| This preliminary prospectus supplement relates to an effective registration statement under the Securities Act of 1933, as amended, but the information in this preliminary prospectus supplement is not complete and may be changed. This preliminary prospectus supplement and the accompanying prospectus are not an offer to sell and are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. |
Filed pursuant to Rule 424(b)(2)
File No. 333-255716
SUBJECT TO COMPLETION, DATED MAY 30, 2023
PRELIMINARY PROSPECTUS SUPPLEMENT
(to Prospectus dated July 21, 2021)
3,250,000 Shares
Horizon Technology Finance Corporation
Common Stock
We are offering for sale 3,250,000 shares of our common stock. We have granted the underwriters a 30-day option to purchase up to 487,500 additional shares of our common stock at the public offering price, less underwriting discounts and commissions.
We are a non-diversified, closed-end management investment company that has elected to be regulated as a business development company, or BDC, under the Investment Company Act of 1940, as amended. We are externally managed by Horizon Technology Finance Management LLC, a registered investment adviser under the Investment Advisers Act of 1940, as amended. Our investment objective is to maximize our investment portfolio’s total return by generating current income from the debt investments in technology, life science, healthcare information and services and sustainability industries.
Our common stock is listed on the Nasdaq Global Select Market, or Nasdaq, under the symbol “HRZN”. The last reported closing sale price for our common stock on May 26, 2023 was $13.03 per share. The net asset value per share of our common stock on March 31, 2023 (the last date prior to the date of this prospectus supplement on which we determined net asset value) was $11.34.
Investing in our common stock should be considered highly speculative, and involves a high degree of risk including the risk of a substantial loss of investment and the risk of leverage and dilution. Before purchasing any shares of our common stock, you should read the discussion of the principal risks of investing in our securities, which are summarized in the “Supplementary Risk Factors” section beginning on page S-10 and in “Risk Factors” in our Annual Report on Form 10-K.
This prospectus supplement and the accompanying prospectus contain important information you should know before investing in our common stock and should be retained for future reference. We file annual, quarterly and current reports, proxy statements and other information about us with the Securities and Exchange Commission, or SEC. We maintain a website at www.horizontechfinance.com and intend to make all of the foregoing information available, free of charge, on or through our website. You may also obtain such information by contacting us at 312 Farmington Avenue, Farmington, Connecticut 06032, or by calling us collect at (860) 676-8654. The SEC maintains a website at www.sec.gov where such information is available without charge. Information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus supplement or the accompanying prospectus, and you should not consider information contained on our website to be part of this prospectus supplement or the accompanying prospectus.
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Before deducting offering expenses payable by us related to this offering, which we estimate will be approximately $150,000. |
The underwriters have the option to purchase from us up to an additional 487,500 shares of common stock at the public offering price, less the underwriting discounts and commissions, within 30 days from the date of this prospectus supplement. If the option to purchase additional shares is exercised in full, the total public offering price will be $ , the total underwriting discounts and commissions will be $ , and the total proceeds to us, before deducting estimated offering expenses payable by us of $150,000, will be $ .
Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the Shares on or about June , 2023.
Book-Running Managers
| Morgan Stanley | UBS Investment Bank | Wells Fargo Securities |
Prospectus supplement dated , 2023
PROSPECTUS SUPPLEMENT
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| Supplementary Risk Factors | S-10 |
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PROSPECTUS
ABOUT THIS PROSPECTUS SUPPLEMENT
You should rely only on the information contained in this prospectus supplement, the accompanying prospectus, any free writing prospectus, the documents incorporated by reference in this prospectus supplement and the accompanying prospectus, or any other information which we have referred you. Neither we nor the underwriters have authorized any other person to provide you with different information from that contained in this prospectus supplement, the accompanying prospectus and in any free writing prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus supplement, the accompanying prospectus, or any free writing prospectus do not constitute an offer to sell, or a solicitation of an offer to buy, any shares of our common stock by any person in any jurisdiction where it is unlawful for that person to make such an offer or solicitation or to any person in any jurisdiction to whom it is unlawful to make such an offer or solicitation. The information contained in this prospectus supplement, the accompanying prospectus, and any free writing prospectus is complete and accurate only as of their respective dates, regardless of the time of their delivery or sale of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.
This document is in two parts. The first part is this prospectus supplement, which describes the terms of this offering of common stock and also adds to and updates information contained in the accompanying prospectus. The second part is the accompanying prospectus, which provides more information about us, our common stock and related matters. To the extent the information contained in this prospectus supplement differs from the information contained in the accompanying prospectus, the information in this prospectus supplement shall control. You should read this prospectus supplement and the accompanying prospectus together with the additional information described under the heading “Available Information” in this prospectus supplement before investing in our common stock.
Forward-Looking Statements
The following discussion should be read in conjunction with our financial statements and related notes and other financial information included or incorporated by reference in this prospectus supplement, the accompanying prospectus, and in any free writing prospectus relating to this offering of our common stock. In addition to historical information, the information included or incorporated by reference in this prospectus supplement, the accompanying prospectus and in any free writing prospectus relating to this offering of our common stock may contain forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by such forward-looking information due to the factors described in the section titled “Supplementary Risk Factors” in this prospectus supplement and our most recent Annual Report on Form 10-K and our most recent Quarterly Report on Form 10-Q, which are incorporated by reference in this prospectus supplement and the accompany prospectus, or in any free writing prospectus relating to this offering and certain other factors noted throughout or incorporated by reference in this prospectus supplement, the accompanying prospectus and in any free writing prospectus relating to this offering. The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us or are within our control. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. We undertake no obligation to revise or update any forward-looking statements but advise you to consult any additional disclosures that we may make directly to you or through reports that we may file in the future with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those expressed or implied by the forward-looking statements.
The forward-looking statements included or incorporated by reference in this prospectus supplement, the accompanying prospectus, and in any free writing prospectus relating to this offering of common stock involve risks and uncertainties, including statements as to:
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our future operating results, including the performance of our existing debt investments, warrants and other investments; |
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the introduction, withdrawal, success and timing of business initiatives and strategies; |
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general economic and political trends and other external factors, including continuing supply chain disruptions, increased inflation and a general slowdown in economic activity; |
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the relative and absolute investment performance and operations of our Advisor; |
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the impact of increased competition; |
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the impact of investments we intend to make and future acquisitions and divestitures; |
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the unfavorable resolution of legal proceedings; |
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our business prospects and the prospects of our portfolio companies, including our and their ability to achieve our respective objectives as a result of the COVID-19 pandemic; |
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turmoil in Ukraine and Russia and the potential for volatility in energy prices and its impact on the industries in which we invest; |
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the impact, extent and timing of technological changes and the adequacy of intellectual property protection; |
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our regulatory structure and tax status; |
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changes in the general interest rate environment; |
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our ability to qualify and maintain qualification as a RIC and as a BDC; |
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the adequacy of our cash resources and working capital; |
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any losses or operations disruptions caused by us, our Advisor or our portfolio companies holding cash balances at financial institutions that exceed federally insured limits or by disruptions in the financial services industry; |
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the timing of cash flows, if any, from the operations of our portfolio companies; |
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the impact of interest rate volatility on our results, particularly if we use leverage as part of our investment strategy; |
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the ability of our portfolio companies to achieve their objective; |
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the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to us or our Advisor; |
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our contractual arrangements and relationships with third parties; |
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our ability to access capital and any future financings by us; |
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our use of financial leverage; |
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the ability of our Advisor to attract and retain highly talented professionals; |
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the impact of changes to tax legislation and, generally, our tax position; and |
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our ability to fund unfunded commitments. |
You should not place undue reliance on these forward-looking statements because the matters they describe are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond our control. In addition to other information included or incorporated by reference in this prospectus supplement, please read carefully the sections titled “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, as well as the section entitled “Caution Concerning Forward-Looking Statements” in the accompanying prospectus, before making any investment in our common stock.
This prospectus supplement, the accompanying prospectus and other statements that we may make, may contain forward-looking statements with respect to future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as “trend,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “plan,” “potential,” “project,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may” or similar expressions.
Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and we assume no duty to and do not undertake to update forward-looking statements. These forward-looking statements do not meet the safe harbor for forward-looking statements pursuant to Section 27A of the Securities Act of 1933, as amended, or the Securities Act, or Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance. You should understand that, under Sections 27A(b)(2)(B) of the Securities Act and Section 21E(b)(2)(B) of the Exchange Act, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 do not apply to statements made in connection with any offering of securities pursuant to this prospectus supplement, the accompanying prospectus or in periodic reports we file under the Exchange Act
The following summary highlights some of the information included elsewhere, or incorporated by reference, in this prospectus supplement or the accompanying prospectus. It is not complete and may not contain all the information that you may want to consider before making any investment decision regarding the common stock offered hereby. To understand the terms of the common stock offered hereby before making any investment decision, you should carefully read this entire prospectus supplement and the accompanying prospectus, including the documents incorporated by reference herein or therein, and any free writing prospectus related to the offering of common stock, including “Supplementary Risk Factors,” “Risk Factors,” “Available Information,” “Incorporation by Reference,” and “Use of Proceeds” and the financial statements contained elsewhere or incorporated by reference in this prospectus supplement and the accompanying prospectus. Together, these documents describe the specific terms of the common stock we are offering.
In this Prospectus Supplement, except where the context suggests otherwise, the terms:
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“we,” “us,” “our,” “the Company” and “Horizon Technology Finance” refer to Horizon Technology Finance Corporation, a Delaware corporation, and its consolidated subsidiaries; |
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The “Advisor” and the “Administrator” refer to Horizon Technology Finance Management LLC, a Delaware limited liability company; |
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“Key” refers to KeyBank National Association and “Key Facility” refers to the revolving credit facility with Key; |
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“NYL Noteholders” refers to several entities owned or affiliated with New York Life Insurance Company and “NYL Facility” refers to the credit facility where the notes are issued to the NYL Noteholders; |
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“Credit Facilities” refers to collectively the Key Facility and the NYL Facility; |
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“2026 Notes” or “Debt Securities” refers to the $57.5 million aggregate principal amount of our 4.875% unsecured notes due 2026, which were issued by us in March 2021; |
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“2027 Notes” (collectively with the 2026 Notes, "Debt Securities") refers to the $57.5 million aggregate principal amount of our 6.25% unsecured notes due 2027, which were issued by us on June 15, 2022 and July 11, 2022; |
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“2019-1 Securitization” refers to the $160.0 million securitization of secured loans we completed on August 13, 2019; |
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“Asset-Backed Notes” refers to $100.0 million in aggregate principal amount of fixed rate asset-backed notes that were issued in conjunction with the 2019-1 Securitization; |
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“2022-1 Securitization” refers to the $157.8 million securitization of secured loans we completed on November 9, 2022; |
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"2022 Asset-Backed Notes" (collectively with the 2019 Asset-Backed Notes, the “Asset-Backed Notes”) refers to $100.00 million in aggregate principal amount of fixed rate asset-backed notes that were issued in conjunction with the 2022-1 Securitization; |
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“2022-1 Trust” refers to Horizon Funding Trust 2022-1, a Delaware trust; |
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“HSLFI” refers to Horizon Secured Loan Fund I, a joint venture formed with Arena Sunset SPV, LLC, or “Arena”. On April 21, 2020, the Company purchased all of the limited liability company interests of Arena in HSLFI, including, without limitation, undistributed amounts owed to Arena and interest accrued and unpaid on the debt investments of HSLFI through the date of purchase. As of April 21, 2020, HSLFI and its subsidiary are consolidated by the Company; and |
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“HFI” refers to Horizon Funding I, LLC, a Delaware limited liability company and indirect wholly owned subsidiary of the Company. |
Our Company
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 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. 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.
We are an externally managed, closed-end, non-diversified management investment company that has elected to be regulated as a business development company, or BDC, under the Investment Company Act of 1940, as amended, or the 1940 Act. In addition, for U.S. federal income tax purposes, we have elected to be treated as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code. As a BDC, we are required to comply with regulatory requirements, including limitations on our use of debt. We are permitted to, and expect to, finance our investments through borrowings subject to a 150% asset coverage agreement. As defined in the 1940 Act, asset coverage of 150% means that for every $100 of net assets a BDC holds, it may raise up to $200 from borrowing and issuing senior securities. The amount of leverage that we may employ will depend on our assessment of market conditions and other factors at the time of any proposed borrowing. As a RIC, we generally are not subject to pay corporate-level income taxes on our investment company taxable income, determined without regard to any deductions for dividends paid, and our net capital gain that we distribute as dividends for U.S. federal income tax purposes to our stockholders as long as we meet certain source-of-income, distribution, asset diversification and other requirements.
We are externally managed and advised by our Advisor. Our Advisor manages our day-to-day operations and also provides all administrative services necessary for us to operate.
Our Advisor
Our investment activities are managed by our Advisor, and we expect to continue to benefit from our Advisor’s ability to identify attractive investment opportunities, conduct diligence on and value prospective investments, negotiate investments and manage our portfolio of investments. In addition to the experience gained from the years that they have worked together both at our Advisor and prior to the formation of our Advisor, the members of our investment team have broad lending backgrounds, with substantial experience at a variety of commercial finance companies, technology banks and private debt funds, and have developed a broad network of contacts within the venture capital and private equity community. This network of contacts provides a principal source of investment opportunities.
Our Advisor is led by six senior managers including Robert D. Pomeroy, Jr., our Chief Executive Officer, Gerald A. Michaud, our President, Daniel R. Trolio, our Executive Vice President and Chief Financial Officer, John C. Bombara, our Executive Vice President, General Counsel and Chief Compliance Officer, Daniel S. Devorsetz, our Executive Vice President and Chief Investment Officer and Diane Earle, our Senior Vice President and Chief Credit Officer.
On February 22, 2023, our Advisor announced that it entered into a transaction with an affiliate of Monroe Capital LLC (“Monroe”), a premier boutique middle market asset manager in private credit with a 20 year track record and approximately $16 billion in assets under management, pursuant to which Monroe will acquire the Advisor (“Transaction”). The Advisor’s current management team and investment personnel are expected to continue to serve as officers and senior management of the Advisor following the Transaction and the Advisor plans to maintain and expand its venture lending investment strategy.
In connection with the Transaction, the Company’s Board of Directors has unanimously approved a new investment advisory agreement with the Advisor, subject to shareholder approval and the closing of the Transaction. The terms of the proposed new investment advisory agreement between the Company and the Advisor are identical to the existing agreement between the Advisor and the Company. However, if the shareholders do not approve the new investment advisory agreement, the existing investment advisory agreement will remain in effect.
Our Strategy
Our investment objective is to maximize our investment portfolio’s total return by generating current income from the loans we make and capital appreciation from the warrants we receive when making such loans. To further implement our business strategy, we expect our Advisor to continue to employ the following core strategies:
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Structured investments in the venture capital and private and public equity markets. We make loans to development-stage companies within our Target Industries typically in the form of secured loans. The secured debt structure provides a lower risk strategy, as compared to equity or unsecured debt investments, to participate in the emerging technology markets because the debt structures we typically utilize provide collateral against the downside risk of loss, provide return of capital in a much shorter timeframe through current-pay interest and amortization of principal and have a senior position to equity in the borrower’s capital structure in the case of insolvency, wind down or bankruptcy. Unlike venture capital and private equity investments, our investment returns and return of our capital do not require equity investment exits such as mergers and acquisitions or initial public offerings. Instead, we receive returns on our debt investments primarily through regularly scheduled payments of principal and interest and, if necessary, liquidation of the collateral supporting the debt investment upon a default. Only the potential gains from warrants depend upon equity investment exits. |
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“Enterprise value” lending. We and our Advisor take an enterprise value approach to structuring and underwriting loans. Enterprise value includes the implied valuation based upon recent equity capital invested as well as the intrinsic value of the applicable portfolio company’s particular technology, service or customer base. We secure our position against the enterprise value of each portfolio company through a lien on all of the assets of the portfolio company or through a lien on all assets of the portfolio company except its intellectual property, with a prohibition on any other party taking a lien on such intellectual property. |
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Creative products with attractive risk-adjusted pricing. Each of our existing and prospective portfolio companies has its own unique funding needs for the capital provided from the proceeds of our Venture Loans. These funding needs include funds for additional development “runways”, funds to hire or retain sales staff or funds to invest in research and development in order to reach important technical milestones in advance of raising additional equity. Our loans include current-pay interest, commitment fees, end-of-term payments, or ETPs, pre-payment fees, success fees and non-utilization fees. We believe we have developed pricing tools, structuring techniques and valuation metrics that satisfy our portfolio companies’ financing requirements while mitigating risk and maximizing returns on our investments. |
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Opportunity for enhanced returns. To enhance our debt investment portfolio returns, in addition to interest and fees, we frequently obtain warrants to purchase the equity of our portfolio companies as additional consideration for making debt investments. The warrants we obtain generally include a “cashless exercise” provision to allow us to exercise these rights without requiring us to make any additional cash investment. Obtaining warrants in our portfolio companies has allowed us to participate in the equity appreciation of our portfolio companies, which we expect will enable us to generate additional returns for our investors. |
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Direct origination. We originate transactions directly with technology, life science, healthcare information and services and sustainability companies. These transactions are referred to our Advisor from a number of sources, including referrals from, or direct solicitation of, venture capital and private equity firms, portfolio company management teams, legal firms, accounting firms, investment banks, portfolio company advisors and other lenders that represent companies within our Target Industries. Our Advisor has been the sole or lead originator in substantially all transactions in which the funds it manages have invested. |
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Disciplined and balanced underwriting and portfolio management. We use a disciplined underwriting process that includes obtaining information validation from multiple sources, extensive knowledge of our Target Industries, comparable industry valuation metrics and sophisticated financial analysis related to development-stage companies. Our Advisor’s due diligence on investment prospects includes obtaining and evaluating information on the prospective portfolio company’s technology, market opportunity, management team, fund raising history, investor support, valuation considerations, financial condition and projections. We seek to balance our investment portfolio to reduce the risk of down market cycles associated with any particular industry or sector, development-stage or geographic area by quarterly reviewing each criteria and, in the event there is an overconcentration, seeking investment opportunities to reduce such overconcentration. Our Advisor employs a “hands on” approach to portfolio management, requiring private portfolio companies to provide monthly financial information and to participate in regular updates on performance and future plans. For public companies, our Advisor typically relies on publicly reported quarterly financials. |
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Use of leverage. We use leverage to increase returns on equity through our Credit Facilities, through our 2026 Notes and 2027 Notes and through our 2019‑1 Securitization and 2022-1 Securitization. See “Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and capital resources” in our Quarterly Report on Form 10-Q for additional information about our use of leverage. In addition, we may issue additional debt securities or preferred stock in one or more series in the future. |
Market Opportunity
We focus our investments primarily in our Target Industries. The technology sectors we focus on include communications, networking, data storage, software, cloud computing, semiconductor, internet and media and consumer-related technologies. The life science sectors we focus on include biotechnology, drug discovery, drug delivery, bioinformatics and medical devices. The healthcare information and services sectors we focus on include diagnostics, electronic medical record services and software and other healthcare related services and technologies that improve efficiency and quality of administered healthcare. The sustainability sectors we focus on include alternative energy, power management, energy efficiency, green building materials and waste recycling. We refer to all of these companies as “technology-related” companies because the companies are developing or offering goods and services to businesses and consumers which utilize scientific knowledge, including techniques, skills, methods, devices and processes, to solve problems. We intend, under normal market conditions, to invest at least 80% of the value of our total assets in such companies
We believe that Venture Lending has the potential to achieve enhanced returns that are attractive notwithstanding the high degree of risk associated with lending to development-stage companies. Potential benefits include:
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interest rates that typically exceed rates that would be available to portfolio companies if they could borrow in traditional commercial financing transactions; |
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the debt investment support provided by cash proceeds from equity capital invested by venture capital and private equity firms or access to public equity markets to access capital; |
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amortization of principal; |
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senior ranking to equity and collateralization of debt investments to minimize potential loss of capital; and |
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potential equity appreciation through warrants. |
We believe that Venture Lending also provides an attractive financing source for portfolio companies, their management teams and their equity capital investors, as it:
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is typically less dilutive to the equity holders than additional equity financing; |
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extends the time period during which a portfolio company can operate before seeking additional equity capital or pursuing a sale transaction or other liquidity event; and |
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allows portfolio companies to better match cash sources with uses. |
Competitive Strengths
We believe that we, together with our Advisor, possess significant competitive strengths, which include the following:
Consistently execute commitments and close transactions. Our Advisor and its senior management and investment professionals have an extensive track record of originating, underwriting and managing Venture Loans. Our Advisor and its predecessor have directly originated, underwritten and managed Venture Loans with an aggregate original principal amount over $2.6 billion to more than 317 companies since operations commenced in 2004.
