Edgar Filing: Horizon Technology Finance Corp

Unassociated Document

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2011

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

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER: 814-00802

HORIZON TECHNOLOGY FINANCE CORPORATION

(Exact name of registrant as specified in its charter)

DELAWARE		27-2114934
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

312 Farmington Avenue
Farmington, CT		06032
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (860) 676-8654

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share		The NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o .

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer o		Non-accelerated filer þ		Smaller Reporting Company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ .

As of August 10, 2011, the Registrant had 7,613,525 shares of common stock, $0.001 par value, outstanding.

HORIZON TECHNOLOGY FINANCE CORPORATION

FORM 10-Q

TABLE OF CONTENTS

		Page
	PART I

Item 1.	Financial Statements	5

	Consolidated Statements of Assets and Liabilities as of June 30, 2011 and December 31, 2010 (unaudited)	5
	Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010 (unaudited)	6
	Consolidated Statements of Changes in Net Assets for the six months ended June 30, 2011 and 2010 (unaudited)	7
	Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010 (unaudited)	8
	Consolidated Schedules of Investments as of June 30, 2011 and December 31, 2010 (unaudited)	9
	Notes to the Consolidated Financial Statements (unaudited)	15

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative And Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39

	PART II

Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Removed and Reserved	40
Item 5.	Other Information	40
Item 6.	Exhibits	40
	Signatures	41

EX-31.1

EX-31.2

EX-32.1

EX-32.2

Forward-Looking Statements

This quarterly report on Form 10-Q, including the Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains statements that constitute forward-looking statements, which relate to future events or our future performance or financial condition. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our industry, our beliefs and our assumptions. The forward-looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties, including statements as to:

our future operating results, including the performance of our existing loans and warrants;

the introduction, withdrawal, success and timing of business initiatives and strategies;

changes in political, economic or industry conditions, the interest rate environment or financial and capital markets, which could result in changes in the value of our assets;

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

the impact of increased competition;

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

the unfavorable resolution of legal proceedings;

our business prospects and the prospects of our portfolio companies;

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

our regulatory structure and tax status;

the adequacy of our cash resources and working capital;

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

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

the ability of our portfolio companies to achieve their objective;

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

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

our contractual arrangements and relationships with third parties;

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

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

the impact of changes to tax legislation and, generally, our tax position.

We use words such as “anticipates,” “believes,” “expects,” “intends,” “seeks” and similar expressions to identify forward-looking statements. Undue influence should not be placed on the forward looking statements as our actual results could differ materially from those projected in the forward-looking statements for any reason, including the factors in “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2010 and elsewhere in this quarterly report on Form 10-Q.

We have based the forward-looking statements included in this report on information available to us on the date of this report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements in this quarterly report on Form 10-Q, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including, future reports on Form 10-Q, current reports on Form 8-K and annual reports on Form 10-K.

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Statements of Assets and Liabilities (Unaudited)

(In thousands, except share data)

	June 30,		December 31,
	2011		2010
ASSETS
Non-affiliate investments at fair value (cost of $185,190 and $133,494, respectively) (Note 4)	$	186,029	$	136,810
Cash and cash equivalents		19,308		76,793
Interest receivable		2,701		1,938
Other assets		1,100		664
Total assets	$	209,138	$	216,205

LIABILITIES
Borrowings (Note 6)	$	73,947	$	87,425
Base management fee payable (Note 3)		349		360
Incentive fee payable (Note 3)		1,611		414
Interest rate swap liability (Note 9)		99		258
Other accrued expenses		676		553
Total liabilities		76,682		89,010

Net assets
Common stock, par value $0.001 per share, 100,000,000 shares authorized, 7,613,525 shares outstanding as of June 30, 2011 and 7,593,421 shares outstanding as of December 31, 2010		8		8
Paid-in capital in excess of par		124,152		123,836
Accumulated undistributed (distribution in excess of) net investment income		1,559		(143	)
Net unrealized appreciation on investments		725		3,043
Net realized gain on investments		6,012		451
Total net assets		132,456		127,195
Total liabilities and net assets	$	209,138	$	216,205

Net asset value per common share	$	17.40	$	16.75

See Notes to Consolidated Financial Statements

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Statements of Operations (Unaudited)

