What changed in this filing

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Item 1. Business

2021-03-02 compared with 2020-03-03 · 438 added, 1109 removed, 165 unchanged (90% of the section changed)

We are a specialty

finance company that lends to and invests in development-stage companies in the technology, life science, healthcare information

and services and sustainability industries, which we refer to as our “Target Industries.”

Our investment objective

is to maximize our investment portfolio’s total return by generating current income from the debt investments we make and

capital appreciation from the warrants we receive when making such debt investments.

We are focused on making secured debt investments,

which we refer to as “Venture Loans,”

to venture capital and private equity backed companies and publicly traded companies

in our Target Industries, which we refer to as “Venture Lending.”

Our debt investments are typically secured by first

liens or first liens behind a secured revolving line of credit, or “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.

externally managed, closed-end, non-diversified management investment company that has elected to be regulated as a business

development company, or BDC, under the Investment Company Act of 1940, as amended, or the 1940 Act.

We are a specialty finance company that lends to and invests in development-stage companies in the technology, life science, healthcare information and services and sustainability industries, which we refer to as our “Target Industries.” Our investment objective is to maximize our investment portfolio’s total return by generating current income from the debt investments we make and capital appreciation from the warrants we receive when making such debt investments.

We are focused on making secured debt investments, which we refer to as “Venture Loans,” to venture capital and private

equity backed companies and publicly traded companies in our Target Industries, which we refer to as “Venture Lending.” Our debt investments are typically secured by first liens or first liens behind a secured revolving line of credit, or collectively, “Senior Term Loans.” Venture Lending is typically characterized by (1) the making of a secured debt investment after a venture capital or equity investment in the portfolio company has been made, which investment provides a source of cash to fund the portfolio company’s debt service obligations under the Venture Loan, (2) the senior priority of the Venture Loan which requires repayment of the Venture Loan prior to the equity investors realizing a return on their capital, (3) the amortization of the Venture Loan and (4) the lender’s receipt of warrants or other success fees with the making of the Venture Loan.

We are an externally managed, closed-end, non-diversified management investment company that has elected to be regulated as a business development company, or BDC, under the Investment Company Act of 1940, as amended, or the 1940 Act.

In addition, for U.S.

federal income tax purposes, we have elected to be treated as a regulated investment company, or RIC, under Subchapter M of

the Internal Revenue Code of 1986, as amended, or the Code.

As a BDC, we are required to comply with regulatory requirements,

including limitations on our use of debt.

federal income tax purposes, we have elected to be treated as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code.

As a BDC, we are required to comply with regulatory requirements, including limitations on our use of debt.

We are permitted to, and expect to, finance our investments through borrowings.

Section 61(a)(2) of the 1940 Act enables BDCs to reduce their asset coverage requirements from 200% to 150%, as a result of

the enactment of the Small Business Credit Availability Act, or SBCAA, in March 2018.

This provision permits a BDC to double

the maximum amount of leverage that it is permitted to incur.

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.

approval from our stockholders to reduce our asset coverage requirement from 200% to 150% on October 30, 2018.

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

As a RIC, we generally are not subject to pay corporate-level income taxes on our investment company taxable

income, determined without regard to any deductions for dividends paid, and our net capital gain that we distribute as

dividends for U.S.

federal income tax purposes to our stockholders as long as we meet certain source-of-income, distribution,

asset diversification and other requirements.

Compass Horizon Funding

Company LLC, or Compass Horizon, our predecessor company, commenced operations in March 2008.

We are a Delaware corporation organized

in March 2010 for the purpose of acquiring Compass Horizon and continuing its business as a public entity.

From the commencement

of operations of Compass Horizon on March 4, 2008 through December 31, 2019, we funded 181 portfolio companies and invested $1.3 billion

in debt investments.

As of December 31, 2019, our debt investment portfolio consisted of 35 debt investments with an aggregate

fair value of $288.4 million.

As of December 31, 2019, 100.0%, or $288.4 million, of our debt investment portfolio at fair

value consisted of Senior Term Loans.

As of December 31, 2019, 56.7%, or $163.4 million, of our total debt investment portfolio

at fair value was held through our 2019-1 Securitization.

As of December 31, 2019, our net assets were $184.1 million, and

all of our debt investments were secured by all or a portion of the tangible and intangible assets of the applicable portfolio

Section 61(a)(2) of the 1940 Act enables BDCs to reduce their asset coverage requirements from 200% to 150%, as a result of the enactment of the Small Business Credit Availability Act, or SBCAA, in March 2018.

This provision permits a BDC to double the maximum amount of leverage that it is permitted to incur.

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.

We received approval from our stockholders to reduce our asset coverage requirement from 200% to 150% on October 30, 2018.

The amount of leverage that we may employ will depend on our assessment of market conditions and other factors at the time of any proposed borrowing.

As a RIC, we generally are not subject to pay corporate-level income taxes on our investment company taxable income, determined without regard to any deductions for dividends paid, and our net capital gain that we distribute as dividends for U.S.

federal income tax purposes to our stockholders as long as we meet certain source-of-income, distribution, asset diversification and other requirements.

Compass Horizon Funding Company LLC, or Compass Horizon, our predecessor company, commenced operations in March 2008.

We are a Delaware corporation organized in March 2010 for the purpose of acquiring Compass Horizon and continuing its business as a public entity.

From the commencement of operations of Compass Horizon on March 4, 2008 through December 31, 2020, we funded 197 portfolio companies and invested $1.5 billion in debt investments.

As of December 31, 2020, our debt investment portfolio consisted of 34 debt investments with an aggregate fair value of $333.5 million.

As of December 31, 2020, 100%, or $333.5 million, of our debt investment portfolio at fair value consisted of Senior Term Loans.

As of December 31, 2020, 43.5%, or $145.0 million, of our total debt investment portfolio at fair value was held through our 2019-1 Securitization.

As of December 31, 2020, our net assets were $212.6 million, and all of our debt investments were secured by all or a portion of the tangible and intangible assets of the applicable portfolio company.

The debt investments in our portfolio are generally not rated by any rating agency.

If the individual debt investments

in our portfolio were rated, they would be rated below “investment grade”.

Debt investments that are unrated or rated

below investment grade are sometimes referred to as “junk bonds”

and have predominantly speculative characteristics

with respect to the issuer’s capacity to pay interest and repay principal.

For the year ended

December 31, 2019, our dollar-weighted annualized yield on average debt investments (excluding any yield from warrants, equity,

other investments and HSLFI) was 16.7%.

We calculate the dollar-weighted yield on average debt investments for any period as (1)

total investment income (excluding income from HSLFI) during the period divided by (2) the average of the fair value of debt investments

outstanding on (a) the last day of the calendar month immediately preceding the first day of the period and (b) the last day of

each calendar month during the period.

The dollar-weighted annualized yield on average debt investments is higher than what investors

will realize because it does not reflect our expenses or any sales load paid by investors.

For the year ended

December 31, 2019, our investment portfolio (including any yield from warrants, equity, other investments and HSLFI) had an overall

total yield of 15.7%.

We calculate the dollar-weighted yield on average investments for any period as (1) total investment income

during the period divided by (2) the average of the fair value of investments outstanding on (a) the last day of the calendar month

immediately preceding the first day of the period and (b) the last day of each calendar month during the period.

The dollar-weighted

annualized yield on average investments is higher than what investors will realize because it does not reflect our expenses or

any sales load paid by investors.

As of December 31,

2019, our debt investments had a dollar-weighted average term of 47 months from inception and a dollar-weighted average remaining

term of 38 months.

As of December 31, 2019, substantially all of our debt investments had an original committed principal

amount of between $3 million and $20 million, repayment terms of between 4 and 60 months and bore current pay interest

at annual interest rates of between 9% and 16%.

For the year ended

December 31, 2019, our total return based on market value was 25.6%.

Total return based on market value is calculated as (x) the

sum of (i) the closing sales price of our common stock on the last day of the period plus (ii) the aggregate amount of distributions

paid per share during the period, less (iii) the closing sales price of our common stock on the first day of the period, divided

by (y) the closing sales price of our common stock on the first day of the period.

In addition to our

debt investments, as of December 31, 2019, we held warrants to purchase stock, predominantly preferred stock, in 66 portfolio companies,

equity positions in nine portfolio companies and success fee arrangements in eight portfolio companies.

On June, 1 2018,

we and Arena formed a joint venture, HSLFI, to make investments, either directly or indirectly through subsidiaries, primarily

in the form of secured loans to development-stage companies our Target Industries.

HSLFI was formed as a Delaware limited liability

company and is not consolidated by either us or Arena for financial reporting purposes.

Investments held by HSLFI are measured

at fair value.

As of December 31, 2019, HSLFI had total assets of $48.3 million.

HSLFI’s portfolio consisted of debt investments

in eight portfolio companies as of December 31, 2019.

As of December 31, 2019, the largest investment in a single portfolio company

in the HSLFI’s portfolio in aggregate principal amount was $11.3 million and the five largest investments in portfolio companies

in HSLFI’s portfolio totaled $30.3 million.

As of December 31, 2019, HSLFI had no investments on non-accrual status.

invests in portfolio companies in the same industries in which we may directly invest.

We invest cash or

securities in portfolio companies in HSLFI in exchange for limited liability company equity interests in HSLFI.

As of December

31, 2019, we and Arena each owned 50.0% of the equity interests of HSLFI.

We had an original commitment to fund $25.0 million of

equity interests in HSLFI.

As of December 31, 2019, $9.8 million was unfunded.

Our investment in HSLFI consisted of an equity contribution

of $15.2 million as of December 31, 2019.

Our investment activities,

and our day-to-day operations, are managed by our Advisor and supervised by our board of directors, or the Board, of which a majority

of the members are independent of us.

Under an investment management agreement dated March 7, 2019, or 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.

also entered into an administration agreement, or 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.

Our common stock began

trading October 29, 2010 and is currently traded on the Nasdaq Global Select Market, or Nasdaq, under the symbol “HRZN”.

If the individual debt investments in our portfolio were rated, they would be rated below “investment grade”.

Debt investments that are unrated or rated below investment grade are sometimes referred to as “junk bonds” and have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal.

For the year ended December 31, 2020, our dollar-weighted annualized yield on average debt investments (excluding any yield from HSLFI through April 21, 2020, warrants, equity and other investments) was 14.6%.

We calculate the dollar-weighted yield on average debt investments for any period as (1) total investment income (excluding income from HSLFI) during the period divided by (2) the average of the fair value of debt investments outstanding on (a) the last day of the calendar month immediately preceding the first day of the period and (b) the last day of each calendar month during the period.

The dollar-weighted annualized yield on average debt investments is higher than what investors will realize because it does not reflect our expenses or any sales load paid by investors.

For the year ended December 31, 2020, our investment portfolio (including any yield from HSLFI through April 21, 2020, warrants, equity and other investments) had an overall total yield of 13.9%.

We calculate the dollar-weighted yield on average investments for any period as (1) total investment income during the period divided by (2) the average of the fair value of investments outstanding on (a) the last day of the calendar month immediately preceding the first day of the period and (b) the last day of each calendar month during the period.

The dollar-weighted annualized yield on average

investments is higher than what investors will realize because it does not reflect our expenses or any sales load paid by investors.

As of December 31, 2020, our debt investments had a dollar-weighted average term of 50 months from inception and a dollar-weighted average remaining term of 40 months.

As of December 31, 2020, substantially all of our debt investments had an original committed principal amount of between $4 million and $25 million, repayment terms of between 15 and 60 months and bore current pay interest at annual interest rates of between 8% and 13%.

For the year ended December 31, 2020, our total return based on market value was 12.1%.

Total return based on market value is calculated as (x) the sum of (i) the closing sales price of our common stock on the last day of the period plus (ii) the aggregate amount of distributions paid per share during the period, less (iii) the closing sales price of our common stock on the first day of the period, divided by (y) the closing sales price of our common stock on the first day of the period.

In addition to our debt investments, as of December 31, 2020, we held warrants to purchase stock, predominantly preferred stock, in 60 portfolio companies, equity positions in eight portfolio companies and success fee arrangements in five portfolio companies.

Our investment activities, and our day-to-day operations, are managed by our Advisor and supervised by our board of directors, or the Board, of which a majority of the members are independent of us.

Under an investment management agreement dated March 7, 2019, or 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.

The Investment Management Agreement was considered and reapproved by our Board, including a majority of our independent directors, on October 26, 2020.

We have also entered into an administration agreement, or 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.

Our common stock began trading October 29, 2010 and is currently traded on the Nasdaq Global Select Market, or Nasdaq, under the symbol “HRZN”.

Information available

Our principal executive

office is located at 312 Farmington Avenue, Farmington, Connecticut 06032, our telephone number is (860) 676-8654, and our

internet address is www.horizontechfinance.com .

We make available, free of charge, on our website our annual report on Form 10-K,

quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable

after we electronically file such material with, or furnish it to, the U.S.

Our principal executive office is located at 312 Farmington Avenue, Farmington, Connecticut 06032, our telephone number is (860) 676-8654, and our internet address is www.horizontechfinance.com .

We make available, free of charge, on our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S.

Securities and Exchange Commission, or the SEC.

Information contained on our website is not incorporated by reference into this annual report on Form 10-K and you should

not consider information contained on our website to be part of this annual report on Form 10-K or any other report we file

with the SEC.

The SEC also maintains

a website that contains reports, proxy and information statements and other information we file with the SEC at www.sec.gov.

of these reports, proxy and information statements and other information may also be obtained, after paying a duplicating fee,

by electronic request at publicinfo@sec.gov.

Our investment activities

are managed by our Advisor, and we expect to continue to benefit from our Advisor’s ability to identify attractive investment

opportunities, conduct diligence on and value prospective investments, negotiate investments and manage our portfolio of investments.

In addition to the experience gained from the years that they have worked together both at our Advisor and prior to the formation

of our Advisor, the members of our investment team have broad lending backgrounds, with substantial experience at a variety of

commercial finance companies, technology banks and private debt funds, and have developed a broad network of contacts within the

venture capital and private equity community.

Information contained on our website is not incorporated by reference into this annual report on Form 10-K and you should not consider information contained on our website to be part of this annual report on Form 10-K or any other report we file with the SEC.

The SEC also maintains a website that contains reports, proxy and information statements and other information we file with the SEC at www.sec.gov.

Copies of these reports, proxy and information statements and other information may also be obtained, after paying a duplicating fee, by electronic request at publicinfo@sec.gov.

Our investment activities are managed by our Advisor, and we expect to continue to benefit from our Advisor’s ability to identify attractive investment opportunities, conduct diligence on and value prospective investments, negotiate investments and manage our portfolio of investments.

In addition to the experience gained from the years that they have worked together both at our Advisor and prior to the formation of our Advisor, the members of our investment team have broad lending backgrounds, with substantial experience at a variety of commercial finance companies, technology banks and private debt funds, and have developed a broad network of contacts within the venture capital and private equity community.

This network of contacts provides a principal source of investment opportunities.

Our Advisor is led

by six senior managers including Robert D.

Our Advisor is led by six senior managers including Robert D.

Pomeroy, Jr., our Chief Executive Officer, Gerald A.

Michaud, our President, Daniel

Michaud, our President, Daniel R.

