Core Insights - The article discusses investment strategies to generate passive income through high-yield stocks and ETFs, emphasizing that significant returns can be achieved with relatively small investments [3][6]. Investment Opportunities - **Eagle Point Credit Company (ECC)**: Generated $52 million in total investment income in Q3, with a forward annual dividend yield of 29.79%. The company has a consistent track record of paying monthly dividends and plans to continue this practice into 2026 [5][8][9]. - **Horizon Technology Finance Corporation (HRZN)**: Originated $3.8 billion in venture loans to over 360 companies, offering a forward annual dividend yield of 20.5%. The company reported $14 million in net investment income for Q3 2025, indicating financial stability for continued dividend payments [10][11]. ETFs for Income Generation - **YieldMax Single-Stock ETFs**: These ETFs, including those for Microsoft (MSFO), Exxon Mobil (XOMO), and PayPal (PYPY), offer expected annual distribution rates ranging from 38.02% to 52.69%. They utilize options-trading strategies to achieve high yields and provide weekly cash distributions [14][15][17]. - The combination of ECC, HRZN, and three YieldMax ETFs can potentially raise the average yield to 37.23%, allowing for over $4,000 in annual income from a $12,500 investment [18]. Summary of Financial Metrics - **Eagle Point Credit Company**: Q3 GAAP net income of $15.5 million, with a total investment income of $52 million [8]. - **Horizon Technology Finance Corporation**: Q3 net investment income of $14 million, indicating a solid financial position [10].

Financial Data and Key Metrics Changes - The company generated net investment income (NII) of $0.32 per share, compared to $0.28 per share in the previous quarter and $0.32 per share in the same quarter last year [21] - The net asset value (NAV) per share increased by 5% to $7.12, up from $6.75 at the end of the previous quarter [7][23] - The company achieved a debt investment portfolio yield of 18.6% for the quarter, compared to 15.9% for the same quarter last year [20][12] Business Line Data and Key Metrics Changes - The current portfolio stood at $603 million, with new originations totaling $15 million during the quarter [10][22] - The company funded three debt investments totaling $15 million in the third quarter [10] - The onboarding debt investment yield was 12.2%, consistent with historical levels [12] Market Data and Key Metrics Changes - The venture capital market saw approximately $81 billion invested in VC-backed companies in the third quarter, with significant investments in AI [15] - The exit markets opened further with approximately $75 billion of exit value driven primarily by tech IPOs [15] Company Strategy and Development Direction - The company announced a merger with Monroe Capital Corporation, expected to close in early 2026, which will significantly increase assets under management [5] - The merger aims to create a more coordinated effort and leverage economies of scale in venture lending [5][6] - The company plans to focus on originating larger venture loans to top early-stage and late-stage companies [6] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing a strong pipeline of larger venture debt transactions and high demand for venture debt capital [9][16] - The company expects to return to a growth trajectory historically experienced, supported by the merger with Monroe Capital [6][9] Other Important Information - The company raised $40 million through the issuance of 5.5% unsecured convertible notes due 2030, which will strengthen the balance sheet [8][18] - The company has a committed backlog of $119 million, down from $149 million at the end of the previous quarter [13] Q&A Session Summary Question: What do you expect the trend of early payoffs to be going forward? - Management expects early payoffs to revert to historical standards despite a higher rate in the recent quarter [26] Question: What is the credit quality of the new deals coming in? - Management indicated that they expect originations to exceed prepayments and are optimistic about the credit quality of new deals [28] Question: How sustainable is the current portfolio yield? - Management noted that the historical average portfolio yield is around 14.5% to 15%, which is more normalized compared to the current yield [32] Question: What is the plan for using the at-the-market program given the stock price is below book? - The company will evaluate its liquidity and capacity before utilizing the at-the-market program [39] Question: What is the target return on equity for new assets from the Monroe deal? - Management stated that they do not have a specific targeted return on equity but will stick to their high-yielding venture debt model [42]

