Horizon Technology Finance Corp

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 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.

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 March 31, 2025, 87.5%, or $563.3 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

We were formed in March 2010 and completed an initial public offering.

Current wording

We were formed in March 2010 and completed an initial public offering in October 2010.

Previous wording

The following table shows total portfolio investment activity as of and for the three and nine months ended September 30, 2024 and 2023:

Current wording

The following table shows total portfolio investment activity as of and for the three months ended March 31, 2025 and 2024:

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 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.

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 21% and 22% of total debt investments outstanding as of March 31, 2025 and December 31, 2024, respectively. Our five largest debt investments at fair value represented 23% of total debt investments outstanding as of March 31, 2025 and December 31, 2024. No single debt investment at cost or fair value represented more than 10% of our total debt investments as of March 31, 2025 and December 31, 2024.

Previous 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.

Current wording

As of March 31, 2025, there were seven debt investments with an internal credit rating of 1, with an aggregate cost of $66.7 million and an aggregate fair value of $15.5 million and there were five debt investments with an internal credit rating of 2, with an aggregate cost of $59.2 million and an aggregate fair value of $54.2 million. As of December 31, 2024, there were four debt investments with an internal credit rating of 1, with an aggregate cost of $44.8 million and an aggregate fair value of $10.5 million and there were seven debt investments with an internal credit rating of 2, with an aggregate cost of $53.3 million and an aggregate fair value of $48.8 million. The increase in the number of investments with internal credit ratings of 1 or 2 was primarily 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 such portfolio companies.

Previous 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.

Current 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.

Previous 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.

Current wording

Interest income on debt investments decreased by $2.4 million, or 9.3%, to $23.5 million, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. Interest income on debt investments for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 decreased primarily due to a decrease in the Prime Rate which is the base rate for most of our variable rate debt investments partially offset by an increase of $2.6 million, or 0.4%, in our 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 March 31, 2025 and 2024 was 4.6% and 6.8%, 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 an increase in prepayments for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Previous wording

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.

Current wording

PIK interest income decreased by $1.1 million, or 79.4%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. For the three months ended March 31, 2025 and 2024, 1.2% and 5.3%, respectively, of total investment income was attributable to non-cash PIK interest income. The decrease in PIK interest income as a percentage of total investment income was primarily due to a decrease in earning assets that contain a PIK feature for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Previous wording

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 wording

Fee income, which includes success fee, other fee and prepayment fee income on debt investments, increased by $0.8 million, or 296.3%, to $1.1 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 primarily due to a higher aggregate amount of principal prepayments for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

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 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.

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 24% and 16% of investment income for the three months ended March 31, 2025 and 2024, respectively. Interest income from the five largest debt investments at fair value in the aggregate accounted for 24% and 21% of investment income for the three months ended March 31, 2025 and 2024, respectively.

Previous 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.

Current wording

Total expenses increased by $0.3 million, or 2.1%, to $13.4 million for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. 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 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.

Current wording

Interest expense increased by $0.5 million, or 6.4%, to $8.7 million for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. Interest expense, which includes the amortization of debt issuance costs, increased primarily due to an increase in average borrowings of $12.5 million, or 2.7%, for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 and an increase in our effective cost of debt for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024.

Previous 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.

Current wording

Base management fee expense increased by $0.02 million, or 0.6%, to $3.2 million for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. Base management fee increased primarily due to an increase of $4.5 million, or 0.6%, in average gross assets less cash for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024.

Previous 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.

Current wording

There was no performance based incentive fee expense for the three months ended March 31, 2025. Performance based incentive fee expense decreased by $0.3 million, or 100.0% for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. This decrease was due to a decrease of $2.2 million, or 16.9%, in Pre-Incentive Fee Net Investment Income for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 and an Incentive Fee Cap calculated based on the Incentive Fee Cap and Deferral Mechanism in our Investment Management Agreement of $2.1 million for the three months ended March 31, 2025 compared to an Incentive Fee Cap of $2.3 million for the three months ended March 31, 2024. The Incentive Fee Cap and Deferral Mechanism resulted in $2.1 million of reduced incentive fee expense and increased net investment income for the three months ended March 31, 2025. The incentive fee on pre-incentive fee net investment income was subject to the Incentive Fee Cap for the three months ended March 31, 2025 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 and $1.3 million for the three months ended September 30, 2024 and 2023, respectively.