(In thousands, except share data)

				Pre-IPO Prior to						Pre-IPO Prior to
	Post-IPO as a			Becoming a			Post-IPO as a			Becoming a
	Business			Business			Business			Business
	Development			Development			Development			Development
	Company			Company			Company			Company
	Three Months Ended			Three Months Ended			Six Months Ended			Six Months Ended
	June 30, 2011			June 30, 2010			June 30, 2011			June 30, 2010
Investment income
Interest income on non-affiliate investments	$	5,889		$	4,153		$	10,782		$	7,897
Interest income on cash and cash equivalents		23			19			88			29
Fee income on non-affiliate investments		58			98			560			137

Total investment income		5,970			4,270			11,430			8,063

Expenses
Interest expense		558			1,090			1,368			2,093
Base management fee (Note 3)		1,062			593			2,137			1,141
Performance based incentive fee (Note 3)		1,611			—			2,140			—
Administrative fee (Note 3)		223			—			518			—
Professional fees		227			32			545			105
General and administrative		309			46			514			103

Total expenses		3,990			1,761			7,222			3,442

Net investment income		1,980			2,509			4,208			4,621

Credit for loan losses		—			116			—			419

Net realized and unrealized gain on investments
Net realized gain (loss) on investments		5,355			(2	)		5,561			(2	)
Net unrealized depreciation on investments		(3,512	)		(364	)		(2,318	)		(162	)

Net realized and unrealized gain (loss) on investments		1,843			(366	)		3,243			(164	)

Net increase in net assets resulting from operations	$	3,823		$	2,259		$	7,451		$	4,876

Net investment income per common share (1)	$	0.26		$	N/A		$	0.55		$	N/A

Change in net assets per common share (1)	$	0.50		$	N/A		$	0.98		$	N/A

Weighted average shares outstanding (1)		7,601,375			N/A			7,597,420			N/A

(1)	For the three and six months ended June 30, 2010, the Company did not have common shares outstanding or an equivalent and, therefore, earnings per share and weighted average shares outstanding information for this period is not provided.

See Notes to Consolidated Financial Statements

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Statements of Changes in Net Assets (Unaudited)

(In thousands, except share data)

												Accumulated
												Undistributed
												(distribution in
			Accumulated							Paid-In		excess of)			Net Unrealized			Net
			Other							Capital in		Net			Appreciation			Realized
	Members’		Comprehensive			Common Stock				Excess of		Investment			on			Gain on		Total
	Capital		Loss			Shares		Amount		Par		Income			Investments			Investments		Net Assets
Balance at December 31, 2009	$	60,260	$	(768	)		—	$	—	$	—	$	—		$	—		$	—	$	59,492

Comprehensive income:

Net income		4,876		—			—		—		—		—			—			—		4,876
Unrealized loss on interest rate swaps		—		257			—		—		—		—			—			—		257

Total comprehensive income		—		—			—		—		—		—			—			—		5,133
Balance at June 30, 2010	$	65,136	$	(511	)		—	$	—	$	—	$	—		$	—		$	—	$	64,625

Balance at December 31, 2010	$	—	$	—			7,593,421	$	8	$	123,836	$	(143	)	$	3,043		$	451	$	127,195
Net increase in net assets from operations		—		—			—		—		—		4,208			(2,318	)		5,561		7,451
Issuance of common stock as stock dividend		—		—			20,104		—		316										316
Dividends declared		—		—			—		—		—		(2,506	)		—			—		(2,506	)
Balance at June 30, 2011	$	—	$	—			7,613,525	$	8	$	124,152	$	1,559		$	725		$	6,012	$	132,456

See Notes to Consolidated Financial Statements

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

	Post-IPO as a Business Development Company Six Months Ended June 30, 2011			Pre-IPO Prior to becoming a Business Development Company Six Months Ended June 30, 2010
Cash flows from operating activities:
Net increase in net assets resulting from operations	$	7,451		$	4,876
Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities:
Credit for loan losses		—			(419	)
Amortization of debt issuance costs		194			580
Net realized (gain) loss on investments		(5,729	)		2
Net change in unrealized appreciation on investments		2,318			162
Purchase of investments		(71,156	)		(49,609	)
Principal payments received on investments		19,700			20,280
Proceeds from sale of investments		5,383			—
Stock received in settlement of fee income		(482	)		—
Changes in assets and liabilities:
Increase in interest receivable		(763	)		(475	)
Increase in unearned loan income		99			35
Increase in other assets		(141	)		(159	)
Increase in other accrued expenses		123			64
(Decrease) increase in base management fee payable		(11	)		31
Increase in incentive fee payable		1,197			—
Net cash used in operating activities		(41,817	)		(24,632	)