Core Insights - Horizon Technology Finance (HRZN) reported quarterly earnings of $0.31 per share, exceeding the Zacks Consensus Estimate of $0.28 per share, but down from $0.32 per share a year ago, resulting in an earnings surprise of +10.71% [1] - The company generated revenues of $26.32 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 12.49% and increasing from $24.56 million year-over-year [2] - Horizon Technology Finance shares have declined approximately 32.5% year-to-date, contrasting with the S&P 500's gain of 16.9% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.29 on revenues of $23.83 million, and for the current fiscal year, it is $1.11 on revenues of $96.26 million [7] - The estimate revisions trend for Horizon Technology Finance was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market [6] Industry Context - The Financial - SBIC & Commercial Industry, to which Horizon Technology Finance belongs, is currently ranked in the bottom 17% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Another company in the same industry, Palmer Square Capital BDC Inc. (PSBD), is expected to report quarterly earnings of $0.41 per share, reflecting a year-over-year decline of -14.6% [9]

Debt Investments - As of September 30, 2025, 97.0% ($543.6 million) of the debt investment portfolio at fair value consisted of Senior Term Loans[254] - As of September 30, 2025, the company had 39 debt investments valued at $560.2 million, representing 92.9% of the total portfolio[262] - Total debt investments amounted to $560.2 million, a decrease of 12.3% from $638.8 million on December 31, 2024[265] - The five largest debt investments at cost represented 25% of total debt investments outstanding as of September 30, 2025[265] - As of September 30, 2025, 100% of the outstanding principal amount of debt investments bore interest at floating rates, compared to 99% as of December 31, 2024[396] Investment Performance - The company reported a net realized loss on investments of $22.5 million for the three months ended September 30, 2025[262] - Net realized losses on investments totaled $22.5 million for the three months ended September 30, 2025, compared to $33.9 million for the same period in 2024[283] - During the nine months ended September 30, 2025, net realized losses on investments totaled $31.8 million, primarily due to the settlement of multiple investments and the realization of warrant investments[303] - Net unrealized depreciation on investments for the nine months ended September 30, 2025, totaled $13.8 million, primarily due to unrealized depreciation of various debt and equity investments[305] Financial Results - The total portfolio value as of September 30, 2025, was $603.5 million, a decrease from $697.9 million as of December 31, 2024[262] - Total investment income increased by $1.8 million, or 7.1%, to $26.3 million for the three months ended September 30, 2025, compared to $24.6 million for the same period in 2024[270] - Interest income on debt investments rose by $1.1 million, or 4.8%, to $24.3 million for the three months ended September 30, 2025[271] - For the nine months ended September 30, 2025, total investment income decreased by $1.0 million, or 1.3%, to $75.4 million compared to the same period in 2024[289] - Interest income on debt investments decreased by $3.4 million, or 4.6%, to $70.4 million for the nine months ended September 30, 2025, primarily due to a decrease in average earning debt investments[290] Expenses and Fees - Total expenses decreased by $0.4 million, or 3.2%, to $12.0 million for the three months ended September 30, 2025[277] - Total expenses increased by $0.2 million, or 0.4%, to $38.1 million for the nine months ended September 30, 2025[297] - Fee income increased by $0.6 million, or 46.7%, to $2.0 million for the three months ended September 30, 2025[273] - Fee income increased by $2.3 million, or 88.0%, to $5.0 million for the nine months ended September 30, 2025, driven by a higher amount of principal prepayments[292] Borrowings and Debt Facilities - The company expects to finance its investments through borrowings subject to a 150% asset coverage test[255] - Total borrowings outstanding as of September 30, 2025, amounted to $757.75 million, with a net balance of $424.03 million after debt issuance costs[327] - The outstanding principal balance under the NYL Facility was $181.0 million as of September 30, 2025, with a borrowing capacity of $69.0 million[317] - The Key Facility commitment was increased to $150 million, with a potential total commitment of $300 million, and the interest rate was adjusted to 7.35% as of September 30, 2025[329] - The NYL Facility had an outstanding balance of $181 million as of September 30, 2025, with a borrowing capacity of $69 million[334] Cash and Liquidity - As of September 30, 2025, cash and investments in money market funds amounted to $128.5 million, an increase from $97.5 million as of December 31, 2024[307] - Operating activities provided cash of $87.1 million for the nine months ended September 30, 2025, while financing activities used cash of $57.0 million[322] - The company believes its current cash and available funds will be sufficient to meet working capital and capital expenditure commitments for at least the next 12 months[326] Regulatory and Compliance - The