Trolio, our Senior Vice President and Chief Financial Officer, John C.

Bombara, our Senior Vice President, General Counsel and

Chief Compliance Officer, Daniel S.

Devorsetz, our Senior Vice President and Chief Investment Officer and Diane Earle, our Senior

Vice President and Chief Credit Officer.

Our investment objective

is to maximize our investment portfolio’s total return by generating current income from the loans we make and capital appreciation

from the warrants we receive when making such loans.

To further implement our business strategy, we expect our Advisor to continue

to employ the following core strategies:

Senior Vice President, General Counsel and Chief Compliance Officer, Daniel S.

Devorsetz, our Senior Vice President and Chief Investment Officer and Diane Earle, our Senior Vice President and Chief Credit Officer.

Our investment objective is to maximize our investment portfolio’s total return by generating current income from the loans we make and capital appreciation from the warrants we receive when making such loans.

To further implement our business strategy, we expect our Advisor to continue to employ the following core strategies:

● Structured investments in the venture capital and private and public equity markets.

make loans to development-stage companies within our Target Industries typically in the form of secured loans.

The secured debt

structure provides a lower risk strategy, as compared to equity or unsecured debt investments, to participate in the emerging technology

markets because the debt structures we typically utilize provide collateral against the downside risk of loss, provide return of

capital in a much shorter timeframe through current-pay interest and amortization of principal and have a senior position to equity

in the borrower’s capital structure in the case of insolvency, wind down or bankruptcy.

Unlike venture capital and private

equity investments, our investment returns and return of our capital do not require equity investment exits such as mergers and

acquisitions or initial public offerings.

Instead, we receive returns on our debt investments primarily through regularly scheduled

payments of principal and interest and, if necessary, liquidation of the collateral supporting the debt investment upon a default.

We make loans to development-stage companies within our Target Industries typically in the form of secured loans.

The secured debt structure provides a lower risk strategy, as compared to equity or unsecured debt investments, to participate in the emerging technology markets because the debt structures we typically utilize provide collateral against the downside risk of loss, provide return of capital in a much shorter timeframe through current-pay interest and amortization of principal and have a senior position to equity in the borrower’s capital structure in the case of insolvency, wind down or bankruptcy.

Unlike venture capital and private equity investments, our investment returns and return of our capital do not require equity investment exits such as mergers and acquisitions or initial public offerings.

Instead, we receive returns on our debt investments primarily through regularly scheduled payments of principal and interest and, if necessary, liquidation of the collateral supporting the debt investment upon a default.

Only the potential gains from warrants depend upon equity investment exits.

“Enterprise value”

We and our Advisor take an enterprise

value approach to structuring and underwriting loans.

Enterprise value includes the implied valuation based upon recent equity

capital invested as well as the intrinsic value of the applicable portfolio company’s particular technology, service or customer

● “Enterprise value” lending.

We and our Advisor take an enterprise value approach to structuring and underwriting loans.

Enterprise value includes the implied valuation based upon recent equity capital invested as well as the intrinsic value of the applicable portfolio company’s particular technology, service or customer base.

We secure our lien position against the enterprise value of each portfolio company.

● Creative products with attractive risk-adjusted pricing.

Each of our existing

and prospective portfolio companies has its own unique funding needs for the capital provided from the proceeds of our Venture

These funding needs include funds for additional development “runways”, funds to hire or retain sales staff

or funds to invest in research and development in order to reach important technical milestones in advance of raising additional

Our loans include current-pay interest, commitment fees, end-of-term payments, or ETPs, pre-payment fees, success fees

and non-utilization fees.

We believe we have developed pricing tools, structuring techniques and valuation metrics that satisfy

our portfolio companies’

financing requirements while mitigating risk and maximizing returns on our investments.

Each of our existing and prospective portfolio companies has its own unique funding needs for the capital provided from the proceeds of our Venture Loans.

These funding needs include funds for additional development “runways”, funds to hire or retain sales staff or funds to invest in research and development in order to reach important technical milestones in advance of raising additional equity.

Our loans include current-pay interest, commitment fees, end-of-term payments, or ETPs, pre-payment fees, success fees and non-utilization fees.

We believe we have developed pricing tools, structuring techniques and valuation metrics that satisfy our portfolio companies’ financing requirements while mitigating risk and maximizing returns on our investments.

● Opportunity for enhanced returns.

To enhance our debt investment portfolio returns,

in addition to interest and fees, we frequently obtain warrants to purchase the equity of our portfolio companies as additional

consideration for making debt investments.

The warrants we obtain generally include a “cashless exercise”

to allow us to exercise these rights without requiring us to make any additional cash investment.

Obtaining warrants in our portfolio

companies has allowed us to participate in the equity appreciation of our portfolio companies, which we expect will enable us to

generate higher returns for our investors.

To enhance our debt investment portfolio returns, in addition to interest and fees, we frequently obtain warrants to purchase the equity of our portfolio companies as additional consideration for making debt investments.

The warrants we obtain generally include a “cashless exercise” provision to allow us to exercise these rights without requiring us to make any additional cash investment.

Obtaining warrants in our portfolio companies has allowed us to participate in the equity appreciation of our portfolio companies, which we expect will enable us to generate higher returns for our investors.

● Direct origination.

We originate transactions directly with technology, life

science, healthcare information and services and sustainability companies.

These transactions are referred to our Advisor from

a number of sources, including referrals from, or direct solicitation of, venture capital and private equity firms, portfolio company

management teams, legal firms, accounting firms, investment banks, portfolio company advisors and other lenders that represent

companies within our Target Industries.

Our Advisor has been the sole or lead originator in substantially all transactions in which

the funds it manages have invested.

We originate transactions directly with technology, life science, healthcare information and services and sustainability companies.

These transactions are referred to our Advisor from a number of sources, including referrals from, or direct solicitation of, venture capital and private equity firms, portfolio company management teams, legal firms, accounting firms, investment banks, portfolio company advisors and other lenders that represent companies within our Target Industries.

Our Advisor has been the sole or lead originator in substantially all transactions in which the funds it manages have invested.

● Disciplined and balanced underwriting and portfolio management.

We use a disciplined

underwriting process that includes obtaining information validation from multiple sources, extensive knowledge of our Target Industries,

comparable industry valuation metrics and sophisticated financial analysis related to development-stage companies.

Our Advisor’s

due diligence on investment prospects includes obtaining and evaluating information on the prospective portfolio company’s

technology, market opportunity, management team, fund raising history, investor support, valuation considerations, financial condition

and projections.

We seek to balance our investment portfolio to reduce the risk of down market cycles associated with any particular

industry or sector, development-stage or geographic area by quarterly reviewing each criteria and, in the event there is an overconcentration,

seeking investment opportunities to reduce such overconcentration.

Our Advisor employs a “hands on”

approach to portfolio

management, requiring private portfolio companies to provide monthly financial information and to participate in regular updates

on performance and future plans.

We use a disciplined underwriting process that includes obtaining information validation from multiple sources, extensive knowledge of our Target Industries, comparable industry valuation metrics and sophisticated financial analysis related to development-stage companies.

Our Advisor’s due diligence on investment prospects includes obtaining and evaluating information on the prospective portfolio company’s technology, market opportunity, management team, fund raising history, investor support, valuation considerations, financial condition and projections.

We seek to balance

our investment portfolio to reduce the risk of down market cycles associated with any particular industry or sector, development-stage or geographic area by quarterly reviewing each criteria and, in the event there is an overconcentration, seeking investment opportunities to reduce such overconcentration.

Our Advisor employs a “hands on” approach to portfolio management, requiring private portfolio companies to provide monthly financial information and to participate in regular updates on performance and future plans.

For public companies, our Advisor typically relies on publicly reported quarterly financials.

● Use of leverage.

We use leverage to increase returns on equity through our Key

Facility, through our 2022 Notes and through our 2019-1 Securitization.

See “Item 7 —

Management’s Discussion

and Analysis of Financial Condition and Results of Operations —

Liquidity and capital resources”

for additional

information about our use of leverage.

In addition, we may issue additional debt securities or preferred stock in one or more series

in the future.

We use leverage to increase returns on equity through our Credit Facilities, through our 2022 Notes and through our 2019-1 Securitization.

See “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and capital resources” for additional information about our use of leverage.

In addition, we may issue additional debt securities or preferred stock in one or more series in the future.

Market opportunity

We focus our investments

primarily in our Target Industries.

The technology sectors we focus on include communications, networking, data storage, software,

cloud computing, semiconductor, internet and media and consumer-related technologies.

The life science sectors we focus on include

biotechnology, drug discovery, drug delivery, bioinformatics and medical devices.

The healthcare information and services sectors

we focus on include diagnostics, electronic medical record services and software and other healthcare related services and technologies

that improve efficiency and quality of administered healthcare.

The sustainability sectors we focus on include alternative energy,

power management, energy efficiency, green building materials and waste recycling.

We refer to all of these companies as “technology-related”

companies because the companies are developing or offering goods and services to businesses and consumers which utilize scientific

knowledge, including techniques, skills, methods, devices and processes, to solve problems.

We intend, under normal market conditions,

to invest at least 80% of the value of our total assets in such companies.

We believe that Venture

Lending has the potential to achieve enhanced returns that are attractive notwithstanding the high degree of risk associated with

lending to development-stage companies.

We focus our investments primarily in our Target Industries.

The technology sectors we focus on include communications, networking, data storage, software, cloud computing, semiconductor, internet and media and consumer-related technologies.

The life science sectors we focus on include biotechnology, drug discovery, drug delivery, bioinformatics and medical devices.

The healthcare information and services sectors we focus on include diagnostics, electronic medical record services and software and other healthcare related services and technologies that improve efficiency and quality of administered healthcare.

The sustainability sectors we focus on include alternative energy, power management, energy efficiency, green building materials and waste recycling.

We refer to all of these companies as “technology-related” companies because the companies are developing or offering goods and services to businesses and consumers which utilize scientific knowledge, including techniques, skills, methods, devices and processes, to solve problems.

We intend, under normal market conditions, to invest at least 80% of the value of our total assets in such companies.

We believe that Venture Lending has the potential to achieve enhanced returns that are attractive notwithstanding the high degree of risk associated with lending to development-stage companies.

Potential benefits include:

interest rates that typically exceed rates that would be available to portfolio companies if they

could borrow in traditional commercial financing transactions;

the debt investment support provided by cash proceeds from equity capital invested by venture capital

and private equity firms or access to public equity markets to access capital;

● interest rates that typically exceed rates that would be available to portfolio companies if they could borrow in traditional commercial financing transactions;

● the debt investment support provided by cash proceeds from equity capital invested by venture capital and private equity firms or access to public equity markets to access capital;

● amortization of principal;

senior ranking to equity and collateralization of debt investments to minimize potential loss of

● senior ranking to equity and collateralization of debt investments to minimize potential loss of capital;

● potential equity appreciation through warrants.

We believe that Venture

Lending also provides an attractive financing source for portfolio companies, their management teams and their equity capital investors,

We believe that Venture Lending also provides an attractive financing source for portfolio companies, their management teams and their equity capital investors, as it:

● is typically less dilutive to the equity holders than additional equity financing;

extends the time period during which a portfolio company can operate before seeking additional

equity capital or pursuing a sale transaction or other liquidity event;

● extends the time period during which a portfolio company can operate before seeking additional equity capital or pursuing a sale transaction or other liquidity event;

● allows portfolio companies to better match cash sources with uses.

Competitive strengths

We believe that we,

together with our Advisor, possess significant competitive strengths, which include the following:

execute commitments and close transactions.

Our Advisor and its senior management and investment professionals have

an extensive track record of originating, underwriting and managing Venture Loans.

Our Advisor and its predecessor have directly

originated, underwritten and managed Venture Loans with an aggregate original principal amount over $1.7 billion to more than

245 companies since operations commenced in 2004.

direct origination capabilities.

Our Advisor has significant experience originating Venture Loans in our Target

This experience has given our Advisor a deep knowledge of our Target Industries and an extensive base of transaction

sources and references.

experienced and cohesive management team.

Most of our Advisor’s senior management team of experienced

professionals has been together since our inception.

This consistency allows companies, their management teams and their

investors to rely on consistent and predictable service, loan products and terms and underwriting standards.

Relationships

with venture capital and private equity investors.

Our Advisor has developed strong relationships with venture capital

and private equity firms and their partners.

Our Advisor has originated Venture Loans to more than 245 companies in our Target Industries under

the “Horizon Technology Finance”

We compete to provide

financing to development-stage companies in our Target Industries with a number of investment funds and other BDCs, as well as

traditional financial services companies such as commercial banks and other financing sources.

Some of our competitors are larger

and have greater financial and other resources than we do.

We believe we compete effectively with these entities primarily on the

basis of the experience, industry knowledge and contacts of our Advisor’s investment professionals, our Advisor’s responsiveness,

efficient investment analysis and decision-making processes, its creative financing products and its customized investment terms.

We do not intend to compete primarily on the interest rates we offer and believe that some competitors make loans with rates that

are comparable to or lower than our rates.

For additional information concerning our competitive position and competitive risks,

see “Item 1A —

Risk Factors —

Risks related to our business and structure —

We operate in a highly

competitive market for investment opportunities, and if we are not able to compete effectively, our business, results of operations

and financial condition may be adversely affected and the value of your investment in us could decline.”

We believe that we, together with our Advisor, possess significant competitive strengths, which include the following:

Consistently execute commitments and close transactions.

Our Advisor and its senior management and investment professionals have an extensive track record of originating, underwriting and managing Venture Loans.

Our Advisor and its predecessor have directly originated, underwritten and managed Venture Loans with an aggregate original principal amount over $1.9 billion to more than 260 companies since operations commenced in 2004.

Robust direct origination capabilities.

Our Advisor has significant experience originating Venture Loans in our Target Industries.

This experience has given our Advisor a deep knowledge of our Target Industries and an extensive base of transaction sources and references.

Highly experienced and cohesive management team.

Most of our Advisor’s senior management team of experienced professionals has been together since our inception.

This consistency allows companies, their management teams and their investors to rely on consistent and predictable service, loan products and terms and underwriting standards.

Relationships with venture capital and private equity investors.

Our Advisor has developed strong relationships with venture capital and private equity firms and their partners.

Well-known brand name.

Our Advisor has originated Venture Loans to more than 260 companies in our Target Industries under the “Horizon Technology Finance” brand.

We compete to provide financing to development-stage companies in our Target Industries with a number of investment funds and other BDCs, as well as traditional financial services companies such as commercial banks and other financing sources.

Some of our competitors are larger and have greater financial and other resources than we do.

We believe we compete effectively with these entities primarily on the basis of the experience, industry knowledge and contacts of our Advisor’s investment professionals, our Advisor’s responsiveness, efficient investment analysis and decision-making processes, its creative financing products and its customized investment terms.

We do not intend to compete primarily on the interest rates we offer and believe that some competitors make loans with rates that are comparable to or lower than our rates.

For additional information concerning our competitive position and competitive risks, see “Item 1A — Risk Factors — General Risk Factors — We operate in a highly competitive market for investment opportunities, and if we are not able to compete effectively, our business, results of operations and financial condition may be adversely affected and the value of your investment in us could decline.”

