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  Title	Horizon Technology Finance : Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
  ID	31269977
  External ID	1729310bd6ccddfa02ade95b5a9ed3a9
  Author	Publicnow
  Published Date	May 5, 2026, 5:41 p.m.
  Summary	Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations In this quarterly report on Form 10-Q, except where the context suggests otherwise,...
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  Content ID	38243971
  Key	250a6464-c7f1-4990-b4ff-82a5396dbebb
  Content	Item 2. Management ' s Discussion and Analysis of Financial Condition and Results of Operations In this quarterly report on Form 10 - Q, except where the context suggests otherwise, the terms " we, " " us, " " our " and " Horizon Technology Finance " refer to Horizon Technology Finance Corporation and its consolidated subsidiaries. The information contained in this section should be read in conjunction with our consolidated financial statements and related notes thereto appearing elsewhere in this quarterly report on Form 10 - Q. 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 debt investments, warrants and other investments; ● the introduction, withdrawal, success and timing of business initiatives and strategies; ● the consummation of the transactions contemplated by our merger with MRCC (as defined below); ● general economic and political trends and other external factors, including continuing supply chain disruptions, increased inflation, tariffs and trade disputes with other countries and a general slowdown in economic activity; ● our business prospects and the prospects of our portfolio companies; ● the impact of changes in laws or regulations (including the interpretation thereof), including tax laws, governing our operations or the operations of our portfolio companies or the operations of our competitors; ● 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; ● geopolitical turmoil and the potential for volatility in energy prices and disruptions to global supply chains resulting from such turmoil and its impact on the industries in which we invest; ● political and regulatory conditions that contribute to uncertainty and market volatility, including legislative, regulatory, trade and policy changes; ● the impact on our business of a U.S. government shutdown; ● the impact, extent and timing of technological changes and the adequacy of intellectual property protection; ● our regulatory structure and tax status; ● changes in the general interest rate environment; ● our ability to qualify and maintain qualification as a RIC and as a BDC; ● the adequacy of our cash resources and working capital; ● 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; ● the timing of cash flows, if any, from the operations of our portfolio companies, and the resulting effect on our portfolio companies' decisions to make payment-in-kind ("PIK") interest payments or ability to make end of term payments; ● the impact of interest rate volatility on our results, particularly if we use leverage as part of our investment strategy; Horizon Technology Finance Corporation and Subsidiaries ● the ability of our portfolio companies to achieve their objective; ● 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; ● our use of financial leverage; ● the ability of our Advisor to attract and retain highly talented professionals; ● the impact of changes to tax legislation and, generally, our tax position; and ● our ability to fund unfunded commitments. 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" and elsewhere in our annual report on Form 10-K for the year ended December 31, 2025, and elsewhere in this quarterly report on Form 10-Q. We have based the forward-looking statements included in this quarterly report on Form 10-Q on information available to us on the date of this quarterly report on Form 10-Q, 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 U.S. Securities and Exchange Commission, or the SEC, including periodic reports on Form 10-Q and Form 10-K and current reports on Form 8-K. You should understand that under Sections 27A(b)(2)(B) and (D) of the Securities Act and Sections 21E(b)(2)(B) and (D) 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 annual or quarterly reports we file under the Exchange Act. Overview We are a specialty finance company that lends to and invests in development-stage companies in the technology, life science, healthcare information and services and sustainability industries, which we refer to as our "Target Industries." Our investment objective is to maximize our investment portfolio's total return by generating current income from the debt investments we make and capital appreciation from the warrants we receive when making such debt investments. We are focused on making secured debt investments, which we refer to collectively as "Venture Loans," to venture capital and private equity backed companies and publicly traded companies in our Target Industries, which we refer to as "Venture Lending." Our debt investments are typically secured by first liens or first liens behind a secured revolving line of credit, or collectively "Senior Term Loans." Some of our debt investments may also be subordinated to term debt provided by third parties. As of March 31, 2026, 97.5%, or $629.3 million, of our debt investment portfolio at fair value consisted of Senior Term Loans. Venture Lending is typically characterized by (1) the making of a secured debt investment after a venture capital or equity investment in the portfolio company has been made, which investment provides a source of cash to fund the portfolio company's debt service obligations under the Venture Loan, (2) the senior priority of the Venture Loan which requires repayment of the Venture Loan prior to the equity investors realizing a return on their capital, (3) the amortization of the Venture Loan and (4) the lender's receipt of warrants or other success fees with the making of the Venture Loan. We are an externally managed, closed-end, non-diversified management investment company that has elected to be regulated as a 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 RIC under Subchapter M of 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 test. 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 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. Horizon Technology Finance Corporation and Subsidiaries We were formed in March 2010 and completed an initial public offering in October 2010. Our investment activities, and our day-to-day operations, are managed by our Advisor and supervised by our Board, of which a majority of the members are independent of us. Under the Investment Management Agreement, we have agreed to pay our Advisor a base management fee and an incentive fee for its advisory services to us. We have also entered into the Administration Agreement with our Advisor under which we have agreed to reimburse our Advisor for our allocable portion of overhead and other expenses incurred by our Advisor in performing its obligations under the Administration Agreement. On April 14, 2026, the Company completed its previously announced merger with Monroe Capital Corporation ("MRCC"), HMMS, Inc. ("Merger Sub"), Monroe Capital BDC Advisors, LLC, and the Advisor, pursuant to the Agreement and Plan of Merger, dated as of August 7, 2025 (the "Merger Agreement"). Pursuant to the Merger Agreement, immediately following the Asset Sale (as defined below) and at the effective time of the Merger (the "Effective Time"), Merger Sub merged with and into MRCC, with MRCC continuing as the surviving company and as a wholly owned subsidiary of the Company, and, immediately thereafter, MRCC merged into the Company, with the Company continuing as the surviving company (collectively, the "Mergers"). MRCC also entered into an Asset Purchase Agreement (the "Asset Purchase Agreement") with Monroe Capital Income Plus Corporation ("MCIP"), and MC Advisors, pursuant to which, MCIP acquired all of MRCC's investment assets and liabilities at fair value, for cash (the "Asset Sale" and together with the Merger, the "Transactions"). Portfolio composition and investment activity The following table shows our portfolio by type of investment as of March 31, 2026 and December 31, 2025: March 31, 2026 December 31, 2025 Percentage of Percentage of Number of Fair Total Number of Fair Total Investments Value Portfolio Investments Value Portfolio (Dollars in thousands) Debt investments 41 $ 645,629 92.8 % 38 $ 596,025 92.1 % Warrants 74 16,685 2.4 72 16,648 2.6 Other investments 8 3,664 0.5 8 3,444 0.5 Equity 17 29,719 4.3 17 31,127 4.8 Total $ 695,697 100.0 % $ 647,244 100.0 % The following table shows total portfolio investment activity as of and for the three months ended March 31, 2026 and 2025: For the three months ended March 31, 2026 2025 Beginning portfolio $ 647,244 $ 697,891 New debt and equity investments 120,004 102,439 Less refinanced debt balances (30,000 ) (28,750 ) Net new debt and equity investments 90,004 73,689 Principal payments received on investments (4,884 ) (11,171 ) Early pay-offs and principal paydowns (33,164 ) (39,574 ) PIK interest on investments 1,278 285 