Horizon Technology Finance Announces Fourth Quarter and Year 2012 Financial Results

Horizon Technology Finance Announces Fourth Quarter and Year 2012 Financial
Results

                       Annual Portfolio Growth of 28.4%

                  Record Loan Volume of $66.5 Million in Q4

         Net Investment Income of $0.36 Per Share for Fourth Quarter

FARMINGTON, Conn., March 12, 2013 (GLOBE NEWSWIRE) -- Horizon Technology
Finance Corporation (Nasdaq:HRZN) (the "Company" or "Horizon"), a leading
specialty finance company that provides secured loans to venture capital and
private equity-backed development-stage companies in the technology, life
science, healthcare information and services, and cleantech industries, today
announced its fourth quarter and year-end financial results for the year ended
December 31, 2012.

Fourth Quarter and Year Ended 2012 Highlights

  oEnded the year with an investment portfolio of $228.6 million, an increase
    of 28.4% compared to year-end 2011
  oClosed loan commitments totaling $77.4 million and $203.2 million for the
    fourth quarter and year ended 2012, respectively
  oFunded $66.5 million and $184.0 million in venture loans for the fourth
    quarter and year ended 2012, respectively
  oEarned net investment income ("NII") of $3.4 million, or $0.36 per share,
    for the fourth quarter and $12.0 million, or $1.41 per share, for the year
    ended 2012
  oPortfolio weighted average yield was 14.7% for the fourth quarter and
    14.2% for the year ended 2012
  oUnfunded loan approvals and commitments totaled $28.6 million at year-end
    2012
  oOn November 27, 2012, declared monthly dividends of $0.115 per share for
    each of January, February and March 2013
  oOn March 8, 2013, declared monthly dividends of $0.115 per share for each
    of April, May and June 2013, bringing cumulative declared dividends to
    $3.89 per share since going public in October 2010
  oNet asset value ("NAV") equaled $145.0 million, or $15.15 per share, as of
    December 31, 2012
  oReceived a total of approximately $26.6 million and $42.3 million in loan
    prepayments in the fourth quarter and full year 2012, respectively
  oReceived a total of approximately $10.6 million and $39.1 million in
    scheduled loan principal payments in the fourth quarter and full year
    2012, respectively
  oDebt to equity ratio as of December 31, 2012 was 65.3%
  oTotal liquidity as of December 31, 2012 was approximately $53.9 million

"We are very proud of our success in generating $66.5 million in new loan
volume in the fourth quarter which more than offset high loan prepayments in
the fourth quarter. This level of prepayments generated strong interest and
fee income supporting our $0.36 per share in NII. Our NII covers our
previously declared fourth quarter dividend of $0.115 per share per month
payable in the first quarter of 2013," said Robert D. Pomeroy, Jr., Chairman
and Chief Executive Officer.

"During the fourth quarter we addressed isolated credit issues, which resulted
in our placing three loans on non-accrual and taking fair value impairments on
each of them. Even with these credit impacts, the performance of our portfolio
since inception has been excellent," Mr. Pomeroy added. "We believe our
continued execution of Horizon's venture lending strategy positions us well,
despite strong competition and an uncertain macro environment. We continue to
focus on taking advantage of select investment opportunities utilizing our
disciplined approach and generating compelling risk-adjusted returns for the
benefit of our stockholders."

Operating Results

Total investment income increased 28.4% to $7.9 million for the three months
ended December 31, 2012 as compared to $6.2 million for the three months ended
December 31, 2011. For the three months ended December 31, 2012, total
investment income consisted of $7.5 million in interest income from
investments, which included $1.9 million in income from the amortization of
origination fees and end-of-term payments on investments. Interest income on
investments rose primarily due to the increased average size of the loan
portfolio. Fee income on investments was primarily comprised of prepayment
fees from six of our portfolio companies.

For the year ended December 31, 2012, total investment income increased 10.9%
to $26.7 million as compared to $24.1 million for the year ended December 31,
2011. For the year ended December 31, 2012, total investment income consisted
primarily of $25.3 million in interest income from investments, which included
$5.0 million in income from the amortization of origination fees and
end-of-term payments on investments. Interest income on investments increased
primarily due to the increased average size of the loan portfolio. Fee income
on investments for the year ended December 31, 2012 was primarily comprised of
prepayment fees from 13 of our portfolio companies.

The Company's dollar-weighted average annualized portfolio yield on average
loans, excluding warrant gains, was 14.7% and 14.3% for the three months ended
December 31, 2012 and 2011, respectively. The Company's dollar-weighted
average annualized portfolio yield on average loans for the year ended
December 31, 2012 and 2011 was 14.2% and 14.6%, respectively.

