Good morning, and welcome to Horizon Technology Finance’s First Quarter 2013 Conference Call. Today’s call is being recorded. All lines have been placed on mute. We will conduct a question-and-answer session after the opening remarks, instructions will follow at that time. I would now like to turn the call over to Michael Cimini of The IGB Group for introductions and the reading of the Safe Harbor statement. Please go ahead, sir.

Thank you, and welcome to the Horizon Technology Finance first quarter 2013 conference call. Representing the company today are Rob Pomeroy, Chairman and Chief Executive Officer; Jerry Michaud, President; and Chris Mathieu, Chief Financial Officer. Before we begin, I would like to point out that Q1 press release is available on the company’s website at www.horizontechnologyfinancecorp.com. Now, I’ll read the following Safe Harbor statement. During this conference call, Horizon Technology Finance will make certain forward-looking statements including statements with regard to the future performance of the company. Words such as believe, expect, anticipate, intend, or similar expressions are used to identify forward-looking statements. These statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ on material basis from those projected in these forward-looking statements, and some of those factors are detailed in the risk factor discussion in the company’s filings with the Securities and Exchange Commission, including the company’s Form 10-K for the year ended December 31, 2012. The company undertakes no obligations to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. At this time, I would like to turn the call over to Rob Pomeroy.

Good morning, and thank you all for joining us. Today, I would like to cover the following areas that impact both the quarterly and the long term performance of Horizon. I will speak to loan origination, portfolio growth, credit quality, components of net investment income and dividend coverage. Our goal continues to be to provide detail and transparency about our results to our investors. In April, we provided our quarterly portfolio update and added detail about the prepayments and normal amortization that incurred in the first quarter. We will continue to provide this detailed information on a quarterly basis. Horizon is a direct originator of loans and we are proud of our ability to find, propose, win and close high quality investments that meet our strict underwriting requirements. In the first quarter, we funded $28.5 million in new loans to seven borrowers. This is strong execution especially considering the traditional slowness of the first quarter and the record level of new loans that we closed in the fourth quarter and the record level of new loans that we closed in the fourth quarter. There were no refinanced balances included in the $28.5 million and we received no early payoffs during the quarter. After deducting $10 million in normal loan amortization, our loan portfolio grew by $19 million to a record $239 million at March 31. A high portion of the new loans were funded late in the quarter and the positive impact of these new loans on net investment income will be realized in the coming quarters. Early payoffs are a normal part of the Horizon lending model and a source of pre-payment fees, increased interest income from accelerated recognition of commitment themes and end of term payments and return of capital for future reinvestment. The Horizon Venture lending model…

Thanks, Rob, and good morning everyone. Our marketing activity for the first quarter underscores the ongoing demand for our venture debt product with particular strength in the technology and medical device sectors. In highlighting our performance for the first quarter, we grew our portfolio by 8.4% from $229 million at the end of the fourth quarter to $248 million. We funded seven companies, totaling $28.5 million. We added five new companies to our portfolio which increased the total number of companies in which we owe warrants to 66, an increase of 37% as compared to March of 2012. Of note, one of our portfolios like Science Company has filed for an IPO, and last week, set the price range of their offering. Importantly, the five new company transactions we funded in Q4, which represented $21 million of the $28.5 million funded, had an average onboarding yields of 13.2% compared to 12.6% for the seven new companies transactions added in fourth quarter. Onboarding yields consist of interest rate on the transaction, commitment fees and ETPs but it does not include expected gains from warrants, prepayment fees or acceleration income from ETPs. We also increased the amount of our investment in warrant positions in two of our existing portfolio companies. In the first quarter, we made five new loan commitments totaling $25.5 million. Our approval and committed backlog stood at $15.6 million to 10 companies. Although there can be no assurance the transactions early in evaluation will result in commitments, our pipeline remain strong with more than $200 million of new opportunities being evaluated. Subsequent to our investment portfolio update press release issued on April 3rd, we have been awarded five new transactions totaling $31 million and funded three transactions totaling $6.5 million from our committed backlog. Today, our approved and committed…