Accretion of debt investment fees 1,619 1,388 New debt investment fees (1,585 ) (804 ) Warrants received in settlement of fee income - 5 Proceeds from sale of investments (104 ) (1 ) Net realized (loss) gain on investments (161 ) 1 Net unrealized depreciation on investments (4,600 ) (32,156 ) Other 50 - Ending portfolio $ 695,697 $ 689,553 We receive payments on our debt investments based on scheduled amortization of the outstanding balances. In addition, we receive repayments of some of our debt investments prior to their scheduled maturity date. The frequency or volume of these repayments may fluctuate significantly from period to period. Horizon Technology Finance Corporation and Subsidiaries The following table shows our debt investments by industry sector as of March 31, 2026 and December 31, 2025: March 31, 2026 December 31, 2025 Debt Percentage of Debt Percentage of Investments at Total Investments at Total Fair Value Portfolio Fair Value Portfolio (Dollars in thousands) Life Science Biotechnology $ 84,814 13.1 % $ 57,753 9.7 % Medical Device 240,241 37.3 213,523 35.8 Technology Consumer-Related 17,348 2.7 17,263 2.9 Software 183,022 28.3 185,534 31.1 Sustainability Alternative Energy 4,874 0.8 4,869 0.8 Other Sustainability 30,491 4.7 29,563 5.0 Healthcare Information and Services Diagnostics 6,809 1.1 6,605 1.1 Other Healthcare 34,527 5.3 34,469 5.8 Software 43,503 6.7 46,446 7.8 Total $ 645,629 100.0 % $ 596,025 100.0 % The largest debt investments in our portfolio may vary from period to period as new debt investments are originated and existing debt investments are repaid. Our five largest debt investments at cost represented 24% and 26% of total debt investments outstanding as of March 31, 2026 and December 31, 2025, respectively. Our five largest debt investments at fair value represented 24% and 26% of total debt investments outstanding as of March 31, 2026 and December 31, 2025, respectively. No single debt investment at cost or fair value represented more than 10% of our total debt investments as of March 31, 2026 and December 31, 2025. Debt investment asset quality We use an internal credit rating system which rates each debt investment on a scale of 4 to 1, with 4 being the highest credit quality rating and 3 being the rating for a standard level of risk. A rating of 2 represents an increased level of risk and, while no loss is currently anticipated for a 2-rated debt investment, there is potential for future loss of principal. A rating of 1 represents a deteriorating credit quality and a high degree of risk of loss of principal. Our internal credit rating system is not a national credit rating system. As of March 31, 2026 and December 31, 2025, our debt investments had a weighted average credit rating of 3.0 and 2.9, respectively. The following table shows the classification of our debt investment portfolio by credit rating as of March 31, 2026 and December 31, 2025: March 31, 2026 December 31, 2025 Debt Percentage Debt Percentage Number of Investments at of Debt Number of Investments at of Debt Investments Fair Value Investments Investments Fair Value Investments (Dollars in thousands) Credit Rating 4 5 $ 71,009 11.0 % 5 $ 72,213 12.1 % 3 28 500,119 77.4 25 445,790 74.8 2 4 50,208 7.8 4 53,503 9.0 1 4 24,293 3.8 4 24,519 4.1 Total 41 $ 645,629 100.0 % 38 $ 596,025 100.0 % As of March 31, 2026, there were four debt investments with an internal credit rating of 1, with an aggregate cost of $33.1 million and an aggregate fair value of $24.3 million and there were four debt investments with an internal credit rating of 2, with an aggregate cost of $56.9 million and an aggregate fair value of $50.2 million. As of December 31, 2025, there were four debt investments with an internal credit rating of 1, with an aggregate cost of $33.8 million and an aggregate fair value of $24.5 million and there were four debt investments with an internal credit rating of 2, with an aggregate cost of $56.8 million and an aggregate fair value of $53.5 million. Consolidated results of operations As a BDC and a RIC, we are subject to certain constraints on our operations, including limitations imposed by the 1940 Act and the Code. The consolidated results of operations described below may not be indicative of the results we report in future periods. Horizon Technology Finance Corporation and Subsidiaries Comparison of the three months ended March 31, 2026 and 2025 The following table shows consolidated results of operations for the three months ended March 31, 2026 and 2025: For the three months ended March 31, 2026 2025 (In thousands) Total investment income $ 24,079 $ 24,516 Total expenses 14,841 13,419 Net investment income before excise tax 9,238 11,097 Provision for excise tax 267 378 Net investment income 8,971 10,719 Net realized (loss) gain (1,593 ) 1 Net unrealized depreciation on investments (4,600 ) (32,156 ) Net increase (decrease) in net assets resulting from operations $ 2,778 $ (21,436 ) Average debt investments, at fair value $ 632,002 $ 650,059 Average earning debt investments $ 634,228 $ 653,748 Average gross assets less cash $ 717,539 $ 732,557 Average borrowings outstanding $ 444,222 $ 469,485 Net increase (decrease) in net assets resulting from operations can vary substantially from period to period for various reasons, including, without limitation, the recognition of realized gains and losses and unrealized appreciation and depreciation on investments. As a result, quarterly comparisons of net increase in net assets resulting from operations may not be meaningful. Investment income Total investment income decreased by $0.4 million, or 1.8%, to $24.1 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. For the three months ended March 31, 2026, total investment income consisted primarily of (1) $23.1 million in interest income from investments, which included $5.0 million in income from the accretion of origination fees and end of term payments and $1.3 million in PIK interest income and (2) $1.0 million in fee income. Interest income on debt investments decreased by $0.4 million, or 1.6%, to $23.1 million, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. Interest income on debt investments for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025 decreased primarily due to a decrease in the Prime Rate which is the base rate for most of our variable rate debt investments and a decrease of $19.5 million, or 3.0%, in our average earning debt investments partially offset by an increase in accelerated income from prepayments. The proportion of total investment income that resulted from the portion of ETPs not received in cash for the three months ended March 31, 2026 and 2025 was 6.0% and 4.6%, respectively. The increase in the proportion of total investment income that resulted from the portion of ETPs not received in cash was a result of an increase in accretion of final payments for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. PIK interest income increased by $1.0 million, or 348.4%, to $1.3 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. For the three months ended March 31, 2026 and 2025, 5.3% and 1.2%, respectively, of total investment income was attributable to non-cash PIK interest income. The increase in PIK interest income as a percentage of total investment income was primarily due to an increase in earning assets that contain a PIK feature for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. Fee income, which includes success fee, other fee and prepayment fee income on debt investments, decreased by $0.1 million, or 6.1%, to $1.0 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 primarily due to a lower success fee and other fee income for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The following table shows our dollar-weighted annualized yield for the three months ended March 31, 2026 and 2025: For the three months ended March 31, Investment type: 2026 2025 Debt investments(1) 15.2 % 15.0 % All investments(1) 14.0 % 13.8 % (1) 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. Investment income, consisting of interest income and fees on debt investments, can fluctuate significantly upon repayment of large debt investments. Interest income from the five largest debt investments at cost in the aggregate accounted for 23% and 24% of investment income for the three months ended March 31, 2026 and 2025, respectively. Interest income from the five largest debt investments at fair value in the aggregate accounted for 23% and 24% of investment income for the three months ended March 31, 2026 and 2025, respectively. Horizon Technology Finance Corporation and Subsidiaries Expenses Total expenses increased by $1.4 million, or 10.6%, to $14.8 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. Total expenses for each period consisted of interest expense, base management fee, incentive and administrative fees, professional fees and general and administrative expenses. Interest expense decreased by $0.5 million, or 5.8%, to $8.2 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. Interest expense, which includes the amortization of debt issuance costs, decreased primarily due to a decrease in average borrowings for the three