Total expenses for the three months ended December 31, 2012 were $4.3 million,
as compared to $2.7 million for the three months ended December 31, 2011.
Total expenses for each period consisted primarily of interest expense,
management fees, incentive and administrative fees and, to a lesser degree,
professional fees and general and administrative expenses. Interest expense
increased quarter-over-quarter primarily due to the increased aggregate
effective interest rate under our borrowings. Total expenses for the year
ended December 31, 2012 totaled $14.4 million, as compared to $13.3 million
for the year ended December 31, 2011.

Net investment income for the three months ended December 31, 2012 was $3.4
million, or $0.36 per share, as compared to net investment income of $3.3
million, or $0.44 per share, for the three months ended December 31, 2011. For
the year ended December 31, 2012, net investment income increased to $12.0
million, or $1.41 per share, as compared to $10.5 million, or $1.38 per share,
for the year ended December 31, 2011.

For the three months ended December 31, 2012, the net realized gain on
investments was $0.2 million, or $0.02 per share, from the sale of stock
acquired through the exercise of warrants in one portfolio company. The net
realized gain on investments for the three months ended December 31, 2011 was
$0.8 million, or $0.10 per share. For the year ended December 31, 2012, the
Company reported a net realized gain on investments of $0.1 million, or $0.01
per share, as compared to a net realized gain on investments of $6.3 million,
or $0.81 per share, for the year ended December 31, 2011.

For the three months ended December 31, 2012, the net unrealized depreciation
on investments was $8.0 million or $0.84 per share, primarily due to $7.3
million of unrealized depreciation on three debt investments on non-accrual
status. This compares to net unrealized depreciation on investments of $3.2
million or $0.42 per share, for the three months ended December 31, 2011,
which was primarily due to the reversal of unrealized appreciation on the sale
of warrants and unrealized depreciation on four debt investments. The net
unrealized depreciation on investments for the year ended December 31, 2012
and 2011 was $8.1 million, or $0.96 per share, and $5.7 million, or $0.75 per
share, respectively.

Portfolio Summary and Investment Activity

As of December 31, 2012, the Company's debt portfolio consisted of 45 secured
loans with an aggregate fair value of $220.3 million. In addition, the
Company's warrant portfolio had an aggregate fair value of $5.5 million as of
December 31, 2012. Total portfolio investment activity as of and for the three
months and the years ended December 31, 2012 and 2011 was as follows:

($ in thousands)              For the three months ended For the years ended
                              December 31,               December 31,
                             2012          2011         2012       2011
Beginning portfolio           $220,909    $180,186   $178,013 $136,810
New loan funding              66,743        19,517       184,202    106,350
Less refinanced balances      (14,556)      —            (45,295)   (8,677)
Net new loan funding          52,187        19,517       138,907    97,673
Principal payments received   (10,570)      (12,127)     (39,092)   (34,793)
on investments
Early pay-offs                (26,627)      (6,741)      (42,291)   (16,649)
Accretion of loan fees        833           539          2,531      1,895
New loan fees                 (556)         (82)         (1,676)    (1,049)
New equity                    —             2            —          579
Proceeds from sale of         (268)         (6,985)      (306)      (6,985)
investments
Net realized gain on          169           6,599        108        6,599
investments
Net depreciation on           (7,996)       (2,802)      (8,113)    (5,974)
investments
Other                         532           (93)         532        (93)
Ending portfolio              $228,613    $178,013   $228,613 $178,013

Net Asset Value

At December 31, 2012, the Company's net assets were approximately $145.0
million, an increase of 11.6% as compared to $129.9 million as of December 31,
2011, and a decrease of 7.6% as compared to $156.9 million as of September 30,
2012.

At December 31, 2012, the Company's net asset value per share was $15.15 based
on 9,567,225 shares outstanding, compared to $17.01 per share based on
7,636,532 shares outstanding as of December 31, 2011 and $16.41 per share
based on 9,562,956 shares outstanding as of September 30, 2012.

For the three months ended December 31, 2012, the net decrease in net assets
resulting from operations was $4.4 million. This compares to a net increase in
net assets resulting from operations of $0.8 million for the three months
ended December 31, 2011. For the years ended December 31, 2012 and 2011, the
net increase in net assets resulting from operations was $4.0 million and
$11.0 million, respectively.

The reduction in NAV at the end of 2012 reflects the impact of fair value
adjustments on three investments. NAV was also impacted by the change in the
Company's dividend strategy where the Company declared a third quarter
dividend in November and then also declared a fourth quarter dividend in
November to be paid at a monthly rate of $0.115 per share in the first quarter
of 2013 totaling $0.345 per share.