Thanks, Gerry, and good morning, everybody. I’d like to turn your attention now to Horizon’s first quarter financial performance. Our consolidated financial results for the three months ended March 31st, 2013 have been presented in our earnings release distributed after the market closed yesterday, and we also filed our Form 10-Q with the SEC last night. Our total investment income for the first quarter of 2013 was $7.4 million compared to $6.6 million for the first quarter of 2012. This increase of 11.2% was primarily due to the increased average size of our loan portfolio, partially offset by lower fee income as they were no longer prepayments during the first quarter of 2014. Substantially, all of the $7.4 million in investment income for this quarter was earned from interest income, which included $1.2 million from the amortization of origination fees and end-of-term payments from our loan portfolio. Total investment income of $6.6 million for the first quarter of 2012 consisted of $5.9 million in interest income, which included $1.1 million from the amortization of origination fees and end-of-term payments, as well as fee income of $700,000 from prepayment fees on loans with four portfolio companies. We continue to believe that loan prepayments are unpredictable and are therefore best measured over a 12-month period to better assess their impact on NII and dividend coverage over time. Our weighted average portfolio yield was 12.8% for the first quarter compared to 5.4% for the first quarter of 2012. The portfolio yield for the first quarter of 2013 reflected a lower than usual level of loan prepayment activity, while the first quarter of 2012 reflected a higher than usual level of prepayment activity recorded during that period. The company’s total expenses were $4.6 million for the first quarter of 2013 as compared to $3.3…

Thank you, Chris. We’re pleased by our start to 2013. Our focus remains on executing our investment strategy that has enabled Horizon to generate attractive risk-adjusted returns since inception. With a high-quality portfolio of venture loans yielding between 11% and 14%, combined with the opportunity to benefit from further upside via warrants, we are well positioned to strengthen Horizon’s leading industry reputation and drive long-term shareholder value. Before we open the floor for questions, I would like to note that we plan to hold our next conference call to report second quarter results during the week of August 5th, 2013. We’ll have happy to take questions you may have at this time.

Thank you sir. (Operator instructions) All right, and our first question will come from the line of Robert Dodd with Raymond James. Please go ahead. Your line is now open. Robert Dodd – Raymond James: Hi, guys. A couple of questions about the stressed part of the portfolio. If we look at the non-accruals, can you give us any color you have on when you expect those issues to be resolved? I think you mentioned, so I’m guessing, I think ACT should be done by the end of the year. But any color on Satcon and/or solar plus [ph]?

So Satcon is in Chapter 7 bankruptcy liquidation. The reports are not a lot of progress, honestly, Robert, during the first quarter. We’re at the whim of the bankruptcy court, but would expect that it would play out in the next quarter or two. Robert Dodd – Raymond James: Great, perfect. Just looking at kind of the risk category to the next step-up assets, I mean, those are substantial increase there from Q4 where you had Tengion, seen one of the new ones as before, and that group is Celsion. Can you give us any color – obviously in the Tengion last quarter, you said you thought it was very low risk that it would go to non-accrual. Celsion to me looks like it’s pretty low risk as well, it’s got issues. Any color on the other two about what you think the probably of that $18 million fair value or some portion of that actually making it down on to the non-accrual list?

Actually, Celsion is not one of the two. Robert Dodd – Raymond James: Okay.

The other two rated companies needed to raise capital, as I said in the text of the conference call. At the time that we rated them at the end of the quarter, all three of the companies actually did raise capital during April, which is a positive sign. Certainly not out of the woods yet. We will continue to monitor them. Yes, it’s higher than in 12/31, but I tried to emphasize that it’s well within the range that we’ve operated before. Our companies have traditionally over time been downgraded to twos because of how they’re performing and plan or they need to raise cash quite often, upgraded back to three or find a way to repay us. And so, sticking to our netting and normal procedures, we felt the need to rate these as twos at the end of March and we will continue to rate these as we evaluate them at the end of each quarter. Robert Dodd – Raymond James: Okay, great. That’s helpful. Last one if I can, on the campus sort of Wells versus Fortress, when you put the Fortress facility in place, as you mentioned on the call, it gives you more flexibility on some of the second-lien buckets, et cetera. It doesn’t seem – obviously, I mean, you haven’t used that much of the facility. So is that indicative that you’ve gone much more away from – I don’t want to call them lower quality assets – but the type of assets you expected to be using, or I mean, originating when you put the Fortress facility in place? Give us any color there. Because it seems, frankly, for a relatively pricey facility getting underutilized at this point.