Current wording

Administrative fee expense, professional fees and general and administrative expenses were $1.6 million and $1.5 million for the three months ended March 31, 2025 and 2024, respectively.

Previous 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.

Current wording

During the three months ended March 31, 2025, net unrealized depreciation on investments totaled $32.2 million which was primarily due to (1) the unrealized depreciation on three of our debt investments and (2) the unrealized depreciation on two of our equity investments. During the three months ended March 31, 2024, net unrealized depreciation on investments totaled $4.0 million which was primarily due to the unrealized depreciation on two of our debt investments and one of our equity 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.

Previous 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.

Current wording

As of March 31, 2025 and December 31, 2024, we had cash and investments in money market funds of $74.0 million and $97.5 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 March 31, 2025 and December 31, 2024, we had $3.5 million and $3.3 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

On September 22, 2023, we terminated the 2021 Equity Distribution Agreement and entered into a new ATM sales agreement (the “2023 Equity Distribution Agreement”) with the Sales Agents. The remaining shares available under the 2021 Equity Distribution Agreement are no longer available for issuance. The 2023 Equity Distribution Agreement provides that we may offer and sell shares of our common stock from time to time through the Sales Agents up to $150.0 million worth of our common stock, in amounts and at times to be determined by us. Sales of our common stock, if any, may be made in negotiated transactions or transactions that are deemed to be “at-the-market,” as defined in Rule 415 under the Securities Act, including sales made directly on the NASDAQ or similar securities exchange or sales made to or through a market maker other than on an exchange, at prices related to the prevailing market prices or at negotiated prices.

Current wording

On September 22, 2023, we entered into an At-The-Market (or “ATM”) sales agreement (or the “2023 Equity Distribution Agreement”) with Goldman Sachs & Co. LLC and B. Riley FBR, Inc., (each a “Sales Agent” and, collectively, the “Sales Agents”). The 2023 Equity Distribution Agreement provides that we may offer and sell shares of our common stock from time to time through the Sales Agents up to $150.0 million worth of our common stock, in amounts and at times to be determined by us. Sales of our common stock, if any, may be made in negotiated transactions or transactions that are deemed to be “at-the-market,” as defined in Rule 415 under the Securities Act, including sales made directly on the NASDAQ or similar securities exchange or sales made to or through a market maker other than on an exchange, at prices related to the prevailing market prices or at negotiated prices.

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 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.

Current wording

On April 25, 2025, 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, 2026 or the repurchase of $5.0 million of our common stock. During the three months ended March 31, 2025 and 2024, we did not make any repurchases of our common stock. From the inception of the stock repurchase program through March 31, 2025, 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 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.

Current wording

At March 31, 2025 and December 31, 2024 there was no outstanding principal balance under the Key Facility. As of March 31, 2025 and December 31, 2024, we had borrowing capacity under the Key Facility of $150.0 million. At March 31, 2025 and December 31, 2024, $38.5 million and $24.8 million, respectively, was available for borrowing under the Key Facility, subject to existing terms and advance rates.

Previous 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.

Current wording

At March 31, 2025 and December 31, 2024, the outstanding principal balance under the NYL Facility was $181.0 million. As of March 31, 2025 and December 31, 2024, we had borrowing capacity under the NYL Facility of $69.0 million. At March 31, 2025 and December 31, 2024, $13.5 million and $8.4 million, respectively, was available for borrowing under the NYL Facility, subject to existing terms and advance rates.

Previous 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.

Current wording

At March 31, 2025 and December 31, 2024, the outstanding principal balance under the Nuveen Facility was $90.0 million and $75.0 million, respectively. As of March 31, 2025 and December 31, 2024, we had borrowing capacity under the Nuveen Facility of $10.0 million and $25.0 million, respectively. At March 31, 2025 and December 31, 2024, $10.0 million and $9.9 million, respectively, was available for borrowing under the Nuveen Facility, subject to existing terms and advance rates.

