Unassociated Document
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of the
 
Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): November 8, 2011
 
HORIZON TECHNOLOGY FINANCE CORPORATION
(Exact name of registrant as specified in its charter)
         
Delaware
 
814-00802
 
27-2114934
(State or other jurisdiction
of incorporation)
 
(Commission File Number)
 
(I.R.S. Employer Identification No.)
 
312 Farmington Avenue
 
Farmington, CT 06032
 
(Address of principal executive offices and zip code)
 
Registrant’s telephone number, including area code: (860) 676-8654
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
     
¨
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
     
¨
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
     
¨
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


 
 

 


Section 2
 
Financial Information
Item 2.02
 
Results of Operations and Financial Condition

On November 8, 2011, Horizon Technology Finance Corporation (the “Company”) issued a press release announcing its financial results for the three and nine months ended September 30, 2011.  A copy of this press release is attached hereto as Exhibit 99.1.

The information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 furnished herewith, is being furnished and shall not be deemed “filed” for any purpose of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liabilities of such Section.  The information in this Current Report on Form 8-K shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.


Section 9
 
Financial Statements and Exhibits
Item 9.01
 
Financial Statements and Exhibits

 (d) Exhibits.
     
99.1
 
Press release of the Company dated November 8, 2011.
 


 
2

 

 
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
         
Date: November 8, 2011
HORIZON TECHNOLOGY FINANCE CORPORATION
 
 
 
 
By:
 
/s/ Robert D. Pomeroy, Jr.
 
   
Robert D. Pomeroy, Jr.
 
   
Chief Executive Officer
 
 
 


 
 


 
3

 

Unassociated Document


Horizon Technology Finance Announces
Increased Quarterly Dividend of $0.45 Per Share and
Third Quarter 2011 Financial Results

Strong Performance of Loan Portfolio and Cumulative Realized Gains
Drive Second Consecutive Dividend Increase

FARMINGTON, Conn., November 8, 2011 – Horizon Technology Finance Corporation (Nasdaq: HRZN) (the “Company” or “Horizon”), a leading specialty finance company that provides secured loans to venture capital and private equity backed development-stage companies in the technology, life science, healthcare information and services, and clean-tech industries, today announced its financial results and declared a cash dividend for the quarter ended September 30, 2011.

Third Quarter 2011 Highlights
·  
Declared a third quarter dividend of $0.45 per share, a 12.5% increase from previous payout
·  
Increase in net assets from operations was $2.8 million, or $0.36 per share
·  
Net investment income was $3.0 million, or $0.39 per share
·  
Net asset value equaled $132.4 million, or $17.36 per share
·  
Ended the quarter with an investment portfolio of $180.2 million
·  
Portfolio weighted average yield was 14.2%
·  
Unfunded loan approvals and commitments (“Committed Backlog”) totaled $18.7 million
·  
Completed $150 million accordion credit facility with initial $75 million commitment

Robert D. Pomeroy, Jr., Chairman and Chief Executive Officer, commented, “During the third quarter, Horizon posted strong financial results as we benefitted from our fully invested balance sheet consisting of quality, high yielding assets. We have maintained a disciplined approach to investment, capitalizing on select opportunities within our target markets.  As a result, we have generated a stable stream of interest income and realized significant warrant gains in a challenging economic environment.”

Mr. Pomeroy added, “Based on the continued execution of management’s investment strategy, we are pleased to once again increase our quarterly dividend. Horizon’s third quarter dividend of $0.45 per share represents an increase of 12.5% from our previous payout and marks our second consecutive quarterly increase. In maintaining our commitment to provide shareholders with increasing dividends over time, we have now declared a cumulative dividend of $1.40 per share since going public approximately one year ago.  Our new quarterly payout is consistent with our current level of net investment income and reflects our cumulative realized warrant gains since our IPO. We are focused on expanding our leadership position in the venture lending industry and generating strong returns as we have consistently done in the past.”

Operating Results
Total investment income increased 24.1% for the three months ended September 30, 2011 to $6.4 million, as compared to $5.2 million for the three months ended September 30, 2010. The year-over-year increase in investment income is primarily due to the increased average size of the Company’s loan portfolio. For the three months ended September 30, 2011, total investment income primarily consisted of $6.1 million in interest income from investments, which included $0.5 million in income from the amortization of discounts and origination fees on investments.
 
 
 

 
 
For the nine months ended September 30, 2011, total investment income increased to $17.9 million as compared to $13.3 million in the prior year period. For the nine months ended September 30, 2011, total investment income consisted primarily of $16.9 million in interest income from investments, which included $1.3 million in income from the amortization of discounts and origination fees on investments. Other investment income was primarily comprised of a one-time success fee received upon the completion of an acquisition of one of Horizon’s portfolio companies.

The Company’s dollar-weighted average annualized portfolio yield on average loans, excluding warrant gains, was 14.2% for the three months ended September 30, 2011, and 15.0% for the three months ended September 30, 2010. The Company’s dollar-weighted average annualized portfolio yield on average loans for the nine months ended September 30, 2011 and September 30, 2010 was 14.6% and 14.3%, respectively.