Right. Yes, so that’s a good question. Essentially, the fundings that we had, to the extent that they are available to be funded under the Wells facility, we will use that facility as it is a cheaper overall cost of capital even with the non-used fees of the Fortress facility in place. So we’ve always aligned the use of our leverage commitments to always fund under the lowest cost of capital. And we’ve had funding timings where our first-lien type transactions have funded sooner. We certainly have some of our second-lien business in the second quarter have funded, but we’ve been able to enjoy the fundings under the Wells today. Robert Dodd – Raymond James: Okay, thank you.

Thank you, sir. Our next question will come from the line of Troy Ward with KBW. Please go ahead. Your line is open. Troy Ward – KBW: Thank you and good morning.

Good morning. Troy Ward – KBW: Guys, just real quick. Can you talk about – you spoke about the public, the IPO market and how the IPOs have gone public, have done well, and your hope maybe that you can see some increased activity there. As I look at your portfolio, by my count, you have 10 companies right now that are public. But if you look at kind of your total exposure to those companies in the $35 million, a couple of your non-accruals fall in there. So your actual public fair value is marked about $0.83 on the dollar. How do you view – I guess how should shareholders view the public exit as the right channel and how do you view it going forward? Is it just an anomaly that your public companies right now haven’t performed as well? Do you still think that’s the right and most likely exit channel?

Yes, it’s actually a pretty interesting observation. There are two kinds of IPOs that get done in our market. One essentially is just another vehicle for financing the company. In other words, it’s not really an exit for either investors or, necessarily, lenders. However, what we’re seeing today is, for the first time in a long time, and actually for the first time in a very long time, forward-looking pretty bullish on both M&A and IPO activity in our market. This is something that I think has been a drag on the overall market for quite a while now. So as you look at the companies that had gone public in the past, most of those in fact were – with the exception of Pharmasset, which we had a very solid exit on – most of those in fact were just essentially financings. Now, I think it’s really important to point out that Satcon is obviously in that group and Satcon was a company we actually financed, I believe, after it had gone public, and the market cap from that company actually grew significantly from the time we did the financing right through the end of 2011, before the solar panel market kind of disintegrated on us. So that one, I think, if you take that out of the equation, it changes those numbers quite a bit. But what I’m talking about is I talked about the IPO market going forward and M&A is a really positive market and a really uptick in valuations, and that’s something we haven’t seen in quite awhile. So for the first time in quite awhile, we’re pretty optimistic about that and we actually think that there’ll be some good results certainly during the second half of 2013, maybe even this quarter, but maybe certainly in the second half of 2013. We’re actually looking to some very positive results in the marketplace. Troy Ward – KBW: Great, that’s good color. Thanks. And, yes, clearly, there’s selection bias here because maybe some of the positive public entities that you’re involved with, you could already have exited at a gain. So one last question. On the guidance, kind of the expectation for quarterly originations, could you repeat that? Did you say $20 million to $35 million or $20 million to $25 million.

I think I said $20 million to $35 million. Troy Ward – KBW: Okay, that’s what I had. And then can you just provide kind of what assumptions kind of go behind that? From a funding perspective, how do you view your ability to raise additional capital funding? And, I guess, what are the options if that funding is not available? How do you intend to run the company if you aren’t going to be able to fund your portfolio?

What we really think about is net portfolio growth, and since the beginning of the year, we’ve really thought about net portfolio growth at a clip of about $10 million per quarter for 2013. And that seems like a good baseline for us. Certainly for the first quarter, we were a little bit higher than that since we had no prepayments. So we had estimated $10 million of net growth. We ended up at $19 million net growth. And so a large part of that variability will be the timing and the extent of prepayments. So Gerry’s estimates of $20 million to $35 million on top side largely play into a normal amortization in the order of $10 million to $15 million of contractual principal payments coming back each quarter, and then layering in some level, although sometimes unknown, some level of prepayments to get to kind of a $10 million net portfolio growth. And we think that that is a number that’s manageable given our prepayments that happen on an annual basis and the normal amortization to build the portfolio up to a little bit higher on the leverage through the end of the year. Certainly, we’ll continue to look at the equity and the debt markets to do efficient financings to grow the company, but also importantly to contribute more favorably to NII, as I described earlier. We’re looking to lower the debt cost, the overall expense by getting some relief there. And that’s ongoing. Troy Ward – KBW: Great, thanks, guys.