months ended March 31, 2026 of $25.3 million, or 5.4%, as compared to the three months ended March 31, 2025 and a decrease in our effective cost of debt for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. Base management fee expense decreased by $0.1 million, or 1.9%, to $3.1 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. Base management fee decreased primarily due to a decrease of $15.0 million, or 2.1%, in average gross assets less cash for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. P erformance based incentive fee expense increased by $1.8 million to $1.8 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. There was no performance based incentive fee expense for three months ended March 31, 2025. This increase was due to an Incentive Fee Cap calculated based on the Incentive Fee Cap and Deferral Mechanism in our Investment Management Agreement of $0.4 million for the three months ended March 31, 2026 compared to an Incentive Fee Cap of $2.1 million for the three months ended March 31, 2025. The Incentive Fee Cap and Deferral Mechanism resulted in $0.4 million and $2.1 million of reduced incentive fee expense and increased net investment income for the three months ended March 31, 2026 and 2025, respectively. The incentive fee on pre-incentive fee net investment income was subject to the Incentive Fee Cap for the three months ended March 31, 2026 due to the cumulative incentive fees paid exceeding 20% of cumulative pre-incentive fee net return during the applicable quarter and the 11 preceding full calendar quarters. Administrative fee expense, professional fees and general and administrative expenses were $1.8 million and $1.6 million for the three months ended March 31, 2026 and 2025, respectively. Net realized gains and losses and net unrealized appreciation and depreciation Realized gains or losses on investments are measured by the difference between the net proceeds from the repayment or sale and the cost basis of our investments without regard to unrealized appreciation or depreciation previously recognized. Realized gains or losses on investments include investments charged off during the period, net of recoveries. The net unrealized appreciation or depreciation on investments primarily reflects the change in portfolio investment fair values during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized. During the three months ended March 31, 2026 and March 31, 2025 , we realized net losses on investments totaling $0.2 million and $0.001 million, respectively. During the three months ended March 31, 2026 , we converted $15.1 million in outstanding principal of the 2030 Convertible Notes (as defined below) which resulted in a realized loss on extinguishment of debt of $1.3 million. During the same period, we r edeemed all of the outstanding principal balance of the 2026 Notes (as defined below) which resulted in a realized loss on extinguishment of debt of $0.1 million. During the three months ended March 31, 2026, net unrealized depreciation on investments totaled $4.6 million which was primarily due to the unrealized depreciation on two of our deb t investments and one of our equity investments and the unrealized depreciation on our warrant investments . During the three months ended March 31, 2025, net unrealized depreciation on investments totaled $32.2 million which was primarily due to the unrealized depreciation on three of our debt investments and two of our equity investments. The difficult equity fundraising market and under performance of certain portfolio companies, among other factors, resulted in our reduction of the fair market value of the debt investments in such portfolio companies, thus increasing the unrealized depreciation on such debt investments. Horizon Technology Finance Corporation and Subsidiaries Liquidity and capital resources As of March 31, 2026 and December 31, 2025, we had cash and investments in money market funds of $70.6 million and $140.2 million, respectively. Cash and investments in money market funds are available to fund new investments, reduce borrowings, pay expenses, repurchase common stock and pay distributions. In addition, as of March 31, 2026 and December 31, 2025, we had $2.6 million and $2.5 million, respectively, of restricted investments in money market funds. Restricted investments in money market funds may be used to make monthly interest and principal payments on our NYL Facility or our Nuveen Facility. Our primary sources of capital have been from our public equity offerings, use of our revolving credit facility (the "Key Facility") with KeyBank National Association ("Key"), the Note Funding Agreement (the "NYL Facility"), with several entities owned or affiliated with New York Life Insurance Company and the Nuveen Note Funding Agreement (the "Nuveen Facility", together with the Key Facility and the NYL Facility, the "Credit Facilities") with several entities owned or affiliated with Nuveen Alternative Advisors LLC, and issuance of our public and private debt securities. On September 22, 2023, we entered into an At-The-Market (or "ATM") sales agreement (or the "2023 Equity Distribution Agreement") with Goldman Sachs & Co. LLC and B. Riley FBR, Inc., (each a "Sales Agent" and, collectively, the "Sales Agents"). The 2023 Equity Distribution Agreement provides that we may offer and sell shares of our common stock from time to time through the Sales Agents up to $150.0 million worth of our common stock, in amounts and at times to be determined by us. Sales of our common stock, if any, may be made in negotiated transactions or transactions that are deemed to be "at-the-market," as defined in Rule 415 under the Securities Act, including sales made directly on the NASDAQ or similar securities exchange or sales made to or through a market maker other than on an exchange, at prices related to the prevailing market prices or at negotiated prices. During the three months ended March 31, 2026, we did not sell any shares of common stock under the 2023 Equity Distribution Agreement. During the three months ended March 31, 2025, we sold 404,305 shares of common stock under the 2023 Equity Distribution Agreement. For the same period, we received total accumulated net proceeds of approximately $3.6 million, including $0.1 million of offering expenses, from these sales. Horizon Technology Finance Corporation and Subsidiaries On May 1, 2026, our Board extended a previously authorized stock repurchase program which allows us to repurchase up to $10.0 million of our common stock at prices below our net asset value ("NAV") per share as reported in our most recent consolidated financial statements, provided such purchases, in the aggregate, do not exceed two percent (2%) of the shares outstanding at the time of purchase and such shares are purchased only when the such shares are trading below 90% of our most recently disclosed NAV per share. Under the repurchase program, we may, but are not obligated to, repurchase shares of our outstanding common stock in the open market or in privately negotiated transactions from time to time. Any repurchases by us will comply with the requirements of Rule 10b-18 under the Exchange Act and any applicable requirements of the 1940 Act. Unless extended by our Board, the repurchase program will terminate on the earlier of June 30, 2027 or the repurchase of $10.0 million of our common stock. During the three months ended March 31, 2026 and 2025, we did not make any repurchases of our common stock under our stock repurchase program. From the date of the inception of our stock repurchase program through March 31, 2026, we repurchased 167,465 shares of our common stock at an average price of $11.22 on the open market at a total cost of $1.9 million. From time to time, our Board assesses the size and effectiveness of the stock repurchase program and could elect to increase or decrease the size of the program in the future. At March 31, 2026, the outstanding principal balance under the Key Facility was $45.0 million. At December 31, 2025, there was no outstanding principal balance under the Key Facility. As of March 31, 2026 and December 31, 2025, we had borrowing capacity under the Key Facility of $105.0 million and $150.0, respectively. At March 31, 2026 and December 31, 2025, $23.3 million and $49.6 million, respectively, was available for borrowing under the Key Facility, subject to existing terms and advance rates. At March 31, 2026 and December 31, 2025, the outstanding principal balance under the NYL Facility was $181.0 million. As of March 31, 2026 and December 31, 2025, we had borrowing capacity under the NYL Facility of $69.0 million. At March 31, 2026 and December 31, 2025, $2.6 million and $1.9 million, respectively, was available for borrowing under the NYL Facility, subject to existing terms and advance rates. At March 31, 2026 and December 31, 2025, the outstanding principal balance under the Nuveen Facility was $90.0 million. As of March 31, 2026 and December 31, 2025, we had borrowing capacity under the Nuveen Facility of $110.0 million. At March 31, 2026 and December 31, 2025, $22.3 million and $12.1 million, respectively, was available for borrowing under the Nuveen