Portfolio Asset Quality

The following table shows the classification of our loan portfolio at fair
value by credit rating as of December 31, 2012 and 2011:

                 December 31, 2012    December 31, 2011
                  Loans at  Percentage Loans at  Percentage
($ in thousands) Fair      of Loan    Fair      of Loan
                  Value     Portfolio  Value     Portfolio
                                             
Credit Rating                                 
4                 $ 30,818  14.0%      $ 30,108  17.4%
3                 181,019   82.2       119,753   69.1
2                 3,560     1.6        23,425    13.5
1                 4,900     2.2        —         —
Total            $ 220,297 100.0%     $ 173,286 100.0%

As of December 31, 2012 and 2011, the Company's loan portfolio had a weighted
average credit rating of 3.2 and 3.1, respectively, with 4 being the highest
credit quality rating and 3 being the rating for a standard level of risk. A
rating of 2 or 1 represents a deteriorating credit quality and increased risk.
As of December 31, 2012, there was one investment with a credit rating of 2.
As of December 31, 2011, there were six investments with a credit rating of 2.
As of December 31, 2012, there were three investments with a credit rating of
1 and on non-accrual status with an approximate cost of $12.9 million and fair
value of approximately $4.9 million. There were no loans with a credit rating
of 1 or on non-accrual status as of December 31, 2011.

Liquidity and Capital Resources

As of December 31, 2012, the Company had approximately $53.9 million in
available liquidity, including cash and investments in money market funds
totaling $3.6 million, and approximately $50.3 million in funds available
under existing credit facility commitments.

Borrowings outstanding under the Company's $150 million accordion credit
facility with Wells Fargo, which contains an initial commitment of $75
million, totaled $46.0 million as of December 31, 2012. Borrowings outstanding
under the Company's term loan credit facility of $75 million with Fortress
Credit totaled $10.0 million as of December 31, 2012. The Company settled all
obligations under its credit facility with WestLB and the facility was closed
during the fourth quarter of 2012.

In March and April 2012, in connection with an underwritten public offering,
the Company issued and sold an aggregate principal amount of $33 million of
7.375% senior unsecured notes due in 2019. These notes are listed on the New
York Stock Exchange under the ticker symbol "HTF".

In July 2012, the Company completed a public offering of 1,909,000 shares of
its common stock with total gross proceeds of approximately $30.9 million from
this offering.

AtDecember 31, 2012, the Company's debt to equity leverage ratio was 65.3%.

Monthly Dividends Payable in Second Quarter 2013

On March 8, 2013, the Company's Board of Directors declared monthly dividends
of $0.115 per share for each of April, May and June 2013 pursuant to the
Company's dividend strategy. These monthly dividends, as set forth in the
table below, total $0.345 per share:

Declared      Ex-Dividend Date Record Date    Payment Date   Amount Per Share
March 8, 2013 March 18, 2013   March 20, 2013 April 15, 2013 $0.115
March 8, 2013 April 16, 2013   April 18, 2013 May 15, 2013   $0.115
March 8, 2013 May 17, 2013     May 20, 2013   June 17, 2013  $0.115
             Total:                                         $0.345

When declaring dividends, the Company's Board of Directors reviews estimates
of taxable income available for distribution, which may differ from
consolidated net income under generally accepted accounting principles due to
(i) changes in unrealized appreciation and depreciation, (ii) temporary and
permanent differences in income and expense recognition and (iii) the amount
of spillover income carried over from a given year for distribution in the
following year. The final determination of taxable income for each tax year,
as well as the tax attributes for dividends in such tax year, will be made
after the close of the tax year.

Conference Call

The Company will host a conference call on Wednesday, March 13, 2013 at 9:00
a.m. ET to discuss its latest corporate developments and financial results.
The dial-in number for callers in the U.S. is (877) 677-9112, and the dial-in
number for international callers is (708) 290-1396. The access code for all
callers is 98070458.

A live webcast will also be available on the Company's website at
horizontechnologyfinancecorp.com.

A replay of the call will be available through March 15, 2013. To access the
replay, please dial (855) 859-2056 in the U.S. and (404) 537-3406 outside the
U.S., and then enter the access code 98070458. An online archive of the
webcast will be available on the Company's website for 30 days following the
call.

About Horizon Technology Finance

Horizon Technology Finance Corporation is a business development company that
provides secured loans to development-stage companies backed by established
venture capital and private equity firms within the technology, life science,
healthcare information and services, and clean-tech industries. The investment
objective of Horizon Technology Finance is to maximize total risk-adjusted
returns by generating current income from a portfolio of directly originated
secured loans as well as capital appreciation from warrants to purchase the
equity of portfolio companies. Headquartered in Farmington, Connecticut, with
regional offices in Walnut Creek, California and Reston, Virginia, the Company
is externally managed by its investment advisor, Horizon Technology Finance
Management LLC. Horizon's common stock trades on the NASDAQ Global Select
Market under the ticker symbol, "HRZN". In addition, the Company's 7.375%
Senior Notes due 2019 trade on the New York Stock Exchange under the ticker
symbol "HTF." To learn more about the Company, please visit
horizontechnologyfinancecorp.com.