company must distribute at least 90% of its net ordinary income and net short-term capital gains to qualify as a RIC, avoiding corporate-level tax[368] - The company operates as a RIC and is required to distribute at least 90% of its investment company taxable income to avoid corporate-level U.S. federal income tax[390] Advisor Fees - For the three months ended September 30, 2025, the Advisor earned $2.7 million, a decrease of 10% from $3.0 million in the same period of 2024[373] - For the nine months ended September 30, 2025, the Advisor earned $8.9 million, down from $9.5 million in 2024, reflecting a decline of approximately 6.3%[373] - The Advisor earned $0.4 million under the Administration Agreement for the three months ended September 30, 2025, compared to $0.4 million in 2024[375] - The Advisor earned $1.2 million under the Administration Agreement for the nine months ended September 30, 2025, slightly down from $1.3 million in 2024[375] Economic Environment - Economic activity has accelerated, but inflation in the U.S. rose due to global supply chain issues and strong consumer demand, before falling to lower levels at the end of 2023[400] - Persistent inflationary pressures and foreign currency exchange volatility could affect the profit margins of the company's portfolio companies[400]

Financial Performance - Third Quarter 2025 net investment income (NII) was $14.0 million, or $0.32 per basic share, compared to $11.8 million, or $0.32 per basic share for the prior-year period [4]. - Total investment income for the three months ended September 30, 2025, was $26,318 million, an increase from $24,563 million in the same period of 2024, representing a growth of 7.1% [45]. - Net investment income for the nine months ended September 30, 2025, was $36,162 million, compared to $37,357 million for the same period in 2024, reflecting a decrease of 3.2% [45]. - Net increase in net assets resulting from operations for the three months ended September 30, 2025, was $30,722 million, a substantial increase from $7,278 million in the same period of 2024 [45]. - Net investment income per common share (basic) for the three months ended September 30, 2025, was $0.32, unchanged from the same period in 2024 [45]. - Weighted average shares outstanding (basic) increased to 43,101,307 for the three months ended September 30, 2025, compared to 36,571,000 in the same period of 2024 [45]. - Distributions declared per share remained stable at $0.33 for the three months ended September 30, 2025, consistent with the same period in 2024 [45]. - Total expenses for the three months ended September 30, 2025, were $11,952 million, a decrease from $12,353 million in the same period of 2024, reflecting a reduction of 3.2% [45]. - Provision for excise tax for the nine months ended September 30, 2025, was $1,123 million, slightly higher than $1,109 million for the same period in 2024 [45]. Investment Portfolio - The total investment portfolio was valued at $603.5 million as of September 30, 2025 [4]. - The net asset value (NAV) per share increased to $7.12 as of September 30, 2025 [4]. - The annualized portfolio yield on debt investments was 18.6% for the quarter, up from 15.9% in the prior year [6]. - The Company funded three loans totaling $15.0 million during the quarter [4]. - The Company funded a $10.0 million debt investment to a new portfolio company on October 1, 2025 [30]. - The Company continues to hold warrants in several portfolio companies, indicating potential future income from these investments [22][23][25]. - The net unrealized appreciation on investments was $40.5 million, or $0.94 per basic share, compared to $29.3 million, or $0.80 per basic share in the prior-year period [9]. - Net unrealized appreciation on non-affiliate investments for the three months ended September 30, 2025, was $25,659 million, compared to $35,407 million in the same period of 2024, indicating a decrease of 27.7% [45]. Liquidity and Capital Structure - As of September 30, 2025, the company had $130.9 million in cash and a credit facility capacity of $329.0 million [4]. - The Company sold 1,570,248 shares of common stock under its ATM offering program, generating approximately $10.6 million in net proceeds [20]. - Horizon completed a $40 million convertible notes offering and raised approximately $10.6 million through its ATM program [3]. - The Company's net debt to equity leverage ratio was 94%, below the targeted leverage of 120%, with an asset coverage ratio for borrowed amounts at 174% [20]. - The Company has repurchased 167,465 shares of its common stock at an average price of $11.22, totaling $1.9 million since the inception of the stock repurchase program [29]. - As of September 30, 2025, total assets were $759.2 million, down from $821.8 million as of December 31, 2024 [43]. Mergers and Acquisitions - Horizon entered into an agreement to merge with Monroe Capital Corporation (MRCC), subject to shareholder approvals [4]. - The company experienced liquidity events from eight portfolio companies during the quarter [4].