Facility, subject to existing terms and advance rates. On October 17, 2024, the Company entered into a note purchase agreement (the "2031 Note Purchase Agreement"), by and among the Company, and each purchaser named therein, in connection with the issuance and sale of $20.0 million aggregate principal of the Company's 7.125% convertible notes due 2031 (the "2031 Convertible Notes"). At March 31, 2026 and December 31, 2025, the aggregate outstanding principal balance of the 2031 Convertible Notes was $2.8 million. On September 4, 2025, the Company entered into a note purchase agreement (the "2030 Note Purchase Agreement"), by and among the Company, and each purchaser named therein, in connection with the issuance and sale of $40.0 million aggregate principal of the Company's 5.50% convertible notes due 2030 (the "2030 Convertible Notes"). At March 31, 2026 and December 31, 2025, the aggregate outstanding principal balance of the 2030 Convertible Notes was $16.5 million and $31.5 million, respectively. Our operating activities used cash of $42.1 million for the three months ended March 31, 2026, and our financing activities used cash of $27.3 million for the same period. Our operating activities used cash primarily to purchase investments in portfolio companies offset by cash provided by principal payments received on our debt investme nts. Our financing activities used cash primarily to repay our 2026 Notes and to pay distributions to our stockholders partially offset by advances on our Key Facility. Our operating activities used cash of $13.2 million for the three months ended March 31, 2025, and our financing activities used cash of $10.2 million for the same period. Our operating activities used cash primarily to purchase investments in portfolio companies partially offset by cash provided by principal payments received on our debt investments. Our financing activities used cash primarily to repay our 2022 Asset-Backed Notes and to pay distributions to our stockholders partially offset by an advance on our Nuveen Facility and the sale of shares through our ATM for net proceeds of $3.6 million. Our primary use of available funds is to make debt investments in portfolio companies and for general corporate purposes. We expect to raise additional equity and debt capital opportunistically as needed and, subject to market conditions, to support our future growth to the extent permitted by the 1940 Act. In order to remain subject to taxation as a RIC, we intend to distribute to our stockholders all or substantially all of our investment company taxable income. In addition, as a BDC, we are required to maintain asset coverage of at least 150%. This requirement limits the amount that we may borrow. We believe that our current cash, cash generated from operations, and funds available from our Credit Facilities will be sufficient to meet our working capital and capital expenditure commitments for at least the next 12 months. Horizon Technology Finance Corporation and Subsidiaries Current borrowings The following table shows our borrowings as of March 31, 2026 and December 31, 2025: March 31, 2026 December 31, 2025 Total Balance Unused Total Balance Unused Commitment Outstanding Commitment Commitment Outstanding Commitment (In thousands) Key Facility $ 150,000 $ 45,000 $ 105,000 $ 150,000 $ - $ 150,000 NYL Facility 250,000 181,000 69,000 250,000 181,000 69,000 Nuveen Facility 200,000 90,000 110,000 200,000 90,000 110,000 2028 Notes 57,500 57,500 - 57,500 57,500 - 2027 Notes 57,500 57,500 - 57,500 57,500 - 2026 Notes - - - 57,500 57,500 - 2030 Convertible Notes 16,450 16,450 - 31,500 31,500 - 2031 Convertible Notes 2,750 2,750 - 2,750 2,750 - Total before debt issuance costs 734,200 450,200 284,000 806,750 477,750 329,000 Unamortized debt issuance costs attributable to term borrowings - (3,034 ) - - (4,723 ) - Total borrowings outstanding, net $ 734,200 $ 447,166 $ 284,000 $ 806,750 $ 473,027 $ 329,000 Credit Facilities Key Facility We entered into the Key Facility effective November 4, 2013. On February 26, 2026, we amended the Key Facility, among other things, (i) to make Michael P. Balkin and Paul G. Seitz each an "Authorized Person", (ii) to amend certain requirements to make a debt investment eligible for the borrowing base and (ii) to amend certain concentration limits. On June 20, 2024, we amended the Key Facility, among other things, (i) to extend the date on which we may request advances under the Key Facility to June 20, 2027 and to extend the maturity date to June 20, 2029 and (ii) to amend the interest rate to be based on the rate of interest published in The Wall Street Journal as the prime rate in the United States plus 0.10%, with an interest rate floor of 4.10%. Prior to June 20, 2024, the interest rate on the Key Facility was based on Prime plus 0.25%, with a prime rate floor of 4.25%. The prime rate was 6.75% as of March 31, 2026 and December 31, 2025. The interest rate in effect was 6.85% as of March 31, 2026 and December 31, 2025. The Key Facility requires the payment of an unused line fee in an amount up to 0.75% of any unborrowed amount available under the facility annually. On June 29, 2023, we amended the Key Facility to, among other things, increase the commitment amount to $150 million and to increase the amount of the accordion feature which now allows the potential increase in the total commitment amount to $300 million. The Key Facility is collateralized by debt investments held by Credit II and permits an advance rate of up to sixty percent (60%) of eligible debt investments held by Credit II. 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 period during which we may request advances under the Key Facility (or 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. NYL Facility HFI is a wholly-owned subsidiary of HSLFI. HFI entered into the NYL Facility with the NYL Noteholders for an aggregate purchase price of up to $100.0 million, with an accordion feature of up to $200.0 million at the mutual discretion and agreement of HSLFI and the NYL Noteholders. On June 1, 2018, HSLFI sold or contributed to HFI certain secured loans made to certain portfolio companies pursuant to the Sale and Servicing Agreement. Any notes issued by HFI are collateralized by all investments held by HFI and permit an advance rate of up to 67% of the aggregate principal amount of eligible debt investments. All advances under the NYL Facility are scheduled to mature in June 2030. On May 24, 2023, we amended the NYL Facility to, among other things, increase the commitment by $50.0 million to enable our wholly-owned subsidiary to issue up to $250.0 million of secured notes. On April 25, 2025, we amended the NYL Facility to, among other things, extend the investment period to June 5, 2027. In addition, the amendment amended the interest rate for advances made after April 25, 2025, fixing the interest rate at the greater of (i) 4.60% and (ii) the Three Year I Curve plus 2.95% with the interest rate to be reset on any advance date. Under the terms of the NYL Facility, we are required to maintain a reserve cash balance, which may be used to pay monthly interest and principal payments on the NYL Facility. We have segregated these funds and classified them as restricted investments in money market funds. At March 31, 2026 and December 31, 2025, there were approximately $1.4 million of such restricted investments. There were $181.0 million in notes issued to the NYL Noteholders as of March 31, 2026 and December 31, 2025 at an interest rate of 6.57%. As of March 31, 2026 and December 31, 2025, we had borrowing capacity under the NYL Facility of $69.0 million. At March 31, 2026 and December 31, 2025, $2.6 million and $1.9 million, respectively, was available for borrowing, subject to existing terms and advance rates. Horizon Technology Finance Corporation and Subsidiaries Nuveen Facility HFII entered into the Nuveen Facility with the Nuveen Noteholders for an aggregate purchase price of up to $100.0 million, with an accordion feature of up to $200.0 million at the mutual discretion and agreement us and the Nuveen Noteholders. On June 21, 2024, we sold or contributed to HFII certain secured loans made to certain portfolio companies pursuant to the Sale and Servicing Agreement. Any notes issued by HFII are collateralized by all investments held by HFII and permit an advance rate of up to 67.5% of the aggregate principal amount of eligible debt investments. The Nuveen Facility bore interest, payable monthly, determined at a rate per annum equal to the greater of (i) the yield for the United States Treasury constant maturity 3-year and 5-year in the most recent statistical release published by the Board of Governors of the Federal Reserve System designated as "Selected Interest Rates (Daily) - H.15" interpolated to a 4.88-year weighted average life (the "Pricing Benchmark") plus 3.15% and (ii) 5.00%. On May 23, 2025, we amended the Nuveen Facility to, among other things, extend the investment period to June 21, 2028 and the maturity date to June 10, 2034, and increase the commitment by $100.0 million which enables our wholly-owned subsidiary to issue up to $200.0 million of secured notes. In addition, the amendment