Investment criteria

We seek to invest

in companies that vary by their stage of development, their Target Industries and sectors of Target Industries and their geographical

location, as well as by the venture capital and private equity sponsors that support our portfolio companies.

While we invest in

companies at various stages of development, we require that prospective portfolio companies be beyond the seed stage of development

and have received at least their first round of venture capital or private equity financing before we will consider making an investment.

We seek to invest in companies that vary by their stage of development, their Target Industries and sectors of Target Industries and their geographical location, as well as by the venture capital and private equity sponsors that support our portfolio companies.

While we invest in companies at various stages of development, we require that prospective portfolio companies be beyond the seed stage of development and have received at least their first round of venture capital or private equity financing before we will consider making an investment.

We expect a prospective portfolio company to demonstrate its ability to advance technology and increase its value over time.

We have identified

several criteria that we believe have proven, and will continue to prove, important in achieving our investment objective.

criteria provide general guidelines for our investment decisions.

However, we caution you that not all of these criteria are met

by each portfolio company in which we choose to invest.

Our portfolio companies are generally led by experienced management that has in-market expertise in the Target

Industry in which the company operates, as well as extensive experience with development-stage companies.

The adequacy and completeness

of the management team is assessed relative to the stage of development and the challenges facing the potential portfolio company.

support from one or more venture capital and private equity investors.

We typically invest in companies in which

one or more established venture capital and private equity investors have previously invested and continue to make a contribution

to the management of the business.

We believe that established venture capital and private equity investors can serve as committed

partners and will assist their portfolio companies and their management teams in creating value.

We take into consideration the

total amount raised by the company, the valuation history, investor reserves for future investment and the expected timing and

milestones to the next equity round financing.

plan and cash resources.

We generally require that a prospective portfolio company, in addition to having sufficient

access to capital to support leverage, demonstrate an operating plan capable of generating cash flows or the ability to raise the

additional capital necessary to cover its operating expenses and service its debt.

Our review of the operating plan will take into

consideration existing cash, cash burn, cash runway and the milestones necessary for the company to achieve cash flow positive

operations or to access additional equity from its investors.

and technology value.

We expect that the enterprise value of a prospective portfolio company should

substantially exceed the principal balance of debt borrowed by the company.

Enterprise value includes the implied valuation

based upon recent equity capital invested as well as the intrinsic value of the company’s particular technology,

service or customer base.

opportunity and exit strategy.

We seek portfolio companies that are addressing market opportunities that capitalize

on their competitive advantages.

Competitive advantages may include unique technology, legally protected intellectual property,

superior clinical results or significant market traction.

As part of our investment analysis, we typically also consider potential

realization of our warrants through merger, acquisition or initial public offering based upon comparable exits in the company’s

Target Industry.

We have identified several criteria that we believe have proven, and will continue to prove, important in achieving our investment objective.

These criteria provide general guidelines for our investment decisions.

However, we caution you that not all of these criteria are met by each portfolio company in which we choose to invest.

Our portfolio companies are generally led by experienced management that has in-market expertise in the Target Industry in which the company operates, as well as extensive experience with development-stage companies.

The adequacy and completeness of the management team is assessed relative to the stage of development and the challenges facing the potential portfolio company.

Continuing support from one or more venture capital and private equity investors.

We typically invest in companies in which one or more established venture capital and private equity investors have previously invested and continue to make a contribution to the management of the business.

We believe that established venture capital and private equity investors can serve as committed partners and will assist their portfolio companies and their management teams in creating value.

We take into consideration the total amount raised by the company, the valuation history, investor reserves for future investment and the expected timing and milestones to the next equity round financing.

Operating plan and cash resources.

We generally require that a prospective portfolio company, in addition to having sufficient access to capital to support leverage, demonstrate an operating plan capable of generating cash flows or the ability to raise the additional capital necessary to cover its operating expenses and service its debt.

Our review of the operating plan will take into consideration existing cash, cash burn, cash runway and the milestones necessary for the company to achieve cash flow positive operations or to access additional equity from its investors.

Enterprise and technology value.

We expect that the enterprise value of a prospective portfolio company should substantially exceed the principal balance of debt borrowed by the company.

Enterprise value includes the implied valuation based upon recent equity capital invested as well as the intrinsic value of the company’s particular technology, service or customer base.

Market opportunity and exit strategy.

We seek portfolio companies that are addressing market opportunities that capitalize on their competitive advantages.

Competitive advantages may include unique technology, legally protected intellectual property, superior clinical results or significant market traction.

As part of our investment analysis, we typically also consider potential realization of our warrants through merger, acquisition or initial public offering based upon comparable exits in the company’s Target Industry.

Investment process

Our Board has delegated

authority for all investment decisions to our Advisor.

Our Advisor, in turn, has created an integrated approach to the loan origination,

underwriting, approval and documentation process that we believe effectively combines the skills of our Advisor’s professionals.

This process allows our Advisor to achieve an efficient and timely closing of an investment from the initial contact with a prospective

portfolio company through the investment decision, close of documentation and funding of the investment, while ensuring that our

Advisor’s rigorous underwriting standards are consistently maintained.

We believe that the high level of involvement by our

Advisor’s staff in the various phases of the investment process allows us to minimize the credit risk while delivering superior

service to our portfolio companies.

Our Advisor’s loan origination process begins with its industry-focused regional managing directors who are

responsible for identifying, contacting and screening prospects.

These managing directors meet with key decision makers and deal

referral sources such as venture capital and private equity firms and management teams, legal firms, accounting firms, investment

banks, portfolio company advisors and other lenders to source prospective portfolio companies.

We believe our brand name and management

team are well known within the Venture Lending community, as well as by many repeat entrepreneurs and board members of prospective

portfolio companies.

These broad relationships, which reach across the Venture Lending industry, give rise to a significant portion

of our Advisor’s deal origination.

The responsible

managing director of our Advisor obtains materials from the prospective portfolio company and from those materials, as well as

other available information, determines whether it is appropriate for our Advisor to issue a non-binding term sheet.

director bases this decision to proceed on his or her experience, the competitive environment and the prospective portfolio company’s

needs and also seeks the counsel of our Advisor’s senior management and investment team.

If the managing director determines, after review and consultation with senior management, that the potential

transaction meets our Advisor’s initial credit standards, our Advisor will issue a non-binding term sheet to the prospective

portfolio company.

terms of the transaction are tailored to a prospective portfolio company’s specific funding needs while taking into consideration

market dynamics, the quality of the management team, the venture capital and private equity investors involved or ability to access

public equity and applicable credit criteria, which may include the prospective portfolio company’s existing cash resources,

the development of its technology and the anticipated timing for the next round of equity financing.

Our Board has delegated authority for all investment decisions to our Advisor.

Our Advisor, in turn, has created an integrated approach to the loan origination, underwriting, approval and documentation process that we believe effectively combines the skills of our Advisor’s professionals.

This process allows our Advisor to achieve an efficient and timely closing of an investment from the initial contact with a prospective portfolio company through the investment decision, close of documentation and funding of the investment, while ensuring that our Advisor’s rigorous underwriting standards are consistently maintained.

We believe that the high level of involvement by our Advisor’s staff in the various phases of the investment process allows us to minimize the credit risk while delivering superior service to our portfolio companies.

Our Advisor’s loan origination process begins with its industry-focused regional managing directors who are responsible for identifying, contacting and screening prospects.

These managing directors meet with key decision makers and deal referral sources such as venture capital and private equity firms and management teams, legal firms, accounting firms, investment banks, portfolio company advisors and other lenders to source prospective portfolio companies.

We believe our brand name and management team are well known within the Venture Lending community, as well as by many repeat entrepreneurs and board members of prospective portfolio companies.

These broad relationships, which reach across the Venture Lending industry, give rise to a significant portion of our Advisor’s deal origination.

The responsible managing director of our Advisor obtains materials from the prospective portfolio company and from those materials, as well as other available information, determines whether it is appropriate for our Advisor to issue a non-binding term sheet.

The managing director bases this decision to proceed on his or her experience, the competitive environment and the prospective portfolio company’s needs and also seeks the counsel of our Advisor’s senior management and investment team.

If the managing director determines, after review and consultation with senior management, that the potential transaction meets our Advisor’s initial credit standards, our Advisor will issue a non-binding term sheet to the prospective portfolio company.

The terms of the transaction are tailored to a prospective portfolio company’s specific funding needs while taking into consideration market dynamics, the quality of the management team, the venture capital and private equity investors involved or the ability of the prospective portfolio company to access public equity and applicable credit criteria, which may include the prospective portfolio company’s existing cash resources, the development of its technology and the anticipated timing for the next round of equity financing.

Underwriting.

Once the term sheet has been negotiated and executed and the prospective portfolio company has remitted a good

faith deposit, we request additional due diligence materials from the prospective portfolio company and arrange for a due diligence

The due diligence process includes a formal visit to the prospective portfolio company’s location

and interviews with the prospective portfolio company’s senior management team.

The process includes obtaining and analyzing

publicly available information from independent third parties that have knowledge of the prospective portfolio company’s

business, including, to the extent available, analysts that follow the technology market, thought leaders in our Target Industries

and important customers or partners, if any.

Outside sources of information are reviewed, including industry publications, scientific

and market articles, internet publications, publicly available information on competitors or competing technologies and information

known to our Advisor’s investment team from their experience in the technology markets.

primary element of the due diligence process is interviewing key existing investors of the prospective portfolio company, who

are often also members of the prospective portfolio company’s board of directors.

While these board members and/or

investors are not independent sources of information, their support for management and willingness to support the prospective

portfolio company’s further development are critical elements of our decision making process.

Upon completion of the due diligence process and review and analysis of all of the information provided

by the prospective portfolio company and obtained externally, our Advisor’s assigned credit officer prepares an investment

memorandum for review and approval.

The investment memorandum is reviewed by our Advisor’s Chief Investment Officer and then

submitted to our Advisor’s investment committee for approval.

Our Advisor’s investment committee is responsible for overall credit policy, portfolio management,

approval of all investments, portfolio monitoring and reporting and managing of problem accounts.

The committee interacts with

the entire staff of our Advisor to review potential transactions and deal flow.

This interaction of cross-functional members of

our Advisor’s staff assures efficient transaction sourcing, negotiating and underwriting throughout the transaction process.

Portfolio performance and current market conditions are reviewed and discussed by the investment committee on a regular basis to

assure that transaction structures and terms are consistent and current.

closing and funding.

Approved investments are documented and closed by our Advisor’s in-house legal and loan

administration staff.

Loan documentation is based upon standard templates created by our Advisor and is customized for each transaction

to reflect the specific deal terms.

The transaction documents typically include a loan and security agreement, warrant agreement

and applicable perfection documents, including applicable Uniform Commercial Code financing statements and, as applicable, may

also include a landlord agreement, patent and trademark security grants, a subordination agreement, an intercreditor agreement

and other standard agreements for commercial loans in the Venture Lending industry.

Funding requires final approval by our Advisor’s

General Counsel, Chief Executive Officer or President, Chief Financial Officer and Chief Investment Officer or Chief Credit Officer.

management and reporting.

Our Advisor maintains a “hands on”

approach to maintain communication with

our portfolio companies.

At least quarterly, our Advisor contacts our portfolio companies for operational and financial updates

by phone and performs reviews.

Our Advisor may contact portfolio companies deemed to have greater credit risk on a monthly or more

frequent basis.

Once the term sheet has been negotiated and executed and the prospective portfolio company has remitted a good faith deposit, we request additional due diligence materials from the prospective portfolio company and arrange for a due diligence visit.

Due diligence.

The due diligence process includes a formal visit to the prospective portfolio company’s location and interviews with the prospective portfolio company’s senior management team.

The process includes obtaining and analyzing publicly available information from independent third parties that have knowledge of the prospective portfolio company’s business, including, to the extent available, analysts that follow the technology market, thought leaders in our Target Industries and important customers or partners, if any.

Outside sources of information are reviewed, including industry publications, scientific and market articles, internet publications, publicly available information on competitors or competing technologies and information known to our Advisor’s investment team from their experience in the technology markets.

A primary element of the due diligence process is interviewing key existing investors of the prospective portfolio company, who are often also members of the prospective portfolio company’s board of directors.

While these board members and/or investors are not independent sources of information, their support for management and willingness to support the prospective portfolio company’s further development are critical elements of our decision making process.

Investment memorandum.

Upon completion of the due diligence process and review and analysis of all of the information provided by the prospective portfolio company and obtained externally, our Advisor’s assigned credit officer prepares an investment memorandum for review and approval.

The investment memorandum is reviewed by our Advisor’s Chief Investment Officer and then submitted to our Advisor’s investment committee for approval.

Investment committee.

Our Advisor’s investment committee is responsible for overall credit policy, portfolio management, approval of all investments, portfolio monitoring and reporting and managing of problem accounts.

The committee interacts with the entire staff of our Advisor to review potential transactions and deal flow.

This interaction of cross-functional members of our Advisor’s staff assures efficient transaction sourcing, negotiating and underwriting throughout the transaction process.

Portfolio performance and current market conditions are reviewed and discussed by the investment committee on a regular basis to assure that transaction structures and terms are consistent and current.

Loan closing and funding.

Approved investments are documented and closed by our Advisor’s in-house legal and loan administration staff.

Loan documentation is based upon standard templates created by our Advisor and is customized for each transaction to reflect the specific deal terms.

The transaction documents typically include a loan and security agreement, warrant agreement and applicable perfection documents, including applicable Uniform Commercial Code financing statements and, as applicable, may also include a landlord agreement, patent and trademark security grants, a subordination agreement, an intercreditor agreement and other standard agreements for commercial loans in the Venture Lending industry.

Funding requires final approval by our Advisor’s General Counsel, Chief Executive Officer or President, Chief Financial Officer and Chief Investment Officer or Chief Credit Officer.

Portfolio management and reporting.

Our Advisor maintains a “hands on” approach to maintain communication with our portfolio companies.

At least quarterly, our Advisor contacts our portfolio companies for operational and financial updates by phone and performs reviews.

Our Advisor may contact portfolio companies deemed to have greater credit risk on a monthly or more frequent basis.

Our Advisor requires all private companies to provide financial statements, typically monthly.

For public companies,

our Advisor typically relies on publicly reported quarterly financials.

This allows our Advisor to identify any unexpected developments

in the financial performance or condition of our portfolio company .

has developed a proprietary internal credit rating system to analyze the quality of our debt investments.

Using this system, our

Advisor analyzes and then rates the credit risk within the portfolio on a quarterly basis.

Each portfolio company is rated on a

1 through 4 scale, with 3 representing the rating for a standard level of risk.

A rating of 4 represents an improved and better

credit quality than existed at the time of its original underwriting.

A rating of 2 or 1 represents a deteriorating credit quality

and an increased risk of loss of principal.

Newly funded investments are typically assigned a rating of 3, unless extraordinary

circumstances require otherwise.

These investment ratings are generated internally by our Advisor, and we cannot guarantee that

others would assign the same ratings to our portfolio investments or similar portfolio investments.

closely monitors portfolio companies rated a 1 or 2 for adverse developments.

In addition, our Advisor maintains regular contact

with the management, board of directors and major equity holders of these portfolio companies in order to discuss strategic initiatives

to correct the deterioration of the portfolio company.