Previous 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.

Current wording

Our operating activities used cash of $13.2 million for the three months ended March 31, 2025, and our financing activities used cash of $10.2 million for the same period. Our operating activities used cash primarily to purchase investments in portfolio companies partially offset by cash provided by principal payments received on our debt investments. Our financing activities used cash primarily to repay our 2022 Asset-Backed Notes and to pay distributions to our stockholders partially offset by an advance on our Nuveen Facility and the sale of shares through our ATM for net proceeds of $3.6 million.

Previous 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.

Current wording

Our operating activities provided cash of $4.0 million for the three months ended March 31, 2024, and our financing activities used cash of $8.4 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 the sale of shares through our ATM for net proceeds of $12.0 million.

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 8.00% 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.

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 7.50% as of March 31, 2025 and December 31, 2024, respectively. The interest rate in effect was 7.60% as of March 31, 2025 and December 31, 2024, respectively. The Key Facility requires the payment of an unused line fee in an amount up to 0.75% of any unborrowed amount available under the facility annually.

Previous 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.

Current wording

There were $181.0 million in notes issued to the NYL Noteholders as of March 31, 2025 and December 31, 2024 at an interest rate of 6.54% and 6.47%, respectively. As of March 31, 2025 and December 31, 2024, we had borrowing capacity under the NYL Facility of $69.0 million. At March 31, 2025 and December 31, 2024, $13.5 million and $8.4 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 September 30, 2024, there were approximately $0.9 million of such 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 March 31, 2025 and December 31, 2024, there were approximately $1.2 million and $1.0 million, respectively, of such restricted investments.

Previous 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.

Current wording

There were $90.0 million and $75.0 million in notes issued to the Nuveen Noteholders as of March 31, 2025 and December 31, 2024 at an interest rate of 7.21% and 7.14%, respectively. As of March 31, 2025 and December 31, 2024, we had borrowing capacity under the Nuveen Facility of $10.0 million and $25.0 million. At March 31, 2025 and December 31, 2024, $10.0 million and $9.9 million, respectively, was available for borrowing, subject to existing terms and advance rates.

Previous wording

At September 30, 2024 and December 31, 2023, the 2022 Asset-Backed Notes had an outstanding principal balance of $91.0 million and $100.0 million, respectively.

Current wording

At March 31, 2025 and December 31, 2024, the 2022 Asset-Backed Notes had an outstanding principal balance of $65.0 million and $81.1 million, respectively.

Previous wording

Under the terms of the 2022 Asset-Backed Notes, we are required to maintain a reserve cash balance, funded through proceeds from the sale of the 2022 Asset-Backed Notes, which may be used to pay monthly interest and principal payments on the 2022 Asset-Backed Notes. 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 $1.0 million and $1.3 million, respectively, of such restricted investments.

Current wording

Under the terms of the 2022 Asset-Backed Notes, we are required to maintain a reserve cash balance, funded through proceeds from the sale of the 2022 Asset-Backed Notes, which may be used to pay monthly interest and principal payments on the 2022 Asset-Backed Notes. We have segregated these funds and classified them as restricted investments in money market funds. At March 31, 2025, and December 31, 2024, there were approximately $0.9 million and $1.0 million, respectively, of such restricted investments.

Previous wording

On March 30, 2021, we issued and sold an aggregate principal amount of $57.5 million of 4.875% notes due in 2026 (the “2026 Notes”). The amount of 2026 Notes issued and sold included the full exercise by the underwriters of their option to purchase $7.5 million in aggregate principal of additional notes. The 2026 Notes have a stated maturity of March 30, 2026 and may be redeemed in whole or in part at our option at any time or from time to time on or after March 30, 2023 at a redemption price of $25 per security plus accrued and unpaid interest. The 2026 Notes bear interest at a rate of 4.875% per year, payable quarterly on March 30, June 30, September 30 and December 30 of each year. The 2026 Notes are our direct unsecured obligations and (i) rank equally in right of payment with our current and future unsecured indebtedness; (ii) are senior in right of payment to any of our future indebtedness that expressly provides it is subordinated to the 2026 Notes; (iii) are effectively subordinated to all of our existing and future secured indebtedness (including indebtedness that is initially unsecured to which we subsequently grant security), to the extent of the value of the assets securing such indebtedness, and (iv) are structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries. As of September 30, 2024, we were in material compliance with the terms of the 2026 Notes. The 2026 Notes are listed on the New York Stock Exchange under the symbol “HTFB”.