amended the interest rate for advances made after May 23, 2025, fixing the interest rate at the greater of (i) 5.00% and (ii) the Pricing Benchmark plus 2.95%. Under the terms of the Nuveen Facility, we are required to maintain a reserve cash balance, which may be used to pay monthly interest and principal payments on the Nuveen Facility. We have segregated these funds and classified them as restricted investments in money market funds. At March 31, 2026 and December 31, 2025, there were approximately $1.3 million and $1.1 million, respectively, of such restricted investments. There were $90.0 million in notes issued to the Nuveen Noteholders as of March 31, 2026 and December 31, 2025 at an interest rate of 7.21%. As of March 31, 2026 and December 31, 2025, we had borrowing capacity under the Nuveen Facility of $110.0 million. At March 31, 2026 and December 31, 2025, $22.3 million and $12.1 million, respectively, was available for borrowing, subject to existing terms and advance rates. Unsecured Notes 2026 Notes On March 30, 2021, we issued and sold an aggregate principal amount of $57.5 million of 4.875% notes due in 2026. The amount of 2026 Notes issued and sold included the full exercise by the underwriters of their option to purchase $7.5 million in aggregate principal of additional notes. The 2026 Notes had a stated maturity of March 30, 2026 and could have been redeemed in whole or in part at our option at any time or from time to time on or after March 30, 2023 at a redemption price of $25 per security plus accrued and unpaid interest. The 2026 Notes bore interest at a rate of 4.875% per year, payable quarterly on March 30, June 30, September 30 and December 30 of each year. The 2026 Notes were our direct unsecured obligations and (i) ranked equally in right of payment with our current and future unsecured indebtedness; (ii) were senior in right of payment to any of our future indebtedness that expressly provides it is subordinated to the 2026 Notes; (iii) were effectively subordinated to all of our existing and future secured indebtedness (including indebtedness that is initially unsecured to which we subsequently grant security), to the extent of the value of the assets securing such indebtedness, and (iv) were structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries. The 2026 Notes were listed on the New York Stock Exchange under the symbol "HTFB". On January 28, 2026, we redeemed all of the outstanding principal balance of the 2026 Notes plus accrued interest. We accelerated $0.1 million of unamortized debt issuance costs related to the 2026 Notes. 2027 Notes On June 15, 2022, we issued and sold an aggregate principal amount of $50.0 million of 6.25% notes due in 2027 and on July 11, 2022, pursuant to the underwriters' 30 day option to purchase additional notes, we sold an additional $7.5 million of such notes (collectively, the "2027 Notes"). The 2027 Notes have a stated maturity of June 15, 2027 and may be redeemed in whole or in part at our option at any time or from time to time on or after June 15, 2024 at a redemption price of $25 per security plus accrued and unpaid interest. The 2027 Notes bear interest at a rate of 6.25% per year, payable quarterly on March 30, June 30, September 30 and December 30 of each year, commencing on September 30, 2022. The 2027 Notes are our direct unsecured obligations and (i) rank equally in right of payment with our current and future unsecured indebtedness; (ii) are senior in right of payment to any of our future indebtedness that expressly provides it is subordinated to the 2027 Notes; (iii) are effectively subordinated to all of our existing and future secured indebtedness (including indebtedness that is initially unsecured to which we subsequently grant security), to the extent of the value of the assets securing such indebtedness, and (iv) are structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries. As of March 31, 2026, we were in material compliance with the terms of the 2027 Notes. The 2027 Notes are listed on the New York Stock Exchange under the symbol "HTFC". 2028 Notes On December 15, 2025, we issued and sold an aggregate principal amount of $57.5 million of 7.00% notes due in 2028 in a private transaction. The 2028 Notes have a stated maturity of December 15, 2028 and may be redeemed in whole or in part at any time at our option through June 15, 2028, at a redemption price equal to the greater of: (1)(a) the sum of the present values of the remaining scheduled payments of principal and interest thereon discounted to the redemption date on a semi-annual basis at the Treasury Rate plus 50 basis points less (b) interest accrued to the date of redemption, and (2) 100% of the principal amount of the 2028 Notes to be redeemed, plus, in either case, accrued and unpaid interest thereon to, but not including, the redemption date. On or after June 15, 2028, we may redeem the 2028 Notes, in whole or in part, at any time and from time to time, at a redemption price equal to 100% of the principal amount of the 2028 Notes being redeemed plus accrued and unpaid interest there onto the date of redemption. The 2028 Notes bear interest at a rate of 7.00% per year, payable semi-annually on June 15 and December 15 of each year, commencing on June 15, 2026. The 2028 Notes are our direct unsecured obligations and (i) rank equally in right of payment with our current and future unsecured indebtedness; (ii) are senior in right of payment to any of our future indebtedness that expressly provides it is subordinated to the 2028 Notes; (iii) are effectively subordinated to all of our existing and future secured indebtedness (including indebtedness that is initially unsecured to which we subsequently grant security), to the extent of the value of the assets securing such indebtedness, and (iv) are structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries. As of March 31, 2026, we were in material compliance with the terms of the 2028 Notes. Horizon Technology Finance Corporation and Subsidiaries Convertible Notes 2030 Convertible Notes On September 4, 2025, we entered into the 2030 Note Purchase Agreement, by and among us and each purchaser named therein, in connection with the issuance and sale of $40.0 million aggregate principal of our 5.50% 2030 Convertible Notes in a transaction exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. We received net proceeds (before expenses) from the sale of the 2030 Convertible Notes of approximately $36.6 million. The 2030 Convertible Notes have a stated maturity of September 4, 2030, unless earlier converted or repurchased in accordance with their terms. The 2030 Convertible Notes bear interest at a rate of 5.50% per year, payable monthly in arrears on the last day of each calendar month, beginning on September 30, 2025. At any time on or after October 4, 2025, at our sole option, we may redeem, from time to time, the 2030 Convertible Notes in whole or in part, out of funds legally available for such redemption, at 100% of the principal amount prepaid plus accrued but unpaid interest to but excluding the date of prepayment. Each holder of a 2030 Convertible Note has the right, at such holder's option, to convert any such 2030 Convertible Note, at any time on or after October 4, 2025 and prior to the close of business on the business day immediately preceding the maturity date, into such number of shares of our common stock equal to the principal balance of the 2030 Convertible Note being converted on the conversion date plus the accrued but unpaid interest on the 2030 Convertible Note as of the conversion date, divided by the greater of (i) volume-weighted average closing sale price for the five trading days immediately prior to the relevant conversion date, or (ii) our most recently reported NAV per share immediately prior to the date of exercise. No holder of 2030 Convertible Notes may exercise its conversion right if upon conversion the holder would receive shares that would cause funds and accounts managed by the investment adviser to such funds and accounts and any person controlled by the parent company of such investment adviser to beneficially own in the aggregate more than 4.99% of the shares outstanding at such time. The 2030 Convertible Notes are not listed on any exchange and may not be transferred without our consent. During the three months ended March 31, 2026, the holders of a portion of the 2030 Convertible Notes converted $15.1 million in outstanding principal of the 2030 Convertible Notes plus accrued but unpaid interest on such outstanding principal as of the conversion date into 2,118,250 shares of common stock at a weighted average conversion price of $7.12 together with cash in lieu of fractional shares, in accordance with noteholder conversion notice. As of March 31, 2026 and December 31, 2025, the aggregate outstanding principal balance of the 2030 Convertible Notes was $16.5 million and $31.5 million, respectively. 