Group 1 - Horizon Technology Finance's dividend yield has reached its highest level on record, indicating strong performance in the current market environment [1] - The business development company (BDC) is trading at a small premium to its net asset value (NAV) per share, suggesting investor confidence despite market challenges [1] - Pacifica Yield is focused on long-term wealth creation by targeting undervalued high-growth companies, high-dividend stocks, REITs, and green energy firms, reflecting a strategic investment approach [1]

Company Performance - Horizon Technology Finance reported quarterly earnings of $0.28 per share, matching the Zacks Consensus Estimate, but down from $0.36 per share a year ago [1] - The company posted revenues of $24.52 million for the quarter ended June 2025, exceeding the Zacks Consensus Estimate by 0.26%, but down from $25.68 million year-over-year [2] - Over the last four quarters, the company has not surpassed consensus EPS estimates and has topped consensus revenue estimates only once [2][3] Stock Movement and Outlook - Horizon Technology Finance shares have declined approximately 13.9% since the beginning of the year, contrasting with the S&P 500's gain of 7.9% [3] - The company's earnings outlook, including current consensus earnings expectations for upcoming quarters, will be crucial for stock price movement [4] - The current consensus EPS estimate for the coming quarter is $0.28 on revenues of $24.74 million, and $1.11 on revenues of $99.01 million for the current fiscal year [7] Industry Context - The Financial - SBIC & Commercial Industry, to which Horizon Technology Finance belongs, is currently ranked in the bottom 42% of over 250 Zacks industries, indicating potential challenges [8] - Historical data suggests that the top 50% of Zacks-ranked industries outperform the bottom 50% by more than a factor of 2 to 1 [8]

Financial Data and Key Metrics Changes - The merger is expected to provide Horizon with an estimated $165 million of incremental equity capital based on preliminary NAV estimates as of June 30, 2025, enhancing the combined company's estimated NAV to approximately $446 million [6][13]. - The transaction is structured to be accretive to net investment income, with expected G&A savings of approximately $2.5 million, translating to a 30% reduction in operating expenses compared to standalone entities [17]. Business Line Data and Key Metrics Changes - The merger will allow Horizon to leverage the additional capital to provide more investment capital, potentially increasing core net investment income growth [13][14]. - Horizon plans to continue providing venture debt to private companies while also expanding its lending to public small-cap companies, indicating a diversification of its business lines [15][16]. Market Data and Key Metrics Changes - The merger is anticipated to unlock shareholder value, with MRCC shareholders expected to realize a 33% premium to the market trading price as of August 5, 2025 [8][12]. - The combined platform is expected to enhance trading liquidity and provide a larger capital base for larger deals, improving the overall market position of Horizon [14][32]. Company Strategy and Development Direction - The merger is seen as a strategic move to optimize direct lending capabilities and enhance scale, operating efficiencies, and growth potential [5][10]. - Horizon aims to rapidly deploy the proceeds from the merger into attractive portfolio assets while maintaining a focus on operational efficiency and prudent capital deployment [16][17]. Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that the merger will create a better business development company with more capital, scale, and earnings power, ultimately benefiting all shareholders [21][22]. - The management team is aligned with shareholders through fee waivers in the first year, emphasizing a commitment to shareholder success [17]. Other Important Information - The merger is expected to close in December 2025, contingent on regulatory approvals and shareholder votes [10][21]. - The combined board structure post-merger will include independent directors from both companies, ensuring balanced governance [11]. Q&A Session Summary Question: Summary of the transaction steps - The MRCC portfolio will be sold to Monroe's non-traded BDC, with cash proceeds going to Horizon [24]. Question: Nature of the transaction from Horizon's perspective - The transaction is viewed as a cost-efficient equity raise for Horizon [26]. Question: Targets for net investment income yield - No hard targets are set, but the focus will be on running the company efficiently [28]. Question: Timing for capital deployment - Capital is expected to be deployed rapidly, aiming for neutral EPS impact in the first year [29][31]. Question: Impact on deal sizes post-merger - The merger allows for larger deals due to an increased capital base [32]. Question: Lockup for Monroe shareholders - No lockup is contemplated for Monroe shareholders after receiving Horizon shares [40]. Question: G&A expense synergies details - Combined G&A expenses prior to synergies were approximately $8.4 million, expected to reduce to $5.8 million post-merger [41].

```markdown [PART I: FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Item 1. Consolidated Financial Statements](index=4&type=section&id=Item%201%2E%20Consolidated%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Horizon Technology Finance Corporation, detailing financial position, operational results, cash flows, and investment schedules for the periods ended June 30, 2025, showing overall decreases in assets and net asset value [Consolidated Statements of Assets and Liabilities](index=4&type=section&id=Consolidated%20Statements%20of%20Assets%20and%20Liabilities) As of June 30, 2025, total assets decreased to **$726.8 million** from **$821.8 million** at December 31, 2024, primarily due to reduced fair value of investments, leading to a decline in total net assets to **$283.8 million** and net asset value per common share to **$6.75** Consolidated Assets and Liabilities (in thousands) | Financial Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **Total Investments at Fair Value** | $622,653 | $697,891 | | **Total Assets** | $726,797 | $821,833 | | **Total Liabilities** | $443,002 | $485,650 | | **Total Net Assets** | $283,795 | $336,183 | | **Net Asset Value Per Common Share** | $6.75 | $8.43 | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) For the three months ended June 30, 2025, total investment income decreased to **$24.5 million**, with net investment income declining to **$11.4 million**, and a net decrease in net assets from operations of **$20.8 million** due to significant net realized and unrealized losses Statement of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Total Investment Income** | $24,520 | $25,678 | $49,036 | $51,807 | | **Total Expenses** | $12,698 | $12,407 | $26,117 | $25,551 | | **Net Investment Income** | $11,449 | $12,914 | $22,169 | $25,520 | | **Net Realized and Unrealized Loss** | $(32,226) | $(22,047) | $(64,382) | $(25,999) | | **Net Decrease in Net Assets from Operations** | $(20,777) | $(9,133) | $(42,213) | $(479) | | **Net Investment Income Per Share - Basic** | $0.28 | $0.36 | $0.54 | $0.74 | | **Net Decrease in Net Assets Per Share - Basic** | $(0.50) | $(0.26) | $(1.04) | $(0.01) | [Consolidated Statements of Changes in Net Assets](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets) The company's net assets decreased from **$336.2 million** at year-end 2024 to **$283.8 million** as of June 30, 2025, primarily due to a net decrease from operations and distributions declared, partially offset by common stock issuances - Net assets decreased by **$52.4 million** in the first six months of 2025, from **$336.2 million** to **$283.8 million**[13](index=13&type=chunk) - Key activities affecting net assets in the first six months of 2025 include a **$42.2 million** net decrease from operations, **$27.4 million** in distributions declared, and **$17.2 million** raised from stock issuances (including for debt extinguishment and dividend reinvestment)[13](index=13&type=chunk)[14](index=14&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash provided by operating activities was **$36.4 million**, a decrease from the prior year, while net cash used in financing activities was **$56.1 million**, resulting in a net decrease in cash of **$19.7 million** Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | **Net Cash Provided by Operating Activities** | $36,417 | $58,330 | | **Net Cash Used in Financing Activities** | $(56,134) | $(17,178) | | **Net (Decrease) Increase in Cash** | $(19,717) | $41,152 | | **Cash, Cash Equivalents and Restricted Cash, End of Period** | $81,151 | $116,874 | - Non-cash financing activities for the six months ended June 30, 2025, included the conversion of **$12.5 million** of debt into common stock[16](index=16&type=chunk) [Consolidated Schedules of Investments](index=9&type=section&id=Consolidated%20Schedules%20of%20Investments) As of June 30, 2025, the total investment portfolio fair value was **$622.7 million**, primarily composed of debt investments, with concentrations in Life Science, Technology, and Healthcare Information & Services sectors, detailing each investment's cost, fair value, interest rate, and maturity Total Portfolio Investment Assets (in thousands) | Date | Cost | Fair Value | | :--- | :--- | :--- | | **June 30, 2025** | $745,848 | $622,653 | | **December 31, 2024** | $766,774 | $697,891 | Portfolio Composition by Fair Value as of June 30, 2025 (in thousands) | Investment Type | Fair Value | % of Net Assets | | :--- | :--- | :--- | | **Non-Affiliate Debt Investments** | $578,370 | 203.8% | | **Non-Affiliate Warrant Investments** | $21,629 | 7.6% | | **Non-Affiliate Equity** | $5,492 | 1.9% | | **Non-Controlled Affiliate Investments** | $6,707 | 2.4% | | **Controlled Affiliate Investments** | $10,455 | 3.7% | | **Total Portfolio** | **$622,653** | **219.4%** | [Notes to the Consolidated Financial Statements](index=35&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) This section details accounting policies and financial data, covering organization, related party transactions, investment and borrowing breakdowns, fair value measurement, and significant subsequent events [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=56&type=section&id=Item%202%2E%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and operational results, highlighting decreased investment income, portfolio changes, liquidity, and key subsequent events including a merger agreement - The company's investment objective is to maximize total return by generating current income from debt investments and capital appreciation from warrants in development-stage companies within its Target Industries (technology, life science, healthcare information and services, and sustainability)[237](index=237&type=chunk) - As of June 30, 2025, **93.9%** of the debt investment portfolio at fair value consisted of Senior Term Loans[237](index=237&type=chunk) - The company has elected to be regulated as a Business Development Company (BDC) and treated as a Regulated Investment Company (RIC) for tax purposes, allowing it to avoid corporate-level income tax by distributing at least **90%** of its taxable income[238](index=238&type=chunk)[336](index=336&type=chunk) [Portfolio Composition and Investment Activity](index=58&type=section&id=Portfolio%20Composition%20and%20Investment%20Activity) As of June 30, 2025, the total portfolio fair value was **$622.7 million**, with debt investments comprising **93.0%**, and the portfolio's weighted average credit rating slightly decreased from 3.1 to 3.0 Portfolio Composition by Fair Value (in thousands) | Investment Type | June 30, 2025 | % of Total | Dec 31, 2024 | % of Total | | :--- | :--- | :--- | :--- | :--- | | Debt investments | $579,171 | 93.0% | $638,779 | 91.5% | | Warrants | $21,629 | 3.5% | $18,277 | 2.6% | | Other investments | $8,451 | 1.4% | $14,637 | 2.1% | | Equity | $13,402 | 2.1% | $26,198 | 3.8% | | **Total** | **$622,653** | **100.0%** | **$697,891** | **100.0%** | Debt Investment Credit Rating by Fair Value (in thousands) | Credit Rating | June 30, 2025 | % of Debt Portfolio | Dec 31, 2024 | % of Debt Portfolio | | :--- | :--- | :--- | :--- | :--- | | 4 (Highest Quality) | $70,411 | 12.2% | $159,944 | 25.1% | | 3 (Standard Risk) | $467,726 | 80.8% | $419,621 | 65.7% | | 2 (Increased Risk) | $14,125 | 2.4% | $48,760 | 7.6% | | 1 (Highest Risk) | $26,909 | 4.6% | $10,454 | 1.6% | | **Total** | **$579,171** | **100.0%** | **$638,779** | **100.0%** | [Consolidated