The following table

describes each rating level:

For public companies, our Advisor typically relies on publicly reported quarterly financials.

This allows our Advisor to identify any unexpected developments in the financial performance or condition of our portfolio company .

Our Advisor has developed a proprietary internal credit rating system to analyze the quality of our debt investments.

Using this system, our Advisor analyzes and then rates the credit risk within the portfolio on a quarterly basis.

Each portfolio company is rated on a 1 through 4 scale, with 3 representing the rating for a standard level of risk.

A rating of 4 represents an improved and better credit quality than existed at the time of its original underwriting.

A rating of 2 or 1 represents a deteriorating credit quality and an increased risk of loss of principal.

Newly funded investments are typically assigned a rating of 3, unless extraordinary circumstances require otherwise.

These investment ratings are generated internally by our Advisor, and we cannot guarantee that others would assign the same ratings to our portfolio investments or similar portfolio investments.

Our Advisor closely monitors portfolio companies rated a 1 or 2 for adverse developments.

In addition, our Advisor maintains regular contact with the management, board of directors and major equity holders of these portfolio companies in order to discuss strategic initiatives to correct the deterioration of the portfolio company.

The following table describes each rating level:

The portfolio company has performed in excess of our expectations as demonstrated by exceeding revenue milestones, clinical milestones or other operating metrics or as a result of raising capital well in excess of our underwriting assumptions.

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Loans rated 1 are generally put on non-accrual status and represent a high degree of risk of loss of principal.

For a discussion

of the ratings of our existing portfolio, see “Item 7 —

Management’s Discussion and Analysis of Financial Condition

and Results of Operations —

Debt investment asset quality.”

For a discussion of the ratings of our existing portfolio, see “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Debt investment asset quality.”

Managerial assistance

As a BDC, we offer,

through our Advisor, and must provide upon request, managerial assistance to certain of our portfolio companies.

This assistance

may involve monitoring the operations of the portfolio companies, participating in board of directors and management meetings,

consulting with and advising officers of portfolio companies and providing other organizational and financial guidance.

may receive fees for these services, pursuant to the Administration Agreement, we will reimburse our Advisor for its expenses related

to providing such services on our behalf.

We do not have any

As a BDC, we offer, through our Advisor, and must provide upon request, managerial assistance to certain of our portfolio companies.

This assistance may involve monitoring the operations of the portfolio companies, participating in board of directors and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance.

Although we may receive fees for these services, pursuant to the Administration Agreement, we will reimburse our Advisor for its expenses related to providing such services on our behalf.

We do not have any employees.

Each of our executive officers is an employee of our Advisor.

Our day-to-day investment operations are managed by our

We reimburse our Advisor for our allocable portion of expenses incurred by it in performing its obligations under the

Administration Agreement, as our Administrator, including our allocable portion of the cost of our Chief Financial Officer and

Chief Compliance Officer and their respective staffs.

Our day-to-day investment operations are managed by our Advisor.

We reimburse our Advisor for our allocable portion of expenses incurred by it in performing its obligations under the Administration Agreement, as our Administrator, including our allocable portion of the cost of our Chief Financial Officer and Chief Compliance Officer and their respective staffs.

Investment Management Agreement

Under the terms of

the Investment Management Agreement, our Advisor:

Under the terms of the Investment Management Agreement, our Advisor:

● determines the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes;

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● closes, monitors and administers the investments we make, including the exercise of any voting or consent rights.

Our Advisor’s

services under the Investment Management Agreement are not exclusive, and it is free to furnish similar services to other entities

so long as its services to us are not impaired.

Our Advisor’s services under the Investment Management Agreement are not exclusive, and it is free to furnish similar services to other entities so long as its services to us are not impaired.

Investment advisory fees

Pursuant to our Investment

Management Agreement, we pay our Advisor a fee for investment advisory and management services consisting of a base management

fee and an incentive fee.

Base management

Through October 30, 2018, the base management fee, payable monthly in arrears, was calculated at an annual

rate of 2.00% of (i) our gross assets less (ii) cash and cash equivalents.

For purposes of calculating the base management fee,

the term “gross assets”

includes any assets acquired with the proceeds of leverage.

From and after October 31, 2018,

the first date on which the reduced asset coverage requirements in Section 61(a)(2) of the 1940 Act applied to the Company, the

base management fee was and will be calculated at an annual rate of 2.00% of the Company’s gross assets (less cash and cash

equivalents) including any assets acquired with the proceeds of leverage;

provided, that, to the extent the Company’s gross

assets (less cash and cash equivalents) exceed $250 million, the base management fee on the amount of such excess over $250 million

is calculated at an annual rate of 1.60% of the Company’s gross assets (less cash and cash equivalents) including any assets

acquired with the proceeds of leverage.

Pursuant to our Investment Management Agreement, we pay our Advisor a fee for investment advisory and management services consisting of a base management fee and an incentive fee.

Base management fee.

Through October 30, 2018, the base management fee, payable monthly in arrears, was calculated at an annual rate of 2.00% of (i) our gross assets less (ii) cash and cash equivalents.

For purposes of calculating the base management fee, the term “gross assets” includes any assets acquired with the proceeds of leverage.

From and after October 31, 2018, the first date on which the reduced asset coverage requirements in Section 61(a)(2) of the 1940 Act applied to the Company, the base management fee was and will be calculated at an annual rate of 2.00% of the Company’s gross assets (less cash and cash equivalents) including any assets acquired with the proceeds of leverage;

provided, that, to the extent the Company’s gross assets (less cash and cash equivalents) exceed $250 million, the base management fee on the amount of such excess over $250 million is calculated at an annual rate of 1.60% of the Company’s gross assets (less cash and cash equivalents) including any assets acquired with the proceeds of leverage.

Incentive fee.

The incentive fee has two parts, as follows:

The first part, which

is subject to the Incentive Fee Cap and Deferral Mechanism, as defined below, is calculated and payable quarterly in arrears based

on our Pre-Incentive Fee Net Investment Income for the immediately preceding calendar quarter.

For this purpose, “Pre-Incentive

Fee Net Investment Income”

means interest income, dividend income and any other income (including any other fees (other than

fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other

fees received from portfolio companies) accrued during the calendar quarter, minus expenses for the quarter (including the base

management fee, expenses payable under the Administration Agreement, and any interest expense and any dividends paid on any issued

and outstanding preferred stock, but excluding the incentive fee).

Pre-Incentive Fee Net Investment Income includes, in the case

of investments with a deferred interest feature (such as original issue discount, debt instruments with payment-in-kind interest,

or PIK, and zero coupon securities), accrued income we have not yet received in cash.

The incentive fee with respect to the Pre-Incentive

Fee Net Investment Income is 20.00% of the amount, if any, by which the Pre-Incentive Fee Net Investment Income for the immediately

preceding calendar quarter exceeds a hurdle rate of 1.75% (which is 7.00% annualized) of our net assets at the end of the immediately

preceding calendar quarter, subject to a “catch-up”

provision measured as of the end of each calendar quarter.

this provision, in any calendar quarter, the Advisor receives no incentive fee until the Pre-Incentive Fee Net Investment Income

equals the hurdle rate of 1.75%, but then receives, as a “catch-up,”

100.00% of the Pre-Incentive Fee Net Investment

Income with respect to that portion of such Pre-Incentive Fee Net Investment Income, if any, that exceeds the hurdle rate but is

less than 2.1875% quarterly (which is 8.75% annualized).

The effect of this “catch-up”

provision is that, if Pre-Incentive

Fee Net Investment Income exceeds 2.1875% in any calendar quarter, the Advisor will receive 20.00% of the Pre-Incentive Fee Net

Investment Income as if the hurdle rate did not apply.

Pre-Incentive Fee

Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or

depreciation.

Because of the structure of the incentive fee, it is possible that we may pay an incentive fee in a quarter in which

we incur a loss.

For example, if we receive Pre-Incentive Fee Net Investment Income in excess of the quarterly minimum hurdle rate,

we will pay the applicable incentive fee up to the Incentive Fee Cap, defined below, even if we have incurred a loss in that quarter

due to realized and unrealized capital losses.

Our net investment income used to calculate this part of the incentive fee is also

included in the amount of our gross assets used to calculate the 2.00% base management fee.

These calculations are appropriately

prorated for any period of less than three months and adjusted for any share issuances or repurchases during the applicable quarter.

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 look-back period for the incentive fee based on

Pre-Incentive Fee Net Investment Income, or the Incentive Fee Look-back Period, the Incentive Fee Look-back Period includes the

most recently completed calendar quarter and the 11 preceding full calendar quarters.

Each quarterly incentive fee payable on Pre-Incentive

Fee Net Investment Income is subject to a cap, or the Incentive Fee Cap, and a deferral mechanism through which the Advisor may

recoup a portion of such deferred incentive fees (collectively, the Incentive Fee Cap and Deferral Mechanism).

The Incentive Fee

Cap is equal to (a) 20.00% of Cumulative Pre-Incentive Fee Net Return (as defined below) during the Incentive Fee Look-back Period

less (b) cumulative incentive fees of any kind paid to the 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 the 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

We only pay incentive fees on Pre-Incentive Fee Net Investment Income to the extent allowed by the Incentive Fee Cap

and Deferral Mechanism.

“Cumulative Pre-Incentive Fee Net Return”

during any Incentive Fee Look-back Period means the

sum of (a) Pre-Incentive Fee Net Investment Income and the base management fee for each calendar quarter during the Incentive Fee

Look-back Period and (b) the sum of cumulative realized capital gains and losses, cumulative unrealized capital appreciation and

cumulative unrealized capital depreciation during the applicable Incentive Fee Look-back Period.

On March 5, 2019,

the Advisor irrevocably waived the receipt of incentive fees related to the amounts previously deferred that it may be entitled

to receive under the Investment Management Agreement for the period commencing on January 1, 2019 and ending on December 31, 2019.

The first part, which is subject to the Incentive Fee Cap and Deferral Mechanism, as defined below, is calculated and payable quarterly in arrears based on our Pre-Incentive Fee Net Investment Income for the immediately preceding calendar quarter.

For this purpose, “Pre-Incentive Fee Net Investment Income” means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees received from portfolio companies) accrued during the calendar quarter, minus expenses for the quarter (including the base management fee, expenses payable under the Administration Agreement, and any interest expense and any dividends paid on any issued and outstanding preferred stock,

but excluding the incentive fee).

Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with payment-in-kind interest, or PIK, and zero coupon securities), accrued income we have not yet received in cash.

The incentive fee with respect to the Pre-Incentive Fee Net Investment Income is 20.00% of the amount, if any, by which the Pre-Incentive Fee Net Investment Income for the immediately preceding calendar quarter exceeds a hurdle rate of 1.75% (which is 7.00% annualized) of our net assets at the end of the immediately preceding calendar quarter, subject to a “catch-up” provision measured as of the end of each calendar quarter.

Under this provision, in any calendar quarter, the Advisor receives no incentive fee until the Pre-Incentive Fee Net Investment Income equals the hurdle rate of 1.75%, but then receives, as a “catch-up,” 100.00% of the Pre-Incentive Fee Net Investment Income with respect to that portion of such Pre-Incentive Fee Net Investment Income, if any, that exceeds the hurdle rate but is less than 2.1875% quarterly (which is 8.75% annualized).

The effect of this “catch-up” provision is that, if Pre-Incentive Fee Net Investment Income exceeds 2.1875% in any calendar quarter, the Advisor will receive 20.00% of the Pre-Incentive Fee Net Investment Income as if the hurdle rate did not apply.

Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.

Because of the structure of the incentive fee, it is possible that we may pay an incentive fee in a quarter in which we incur a loss.

For example, if we receive Pre-Incentive Fee Net Investment Income in excess of the quarterly minimum hurdle rate, we will pay the applicable incentive fee up to the Incentive Fee Cap, defined below, even if we have incurred a loss in that quarter due to realized and unrealized capital losses.

Our net investment income used to calculate this part of the incentive fee is also included in the amount of our gross assets used to calculate the 2.00% base management fee.

These calculations are appropriately prorated for any period of less than three months and adjusted for any share issuances or repurchases during the applicable quarter.

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 look-back period for the incentive fee based on Pre-Incentive Fee Net Investment Income, or the Incentive Fee Look-back Period, the Incentive Fee Look-back Period includes the most recently completed calendar quarter and the 11 preceding full calendar quarters.

Each quarterly incentive fee payable on Pre-Incentive Fee Net Investment Income is subject to a cap, or the Incentive Fee Cap, and a deferral mechanism through which the Advisor may recoup a portion of such deferred incentive fees (collectively, the Incentive Fee Cap and Deferral Mechanism).

The Incentive Fee Cap is equal to (a) 20.00% of Cumulative Pre-Incentive Fee Net Return (as defined below) during the Incentive Fee Look-back Period less (b) cumulative incentive fees of any kind paid to the 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 the 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.

We only pay incentive fees on Pre-Incentive Fee Net Investment Income to the extent allowed by the Incentive Fee Cap and Deferral Mechanism.

“Cumulative Pre-Incentive Fee Net Return” during any Incentive Fee Look-back Period means the sum of (a) Pre-Incentive Fee Net Investment Income and the base management fee for each calendar quarter during the Incentive Fee Look-back Period and (b) the sum of cumulative realized capital gains and losses, cumulative unrealized capital appreciation and cumulative unrealized capital depreciation during the applicable Incentive Fee Look-back Period.

On March 5, 2019, the Advisor irrevocably waived the receipt of incentive fees related to the amounts previously deferred that it may be entitled to receive under the Investment Management Agreement for the period commencing on January 1, 2019 and ending on December 31, 2019.

Such waived incentive fees will not be subject to recoupment.

On March 6, 2018,

the Advisor irrevocably waived the receipt of incentive fees related to the amounts previously deferred that it may be entitled

to receive under the Investment Management Agreement for the period commencing on January 1, 2018 and ending on December 31, 2018.

On March 6, 2018, the Advisor irrevocably waived the receipt of incentive fees related to the amounts previously deferred that it may be entitled to receive under the Investment Management Agreement for the period commencing on January 1, 2018 and ending on December 31, 2018.

Such waived incentive fees are not subject to recoupment.

The following is a

graphical representation of the calculation of the income-related portion of the incentive fee:

Quarterly incentive fee based on Net

Investment Income

Pre-Incentive Fee Net Investment Income

(expressed as a percentage of the value of net assets)

Percentage of Pre-Incentive

Fee Net Investment Income allocated to first part of incentive fee

The second part of

the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment

Management Agreement, as of the termination date) and equals 20.00% of our realized capital gains, if any, on a cumulative basis

from the date of our election to be a BDC through the end of each calendar year, computed net of all realized capital losses and

unrealized capital depreciation on a cumulative basis through the end of such year, less all previous amounts paid in respect of

the capital gain incentive fee.

The following is a graphical representation of the calculation of the income-related portion of the incentive fee:

Quarterly incentive fee based on Net Investment Income

Pre-Incentive Fee Net Investment Income (expressed as a percentage of the value of net assets)

Percentage of Pre-Incentive Fee Net Investment Income allocated to first part of incentive fee

The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Management Agreement, as of the termination date) and equals 20.00% of our realized capital gains, if any, on a cumulative basis from the date of our election to be a BDC through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis through the end of such year, less all previous amounts paid in respect of the capital gain incentive fee.