Robust direct origination capabilities. Our Advisor has significant experience originating Venture Loans in our Target Industries. This experience has given our Advisor a deep knowledge of our Target Industries and an extensive base of transaction sources and references.
Highly experienced and cohesive management team. Most of our Advisor’s senior management team of experienced professionals has been together since our inception. This consistency allows companies, their management teams and their investors to rely on consistent and predictable service, loan products and terms and underwriting standards.
Relationships with venture capital and private equity investors. Our Advisor has developed strong relationships with venture capital and private equity firms and their partners
Well-known brand name. Our Advisor has originated Venture Loans to more than 317 companies in our Target Industries under the “Horizon Technology Finance” brand.
Our Portfolio
From the commencement of operations of Compass Horizon on March 4, 2008 through March 31, 2023, we funded 249 portfolio companies and invested $2.2 billion in debt investments. As of March 31, 2023, our debt investment portfolio consisted of 57 debt investments with an aggregate fair value of $684.5 million. As of March 31, 2023, 86.7%, or $593.6 million, of our debt investment portfolio at fair value consisted of Senior Term Loans. As of March 31, 2023, 9.2%, or $63.1 million, of our total debt investment portfolio at fair value was held through our 2019‑1 Securitization. As of March 31, 2023, 21.6%, or $148.0 million, of our total debt investment portfolio at fair value was held through our 2022-1 Securitization. As of March 31, 2023, our net assets were approximately $321.7 million, and all of our debt investments were secured by all or a portion of the tangible and intangible assets of the applicable portfolio company. The debt investments in our portfolio are generally not rated by any rating agency. If the individual debt investments in our portfolio were rated, they would be rated below “investment grade”. Debt investments that are unrated or rated below investment grade are sometimes referred to as “junk bonds” and have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal.
For the quarter ended March 31, 2023, our dollar-weighted annualized yield on average debt investments was 16.3%. We calculate the dollar-weighted yield on average debt investments for any period as (1) total investment income during the period divided by (2) the average of the fair value of debt investments outstanding on (a) the last day of the calendar month immediately preceding the first day of the period and (b) the last day of each calendar month during the period. The dollar-weighted annualized yield on average debt investments is higher than what investors will realize because it does not reflect our expenses or any sales load paid by investors.
For the quarter ended March 31, 2023, our investment portfolio had an overall total yield of 15.5%. We calculate the overall total yield for any period as (1) total investment income during the period divided by (2) the average of the fair value of investments outstanding on (a) the last day of the calendar month immediately preceding the first day of the period and (b) the last day of each calendar month during the period. The overall total yield is higher than what investors will realize because it does not reflect our expenses or any sales load paid by investors.
As of March 31, 2023, our debt investments had a dollar-weighted average term of 49 months from inception and a dollar-weighted average remaining term of 36 months. As of March 31, 2022, substantially all of our debt investments had an original committed principal amount of between $3 million and $45 million, repayment terms of between 3 and 60 months and bore current pay interest at annual interest rates of between 11% and 17%.
For the quarter ended March 31, 2023, our total return based on market value was 0.1%. Total return based on market value is calculated as (x) the sum of (i) the closing sales price of our common stock on the last day of the period plus (ii) the aggregate amount of distributions paid per share during the period, less (iii) the closing sales price of our common stock on the first day of the period, divided by (y) the closing sales price of our common stock on the first day of the period.
In addition to our debt investments, as of March 31, 2023, we held warrants to purchase stock, predominantly preferred stock, in 88 portfolio companies, equity positions in eleven portfolio companies and success fee arrangements in seven portfolio companies.
We continue to actively manage our portfolio in the face of an increasingly challenging macroeconomic environment. In recent months, certain of our portfolio companies have either filed for bankruptcy protection or entered into standstill agreements. See “—Recent developments.” As with the broader economy, our portfolio companies have had to confront the elevated interest rate environment, as of this date, as well as the secondary effects of the elevated rate environment. Such effects include, but are not limited to, higher borrowing costs, less access to equity capital to support their operations and growth, and a heightened skepticism about the prospects of growth companies. We actively monitor each of our portfolio companies and will seek to adopt a flexible and dynamic approach that focuses on providing our management expertise and deep experience investing through all portions of the economic cycle to assist our portfolio companies, while seeking to maximize value for our stockholders. Form more information regarding the risks associated with our portfolio companies, please see the “Supplementary Risk Factors” section beginning on page S-10 and in “Risk Factors” in our Annual Report on Form 10-K.
Recent Developments
In April 2023, we sold 272,303 shares of common stock under the 2021 Equity Distribution Agreement. For the same period, we received total accumulated net proceeds of approximately $3.1 million, including $0.1 million of offering expenses, from these sales.
On May 1, 2023, IMV Inc. (“IMV”) (NASDAQ: IMV; TSX: IMV), announced that the Nova Scotia Supreme Court had issued an initial order (the “Initial Order”) granting IMV and its subsidiaries protection under the Companies’ Creditors Arrangement Act (R.S.C., 1985, c. C-36) and IMV will seek the recognition of the Initial Order in the United States by filing a petition commencing proceedings under Chapter 15 of the United States Bankruptcy Code. As of March 31, 2023, our debts investments in IMV had a cost basis of $17.3 million and a fair market value of $16.7 million. As of March 31, 2023, our warrant investments in IMV had a cost basis of $67,000 and a fair market value of $0.
On May 10, 2023, we and Evelo Biosciences, Inc. (“Evelo”) entered into a Standstill Agreement pursuant to which we agreed to forbear and not to exercise, any and all remedies available under our Loan and Security Agreement with Evelo (“Loan Agreement”), warrants, notes and other financing documents until May 15, 2023 (as may be extended, the “Standstill Period”) as we continue negotiations with Evelo and Evelo pursues potential sources of financing and financial restructuring alternatives. In order to secure the Standstill Period, Evelo has agreed, among other things, that during the Standstill Period, it will only use the designated collateral under the Loan Agreement in the ordinary course of its business and in accordance with the provisions of the Loan Agreement and other financing documents. We have subsequently further extended the Standstill Period until May 31, 2023. As of the date hereof, we have not made a demand for payment of amounts outstanding under the Financing Documents purported to accelerate any loan to maturity, or otherwise sought to exercise remedies, as we continue to assess the best path forward. As of March 31, 2023, our debt investments in Evelo had a cost basis of $44.5 million and a fair market value of $44.5 million. As of March 31, 2023, our warrant investments in Evelo had a cost basis of $126,000 and a fair market value of $0.
On May 24, 2023, HFI increased the size of the NYL Facility from $200 million to $250 million and extended the maturity to June 2029. In addition, we amended the sale and servicing agreement with HFI to, among other things, (1) transition advances under the facility from utilizing Three Year USD mid-market swap as a benchmark rate plus 3.55% to the Three Year I-Curve plus 3.50%, while retaining a floor of 4.60%, (2) extend the investment period termination and from June 5, 2023 to June 5, 2024 and (3) extend the final payment date from June 2028 to June 2029.
Company Information
Our administrative and executive offices and those of our Advisor are located at 312 Farmington Avenue, Farmington, Connecticut 06032, and our telephone number is (860) 676-8654. Our corporate website is located at www.horizontechfinance.com. Information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus supplement or the accompanying prospectus, and you should not consider any such information contained to be part of this prospectus supplement or the accompanying prospectus.
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Common stock offered by us |
3,250,000 shares |
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Common stock outstanding prior to this offering |
28,839,131 shares |
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Common stock to be outstanding after this offering |
32,089,131 shares |
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Option to purchase additional shares |
487,500 shares |
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Use of proceeds |
The net proceeds to us from this offering (excluding the underwriters’ option to purchase additional shares and before deducting estimated expenses payable by us of approximately $150,000) will be approximately $ million based on a public offering price of $ , which includes underwriting discounts and commissions.
See “Use of Proceeds” in this prospectus supplement for more information. |
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Distributions |
We intend to continue to pay monthly distributions to our stockholders out of assets legally available for distribution. Our distributions, if any, will be determined by our board of directors, or the Board. Our ability to declare distributions depends on our earnings, our overall financial condition (including our liquidity position), maintenance of RIC status and such other factors as our Board may deem relevant from time to time.
Thus, the source of a distribution to our stockholders may be the original capital invested by the stockholder rather than our income or gains. Stockholders should read any written disclosure accompanying a distribution payment carefully and should not assume that the source of any distribution is our ordinary income or gains. |
| Dividend Reinvestment Plan | We have adopted a dividend reinvestment plan, or DRIP, for our stockholders. The DRIP is an “opt out” DRIP. As a result, distributions to our stockholders are automatically reinvested in additional shares of our common stock, unless a stockholder specifically “opts out” of the DRIP so as to receive cash distributions. Stockholders who receive distributions in the form of stock will generally be subject to the same federal, state and local tax consequences as stockholders who elect to receive their distributions in cash. See “Dividend Reinvestment Plan” in accompanying prospectus. |
| Taxation | We have elected to be treated as a RIC. Accordingly, we generally will not incur corporate-level income taxes on any investment company taxable income determined without regard to any deductions for dividends paid and net capital gains that we distribute as dividends for U.S. federal income tax purposes to our stockholders. To maintain RIC tax treatment, we must meet specified source-of-income and asset diversification requirements and distribute annually an amount generally equal to at least 90% of our investment company taxable income, determined without regard to any deduction for dividends paid. |
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Investment Management Agreement |
Under an amended and restated investment management agreement, or the Investment Management Agreement, subject to the overall supervision of our Board, our Advisor manages our day-to-day operations and provides investment advisory services to us. For providing these services, our Advisor receives a base management fee from us, paid monthly in arrears, at an annual rate of 2.00% of (i) our gross assets, including any assets acquired with the proceeds of leverage less (ii) assets consisting of cash and cash equivalents. The base management fee is calculated at an annual rate of 2.00% of the Company’s gross assets (less cash and cash equivalents) including any assets acquired with the proceeds of leverage; provided, that, to the extent the Company’s gross assets (less cash and cash equivalents) exceed $250 million, the base management fee on the amount of such excess over $250 million is calculated at an annual rate of 1.60% of the Company’s gross assets (less cash and cash equivalents) including any assets acquired with the proceeds of leverage.
For this purpose, “Pre-Incentive Fee Net Investment Income” means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees received from portfolio companies) accrued during the calendar quarter, minus operating expenses for the quarter (including the base management fee, expenses payable under the Administration Agreement (as defined below), and any interest expense and any dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee).
Under the second part of the incentive fee, we pay our Advisor at the end of each calendar year 20.00% of our realized capital gains, if any, from October 28, 2010 through the end of that calendar year, computed net of all realized capital losses and all unrealized capital depreciation on a cumulative basis through the end of such year, less all previous amounts paid in respect of the capital gain incentive fee. The second part of the incentive fee is not subject to any minimum return to stockholders. The Investment Management Agreement may be terminated by either party without penalty by delivering written notice to the other party upon not more than 60 days’ written notice. See “Investment Management and Administration Agreements — Investment Management Agreement” in the accompanying prospectus. |
| Administration Agreement |
We reimburse our Administrator for the allocable portion of overhead and other expenses incurred by our Administrator in performing its obligations under an administration agreement, or the Administration Agreement, including furnishing rent, the fees and expenses associated with performing compliance functions 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. See “Investment Management and Administration Agreements — Administration Agreement” in the accompanying prospectus. |
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| Trading at a discount |
Shares of closed-end investment companies, including business development companies, frequently trade at a discount to their NAV. The risk that our shares may trade at a discount to our NAV is separate and distinct from the risk that our NAV per share may decline. We cannot predict whether our shares will trade above, at or below NAV. Before buying any securities, you should read the discussion of the material risks of investing in our common stock under “Risk Factors” in our most recent Annual Report on Form 10-K incorporated by reference to this prospectus supplement and in any free writing prospectuses we have authorized for use in connection with this offering, and under similar headings in the documents that are filed with the SEC on or after the date hereof and are incorporated by reference into this prospectus supplement and the accompanying prospectus. |
Our portfolio may be focused on a limited number of industries, which will subject us to a risk of significant loss if there is a downturn in a particular industry.
Our portfolio may be focused on a limited number of industries. As a result, a downturn in any particular industry in which we are invested could also significantly impact the aggregate returns we realize. The technology, life science, healthcare information and services and sustainability industries, Our Target Industries, are susceptible to changes in government policy and economic assistance, including heightened interest rates and uncertainty about the Federal Reserve’s targeted terminal rate, which could adversely affect the returns we receive.
Elevated interest rates affect our portfolio companies in a number of important and deleterious ways. Portfolio companies that did not anticipate either the rapidity of the increase in interest rates or the current rate level may have to adjust their business plan and operations to meet their debt obligations. Additionally, in the current elevated interest rate environment, venture capital funds may have greater difficulty raising capital to deploy. As such, there is less available capital for our portfolio companies to fund growth or extend their runways while developing their products, including, but not limited to, receiving approvals from government agencies. Without the injection of new venture capital, these companies are more likely to fail, potentially resulting in the loss of all or part of our investment.
Our investment strategy focuses on investments in development-stage companies in our Target Industries, which are subject to many risks, including volatility, intense competition, shortened product life cycles and periodic downturns, and would be rated below “investment grade.”
We intend to invest, under normal circumstances, most of the value of our total assets (including the amount of any borrowings for investment purposes) in development-stage companies, which may have relatively limited operating histories, in our Target Industries. Many of these companies may have narrow product lines and small market shares, compared to larger established, publicly owned firms, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns. The revenues, income (or losses) and valuations of development-stage companies in our Target Industries can and often do fluctuate suddenly and dramatically. For these reasons, investments in our portfolio companies, if rated by one or more ratings agency, would typically be rated below “investment grade,” which refers to securities rated by ratings agencies below the four highest rating categories. These companies may also have more limited access to capital and higher funding costs. In volatile interest rate environments, these companies may not have adequate access to funding to meet their capital needs. Consequently, these companies are more likely to face bankruptcy or insolvency proceedings, reducing the return on, or the recovery of, our investment. This could, in turn, materially adversely affect our business, financial condition and results of operations. In addition, development-stage technology markets are generally characterized by abrupt business cycles and intense competition, and the competitive environment can change abruptly due to rapidly evolving technology. Therefore, our portfolio companies may face considerably more risk than companies in other industry sectors. Accordingly, these factors could impair their cash flow or result in other events, such as bankruptcy, which could limit their ability to repay their obligations to us and may materially adversely affect the return on, or the recovery of, our investments in these businesses.
Because of rapid technological change, the average selling prices of products and some services provided by development-stage companies in our Target Industries have historically decreased over their productive lives. These decreases could adversely affect their operating results and cash flow, their ability to meet obligations under their debt securities and the value of their equity securities. This could, in turn, materially adversely affect our business, financial condition and results of operations.
We may hold the debt securities of leveraged companies that may, due to the significant volatility of such companies, experience bankruptcy or similar financial distress.
Leveraged companies may experience bankruptcy, receivership or similar financial distress. The debt investments of distressed companies may not produce income, may require us to bear certain expenses or to make additional advances in order to protect our investment and may subject us to uncertainty as to when, in what manner (e.g., through liquidation, reorganization, receivership or bankruptcy) and for what value such distressed debt will eventually be satisfied. Proceeds received from such proceedings may not be income that satisfies the Qualifying Income Test for RICs and may not be in an amount sufficient to repay such expenses or advances. In the event that a plan of reorganization is adopted or a receivership is established, in exchange for the debt investment we currently hold, we may receive non-cash proceeds, including equity securities or license or royalty agreements with contingent payments, which may require significantly more of our management’s time and attention. In addition, if we take control of a distressed company in connection with a reorganization, it could require additional costs and significant amounts of our management’s time and attention.
If a portfolio company enters a bankruptcy process, we will be subject to a number of significant inherent risks. Many events in a bankruptcy proceeding are the product of contested matters and adversarial proceedings and are beyond the control of the creditors. A bankruptcy filing by an issuer may adversely and permanently affect the issuer. If the proceeding is converted to a liquidation, the value of the issuer may not equal the liquidation value that was believed to exist at the time of the investment. The duration of a bankruptcy proceeding is also difficult to predict, and a creditor’s return on investment can be adversely affected by delays until the plan of reorganization or liquidation ultimately becomes effective. The administrative costs of a bankruptcy proceeding are frequently high and would be paid out of the debtor’s estate prior to any return to creditors. Because the standards for classification of claims under bankruptcy law are vague, our influence with respect to the class of securities or other obligations we own may be lost by increases in the number and amount of claims in the same class or by different classification and treatment. In the early stages of the bankruptcy process, it is often difficult to estimate the extent of, or even to identify, any contingent claims that might be made. In addition, certain claims that have priority by law (for example, claims for taxes) may be substantial. We may be forced to write down the fair market value of investments we hold in companies experiencing bankruptcy proceedings or other financial distress.
We are Subject to Risks Relating to Volatility in the Banking Sector.
In March 2023, Silicon Valley Bank and Signature Bank were closed by U.S. state regulators and placed under receivership by the U.S. Federal Deposit Insurance Corporation (“FDIC”), and in May 2023, JPMorgan Chase acquired a substantial majority of assets and assumed certain liabilities of First Republic Bank. Following these high-profile events, several other U.S. and non-U.S. banking institutions experienced sell-offs and/or significant declines to their share prices, with several being placed on “watch lists,” suffering ratings downgrades and/or receiving emergency funding from governments. At this time, it is not clear if there will be additional banking institution failures and whether (and to what extent) U.S. or non-U.S. governments will intervene to support the relevant banking institutions. The impact of the banking sector’s volatility on the financial system and broader economy could be significant.
If the banking institutions used by us fail or are impacted by such volatility, such events could have a material adverse effect on us and our stockholders (including loss of capital held at such banking institutions and/or an inability to meet its obligations to other counterparties). A large percentage of our assets are or may be held by a limited number of banking institutions (or even a single banking institution). If a banking institution at which we maintain deposit accounts or securities accounts fails, any cash or other assets in such accounts may be temporarily inaccessible or permanently lost by us. Generally, we would be an unsecured creditor with respect to cash balances in excess of $250,000 held at a single banking institution insured by the FDIC, and therefore we may not ultimately recover any such excess amounts. In addition, FDIC deposit insurance does not extend to certain other assets held by a banking institution (e.g., bond investments, U.S. Treasury bills or notes).