Results of Operations](index=60&type=section&id=Consolidated%20Results%20of%20Operations) For Q2 2025, total investment income fell **4.5%** YoY to **$24.5 million**, and net investment income decreased to **$11.4 million**, resulting in a net decrease in net assets of **$20.8 million** for the quarter due to realized and unrealized losses - For Q2 2025, total investment income decreased by **$1.2 million** YoY, primarily due to a decrease in the Prime Rate, which is the base rate for most of the company's variable rate debt investments[251](index=251&type=chunk)[252](index=252&type=chunk) - Interest expense for Q2 2025 increased by **$0.3 million** YoY to **$8.2 million**, mainly due to a higher effective cost of debt, partially offset by a slight decrease in average borrowings[259](index=259&type=chunk) - The Incentive Fee Cap and Deferral Mechanism reduced the performance-based incentive fee expense by **$2.3 million** in Q2 2025 and **$4.4 million** in the first six months of 2025[261](index=261&type=chunk)[278](index=278&type=chunk) - For Q2 2025, the company realized a net loss of **$9.3 million**, primarily from the settlement of two debt investments, and recorded net unrealized depreciation of **$22.2 million**, driven by markdowns on seven debt investments[264](index=264&type=chunk)[265](index=265&type=chunk) [Liquidity and Capital Resources](index=64&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2025, the company had **$77.9 million** in cash and money market funds, with total borrowings outstanding of **$425.1 million**, and believes its current liquidity is sufficient to meet commitments for at least the next 12 months - As of June 30, 2025, the company had **$77.9 million** in cash and investments in money market funds, down from **$97.5 million** at year-end 2024[283](index=283&type=chunk) Borrowings Outstanding (in thousands) | Facility/Note | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Key Facility | $— | $— | | NYL Facility | $181,000 | $181,000 | | Nuveen Facility | $90,000 | $75,000 | | 2022 Asset-Backed Notes | $34,169 | $81,078 | | 2027 Notes | $57,500 | $57,500 | | 2026 Notes | $57,500 | $57,500 | | 2031 Convertible Notes | $7,500 | $20,000 | | **Total Borrowings (Net)** | **$425,138** | **$467,904** | - During the six months ended June 30, 2025, the company sold **404,305 shares** under its ATM program, raising net proceeds of approximately **$3.6 million**[286](index=286&type=chunk) - As of June 30, 2025, the company had unfunded commitments to extend credit totaling **$149.0 million**[210](index=210&type=chunk)[330](index=330&type=chunk) [Recent Developments](index=71&type=section&id=Recent%20Developments) Subsequent to quarter-end, the company engaged in significant activities including warrant exercises, convertible note conversions, principal prepayments, an increased stock repurchase authorization, and a merger agreement with Monroe Capital Corporation - **Merger Agreement:** On August 7, 2025, the company entered into a merger agreement with Monroe Capital Corporation (MRCC), where MRCC will merge into the company, subject to shareholder approvals and other conditions[230](index=230&type=chunk)[366](index=366&type=chunk) - **Portfolio Activity:** Received prepayments totaling **$30.2 million** from Noodle Partners, Pivot Bio, and Native Microbials in July 2025[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk) - **Capital Activity:** Converted **$3.75 million** of 2031 Convertible Notes into **496,256 shares** of common stock on July 10, 2025[224](index=224&type=chunk)[360](index=360&type=chunk) - **Stock Repurchase Program:** On August 5, 2025, the Board increased the stock repurchase authorization from **$5 million** to **$10 million**[228](index=228&type=chunk)[364](index=364&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=73&type=section&id=Item%203%2E%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is primarily exposed to interest rate risk, with **99%** of its debt investments having floating rates, and a sensitivity analysis indicates a **$4.1 million** annual increase in net assets for a 100 basis point rate increase, while also acknowledging risks from inflation, market volatility, and