Total expenses were $3.4 million for the three months ended September 30, 2011, as compared to $1.9 million for the three months ended September 30, 2010. Total expenses consisted principally of interest expense and management and incentive fees. Performance based incentive fees for the three months ended September 30, 2011 totaled approximately $0.6 million, compared to no incentive fees for the three months ended September 30, 2010. Professional fees and general and administrative expenses increased year-over-year primarily due to the cost associated with operating as a public company. Total expenses for the nine months ended September 30, 2011 were $10.7 million versus $5.4 million in the year-earlier period.

Net investment income for the three months ended September 30, 2011 was $3.0 million, or $0.39 per share, as compared to net investment income of $3.3 million in the year-earlier period. For the nine months ended September 30, 2011 and September 30, 2010, net investment income was $7.2 million and $7.9 million, respectively.

For the three months ended September 30, 2011, the net unrealized depreciation on investments was $0.2 million as compared to a net unrealized appreciation on investments of $1.7 million in the prior year period. For the nine months ended September 30, 2011, the net unrealized depreciation on investments was $2.5 million as compared to a net unrealized appreciation on investments of $1.5 million for the nine month period ended September 30, 2010. The net unrealized depreciation on investments was primarily due to the reversal of previously recorded unrealized appreciation on warrant investments that were realized during the first half of 2011.

For the three months ended September 30, 2011 and 2010, the net increase in net assets resulting from operations was $2.8 million and $5.3 million, respectively. For both the nine months ended September 30, 2011 and 2010, the net increase in net assets resulting from operations was $10.2 million.

Portfolio Summary and Investment Activity
As of September 30, 2011, the Company’s debt portfolio consisted of 37 secured loans with an aggregate fair value of $174.4 million. In addition, the Company’s warrant portfolio of investments had an aggregate fair value of $5.1 million as of September 30, 2011.
 
 
 

 
 
Total portfolio investment activity as of and for the three and nine months ended September 30, 2011 and 2010 was as follows:
 
For the three months
ended September 30
For the nine months
ended September 30
 
   
   
 
2011
2010
2011
2010
 
 
($ in thousands)
 
($ in thousands)
 
 
Beginning portfolio
$
186,029
   
$
143,008
 
$
136,810
 
$
113,878
 
New loan funding
 
7,000
     
15,000
   
86,833
   
75,517
 
Less refinanced balances
 
     
   
(8,677
)
 
(10,909
)
Net new loan funding
 
7,000
     
15,000
   
78,156
   
64,608
 
                       
Principal and stock payments received on investments
 
(8,559
)
   
(11,278
)
 
(22,666
)
 
(28,104
)
Early pay-offs
 
(4,315
)
   
(9,777
)
 
(9,908
)
 
(13,231
)
Accretion of loan fees
 
527
     
451
   
1,356
   
934
 
New loan fees
 
(40
)
   
(134
)
 
(967
)
 
(651
)
New equity investments
 
     
79
   
577
   
79
 
Net depreciation on investments
 
(456
)
   
1,654
   
(3,172
)
 
1,490
 
                       
Ending portfolio
$
180,186
   
$
139,003
 
$
180,186
 
$
139,003
 
                       

Portfolio Asset Quality
As of September 30, 2011 and September 30, 2010, the Company’s loan portfolio had a weighted average credit rating of 3.2, with 4 being the highest credit quality rating and 3 being the rating for a standard level of risk. A rating of 2 or 1 represents a deteriorating credit quality and increased risk. The Company did not have any investments on non-accrual status as of these dates.

Liquidity and Capital Resources
As of September 30, 2011, Horizon had cash and cash equivalents of approximately $32.6 million.

On July 14, 2011, the Company closed a new credit facility of up to $150 million with an initial commitment of $75 million from Wells Fargo Capital Finance, part of Wells Fargo & Company (NYSE:WFC). The credit facility will be used to leverage new and existing investments and contains an “accordion” feature that allows additional lenders to join the facility with increased commitments up to an aggregate of $150 million. The new credit facility complements the Company’s existing WestLB credit facility, which continues to provide leverage to the Company through March 2015.

Third Quarter 2011 Dividend
On November 8, 2011, Horizon’s Board of Directors declared a third quarter dividend of $0.45 per share, payable on November 30, 2011 to stockholders of record on November 23, 2011. The Company expects the dividend to be paid from taxable earnings with specific tax characteristics reported to stockholders after the end of the 2011 calendar year.

Conference Call
Management will host a conference call on Wednesday, November 9, 2011 at 9:00 a.m. ET to discuss the latest corporate developments and financial results. The dial-in number for callers in the U.S. is (877) 677-9112 and the dial-in number for international callers is (708) 290-1396. The access code for all callers is 17454274. A live webcast will also be available on the Company’s website at www.horizontechnologyfinancecorp.com.