If a banking institution that provides all or a part of a credit facility, other borrowings and/or other services to us fails, we could be unable to draw funds under such credit facilities and may not be able to obtain replacement credit facilities or other services from other lending institutions with similar terms. If our credit facilities and accounts are provided by the same banking institution, and such banking institution fails, we could face significant difficulties in funding any near-term obligations we have in respect of our investments or otherwise. Even if the banking institutions used by us remain solvent, continued volatility in the banking sector could cause or intensify an economic recession and make it more difficult for us to obtain or refinance our credit facilities and other indebtedness at all or on as favorable terms as could otherwise have been obtained.
Similarly, the banking institutions that the portfolio companies in which we invest have depositor or lending arrangements may fail. This would have a material adverse effect on such portfolio companies, us and our stockholders, including by preventing such portfolio companies from making principal and interest payments or other applicable payments owed with respect to our investments. Generally, the Advisor does not have a meaningful role in selecting the banking institutions used by the portfolio companies in which we invest. Instead, the Advisor generally relies on the management team of the portfolio companies to select appropriate banking services.
The following table is intended to assist you in understanding the costs and expenses that an investor in shares of our common stock will bear directly or indirectly. However, we caution you that some of the percentages indicated in the table below are estimates and may vary. The following table and example should not be considered a representation of our future expenses. Actual expenses may be greater or less than shown. Except where the context suggests otherwise, whenever this prospectus supplement and the accompanying prospectus contain a reference to fees or expenses paid by “you” or “us” or that “we” will pay fees or expenses, stockholders will indirectly bear such fees or expenses as investors in the Company.
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Stockholder Transaction Expenses |
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Sales Load (as a percentage of offering price) |
%(1) | |||
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Offering Expenses (as a percentage of offering price) |
%(2) | |||
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Dividend Reinvestment Plan Fees |
— |
(3) |
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Total Stockholder Transaction Expenses (as a percentage of offering price) |
% |
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Annual Expenses (as a Percentage of Net Assets Attributable to Common Stock)(4) |
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Base Management Fee |
4.14 |
%(5) |
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Incentive Fee Payable Under the Investment Management Agreement |
3.75 |
%(6) |
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Interest Payments on Borrowed Funds |
9.11 |
%(7) |
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Other Expenses (estimated for the current fiscal year) |
1.74 |
%(8) |
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Acquired Fund Fees and Expenses |
0.0 |
%(9) |
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Total Annual Expenses (estimated) |
18.74 |
%(5)(10) |
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(1) |
Represents the underwriting discounts and commissions with respect to the shares sold by us in this offering. |
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(2) |
The offering expenses of this offering borne by us are estimated to be approximately $150,000. |
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(3) |
The expenses associated with the DRIP are included in “Other Expenses” in the table. See “Dividend Reinvestment Plan” in the accompanying prospectus. |
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(4) |
Net Assets Attributable to Common Stock equals estimated average net assets for the current fiscal year and is based on our net assets at March 31, 2023 and includes the net proceeds of the offering estimated to be received by the Company. |
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(5) |
Our base management fee under the Investment Management Agreement is based on our gross assets, less cash and cash equivalents, which includes assets acquired using leverage, including any leverage disclosed in the accompanying prospectus, and is payable monthly in arrears. The management fee referenced in the table above is based on our gross assets, less cash and cash equivalents, of $731.7 million as of March 31, 2023 and includes net proceeds of the offering, after the net proceeds have been invested in portfolio companies, and $149 million of assets estimated to be acquired in the current fiscal year using leverage. See “Investment Management and Administration Agreements — Investment Management Agreement” in the accompanying prospectus. |
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(6) |
Our incentive fee payable under the Investment Management Agreement consists of two parts: |
The first part, which is payable quarterly in arrears, subject to a Fee Cap and Deferral Mechanism, equals 20% of the excess, if any, of our Pre-Incentive Fee Net Investment Income over a 1.75% quarterly (7% annualized) hurdle rate and a “catch-up” provision measured as of the end of each calendar quarter. Under this provision, in any calendar quarter, our Advisor receives no incentive fee until our net investment income equals the hurdle rate of 1.75% but then receives, as a “catch-up,” 100% of our Pre-Incentive Fee Net Investment Income with respect to that portion of such Pre-Incentive Fee Net Investment Income, if any, that exceeds the hurdle rate but is less than 2.1875%. The effect of this provision is that, if Pre-Incentive Fee Net Investment Income exceeds 2.1875% in any calendar quarter, our Advisor will receive 20% of our Pre-Incentive Fee Net Investment Income as if a hurdle rate did not apply. The first part of the incentive fee is computed and paid on income that may include interest that is accrued but not yet received in cash.
The second part of the incentive fee equals 20% of our Incentive Fee Capital Gains, if any. Incentive Fee Capital Gains are our realized capital gains on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees. The second part of the incentive fee is payable, in arrears, at the end of each calendar year (or upon termination of the Investment Management Agreement, as of the termination date). For a more detailed discussion of the calculation of this fee, see “Investment Management and Administration Agreements — Investment Management Agreement” in the accompanying prospectus.
The incentive payable to our Advisor represents our estimated annual expense incurred under the first part of the incentive fee payable under the Investment Management Agreement over the next twelve months. As of March 31, 2023, our cumulative realized capital gains and unrealized capital appreciation did not exceed our cumulative realized capital losses and unrealized capital depreciation. Given our strategy of investing primarily in Venture Loans, which are fixed-income assets, we believe it is unlikely that our cumulative realized capital gains and unrealized capital appreciation will exceed our cumulative realized capital losses and unrealized capital depreciation in the next twelve months. Consequently, we do not expect to incur any Incentive Fee Capital Gains during the next twelve months. As we cannot predict the occurrence of any capital gains from the portfolio, we have assumed no Incentive Fee Capital Gains.
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(7) |
Interest payments on borrowed funds represent our estimated annual interest payments on borrowed funds based on current debt levels as adjusted for projected increases in debt levels over the next twelve months. We may issue additional debt securities pursuant to the registration statement of which this prospectus supplement forms a part. In the event we were to issue additional debt securities, our borrowing costs, and correspondingly our total annual expenses, including, in the case of such preferred stock, our base management fee as a percentage of our net assets attributable to common stock, would increase. |
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(8) |
“Other Expenses” includes our overhead expenses, including payments under the Administration Agreement, based on our allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement. See “Investment Management and Administration Agreements — Administration Agreement” in the accompanying prospectus. “Other expenses” also includes the ongoing administrative expenses to the independent accountants and legal counsel of the Company and compensation of independent directors. |
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(9) |
Amount reflects our estimated expenses of the temporary investment of offering proceeds in money market funds pending our investment of such proceeds in portfolio companies in accordance with the investment objective and strategies described in this prospectus supplement and the accompanying prospectus. |
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(10) |
“Total Annual Expenses” as a percentage of consolidated net assets attributable to common stock are higher than the total annual expenses percentage would be for a company that is not leveraged. We borrow money to leverage our net assets and increase our total assets. The SEC requires that the “Total Annual Expenses” percentage be calculated as a percentage of net assets (defined as total assets less indebtedness and after taking into account any incentive fees payable during the period), rather than the total assets, including assets that have been funded with borrowed monies. |
Example
The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock. This example and the expenses in the table above should not be considered a representation of our future expenses, and actual expenses (including the cost of debt, if any, and other expenses) may be greater or less than those shown. In calculating the following expense amounts, we have assumed that our annual operating expenses remain at the levels set forth in the table above.
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1 Year |
3 Years |
5 Years |
10 Years |
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You would pay the following expenses on a $1,000 investment, assuming a 5% annual return |
$ | 174.53 | $ | 454.93 | $ | 663.58 | $ | 980.49 | ||||||||
The example and the expenses in the tables above should not be considered a representation of our future expenses, and actual expenses may be greater or lesser than those shown.
While the example assumes, as required by the applicable rules of the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%. The incentive fee under the Investment Management Agreement is unlikely to be significant assuming a 5% annual return and is not included in the example. This illustration assumes that we will not realize any capital gains (computed net of all realized capital losses and unrealized capital depreciation) in any of the indicated time periods. If we achieve sufficient returns on our investments, including through the realization of capital gains, to trigger an incentive fee of a material amount, our distributions to our common stockholders and our expenses would likely be higher. If the 5% annual return were derived entirely from capital gains, you would pay expenses on a $1,000 investment of $151.11, $405.34, $606.76 and $945.78 over periods of one year, three years, five years and ten years, respectively. See “Investment Management and Administration Agreements — Investment Management Agreement — Examples of Incentive Fee Calculation” in the accompanying prospectus for additional information regarding the calculation of incentive fees.
In addition, while the example assumes reinvestment of all dividends and other distributions at net asset value, or NAV participants in our DRIP receive a number of shares of our common stock determined by dividing the total dollar amount of the distribution payable to a participant by the market price per share of our common stock at the close of trading on the valuation date for the distribution. This price may be at, above or below NAV. See “Dividend Reinvestment Plan” in the accompanying prospectus for additional information regarding our DRIP.
We estimate that the net proceeds from the sale of 3,250,000 shares of common stock offered by us pursuant to this prospectus supplement will be $ million (or $ million if the underwriters fully exercise their option to purchase additional shares), based on a public offering price of $ after deducting the underwriting discounts and commissions and estimated offering expenses of $150,000 payable by us.
We intend to initially use the net proceeds from this offering to repay outstanding debt borrowed under our Key Facility. However, through re-borrowing of the initial repayments under our Key Facility, we intend to use the net proceeds from this offering to make investments in accordance with our investment objective and strategies described in this prospectus supplement and the accompanying prospectus to pay our operating expenses and other cash obligations, and for general corporate purposes. We may be unable to invest a significant portion of the net proceeds from an offering or from exiting an investment or other capital on acceptable terms, which could harm our financial condition and operating results.
We entered into the Key Facility effective November 4, 2013. As of the date hereof, the interest rate on the Key Facility is based on the rate of interest published in The Wall Street Journal as the prime rate in the United States plus 0.25%, with a prime rate floor of 4.25%. The Key Facility requires the payment of an unused line fee in an amount equal to 0.50% of any unborrowed amount available under the facility annually. The Key Facility contains covenants that, among other things, require us to maintain a minimum net worth, to restrict the debt investments securing the Key Facility to certain criteria for qualified debt investments and to comply with portfolio company concentration limits as defined in the related loan agreement. After the Revolving Period, we may not request new advances, and we must repay the outstanding advances under the Key Facility as of such date, at such times and in such amounts as are necessary to maintain compliance with the terms and conditions of the Key Facility, particularly the condition that the principal balance of the Key Facility not exceed sixty percent (60%) of the aggregate principal balance of our eligible debt investments to our portfolio companies. The maturity of the Key Facility, the date on which all outstanding advances under the Key Facility are due and payable, is on June 22, 2026.
As of March 31, 2023, our total consolidated indebtedness was approximately $444.5 million, $329.5 million of which was secured, and $329.5 million of which was indebtedness of our subsidiaries.
The following table sets forth:
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• |
our actual capitalization as of March 31, 2023; and |
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• |
our capitalization on an as-adjusted basis giving effect to the sale of shares of our common stock by us in this offering (assuming no exercise of the underwriters’ option to purchase additional shares) based on a public offering price of $ per share, less estimated underwriting discounts and commissions payable by us of $ and estimated offering expenses payable by us of $150,000. |
This table should be read in conjunction with “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and notes thereto included in this prospectus supplement and the accompanying prospectus.
| As of March 31, 2023 | ||||||||
| Actual | As-Adjusted for this Offering(1) |
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Assets |
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Non-affiliate investments at fair value (cost of $724,162) |
$ | 714,466 | $ | |||||
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Non-controlled affiliate investments at fair value (cost $0) |
846 | |||||||
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Total investments at fair value (cost of $724,162) |
715,312 | |||||||
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Cash |
19,844 | |||||||
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Investments in money market funds |
23,698 | |||||||
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Restricted investments in money market funds |
2,987 | |||||||
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Interest receivable |
13,843 | |||||||
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Other assets |
2,554 | |||||||
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Total assets |
$ | 778,238 | $ | |||||
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Liabilities |
||||||||
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Borrowings |
$ | 439,645 | $ | |||||
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Distributions payable |
9,365 | |||||||
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Base management fee payable |
1,059 | |||||||
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Incentive fee payable |
2,978 | |||||||
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Other accrued expenses |
3,508 | |||||||
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Total liabilities |
456,555 | |||||||
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Commitments and contingencies |
||||||||
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Net assets |
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Preferred stock, par value $0.001 per share, 1,000,000 shares authorized, zero shares issued and outstanding as of March 31, 2023 |
— | |||||||
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Common stock, par value $0.001 per share, 100,000,000 shares authorized, 28,544,822 issued and 28,377,357 shares outstanding as of March 31, 2023 |
30 | |||||||
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Paid-in capital in excess of par |
393,312 | |||||||
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Distributable earnings |
(71,659 | ) | ||||||
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Total net assets |
321,683 | |||||||
| Net asset value per common share | 11.34 | |||||||
| Total liabilities and net assets | 778,238 | |||||||
(1) Excludes up to 487,500 shares of our common stock issuable by us upon exercise of the underwriters’ over-allotment option.
We are offering the common stock described in this prospectus supplement and the accompanying prospectus through a number of underwriters. Morgan Stanley & Co. LLC is acting as the representative of the underwriters. We have entered into an underwriting agreement with the representative. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriters, and each underwriter has severally agreed to purchase, at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus supplement, the number of shares of common stock listed next to its name in the following table:
|
Underwriter |
Number of Shares |
|
|
Morgan Stanley & Co. LLC |
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|
UBS Securities LLC |
||
|
Wells Fargo Securities, LLC |
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|
Total |
3,250,000 |
The underwriting agreement provides that the obligations of the underwriters to pay for and accept delivery of the shares of common stock offered hereby are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are severally obligated to take and pay for all shares of common stock offered hereby (other than those covered by the underwriters’ option to purchase additional shares described below) if any such shares are taken. We and the Advisor have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or the Securities Act.
Option to Purchase Additional Shares
We have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus supplement, to purchase up to an aggregate of additional shares of common stock at the public offering price set forth on the cover page hereof, less the underwriting discounts and commissions. To the extent such option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase approximately the same percentage of such additional shares of common stock as the number set forth next to such underwriter’s name in the preceding table bears to the total number of shares set forth next to the names of all underwriters in the preceding table.
Lock-Up Agreements
Each of us, our directors and executive officers has agreed that, without the prior written consent of the representative on behalf of the underwriters, it will not, during the period ending 60 days after the date of this prospectus supplement:
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offer pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of directly or indirectly, any shares of our common stock or any securities convertible into or exercisable or exchangeable for our common stock; or |
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enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequence of ownership of the common stock, |
whether any transaction described above is to be settled by delivery of common stock or such other securities, in cash or otherwise.
The restrictions described in the preceding paragraph are subject to several exceptions, including:
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the sale of shares to the underwriters; |
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• |
the issuance by us of shares of common stock upon the exercise of an option or a warrant or the conversion of a security outstanding on the date of this prospectus supplement of which the underwriters have been advised in writing; or |
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• |
transactions by any person other than us relating to shares of common stock or other securities acquired in open market transactions after the completion of the offering of the shares. |
The release of any securities subject to these lock-up agreements is considered on a case-by-case basis. Factors that would be considered by the representative in determining whether to release securities subject to these lock-up agreements may include the length of time before the lock-up agreement expires, the number of shares or other securities involved, the reason for a requested release, market conditions at the time of the requested release, the trading price of our common stock, historical trading volumes of our common stock and whether the person seeking the release is an officer, director or affiliate of ours.
Commissions and Discounts
The underwriters propose to offer the shares directly to the public at the public offering price set forth on the cover page of this prospectus supplement and to certain dealers at a price that represents a concession not in excess of $ per share below the public offering price. After the public offering of the shares, the offering price and other selling terms may be changed by the underwriters.
The underwriting fee is equal to the public offering price per share of common stock less the amount paid by the underwriters to us per share of common stock. The underwriting fee is $ per share. The following table shows the price per share of common stock and total underwriting discounts and commissions to be paid to the underwriters assuming both no exercise and full exercise of the underwriters’ overallotment option.
|
Per share |
Total |
|||||||||||||||
|
Without |
With |
Without |
With |
|||||||||||||
|
Initial price to public |
$ |
$ |
$ |
$ |
||||||||||||
|
Underwriting discounts and commissions payable by us on shares sold to the public |
$ |
$ |
$ |
$ |
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|
Proceeds, before expenses, to us(1) |
$ |
$ |
$ |
$ |
||||||||||||
|
(1) |
Before deducting offering expenses payable by us related to this offering, which we estimate will be approximately $150,000. |
Price Stabilization, Short Positions and Penalty Bids
In connection with this offering, the underwriters may purchase and sell shares of our common stock in the open market. These transactions may include short sales, syndicate covering transactions and stabilizing transactions. A short sale involves syndicate sales of shares in excess of the number of shares to be purchased by the underwriters in the offering, which creates a syndicate short position. Syndicate covering transactions involve purchases of shares in the open market after the distribution has been completed in order to cover syndicate short positions.
Stabilizing transactions consist of some bids or purchases of shares of our common stock made for the purpose of preventing or slowing a decline in the market price of the shares while the offering is in progress.
In addition, the underwriters may impose penalty bids, under which they may reclaim the selling concession from a syndicate member when the shares of our common stock originally sold by that syndicate member are purchased in a stabilizing transaction or syndicate covering transaction to cover syndicate short positions.
Similar to other purchase transactions, these activities may have the effect of raising or maintaining the market price of the common stock or preventing or slowing a decline in the market price of the common stock. As a result, the price of the common stock may be higher than the price that might otherwise exist in the open market. Except for the sale of shares of our common stock in this offering, the underwriters may carry out these transactions on the Nasdaq, in the over-the-counter market or otherwise.
We and the underwriters do not make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the shares. In addition, we and the underwriters do not make any representation that the underwriters will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.
Sales Outside the United States
No action has been taken in any jurisdiction (except in the United States) that would permit a public offering of the common stock, or the possession, circulation or distribution of this prospectus supplement or accompanying prospectus or any other material relating to us or the common stock in any jurisdiction where action for that purpose is required. Accordingly, the common stock may not be offered or sold, directly or indirectly, and none of this prospectus supplement, the accompanying prospectus or any other offering material or advertisements in connection with the common stock may be distributed or published, in or from any country or jurisdiction except in compliance with any applicable rules and regulations of any such country or jurisdiction.
Each of the underwriters may arrange to sell common shares offered hereby in certain jurisdictions outside the United States, either directly or through affiliates, where it is permitted to do so. Persons into whose possession this prospectus supplement comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus supplement. This prospectus supplement does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus supplement in any jurisdiction in which such an offer or a solicitation is unlawful.
Hong Kong
Shares of our common stock may not be offered or sold by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), or (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.
Notice to Prospective Investors in the Dubai International Financial Centre
This document relates to an exempt offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority. This document is intended for distribution only to persons of a type specified in those rules. It must not be delivered to, or relied on by, any other person. The Dubai Financial Services Authority has no responsibility for reviewing or verifying any documents in connection with exempt offers. The Dubai Financial Services Authority has not approved this document nor taken steps to verify the information set out in it, and has no responsibility for it. The shares of our common stock which are the subject of the offering contemplated by this prospectus may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares of our common stock offered should conduct their own due diligence on our common stock. If you do not understand the contents of this document you should consult an authorized financial adviser.
Electronic Delivery
The underwriters may make this prospectus supplement and accompanying prospectus available in an electronic format. The prospectus supplement and accompanying prospectus in electronic format may be made available on a website maintained by any of the underwriters, and the underwriters may distribute such documents electronically. The underwriters may agree with us to allocate a limited number of common stock for sale to their online brokerage customers. Any such allocation for online distributions will be made by the underwriters on the same basis as other allocations.