Current wording

On March 30, 2021, we issued and sold an aggregate principal amount of $57.5 million of 4.875% notes due in 2026 (or the “2026 Notes”). The amount of 2026 Notes issued and sold included the full exercise by the underwriters of their option to purchase $7.5 million in aggregate principal of additional notes. The 2026 Notes have a stated maturity of March 30, 2026 and may be redeemed in whole or in part at our option at any time or from time to time on or after March 30, 2023 at a redemption price of $25 per security plus accrued and unpaid interest. The 2026 Notes bear interest at a rate of 4.875% per year, payable quarterly on March 30, June 30, September 30 and December 30 of each year. The 2026 Notes are our direct unsecured obligations and (i) rank equally in right of payment with our current and future unsecured indebtedness; (ii) are senior in right of payment to any of our future indebtedness that expressly provides it is subordinated to the 2026 Notes; (iii) are effectively subordinated to all of our existing and future secured indebtedness (including indebtedness that is initially unsecured to which we subsequently grant security), to the extent of the value of the assets securing such indebtedness, and (iv) are structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries. As of March 31, 2025, we were in material compliance with the terms of the 2026 Notes. The 2026 Notes are listed on the New York Stock Exchange under the symbol “HTFB”.

Previous wording

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 wording

On October 17, 2024, we entered into the 2031 Note Purchase Agreement, by and among us and each purchaser named therein, in connection with the issuance and sale of $20.0 million aggregate principal of our 7.125% 2031 Convertible Notes in a transaction exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. We received net proceeds (before expenses) from the sale of the 2031 Convertible Notes of approximately $18.6 million.

Previous wording

As of September 30, 2024 and December 31, 2023, other assets were $6.6 million and $3.6 million, respectively, which was primarily comprised of debt issuance costs and prepaid expenses.

Current wording

As of March 31, 2025 and December 31, 2024, other assets were $6.2 million and $6.5 million, respectively, which was primarily comprised of debt issuance costs and prepaid expenses.

Previous wording

In the normal course of business, we are party to financial instruments with off-balance sheet risk. These consist primarily of unfunded commitments to extend credit, in the form of loans, to our portfolio companies. Unfunded commitments to provide funds to portfolio companies are not reflected on our balance sheet. Our unfunded commitments may be significant from time to time. As of September 30, 2024, we had unfunded commitments of $189.9 million. This includes $20.0 million of undrawn revolver commitments. These commitments are subject to the same underwriting and ongoing portfolio maintenance requirements as are the financial instruments that we hold on our balance sheet. In addition, these commitments are often subject to financial or non-financial milestones and other conditions to borrowing that must be achieved before the commitment can be drawn. Since these commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. We regularly monitor our unfunded commitments and anticipated refinancings, maturities and capital raising, to ensure that we have sufficient liquidity to fund unfunded commitments. As of September 30, 2024, we reasonably believed that our assets would provide adequate financial resources to satisfy all of our unfunded commitments.

Current wording

In the normal course of business, we are party to financial instruments with off-balance sheet risk. These consist primarily of unfunded commitments to extend credit, in the form of loans, to our portfolio companies. Unfunded commitments to provide funds to portfolio companies are not reflected on our balance sheet. Our unfunded commitments may be significant from time to time. As of March 31, 2025, we had unfunded commitments of $200.0 million. This includes $20.0 million of undrawn revolver commitments. These commitments are subject to the same underwriting and ongoing portfolio maintenance requirements as are the financial instruments that we hold on our balance sheet. In addition, these commitments are often subject to financial or non-financial milestones and other conditions to borrowing that must be achieved before the commitment can be drawn. Since these commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. We regularly monitor our unfunded commitments and anticipated refinancings, maturities and capital raising, to ensure that we have sufficient liquidity to fund unfunded commitments. As of March 31, 2025, we reasonably believed that our assets would provide adequate financial resources to satisfy all of our unfunded commitments.