Cash flows from financing activities:
Net (decrease) increase in revolving borrowings		(13,478	)		27,097
Dividends paid		(2,190	)		—
Net cash (used in) provided by financing activities		(15,668	)		27,097
Net (decrease) increase in cash and cash equivalents		(57,485	)		2,465
Cash and cash equivalents:
Beginning of period		76,793			9,892
End of period	$	19,308		$	12,357

Cash paid for interest	$	1,140		$	1,483
Supplemental non-cash investing and financing activities:
Warrant investments received & recorded as unearned loan income	$	1,082		$	1,166
Receivables resulting from sales of investments	$	489		$	—
Decrease in interest rate swap liability	$	(159	)	$	(257	)

See Notes to Consolidated Financial Statements

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Schedule of Investments

June 30, 2011

(In thousands)

		Type of	Interest				Cost of
Portfolio Company	Sector	Investment(2)	Rate(3)			Maturity	Investment(5)		Fair Value
Debt Investments
Debt Investments — Life Science — 45.9%
ACT Biotech, Inc.	Biotechnology	Term Loan(1)		12.10	%	6/1/2013	$	904	$	904
		Term Loan(1)		12.01	%	6/1/2013		903		903
		Term Loan(1)		12.01	%	6/1/2013		1,362		1,362
Ambit Biosciences, Inc.	Biotechnology	Term Loan(1)		12.25	%	10/1/2013		5,583		5,583
Anacor Pharmaceuticals, Inc.(4)	Biotechnology	Term Loan		9.41	%	4/1/2015		3,199		3,199
GenturaDX, Inc.	Biotechnology	Term Loan		11.25	%	4/1/2014		1,898		1,898
N30 Pharmaceuticals, LLC,	Biotechnology	Term Loan(1)		11.25	%	9/1/2014		2,402		2,402
Pharmasset, Inc.(4)	Biotechnology	Term Loan(1)		12.00	%	8/1/2011		128		128
		Term Loan(1)		12.00	%	1/1/2012		747		747
		Term Loan(1)		12.50	%	10/1/2012		1,787		1,787
Revance Therapeutics, Inc.	Biotechnology	Term Loan(1)		10.50	%	12/1/2011		747		747
		Term Loan(1)		10.50	%	3/1/2013		2,786		2,786
Supernus Pharmaceuticals, Inc.	Biotechnology	Term Loan		11.00	%	8/1/2014		2,942		2,942
Tranzyme, Inc.	Biotechnology	Term Loan(1)		10.75	%	1/1/2014		4,975		4,975
Xcovery Holding Company, LLC	Biotechnology	Term Loan		12.00	%	10/1/2013		1,493		1,493
		Term Loan		12.00	%	7/1/14		1,474		1,474
Concentric Medical, Inc.	Medical Device	Term Loan(1)		12.04	%	9/1/2013		6,919		6,919
OraMetrix, Inc.	Medical Device	Term Loan(1)		11.50	%	4/1/2014		4,915		4,915
PixelOptics, Inc.	Medical Device	Term Loan		10.75	%	11/1/2014		9,898		9,898
Tengion, Inc.(4)	Medical Device	Term Loan		11.75	%	1/1/2014		4,938		4938
ViOptix, Inc.	Medical Device	Term Loan(1)		13.55	%	11/1/2011		811		811
Total Debt Investments — Life Science								60,811		60,811