The principal business addresses of the underwriters are: Morgan Stanley & Co. LLC, 180 Varick Street, 2nd Floor, New York, NY 10014, UBS Securities LLC, 1285 Avenue of the Americas, New York, NY 10019 and Wells Fargo Securities, LLC, 550 South Tryon Street, Charlotte, NC 28202.
Conflicts of Interest
The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage, valuation services and other financial and non-financial activities and services. Certain of the underwriters and their respective affiliates have provided, and may in the future provide, a variety of these services to the Company and to persons and entities with relationships with the Company, for which they received or will receive customary fees and expenses. In the ordinary course of their various business activities, the underwriters and their respective affiliates, officers, directors and employees may purchase, sell or hold a broad array of investments and actively trade securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments for their own account and for the accounts of their customers, and such investment and trading activities may involve or relate to our assets, securities or instruments (directly, as collateral securing other obligations or otherwise) or persons and entities with relationships with us. Certain of the underwriters and their affiliates that have a lending relationship with us routinely hedge their credit exposure to the Company consistent with their customary risk management policies. Typically, such underwriters and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities, including potentially the Shares. Any such credit default swaps or short positions could adversely affect future trading prices of the Shares. The underwriters and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long or short positions in such assets, securities and instruments.
Affiliates of certain of the underwriters serve as lenders under the Key Facility and may serve as lenders or in other roles under any future credit facilities. Some of the underwriters and/or their affiliates were underwriters in connection with our initial public offerings and follow-on public offerings for which they received customary fees. Affiliates of certain of the underwriters are expected to receive part of the proceeds of the offering if we use proceeds from this offering to repay certain amounts outstanding under the Key Facility.
Certain legal matters regarding the shares of common stock offered by this prospectus supplement will be passed upon for us by Dechert LLP. Dechert LLP has from time to time represented the underwriters on unrelated matters. Certain legal matters in connection with the shares of common stock offered hereby will be passed upon for the underwriters by Ropes & Gray LLP.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The consolidated financial statements of Horizon Technology Finance Corporation as of December 31, 2022 and 2021 and for each of the years in the three-year period ended December 31, 2022 incorporated in this Prospectus by reference from the Horizon Technology Finance Corporation Annual Report on Form 10-K for the year ended December 31, 2022 have been audited by RSM US LLP, an independent registered public accounting firm, as stated in their report thereon, incorporated herein by reference, and have been incorporated in this Prospectus and Registration Statement in reliance upon such report and upon the authority of such firm as experts in accounting and auditing.
INCORPORATION BY REFERENCE
We incorporate by reference in this prospectus supplement the documents listed below and any future reports and other documents we file with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, until all of the securities offered by this prospectus supplement have been sold or we otherwise terminate the offering of these securities (such reports and other documents deemed to be incorporated by reference into this prospectus supplement and to be part hereof from the date of filing of such reports and other documents); provided, however, that information “furnished” under Item 2.02 or Item 7.01 of Form 8-K, or other information “furnished” to the SEC pursuant to the Exchange Act will not be incorporated by reference into this prospectus supplement:
Any reports filed by us with the SEC before the date that any offering of any securities by means of this prospectus supplement and the accompanying prospectus is terminated will automatically update and, where applicable, supersede any information contained in this prospectus supplement and the accompanying prospectus or incorporated by reference into this prospectus supplement and the accompanying prospectus.
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our Annual Report on Form 10-K for fiscal year ended December 31, 2022, filed with the SEC on February 28, 2023; |
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| ● | our Quarterly Report on Form 10-Q for fiscal quarter ended March 31, 2023, filed with the SEC on May 2, 2023; | |
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our Current Reports on Form 8-K, filed with the SEC on February 28, 2023, March 13, 2023, March 14, 2023, May 2, 2023, May 25, 2023 and May 25, 2023; and |
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● |
our Definitive Proxy Statement on Schedule 14A, filed with the SEC on April 6, 2023 (to the extent incorporated by reference into Part III of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022). |
To obtain copies of these filings, see “Available Information” in this prospectus supplement.
We have filed with the SEC a universal shelf registration statement, of which this prospectus supplement and the accompanying prospectus form a part, on Form N-2, together with all amendments and related exhibits, under the Securities Act, with respect to our shares of common stock offered by this prospectus supplement and the accompanying prospectus. The registration statement contains additional information about us and our shares of common stock being offered by this prospectus supplement and the accompanying prospectus.
We file with or submit to the SEC annual, quarterly and current periodic reports, proxy statements and other information meeting the informational requirements of the Exchange Act. The SEC maintains a website that contains reports, proxy and information statements and other information filed electronically by us with the SEC at www.sec.gov. Copies of these reports, proxy and information statements and other information may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov. We maintain a website at www.horizontechfinance.com and make all of our annual, quarterly and current reports, proxy statements and other publicly filed information available, free of charge, on or through our website. This information is also available, free of charge, by contacting us at 312 Farmington Avenue, Farmington, Connecticut 060302, Attention: Investor Relations, or by calling us collect at (860) 676-8654. Information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus supplement or the accompanying prospectus, and you should not consider such information to be part of this prospectus supplement or the accompanying prospectus.
$350,000,000
Horizon Technology Finance Corporation
Common Stock
Preferred Stock
Subscription Rights
Debt Securities
Warrants
We are a non-diversified closed-end management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). We are externally managed by Horizon Technology Finance Management LLC, a registered investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). 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 make secured debt investments to development stage companies in the technology, life science, healthcare information and services and sustainability industries.
We may offer, from time to time, in one or more offerings or series, together or separately, up to $350,000,000 of our common stock, preferred stock, subscription rights, debt securities or warrants representing rights to purchase shares of our common stock, preferred stock or debt securities, which we refer to, collectively, as the “securities.”
We may sell our securities through underwriters or dealers, “at-the-market” to or through a market maker into an existing trading market or otherwise directly to one or more purchasers or through agents or through a combination of methods of sale. The identities of such underwriters, dealers, market makers or agents, as the case may be, will be described in one or more supplements to this prospectus. The securities may be offered at prices and on terms to be described in one or more supplements to this prospectus. In the event we offer common stock or warrants or rights to acquire such common stock hereunder, the offering price per share of our common stock less any underwriting commissions or discounts will not be less than the net asset value per share of our common stock at the time we make the offering except (1) in connection with the exercise of certain warrants, options or rights whose issuance has been approved by our stockholders at an exercise or conversion price not less than the market value of our common stock at the date of issuance (or, if no such market value exists, the net asset value per share of our common stock as of such date); (2) to the extent such an offer or sale is approved by our stockholders and by our board of directors (our “Board”); or (3) under such other circumstances as may be permitted under the 1940 Act or by the Securities and Exchange Commission (the “SEC”).
Our common stock is listed on The Nasdaq Global Select Market (“Nasdaq”) under the symbol “HRZN”. In addition, our 4.875% Notes due 2026 trade on the New York Stock Exchange under the ticker symbol “HTFB”. On June 28, 2021, the last reported sale price of a share of our common stock on Nasdaq was $17.24. The net asset value per share of our common stock at March 31, 2021 (the last date prior to the date of this prospectus on which we determined net asset value) was $11.07.
Shares of closed-end investment companies, including BDCs, frequently trade at a discount to their net asset value. If our shares trade at a discount to net asset value, it may increase the risk of loss for purchasers in an offering made pursuant to this prospectus or any related prospectus supplement. You should review carefully the risks and uncertainties, including the risk of leverage and dilution, described in the section titled “Risk Factors” beginning on page 11 of this prospectus or otherwise incorporated by reference herein and included in, or incorporated by reference into, the applicable prospectus supplement and in any free writing prospectuses we have authorized for use in connection with a specific offering, and under similar headings in the other documents that are incorporated by reference into this prospectus before investing in our securities.
This prospectus and any accompanying prospectus supplement contain important information you should know before investing in our securities and should be retained for future reference. We file annual, quarterly and current reports, proxy statements and other information about us with the SEC. We maintain a website at www.horizontechfinance.com and intend to make all of the foregoing information available, free of charge, on or through our website. You may also obtain such information by contacting us at 312 Farmington Avenue, Farmington, Connecticut 06032, or by calling us collect at (860) 676-8654. The SEC maintains a website at www.sec.gov where such information is available without charge. Information contained on our website is not incorporated by reference into this prospectus, and you should not consider information contained on our website to be part of this prospectus.
The individual securities in which we invest will not be rated by any rating agency. If they were, they would be rated as below investment grade or “junk.” Indebtedness of below investment grade quality has predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal.
Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
This prospectus may not be used to consummate sales of securities unless accompanied by a prospectus supplement.
The date of this prospectus is , 2021
You should rely only on the information contained in this prospectus or any accompanying supplement to this prospectus. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. This prospectus and any accompanying prospectus supplement do not constitute an offer to sell or a solicitation of any offer to buy any security other than the registered securities to which they relate. You should assume that the information in this prospectus is accurate only as of the date of this prospectus. Our business, financial condition and prospects may have changed since that date. We will update this prospectus to reflect material changes to the information contained herein.
TABLE OF CONTENTS
This prospectus is part of a registration statement that we have filed with the Securities and Exchange Commission, using the “shelf” registration process. Under the shelf registration process, we may offer, from time to time, up to $350,000,000 of our common stock, preferred stock, subscription rights, debt securities or warrants representing rights to purchase shares of our common stock, preferred stock or debt securities on terms to be determined at the time of the offering.
This prospectus provides you with a general description of the securities that we may offer. Each time we use this prospectus to offer securities, we will provide a prospectus supplement that will contain specific information about the terms of that offering. We may also authorize one or more free writing prospectuses to be provided to you that may contain material information relating to these offerings. In a prospectus supplement or free writing prospectus, we may also add, update, or change any of the information contained in this prospectus or in the documents we have incorporated by reference into this prospectus. This prospectus, together with the applicable prospectus supplement, any related free writing prospectus, and the documents incorporated by reference into this prospectus and the applicable prospectus supplement, will include all material information relating to the applicable offering. Before buying any of the securities being offered, please carefully read this prospectus, any accompanying prospectus supplement, any free writing prospectus and the documents incorporated by reference into this prospectus and any accompanying prospectus supplement.
This prospectus may contain estimates and information concerning our industry, including market size and growth rates of the markets in which we participate, that are based on industry publications and other third-party reports. This information involves many assumptions and limitations, and you are cautioned not to give undue weight to these estimates. We have not independently verified the accuracy or completeness of the data contained in these industry publications and reports. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described or referenced in the section titled “Risk Factors,” that could cause results to differ materially from those expressed in these publications and reports.
This prospectus includes summaries of certain provisions contained in some of the documents described in this prospectus, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed or incorporated by reference, or will be filed or incorporated by reference, as exhibits to the registration statement of which this prospectus is a part, and you may obtain copies of those documents as described in the section titled “Available Information.”
You should rely only on the information included or incorporated by reference into this prospectus, any prospectus supplement or in any free writing prospectus prepared by us or on our behalf or to which we have referred you. We have not authorized any dealer, salesperson or other person to provide you with different information or to make representations as to matters not stated in this prospectus, in any accompanying prospectus supplement or in any free writing prospectus prepared by us or on our behalf or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus, any accompanying prospectus supplement and any free writing prospectus prepared by us or on our behalf or to which we have referred you do not constitute an offer to sell, or a solicitation of an offer to buy, any securities by any person in any jurisdiction where it is unlawful for that person to make such an offer or solicitation or to any person in any jurisdiction to whom it is unlawful to make such an offer or solicitation. You should not assume that the information included or incorporated by reference into this prospectus, in any accompanying prospectus supplement or in any such free writing prospectus is accurate as of any date other than their respective dates. Our financial condition, results of operations and prospects may have changed since any such date. To the extent required by law, we will amend or supplement the information contained or incorporated by reference into this prospectus and any accompanying prospectus supplement to reflect any material changes to such information subsequent to the date of the prospectus and any accompanying prospectus supplement and prior to the completion of any offering pursuant to the prospectus and any accompanying prospectus supplement.
This summary highlights some of the information included elsewhere in this prospectus or incorporated by reference. It is not complete and may not contain all of the information that you should consider before making your investment decision. You should carefully read the entire prospectus, the applicable prospectus supplement, and any related free writing prospectus, including the risks of investing in our securities discussed in the section titled “Risk Factors” in the applicable prospectus supplement and any related free writing prospectus, and under similar headings in the other documents that are incorporated by reference into this prospectus and the applicable prospectus supplement. Before making your investment decision, you should also carefully read the information incorporated by reference into this prospectus, including our financial statements and related notes, and the exhibits to the registration statement of which this prospectus is a part. Any yield information contained or incorporated by reference into this prospectus related to investments in our investment portfolio is not intended to approximate a return on your investment in us and does not take into account other aspects of our business, including our operating and other expenses, or other costs incurred by you in connection with your investment in us
In this prospectus, except where the context suggests otherwise, the terms:
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“we,” “us,” “our,” “the Company” and “Horizon Technology Finance” refer to Horizon Technology Finance Corporation, a Delaware corporation, and its consolidated subsidiaries; |
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The “Advisor” and the “Administrator” refer to Horizon Technology Finance Management LLC, a Delaware limited liability company; |
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“Key” refers to KeyBank National Association and “Key Facility” refers to the revolving credit facility with Key; |
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“NYL Noteholders” refers to several entities owned or affiliated with New York Life Insurance Company and “NYL Facility” refers to the credit facility where the notes are issued to the NYL Noteholders; |
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“Credit Facilities” refers to collectively the Key Facility and the NYL Facility; |
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“2026 Notes” or “Debt Securities” refers to the $57.5 million aggregate principal amount of our 4.875% unsecured notes due 2026, which were issued by us in March 2021; and |
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“2019-1 Securitization” refers to the $160.0 million securitization of secured loans we completed on August 13, 2019. |
Our company
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 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.” 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.
We are an externally managed, closed-end, non-diversified management investment company that has elected to be regulated as a business development company, or BDC, under the Investment Company Act of 1940, as amended, or the 1940 Act. In addition, for U.S. federal income tax purposes, we have elected to be treated as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code. As a BDC, we are required to comply with regulatory requirements, including limitations on our use of debt. We are permitted to, and expect to, finance our investments through borrowings. Under Section 61(a)(2) of the 1940 Act we have received approval from our stockholders to reduce our asset coverage requirement from 200% to 150%. The amount of leverage that we may employ will depend on our assessment of market conditions and other factors at the time of any proposed borrowing. As a RIC, we generally are not subject to pay corporate-level income taxes on our investment company taxable income, determined without regard to any deductions for dividends paid, and our net capital gain that we distribute as dividends for U.S. federal income tax purposes to our stockholders as long as we meet certain source-of-income, distribution, asset diversification and other requirements.
We are externally managed and advised by our Advisor. Our Advisor manages our day-to-day operations and also provides all administrative services necessary for us to operate.
Our advisor
Our investment activities are managed by our Advisor, and we expect to continue to benefit from our Advisor’s ability to identify attractive investment opportunities, conduct diligence on and value prospective investments, negotiate investments and manage our portfolio of investments. In addition to the experience gained from the years that they have worked together both at our Advisor and prior to the formation of our Advisor, the members of our investment team have broad lending backgrounds, with substantial experience at a variety of commercial finance companies, technology banks and private debt funds, and have developed a broad network of contacts within the venture capital and private equity community. This network of contacts provides a principal source of investment opportunities.
Our Advisor is led by six senior managers including Robert D. Pomeroy, Jr., our Chief Executive Officer, Gerald A. Michaud, our President, Daniel R. Trolio, our Senior Vice President and Chief Financial Officer, John C. Bombara, our Senior Vice President, General Counsel and Chief Compliance Officer, Daniel S. Devorsetz, our Senior Vice President and Chief Investment Officer and Diane Earle, our Senior Vice President and Chief Credit Officer.
Our strategy
Our investment objective is to maximize our investment portfolio’s total return by generating current income from the loans we make and capital appreciation from the warrants we receive when making such debt investments. To further implement our business strategy, we expect our Advisor to continue to employ the following core strategies:
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Structured investments in the venture capital and private and public equity markets. We make loans to development-stage companies within our Target Industries typically in the form of secured loans. The secured debt structure provides a lower risk strategy, as compared to equity or unsecured debt investments, to participate in the emerging technology markets because the debt structures we typically utilize provide collateral against the downside risk of loss, provide return of capital in a much shorter timeframe through current-pay interest and amortization of principal and have a senior position to equity in the borrower’s capital structure in the case of insolvency, wind down or bankruptcy. Unlike venture capital and private equity investments, our investment returns and return of our capital do not require equity investment exits such as mergers and acquisitions or initial public offerings. Instead, we receive returns on our debt investments primarily through regularly scheduled payments of principal and interest and, if necessary, liquidation of the collateral supporting the debt investment upon a default. Only the potential gains from warrants depend upon equity investment exits. |
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“Enterprise value” lending. We and our Advisor take an enterprise value approach to structuring and underwriting loans. Enterprise value includes the implied valuation based upon recent equity capital invested as well as the intrinsic value of the applicable portfolio company’s particular technology, service or customer base. We secure our lien position against the enterprise value of each portfolio company. |
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Creative products with attractive risk-adjusted pricing. Each of our existing and prospective portfolio companies has its own unique funding needs for the capital provided from the proceeds of our Venture Loans. These funding needs include funds for additional development “runways”, funds to hire or retain sales staff or funds to invest in research and development in order to reach important technical milestones in advance of raising additional equity. Our loans include current-pay interest, commitment fees, end-of-term payments, or ETPs, pre-payment fees, success fees and non-utilization fees. We believe we have developed pricing tools, structuring techniques and valuation metrics that satisfy our portfolio companies’ financing requirements while mitigating risk and maximizing returns on our investments. |
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• |
Opportunity for enhanced returns. To enhance our debt investment portfolio returns, in addition to interest and fees, we frequently obtain warrants to purchase the equity of our portfolio companies as additional consideration for making debt investments. The warrants we obtain generally include a “cashless exercise” provision to allow us to exercise these rights without requiring us to make any additional cash investment. Obtaining warrants in our portfolio companies has allowed us to participate in the equity appreciation of our portfolio companies, which we expect will enable us to generate higher returns for our investors. |
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|
• |
Direct origination. We originate transactions directly with technology, life science, healthcare information and services and sustainability companies. These transactions are referred to our Advisor from a number of sources, including referrals from, or direct solicitation of, venture capital and private equity firms, portfolio company management teams, legal firms, accounting firms, investment banks, portfolio company advisors and other lenders that represent companies within our Target Industries. Our Advisor has been the sole or lead originator in substantially all transactions in which the funds it manages have invested. |
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• |
Disciplined and balanced underwriting and portfolio management. We use a disciplined underwriting process that includes obtaining information validation from multiple sources, extensive knowledge of our Target Industries, comparable industry valuation metrics and sophisticated financial analysis related to development-stage companies. Our Advisor’s due diligence on investment prospects includes obtaining and evaluating information on the prospective portfolio company’s technology, market opportunity, management team, fund raising history, investor support, valuation considerations, financial condition and projections. We seek to balance our investment portfolio to reduce the risk of down market cycles associated with any particular industry or sector, development-stage or geographic area by quarterly reviewing each criteria and, in the event there is an overconcentration, seeking investment opportunities to reduce such overconcentration. Our Advisor employs a “hands on” approach to portfolio management, requiring private portfolio companies to provide monthly financial information and to participate in regular updates on performance and future plans. For public companies, our Advisor typically relies on publicly reported quarterly financials. |
|
• |
Use of leverage. We use leverage to increase returns on equity through our Credit Facilities, through our 2026 Notes and through our 2019-1 Securitization. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and capital resources” in our Annual Report on Form 10-K for additional information about our use of leverage. In addition, we may issue additional debt securities or preferred stock in one or more series in the future. |
Market opportunity
We focus our investments primarily in our Target Industries. The technology sectors we focus on include communications, networking, data storage, software, cloud computing, semiconductor, internet and media and consumer-related technologies. The life science sectors we focus on include biotechnology, drug discovery, drug delivery, bioinformatics and medical devices. The healthcare information and services sectors we focus on include diagnostics, electronic medical record services and software and other healthcare related services and technologies that improve efficiency and quality of administered healthcare. The sustainability sectors we focus on include alternative energy, power management, energy efficiency, green building materials and waste recycling. We refer to all of these companies as “technology-related” companies because the companies are developing or offering goods and services to businesses and consumers which utilize scientific knowledge, including techniques, skills, methods, devices and processes, to solve problems. We intend, under normal market conditions, to invest at least 80% of the value of our total assets in such companies.