Previous wording

The incentive fee on Pre-Incentive Fee Net Investment Income is subject to a fee cap and deferral mechanism which is determined based upon a look-back period of up to three years and is expensed when incurred. For this purpose, the Incentive Fee Look-back Period includes the relevant calendar quarter and the 11 preceding full calendar quarters. Each quarterly incentive fee payable on Pre-Incentive Fee Net Investment Income is subject to the Incentive Fee Cap and Deferral Mechanism. The Incentive Fee Cap is equal to (a) 20.00% of Cumulative Pre-Incentive Fee Net Return during the Incentive Fee Look-back Period less (b) cumulative incentive fees of any kind paid to our Advisor during the Incentive Fee Look-back Period. To the extent the Incentive Fee Cap is zero or a negative value in any calendar quarter, we will not pay an incentive fee on Pre-Incentive Fee Net Investment Income to our Advisor in that quarter. To the extent that the payment of incentive fees on Pre-Incentive Fee Net Investment Income is limited by the Incentive Fee Cap, the payment of such fees will be deferred and paid in subsequent calendar quarters up to three years after their date of deferment, subject to certain limitations, which are set forth in the Investment Management Agreement. During the three months ended September 30, 2024 and 2023, the Incentive Fee Cap and Deferral Mechanism resulted in deferral of $2.4 million and $3.5 million, respectively, of incentive fee which may become subject to payment up to three years after the date of deferment. During the nine months ended September 30, 2024 and 2023, the Incentive Fee Cap and Deferral Mechanism resulted in deferral of $7.2 million and $6.8 million, respectively, of incentive fee which may become subject to payment up to three years after the date of deferment. As of September 30, 2024 and December 31, 2023, the total amount subject to recoupment was $18.1 million and $10.8 million, respectively.

Current wording

The incentive fee on Pre-Incentive Fee Net Investment Income is subject to a fee cap and deferral mechanism which is determined based upon a look-back period of up to three years and is expensed when incurred. For this purpose, the Incentive Fee Look-back Period includes the relevant calendar quarter and the 11 preceding full calendar quarters. Each quarterly incentive fee payable on Pre-Incentive Fee Net Investment Income is subject to the Incentive Fee Cap and Deferral Mechanism. The Incentive Fee Cap is equal to (a) 20.00% of Cumulative Pre-Incentive Fee Net Return during the Incentive Fee Look-back Period less (b) cumulative incentive fees of any kind paid to our Advisor during the Incentive Fee Look-back Period. To the extent the Incentive Fee Cap is zero or a negative value in any calendar quarter, we will not pay an incentive fee on Pre-Incentive Fee Net Investment Income to our Advisor in that quarter. To the extent that the payment of incentive fees on Pre-Incentive Fee Net Investment Income is limited by the Incentive Fee Cap, the payment of such fees will be deferred and paid in subsequent calendar quarters up to three years after their date of deferment, subject to certain limitations, which are set forth in the Investment Management Agreement. During the three months ended March 31, 2025 and 2024, the Incentive Fee Cap and Deferral Mechanism resulted in deferral of $2.1 million and $2.3 million, respectively, of incentive fee which may become subject to payment up to three years after the date of deferment. As of March 31, 2025 and December 31, 2024, the total amount subject to recoupment was $22.3 million and $20.2 million, respectively. Our Advisor agreed to waive the portion of its quarterly income incentive fee, if any, if and to the extent that, after payment of such portion, our net investment income per share for such quarter would be less than the quarterly distribution per share declared in such quarter. The income incentive fee waiver is effective commencing with the quarter ending March 31, 2025 and terminates with the quarter ending December 31, 2025. During the three months ended March 31, 2025, our Advisor did not earn an income incentive fee.