Thank you, sir. Our next question will come from the line of Jonathan Bock with Wells Fargo Securities. Please go ahead. Your line is now open. Jonathan Bock – Wells Fargo Securities: Apologize if I missed it, Chris, but can you give us available liquidity to date on both the facilities as well as the current cash balances, maybe what’s that fungible number? I thought it was $34 million. Is that right or is that significantly higher?

That’s correct. So as of the end of the quarter, we have $34 million of liquidity broken down between about $5 million of cash and the rest coming from availability on both the Wells line and the Fortress line. We certainly have more availability right now on the commitment from Fortress than we can actually given the overall one-to-one regulatory limitation as a BDC. Jonathan Bock – Wells Fargo Securities: Yes. And the total amount of unfunded commitments to date of $15 million, so I would assume that that liquidity you do need to keep some amount available in order to fund those unfunded commitments, correct?

Yes. So some of that committed backlog has already funded, some of that will fund over the next few quarters. Jonathan Bock – Wells Fargo Securities: And this is just a question I’m sure a lot of investors will have. If we’re trying to get to $10 million net portfolio growth a quarter, would that mean that we have less than two quarters worth of portfolio growth actually available and through liquidity?

Yes, that’s the math, Jonathan. Remember though that there’s $10 million to $15 million of amortization and we’ve already got $10 million of prepays in the first quarter. Jonathan Bock – Wells Fargo Securities: So maybe give or take a quarter, walk us through, now that we’re at leverage capacity, we do give BDCs credit for using their leverage, which is good to see here, but what’s the next step related to equity capital given that you do have an ability to raise, though, I believe, below NAV?

So we will continue to monitor both the equity and debt markets and expect opportunistically, seek to raise additional capital based on market conditions, status of our pipeline, all in support of growth that we believe is accretive to NII. Jonathan Bock – Wells Fargo Securities: Is it possible to make a below-book offering today with the cost of capital at 9.5% at your current debt rates accretive?

It’s possible.

It’s possible. Jonathan Bock – Wells Fargo Securities: Okay. That’s really what we’re looking for. I think at the end of the day, we’re happy to see leverage utilization. I just think the question is, while it’s possible, is that something that you believe in light of what happened on the last below-book offering, something you’d be considering at this moment in time as maybe your door number one? Or would you prefer rather to just wait and let the markets trade you above NAV before you would consider an issuance?

I think what’s important is to focus on both equity and debt. And so, as I was describing, we are very actively focusing today on improving our debt costs. And that will go immediately to improving the overall contribution to NII, and that will be pretty clear. Jonathan Bock – Wells Fargo Securities: Generally, we see debt costs oftentimes get lowered as a result often following the raising of equity capital. Would you consider that one must happen first before you would consider the other?

It’s very possible that the debt would happen before equity. Jonathan Bock – Wells Fargo Securities: Okay.

But there’s nothing that we can report on today. Jonathan Bock – Wells Fargo Securities: No, of course. All right, guys, thank you so much.

Okay.

Thank you, sir. And our next question will come from Casey Alexander with Gilford Securities. Please go ahead. Your line is open. Casey Alexander – Gilford Securities: You said that one of your life science companies filed for an IPO. Can you share which company it was and when it was filed?

Yes, it was Ambit. I actually don’t remember when the initial filing took place, but they did just announce last week that –

Their range, right?

Yes, they announced the range last week. Casey Alexander – Gilford Securities: Okay. So does the current fair value of the Ambit warrant position take that into account or is there potentially going to be a markup in the coming quarter?

Yes. They have not priced that offering. So we have used our normal Black Scholes valuation modeling as of March. The update about the filing and the range only happened last week. So we would not have reflected that in the March numbers. I would suspect, much like Gerry described, that this is a financing for the company, not an exit for us in the near term. Casey Alexander – Gilford Securities: Okay, great. Thank you.

Thank you, sir. And presenters, at this time, I’m showing no additional phone line questions. I’d like to turn the call back over to Rob Pomeroy for any additional or closing remarks.

I’d like to thank everyone again for joining us on today’s call and for your continued interest in the Horizon story. We look forward to sharing our progress with you in the future.

Thank you, sir. Ladies and gentlemen, this concludes Horizon Technology Finance Corporation’s conference call. Thank you and have a great day.