We believe that Venture Lending has the potential to achieve enhanced returns that are attractive notwithstanding the high degree of risk associated with lending to development-stage companies. Potential benefits include:
|
• |
interest rates that typically exceed rates that would be available to portfolio companies if they could borrow in traditional commercial financing transactions; |
|
• |
the debt investment support provided by cash proceeds from equity capital invested by venture capital and private equity firms or access to public equity markets to access capital; |
|
• |
relatively rapid amortization of principal; |
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|
• |
senior ranking to equity and collateralization of debt investments to minimize potential loss of capital; and |
|
• |
potential equity appreciation through warrants. |
We believe that Venture Lending also provides an attractive financing source for portfolio companies, their management teams and their equity capital investors, as it:
|
• |
is typically less dilutive to the equity holders than additional equity financing; |
|
• |
extends the time period during which a portfolio company can operate before seeking additional equity capital or pursuing a sale transaction or other liquidity event; and |
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• |
allows portfolio companies to better match cash sources with uses. |
Competitive strengths
We believe that we, together with our Advisor, possess significant competitive strengths, which include the following:
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• |
Consistently execute commitments and close transactions. Our Advisor and its senior management and investment professionals have an extensive track record of originating, underwriting and managing Venture Loans. Our Advisor and its predecessor have directly originated, underwritten and managed Venture Loans with an aggregate original principal amount over $2.0 billion to more than 270 companies since operations commenced in 2004. |
|
• |
Robust direct origination capabilities. Our Advisor has significant experience originating Venture Loans in our Target Industries. This experience has given our Advisor a deep knowledge of our Target Industries and an extensive base of transaction sources and references. |
|
• |
Highly experienced and cohesive management team. Most of our Advisor’s senior management team of experienced professionals has been together since our inception. This consistency allows companies, their management teams and their investors to rely on consistent and predictable service, loan products and terms and underwriting standard. |
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• |
Relationships with venture capital and private equity investors. Our Advisor has developed strong relationships with venture capital and private equity firms and their partners. |
|
• |
Well-known brand name. Our Advisor has originated Venture Loans to more than 270 companies in our Target Industries under the “Horizon Technology Finance” brand. |
Our portfolio
From the commencement of operations of our predecessor on March 4, 2008 through March 31, 2021, we funded debt investments to 270 portfolio companies and invested $2.0 billion in debt investments. As of March 31, 2021, our debt investment portfolio consisted of 37 debt investments with an aggregate fair value of $361.8 million. As of March 31, 2021, 97.4%, or $352.2 million, of our debt investment portfolio at fair value consisted of Senior Term Loans. As of March 31, 2021, our net assets were $217.7 million, and all of our debt investments were secured by all or a portion of the tangible and intangible assets of the applicable portfolio company. The debt investments in our portfolio are generally not rated by any rating agency. If the individual debt investments in our portfolio were rated, they would be rated below “investment grade”. Debt investments that are unrated or rated below investment grade are sometimes referred to as “junk bonds” and have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal.
For the three months ended March 31, 2021, our dollar-weighted annualized yield on average debt investments was 15.2%. We calculate the dollar-weighted yield on average debt investments for any period as (1) total investment income during the period divided by (2) the average of the fair value of debt investments outstanding on (a) the last day of the calendar month immediately preceding the first day of the period and (b) the last day of each calendar month during the period. The dollar-weighted annualized yield on average debt investments is higher than what investors will realize because it does not reflect our expenses or any sales load paid by investors.
For the three months ended March 31, 2021, our investment portfolio had an overall total yield of 14.4%. We calculate the dollar-weighted annualized yield on average investment type for any period as (1) total related investment income during the period divided by (2) the average of the fair value of the investment type outstanding on (a) the last day of the calendar month immediately preceding the first day of the period and (b) the last day of each calendar month during the period. The dollar-weighted annualized yield on average investment type is higher than what investors will realize because it does not reflect our expenses or any sales load paid by investors.
See “Business” in Part I, Item 1 in our most recent Annual Report on Form 10-K for additional information about us.
Risk factors
Our business is subject to numerous risks, as described in the section titled “Risk Factors” in the applicable prospectus supplement and in any free writing prospectuses we have authorized for use in connection with a specific offering, and under similar headings in the documents that are incorporated by reference into this prospectus, including the section titled “Risk Factors” included in our most recent Annual Report on Form 10-K, in our most recent Quarterly Report on Form 10-Q, as well as in any of our subsequent SEC filings.
Company information
Our administrative and executive offices and those of our Advisor are located at 312 Farmington Avenue, Farmington, Connecticut 06032, and our telephone number is (860) 676-8654. Our corporate website is located at www.horizontechfinance.com. Information contained on our website is not incorporated by reference into this prospectus, and you should not consider information contained on our website to be part of this prospectus.
We may offer, from time to time, up to $350,000,000 of our common stock, preferred stock, subscription rights, debt securities and/or warrants representing rights to purchase shares of our common stock, preferred stock or debt securities on terms to be determined at the time of the offering. Any debt securities, preferred stock, warrants and subscription rights offered by means of this prospectus may be convertible or exchangeable into shares of our common stock, on terms to be determined at the time of the offering. We will offer our securities at prices and on terms to be set forth in one or more supplements to this prospectus and any related free writing prospectus.
We may offer our securities directly to one or more purchasers, including existing stockholders in a rights offering, through agents that we designate from time to time or to or through underwriters or dealers. The prospectus supplement relating to each offering will identify any agents or underwriters involved in the sale of our securities and will set forth any applicable purchase price, fee, commission or discount arrangement between us and our agents or underwriters or among our underwriters or the basis upon which such amount may be calculated. See “Plan of Distribution.” We may not sell any of our securities through agents, underwriters or dealers without delivery of a prospectus supplement describing the method and terms of the offering of our securities.
Set forth below is additional information regarding offerings of our securities:
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Use of proceeds |
We intend to use the net proceeds from selling our securities to make new investments in portfolio companies in accordance with our investment objective and strategies as described in this prospectus and for working capital and general corporate purposes. |
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Listing |
Our common stock is traded on Nasdaq under the symbol “HRZN.” Our 2026 Notes trade on the New York Stock Exchange, or NYSE, under the ticker symbol “HTFB.” |
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Distributions |
We intend to continue to pay monthly distributions to our stockholders out of assets legally available for distribution. Our distributions, if any, will be determined by our Board. Our ability to declare distributions depends on our earnings, our overall financial condition (including our liquidity position), maintenance of RIC status and such other factors as our Board may deem relevant from time to time. |
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To the extent our taxable earnings fall below the total amount of our distributions for any given fiscal year, a portion of those distributions may be deemed to be a return of capital to our common stockholders for U.S. federal income tax purposes. Thus, the source of a distribution to our stockholders may be the original capital invested by the stockholder rather than our income or gains. Stockholders should read any written disclosure accompanying a distribution payment carefully and should not assume that the source of any distribution is our ordinary income or gains. |
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Taxation |
We have elected to be treated as a RIC. Accordingly, we generally will not incur corporate-level income taxes on any investment company taxable income determined without regard to any deductions for dividends paid and net capital gains that we distribute as dividends for U.S. federal income tax purposes to our stockholders. To maintain RIC tax treatment, we must meet specified source-of-income and asset diversification requirements and distribute annually an amount generally equal to 90% of our investment company taxable income, determined without regard to any deduction for dividends paid. |
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Leverage |
We borrow funds to make additional investments. We use this practice, which is known as “leverage,” to attempt to increase returns to our stockholders, but it involves significant risks. See “Risk Factors.” As of this prospectus, we are allowed to borrow amounts such that our asset coverage, as calculated pursuant to the 1940 Act, equals at least 150% after such borrowing (i.e., we are able to borrow up to two dollars for every dollar we have in assets less all liabilities and indebtedness not represented by senior securities issued by us). For more information, see “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 1A — Risk Factors — General Risk Factors — We borrow money, which magnifies the potential for gain or loss on amounts invested and may increase the risk of investing in us” in our most recent Annual Report on Form 10-K. |
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Trading at a discount |
Shares of closed-end investment companies, including BDCs, frequently trade at a discount to their net asset value. This risk is separate and distinct from the risk that our net asset value per share may decline. We cannot predict whether our common stock will trade above, at or below net asset value. |
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Dividend Reinvestment Plan |
We have adopted a DRIP for our stockholders. The dividend reinvestment plan is an “opt out” DRIP. As a result, distributions to our stockholders are automatically reinvested in additional shares of our common stock, unless a stockholder specifically “opts out” of the DRIP so as to receive cash distributions. Stockholders who receive distributions in the form of stock will generally be subject to the same federal, state and local tax consequences as stockholders who elect to receive their distributions in cash. See “Dividend Reinvestment Plan.” |
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Sales of common stock below net asset value |
In the event we offer common stock or warrants or rights to acquire such common stock, the offering price per share of our common stock less any underwriting commissions or discounts will not be less than the net asset value per share of our common stock at the time we make the offering except (1) in connection with the exercise of certain warrants, options or rights whose issuance has been approved by our stockholders at an exercise or conversion price not less than the market value of our common stock at the date of issuance (or, if no such market value exists, the net asset value per share of our common stock as of such date); (2) to the extent such an offer or sale is approved by stockholders holding a majority of our outstanding securities and our Board; or (3) under such other circumstances as may be permitted under the 1940 Act or by the SEC. For purposes of (2) above, a “majority” of outstanding securities is defined in the 1940 Act as (i) 67% or more of the voting securities present at a stockholders’ meeting if the holders of more than 50% of our outstanding voting securities are present or represented by proxy; or (ii) 50% of our outstanding voting securities, whichever is less. |
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Available information |
We are required to file periodic reports, current reports, proxy statements and other information with the SEC. This information is available on the SEC’s website at www.sec.gov. You may also obtain such information by contacting us at 312 Farmington Avenue, Farmington, Connecticut 06032 or by calling us at (860) 676-8654. We intend to provide much of the same information on our website at www.horizontechfinance.com. Information contained on our website is not part of this prospectus or any prospectus supplement and should not be relied upon as such. |
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Incorporation of Certain Information by Reference |
This prospectus is part of a registration statement that we have filed with the SEC. In accordance with the Small Business Credit Availability Act, or SBCAA, we are allowed to “incorporate by reference” the information that we file with the SEC, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to comprise a part of this prospectus from the date we file that information. Any reports filed by us with the SEC subsequent to the date of this prospectus until we have sold all of the securities offered by this prospectus or the offering is otherwise terminated will automatically update and, where applicable, supersede any information contained in this prospectus or incorporated by reference into this prospectus. See “Incorporation of Certain Information by Reference” in this prospectus. |
The following table is intended to assist you in understanding the costs and expenses that an investor will bear directly or indirectly. However, we caution you that some of the percentages indicated in the table below are estimates and may vary. The following table and example should not be considered a representation of our future expenses. Actual expenses may be greater or less than shown. Except where the context suggests otherwise, whenever this prospectus contains a reference to fees or expenses paid by “you” or “us” or that “we” will pay fees or expenses, stockholders will indirectly bear such fees or expenses as investors in the Company.
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Stockholder Transaction Expenses |
||||
|
Sales Load (as a percentage of offering price) |
— |
%(1) |
||
|
Offering Expenses (as a percentage of offering price) |
— |
%(2) |
||
|
Dividend Reinvestment Plan Fees |
— |
%(3) |
||
|
Total Stockholder Transaction Expenses (as a percentage of offering price) |
— |
% |
||
|
Annual Expenses (as a Percentage of Net Assets Attributable to Common Shares)(4) |
||||
|
Base Management Fees |
4.02 |
%(5) |
||
|
Incentive Fees Payable Under the Investment Management Agreement |
3.17 |
%(6) |
||
|
Interest Payments on Borrowed Funds |
5.44 |
%(7) |
||
|
Other Expenses (estimated for the current fiscal year) |
1.72 |
%(8) |
||
|
Total Annual Expenses |
14.35 |
%(9) |
|
(1) |
In the event that securities to which this prospectus relates are sold to or through underwriters or agents, a corresponding prospectus supplement will disclose the applicable sales load. |
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(2) |
In the event that we conduct an offering of any of our securities, a corresponding prospectus supplement will disclose the estimated offering expenses because they will be ultimately borne by the stockholders. |
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(3) |
The expenses of the DRIP are included in “Other Expenses” in the table. For instance, if a participant directs the plan administrator to sell part or all of the shares held by the plan administrator in the participant’s account and to remit the proceeds of such sale to the participant, then the plan administrator is authorized to deduct a $15.00 transaction fee plus a $0.10 per share trading fee from such proceeds. See “Dividend Reinvestment Plan.” |
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(4) |
Net Assets Attributable to Common Stock is based on our net assets at March 31, 2021. |
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(5) |
Our base management fee under the Investment Management Agreement is based on our gross assets, less cash and cash equivalents, which includes assets acquired using leverage, including any leverage incurred under this prospectus, and is payable monthly in arrears. The management fee referenced in the table above is based on our gross assets, less cash and cash equivalents, of $388 million as of March 31, 2021, including assets to be or will be acquired using leverage over the next twelve months, which management estimates will be in the amount of $117 million. See Note 3 “Related Party Transactions—Investment Management Agreement” of our Consolidated Financial Statements in Part I, Item 1 of our most recent Quarterly Report on Form 10-Q. |
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(6) |
The incentive payable to our Advisor represents our estimated annual expense incurred under the first part of the incentive fee payable under the Investment Management Agreement over the next twelve months. As of March 31, 2021, our cumulative realized capital gains and unrealized capital appreciation did not exceed our cumulative realized capital losses and unrealized capital depreciation. Given our strategy of investing primarily in Venture Loans, which are fixed-income assets, we believe it is unlikely that our cumulative realized capital gains and unrealized capital appreciation will exceed our cumulative realized capital losses and unrealized capital depreciation in the next twelve months. Consequently, we do not expect to incur any Incentive Fee Capital Gains during the next twelve months. As we cannot predict the occurrence of any capital gains from the portfolio, we have assumed no Incentive Fee Capital Gains. See Note 3 “Related Party Transactions—Investment Management Agreement” of our Consolidated Financial Statements in Part I, Item 1 of our most recent Quarterly Report on Form 10-Q. |
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(7) |
Interest payments on borrowed funds represent our estimated annual interest payments on borrowed funds based on current debt levels as adjusted for projected increases in debt levels over the next twelve months. |
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(8) |
Includes our overhead expenses, including payments under the Administration Agreement, based on our allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement. See Note 3 “Related Party Transactions— Administration Agreement” of our Consolidated Financial Statements in Part I, Item 1 of our most recent Quarterly Report on Form 10-Q. “Other Expenses” are based on estimated amounts to be incurred during the current fiscal year. |
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(9) |
“Total Annual Expenses” as a percentage of consolidated net assets attributable to common stock are higher than the total annual expenses percentage would be for a company that is not leveraged. We borrow money to leverage our net assets and increase our total assets. The SEC requires that the “Total Annual Expenses” percentage be calculated as a percentage of net assets (defined as total assets less indebtedness and after taking into account any incentive fees payable during the period), rather than the total assets, including assets that have been funded with borrowed monies. |
Example
The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock. In calculating the following expense amounts, we have assumed that our annual operating expenses remain at the levels set forth in the table above. In the event that shares to which this prospectus relates are sold to or through underwriters or agents, a corresponding prospectus supplement will restate this example to reflect the applicable sales load and estimated offering expenses.
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1 Year |
3 Years |
5 Years |
10 Years |
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You would pay the following expenses on a $1,000 investment, assuming a 5% annual return (assumes no return from net realized capital gains or net unrealized capital appreciation) |
$ | 136.79 | $ | 373.20 | $ | 567.47 | $ | 914.83 | ||||||||
The example and the expenses in the tables above should not be considered a representation of our future expenses, and actual expenses may be greater or lesser than those shown.
While the example assumes, as required by the applicable rules of the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%. The incentive fee under the Investment Management Agreement is unlikely to be significant assuming a 5% annual return and is not included in the example. This illustration assumes that we will not realize any capital gains (computed net of all realized capital losses and unrealized capital depreciation) in any of the indicated time periods. If we achieve sufficient returns on our investments, including through the realization of capital gains, to trigger an incentive fee of a material amount, our distributions to our common stockholders and our expenses would likely be higher.
The following example demonstrates the projected dollar amount of total cumulative expenses that would be incurred over various periods with respect to a hypothetical investment in our common stock assuming a 5% annual return derived entirely from capital gains.
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1 Year |
3 Years |
5 Years |
10 Years |
|||||||||||||
|
You would pay the following expenses on a $1,000 investment, assuming a 5% annual return (assumes return from only realized capital gains and thus subject to the capital gains incentive fee) |
$ | 117.43 | $ | 327.59 | $ | 508.66 | $ | 859.12 | ||||||||
In addition, while the examples assume reinvestment of all dividends and other distributions at net asset value, participants in our DRIP receive a number of shares of our common stock determined by dividing the total dollar amount of the distribution payable to a participant by the market price per share of our common stock at the close of trading on the valuation date for the distribution. This price may be at, above or below net asset value. See “Dividend Reinvestment Plan” for additional information regarding our DRIP.
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The information in “Item 6. Selected Consolidated Financial Data” of our most recent annual report on Form 10-K, “Part I — Consolidated Statements of Assets and Liabilities” of our most recent quarterly report on Form 10-Q and “Part I — Consolidated Statements of Operations” of our most recent quarterly report on Form 10-Q is incorporated by reference herein.