Previous wording

In order to qualify and be subject to tax as a RIC, we must meet certain source-of-income, asset diversification and annual distribution requirements. Generally, in order to qualify as a RIC, we must derive at least 90% of our gross income for each tax year from dividends, interest, payments with respect to certain securities, loans, gains from the sale or other disposition of stock, securities or foreign currencies, income derived from certain publicly traded partnerships, or other income derived with respect to our business of investing in stock or other securities. We must also meet certain asset diversification requirements at the end of each quarter of each tax year. Failure to meet these diversification requirements on the last day of a quarter may result in us having to dispose of certain investments quickly in order to prevent the loss of RIC status. Any such dispositions could be made at disadvantageous prices or times, and may cause us to incur substantial losses.

Current wording

In order to qualify and be subject to tax as a RIC, we must meet certain source-of-income, asset diversification and annual distribution requirements. Generally, in order to qualify as a RIC, we must derive at least 90% of our gross income for each tax year from dividends, interest, payments with respect to certain securities, loans, gains from the sale or other disposition of stock, securities or foreign currencies, income derived from certain publicly traded partnerships, or other income (including but not limited to gains from options, futures or forward contracts) derived with respect to our business of investing in stock, securities or currencies. We must also meet certain asset diversification requirements at the end of each quarter of each tax year. Failure to meet these diversification requirements on the last day of a quarter may result in us having to dispose of certain investments quickly in order to prevent the loss of RIC status. Any such dispositions could be made at disadvantageous prices or times, and may cause us to incur substantial losses.

Previous wording

In addition, in order to be subject to tax as a RIC and to avoid the imposition of corporate-level tax on the income and gains we distribute to our stockholders in respect of any tax year, we are required under the Code to distribute as dividends to our stockholders out of assets legally available for distribution each tax year an amount generally at least equal to 90% of the sum of our net ordinary income and net short-term capital gains in excess of net long-term capital losses, if any. Additionally, in order to avoid the imposition of a U.S. federal excise tax, we are required to distribute, in respect of each calendar year, dividends to our stockholders of an amount at least equal to the sum of 98% of our calendar year net ordinary income (taking into account certain deferrals and elections); 98.2% of our capital gain net income (adjusted for certain ordinary losses) for the one year period ending on October 31 of such calendar year; and any net ordinary income and capital gain net income for preceding calendar years that were not distributed during such calendar years and on which we previously did not incur any U.S. federal income tax. If we fail to qualify as a RIC for any reason and become subject to corporate tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions. Such a failure would have a material adverse effect on us and our stockholders. In addition, we could be required to recognize unrealized gains, incur substantial taxes and interest and make substantial distributions in order to re-qualify as a RIC. We cannot assure stockholders that they will receive any distributions.

Current wording

In addition, in order to be subject to tax as a RIC and to avoid the imposition of corporate-level tax on the income and gains we distribute to our stockholders in respect of any tax year, we are required under the Code to distribute as dividends to our stockholders out of assets legally available for distribution each tax year an amount generally at least equal to 90% of the sum of our net ordinary income and net short-term capital gains in excess of net long-term capital losses, if any. Additionally, in order to avoid the imposition of a U.S. federal excise tax, we are required to distribute, in respect of each calendar year, dividends to our stockholders of an amount at least equal to the sum of 98% of our calendar year net ordinary income (taking into account certain deferrals and elections); 98.2% of our capital gain net income (adjusted for certain ordinary losses) for the one year period ending on October 31 of such calendar year; and any net ordinary income and capital gain net income for preceding calendar years that were not distributed during such calendar years and on which we previously did not incur any U.S. federal corporate-level income tax. If we fail to qualify as a RIC for any reason and become subject to corporate-level income tax, the resulting corporate-level income taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions. Such a failure would have a material adverse effect on us and our stockholders. In addition, we could be required to recognize unrealized gains, incur substantial taxes and interest and make substantial distributions in order to re-qualify as a RIC. We cannot assure stockholders that they will receive any distributions.