2031 Convertible Notes On October 17, 2024, we entered into the 2031 Note Purchase Agreement, by and among us and each purchaser named therein, in connection with the issuance and sale of $20.0 million aggregate principal of our 7.125% 2031 Convertible Notes in a transaction exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. We received net proceeds (before expenses) from the sale of the 2031 Convertible Notes of approximately $18.6 million. The 2031 Convertible Notes have a stated maturity of October 17, 2031, unless earlier converted or repurchased in accordance with their terms. The 2031 Convertible Notes bear interest at a rate of 7.125% per year, subject to additional interest or repurchase obligation upon certain events, payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, beginning on December 31, 2024. If an investment grade rating is not maintained with respect to the 2031 Convertible Notes, additional interest of 1.00% per annum will accrue on the 2031 Convertible Notes until such time as the 2031 Convertible Notes have received an investment grade rating of "BBB-" (or its equivalent) or better. We will also be required to pay additional interest of 2.00% per annum (x) on any overdue payment of interest and (y) during the continuance of an Event of Default (as defined in the 2031 Note Purchase Agreement). In addition, on the occurrence of a Change in Control Repurchase Event (as defined in the 2031 Note Purchase Agreement) or Delisting Event (as defined in the 2031 Note Purchase Agreement), we will generally be required to make an offer to purchase the outstanding 2031 Convertible Notes at a price equal to 100% of the principal amount of such 2031 Convertible Notes plus accrued and unpaid interest to the repurchase date. At any time on or after April 17, 2025, at our sole option, we may redeem, from time to time, the 2031 Convertible Notes in whole or in part, out of funds legally available for such redemption, at 100% of the principal amount prepaid plus accrued but unpaid interest to but excluding the date of prepayment. Each holder of a 2031 Convertible Note has the right, at such holder's option, to convert any such 2031 Convertible Note, at any time on or after April 17, 2025 and prior to the close of business on the business day immediately preceding the maturity date, into such number of shares of our common stock equal to the principal balance of the 2031 Convertible Note being converted on the conversion date plus the accrued but unpaid interest on the 2031 Convertible Note as of the conversion date, divided by the greater of (i) volume-weighted average closing sale price for the five trading days immediately prior to the relevant conversion date, or (ii) our most recently reported NAV per share immediately prior to the date of exercise. No holder of 2031 Convertible Notes may exercise its conversion right if upon conversion the holder would receive shares that would cause funds and accounts managed by the investment adviser to such funds and accounts and any person controlled by the parent company of such investment adviser to beneficially own in the aggregate more than 4.99% of the shares outstanding at such time. The 2031 Convertible Notes are not listed on any exchange and may not be transferred without our consent. During the three months ended March 31, 2026 and 2025, the holders of the 2031 Convertible Notes did not convert any of the 2031 Convertible Notes. As of March 31, 2026 and December 31, 2025, the aggregate outstanding principal balance of the 2031 Convertible Notes was $2.8 million. Other assets As of March 31, 2026 and December 31, 2025, other assets were $9.9 million and $9.1 million, respectively, which were primarily comprised of debt issuance costs and prepaid expenses. Horizon Technology Finance Corporation and Subsidiaries Contractual obligations and off-balance sheet arrangements The following table shows our significant contractual payment obligations and off-balance sheet arrangements as of March 31, 2026: Payments due by period Less than 1 - 3 3 - 5 After 5 Total 1 year Years Years years (In thousands) Borrowings $ 450,200 $ 25,783 $ 235,460 $ 186,207 $ 2,750 Unfunded commitments 155,000 91,667 63,333 - - Incentive fee deferral 28,178 11,878 16,300 - - Total $ 633,378 $ 129,328 $ 315,093 $ 186,207 $ 2,750 In the normal course of business, we are party to financial instruments with off-balance sheet risk. These consist primarily of unfunded commitments to extend credit, in the form of loans, to our portfolio companies. Unfunded commitments to provide funds to portfolio companies are not reflected on our balance sheet. Our unfunded commitments may be significant from time to time. As of March 31, 2026, we had unfunded commitments of $155.0 million. This includes $15.0 million of undrawn revolver commitments. These commitments are subject to the same underwriting and ongoing portfolio maintenance requirements as are the financial instruments that we hold on our balance sheet. In addition, these commitments are often subject to financial or non-financial milestones and other conditions to borrowing that must be achieved before the commitment can be drawn. Since these commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. We regularly monitor our unfunded commitments and anticipated refinancings, maturities and capital raising, to ensure that we have sufficient liquidity to fund unfunded commitments. As of March 31, 2026, we reasonably believed that our assets would provide adequate financial resources to satisfy all of our unfunded commitments. In addition to the Credit Facilities, we have certain commitments pursuant to our Investment Management Agreement entered into with our Advisor. We have agreed to pay a fee for investment advisory and management services consisting of two components (1) a base management fee equal to a percentage of the value of our gross assets less cash or cash equivalents, and (2) a two-part incentive fee. We have also entered into a contract with our Advisor to serve as our administrator. Payments under the Administration Agreement are equal to an amount based upon our allocable portion of our Advisor's overhead in performing its obligations under the agreement, including rent, fees and other expenses inclusive of our allocable portion of the compensation of our Chief Financial Officer and Chief Compliance Officer and their respective staffs. See Note 3 to our consolidated financial statements for additional information regarding our Investment Management Agreement and our Administration Agreement. The incentive fee on Pre-Incentive Fee Net Investment Income is subject to a fee cap and deferral mechanism which is determined based upon a look-back period of up to three years and is expensed when incurred. For this purpose, the Incentive Fee Look-back Period includes the relevant calendar quarter and the 11 preceding full calendar quarters. Each quarterly incentive fee payable on Pre-Incentive Fee Net Investment Income is subject to the Incentive Fee Cap and Deferral Mechanism. The Incentive Fee Cap is equal to (a) 20.00% of Cumulative Pre-Incentive Fee Net Return during the Incentive Fee Look-back Period less (b) cumulative incentive fees of any kind paid to our Advisor during the Incentive Fee Look-back Period. To the extent the Incentive Fee Cap is zero or a negative value in any calendar quarter, we will not pay an incentive fee on Pre-Incentive Fee Net Investment Income to our Advisor in that quarter. To the extent that the payment of incentive fees on Pre-Incentive Fee Net Investment Income is limited by the Incentive Fee Cap, the payment of such fees will be deferred and paid in subsequent calendar quarters up to three years after their date of deferment, subject to certain limitations, which are set forth in the Investment Management Agreement. During the three months ended March 31, 2026 and 2025, the Incentive Fee Cap and Deferral Mechanism resulted in deferral of $0.4 million and $2.1 million, respectively, of incentive fee which may become subject to payment up to three years after the date of deferment. As of March 31, 2026 and December 31, 2025, the total amount subject to recoupment was $28.2 million and $28.0 million, respectively. Commencing with the quarter ending March 31, 2025 and terminated with the quarter ending December 31, 2025, our Advisor agreed to waive the portion of its quarterly income incentive fee, if any, if and to the extent that, after payment of such portion, our net investment income per share for such quarter would be less than the quarterly distribution per share declared in such quarter. During the three months ended March 31, 2025, our Advisor did not earn an income incentive fee. Distributions In order to qualify and be subject to tax as a RIC, we must meet certain source-of-income, asset diversification and annual distribution requirements. Generally, in order to qualify as a RIC, we must derive at least 90% of our gross income for each tax year from dividends, interest, payments with respect to certain securities, loans, gains from the sale or other disposition of stock, securities or foreign currencies, income derived from certain publicly traded partnerships, or other income (including but not limited to gains from options, futures or forward contracts) derived with respect to our business of investing in stock, securities or other currencies. We must also meet certain asset diversification requirements