Debt Investments — Technology — 37.5%
OpenPeak, Inc.	Communications	Term Loan(1)		11.86	%	12/1/2013		6,583		6,136
Starcite, Inc.	Consumer-related technologies	Term Loan(1)		12.05	%	9/1/2012		1,973		1,973
Tagged, Inc.	Consumer-related technologies	Term Loan(1)		12.78	%	5/1/2012		829		829
		Term Loan(1)		11.46	%	8/1/2012		351		351
Xtera Communications, Inc.	Semiconductors	Term Loan		11.50	%	12/1/2014		9,713		9,713
Vette Corp.	Data Storage	Term Loan(1)		11.75	%	7/1/2014		4,919		4,919
XIOtech, Inc.	Data Storage	Term Loan(1)		14.00	%	5/1/2012		2,007		2,007
IntelePeer, Inc.	Networking	Term Loan(1)		12.43	%	4/1/2012		334		334
		Term Loan(1)		12.33	%	6/1/2012		413		413
		Term Loan(1)		12.33	%	10/1/2012		881		881
Construction Software Technologies, Inc.	Software	Term Loan		11.75	%	12/1/2014		3,933		3,933
		Term Loan		11.75	%	6/1/2014		1,966		1,966
Courion Corporation	Software	Term Loan(1)		11.45	%	9/1/2014		6,873		6,873
Seapass Solutions, Inc.	Software	Term Loan		11.75	%	11/1/14		4,914		4,914
StreamBase Systems, Inc.	Software	Term Loan(1)		12.51	%	11/1/2013		3,432		3,432
		Term Loan(1)		12.50	%	6/1/2014		982		982
Total Debt Investments — Technology								50,103		49,656

Debt Investments — Cleantech — 20.3%
Cereplast, Inc.(4)	Waste Removal	Term Loan(1)		12.00	%	4/1/2014		2,438		2,438
	Waste Removal	Term Loan(1)		12.00	%	6/1/2014		2,432		2,432
Enphase Energy, Inc.	Energy Efficiency	Term Loan(1)		12.60	%	10/1/2013		6,508		6,508
	Energy Efficiency	Term Loan		10.75	%	4/1/2015		1,901		1,901
Satcon Technology Corporation(4)	Energy Efficiency	Term Loan(1)		12.58	%	1/1/2014		9,272		9,272
Tigo Energy, Inc.	Energy Efficiency	Term Loan(1)		11.00	%	8/1/2014		3,360		3,360
		Revolver		10.75	%	1/1/2014		985		985
			(Prime + 7.50)%
Total Debt Investments — Cleantech								26,896		26,896

See Notes to Consolidated Financial Statements

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Schedule of Investments

June 30, 2011 — (Continued)

(In thousands)

		Type of	Interest				Cost of
Portfolio Company	Sector	Investment(2)	Rate(3)			Maturity	Investment(5)		Fair Value
Debt Investments — Healthcare information and services — 32.3%
BioScale, Inc.	Diagnostics	Term Loan(1)		12.00	%	8/1/2012		1,730		1,730
		Term Loan(1)		11.51	%	1/1/2014		4,930		4,930
Precision Therapeutics, Inc.	Diagnostics	Term Loan		10.25	%	12/1/2014		6,946		6,946
Radisphere National Radiology Group, Inc.	Diagnostics	Term Loan(1)		12.75	%	1/1/2014		9,894		9,894
Aperio Technologies, Inc.	Other Healthcare	Term Loan		9.64	%	5/1/2015		4,921		4,921
Patientkeeper, Inc.	Other Healthcare	Term Loan		10.50	%	12/1/2014		5,188		5,188
Singulex, Inc.	Other Healthcare	Term Loan(1)		11.00	%	3/1/2014		2,961		2,961
		Term Loan(1)		11.00	%	3/1/2014		1,973		1,973
Talyst, Inc.	Other Healthcare	Term Loan(1)		12.10	%	12/1/2013		2,104		2,104
		Term Loan(1)		12.05	%	12/1/2013		2,100		2,100
Total Debt Investment — Healthcare information and services								42,747		42,747