Investing in our securities involves a high degree of risk. Before deciding whether to invest in our securities, you should carefully consider the risks and uncertainties described in the section titled “Risk Factors” in the applicable prospectus supplement and any related free writing prospectus, and discussed in the section titled “Risk Factors” in Part I, Item 1A of our most recent Annual Report on Form 10-K and any subsequent filings we have made with the SEC that are incorporated by reference into this prospectus or any prospectus supplement, together with other information in this prospectus, the documents incorporated by reference into this prospectus or any prospectus supplement, and any free writing prospectus that we may authorize for use in connection with this offering. The risks described in these documents are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. Past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results or trends in future periods. If any of these risks actually occurs, our business, reputation, financial condition, results of operations, revenue, and future prospects could be seriously harmed. This could cause our net asset value and the trading price of our securities to decline, resulting in a loss of all or part of your investment. Please also read carefully the section titled “Cautionary Note Regarding Forward-Looking Statements” in this prospectus.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the documents we incorporate by reference herein, contains, and any applicable prospectus supplement or free writing prospectus, including the documents we incorporate by reference therein, contain forward-looking statements that involve substantial risks and uncertainties. The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us or are within our control. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. We undertake no obligation to revise or update any forward-looking statements but advise you to consult any additional disclosures that we may make directly to you or through reports that we may file in the future with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those expressed or implied by the forward-looking statements. The following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance:
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• |
our future operating results, including the performance of our existing debt investments, warrants and other investments; |
|
• |
the introduction, withdrawal, success and timing of business initiatives and strategies; |
|
• |
general economic and political trends and other external factors, including the current COVID-19 pandemic; |
|
• |
the relative and absolute investment performance and operations of our Advisor; |
|
• |
the impact of increased competition; |
|
• |
the impact of investments we intend to make and future acquisitions and divestitures; |
|
• |
the unfavorable resolution of legal proceedings; |
|
• |
our business prospects and the prospects of our portfolio companies, including our and their ability to achieve our respective objectives as a result of the current COVID-19 pandemic; |
|
• |
the impact, extent and timing of technological changes and the adequacy of intellectual property protection; |
|
• |
our regulatory structure and tax status; |
|
• |
our ability to qualify and maintain qualification as a RIC and as a BDC; |
|
• |
the adequacy of our cash resources and working capital; |
|
• |
the timing of cash flows, if any, from the operations of our portfolio companies; |
|
• |
the impact of interest rate volatility on our results, particularly if we use leverage as part of our investment strategy; |
|
• |
the ability of our portfolio companies to achieve their objectives; |
|
• |
the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to us or our Advisor; |
|
• |
our contractual arrangements and relationships with third parties; |
|
• |
our ability to access capital and any future financings by us; |
|
• |
the ability of our Advisor to attract and retain highly talented professionals; and |
|
• |
the impact of changes to tax legislation and, generally, our tax position. |
This prospectus, and other statements that we may make, may contain forward-looking statements with respect to future financial or business performance, strategies or expectations. Forward-looking statements are typically identified by words or phrases such as “trend,” “opportunity,” “pipeline,” “believe,” “comfortable,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “assume,” “plan,” “potential,” “project,” “outlook,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve” and similar expressions, or future or conditional verbs such as “will,” “would,” “should,” “could,” “may” or similar expressions.
Any forward-looking statement made by us in this prospectus speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the SEC, including our annual reports on Form 10-K, registration statements on Form N-2, quarterly reports on Form 10-Q, current reports on Form 8-K and definitive proxy statements on Schedule 14A. Under Sections 27A(b)(2)(B) of the Securities Act and Section 21E(b)(2)(B) of the Exchange Act, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 do not apply to statements made in connection with any offering of securities pursuant to this prospectus or in the periodic reports we file under the Exchange Act.
Unless otherwise specified in any prospectus supplement accompanying this prospectus, we intend to use the net proceeds from the sale of our securities for investment in portfolio companies in accordance with our investment objective and strategies as described in this prospectus and for working capital and general corporate purposes. We may also use a portion of the net proceeds from the sale of our securities to repay amounts outstanding under the Credit Facilities. We may also use a portion of the net proceeds to redeem the 2026 Notes after they are subject to optional redemption in March 2023. The 2026 Notes bear interest at an annual rate of 4.875% and otherwise mature on March 30, 2026. The supplement to this prospectus relating to an offering will more fully identify the use of proceeds from such offering. We estimate that it will take up to six months for us to substantially invest the net proceeds of any offering made pursuant to this prospectus, depending on the availability of attractive opportunities and market conditions. However, we can offer no assurances that we will be able to achieve this goal.
Pending such use, we will invest the remaining net proceeds of this offering primarily in cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less from the date of investment. These temporary investments may have lower yields than our other investments and, accordingly, may result in lower distributions, if any, during such period. See “Business—Regulation—Temporary Investments” in Part I, Item 1 in our most recent Annual Report on Form 10-K for additional information about temporary investments we may make while waiting to make longer-term investments in pursuit of our investment objective.
PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS
Our common stock is traded on Nasdaq, under the symbol “HRZN”. The following table sets forth, for each fiscal quarter since January 1, 2019, the range of high and low closing sales price of our common stock, the premium or discount of the closing sales price to our NAV and the distributions declared per share by us.
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Closing Sales Price |
Premium/ Discount of High Sales Price to |
Premium/ Discount of Low Sales Price to |
Distributions Declared Per |
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|
Period |
NAV(1) |
High |
Low |
NAV(2) |
NAV(2) |
Share(3) |
||||||||||||||||||
|
Year ended December 31, 2021 |
||||||||||||||||||||||||
|
Second Quarter(4) |
$ | * | $ | 17.83 | $ | 14.57 | * | * | $ | 0.30 | ||||||||||||||
|
First Quarter |
$ | 11.07 | $ | 15.01 | $ | 12.60 | 36 |
% |
14 |
% |
$ | 0.30 | ||||||||||||
|
Year ended December 31, 2020 |
||||||||||||||||||||||||
|
Fourth Quarter |
$ | 11.02 | $ | 13.33 | $ | 11.30 | 21 |
% |
3 |
% |
$ | 0.30 | ||||||||||||
|
Third Quarter |
$ | 11.17 | $ | 12.48 | $ | 10.87 | 12 |
% |
(3 |
)% |
$ | 0.30 | ||||||||||||
|
Second Quarter |
$ | 11.64 | $ | 11.95 | $ | 7.09 | 3 |
% |
(39 |
)% |
$ | 0.30 | ||||||||||||
|
First Quarter |
$ | 11.48 | $ | 13.69 | $ | 5.25 | 19 |
% |
(54 |
)% |
$ | 0.35 | ||||||||||||
|
Year ended December 31, 2019 |
||||||||||||||||||||||||
|
Fourth Quarter |
$ | 11.83 | $ | 12.93 | $ | 11.67 | 9 |
% |
(1 |
)% |
$ | 0.30 | ||||||||||||
|
Third Quarter |
$ | 11.67 | $ | 12.23 | $ | 11.80 | 5 |
% |
1 |
% |
$ | 0.30 | ||||||||||||
|
Second Quarter |
$ | 11.60 | $ | 12.05 | $ | 11.62 | 4 |
% |
— |
% |
$ | 0.30 | ||||||||||||
|
First Quarter |
$ | 11.55 | $ | 13.41 | $ | 11.05 | 16 |
% |
(4 |
)% |
$ | 0.30 | ||||||||||||
|
(1) |
NAV per share determined as of the last day in the relevant quarter and therefore may not reflect the NAV per share on the date of the high and low sales prices. The NAVs shown are based on outstanding shares at the end of each period. |
|
(2) |
Calculated as of the respective high or low closing sales price divided by the quarter end NAV. |
|
(3) |
We have adopted an “opt out” DRIP for our common stockholders. As a result, if we declare a distribution, then stockholders’ cash distributions are automatically reinvested in additional shares of our common stock, unless they specifically opt out of the DRIP so as to receive cash distributions. |
|
(4) |
Through June 28, 2021. |
|
* |
Not yet determined at the time of filing. |
The last reported price for our common stock on June 28, 2021 was $17.24 per share. Our NAV per share on March 31, 2021 (the last date prior to the date of this prospectus on which we determined NAV) was $11.07. The closing sales price of our shares on Nasdaq on that date was $14.57, which represented a 32% premium to NAV per share. As of June 28, 2021 we had 18 stockholders of record, which did not include stockholders for whom shares are held in nominee or “street” name.
Shares of BDCs may trade at a market price that is less than the NAV that is attributable to those shares. The possibility that our shares of common stock will trade at a discount from NAV or at a premium that is unsustainable over the long term is separate and distinct from the risk that our NAV will decrease. It is not possible to predict whether our shares will trade at, above or below NAV in the future.
Issuer Purchases of Equity Securities
On April 23, 2021, our Board extended a previously authorized stock repurchase plan which allows us to repurchase up to $5.0 million of our outstanding common stock. Unless extended by our Board, the repurchase program will expire on the earlier of June 30, 2022 and the repurchase of $5.0 million of common stock. The following table provides information regarding our purchases of our common stock for each quarter since the announcement of the stock repurchase plan through the quarter ended March 31, 2021:
|
Period |
Total |
Average Price |
Total Number |
Approximate |
||||||||||||
|
(In thousands, except share and per share data) |
||||||||||||||||
|
October 1, 2015 through December 31, 2015 |
113,382 | $ | 11.53 | 113,382 | $ | 3,693 | ||||||||||
|
January 1, 2016 through March 31, 2016 |
— | $ | — | — | $ | 3,693 | ||||||||||
|
April 1, 2016 through June 30, 2016 |
— | $ | — | — | $ | 3,693 | ||||||||||
|
July 1, 2016 through September 30, 2016 |
1,319 | $ | 11.54 | 1,319 | $ | 3,678 | ||||||||||
|
October 1, 2016 through December 31, 2016 |
46,841 | $ | 10.63 | 46,841 | $ | 3,180 | ||||||||||
|
January 1, 2017 through March 31, 2017 |
— | $ | — | — | $ | 3,180 | ||||||||||
|
April 1, 2017 through June 30, 2017 |
— | $ | — | — | $ | 3,180 | ||||||||||
|
July 1, 2017 through September 30, 2017 |
5,923 | $ | 9.97 | 5,923 | $ | 3,121 | ||||||||||
|
October 1, 2017 through December 31, 2017 |
— | $ | — | — | $ | 3,121 | ||||||||||
|
January 1, 2018 through March 31, 2018 |
— | $ | — | — | $ | 3,121 | ||||||||||
|
April 1, 2018 through June 30, 2018 |
— | $ | — | — | $ | 3,121 | ||||||||||
|
July 1, 2018 through September 30, 2018 |
— | $ | — | — | $ | 3,121 | ||||||||||
|
October 1, 2018 through December 31, 2018 |
— | $ | — | — | $ | 3,121 | ||||||||||
|
January 1, 2019 through March 31, 2019 |
— | $ | — | — | $ | 3,121 | ||||||||||
|
April 1, 2019 through June 30, 2019 |
— | $ | — | — | $ | 3,121 | ||||||||||
|
July 1, 2019 through September 30, 2019 |
— | $ | — | — | $ | 3,121 | ||||||||||
|
October 1, 2019 through December 31, 2019 |
— | $ | — | — | $ | 3,121 | ||||||||||
|
January 1, 2020 through March 31, 2020 |
— | $ | — | — | $ | 3,121 | ||||||||||
|
April 1, 2020 through June 30, 2020 |
— | $ | — | — | $ | 3,121 | ||||||||||
|
July 1, 2020 through September 30, 2020 |
— | $ | — | — | $ | 3,121 | ||||||||||
|
October 1, 2020 through December 31, 2020 |
— | $ | — | — | $ | 3,121 | ||||||||||
|
January 1, 2021 through March 31, 2021 |
— | $ | — | — | $ | 3,121 | ||||||||||
|
Total |
167,465 | $ | 11.22 | 167,465 | ||||||||||||
Any shares repurchased by us may have the effect of maintaining the market price of our common stock or retarding a decline in the market price of the common stock, and, as a result, the price of our common stock may be higher than the price that otherwise might exist in the open market. In addition, as any shares repurchased pursuant to the stock repurchase plan will be purchased at a price below the net asset value per share as reported in our most recent financial statements, share repurchases may have the effect of increasing our net asset value per share.
Distributions
We intend to continue making monthly distributions to our stockholders. The timing and amount of our monthly distributions, if any, is determined by our Board. Any distributions to our stockholders are declared out of assets legally available for distribution. We monitor available net investment income to determine if a tax return of capital may occur for the fiscal year. To the extent our taxable earnings fall below the total amount of our distributions for any given fiscal year, a portion of those distributions may be considered a return of capital to our common stockholders for U.S. federal income tax purposes. Thus, the source of distribution to our stockholders may be the original capital invested by the stockholder rather than our income or gains. Stockholders should read any written disclosure accompanying a distribution payment carefully and should not assume that the source of any distribution is our ordinary income or gains.
In order to qualify to 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 during 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, 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.
In addition, in order to be eligible for the special tax treatment accorded to RICs and to avoid the imposition of corporate level tax on the income and gains we distribute to our stockholders, each tax year we are required under the Code to distribute as dividends of an amount generally at least 90% of our investment company taxable income, determined without regard to any deduction for dividends paid to our stockholders. We refer to such amount as the Annual Distribution Requirement. Additionally, we must distribute, in respect of each calendar year, dividends of an amount generally 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 or capital gain net income for preceding years that was not distributed during such years and on which we previously did not incur any U.S. federal income tax in order to avoid the imposition of a 4% U.S. federal excise tax. If we fail to qualify as a RIC for any reason and become subject to corporate income tax, the resulting corporate 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.
Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current year distributions into the next tax year and pay a 4% U.S. federal excise tax on such undistributed income. Distributions of any such carryover taxable income must be made through a distribution declared as of the earlier of the filing date of the corporate income tax return related to the tax year in which such taxable income was generated or the 15th day of the ninth month following the end of such tax year, in order to count towards the satisfaction of the Annual Distribution Requirement for the tax year in which such taxable income was generated. We can offer no assurance that we will achieve results that will permit the payment of any cash distributions and, if we issue senior securities, we may be prohibited from making distributions if doing so causes us to fail to maintain the asset coverage stipulated by the 1940 Act or if distributions are limited by the terms of any of our borrowings. See “Material U.S. Federal Income Tax Considerations.”
We have adopted an “opt out” DRIP for our common stockholders. As a result, if we make a distribution, then stockholders’ cash distributions are automatically reinvested in additional shares of our common stock, unless they specifically opt out of the DRIP. If a stockholder opts out, that stockholder receives cash distributions. Although distributions paid in the form of additional shares of common stock are generally subject to U.S. federal, state and local taxes, stockholders participating in our DRIP do not receive any corresponding cash distributions with which to pay any such applicable taxes. 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.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our most recent Annual Report on Form 10-K and in Part 1, Item 2 of our most recent Quarterly Report on Form 10-Q is incorporated herein by reference.
Information about our senior securities is shown in the following table as of March 31, 2021 and December 31, 2020, 2019, 2018, 2017, 2016, 2015, 2014, 2013, 2012, 2011 and 2010. The information as of December 31, 2020, 2019, 2018, 2017 and 2016 was included in or derived from our consolidated financial statements for the year ended December 31, 2020, which were audited by RSM US LLP, our independent registered public accounting firm. This information about our senior securities should be read in conjunction with our audited consolidated financial statements and related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
|
Class and Year |
Total Amount Outstanding Exclusive of Treasury Securities(1) |
Asset Coverage per Unit(2) |
Involuntary Liquidation Preference per Unit(3) |
Average Market Value per Unit(4) |
||||||||||||
|
(in thousands, except unit data) |
||||||||||||||||
|
Credit facilities |
||||||||||||||||
|
2021 (as of March 31) |
$ | 50,750 | 9,129 | — | N/A | |||||||||||
|
2020 |
$ | 50,250 | 7,965 | — | N/A | |||||||||||
|
2019 |
$ | 17,000 | 19,908 | — | N/A | |||||||||||
|
2018 |
$ | 90,500 | 2,896 | — | N/A | |||||||||||
|
2017 |
$ | 58,000 | $ | 3,973 | — | N/A | ||||||||||
|
2016 |
$ | 63,000 | $ | 3,733 | — | N/A | ||||||||||
|
2015 |
$ | 68,000 | $ | 4,048 | — | N/A | ||||||||||
|
2014 |
$ | 10,000 | $ | 22,000 | — | N/A | ||||||||||
|
2013 |
$ | 10,000 | $ | 25,818 | — | N/A | ||||||||||
|
2012 |
$ | 56,020 | $ | 4,177 | — | N/A | ||||||||||
|
2011 |
$ | 64,571 | $ | 3,012 | — | N/A | ||||||||||
|
2010 |
$ | 87,425 | $ | 2,455 | — | N/A | ||||||||||
|
2022 Notes |
||||||||||||||||
|
2021 (as of March 31) |
$ | 37,375 | 12,396 | — | 25.29 | |||||||||||
|
2020 |
$ | 37,375 | 10,708 | — | 24.60 | |||||||||||
|
2019 |
$ | 37,375 | 9,055 | — | 25.53 | |||||||||||
|
2018 |
$ | 37,375 | 7,014 | — | 25.52 | |||||||||||
|
2017 |
$ | 37,375 | $ | 6,166 | — | $ | 25.66 | |||||||||
|
2026 Notes |
||||||||||||||||
|
2021 (as of March 31) |
$ | 57,500 | 8,057 | — | 25.00 | |||||||||||
|
2019 Notes |
||||||||||||||||
|
2021 (as of March 31) |
— | — | — | — | ||||||||||||
|
2020 |
— | — | — | — | ||||||||||||
|
2019 |
— | — | — | — | ||||||||||||
|
2018 |
— | — | — | — | ||||||||||||
|
2017 |
— | — | — | — | ||||||||||||
|
2016 |
$ | 33,000 | $ | 7,127 | — | $ | 25.42 | |||||||||
|
2015 |
$ | 33,000 | $ | 8,342 | — | $ | 25.26 | |||||||||
|
2014 |
$ | 33,000 | $ | 6,667 | — | $ | 25.64 | |||||||||
|
2013 |
$ | 33,000 | $ | 7,824 | — | $ | 25.70 | |||||||||
|
2012 |
$ | 33,000 | $ | 7,091 | — | $ | 25.38 | |||||||||
|
2019-1 Securitization |
||||||||||||||||
|
2021 (as of March 31) |
$ | 100,000 | 4,633 | — | N/A | |||||||||||
|
2020 |
$ | 100,000 | 4,002 | — | N/A | |||||||||||
|
2019 |
$ | 100,000 | 3,384 | — | N/A | |||||||||||
|
2013-1 Securitization |
||||||||||||||||
|
2021 (as of March 31) |
— | — | — | N/A | ||||||||||||
|
2020 |
— | — | — | N/A | ||||||||||||
|
2019 |
— | — | — | N/A | ||||||||||||
|
2018 |
— | — | — | N/A | ||||||||||||
|
2017 |
— | — | — | N/A | ||||||||||||
|
2016 |
— | — | — | N/A | ||||||||||||
|
2015 |
$ | 14,546 | $ | 18,926 | — | N/A | ||||||||||
|
2014 |
$ | 38,753 | $ | 5,677 | — | N/A | ||||||||||
|
2013 |
$ | 79,343 | $ | 3,254 | — | N/A | ||||||||||
|
Total senior securities |
||||||||||||||||
|
2021 (as of March 31) |
$ | 245,625 | $ | 1,886 | — | N/A | ||||||||||
|
2020 |
$ | 187,625 | $ | 2,133 | — | N/A | ||||||||||
|
2019 |
$ | 154,375 | $ | 2,192 | — | N/A | ||||||||||
|
2018 |
$ | 127,875 | $ | 2,050 | — | N/A | ||||||||||
|
2017 |
$ | 95,375 | $ | 2,416 | — | N/A | ||||||||||
|
2016 |
$ | 96,000 | $ | 2,450 | — | N/A | ||||||||||
|
2015 |
$ | 115,546 | $ | 2,383 | — | N/A | ||||||||||
|
2014 |
$ | 81,753 | $ | 2,691 | — | N/A | ||||||||||
|
2013 |
$ | 122,343 | $ | 2,110 | — | N/A | ||||||||||
|
2012 |
$ | 89,020 | $ | 2,629 | — | N/A | ||||||||||
|
2011 |
$ | 64,571 | $ | 3,012 | — | N/A | ||||||||||
|
2010 |
$ | 87,425 | $ | 2,455 | — | N/A | ||||||||||
|
(1) |
Total amount of senior securities outstanding at the end of the period presented. |
|
(2) |
Asset coverage per unit is the ratio of the original cost less accumulated depreciation, amortization or impairment of the Company’s total consolidated assets, less all liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness. Asset coverage per unit is expressed in terms of dollar amounts per $1,000 of indebtedness. |
|
(3) |
The amount which the holder of such class of senior security would be entitled upon the voluntary liquidation of the applicable issuer in preference to any security junior to it. The “—” in this column indicates that the SEC expressly does not require this information to be disclosed for certain types of securities. |
|
(4) |
Not applicable to the Company’s Credit Facilities, the 2019-1 Securitization, and the $189.3 million securitization of secured loans we completed on June 28, 2013, or the 2013-1 Securitization, because such securities are not registered for public trading. |
Please refer to “Business” in Part I, Item 1 of our most recent Annual Report on Form 10-K and “Legal Proceedings” in Part I, Item 3 of our most recent Annual Report on Form 10-K and Part II, Item 1 of our most recent Quarterly Report on Form 10-Q for a description of the Company.