Examples of incentive fee calculation

Income related portion of incentive

fee before total return requirement calculation for each fiscal quarter

Income related portion of incentive fee before total return requirement calculation for each fiscal quarter

Alternative 1

Assumptions :

Investment income (including interest,

distributions, fees, etc.) = 1.25%

Investment income (including interest, distributions, fees, etc.) = 1.25%

Hurdle rate (1) = 1.75%

Management fee (2) = 0.50%

Other expenses (legal, accounting, custodian,

transfer agent, etc.) (3) = 0.20%

Pre-Incentive Fee Net Investment Income

(investment income - (management fee + other expenses)) = 0.55%

Pre-Incentive Fee Net Investment Income does not

exceed hurdle rate;

Other expenses (legal, accounting, custodian, transfer agent, etc.) (3) = 0.20%

Pre-Incentive Fee Net Investment Income (investment income - (management fee + other expenses)) = 0.55%

Pre-Incentive Fee Net Investment Income does not exceed hurdle rate;

therefore, there is no income-related incentive fee.

Alternative 2

Assumptions :

Investment income (including interest,

distributions, fees, etc.) = 2.80%

Investment income (including interest, distributions, fees, etc.) = 2.80%

Hurdle rate (1) = 1.75%

Management fee (2) = 0.50%

Other expenses (legal, accounting, custodian,

transfer agent, etc.) (3) = 0.20%

Pre-Incentive Fee Net Investment Income

(investment income - (management fee + other expenses)) = 2.10%

Incentive fee = 100.00% ×

Pre-Incentive

Fee Net Investment Income (subject to “catch-up”) (4)

= 100.00% ×

Other expenses (legal, accounting, custodian, transfer agent, etc.) (3) = 0.20%

Pre-Incentive Fee Net Investment Income (investment income - (management fee + other expenses)) = 2.10%

Incentive fee = 100.00% × Pre-Incentive Fee Net Investment Income (subject to “catch-up”) (4)

= 100.00% × (2.10% - 1.75%)

Pre-Incentive Fee Net Investment

Income exceeds the hurdle rate, but does not fully satisfy the “catch-up”

therefore, the income related

portion of the incentive fee is 0.35%.

Pre-Incentive Fee Net Investment Income exceeds the hurdle rate, but does not fully satisfy the “catch-up” provision;

therefore, the income related portion of the incentive fee is 0.35%.

Alternative 3

Assumptions :

Investment income (including interest,

distributions, fees, etc.) = 3.00%

Investment income (including interest, distributions, fees, etc.) = 3.00%

Hurdle rate (1) = 1.75%

Management fee (2) = 0.50%

Other expenses (legal, accounting, custodian,

transfer agent, etc.) (3) = 0.20%

Pre-Incentive Fee Net Investment Income

(investment income - (management fee + other expenses)) = 2.30%

Incentive fee = 100.00% ×

Pre-Incentive

Fee Net Investment Income (subject to “catch-up”) (4)

Incentive fee = 100.00% ×

“catch-up”

+ (20.00% ×

(Pre-Incentive Fee Net Investment Income - 2.1875%))

Other expenses (legal, accounting, custodian, transfer agent, etc.) (3) = 0.20%

Pre-Incentive Fee Net Investment Income (investment income - (management fee + other expenses)) = 2.30%

Incentive fee = 100.00% × Pre-Incentive Fee Net Investment Income (subject to “catch-up”) (4)

Incentive fee = 100.00% × “catch-up” + (20.00% × (Pre-Incentive Fee Net Investment Income - 2.1875%))

Catch up = 2.1875% - 1.75%

Incentive fee = (100.00% ×

+ (20.00% ×

Incentive fee = (100.00% × 0.4375%) + (20.00% × (2.30% - 2.1875%))

= 0.4375% + (20.00% × 0.1125%)

= 0.4375% + (20.00% ×

= 0.4375% + 0.0225%

Pre-Incentive Fee Net Investment

Income exceeds the hurdle rate and fully satisfies the “catch-up”

therefore, the income related portion

of the incentive fee is 0.46%.

Pre-Incentive Fee Net Investment Income exceeds the hurdle rate and fully satisfies the “catch-up” provision;

therefore, the income related portion of the incentive fee is 0.46%.

(1) Represents 7.00% annualized hurdle rate.

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(3) Excludes organizational and offering expenses.

The “catch-up”

provision is intended to provide our Advisor with an incentive fee of 20.00% on all Pre-Incentive Fee Net Investment Income as if a hurdle rate did not apply when our Pre-Incentive Fee Net Investment Income exceeds 2.1875% in any fiscal quarter.

Income related portion of incentive

fee after total return requirement calculation for each fiscal quarter

(4) The “catch-up” provision is intended to provide our Advisor with an incentive fee of 20.00% on all Pre-Incentive Fee Net Investment Income as if a hurdle rate did not apply when our Pre-Incentive Fee Net Investment Income exceeds 2.1875% in any fiscal quarter.

Income related portion of incentive fee after total return requirement calculation for each fiscal quarter

Alternative 1

Assumptions :

Investment income (including interest, distributions,

fees, etc.) = 2.80%

Investment income (including interest, distributions, fees, etc.) = 2.80%

Hurdle rate (1) = 1.75%

Management fee (2) = 0.50%

Other expenses (legal, accounting, custodian, transfer

agent, etc.) (3) = 0.20%

Pre-Incentive Fee Net Investment Income (investment

income - (management fee + other expenses)) = 2.10%

Incentive fee = 100.00% ×

Pre-Incentive Fee

Net Investment Income (subject to ‘‘catch-up’’) (4)

=100.00% ×

Other expenses (legal, accounting, custodian, transfer agent, etc.) (3) = 0.20%

Pre-Incentive Fee Net Investment Income (investment income - (management fee + other expenses)) = 2.10%

Incentive fee = 100.00% × Pre-Incentive Fee Net Investment Income (subject to ‘‘catch-up’’) (4)

=100.00% × (2.10% - 1.75%)

Cumulative incentive compensation accrued and/or

paid since July 1, 2014 = $9,000,000

20.0% of cumulative net increase in net assets resulting

from operations since July 1, 2014 = $8,000,000

our Pre-Incentive Fee Net Investment Income exceeds the hurdle rate of 1.75%, no incentive fee is payable because 20.0% of the

cumulative net increase in net assets resulting from operations since July 1, 2014 did not exceed the cumulative income and capital

gains incentive fees accrued and/or paid since July 1, 2014.

Cumulative incentive compensation accrued and/or paid since July 1, 2014 = $9,000,000

20.0% of cumulative net increase in net assets resulting from operations since July 1, 2014 = $8,000,000

Although our Pre-Incentive Fee Net Investment Income exceeds the hurdle rate of 1.75%, no incentive fee is payable because 20.0% of the cumulative net increase in net assets resulting from operations since July 1, 2014 did not exceed the cumulative income and capital gains incentive fees accrued and/or paid since July 1, 2014.

Alternative 2

Assumptions :

Investment income (including interest, distributions,

fees, etc.) = 2.80%

Investment income (including interest, distributions, fees, etc.) = 2.80%

Hurdle rate (1) = 1.75%

Management fee (2) = 0.50%

Other expenses (legal, accounting, custodian, transfer

agent, etc.) (3) = 0.20%

Pre-Incentive Fee Net Investment Income (investment

income - (management fee + other expenses)) = 2.10%

Incentive fee = 100.00% ×

Pre-Incentive Fee

Net Investment Income (subject to ‘‘catch-up’’) (4)

=100.00% ×

Other expenses (legal, accounting, custodian, transfer agent, etc.) (3) = 0.20%

Pre-Incentive Fee Net Investment Income (investment income - (management fee + other expenses)) = 2.10%

Incentive fee = 100.00% × Pre-Incentive Fee Net Investment Income (subject to ‘‘catch-up’’) (4)

=100.00% × (2.10% - 1.75%)

Pre-Incentive

Fee Net Investment Income exceeds the hurdle rate, but does not fully satisfy the ‘‘catch-up’’

Pre-Incentive Fee Net Investment Income exceeds the hurdle rate, but does not fully satisfy the ‘‘catch-up’’ provision;

therefore, the income related portion of the incentive fee is 0.35%.

Cumulative incentive compensation accrued

and/or paid since July 1, 2014 = $9,000,000

20.0% of cumulative net increase in net assets resulting

from operations since July 1, 2014 = $10,000,000

our Pre-Incentive Fee Net Investment Income exceeds the hurdle rate of 1.75% and because 20.0% of the cumulative net increase in

net assets resulting from operations since July 1, 2014 exceeds the cumulative income and capital gains incentive fees accrued

and/or paid since July 1, 2014, an incentive fee would be payable, as shown in Alternative 3 of Example 1 above.

Cumulative incentive compensation accrued and/or paid since July 1, 2014 = $9,000,000

20.0% of cumulative net increase in net assets resulting from operations since July 1, 2014 = $10,000,000

Because our Pre-Incentive Fee Net Investment Income exceeds the hurdle rate of 1.75% and because 20.0% of the cumulative net increase in net assets resulting from operations since July 1, 2014 exceeds the cumulative income and capital gains incentive fees accrued and/or paid since July 1, 2014, an incentive fee would be payable, as shown in Alternative 3 of Example 1 above.

(1) Represents 7.00% annualized hurdle rate.

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(3) Excludes organizational and offering expenses.

The “catch-up”

Capital gains portion of incentive

Capital gains portion of incentive fee

Alternative 1

Assumptions :

$20 million investment

made in Company A, or Investment A, and $30 million investment made in Company B, or Investment B

Investment A sold for

$50 million and fair market value, or FMV, of Investment B determined to be $32 million

FMV of Investment

B determined to be $25 million

B sold for $31 million

The capital gains

portion of the incentive fee, if any, would be:

None (No sales

Capital gains incentive

fee of $6 million ($30 million realized capital gains on sale of Investment A multiplied by 20%)

((20% multiplied by ($30 million cumulative capital gains less $5 million cumulative capital depreciation)) less $6 million

(previous capital gains fee paid in Year 2))

Capital gains incentive

fee of $200,000;

$6.2 million (($31 million cumulative realized capital gains multiplied by 20%) less $6 million

(capital gains incentive fee taken in Year 2))

$20 million investment made in Company A, or Investment A, and $30 million investment made in Company B, or Investment B

Investment A sold for $50 million and fair market value, or FMV, of Investment B determined to be $32 million

FMV of Investment B determined to be $25 million

Investment B sold for $31 million

The capital gains portion of the incentive fee, if any, would be:

None (No sales transaction)

Capital gains incentive fee of $6 million ($30 million realized capital gains on sale of Investment A multiplied by 20%)

$5 million ((20% multiplied by ($30 million cumulative capital gains less $5 million cumulative capital depreciation)) less $6 million (previous capital gains fee paid in Year 2))

Capital gains incentive fee of $200,000;

$6.2 million (($31 million cumulative realized capital gains multiplied by 20%) less $6 million (capital gains incentive fee taken in Year 2))

Alternative 2

Assumptions :

$20 million investment

made in Company A, or Investment A, $30 million investment made in Company B, or Investment B and $25 million investment

made in Company C, or Investment C

Investment A sold for

$50 million, FMV of Investment B determined to be $25 million and FMV of Investment C determined to be $25 million

FMV of Investment

B determined to be $27 million and Investment C sold for $30 million

FMV of Investment

B determined to be $35 million

B sold for $20 million

The capital gains

incentive fee, if any, would be:

None (no sales

$5 million capital

gains incentive fee (20% multiplied by $25 million ($30 million realized capital gains on Investment A less unrealized

capital depreciation on Investment B))

$1.4 million capital

gains incentive fee (1) ($6.4 million (20% multiplied by $32 million ($35 million cumulative realized

capital gains less $3 million unrealized capital depreciation)) less $5 million capital gains incentive fee received

None (no sales

None ($5 million

(20% multiplied by $25 million (cumulative realized capital gains of $35 million less realized capital losses of $10 million))

less $6.4 million cumulative capital gains incentive fee paid in Year 2 and Year 3 (2)

The hypothetical amounts of

returns shown are based on a percentage of our total net assets and assume no leverage.

There is no guarantee that positive returns

will be realized and actual returns may vary from those shown in this example.

$20 million investment made in Company A, or Investment A, $30 million investment made in Company B, or Investment B and $25 million investment made in Company C, or Investment C

Investment A sold for $50 million, FMV of Investment B determined to be $25 million and FMV of Investment C determined to be $25 million

FMV of Investment B determined to be $27 million and Investment C sold for $30 million

FMV of Investment B determined to be $35 million

Investment B sold for $20 million

The capital gains incentive fee, if any, would be:

None (no sales transaction)

$5 million capital gains incentive fee (20% multiplied by $25 million ($30 million realized capital gains on Investment A less unrealized capital depreciation on Investment B))

$1.4 million capital gains incentive fee (1) ($6.4 million (20% multiplied by $32 million ($35 million cumulative realized capital gains less $3 million unrealized capital depreciation)) less $5 million capital gains incentive fee received in Year 2

None (no sales transaction)

None ($5 million (20% multiplied by $25 million (cumulative realized capital gains of $35 million less realized capital losses of $10 million)) less $6.4 million cumulative capital gains incentive fee paid in Year 2 and Year 3 (2)

The hypothetical amounts of returns shown are based on a percentage of our total net assets and assume no leverage.

There is no guarantee that positive returns will be realized and actual returns may vary from those shown in this example.

(1) As illustrated in Year 3 of Alternative 1 above, if the Investment Management Agreement were terminated on a date other than our fiscal year end of any year, we may have paid aggregate capital gains incentive fees that are more than the amount of such fees that would be payable if the Investment Management Agreement were terminated on the fiscal year end of such year.

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Payment of our expenses

All investment professionals

and staff of our Advisor, when and to the extent engaged in providing investment advisory and management services, and the compensation

and routine overhead expenses of its personnel allocable to such services, are provided and paid for by our Advisor.

other costs and expenses of our operations and transactions, including those relating to:

All investment professionals and staff of our Advisor, when and to the extent engaged in providing investment advisory and management services, and the compensation and routine overhead expenses of its personnel allocable to such services, are provided and paid for by our Advisor.

We bear all other costs and expenses of our operations and transactions, including those relating to:

● our organization;

calculating our net asset value, or NAV (including the cost and expenses of any independent valuation

expenses, including travel expense, incurred by our Advisor or payable to third parties performing

due diligence on prospective portfolio companies, monitoring our investments and, if necessary, enforcing our rights;

● calculating our net asset value, or NAV (including the cost and expenses of any independent valuation firms);

● expenses, including travel expense, incurred by our Advisor or payable to third parties performing due diligence on prospective portfolio companies, monitoring our investments and, if necessary, enforcing our rights;

● interest payable on debt, if any, incurred to finance our investments;

the costs of all future offerings and repurchases of our common stock and other securities, if

● the costs of all future offerings and repurchases of our common stock and other securities, if any;

● the base management fee and any incentive fee;

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● administration fees payable under the Administration Agreement;

the allocated costs incurred by our Advisor as our Administrator in providing managerial assistance

to those portfolio companies that request it;

● the allocated costs incurred by our Advisor as our Administrator in providing managerial assistance to those portfolio companies that request it;

● amounts payable to third parties relating to, or associated with, making investments;

6 unchanged sentences

● costs of preparing and filing reports or other documents with the SEC;

the costs of any reports, proxy statements or other notices to our stockholders, including printing

● the costs of any reports, proxy statements or other notices to our stockholders, including printing costs;

● the fidelity bond;

2 unchanged sentences

● direct costs and expenses of administration, including audit and legal costs;

all other expenses incurred by us or the Administrator in connection with administering our business,

such as the allocable portion of overhead under the Administration Agreement, including rent, the fees and expenses associated

with performing compliance functions and our allocable portion of the costs of compensation and related expenses of our Chief Financial

Officer and Chief Compliance Officer and their respective staffs.