supply chain disruptions - As of June 30, 2025, **99%** of the company's debt investments bore interest at floating rates, making its income sensitive to changes in interest rates[367](index=367&type=chunk) Annual Impact of Interest Rate Changes on Net Assets (in thousands) | Change in Basis Points | Change in Net Assets (1) | | :--- | :--- | | Up 300 basis points | $15,941 | | Up 100 basis points | $4,145 | | Down 100 basis points | $(1,709) | | Down 300 basis points | $(3,726) | (1) Excludes the impact of incentive fees - The company acknowledges risks from inflation, market volatility, and supply chain issues, which could affect the profit margins of its portfolio companies[373](index=373&type=chunk) [Item 4. Controls and Procedures](index=74&type=section&id=Item%204%2E%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - As of June 30, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level[374](index=374&type=chunk) - No material changes were made to the company's internal control over financial reporting during the quarter ended June 30, 2025[375](index=375&type=chunk) [PART II: OTHER INFORMATION](index=74&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=74&type=section&id=Item%201%2E%20Legal%20Proceedings) The company is not currently subject to any material legal proceedings, nor is it aware of any material legal proceedings being threatened against it - The company reports no current material legal proceedings against it[376](index=376&type=chunk) [Item 1A. Risk Factors](index=74&type=section&id=Item%201A%2E%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to the risk factors disclosed in the 2024 Form 10-K have occurred during the six months ended June 30, 2025[377](index=377&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=75&type=section&id=Item%202%2E%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports that there were no unregistered sales of equity securities during the period - None[378](index=378&type=chunk) [Item 3. Defaults Upon Senior Securities](index=75&type=section&id=Item%203%2E%20Defaults%20Upon%20Senior%20Securities) This section reports that there were no defaults upon senior securities during the period - None[379](index=379&type=chunk) [Item 5. Other Information](index=75&type=section&id=Item%205%2E%20Other%20Information) During the fiscal quarter ended June 30, 2025, none of the company's directors or executive officers adopted or terminated any Rule 10b5-1 trading plans or any non-Rule 10b5-1 trading arrangements - No directors or executive officers adopted or terminated any Rule 10b5-1 trading plans during the quarter ended June 30, 2025[380](index=380&type=chunk) [Item 6. Exhibits](index=75&type=section&id=Item%206%2E%20Exhibits) This section provides an index of the exhibits filed with the Form 10-Q, including amendments to credit agreements, certifications by the CEO and CFO, and XBRL data files ```

Transaction Overview - Monroe Capital Corporation (MRCC) and Horizon Technology Finance Corporation (HRZN) have announced a proposed merger[7] - MRCC will sell substantially all of its assets to Monroe Capital Income Plus Corporation (MCIP) at fair value[7] - The merger is structured as a tax-free exchange, offering long-term upside for MRCC shareholders[7, 14] - The merger is expected to close in December 2025, pending shareholder approvals and customary conditions[7, 13] Financial Benefits and Synergies - The merger will provide HRZN with approximately $165 million in equity capital[7] - MRCC shareholders realize an immediate 33% NAV premium to the current trading price[14] - The combined company's investment adviser, HTFM, will waive $4 million in management and incentive fees[13, 19] - Estimated annualized G&A expense savings of $2.5 million are expected in the first year, a 30% expense reduction[28] Post-Merger Structure and Governance - HRZN will be the surviving public entity, managed by Horizon Technology Finance Management LLC (HTFM)[12] - MRCC shareholders are expected to own approximately 37% of the combined company immediately following closing[29] - HRZN's existing stock purchase program will be available for open market repurchases of up to 2% of outstanding shares when trading below 90% of NAV[13]