The following table sets forth certain information as of March 31, 2021 for each portfolio company in which we had a debt, equity or other investment. Other than these investments, our only relationships with our portfolio companies involve the managerial assistance we may separately provide to our portfolio companies, such services being ancillary to our investments, and the board observer or participation rights we may receive in connection with our investment. We do not “control” any of our portfolio companies, each as defined in the 1940 Act. In general, under the 1940 Act, we would “control” a portfolio company if we owned more than 25% of its voting securities.
|
Principal |
Cost of |
Fair |
|||||||||||||
|
Portfolio Company (1)(3) |
Sector |
Type of Investment (4)(7)(9)(10) |
Amount |
Investments (6) |
Value |
||||||||||
|
Non-Affiliate Investments — |
|||||||||||||||
|
Non-Affiliate Debt Investments — |
|||||||||||||||
|
Non-Affiliate Debt Investments — Life Science |
|||||||||||||||
|
Castle Creek Pharmaceuticals Holdings, Inc.(2)(12) 330 N. Wabash Chicago, IL 60611 |
Biotechnology |
Term Loan (9.30% cash (Libor + 7.50%; Floor 9.30%), 5.00% ETP, Due 3/1/24) |
$ |
5,000 |
$ |
4,889 |
$ |
4,889 |
|||||||
|
Term Loan (9.30% cash (Libor + 7.50%; Floor 9.30%), 5.00% ETP, Due 3/1/24) |
5,000 |
4,943 |
4,943 |
||||||||||||
|
Term Loan (9.30% cash (Libor + 7.50%; Floor 9.30%), 5.00% ETP, Due 3/1/24) |
5,000 |
4,943 |
4,943 |
||||||||||||
|
Term Loan (9.30% cash (Libor + 7.50%; Floor 9.30%), 5.00% ETP, Due 3/1/24) |
5,000 |
4,943 |
4,943 |
||||||||||||
|
Celsion Corporation (2)(5)(12) 997 Lenox Drive, Suite 100 |
Biotechnology |
Term Loan (9.63% cash (Libor + 7.63%; Floor 9.63%), 5.50% ETP, Due 4/1/23) |
2,500 |
2,479 |
2,479 |
||||||||||
|
Term Loan (9.63% cash (Libor + 7.63%; Floor 9.63%), 5.50% ETP, Due 4/1/23) |
2,500 |
2,527 |
2,483 |
||||||||||||
|
Emalex Biosciences, Inc. (2)(12) 330 N. Wabash, Suite 3500 Chicago, IL 60611 |
Biotechnology |
Term Loan (9.75% cash (Libor + 7.90%; Floor 9.75%), 5.00% ETP, Due 12/1/23) |
2,500 |
2,357 |
2,357 |
||||||||||
|
Term Loan (9.75% cash (Libor + 7.90%; Floor 9.75%), 5.00% ETP, Due 12/1/23) |
2,500 |
2,461 |
2,461 |
||||||||||||
|
LogicBio, Inc. (2)(5)(12) 99 Eerie Street Cambridge, MA 02139 |
Biotechnology |
Term Loan (8.75% cash (Libor + 6.25%; Floor 8.75%), 4.50% ETP, Due 6/1/24) |
5,000 |
4,979 |
4,979 |
||||||||||
|
Provivi, Inc. (2)(12) 1701 Colorado Avenue Santa Monica, CA 90404 |
Biotechnology |
Term Loan (9.50% cash (Libor + 8.50%; Floor 9.50%), 5.50% ETP, Due 12/1/24) |
5,000 |
4,769 |
4,769 |
||||||||||
|
Term Loan (9.50% cash (Libor + 8.50%; Floor 9.50%), 5.50% ETP, Due 12/1/24) |
5,000 |
4,918 |
4,918 |
||||||||||||
|
Bardy Diagnostics, Inc. (2)(12) 316 Occidental Avenue South Seattle, WA 98104 |
Medical Device |
Term Loan (8.90% cash (Libor + 7.00%; Floor 8.90%), 5.00% ETP, Due 9/1/24) |
5,000 |
4,948 |
4,948 |
||||||||||
|
Term Loan (8.90% cash (Libor + 7.00%; Floor 8.90%), 5.00% ETP, Due 9/1/24) |
5,000 |
4,948 |
4,948 |
||||||||||||
|
Term Loan (8.90% cash (Libor + 7.00%; Floor 8.90%), 5.00% ETP, Due 9/1/24) |
1,000 |
989 |
989 |
||||||||||||
|
Term Loan (8.90% cash (Libor + 7.00%; Floor 8.90%), 5.00% ETP, Due 9/1/24) |
1,000 |
989 |
989 |
||||||||||||
|
Term Loan (8.90% cash (Libor + 7.00%; Floor 8.90%), 5.00% ETP, Due 9/1/24) |
1,000 |
989 |
989 |
||||||||||||
|
Term Loan (8.90% cash (Libor + 7.00%; Floor 8.90%), 5.00% ETP, Due 9/1/24) |
1,000 |
989 |
989 |
||||||||||||
|
Term Loan (8.90% cash (Libor + 7.00%; Floor 8.90%), 5.00% ETP, Due 9/1/24) |
1,000 |
989 |
989 |
||||||||||||
|
Canary Medical Inc. (2)(12) 2710 Loker Avenue West Carlsbad, CA 92010 |
Medical Device |
Term Loan (9.00% cash (Prime + 5.75%; Floor 9.00%), 7.00% ETP, Due 11/1/24) |
2,500 |
2,349 |
2,349 |
||||||||||
|
Ceribell, Inc. (2)(12) 2483 Old Middlefield Way, Suite 120 Mount View, CA 94043 |
Medical Device |
Term Loan (8.25% cash (Libor + 6.70%; Floor 8.25%), 5.50% ETP, Due 10/1/24) |
5,000 |
4,882 |
4,882 |
||||||||||
|
Term Loan (8.25% cash (Libor + 6.70%; Floor 8.25%), 5.50% ETP, Due 10/1/24) |
5,000 |
4,946 |
4,946 |
||||||||||||
|
Conventus Orthopaedics, Inc. (2)(12) 10200 73rd Avenue North, Suite 122 Maple Grove, MN 55369 |
Medical Device |
Term Loan (9.25% cash (Libor + 8.00%; Floor 9.25%), 10.36% ETP, Due 7/1/25) |
4,936 |
4,878 |
4,878 |
||||||||||
|
Term Loan (9.25% cash (Libor + 8.00%; Floor 9.25%), 10.36% ETP, Due 7/1/25) |
4,936 |
4,878 |
4,878 |
||||||||||||
|
Corinth Medtech, Inc. (2)(12) 1190 Saratoga Avenue, Suite 210 San Jose, CA 95129 |
Medical Device |
Term Loan (8.50% cash (Prime + 5.25%; Floor 8.50%), 20.00% ETP, Due 4/1/22) |
2,500 |
2,480 |
2,480 |
||||||||||
|
Term Loan (8.50% cash (Prime + 5.25%; Floor 8.50%), 20.00% ETP, Due 4/1/22) |
2,500 |
2,480 |
2,480 |
||||||||||||
|
CSA Medical, Inc. (2)(12) 91 Hartwell Avenue Lexington, MA 02421 |
Medical Device |
Term Loan (10.00% cash (Libor + 8.20%; Floor 10.00%), 5.00% ETP, Due 1/1/24) |
3,750 |
3,708 |
3,708 |
||||||||||
|
Term Loan (10.00% cash (Libor + 8.20%; Floor 10.00%), 5.00% ETP, Due 1/1/24) |
250 |
247 |
247 |
||||||||||||
|
Term Loan (10.00% cash (Libor + 8.20%; Floor 10.00%), 5.00% ETP, Due 3/1/24) |
4,000 |
3,959 |
3,959 |
||||||||||||
|
CVRx, Inc. (2)(12) 9201 W. Broadway Ave, #650 Minneapolis, MN 55445 |
Medical Device |
Term Loan (10.00% cash (Libor + 7.80%; Floor 10.00%), 3.50% ETP, Due 10/1/24) |
5,000 |
4,951 |
4,951 |
||||||||||
|
Term Loan (10.00% cash (Libor + 7.80%; Floor 10.00%), 3.50% ETP, Due 10/1/24) |
5,000 |
4,951 |
4,951 |
||||||||||||
|
Term Loan (10.00% cash (Libor + 7.80%; Floor 10.00%), 3.50% ETP, Due 10/1/24) |
5,000 |
4,951 |
4,951 |
||||||||||||
|
Term Loan (10.00% cash (Libor + 7.80%; Floor 10.00%), 3.50% ETP, Due 10/1/24) |
5,000 |
4,951 |
4,951 |
||||||||||||
|
InfoBionic, Inc. (2)(12) 400 Totten Pond Road, Suite 315 Waltham, MA 02451 |
Medical Device |
Term Loan (9.50% cash (Prime + 6.25%; Floor 9.50%), 4.00% ETP, Due 10/1/24) |
3,500 |
3,331 |
3,331 |
||||||||||
|
MacuLogix, Inc. (2)(12) 1801 Oberlin Road, Suite 301 Middletown, PA 17057 |
Medical Device |
Term Loan (10.08% cash (Libor + 7.68%; Floor 10.08%), 5.50% ETP, Due 10/1/23) |
7,500 |
7,429 |
7,429 |
||||||||||
|
Term Loan (10.08% cash (Libor + 7.68%; Floor 10.08%), 5.50% ETP, Due 10/1/23) |
4,050 |
4,012 |
4,012 |
||||||||||||
|
Principal |
Cost of |
Fair |
|||||||||||||
|
Portfolio Company (1)(3) |
Sector |
Type of Investment (4)(7)(9)(10) |
Amount |
Investments (6) |
Value |
||||||||||
|
Magnolia Medical Technologies, Inc. (2)(12) 200 West Mercer Street, Suite 500 Seattle, WA 98119 |
Medical Device |
Term Loan (9.75% cash (Prime + 5.00%; Floor 9.75%), 4.00% ETP, Due 3/1/25) |
5,000 |
4,941 |
4,941 |
||||||||||
|
Term Loan (9.75% cash (Prime + 5.00%; Floor 9.75%), 4.00% ETP, Due 3/1/25) |
5,000 |
4,941 |
4,941 |
||||||||||||
|
Term Loan (9.75% cash (Prime + 5.00%; Floor 9.75%), 4.00% ETP, Due 3/1/25) |
5,000 |
4,930 |
4,930 |
||||||||||||
|
Term Loan (9.75% cash (Prime + 5.00%; Floor 9.75%), 4.00% ETP, Due 3/1/25) |
5,000 |
4,930 |
4,930 |
||||||||||||
|
Sonex Health, Inc. (2)(12) 950 Blue Gentian Rd., Suite 200 Eagan, MN 55121 |
Medical Device |
Term Loan (9.25% cash (Prime + 6.00%; Floor 9.25%), 5.00% ETP, Due 6/1/24) |
2,500 |
2,382 |
2,382 |
||||||||||
|
Term Loan (9.25% cash (Prime + 6.00%; Floor 9.25%), 5.00% ETP, Due 6/1/24) |
2,500 |
2,463 |
2,463 |
||||||||||||
|
Term Loan (9.25% cash (Prime + 6.00%; Floor 9.25%), 5.00% ETP, Due 6/1/24) |
2,500 |
2,463 |
2,463 |
||||||||||||
|
Total Non-Affiliate Debt Investments — Life Science |
155,482 |
155,438 |
|||||||||||||
|
Non-Affiliate Debt Investments — Technology |
|||||||||||||||
|
Alula Holdings, Inc. (2)(12) 2340 Energy Park Drive, Suite 100 St. Paul, MN 55108 |
Consumer-related Technologies |
Term Loan (10.00% cash (Prime + 6.75%; Floor 10.00%), 3.00% ETP, Due 1/1/25) |
5,000 |
4,908 |
4,908 |
||||||||||
|
Term Loan (10.00% cash (Prime + 6.75%; Floor 10.00%), 3.00% ETP, Due 1/1/25) |
5,000 |
4,936 |
4,936 |
||||||||||||
|
Term Loan (10.00% cash (Prime + 6.75%; Floor 10.00%), 3.00% ETP, Due 1/1/25) |
3,000 |
2,961 |
2,961 |
||||||||||||
|
Betabrand Corporation (2)(12) 780 Valencia St. San Francisco, CA 94110 |
Consumer-related Technologies |
Term Loan (10.05% cash (Libor + 7.50%; Floor 10.05%), 5.75% ETP, Due 9/1/23) |
3,825 |
3,774 |
3,774 |
||||||||||
|
Term Loan (10.05% cash (Libor + 7.50%; Floor 10.05%), 5.75% ETP, Due 9/1/23) |
3,825 |
3,780 |
3,780 |
||||||||||||
|
Term Loan (10.05% cash (Libor + 7.50%; Floor 10.05%), 5.75% ETP, Due 9/1/23) |
1,013 |
987 |
987 |
||||||||||||
|
Clara Foods Co. (2)(12) 1 Tower Place, Suite 800 South San Francisco, CA 94080 |
Consumer-related Technologies |
Term Loan (9.00% cash (Prime + 5.75%; Floor 9.00%), 5.50% ETP, Due 8/1/25) |
2,500 |
2,442 |
2,442 |
||||||||||
|
Term Loan (9.00% cash (Prime + 5.75%; Floor 9.00%), 5.50% ETP, Due 8/1/25) |
2,500 |
2,471 |
2,471 |
||||||||||||
|
Getaround, Inc. (2)(12) 55 Green Street San Francisco, CA 94111 |
Consumer-related Technologies |
Term Loan (10.50% cash (Prime + 7.25%; Floor 10.50%), 4.50% ETP, Due 12/1/24) |
10,000 |
9,809 |
9,809 |
||||||||||
|
Term Loan (10.50% cash (Prime + 7.25%; Floor 10.50%), 4.50% ETP, Due 12/1/24) |
4,000 |
3,864 |
3,864 |
||||||||||||
|
Term Loan (10.50% cash (Prime + 7.25%; Floor 10.50%), 4.50% ETP, Due 12/1/24) |
4,000 |
3,864 |
3,864 |
||||||||||||
|
Term Loan (10.50% cash (Prime + 7.25%; Floor 10.50%), 4.50% ETP, Due 12/1/24) |
3,500 |
3,404 |
3,404 |
||||||||||||
|
Term Loan (10.50% cash (Prime + 7.25%; Floor 10.50%), 4.50% ETP, Due 12/1/24) |
3,500 |
3,404 |
3,404 |
||||||||||||
|
Primary Kids, Inc. (2)(12) 158 West 27th Street, 6th Floor New York, NY 10010 |
Consumer-related Technologies |
Term Loan (10.50% cash (Prime + 7.25%; Floor 10.50%), 3.00% ETP, Due 3/1/25) |
3,000 |
2,933 |
2,933 |
||||||||||
|
Term Loan (10.50% cash (Prime + 7.25%; Floor 10.50%), 3.00% ETP, Due 3/1/25) |
3,000 |
2,952 |
2,952 |
||||||||||||
|
Quip NYC Inc. 45 Main Street, Suite 630 Brooklyn, NY 11201 |
Consumer-related Technologies |
Term Loan (11.25% cash (Prime + 8.00%; Floor 11.25%), 3.00% ETP, Due 4/1/26) |
10,000 |
9,575 |
9,575 |
||||||||||
|
Updater, Inc. (2)(12) 19 Union Square West, 12th Floor New York, NY 10001 |
Consumer-related Technologies |
Term Loan (12.00% cash (Prime + 5.75%; Floor 12.00%, Ceiling 14.00%),0.56% ETP, Due 12/20/24) |
5,000 |
4,951 |
4,951 |
||||||||||
|
Term Loan (12.00% cash (Prime + 5.75%; Floor 12.00%, Ceiling 14.00%), 0.56% ETP, Due 12/20/24) |
5,000 |
4,951 |
4,951 |
||||||||||||
|
Term Loan (12.00% cash (Prime + 5.75%; Floor 12.00%, Ceiling 14.00%), 0.56% ETP, Due 12/20/24) |
10,000 |
9,903 |
9,903 |
||||||||||||
|
Silk, Inc. (2)(12) 75 Second Avenue, Suite 620 Needham, MA 02494 |
Data Storage |
Term Loan (10.65% cash (Libor + 8.40%; Floor 10.65%), 4.00% ETP, Due 1/1/23) |
3,667 |
3,631 |
3,631 |
||||||||||
|
Term Loan (10.65% cash (Libor + 8.40%; Floor 10.65%), 4.00% ETP, Due 1/1/23) |
3,667 |
3,631 |
3,631 |
||||||||||||
|
Term Loan (10.65% cash (Libor + 8.40%; Floor 10.65%), 4.00% ETP, Due 7/1/23) |
4,667 |
4,564 |
4,563 |
||||||||||||
|
Liqid, Inc.(2)(12) 339 Interlocken Parkway, Suite 200 Broomfield, CO 80021 |
Networking |
Term Loan (9.50% cash (Prime + 6.25%; Floor 9.50%), 4.00% ETP, Due 9/1/24) |
5,000 |
4,876 |
4,876 |
||||||||||
|
Term Loan (9.50% cash (Prime + 6.25%; Floor 9.50%), 4.00% ETP, Due 9/1/24) |
5,000 |
4,903 |
4,903 |
||||||||||||
|
Term Loan (9.50% cash (Prime + 6.25%; Floor 9.50%), 4.00% ETP, Due 9/1/24) |
2,500 |
2,448 |
2,448 |
||||||||||||
|
Principal |
Cost of |
Fair |
|||||||||||||
|
Portfolio Company (1)(3) |
Sector |
Type of Investment (4)(7)(9)(10) |
Amount |
Investments (6) |
Value |
||||||||||
|
Term Loan (9.50% cash (Prime + 6.25%; Floor 9.50%), 4.00% ETP, Due 9/1/24) |
2,500 |
2,448 |
2,448 |
||||||||||||
|
BriteCore Holdings, Inc. (2)(12) 1522 S. Glenstone Springfield, MO 65808 |
Software |
Term Loan (10.50% cash (Prime + 7.25%; Floor 10.50%), 4.00% ETP, Due 10/1/24) |
2,500 |
2,476 |
2,476 |
||||||||||
|
Term Loan (10.50% cash (Prime + 7.25%; Floor 10.50%), 4.00% ETP, Due 10/1/24) |
2,500 |
2,476 |
2,476 |
||||||||||||
|
E La Carte, Inc. (2)(12) 810 Hamilton St. Redwood City, CA 94063 |
Software |
Term Loan (9.75% cash (Prime + 6.50%; Floor 9.75%), 4.00% ETP, Due 10/1/25) |
3,000 |
2,928 |
2,928 |
||||||||||
|
Term Loan (9.75% cash (Prime + 6.50%; Floor 9.75%), 4.00% ETP, Due 10/1/25) |
3,000 |
2,949 |
2,949 |
||||||||||||
|
Term Loan (9.75% cash (Prime + 6.50%; Floor 9.75%), 4.00% ETP, Due 10/1/25) |
1,500 |
1,475 |
1,475 |
||||||||||||
|
Keypath Education, LLC (2)(12) 1933 N. Meacham Rd., Suite 400 Schaumbug, IL 60173 |
Software |
Term Loan (10.50% cash (Libor + 8.50%; Floor 10.50%), 2.50% ETP, Due 10/1/24) |
3,750 |
3,587 |
3,587 |
||||||||||
|
Term Loan (10.50% cash (Libor + 8.50%; Floor 10.50%), 2.50% ETP, Due 10/1/24) |
3,750 |
3,690 |
3,690 |
||||||||||||
|
Term Loan (10.50% cash (Libor + 8.50%; Floor 10.50%), 2.50% ETP, Due 10/1/24) |
2,500 |
2,460 |
2,460 |
||||||||||||
|
OutboundEngine, Inc. (2)(12) 98 San Jacinto Blvd., Suite 1300 Austin, TX 78701 |
Software |