A replay of the call will be available through November 16, 2011. To access the replay, please dial (855) 859-2056 in the U.S. and (404) 537-3406 outside the U.S., and then enter the access code 17454274. An online archive of the webcast will be available on the Company’s website for 30 days following the call.
 
 
 

 
 
About Horizon Technology Finance Corporation
Horizon Technology Finance Corporation is a closed-end investment company that has elected to be treated as a business development company under the Investment Company Act of 1940. The Company provides secured loans to development-stage companies backed by established venture capital and private equity firms within the technology, life science, healthcare information and services, and clean-tech industries. The investment objective of Horizon Technology Finance is to maximize total risk-adjusted returns by generating current income from a portfolio of directly originated secured loans as well as capital appreciation from warrants to purchase the equity of portfolio companies. Headquartered in Farmington, CT, with a regional office in Walnut Creek, CA, the Company is externally managed by its investment advisor, Horizon Technology Finance Management LLC. To learn more, please visit www.horizontechnologyfinancecorp.com.

Forward-Looking Statements
Statements included herein may constitute "forward-looking statements," which relate to future events or our future performance or financial condition. These statements are not guarantees of future performance, condition or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in our filings with the Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.

 
 

 

Horizon Technology Finance Corporation and Subsidiaries
Consolidated Statements of Assets and Liabilities (Unaudited)
(In thousands, except share data)



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

 
 

 

Horizon Technology Finance Corporation and Subsidiaries
Consolidated Statements of Operations (Unaudited)
(In thousands, except share data)


     
Three months ended
   
Three months ended
   
Nine months ended
   
Nine months ended
 
     
September 30, 2011(1)
   
September 30, 2010(1)
   
September 30, 2011(1)
   
September 30, 2010(1)
 
Investment income
                         
Interest income on non-affiliate investments
 
$
6,129
 
$
4,955
 
$
16,911
 
$
12,852
 
Interest income on cash and cash equivalents
   
2
   
25
   
90
   
53
 
Fee income on non-affiliate investments
   
310
   
209
   
870
   
345
 
                           
Total investment income
   
6,441
   
5,189
   
17,871
   
13,250
 
                           
Expenses
                         
Interest expense
   
725
   
1,189
   
2,093
   
3,282
 
Base management fee
   
1,091
   
675
   
3,229
   
1,816
 
Performance based incentive fee
   
561
   
   
2,701
   
 
Administrative fee
   
355
   
   
873
   
 
Professional fees
   
489
   
7
   
1,034
   
110
 
General and administrative
   
227
   
61
   
740
   
164
 
                           
Total expenses
   
3,448
   
1,932
   
10,670
   
5,372
 
                           
Net investment income
   
2,993
   
3,257
   
7,201
   
7,878
 
                           
Credit for loan losses
   
   
320
   
   
739
 
                           
Net realized and unrealized gain on investments
                         
Net realized (loss) gain on investments
   
(17)
   
   
5,544
   
(2
)
Net change in unrealized (depreciation) appreciation on investments
   
(217)
   
1,711
   
(2,535
)
 
1,549
 
                           
Net realized and unrealized (loss) gain on investments
   
(234)
   
1,711
   
3,009
   
1,547
 
                           
Net increase in net assets resulting from operations
 
$
2,759
 
$
5,288
 
$
10,210
 
$
10,164
 
                           
Net investment income per common share (2)
 
$
0.39
 
$
N/A
 
$
0. 95
 
$
N/A
 
                           
Change in net assets per common share (2)
 
$
0.36
 
$
N/A
 
$
1.34
 
$
N/A
 
                           
Weighted average shares outstanding (2)
   
7,617,972
   
N/A
   
7, 604,345
   
N/A
 
                   
 
(1)        The results of operations for the third quarter and nine months ended September 30, 2011 reflect Horizon’s qualification to be treated as a Business Development Company (BDC) under the 1940 Act immediately following the Company’s initial public offering (IPO), which was effective on October 28, 2010, whereas the operating results for the third quarter and nine months ended September 30, 2010 reflect the Company’s results prior to operating as a BDC under the 1940 Act. Accounting principles used in the preparation of these two periods are different, primarily as it relates to the carrying value of loan investments and classification of hedging activity. Therefore, the results of operations and financial position for the third quarter and nine months ended September 30, 2011, and third quarter and nine months ended September 30, 2010, are not directly comparable.
 
(2)         For the third quarter and nine months ended September 30, 2010, the Company did not have common shares outstanding or an equivalent and, therefore, earnings per share and weighted average shares outstanding information for this period is not provided.
 
         
 
 
Contacts:
Horizon Technology Finance Corporation
Christopher M. Mathieu
Chief Financial Officer
(860) 676-8653
chris@horizontechfinance.com
Investor Relations and Media Contacts:
The IGB Group
Leon Berman / Michael Cimini
(212) 477-8438 / (212) 477-8261
lberman@igbir.com  / mcimini@igbir.com