Previous wording

We have adopted an “opt out” dividend reinvestment plan, or DRIP, for our common stockholders. As a result, if we declare a distribution, then stockholders’ cash distributions will be automatically reinvested in additional shares of our common stock unless a stockholder specifically “opts out” of our DRIP. If a stockholder opts out, that stockholder will receive cash distributions. Although distributions paid in the form of additional shares of our common stock will generally be subject to U.S. federal, state and local taxes, stockholders participating in our DRIP will not receive any corresponding cash distributions with which to pay any such applicable taxes. If our common stock is trading above NAV, a stockholder receiving distributions in the form of additional shares of our common stock will be treated as receiving a distribution of an amount equal to the fair market value of such shares of our common stock. We may use newly issued shares to implement the DRIP, or we may purchase shares in the open market in connection with our obligations under the DRIP.

Current wording

We have adopted an “opt out” dividend reinvestment plan, or DRIP, for our common stockholders. As a result, if we declare a distribution, then stockholders’ cash distributions will be automatically reinvested in additional shares of our common stock, net of applicable withholding taxes, unless a stockholder specifically “opts out” of our DRIP. If a stockholder opts out, that stockholder will receive cash distributions. Although distributions paid in the form of additional shares of our common stock will generally be subject to U.S. federal, state and local taxes, stockholders participating in our DRIP will not receive any corresponding cash distributions with which to pay any such applicable taxes. If our common stock is trading above NAV, a stockholder receiving distributions in the form of additional shares of our common stock will be treated as receiving a distribution of an amount equal to the fair market value of such shares of our common stock. We may use newly issued shares to implement the DRIP, or we may purchase shares in the open market in connection with our obligations under the DRIP.

Previous wording

We have entered into the Investment Management Agreement with our Advisor. Our Advisor is registered as an investment adviser under the Investment Advisers Act of 1940, as amended. Our investment activities are managed by our Advisor and supervised by our Board, the majority of whom are independent directors. Under the Investment Management Agreement, we have agreed to pay our Advisor a base management fee as well as an incentive fee. During the three months ended September 30, 2024 and 2023, our Advisor earned $3.0 million and $3.2 million, respectively, pursuant to the Investment Management Agreement. During the nine months ended September 30, 2024 and 2023, our Advisor earned $9.5 million and $12.7 million, respectively, pursuant to the Investment Management Agreement.

Current wording

We have entered into the Investment Management Agreement with our Advisor. Our Advisor is registered as an investment adviser under the Investment Advisers Act of 1940, as amended. Our investment activities are managed by our Advisor and supervised by our Board, the majority of whom are independent directors. Under the Investment Management Agreement, we have agreed to pay our Advisor a base management fee as well as an incentive fee. During the three months ended March 31, 2025 and 2024, our Advisor earned $3.2 million and $3.5 million, respectively, pursuant to the Investment Management Agreement.

Previous wording

We have also entered into the Administration Agreement with our Advisor. Under the Administration Agreement, we have agreed to reimburse our Advisor for our allocable portion of overhead and other expenses incurred by our Advisor in performing its obligations under the Administration Agreement, including rent and our allocable portion of the costs of compensation and related expenses of our Chief Financial Officer and Chief Compliance Officer and their respective staffs. In addition, pursuant to the terms of the Administration Agreement our Advisor provides us with the office facilities and administrative services necessary to conduct our day-to-day operations. During the three months ended September 30, 2024 and 2023, our Advisor earned $0.4 million pursuant to the Administration Agreement. During the nine months ended September 30, 2024 and 2023, our Advisor earned $1.3 million and $1.2 million, respectively, pursuant to the Administration Agreement.

Current wording

We have also entered into the Administration Agreement with our Advisor. Under the Administration Agreement, we have agreed to reimburse our Advisor for our allocable portion of overhead and other expenses incurred by our Advisor in performing its obligations under the Administration Agreement, including rent and our allocable portion of the costs of compensation and related expenses of our Chief Financial Officer and Chief Compliance Officer and their respective staffs. In addition, pursuant to the terms of the Administration Agreement our Advisor provides us with the office facilities and administrative services necessary to conduct our day-to-day operations. During the three months ended March 31, 2025 and 2024, our Advisor earned $0.4 million pursuant to the Administration Agreement.