Forward-Looking Statements

Statements included herein may constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995.
Statements other than statements of historical facts included in this press
release may constitute forward-looking statements and are not guarantees of
future performance, condition or results and involve a number of risks and
uncertainties. Actual results may differ materially from those in the
forward-looking statements as a result of a number of factors, including those
described from time to time in our filings with the Securities and Exchange
Commission. The Company undertakes no duty to update any forward-looking
statement made herein. All forward-looking statements speak only as of the
date of this press release.

Horizon Technology Finance Corporation and Subsidiaries
Consolidated Statements of Assets and Liabilities (Unaudited)
(In thousands, except share data)
                                                                   
                                                          December31,
                                                          2012      2011
                                                                   
Assets                                                              
Non-affiliate investments at fair value (cost of $239,385  $ 228,613 $ 178,013
and $180,651, respectively)
Investment in money market funds                           2,560     13,518
Cash                                                       1,048     1,298
Interest receivable                                        2,811     2,985
Other assets                                               4,626     1,997
Total assets                                               $ 239,658 $ 197,811
                                                                   
Liabilities                                                         
Borrowings                                                $ 89,020  $ 64,571
Dividends payable                                          3,301     —
Base management fee payable                               402       330
Incentive fee payable                                     855       1,766
Other accrued expenses                                     1,108     1,260
Total liabilities                                          94,686    67,927
                                                                   
Net assets                                                          
Preferred stock, par value $0.001 per share,
1,000,000shares authorized, zeroshares issued and        —         —
outstanding as of December 31, 2012 and 2011
Common stock, par value $0.001 per share,
100,000,000shares authorized, 9,567,225 and               10        8
7,636,532shares outstanding as of December 31, 2012 and
2011, respectively
Paid-in capital in excess of par                           154,384   124,512
Accumulated undistributed net investment income            1,428     4,965
Net unrealized depreciation on investments                 (10,772)  (2,659)
Net realized (loss) gains on investments                   (78)      3,058
Total net assets                                           144,972   129,884
Total liabilities and net assets                           $ 239,658 $ 197,811
Net asset value per common share                           $ 15.15   $ 17.01


Horizon Technology Finance Corporation and Subsidiaries
Consolidated Statements of Operations (Unaudited)
(In thousands, except share data)
                                                             
                                For the Three Months For the Years Ended  
                                 Ended December 31,   December 31,
                                2012       2011      2012       2011
Investment income                                             
Interest income on non-affiliate $7,486   $5,968  $25,289  $22,879
investments
Interest income on money market  —          1         —          91
funds
Fee income on non-affiliate      452        214       1,375      1,084
investments
Total investment income          7,938      6,183     26,664     24,054
Expenses                                                      
Interest expense                 1,529      588       4,283      2,681
Base management fee             1,166      963       4,208      4,192
Performance based incentive fee 855        312       2,847      3,013
Administrative fee              228        326       1,082      1,199
Professional fees                281        225       1,027      1,259
General and administrative       226        248       990        988
Total expenses                   4,285      2,662     14,437     13,332
Net investment income before     3,653      3,521     12,227     10,722
excise tax
Provision for excise tax         (237)      (211)     (231)      (211)
Net investment income           3,416      3,310     11,996     10,511
                                                             
Net realized and unrealized                                   
(loss) gain on investments
Net realized gain on investments 169        772       108        6,316
Provision for excise tax         —          (129)     —          (129)
Net unrealized depreciation on   (7,996)    (3,167)   (8,113)    (5,702)
investments
Net realized and unrealized      (7,827)    (2,524)   (8,005)    485
(loss) gain on investments
                                                             
Net (decrease) increase in net   $(4,411) $786    $3,991   $10,996
assets resulting from operations
Net investment income per common $0.36    $0.44   $1.41    $1.38
share
Change in net assets per common  $(0.46)  $0.10   $0.47    $1.44
share
Weighted average shares          9,564,410  7,630,025 8,481,604  7,610,818
outstanding

CONTACT: Horizon Technology Finance Corporation
         Christopher M. Mathieu
         Chief Financial Officer
         (860) 676-8653
         chris@horizontechfinance.com
        
         Investor Relations and Media Contacts:
         The IGB Group
         Leon Berman / Michael Cimini
         (212) 477-8438 / (212) 477-8261
         lberman@igbir.com / mcimini@igbir.com
 
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