Term Loan (11.15% cash (Libor + 8.40%; Floor 11.15%), 3.63% ETP, Due 7/1/23) |
3,600 |
3,554 |
3,554 |
||||||||||
|
Term Loan (11.15% cash (Libor + 8.40%; Floor 11.15%), 3.63% ETP, Due 7/1/23) |
3,150 |
3,110 |
3,110 |
||||||||||||
|
Term Loan (11.15% cash (Libor + 8.40%; Floor 11.15%), 3.63% ETP, Due 7/1/23) |
450 |
454 |
446 |
||||||||||||
|
Revinate, Inc. (2)(12) 1 Letterman Drive, Suite CM 100 San Francisco, CA 94129 |
Software |
Term Loan (9.50% cash (Libor + 7.00%; Floor 9.50%), 4.00% ETP, Due 11/1/23) |
4,000 |
3,977 |
3,910 |
||||||||||
|
Term Loan (9.50% cash (Libor + 7.00%; Floor 9.50%), 4.00% ETP, Due 11/1/23) |
1,000 |
991 |
991 |
||||||||||||
|
Term Loan (9.50% cash (Libor + 7.00%; Floor 9.50%), 4.00% ETP, Due 11/1/23) |
5,000 |
4,951 |
4,951 |
||||||||||||
|
Supply Network Visibility Holdings LLC (2)(12) 204 S Union St. Alexandria, VA 22314 |
Software |
Term Loan (9.75% cash (Prime + 6.50%; Floor 9.75%), 4.00% ETP, Due 2/1/25) |
3,500 |
3,448 |
3,448 |
||||||||||
|
Term Loan (9.75% cash (Prime + 6.50%; Floor 9.75%), 4.00% ETP, Due 2/1/25) |
3,500 |
3,448 |
3,448 |
||||||||||||
|
Topia Mobility, Inc. (2)(12) 30 Maiden Lane, Suite 550 San Francisco, CA 94108 |
Software |
Term Loan (10.00% cash (Prime + 6.75%; Floor 10.00%), 4.00% ETP, Due 9/1/24) |
5,000 |
4,834 |
4,751 |
||||||||||
|
Term Loan (10.00% cash (Prime + 6.75%; Floor 10.00%), 4.00% ETP, Due 9/1/24) |
5,000 |
4,908 |
4,820 |
||||||||||||
|
xAd, Inc. (2)(12) One World Trade Center, 60th Floor New York, NY 10007 |
Software |
Term Loan (10.00% cash (Libor + 8.70%; Floor 10.00%), 5.0% ETP, Due 1/1/22) |
2,708 |
2,686 |
2,686 |
||||||||||
|
Term Loan (10.00% cash (Libor + 8.70%; Floor 10.00%), 5.0% ETP, Due 1/1/22) |
2,708 |
2,686 |
2,686 |
||||||||||||
|
Term Loan (10.00% cash (Libor + 8.70%; Floor 10.00%), 5.0% ETP, Due 1/1/22) |
1,625 |
1,612 |
1,612 |
||||||||||||
|
Term Loan (10.00% cash (Libor + 8.70%; Floor 10.00%), 5.0% ETP, Due 1/1/22) |
1,083 |
1,074 |
1,074 |
||||||||||||
|
Total Non-Affiliate Debt Investments — Technology |
176,144 |
175,897 |
|||||||||||||
|
Non-Affiliate Debt Investments — Healthcare information and services |
|||||||||||||||
|
IDbyDNA, Inc. (2)(12) 675 Arapeen Drive, Suite 301 Salt Lake City, UT 84108 |
Diagnostics |
Term Loan (9.00% cash (Prime + 5.75%; Floor 9.00%), 5.50% ETP, Due 1/1/25) |
5,000 |
4,851 |
4,851 |
||||||||||
|
Term Loan (9.00% cash (Prime + 5.75%; Floor 9.00%), 5.50% ETP, Due 1/1/25) |
5,000 |
4,919 |
4,919 |
||||||||||||
|
Kate Farms, Inc. (2)(12) 101 Innovation Place Santa Barbara, CA 93108 |
Other Healthcare |
Term Loan (9.75% cash (Libor + 7.45%; Floor 9.75%), 5.00% ETP, Due 10/1/23) |
5,000 |
4,946 |
4,946 |
||||||||||
|
Term Loan (9.75% cash (Libor + 7.45%; Floor 9.75%), 5.00% ETP, Due 10/1/23) |
5,000 |
4,946 |
4,946 |
||||||||||||
|
Term Loan (9.75% cash (Libor + 7.45%; Floor 9.75%), 5.00% ETP, Due 10/1/23) |
2,500 |
2,469 |
2,469 |
||||||||||||
|
Term Loan (9.75% cash (Libor + 7.45%; Floor 9.75%), 5.00% ETP, Due 10/1/23) |
2,500 |
2,469 |
2,469 |
||||||||||||
|
Total Non-Affiliate Debt Investments — Healthcare information and services |
24,600 |
24,600 |
|||||||||||||
|
Total Non- Affiliate Debt Investments |
356,226 |
355,935 |
|||||||||||||
|
Non-Affiliate Warrant Investments |
|||||||||||||||
|
Non-Affiliate Warrants — Life Science |
|||||||||||||||
|
Castle Creek Pharmaceuticals, Inc. (2)(12) 330 N. Wabash Chicago, IL 60611 |
Biotechnology |
2,428 Preferred Stock Warrants |
144 |
157 |
|||||||||||
|
Celsion Corporation (2)(5)(12) 997 Lenox Drive, Suite 100 Lawrenceville, NJ 08648 |
Biotechnology |
295,053 Common Stock Warrants |
65 |
117 |
|||||||||||
|
Corvium, Inc. (2)(12) 840 Memorial Drive, 4th Floor Cambridge, MA 02139 |
Biotechnology |
661,956 Preferred Stock Warrants |
53 |
— |
|||||||||||
|
Emalex Biosciences, Inc. (2)(12) 330 N. Wabash, Suite 3500 Chicago, IL 60611 |
Biotechnology |
73,602 Preferred Stock Warrants |
107 |
158 |
|||||||||||
|
LogicBio, Inc. (2)(5)(12) 99 Eerie Street Cambridge, MA 02139 |
Biotechnology |
7,843 Common Stock Warrants |
8 |
2 |
|||||||||||
|
Mustang Bio, Inc. (2)(5)(12) 377 Plantation Street Worcester, MA 01605 |
Biotechnology |
252,161 Common Stock Warrants |
146 |
149 |
|||||||||||
|
Provivi, Inc. (2)(12) 1701 Colorado Avenue Santa Monica, CA 90404 |
Biotechnology |
123,457 Preferred Stock Warrants |
147 |
431 |
|||||||||||
|
Rocket Pharmaceuticals Corporation (5)(12) 131 Hartwell Avenue, Suite 105 Lexington, MA 02421 |
Biotechnology |
7,051 Common Stock Warrants |
16 |
138 |
|||||||||||
|
Strongbridge U.S. Inc. (2)(5)(12) 900 Northbrook Drive, Suite 200 Trevose, PA 19053 |
Biotechnology |
160,714 Common Stock Warrants |
70 |
93 |
|||||||||||
|
vTv Therapeutics Inc. (2)(5)(12) 4170 Mendenhall Oaks Parkway High Point, NC 27265 |
Biotechnology |
95,293 Common Stock Warrants |
44 |
1 |
|||||||||||
|
Cost of |
Fair |
||||||||||||||
|
Portfolio Company (1)(3) |
Sector |
Type of Investment (4)(7)(9)(10) |
Investments (6) |
Value |
|||||||||||
|
AccuVein Inc. (2)(12) 40 Goose Hill Road Cold Spring Harbor, NY 11724 |
Medical Device |
1,175 Common Stock Warrants |
24 |
— |
|||||||||||
|
Aerin Medical, Inc. (2)(12) 232 E. Caribbean Drive Sunnyvale, CA 94089 |
Medical Device |
1,818,183 Preferred Stock Warrants |
66 |
466 |
|||||||||||
|
Bardy Diagnostics, Inc. (2)(12) 316 Occidental Avenue South Seattle, WA 98104 |
Medical Device |
360,000 Preferred Stock Warrants |
56 |
672 |
|||||||||||
|
Canary Medical Inc. (2)(12) 2710 Loker Avenue West Carlsbad, CA 92010 |
Medical Device |
7,292 Preferred Stock Warrants |
54 |
56 |
|||||||||||
|
Ceribell, Inc. (2)(12) 2483 Old Middlefield Way, Suite 120 Mount View, CA 94043 |
Medical Device |
117,521 Preferred Stock Warrants |
50 |
119 |
|||||||||||
|
Conventus Orthopaedics, Inc. (2)(12) 10200 73rd Avenue North, Suite 122 Maple Grove, MN 55369 |
Medical Device |
6,361,111 Preferred Stock Warrants |
149 |
179 |
|||||||||||
|
CSA Medical, Inc. (2)(12) 91 Hartwell Avenue Lexington, MA 02421 |
Medical Device |
1,375,727 Preferred Stock Warrants |
153 |
155 |
|||||||||||
|
CVRx, Inc.(2)(12) 9201 W. Broadway Ave, #650 Minneapolis, MN 55445 |
Medical Device |
750,000 Preferred Stock Warrants |
76 |
76 |
|||||||||||
|
Infobionic, Inc. (2)(12) 400 Totten Pond Road, Suite 315 Waltham, MA 02451 |
Medical Device |
317,647 Preferred Stock Warrants |
124 |
124 |
|||||||||||
|
MacuLogix, Inc. (2)(12) 1801 Oberlin Road, Suite 301 Middletown, PA 17057 |
Medical Device |
454,460 Preferred Stock Warrants |
236 |
119 |
|||||||||||
|
Magnolia Medical Technologies, Inc. (2)(12) 200 West Mercer Street, Suite 500 Seattle, WA 98119 |
Medical Device |
378,363 Preferred Stock Warrants |
91 |
94 |
|||||||||||
|
Meditrina, Inc. (2)(12) 1601 S. De Anza Blvd., Suite 165 Cupertino, CA 95014 |
Medical Device |
221,510 Preferred Stock Warrants |
83 |
123 |
|||||||||||
|
Sonex Health, Inc. (2)(12) 950 Blue Gentian Rd., Suite 200 Eagan, MN 55121 |
Medical Device |
484,250 Preferred Stock Warrants |
78 |
79 |
|||||||||||
|
VERO Biotech LLC (2)(12) 2941 Oxbow Circle Cocoa, FL 32929 |
Medical Device |
408 Preferred Stock Warrants |
54 |
52 |
|||||||||||
|
Total Non-Affiliate Warrants — Life Science |
2,094 |
3,560 |
|||||||||||||
|
Non-Affiliate Warrants — Technology |
|||||||||||||||
|
Intelepeer Holdings, Inc. (2)(12) 155 Bovet Road, Suite 405 San Mateo, CA 94402 |
Communications |
3,078,084 Preferred and Common Stock Warrants |
138 |
186 |
|||||||||||
|
PebblePost, Inc. (2)(12) 36 Cooper Square, 4th Floor New York, NY 10003 |
Communications |
598,850 Preferred Stock Warrants |
92 |
167 |
|||||||||||
|
Alula Holdings, Inc. (2)(12) 2340 Energy Park Drive, Suite 100 St. Paul, MN 55108 |
Consumer-related Technologies |
20,000 Preferred Stock Warrants |
93 |
94 |
|||||||||||
|
Betabrand Corporation (2)(12) 780 Valencia St. San Francisco, CA 94110 |
Consumer-related Technologies |
261,198 Preferred Stock Warrants |
106 |
12 |
|||||||||||
|
Caastle, Inc. (2)(12) 43-01 22nd Street Long Island City, NY 11101 |
Consumer-related Technologies |
268,591 Preferred Stock Warrants |
68 |
823 |
|||||||||||
|
Clara Foods Co. (2)(12) 1 Tower Place, Suite 800 South San Francisco, CA 94080 |
Consumer-related Technologies |
46,745 Preferred Stock Warrants |
30 |
30 |
|||||||||||
|
Getaround, Inc. (2)(12) 55 Green Street San Francisco, CA 94111 |
Consumer-related Technologies |
651,040 Preferred Stock Warrants |
450 |
462 |
|||||||||||
|
Mohawk Group Holdings, Inc. (2)(5)(12) 37 East 18th St., 7th Floor New York, NY 10003 |
Consumer-related Technologies |
76,923 Common Stock Warrants |
195 |
1,115 |
|||||||||||
|
Primary Kids, Inc. (2)(12) 158 West 27th Street, 6th Floor New York, NY 10010 |
Consumer-related Technologies |
553,778 Preferred Stock Warrants |
57 |
57 |
|||||||||||
|
Quip NYC Inc. (2)(12) 45 Main Street, Suite 630 Brooklyn, NY 11201 |
Consumer-related Technologies |
6,191 Preferred Stock Warrants |
325 |
325 |
|||||||||||
|
Updater, Inc.(2)(12) 19 Union Square West, 12th Floor New York, NY 10001 |
Consumer-related Technologies |
108,333 Common Stock Warrants |
34 |
72 |
|||||||||||
|
CPG Beyond, Inc. (2)(12) 2077 Convention Center Concourse, Suite 425 Atlanta, GA 30337 |
Data Storage |
500,000 Preferred Stock Warrants |
242 |
704 |
|||||||||||
|
Silk, Inc. (2)(12) 75 Second Avenue, Suite 620 Needham, MA 02494 |
Data Storage |
44,211,003 Preferred and Common Stock Warrants |
233 |
202 |
|||||||||||
|
Global Worldwide LLC (2)(12) 333 Bush Street, 19th Floor San Francisco, CA 94104 |
Internet and Media |
245,810 Preferred Stock Warrants |
75 |
9 |
|||||||||||
|
Rocket Lawyer Incorporated (2)(12) 182 Howard Street, Suite #830 San Francisco, CA 9410 |
Internet and Media |
261,721 Preferred Stock Warrants |
92 |
89 |
|||||||||||
|
Skillshare, Inc. (2)(12) 35 East 21st, 5th Floor New York, NY 10012 |
Internet and Media |
139,073 Preferred Stock Warrants |
162 |
2,412 |
|||||||||||
|
Liqid, Inc.(2)(12) 339 Interlocken Parkway, Suite 200 Broomfield, CO 80021 |
Networking |
284,599 Preferred Stock Warrants |
189 |
193 |
|||||||||||
|
Kinestral, Inc. (2)(12) 3955 Trust Way Hayward, CA 94545 |
Power Management |
5,002,574 Preferred Stock Warrants |
1,585 |
1,326 |
|||||||||||
|
Avalanche Technology, Inc. (2)(12) 43871 Fremont Boulevard, Suite 101 Fremont, CA 94538 |
Semiconductors |
6,753 Preferred and Common Stock Warrants |
101 |
— |
|||||||||||
|
BriteCore Holdings, Inc. (2)(12) 1522 S. Glenstone Springfield, MO 65808 |
Software |
12,857 Preferred Stock Warrants |
5 |
11 |
|||||||||||
|
E La Carte, Inc. (2)(12) 810 Hamilton St. Redwood City, CA 94063 |
Software |
181,947 Preferred Stock Warrants |
60 |
60 |
|||||||||||
|
Education Elements, Inc. (2)(12) 999 Skyway Road San Carlos, CA 94070 |
Software |
238,121 Preferred Stock Warrants |
28 |
27 |
|||||||||||
|
Keypath Education, Inc.(2)(12) 1933 N. Meacham Rd., Suite 400 Schaumbug, IL 60173 |
Software |
900,000 Preferred Stock Warrants |
157 |
513 |
|||||||||||
|
Lotame Solutions, Inc. (2)(12) 8850 Stanford Blvd, Suite 2000 Columbus, MD 21045 |
Software |
288,115 Preferred Stock Warrants |
19 |
276 |
|||||||||||
|
OutboundEngine, Inc. (2)(12) 98 San Jacinto Blvd., Suite 1300 Austin, TX 78701 |
Software |
620,000 Preferred Stock Warrants |
80 |
33 |
|||||||||||
|
Revinate, Inc. (2)(12) 1 Letterman Drive, Suite CM 100 San Francisco, CA 94129 |
Software |
615,475 Preferred Stock Warrants |
45 |
54 |
|||||||||||
|
Riv Data Corp. (2)(12) 735 State Street, Suite 600 Santa Barbara, CA 93101 |
Software |
321,428 Preferred Stock Warrants |
13 |
287 |
|||||||||||
|
SIGNiX, Inc. (12) 1203 Carter St. Chattanooga, TN 37402 |
Software |
186,045 Preferred Stock Warrants |
225 |
— |
|||||||||||
|
Skyword, Inc. (12) 38 Chauncy Street Boston, MA 02111 |
Software |
301,055 Preferred and Common Stock Warrants |
49 |
8 |
|||||||||||
|
Supply Network Visibility Holdings LLC (2)(12) 204 S Union St. Alexandria, VA 22314 |
Software |
398 Preferred Stock Warrants |
38 |
38 |
|||||||||||
|
Topia Mobility, Inc. (2)(12) 30 Maiden Lane, Suite 550 San Francisco, CA 94108 |
Software |
3,049,607 Preferred Stock Warrants |
139 |
— |
|||||||||||
|
xAd, Inc. (2)(127) One World Trade Center, 60th Floor New York, NY 10007 |
Software |
4,343,348 Preferred Stock Warrants |
178 |
3 |
|||||||||||
|
Total Non-Affiliate Warrants — Technology |
5,303 |
9,588 |
|||||||||||||
|
Non-Affiliate Warrants — Healthcare information and services |
|||||||||||||||
|
IDbyDNA, Inc.(2)(12) 675 Arapeen Drive, Suite 301 Salt Lake City, UT 84108 |
Diagnostics |
363,082 Preferred Stock Warrants |
91 |
93 |
|||||||||||
|
Kate Farms, Inc. (2)(12) 101 Innovation Place Santa Barbara, CA 93108 |
Other Healthcare |
82,965 Preferred Stock Warrants |
102 |
1,176 |
|||||||||||
|
Watermark Medical, Inc. (2)(12) 1641 Worthington Road, Suite 320 West Palm Beach, FL 33409 |
Other Healthcare |
27,373 Preferred Stock Warrants |
74 |
— |
|||||||||||
|
Medsphere Systems Corporation (2)(12) 1903 Wright Place, Suite 120 Carlsbad, CA 92008 |
Software |
7,097,792 Preferred Stock Warrants |
60 |
196 |
|||||||||||
|
Total Non-Affiliate Warrants — Healthcare information and services |
327 |
1,465 |
|||||||||||||
|
Total Non-Affiliate Warrants |
|||||||||||||||