $1.4 million of restricted investments.
Current wording
Under the terms of the NYL Facility, we are required to maintain a reserve cash balance, which may be used to pay monthly interest and principal payments on the NYL Facility. We have segregated these funds and classified them as restricted investments in money market funds. At September 30, 2024 and December 31, 2023, there were approximately $1.4 million of such restricted investments.
Previous wording
There were $181.0 million in notes issued to the NYL Noteholders as of June 30, 2024 and December 31, 2023 at an interest rate of 6.34% and 5.96%, respectively. As of June 30, 2024 and December 31, 2023, we had borrowing capacity under the NYL Facility of $69.0 million. At June 30, 2024 and December 31, 2023, $17.9 million and $17.4 million, respectively, was available for borrowing, subject to existing terms and advance rates.
Current wording
There were $181.0 million in notes issued to the NYL Noteholders as of September 30, 2024 and December 31, 2023 at an interest rate of 6.43% and 5.96%, respectively. As of September 30, 2024 and December 31, 2023, we had borrowing capacity under the NYL Facility of $69.0 million. At September 30, 2024 and December 31, 2023, $8.2 million and $17.4 million, respectively, was available for borrowing, subject to existing terms and advance rates.
Previous wording
Under the terms of the Nuveen Facility, we are required to maintain a reserve cash balance, which may be used to pay monthly interest and principal payments on the Nuveen Facility. We have segregated these funds and classified them as restricted investments in money market funds. At June 30, 2024, there were approximately $0.7 million of restricted investments.
Current wording
Under the terms of the Nuveen Facility, we are required to maintain a reserve cash balance, which may be used to pay monthly interest and principal payments on the Nuveen Facility. We have segregated these funds and classified them as restricted investments in money market funds. At September 30, 2024, there were approximately $0.9 million of such restricted investments.
Previous wording
There were $50.0 million in notes issued to the Nuveen Noteholders as of June 30, 2024 at an interest rate of 7.38%. As of June 30, 2024, we had borrowing capacity under the Nuveen Facility of $50.0 million. At June 30, 2024, $14.1 million, was available for borrowing, subject to existing terms and advance rates.
Current wording
There were $50.0 million in notes issued to the Nuveen Noteholders as of September 30, 2024 at an interest rate of 7.38%. As of September 30, 2024, we had borrowing capacity under the Nuveen Facility of $50.0 million. At September 30, 2024, $29.9 million, was available for borrowing, subject to existing terms and advance rates.
Showing the first 40 of 49 pairs. Open the source sections for the rest.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Fee income, which includes success fee, other fee and prepayment fee income on debt investments, increased by $1.3 million, or 1014.5%, to $1.4 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 primarily due to higher fee income earned on prepayments for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.
Current report — wording carried from elsewhere
PIK income decreased by $3.9 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. For the nine months ended September 30, 2024 and 2023, 2.8% and 7.1%, respectively, of total investment income was attributable to non-cash PIK interest. The decrease in PIK interest as a percentage of total investment income was principally the result of a decrease in earning assets that contain a PIK feature for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.