From time to time,

our Advisor may pay amounts owed by us to third party providers of goods or services.

We subsequently reimburse our Advisor for

such amounts paid on our behalf.

● all other expenses incurred by us or the Administrator in connection with administering our business, such as the allocable portion of overhead under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions and our allocable portion of the costs of compensation and related expenses of our Chief Financial Officer and Chief Compliance Officer and their respective staffs.

From time to time, our Advisor may pay amounts owed by us to third party providers of goods or services.

We subsequently reimburse our Advisor for such amounts paid on our behalf.

Generally, our expenses are expensed as incurred in accordance with U.S.

generally accepted accounting

principles, or GAAP.

To the extent we incur costs that should be capitalized and amortized into expense we also do so in accordance

with GAAP, which may include amortizing such amount on a straight line basis over the life of the asset or the life of the services

or product being performed or provided.

generally accepted accounting principles, or GAAP.

To the extent we incur costs that should be capitalized and amortized into expense we also do so in accordance with GAAP, which may include amortizing such amount on a straight line basis over the life of the asset or the life of the services or product being performed or provided.

Limitation of liability and indemnification

The Investment Management

Agreement provides that our Advisor and its officers, managers, partners, agents, employees, controlling persons and any other

person or entity affiliated with our Advisor are not liable to us for any act or omission by it in the supervision or management

of our investment activities or for any loss sustained by us except for acts or omissions constituting willful misfeasance, bad

faith, gross negligence or reckless disregard of its obligations under the Investment Management Agreement.

The Investment Management

Agreement also provides, subject to certain conditions, for indemnification by us of our Advisor and its officers, managers, partners,

agents, employees, controlling persons and any other person or entity affiliated with our Advisor for liabilities incurred by them

in connection with their services to us (including any liabilities associated with an action or suit by or in the right of us or

our stockholders), but excluding liabilities for acts or omissions constituting willful misfeasance, bad faith or gross negligence

or reckless disregard of their duties under the Investment Management Agreement.

Board Recommendation and Approval of the Investment Management

meeting of the stockholders on October 30, 2018, the stockholders, upon the recommendation of the Board, approved a new

Investment Management Agreement which became effective on March 7, 2019.

The Investment Management Agreement is effective for

two years from the date of approval and then must be annually reapproved by our Board for a one-year period.

considered recommending the approval of the Investment Management Agreement, our Board held an in-person meeting at which it

focused on information it received relating to (a) the nature, quality and extent of the advisory and other services to be

provided to us by our Advisor;

(b) comparative data with respect to advisory fees or similar expenses paid by other BDCs with

similar investment objectives;

(d) any existing and potential sources of indirect income to our Advisor or the Administrator from their

relationships with us and the profitability of those relationships;

(e) information about the services to be performed and

the personnel performing such services under the Investment Management Agreement;

(f) the organizational capability and

financial condition of our Advisor and its affiliates;

(g) our Advisor’s practices regarding the selection and

compensation of brokers that may execute our portfolio transactions and the brokers’

provision of brokerage and

research services to our Advisor;

and (h) the possibility of obtaining similar services from other third party service

providers or through an internally managed structure.

Based on the information

reviewed and its discussions related thereto, our Board, including a majority of the directors who are not interested persons of

us, determined that the investment management fee rates payable pursuant to the terms of the Investment Management Agreement were

reasonable in relation to the services to be provided.

The Investment Management Agreement provides that our Advisor and its officers, managers, partners, agents, employees, controlling persons and any other person or entity affiliated with our Advisor are not liable to us for any act or omission by it in the supervision or management of our investment activities or for any loss sustained by us except for acts or omissions constituting willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations under the Investment Management Agreement.

The Investment Management Agreement also provides, subject to certain conditions, for indemnification by us of our Advisor and its officers, managers, partners, agents, employees, controlling persons and any other person or entity affiliated with our Advisor for liabilities incurred by them in connection with their services to us (including any liabilities associated with an action or suit by or in the right of us or our stockholders), but excluding liabilities for acts or omissions constituting willful misfeasance, bad faith or gross negligence or reckless disregard of their duties under the Investment Management Agreement.

Board Recommendation and Approval of the Investment Management Agreement

At a special meeting of the stockholders on October 30, 2018, the stockholders, upon the recommendation of the Board, approved a new Investment Management Agreement which became effective on March 7, 2019.

The Investment Management Agreement was effective for two years from the date of approval and then must be annually reapproved by our Board for a one-year period.

The Investment Management Agreement was considered and reapproved by our Board, including a majority of our independent directors, on October 26, 2020.

When it considered recommending the approval of the Investment Management Agreement, our Board held a meeting at which it focused on information it received relating to (a) the nature, quality and extent of the advisory and other services to be provided to us by our Advisor;

(b) comparative data with respect to advisory fees or similar expenses paid by other BDCs with similar investment objectives;

(d) any existing and potential sources of indirect income to our Advisor or the Administrator from their relationships with us and the profitability of those relationships;

(e) information about the services to be performed and the personnel performing such services under the Investment Management Agreement;

(f) the organizational capability and financial condition of our Advisor and its affiliates;

(g) our Advisor’s practices regarding the selection and compensation of brokers that may execute our portfolio transactions and the brokers’ provision of brokerage and research services to our Advisor;

and (h) the possibility of obtaining similar services from other third party service providers or through an internally managed structure.

Based on the information reviewed and its discussions related thereto, our Board, including a majority of the directors who are not interested persons of us, determined that the investment management fee rates payable pursuant to the terms of the Investment Management Agreement were reasonable in relation to the services to be provided.

Duration and termination

Unless terminated

earlier as described below, it will continue in effect from year to year after the initial two-year term if approved annually by

our Board including a majority of our directors who are not interested persons or by the affirmative vote of the holders of a majority

of our outstanding voting securities and a majority of our directors who are not interested persons.

The Investment Management

Agreement will automatically terminate in the event of its assignment.

The Investment Management Agreement may be terminated by

either party without penalty by delivering notice of termination upon not more than 60 days’

written notice to the other

See “Item 1A —

Risk Factors —

Risks related to our business and structure —

Our Advisor can resign

on 60 days’

notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in

our operations that could adversely affect our business, results of operations or financial condition.”

Unless terminated earlier as described below, it will continue in effect from year to year after the initial two-year term if approved annually by our Board including a majority of our directors who are not interested persons or by the affirmative vote of the holders of a majority of our outstanding voting securities and a majority of our directors who are not interested persons.

The Investment Management Agreement will automatically terminate in the event of its assignment.

The Investment Management Agreement may be terminated by either party without penalty by delivering notice of termination upon not more than 60 days’ written notice to the other party.

See “Item 1A — Risk Factors — Risks Related to Our Advisor and Affiliates — Our Advisor can resign on 60 days’ notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our business, results of operations or financial condition.”

Administration Agreement

The Administration

Agreement was considered and reapproved by our Board, and a majority of our independent directors, on July 27, 2018.

Administration Agreement, the Administrator furnishes us with office facilities and equipment, provides us clerical, bookkeeping

and record keeping services at such facilities and provides us with other administrative services necessary to conduct our day-to-day

We reimburse the Administrator for our allocable portion of overhead and other expenses incurred by the Administrator

in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing

compliance functions and our allocable portion of the costs of compensation and related expenses of our Chief Financial Officer

and Chief Compliance Officer and their respective staffs.

The Board reviews the allocation of expenses shared with the Advisor

or other clients of the Advisor, if any, on a periodic basis to confirm that the allocations are reasonable and appropriate in

light of the provisions of the Investment Management Agreement and Administration Agreement and then-current circumstances.

The Administration Agreement was considered and reapproved by our Board, including a majority of our independent directors, on October 26, 2020.

Under the Administration Agreement, the Administrator furnishes us with office facilities and equipment, provides us clerical, bookkeeping and record keeping services at such facilities and provides us with other administrative services necessary to conduct our day-to-day operations.

We reimburse the Administrator for our allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions and our allocable portion of the costs of compensation and related expenses of our Chief Financial Officer and Chief Compliance Officer and their respective staffs.

The Board reviews the allocation of expenses shared with the Advisor or other clients of the Advisor, if any, on a periodic basis to confirm that the allocations are reasonable and appropriate in light of the provisions of the Investment Management Agreement and Administration Agreement and then-current circumstances.

License agreement

We have entered into

a license agreement with Horizon Technology Finance, LLC, or HTF, pursuant to which we were granted a non-exclusive, royalty-free

right and license to use the service mark “Horizon Technology Finance.”

Under this agreement, we have a right to use

the “Horizon Technology Finance”

service mark for so long as the Investment Management Agreement with our Advisor is

Other than with respect to this limited license, we have no legal right to the “Horizon Technology Finance”

service mark.

We have elected to

be regulated as a BDC under the 1940 Act and elected to be treated as a RIC under Subchapter M of the Code.

As with other companies

regulated by the 1940 Act, a BDC must adhere to certain substantive regulatory requirements.

The 1940 Act contains prohibitions

and restrictions relating to transactions between BDCs and their affiliates (including any investment advisers or sub-advisers),

principal underwriters and affiliates of those affiliates or underwriters and requires that a majority of the directors be persons

other than “interested persons,”

as that term is defined in the 1940 Act.

In addition, the 1940 Act provides that we

may not change the nature of our business so as to cease to be, or to withdraw our election as, a BDC unless approved by “a

majority of our outstanding voting securities”

as defined in the 1940 Act.

A majority of the outstanding voting securities

of a company is defined under the 1940 Act as the lesser of:

(1) 67% or more of such company’s shares present at a meeting

if more than 50% of the outstanding shares of such company are present or represented by proxy or (2) more than 50% of the

outstanding shares of such company.

Our bylaws provide for the calling of a special meeting of stockholders at which such action

could be considered upon written notice of not less than ten or more than sixty days before the date of such meeting.

We may invest up

to 100% of our assets in securities acquired directly from issuers in privately negotiated transactions.

With respect to such

securities, we may, for the purpose of public resale, be deemed an “underwriter”

as that term is defined in the

Securities Act of 1933, as amended, or the Securities Act.

We do not intend to acquire securities issued by any investment

company that exceed the limits imposed by the 1940 Act.

Under these limits, except for registered money market funds, we

generally cannot acquire more than 3% of the voting stock of any investment company, invest more than 5% of the value of our

total assets in the securities of one investment company or invest more than 10% of the value of our total assets in the

securities of more than one investment company.

With regard to that portion of our portfolio invested in securities issued by

investment companies, it should be noted that such investments might subject our stockholders to additional expenses.

our investment policies are fundamental and any may be changed without stockholder approval.

We may also be prohibited

under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our directors

who are not interested persons and, in some cases, prior approval by the SEC.

For example, under the 1940 Act, absent receipt of

exemptive relief from the SEC, we and our affiliates may be precluded from co-investing in transactions for which terms other than

price are negotiated by our affiliates.

As a result of one or more of these situations, we may not be able to invest as much as

we otherwise would in certain investments or may not be able to liquidate a position as quickly.

On November 27, 2017, the SEC

granted us, our Advisor and certain of our affiliates an exemptive relief order permitting us to co-invest with certain affiliated

funds in negotiated investments, subject to the terms and conditions of the order.

We expect to be periodically

examined by the SEC for compliance with the 1940 Act.

We are required to

provide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement.

as a BDC, we are prohibited from protecting any director or officer against any liability to us or our stockholders arising from

willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s

We and our Advisor

have adopted and implemented written policies and procedures reasonably designed to prevent violation of the federal securities

laws and review these policies and procedures annually for their adequacy and the effectiveness of their implementation.

our Advisor have designated a chief compliance officer to be responsible for administering the policies and procedures.

We have entered into a license agreement with Horizon Technology Finance Principals, LLC fka Horizon Technology Finance, LLC, or HTF, pursuant to which we were granted a non-exclusive, royalty-free right and license to use the service mark “Horizon Technology Finance.” Under this agreement, we have a right to use the “Horizon Technology Finance” service mark for so long as the Investment Management Agreement with our Advisor is in effect.

Other than with respect to this limited license, we have no legal right to the “Horizon Technology Finance” service mark.

We have elected to be regulated as a BDC under the 1940 Act and elected to be treated as a RIC under Subchapter M of the Code.

As with other companies regulated by the 1940 Act, a BDC must adhere to certain substantive regulatory requirements.

The 1940 Act contains prohibitions and restrictions relating to transactions between BDCs and their affiliates (including any investment advisers or sub-advisers), principal underwriters and affiliates of those affiliates or underwriters and requires that a majority of the directors be persons other than “interested persons,” as that term is defined in the 1940 Act.

In addition, the 1940 Act provides that we may not change the nature of our business so as to cease to be, or to withdraw our election as, a BDC unless approved by “a majority of our outstanding voting securities” as defined in the 1940 Act.

A majority of the outstanding voting securities of a company is defined under the 1940 Act as the lesser of:

(1) 67% or more of such company’s shares present at a meeting if more than 50% of the outstanding shares of such company are present or represented by proxy or (2) more than 50% of the outstanding shares of such company.

Our bylaws provide for the calling of a special meeting of stockholders at which such action could be considered upon written notice of not less than ten or more than sixty days before the date of such meeting.

We may invest up to 100% of our assets in securities acquired directly from issuers in privately negotiated transactions.

With respect to such securities, we may, for the purpose of public resale, be deemed an “underwriter” as that term is defined in the Securities Act of 1933, as amended, or the Securities Act.

We do not intend to acquire securities issued by any investment company that exceed the limits imposed by the 1940 Act.

Under these limits, except for registered money market funds, we generally cannot acquire more than 3% of the voting stock of any investment company, invest more than 5% of the value of our total assets in the securities of one investment company or invest more than 10% of the value of our total assets in the securities of more than one investment company.

With regard to that portion of our portfolio invested in securities issued by investment companies, it should be noted that such investments might subject our stockholders to additional expenses.

None of our investment policies are fundamental and any may be changed without stockholder approval.

We may also be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our directors who are not interested persons and, in some cases, prior approval by the SEC.

For example, under the 1940 Act, absent receipt of exemptive relief from the SEC, we and our affiliates may be precluded from co-investing in transactions for which terms other than price are negotiated by our affiliates.

As a result of one or more of these situations, we may not be able to invest as much as we otherwise would in certain investments or may not be able to liquidate a position as quickly.

On November 27, 2017, the SEC granted us, our Advisor and certain of our affiliates an exemptive relief order permitting us to co-invest with certain affiliated funds in negotiated investments, subject to the terms and conditions of the order.