Total Debt Investments								180,557		180,110

Warrant Investments
Warrants — Life Science — 0.9%
ACT Biotech, Inc.	Biotechnology	Preferred Stock Warrants(1)		—		—		58		68
Ambit Biosciences, Inc.	Biotechnology	Preferred Stock Warrants(1)		—		—		143		99
Anacor Pharmaceuticals, Inc.(4)	Biotechnology	Common Stock Warrants		—		—		42		33
Anesiva, Inc.(4)	Biotechnology	Common Stock Warrants(1)		—		—		18		—
GenturaDX, Inc.	Biotechnology	Preferred Stock Warrants		—		—		63		62
N30 Pharmaceuticals, LLC	Biotechnology	Preferred Stock Warrants(1)		—		—		60		46
Novalar Pharmaceuticals, Inc.	Biotechnology	Preferred Stock Warrants(1)		—		—		69		—
Revance Therapeutics, Inc.	Biotechnology	Preferred Stock Warrants(1)		—		—		224		84
Supernus Pharmaceuticals, Inc.	Biotechnology	Preferred Stock Warrants		—		—		16		15
Tranzyme, Inc.	Biotechnology	Preferred Stock Warrants(1)		—		—		1		—
Calypso Medical Technologies, Inc.	Medical Device	Preferred Stock Warrants(1)		—		—		17		75
Concentric Medical, Inc.	Medical Device	Preferred Stock Warrants(1)		—		—		84		563
EnteroMedics, Inc.(4)	Medical Device	Common Stock Warrants(1)		—		—		347		22
OraMetrix, Inc.	Medical Device	Preferred Stock Warrants(1)		—		—		78		82
PixelOptics, Inc.	Medical Device	Preferred Stock Warrants		—		—		96		47
Tengion, Inc.(4)	Medical Device	Common Stock Warrants		—		—		62		3
ViOptix, Inc.	Medical Device	Preferred Stock Warrants(1)		—		—		13		—
Total Warrants — Life Science								1,391		1,199

Warrants — Technology — 1.5%
OpenPeak, Inc.	Communications	Preferred Stock Warrants(1)		—		—		89		—
Everyday Health, Inc.	Consumer-related technologies	Preferred Stock Warrants(1)		—		—		69		117
SnagAJob.com, Inc.	Consumer-related technologies	Preferred Stock Warrants(1)		—		—		24		271
Starcite, Inc.	Consumer-related technologies	Preferred Stock Warrants(1)		—		—		23		27
Tagged, Inc.	Consumer-related technologies	Preferred Stock Warrants(1)		—		—		17		27

See Notes to Consolidated Financial Statements

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Schedule of Investments

June 30, 2011 — (Continued)

(In thousands)

		Type of	Interest				Cost of
Portfolio Company	Sector	Investment(2)	Rate(3)			Maturity	Investment(5)		Fair Value
Xtera Communications, Inc.	Semiconductors	Preferred Stock Warrants		—		—		206		206
Vette Corp.	Data Storage	Preferred Stock Warrants(1)		—		—		75		48
XIOtech, Inc.	Data Storage	Preferred Stock Warrants(1)		—		—		22		80
Cartera Commerce, Inc.	Internet and media	Preferred Stock Warrants(1)		—		—		16		30
Grab Networks, Inc.	Networking	Preferred Stock Warrants(1)		—		—		74		—
IntelePeer, Inc.	Networking	Preferred Stock Warrants(1)		—		—		40		528
Motion Computing, Inc.	Networking	Preferred Stock Warrants(1)		—		—		7		336
Impinj, Inc.	Semi-conductor	Preferred Stock Warrants(1)		—		—		7		—
Clarabridge, Inc.	Software	Preferred Stock Warrants(1)		—		—		28		25
Construction Software Technologies, Inc.	Software	Preferred Stock Warrants		—		—		45		45
Courion Corporation	Software	Preferred Stock Warrants(1)		—		—		85		101
DriveCam, Inc.	Software	Preferred Stock Warrants(1)		—		—		19		8
Netuitive, Inc.	Software	Preferred Stock Warrants(1)		—		—		27		23
Seapass Solutions, Inc.	Software	Preferred Stock Warrants		—		—		43		43
StreamBase Systems, Inc.	Software	Preferred Stock Warrants(1)		—		—		66		68
Total Warrants — Technology								982		1,983

Warrants — Cleantech — 0.5%
Cereplast, Inc.(4)	Waste Removal	Common Stock Warrants(1)		—		—		112		136
Enphase Energy, Inc.	Energy Efficiency	Preferred Stock Warrants(1)		—		—		175		137
Satcon Technology Corporation(4)	Energy Efficiency	Common Stock Warrants(1)		—		—		285		299
Tigo Energy, Inc.	Energy Efficiency	Preferred Stock Warrants(1)		—		—		100		81
Total Warrants — Cleantech								672		653