at the end of each quarter of each tax year. Failure to meet these diversification requirements on the last day of a quarter may result in us having to dispose of certain investments quickly in order to prevent the loss of RIC status. Any such dispositions could be made at disadvantageous prices or times, and may cause us to incur substantial losses. In addition, in order to be subject to tax as a RIC and to avoid the imposition of corporate-level tax on the income and gains we distribute to our stockholders in respect of any tax year, we are required under the Code to distribute as dividends to our stockholders out of assets legally available for distribution each tax year an amount generally at least equal to 90% of the sum of our net ordinary income and net short-term capital gains in excess of net long-term capital losses, if any. Additionally, in order to avoid the imposition of a U.S. federal excise tax, we are required to distribute, in respect of each calendar year, dividends to our stockholders of an amount at least equal to the sum of 98% of our calendar year net ordinary income (taking into account certain deferrals and elections); 98.2% of our capital gain net income (adjusted for certain ordinary losses) for the one year period ending on October 31 of such calendar year; and any net ordinary income and capital gain net income for preceding calendar years that were not distributed during such calendar years and on which we previously did not incur any U.S. federal corporate-level income tax. If we fail to qualify as a RIC for any reason and become subject to corporate-level income tax, the resulting corporate-level income taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions. Such a failure would have a material adverse effect on us and our stockholders. In addition, we could be required to recognize unrealized gains, incur substantial taxes and interest and make substantial distributions in order to re-qualify as a RIC. We cannot assure stockholders that they will receive any distributions. Horizon Technology Finance Corporation and Subsidiaries To the extent our taxable earnings in a tax year fall below the total amount of our distributions made to stockholders in respect of such tax year, a portion of those distributions may be deemed a return of capital to our 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 review any written disclosure accompanying a distribution payment carefully and should not assume that the source of any distribution is our ordinary income or gains. We have adopted an "opt out" dividend reinvestment plan, or DRIP, for our common stockholders. As a result, if we declare a distribution, then stockholders' cash distributions will be automatically reinvested in additional shares of our common stock, net of applicable withholding taxes, unless a stockholder specifically "opts out" of our DRIP. If a stockholder opts out, that stockholder will receive cash distributions. Although distributions paid in the form of additional shares of our common stock will generally be subject to U.S. federal, state and local taxes, stockholders participating in our DRIP will not receive any corresponding cash distributions with which to pay any such applicable taxes. If our common stock is trading above NAV, a stockholder receiving distributions in the form of additional shares of our common stock will be treated as receiving a distribution of an amount equal to the fair market value of such shares of our common stock. We may use newly issued shares to implement the DRIP, or we may purchase shares in the open market in connection with our obligations under the DRIP. Related party transactions We have entered into the Investment Management Agreement with our Advisor. Our Advisor is registered as an investment adviser under the Investment Advisers Act of 1940, as amended. Our investment activities are managed by our Advisor and supervised by our Board, the majority of whom are independent directors. Under the Investment Management Agreement, we have agreed to pay our Advisor a base management fee as well as an incentive fee. During the three months ended March 31, 2026 and 2025, our Advisor earned $4.9 million and $3.2 million pursuant to the Investment Management Agreement. On March 31, 2025, Monroe closed a transaction pursuant to which Momentum US Bidco LLC, an affiliate of Wendel SE, acquired 75% of the outstanding equity interests of Monroe Capital Intermediate Holdings, LLC, the indirect parent company of our Advisor, and certain other affiliates of Monroe (or the "Transaction"). The closing of the Transaction resulted in a change in control of our Advisor (the "Advisor Change in Control"). The Advisor Change in Control did not substantially or adversely affect us. On April 14, 2026, we completed our previously announced merger with MRCC, the Merger Sub, Monroe Capital BDC Advisors, LLC, and the Advisor, pursuant to the Agreement and Plan of Merger, dated as of August 7, 2025 (the "Merger Agreement"). See "Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview" for additional information about the Mergers. We have also entered into the Administration Agreement with our Advisor. Under the Administration Agreement, we have agreed to reimburse our Advisor for our allocable portion of overhead and other expenses incurred by our Advisor in performing its obligations under the Administration Agreement, including rent and our allocable portion of the costs of compensation and related expenses of our Chief Financial Officer and Chief Compliance Officer and their respective staffs. In addition, pursuant to the terms of the Administration Agreement our Advisor provides us with the office facilities and administrative services necessary to conduct our day-to-day operations. During the three months ended March 31, 2026 and 2025, our Advisor earned $0.6 million and $0.4 million, respectively, pursuant to the Administration Agreement. Our Advisor has granted us a non-exclusive, royalty-free license to use the service mark "Horizon Technology Finance." We believe that we derive substantial benefits from our relationship with our Advisor. Our Advisor and its affiliates may manage other investment vehicles with similar or overlapping investment strategies as us. Our Advisor may provide us with an opportunity to co-invest with other investment vehicles managed by our Advisor, Monroe and/or their affiliates. Under the 1940 Act, absent receipt of exemptive relief from the SEC, we and our affiliates are precluded from co-investing in negotiated investments with other funds and accounts sponsored or managed by our Advisor, Monroe and their affiliates. Since June 30, 2023, we and our Advisor have relied on exemptive relief from the SEC granted to certain affiliates of Monroe on October 15, 2014, as amended on January 10, 2023. Monroe, et al. filed an application on May 14, 2025, and amendments to the application on August 6, 2025 and October 3, 2025, for a new exemptive relief order for co-investments for the Company, the Advisor, Monroe and its affiliates. On November 21, 2025, a notice of the filing of the application was issued (Investment Company Act Release No. 35799). On December 17, 2025, the SEC granted an order for such exemptive relief (File No. 812-15798). The exemptive relief affords our Advisor greater flexibility to negotiate the terms of co-investments if our Board determines that it would be advantageous for us to co-invest with other accounts sponsored or managed by our Advisor, Monroe or their affiliates in a manner consistent with our investment objectives, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors. Critical accounting policies The discussion of our financial condition and results of operation is based upon our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ. In addition to the discussion below, we describe our significant accounting policies in the notes to our consolidated financial statements. We have identified the following items as critical accounting policies. Valuation of investments Investments are recorded at fair value. Pursuant to the amended SEC Rule 2a-5 of the 1940 Act, on July 29, 2022, our Board designated our Advisor as the "valuation designee." Our Board is responsible for oversight of the valuation designee. The valuation designee has established a Valuation Committee to determine in good faith the fair value of our investments, based on input of our Advisor's management and personnel and independent valuation firms which are engaged at the direction of the Valuation Committee to assist in the valuation of certain portfolio investments lacking a readily available market quotation at least once during a trailing twelve-month period. The Valuation Committee determines fair values pursuant to a valuation policy approved by our Board and pursuant to a consistently applied valuation process. This valuation process is conducted at the end of each fiscal quarter, with at least 25% (based on fair value) of our valuation of portfolio companies lacking readily available market quotations subject to review by an independent valuation firm. We apply fair value to substantially all of our investments in accordance with Topic 820, Fair Value Measurement , of the Financial Accounting Standards Board's, or FASB's, Accounting Standards Codification as amended, or ASC, which establishes a framework used to measure fair value and requires disclosures for fair value measurements. We have categorized our investments carried at fair value, based on the priority of the valuation technique, into a three-level fair value hierarchy. Fair value is a market-based measure considered from the perspective of the market participant who holds the financial instrument rather than an entity specific measure. Therefore, when market assumptions are not readily available, our own assumptions are set to reflect those that we believe market participants would use in pricing the financial instrument at the measurement date. Horizon Technology Finance Corporation and Subsidiaries The availability of observable inputs can vary depending on the financial instrument and is affected by a wide variety of factors, including, for example, the type of product, whether the product is new, whether the product is traded on an active exchange or in the secondary market and the current market conditions. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. The three categories within the hierarchy are as follows: Level 1 Quoted prices in active markets for identical assets and liabilities. Level 2 Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not active and model-based valuation techniques for which all significant inputs are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. Income recognition Interest on debt investments is accrued and included in income based on contractual rates applied to principal amounts outstanding. Interest income is determined using a method that results in a level rate of return on principal amounts outstanding. Generally, when a debt investment becomes 90 days or more past due, or if we otherwise do not expect to receive interest and principal repayments, the debt investment is placed on non-accrual status and the recognition of interest income may be discontinued. Interest payments received on non-accrual debt investments may be recognized as income, on a cash basis, or applied to principal depending upon management's judgment at the time the debt investment is placed on non-accrual status. For the three months ended March 31, 2026, we recognized in interest income $0.1 million from debt investments while on non-accrual status. For the three months ended March 31, 2025, we did not recognize any interest income from debt investments on non-accrual status. We receive a variety of fees from borrowers in the ordinary course of conducting our business, including advisory fees, commitment fees, amendment fees, non-utilization fees, success fees and prepayment fees. In a limited number of cases, we may also receive a non-refundable deposit earned upon the termination of a transaction. Debt investment origination fees, net of certain direct origination costs, are deferred, and along with unearned income, are amortized as a level yield adjustment over the respective term of the debt investment. All other income is recorded into income when earned. Fees for counterparty debt investment commitments with multiple debt investments are allocated to each debt investment based upon each debt investment's relative fair value. When a debt investment is placed on non-accrual status, the amortization of the related fees and unearned income is discontinued until the debt investment is returned to accrual status. Certain debt investment agreements also require the borrower to make an ETP that is accrued into income over the life of the debt investment to the extent such amounts are expected to be collected. We will generally cease accruing the income if there is insufficient value to support the accrual or if we do not expect the borrower to be able to pay the ETP due. In connection with substantially all lending arrangements, we receive warrants to purchase shares of stock from the borrower. We record the warrants as assets at estimated fair value on the grant date using the Black-Scholes valuation model. We consider the warrants as loan fees and record them as unearned income on the grant date. The unearned income is recognized as interest income over the contractual life of the related debt investment in accordance with our income recognition policy. Subsequent to origination, the warrants are also measured at fair value using the Black-Scholes valuation model. Any adjustment to fair value is recorded through earnings as net unrealized gain or loss on investments. Gains and losses from the disposition of the warrants or stock acquired from the exercise of warrants are recognized as realized gains and losses on investments. Horizon Technology Finance Corporation and Subsidiaries Realized gains or losses on the sale of investments, or upon the determination that an investment balance, or portion thereof, is not recoverable, are calculated using the specific identification method. We measure realized gains or losses by calculating the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment. Net unrealized appreciation or depreciation reflects the change in the fair values of our portfolio investments during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized. Income taxes We have elected to be treated as a RIC under Subchapter M of the Code and operate in a manner so as to qualify for the tax treatment applicable to RICs. In order to qualify as a RIC and to avoid the imposition of corporate-level U.S. federal income tax on the amounts we distribute to our stockholders, among other things, we are required to meet certain source of income and asset diversification requirements, and we must timely distribute dividends to our stockholders out of assets legally available for distribution each tax year of an amount generally equal to at least 90% of our investment company taxable income, as defined by the Code and determined without regard to any deduction for dividends paid. We, among other things, have made and intend to continue to make the requisite distributions to our stockholders, which will generally relieve us from incurring any material liability for U.S. federal income taxes. 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 incur a 4% excise tax on such income, as required. To the extent that we determine that our estimated current year annual taxable income will be in excess of estimated current year distributions, we will accrue excise tax, if any, on estimated excess taxable income as taxable income is earned. We evaluate tax positions taken in the course of preparing our tax returns to determine whether the tax positions are "more-likely-than-not" to be sustained by the applicable tax authority in accordance with ASC Topic 740, Income Taxes , as modified by ASC Topic 946, Financial Services - Investment Companies . Tax benefits of positions not deemed to meet the more-likely-than-not threshold, or uncertain tax positions, are recorded as a tax expense in the current year. It is our policy to recognize accrued interest and penalties related to uncertain tax benefits in income tax expense. We had no material uncertain tax positions at March 31, 2026 and December 31, 2025. Recently issued accounting pronouncement In November 2024, the Financial Accounting Standards Board issued Accounting Standards Update, or ASU, No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40). ASU No. 2024-03 requires disaggregated disclosure of certain costs and expenses, including purchase of inventory, employee compensation, depreciation, amortization and depletion, within relevant income statement captions. ASU 2024-03 is effective for years beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Early adoption and retrospective application are permitted. We are currently evaluating the impact ASU No. 2024-03. Recent developments On April 1, 2026, we funded a $15.0 million debt investment to a new portfolio company, Stellar Cyber, Inc. On April 14, 2026, we closed the Merger with MRCC. In connection with the closing of the Merger, we received approximately $141.1 million in cash and issued 20,370,645 shares of our common stock in the aggregate, or 0.9402 shares of our common stock for each share of MRCC common stock, to MRCC stockholders (and payment of cash in lieu of fractional shares). Former MRCC stockholders and our legacy stockholders own 29.86% and 70.14% of the combined company, respectively, immediately following the closing of the Merger. On April 14, 2026, we repaid the outstanding balance of $45.0 million on our Key Facility from the proceeds of our merger with MRCC. On April 30, 2026, we funded a $3.0 million debt investment to a new portfolio company, Bastille Buyer, Inc. On April 30, 2026, we funded a $4.0 million debt investment to a new portfolio company, Volt Bidco, Inc. Horizon Technology Finance Corporation and Subsidiaries Attachments Original document Permalink Disclaimer Horizon Technology Finance Corporation published this content on May 05, 2026 , and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT) , unedited and unaltered, on May 05, 2026 at 22:21 UTC .
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