We expect to be periodically examined by the SEC for compliance with the 1940 Act.

We are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement.

Furthermore, as a BDC, we are prohibited from protecting any director or officer against any liability to us or our stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.

We and our Advisor have adopted and implemented written policies and procedures reasonably designed to prevent violation of the federal securities laws and review these policies and procedures annually for their adequacy and the effectiveness of their implementation.

We and our Advisor have designated a chief compliance officer to be responsible for administering the policies and procedures.

Qualifying assets

Under the 1940 Act,

a BDC may not acquire any asset other than assets of the type listed in section 55(a) of the 1940 Act, which are referred

to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s

total assets.

Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at

least 70% of the company’s total assets.

The principal categories of qualifying assets relevant to our proposed business are the following:

Securities purchased in transactions not involving any public offering from the issuer of such

securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company, or from any person who is, or

has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person,

subject to such rules as may be prescribed by the SEC.

● Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC.

An eligible portfolio company is defined in the 1940 Act as any issuer which:

● is organized under the laws of, and has its principal place of business in, the United States;

is not an investment company (other than a small business investment company wholly owned by the

BDC) or a company that would be an investment company but for certain exclusions under the 1940 Act;

● is not an investment company (other than a small business investment company wholly owned by the BDC) or a company that would be an investment company but for certain exclusions under the 1940 Act;

● satisfies any of the following:

has a market capitalization of less than $250 million or does not have any class of securities

listed on a national securities exchange;

is controlled by a BDC or a group of companies including a BDC, the BDC actually exercises a controlling

influence over the management or policies of the eligible portfolio company, and, as a result thereof, the BDC has an affiliated

person who is a director of the eligible portfolio company;

is a small and solvent company having total assets of not more than $4 million and capital

and surplus of not less than $2 million.

● has a market capitalization of less than $250 million or does not have any class of securities listed on a national securities exchange;

● is controlled by a BDC or a group of companies including a BDC, the BDC actually exercises a controlling influence over the management or policies of the eligible portfolio company, and, as a result thereof, the BDC has an affiliated person who is a director of the eligible portfolio company;

● is a small and solvent company having total assets of not more than $4 million and capital and surplus of not less than $2 million.

● Securities of any eligible portfolio company which we control.

● Securities purchased in a private transaction from a U.S.

issuer that is not an investment

company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject

to reorganization or if the issuer, immediately prior to the purchase of its securities was unable to meet its obligations as they

came due without material assistance other than conventional lending or financing arrangements.

Securities of an eligible portfolio company purchased from any person in a private transaction

if there is no ready market for such securities and we already own 60% of the outstanding equity of the eligible portfolio company.

Securities received in exchange for or distributed on or with respect to securities described above,

or pursuant to the exercise of warrants or rights relating to such securities.

issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements.

● Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and we already own 60% of the outstanding equity of the eligible portfolio company.

● Securities received in exchange for or distributed on or with respect to securities described above, or pursuant to the exercise of warrants or rights relating to such securities.

● Cash, cash equivalents, U.S.

Government securities or high-quality debt securities maturing

in one year or less from the time of investment.

The regulations defining

qualifying assets may change over time.

We may adjust our investment focus as needed to comply with and/or take advantage of any

regulatory, legislative, administrative or judicial actions in this area.

Government securities or high-quality debt securities maturing in one year or less from the time of investment.

The regulations defining qualifying assets may change over time.

We may adjust our investment focus as needed to comply with and/or take advantage of any regulatory, legislative, administrative or judicial actions in this area.

Managerial assistance to portfolio companies

A BDC must have been

organized and have its principal place of business in the United States and must be operated for the purpose of making investments

in the types of securities described in “Qualifying assets.”

However, in order to count portfolio securities as qualifying

assets for the purpose of the 70% test, the BDC must either control the issuer of the securities or must offer to make available

to the issuer of the securities (other than small and solvent companies described above) significant managerial assistance.

the BDC purchases such securities in conjunction with one or more other persons acting together, the BDC will satisfy this test

if one of the other persons in the group makes available such managerial assistance.

Making available managerial assistance means,

among other things, any arrangement whereby the BDC, through its directors, officers or employees, offers to provide, and, if accepted,

does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of

a portfolio company.

A BDC must have been organized and have its principal place of business in the United States and must be operated for the purpose of making investments in the types of securities described in “Qualifying assets.” However, in order to count portfolio securities as qualifying assets for the purpose of the 70% test, the BDC must either control the issuer of the securities or must offer to make available to the issuer of the securities (other than small and solvent companies described above) significant managerial assistance.

Where the BDC purchases such securities in conjunction with one or more other persons acting together, the BDC will satisfy this test if one of the other persons in the group makes available such managerial assistance.

Making available managerial assistance means, among other things, any arrangement whereby the

BDC, through its directors, officers or employees, offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company.

Issuance of additional shares

We are not generally

able to issue and sell our common stock at a price below NAV per share.

We may, however, issue and sell our common stock, at a

price below the current NAV of the common stock, or issue and sell warrants, options or rights to acquire such common stock, at

a price below the current NAV of the common stock if our Board determines that such sale is in our best interest and in the best

interests of our stockholders, and our stockholders have approved our policy and practice of making such sales within the preceding

In any such case, the price at which our securities are to be issued and sold may not be less than a price which,

in the determination of our Board, closely approximates the market value of such securities.

We have not sought the approval of

our stockholders in the preceding 12 months but we may seek approval from our stockholders to offer shares of our common stock

below its NAV in the future.

We are not generally able to issue and sell our common stock at a price below NAV per share.

We may, however, issue and sell our common stock, at a price below the current NAV of the common stock, or issue and sell warrants, options or rights to acquire such common stock, at a price below the current NAV of the common stock if our Board determines that such sale is in our best interest and in the best interests of our stockholders, and our stockholders have approved our policy and practice of making such sales within the preceding 12 months.

In any such case, the price at which our securities are to be issued and sold may not be less than a price which, in the determination of our Board, closely approximates the market value of such securities.

We have not sought the approval of our stockholders in the preceding 12 months but we may seek approval from our stockholders to offer shares of our common stock below its NAV in the future.

Temporary investments

investment in other types of “qualifying assets,”

as described above, our investments may consist of cash, cash

equivalents, U.S.

Government securities or high-quality debt securities maturing in one year or less from the time of

investment, which we refer to, collectively, as temporary investments, so that 70% of our assets are qualifying assets.

Pending investment in other types of “qualifying assets,” as described above, our investments may consist of cash, cash equivalents, U.S.

Government securities or high-quality debt securities maturing in one year or less from the time of investment, which we refer to, collectively, as temporary investments, so that 70% of our assets are qualifying assets.

Typically, we invest in highly rated commercial paper, U.S.

Government agency notes, U.S.

Treasury bills or in

repurchase agreements relating to such securities that are fully collateralized by cash or securities issued by the

Treasury bills or in repurchase agreements relating to such securities that are fully collateralized by cash or securities issued by the U.S.

Government or its agencies.

A repurchase agreement involves the purchase by an investor, such as us, of a specified

security and the simultaneous agreement by the seller to repurchase it at an agreed-upon future date and at a price which is

greater than the purchase price by an amount that reflects an agreed-upon interest rate.

There is no percentage restriction

on the proportion of our assets that may be invested in such repurchase agreements.

However, subject to certain exceptions,

if more than 25% of our total assets constitute repurchase agreements from a single counterparty, we generally would not meet

the diversification tests in order to qualify as a RIC for federal income tax purposes.

Thus, we do not intend to enter into

repurchase agreements with a single counterparty in excess of this limit.

Our Advisor monitors the creditworthiness of the

counterparties with which we enter into repurchase agreement transactions.

A repurchase agreement involves the purchase by an investor, such as us, of a specified security and the simultaneous agreement by the seller to repurchase it at an agreed-upon future date and at a price which is greater than the purchase price by an amount that reflects an agreed-upon interest rate.

There is no percentage restriction on the proportion of our assets that may be invested in such repurchase agreements.

However, subject to certain exceptions, if more than 25% of our total assets constitute repurchase agreements from a single counterparty, we generally would not meet the diversification tests in order to qualify as a RIC for federal income tax purposes.

Thus, we do not intend to enter into repurchase agreements with a single counterparty in excess of this limit.

Our Advisor monitors the creditworthiness of the counterparties with which we enter into repurchase agreement transactions.

Senior securities;

derivative securities

We are permitted,

under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to our common stock if our

asset coverage, as defined in the 1940 Act, is at least equal to 150% immediately after each such issuance.

In addition, while

any senior securities are outstanding, we must make provisions to prohibit any distribution to our stockholders or the repurchase

of such securities or shares unless we meet the applicable asset coverage requirements at the time of the distribution or repurchase.

We are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to our common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 150% immediately after each such issuance.

In addition, while any senior securities are outstanding, we must make provisions to prohibit any distribution to our stockholders or the repurchase of such securities or shares unless we meet the applicable asset coverage requirements at the time of the distribution or repurchase.

We may also borrow amounts up to 5% of the value of our total assets for temporary purposes without regard to asset coverage.

a discussion of the risks associated with leverage, see “Item 1A —

Risk Factors —

Risks related to our business

and structure —

We borrow money, which magnifies the potential for gain or loss on amounts invested and may increase

the risk of investing in us.”

The 1940 Act also

limits the amount of warrants, options and rights to common stock that we may issue and the terms of such securities.

For a discussion of the risks associated with leverage, see “Item 1A — Risk Factors — General Risk Factors — We borrow money, which magnifies the potential for gain or loss on amounts invested and may increase the risk of investing in us.”

The 1940 Act also limits the amount of warrants, options and rights to common stock that we may issue and the terms of such securities.

Code of ethics

We and our Advisor

have each adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act and Rule 204A-1 under the Investment Advisers

Act of 1940, as amended, or the Advisers Act, respectively, that establishes procedures for personal investments and restricts

certain personal securities transactions.

Personnel subject to each code may invest in securities for their personal investment

accounts, including securities that may be purchased or held by us, so long as such investments are made in accordance with the

relevant code of ethics’

requirements.

We and our Advisor have each adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act and Rule 204A-1 under the Investment Advisers Act of 1940, as amended, or the Advisers Act, respectively, that establishes procedures for personal investments and restricts certain personal securities transactions.

Personnel subject to each code may invest in securities for their personal investment accounts, including securities that may be purchased or held by us, so long as such investments are made in accordance with the relevant code of ethics’ requirements.

Each code of ethics is published on our website at www.horizontechfinance.com.

intend to disclose any substantive amendments to, or waivers from, the codes of conduct within four business days of the waiver

or amendment through a web site posting.

We intend to disclose any substantive amendments to, or waivers from, the codes of conduct within four business days of the waiver or amendment through a web site posting.

Proxy voting policies and procedures

We have delegated

our proxy voting responsibility to our Advisor.

We have delegated our proxy voting responsibility to our Advisor.

The proxy voting policies and procedures of our Advisor are set forth below.

guidelines are reviewed periodically by our Advisor and our independent directors and, accordingly, are subject to change.

Our Advisor is registered

with the SEC as an investment adviser under the Advisers Act.

As an investment adviser registered under the Advisers Act, our Advisor

has fiduciary duties to us.

As part of this duty, our Advisor recognizes that it must vote client securities in a timely manner

free of conflicts of interest and in our best interests and the best interests of our stockholders.

Our Advisor’s proxy voting

policies and procedures have been formulated to ensure decision-making is consistent with these fiduciary duties.

These policies and

procedures for voting proxies are intended to comply with Section 206 of, and Rule 206(4)-6 under, the Advisers Act.

The guidelines are reviewed periodically by our Advisor and our independent directors and, accordingly, are subject to change.

Our Advisor is registered with the SEC as an investment adviser under the Advisers Act.

As an investment adviser registered under the Advisers Act, our Advisor has fiduciary duties to us.

As part of this duty, our Advisor recognizes that it must vote client securities in a timely manner free of conflicts of interest and in our best interests and the best interests of our stockholders.

Our Advisor’s proxy voting policies and procedures have been formulated to ensure decision-making is consistent with these fiduciary duties.

These policies and procedures for voting proxies are intended to comply with Section 206 of, and Rule 206(4)-6 under, the Advisers Act.

Proxy policies

Our Advisor votes

proxies relating to our portfolio securities in what our Advisor perceives to be the best interest of our stockholders.

reviews on a case-by-case basis each proposal submitted to a stockholder vote to determine its effect on the portfolio securities

Although our Advisor generally votes against proposals that may have a negative effect on our portfolio securities,

our Advisor may vote for such a proposal if there exist compelling long-term reasons to do so.

Our Advisor’s

proxy voting decisions are made by those senior officers who are responsible for monitoring each of our investments.

that a vote is not the product of a conflict of interest, our Advisor requires that (1) anyone involved in the decision-making

process disclose to our Chief Compliance Officer any potential conflict that he or she is aware of and any contact that he or she

has had with any interested party regarding a proxy vote and (2) employees involved in the decision-making process or vote

administration are prohibited from revealing how we intend to vote on a proposal in order to reduce any attempted influence from

interested parties.

Our Advisor votes proxies relating to our portfolio securities in what our Advisor perceives to be the best interest of our stockholders.

Our Advisor reviews on a case-by-case basis each proposal submitted to a stockholder vote to determine its effect on the portfolio securities held by us.

Although our Advisor generally votes against proposals that may have a negative effect on our portfolio securities, our Advisor may vote for such a proposal if there exist compelling long-term reasons to do so.

Our Advisor’s proxy voting decisions are made by those senior officers who are responsible for monitoring each of our investments.

To ensure that a vote is not the product of a conflict of interest, our Advisor requires that (1) anyone involved in the decision-making process disclose to our Chief Compliance Officer any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a proxy vote and (2) employees involved in the decision-making process or vote administration are prohibited from revealing how we intend to vote on a proposal in order to reduce any attempted influence from interested parties.

Proxy voting records

You may obtain information

about how we voted proxies by making a written request for proxy voting information to:

Chief Compliance Officer, Horizon Technology

Finance Corporation, 312 Farmington Avenue, Farmington, Connecticut 06032 or by calling (860) 676-8654.

You may obtain information about how we voted proxies by making a written request for proxy voting information to:

Chief Compliance Officer, Horizon Technology Finance Corporation, 312 Farmington Avenue, Farmington, Connecticut 06032 or by calling (860) 676-8654.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley

Act of 2002, as amended, or the Sarbanes-Oxley Act, imposes a wide variety of regulatory requirements on publicly held companies

and their insiders.

The Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, imposes a wide variety of regulatory requirements on publicly held companies and their insiders.

Many of these requirements affect us.

pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended, or the Exchange

Act, our principal executive officer and principal financial officer must certify the accuracy of the financial statements contained

in our periodic reports;

pursuant to Item 307 of Regulation S-K under the Securities Act, our periodic reports must disclose

our conclusions about the effectiveness of our disclosure controls and procedures;

pursuant to Rule 13a-15 under the Exchange Act, our management must prepare an annual report regarding

its assessment of our internal control over financial reporting, which must be audited by our independent registered public accounting

pursuant to Item 308 of Regulation S-K under the Securities Act and Rule 13a-15 under the Exchange

Act, our periodic reports must disclose whether there were significant changes in our internal controls over financial reporting

or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective

actions with regard to significant deficiencies and material weaknesses.