Warrants — Healthcare information and services — 0.6%
BioScale, Inc.	Diagnostics	Preferred Stock Warrants(1)		—		—		54		64
Precision Therapeutics, Inc.	Diagnostics	Preferred Stock Warrants		—		—		73		159
Radisphere National Radiology Group, Inc.	Diagnostics	Preferred Stock Warrants(1)		—		—		167		379
Aperio Technologies, Inc.	Other Healthcare	Preferred Stock Warrants		—		—		34		34
Patientkeeper, Inc.	Other Healthcare	Preferred Stock Warrants		—		—		269		269
Singulex, Inc.	Other Healthcare	Preferred Stock Warrants(1)		—		—		39		31
Talyst, Inc.	Other Healthcare	Preferred Stock Warrants(1)		—		—		101		82
Total Warrants — Healthcare information and services								737		1,018

Total Warrants								3,782		4,853

Equity — 0.8%
AFS Technologies, Inc.		Common Stock(1)		—		—		142		142
Insmed Incorporated(4)		Common Stock(1)		—		—		227		398
Overture Networks Inc.		Preferred Stock(1)		—		—		482		526
Total equity								851		1,066

Total investments assets							$	185,190	$	186,029

Investment Liabilities
Derivative Agreement
WestLB, AG	Interest rate swap — pay fixed/receive floating, Notional Amount $10 million			3.58	%	10/14/2011		—		99
Total investment liabilities							$	—	$	99

(1)	Has been pledged as collateral under the Credit Facility.

(2)	All investments are less than 5% ownership of the class and ownership of the portfolio company.

(3)

All interest is payable in cash due monthly in arrears, unless otherwise indicated and applies only to the Company’s debt investments. Amount is the annual interest rate on the debt investment and does not include any additional fees related to the investment, such as deferred interest, commitment fees or prepayment fees. The majority of the debt investments are at fixed rates for the term of the loan. For each debt investment, we have provided the current interest rate in effect as of June 30, 2011.

(4)	Portfolio company is a public company.

(5)	For debt investments, represents principal balance less unearned income.

See Notes to Consolidated Financial Statements

Horizon Technology Finance Corporation and Subsidiaries

Consolidated Schedule of Investments

December 31, 2010

(In thousands)

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

Debt Investments — Technology — 24.4%
Hatteras Networks, Inc.	Communications	Term Loan(1)		12.40	%	2/1/2011		1,042		1,042
OpenPeak, Inc.	Communications	Term Loan(1)		11.86	%	12/1/2013		6,549		6,549
Starcite, Inc.	Consumer-related technologies	Term Loan(1)		12.05	%	9/1/2012		2,679		2,679
Tagged, Inc.	Consumer-related technologies	Term Loan(1)		12.78	%	5/1/2012		1,284		1,284
		Term Loan(1)		11.46	%	8/1/2012		498		498
Vette Corp.	Data Storage	Term Loan(1)		11.75	%	7/1/2014		4,916		4,916
XIOtech, Inc.	Data Storage	Term Loan(1)		14.00	%	5/1/2012		2,997		2,997
IntelePeer, Inc.	Networking	Term Loan(1)		12.43	%	4/1/2012		515		515
		Term Loan(1)		12.33	%	6/1/2012		598		598
		Term Loan(1)		12.33	%	10/1/2012		1,171		1,171
Clarabridge, Inc.	Software	Term Loan(1)		12.50	%	1/1/2013		1,166		1,166
		Term Loan(1)		12.50	%	6/1/2013		688		688
		Term Loan(1)		12.50	%	5/1/2014		743		743
Courion Corporation	Software	Term Loan(1)		11.45	%	12/1/2011		1,083		1,083
Netuitive, Inc.	Software	Term Loan(1)		12.90	%	4/1/2011		152		152
StreamBase Systems, Inc.	Software	Term Loan(1)		12.51	%	11/1/2013		3,934		3,934
		Term Loan(1)		12.50	%	6/1/2014		977		977
Total Debt Investments — Technology								30,992		30,992

Debt Investments — Cleantech — 14.9%
Cereplast, Inc.(4)	Waste Removal	Term Loan(1)		12.00	%	4/1/2014		2,363