The Sarbanes-Oxley

Act requires us to review our current policies and procedures to determine whether we comply with the Sarbanes-Oxley Act and the

regulations promulgated thereunder.

We will continue to monitor our compliance with all regulations under the Sarbanes-Oxley Act

and intend to take actions necessary to ensure that we are in compliance therewith.

● pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, our principal executive officer and principal financial officer must certify the accuracy of the financial statements contained in our periodic reports;

● pursuant to Item 307 of Regulation S-K under the Securities Act, our periodic reports must disclose our conclusions about the effectiveness of our disclosure controls and procedures;

● pursuant to Rule 13a-15 under the Exchange Act, our management must prepare an annual report regarding its assessment of our internal control over financial reporting, which must be audited by our independent registered public accounting firm;

● pursuant to Item 308 of Regulation S-K under the Securities Act and Rule 13a-15 under the Exchange Act, our periodic reports must disclose whether there were significant changes in our internal controls over financial

reporting or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

The Sarbanes-Oxley Act requires us to review our current policies and procedures to determine whether we comply with the Sarbanes-Oxley Act and the regulations promulgated thereunder.

We will continue to monitor our compliance with all regulations under the Sarbanes-Oxley Act and intend to take actions necessary to ensure that we are in compliance therewith.

Nasdaq corporate governance regulations

Nasdaq has adopted

corporate governance regulations with which listed companies must comply.

We intend to be in compliance with these corporate governance

listing standards.

We intend to monitor our compliance with all future listing standards and to take all necessary actions to ensure

that we are in compliance therewith.

Nasdaq has adopted corporate governance regulations with which listed companies must comply.

We intend to be in compliance with these corporate governance listing standards.

We intend to monitor our compliance with all future listing standards and to take all necessary actions to ensure that we are in compliance therewith.

Privacy principles

We are committed to

maintaining the privacy of stockholders and to safeguarding our non-public personal information.

The following information is provided

to help you understand what personal information we collect, how we protect that information and why, in certain cases, we may

share information with select other parties.

Generally, we do not

receive any nonpublic personal information relating to our stockholders, although certain nonpublic personal information of our

stockholders may become available to us.

We do not disclose any nonpublic personal information about our stockholders or former

stockholders, except as permitted by law or as is necessary in order to service stockholder accounts (for example, to a transfer

agent or third party administrator).

We restrict access

to nonpublic personal information about our stockholders to our Advisor’s employees with a legitimate business need for the

We maintain physical, electronic and procedural safeguards designed to protect the nonpublic personal information

of our stockholders.

For a discussion of the risks associated with cyber incidents, see “Item 1A —

Risk Factors —

Risks related to our business and structure —

We are highly dependent on information systems and systems failures could significantly

disrupt our business, which may, in turn, negatively affect the market price of our common stock and our ability to pay distributions.”

We are committed to maintaining the privacy of stockholders and to safeguarding our non-public personal information.

The following information is provided to help you understand what personal information we collect, how we protect that information and why, in certain cases, we may share information with select other parties.

Generally, we do not receive any nonpublic personal information relating to our stockholders, although certain nonpublic personal information of our stockholders may become available to us.

We do not disclose any nonpublic personal information about our stockholders or former stockholders, except as permitted by law or as is necessary in order to service stockholder accounts (for example, to a transfer agent or third party administrator).

We restrict access to nonpublic personal information about our stockholders to our Advisor’s employees with a legitimate business need for the information.

We maintain physical, electronic and procedural safeguards designed to protect the nonpublic personal information of our stockholders.

For a discussion of the risks associated with cyber incidents, see “Item 1A — Risk Factors — General Risk Factors — We are highly dependent on information systems and systems failures could significantly disrupt our business, which may, in turn, negatively affect the market price of our common stock and our ability to pay distributions.”

Election to be taxed as a RIC

We have elected

to be subject to tax, and intend to qualify annually to maintain our election to be subject to tax, as a RIC under Subchapter

M of the Code.

To maintain our RIC status, we must, among other requirements, meet certain source-of-income and quarterly

asset diversification requirements (as described below).

We also must distribute dividends each tax year of an amount

generally at least equal to 90% of the sum of our ordinary income and our realized net short-term capital gains (i.e., net

short-term capital gains in excess of net long term losses), or investment company taxable income, if any, out of the assets

legally available for distribution, which we refer to as the “Annual Distribution Requirement.”

required for us to maintain our RIC tax status, in order to preclude the imposition of a 4% nondeductible federal excise tax

imposed on RICs, we are required to distribute dividends in respect of each calendar year of an amount generally at least

equal to the sum of (1) 98% of our ordinary income (taking into account certain deferrals and elections) for the

calendar year, (2) 98.2% of the excess of our capital gains over our capital losses, or capital gain net income

(adjusted for certain ordinary losses) for the one-year period ending on October 31 of the calendar year and (3) any

ordinary income or net capital gains for preceding years that was not distributed during such years and on which we

previously did not incur any U.S.

We have elected to be subject to tax, and intend to qualify annually to maintain our election to be subject to tax, as a RIC under Subchapter M of the Code.

To maintain our RIC status, we must, among other requirements, meet certain source-of-income and quarterly asset diversification requirements (as described below).

We also must distribute dividends each tax year of an amount generally at least equal to 90% of the sum of our ordinary income and our realized net short-term capital gains (i.e., net short-term capital gains in excess of net long term losses), or investment company taxable income, if any, out of the assets legally available for distribution, which we refer to as the “Annual Distribution Requirement.” Although not required for us to maintain our RIC tax status, in order to preclude the imposition of a 4% nondeductible federal excise tax imposed on RICs, we are required to distribute dividends in respect of each calendar year of an amount generally at least equal to the sum of (1) 98% of our ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of the excess of our capital gains over our capital losses, or capital gain net income (adjusted for certain ordinary losses) for the one-year period ending on October 31 of the calendar year and (3) any ordinary income or net capital gains for preceding years that was not distributed during such years and on which we previously did not incur any U.S.

federal corporate income tax, or the Excise Tax Avoidance Requirement.

although we may distribute realized net capital gains (i.e., net long-term capital gains in excess of short-term capital

losses), if any, at least annually out of the assets legally available for such distributions, we may decide to retain such

net capital gains or ordinary income to provide us with additional liquidity.

In addition, although we may distribute realized net capital gains (i.e., net long-term capital gains in excess of short-term capital losses), if any, at least annually out of the assets legally available for such distributions, we may decide to retain such net capital gains or ordinary income to provide us with additional liquidity.

In order to qualify as a RIC, we must:

1 unchanged sentence

● meet any applicable securities law requirements, including capital structure requirements;

derive in each tax year at least 90% of our gross income from dividends, interest, payments with

respect to certain securities loans, gains from the sale of stock or other securities, net income from certain qualified publicly

traded partnerships or other income derived with respect to our business of investing in such stock or securities, or the Qualifying

● derive in each tax year at least 90% of our gross income from dividends, interest, payments with respect to certain securities loans, gains from the sale of stock or other securities, net income from certain qualified publicly traded partnerships or other income derived with respect to our business of investing in such stock or securities, or the Qualifying Income Test;

● diversify our holdings so that at the end of each quarter of the tax year:

● at least 50% of the value of our assets consists of cash, cash equivalents, U.S.

securities, securities of other RICs, and other securities if such other securities of any one issuer neither represents more than

5% of the value of our assets nor more than 10% of the outstanding voting securities of the issuer;

government securities, securities of other RICs, and other securities if such other securities of any one issuer neither represents more than 5% of the value of our assets nor more than 10% of the outstanding voting securities of the issuer;

● no more than 25% of the value of our assets is invested in the securities, other than U.S.

securities or securities of other RICs, of one issuer or of two or more issuers that are controlled, as determined under applicable

tax rules, by us and that are engaged in the same or similar or related trades or businesses or in certain qualified publicly traded

partnerships, or the Diversification Tests.

government securities or securities of other RICs, of one issuer or of two or more issuers that are controlled, as determined under applicable tax rules, by us and that are engaged in the same or similar or related trades or businesses or in certain qualified publicly traded partnerships, or the Diversification Tests.

Taxation as a RIC

If we qualify as a

RIC, and satisfy the Annual Distribution Requirement, then we will not be subject to entity-level income taxes on the portion of

our investment company taxable income as well as any net capital gain (i.e., realized net long-term capital gains in excess of

realized net short-term capital losses) we distribute as dividends to stockholders.

We may retain for investment all or a portion

of our net capital gain.

However, if we retain any investment company taxable income or net capital gains, and fail to satisfy

the Annual Distribution Requirement, we will be subject to entity-level taxation at regular corporate rates on any amounts retained.

If we fail to qualify as a RIC for a period greater than two consecutive tax years, to qualify as a RIC in a subsequent tax year,

we may be subject to regular corporate rates on any net built-in gains with respect to certain of our assets (that is, the excess

of the aggregate gains, including items of income, over aggregate losses that would have been realized with respect to such assets

if we had sold the property at fair market value at the end of the tax year) that we elect to recognize on requalification or when

recognized over the next five tax years.

We may be required

to recognize taxable income in circumstances in which we do not receive cash.

For example, if we hold debt securities that are

treated under applicable tax rules as having original issue discount (such as debt instruments with PIK interest or, in certain

cases, increasing interest rates or issued with warrants), we must include in income each tax year a portion of the original issue

discount that accrues over the life of the debt security, regardless of whether cash representing such income is received by us

in the same tax year.

Because any original issue discount accrued will be included in our investment company taxable income for

the tax year of accrual, we may be required to make a distribution to our stockholders in order to satisfy the Annual Distribution

Requirement or the Excise Tax Avoidance Requirement, even though we will not have received any corresponding cash amount.

Gain or loss realized

by us from warrants acquired by us, as well as any loss attributable to the lapse of such warrants, generally will be treated as

capital gain or loss.

If we qualify as a RIC, and satisfy the Annual Distribution Requirement, then we will not be subject to entity-level income taxes on the portion of our investment company taxable income as well as any net capital gain (i.e., realized net long-term capital gains in excess of realized net short-term capital losses) we distribute as dividends to stockholders.

We may retain for investment all or a portion of our net capital gain.

However, if we retain any investment company taxable income or net capital gains, and fail to satisfy the Annual Distribution Requirement, we will be subject to entity-level taxation at regular corporate rates on any amounts retained.

If we fail to qualify as a RIC for a period greater than two consecutive tax years, to qualify as a RIC in a subsequent tax year, we may be subject to regular corporate rates on any net built-in gains with respect to certain of our assets (that is, the excess of the aggregate gains, including items of income, over aggregate losses that would have been realized with respect to such assets if we had sold the property at fair market value at the end of the tax year) that we elect to recognize on requalification or when recognized over the next five tax years.

We may be required to recognize taxable income in circumstances in which we do not receive cash.

For example, if we hold debt securities that are treated under applicable tax rules as having original issue discount (such as debt instruments with PIK interest or, in certain cases, increasing interest rates or issued with warrants), we must include in income each tax year a portion of the original issue discount that accrues over the life of the debt security, regardless of whether cash representing such income is received by us in the same tax year.

Because any original issue discount accrued will be included in our investment company taxable income for the tax year of accrual, we may be required to make a distribution to our stockholders in order to satisfy the Annual Distribution Requirement or the Excise Tax Avoidance Requirement, even though we will not have received any corresponding cash amount.

Gain or loss realized by us from warrants acquired by us, as well as any loss attributable to the lapse of such warrants, generally will be treated as capital gain or loss.

Such gain or loss generally will be long-term or short-term, depending on how long we held a particular warrant.

Although we do not

presently expect to do so, we are authorized to borrow funds and to sell assets in order to satisfy distribution requirements.

However, under the 1940 Act, we are generally not permitted to make distributions to our stockholders while our debt obligations

and other senior securities are outstanding unless certain “asset coverage”

tests are met.

Moreover, our ability to

dispose of assets to meet our distribution requirements may be limited by (1) the illiquid nature of our portfolio and/or

(2) other requirements relating to our status as a RIC, including the Diversification Tests.

If we dispose of assets in order

to meet the Annual Distribution Requirement or the Excise Tax Avoidance Requirement, we may make such dispositions at times that,

from an investment standpoint, are not advantageous.

Although we do not presently expect to do so, we are authorized to borrow funds and to sell assets in order to satisfy distribution requirements.

However, under the 1940 Act, we are generally not permitted to make distributions to our stockholders while our debt obligations and other senior securities are outstanding unless certain “asset coverage” tests are met.

Moreover, our ability to dispose of assets to meet our distribution requirements may be limited by (1) the illiquid nature of our portfolio and/or (2) other requirements relating to our status as a RIC, including the Diversification Tests.

If we dispose of assets in order to meet the Annual Distribution Requirement or the Excise Tax Avoidance Requirement, we may make such dispositions at times that, from an investment standpoint, are not advantageous.

Failure to qualify as a RIC

If we fail to satisfy

the Annual Distribution Requirement or fail to qualify as a RIC in any tax year, assuming we do not qualify for or take advantage

of certain remedial provisions, we will be subject to tax in that year on all of our taxable income, regardless of whether we make

any distributions to our stockholders.

In that case, all of our income will be subject to corporate-level federal income tax, reducing

the amount available to be distributed to our stockholders.

In contrast, assuming we qualify as a RIC, our corporate-level federal

income tax liability should be substantially reduced or eliminated.

See “—Election to be taxed as a RIC”

If we are unable to

maintain our status as a RIC, we would be subject to tax on all of our taxable income at regular corporate rates.

be able to deduct distributions to stockholders, nor would they be required to be made.

Distributions would generally be taxable

to our stockholders as ordinary distribution income eligible for the 15% or 20% maximum rate to the extent of our current and accumulated

earnings and profits.

Subject to certain limitations under the Code, dividends paid by us to certain corporate stockholders would

be eligible for the dividends received deduction.

Distributions in excess of our current and accumulated earnings and profits would

be treated first as a return of capital to the extent of the stockholder’s tax basis in our common stock, and any remaining

distributions would be treated as a capital gain.

If we fail to satisfy the Annual Distribution Requirement or fail to qualify as a RIC in any tax year, assuming we do not qualify for or take advantage of certain remedial provisions, we will be subject to tax in that year on all of our taxable

income, regardless of whether we make any distributions to our stockholders.

In that case, all of our income will be subject to corporate-level federal income tax, reducing the amount available to be distributed to our stockholders.

In contrast, assuming we qualify as a RIC, our corporate-level federal income tax liability should be substantially reduced or eliminated.

See “—Election to be taxed as a RIC” above.

If we are unable to maintain our status as a RIC, we would be subject to tax on all of our taxable income at regular corporate rates.

We would not be able to deduct distributions to stockholders, nor would they be required to be made.

Distributions would generally be taxable to our stockholders as ordinary distribution income eligible for the 15% or 20% maximum rate to the extent of our current and accumulated earnings and profits.

Subject to certain limitations under the Code, dividends paid by us to certain corporate stockholders would be eligible for the dividends received deduction.

Distributions in excess of our current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholder’s tax basis in our common stock, and any remaining distributions would be treated as a capital gain.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business