Horizon Technology Finance Corp

Current report

Risks Relating to the Merger

Current report

On August 7, 2025, we entered into the Merger Agreement with MRCC, Merger Sub, MC Advisors, and the Advisor. The Merger Agreement provides that, subject to the conditions set forth in the Merger Agreement, immediately following the Asset Sale and at the Effective Time, the Mergers will occur. Both MRCC and our boards of directors, including each of the respective independent directors (in each case, on the recommendation of a special committee of each such board comprised solely of certain independent directors of the applicable board) have approved the Merger Agreement and the transactions contemplated thereby.

Current report

On August 7, 2025, MRCC also entered into the Asset Purchase Agreement with MCIP, and MC Advisors, pursuant to which, subject to the satisfaction or waiver of the closing conditions set forth in the Asset Purchase Agreement, on the Closing Date, MCIP will complete the Asset Sale. Under the Asset Purchase Agreement, the Asset Sale is contingent upon, and will become effective immediately prior to the effectiveness of, the Mergers.

Current report

The termination of the Merger Agreement and/or Asset Purchase Agreement could negatively impact us.

Current report

If the Merger Agreement and/or Asset Purchase Agreement are terminated, we may suffer adverse consequences, including:

Current report

The Transactions are subject to customary closing conditions, including stockholder approvals. If such conditions are not satisfied or waived, the Transactions will not close, which may result in material adverse consequences to our business, operations and business prospects.

Current report

The Transactions are subject to customary closing conditions, including certain approvals of our and MRCC’s respective stockholders. If such conditions are not satisfied, the Transactions will not close. We currently expect that all of our directors and executive officers will vote their shares of our common stock in favor of the proposals to be presented at our special meeting of stockholders. If our stockholders do not approve the Merger, and the Transactions are not completed, the resulting failure of the Transactions could have a material adverse impact on our business, operations and business prospects.

Current report

The closing condition that our stockholders approve the issuance of the shares of our common stock pursuant to the Merger Agreement (the “Merger Stock Issuance Proposal”) at our special meeting of stockholders as described in the Merger Agreement may not be waived under applicable law and must be satisfied for the Merger to be completed. If the stockholders of MRCC do not approve the Merger and the Transactions are not completed, the resulting failure of the Transactions could have a material adverse impact on our business, operations and business prospects. In addition to the required approvals of our, MCIP and MRCC’s stockholders, the Transactions are subject to a number of other conditions beyond our control or the control of MCIP and MRCC. These conditions may prevent, delay or otherwise materially adversely affect Transactions from being completed. None of MCIP, MRCC or the Company can predict whether and when these other conditions will be satisfied.

Current report

If the Transactions do not close, we will not benefit from the expenses incurred in their pursuit.

Current report

The Transactions may not be completed. If the Transactions are not completed, we will have incurred substantial expenses for which no ultimate benefit will be received. We have incurred and will incur substantial out-of-pocket expenses in connection with the Transactions for investment banking, legal and accounting fees, financial printing and other Transaction-related expenses, much of which will be incurred even if the Transactions are not completed.

Current report

Because the market price of our common stock will fluctuate, our stockholders and the stockholders of MRCC cannot be sure of the market value of the amount of Merger Consideration to be paid to MRCC’s stockholders until the closing of the Merger.

Current report

At the effective time of the Merger, each share of MRCC common stock issued and outstanding immediately prior to such time (other than shares owned by us or any of our consolidated subsidiaries) will be converted into the right to receive a number of shares of our common stock equal to an exchange ratio to be determined not more than 48 hours prior to the effective time, plus cash (without interest) in lieu of fractional shares. For illustrative purposes, based on June 30, 2025 net asset values of MRCC and us, and including Transaction-related costs and other tax-related distributions, we would issue approximately 24.6 million shares of our common stock in the aggregate pursuant to the Merger Agreement and based on the number of shares of MRCC common stock outstanding as of that date, resulting in pro forma ownership of the Company of 63.1% for our current stockholders and 36.9% for MRCC’s current stockholders.

Current report

The market value of the shares of our common stock to be received by MRCC’s stockholders (together with cash received by MRCC’s common stockholders in lieu of fractional shares, the “Merger Consideration”) may vary from our common stock’s closing price on the date the Merger was announced, on the date of the filing of this current report, on the date our joint proxy statement/prospectus is mailed to our stockholders, on the date of our special meeting of stockholders or the date of MRCC’s special meeting of stockholders and on the date the Merger is completed and thereafter. Any change in the market price of our common stock prior to completion of the Merger will affect the market value of the Merger Consideration that MRCC’s stockholders will receive upon completion of the Merger.

Current report

Accordingly, at the time of our special meeting of stockholders, our stockholders and MRCC’s stockholders will not know or be able to calculate the amount of Merger Consideration they would receive upon completion of the Merger. Under the terms of the Merger Agreement, we and MRCC are not permitted to terminate the Merger Agreement or to resolicit the vote of their respective stockholders solely because of changes in the market price of shares of our common stock after our special meeting of stockholders.

Current report

The market price and liquidity of the market for our common stock may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance.

Current report

These factors include:

Current report

If the Transactions close as contemplated, we will receive a substantial amount of cash, as net proceeds, that we must then deploy, and you may not agree with the way we allocate the net proceeds from the Transactions.

Current report

Upon the closing of the Transactions, based upon net asset values of our and MRCC’s shares as of June 30, 2025, we expect to receive approximately $165 million in cash proceeds. To deploy that cash, we must identify and invest in loans and other assets consistent with our investment strategy. Depending on market conditions, it may be difficult to identify a sufficient number of investments compatible with our strategy at pricing that generates attractive returns to the stockholders of the combined company. Our ability to identify suitable investments will depend on conditions in the market for loans immediately after the closing of the Transactions, and any disruption in the lending market at that time could require that we delay our investments or make investments on less favorable terms than we would typically require. We may also invest in companies with which you may not agree. If we are unable to make appropriate, attractive investments, our returns will diminish as we hold cash or cash equivalents that generate returns lower than returns we typically earn on our debt investments until such time as we can invest the net proceeds of the Transactions in debt investments.

Current report

We could have indemnification obligations to our directors or officers and MRCC’s directors or officers.

Current report

Under the terms of the Merger Agreement, we have agreed to indemnify our directors and officers and MRCC’s directors or officer who may become the subject of claims based on the fact that such person is or was our director or officer or MRCC’s director or officer and pertaining to actions occurring at or prior to the effective time of the Merger. Uncertainty with respect to the outcome of these obligations could have a material adverse impact on us and the surviving company following the consummation of the Transactions.

Current report

The Merger Agreement and Asset Purchase Agreement limit our ability to pursue alternatives to the Transactions.

Current report

The Merger Agreement and Asset Purchase Agreement contain provisions that limit our ability to discuss, facilitate or commit to alternative third-party proposals to enter into a business combination or other similar control transaction. These provisions, which are customary for transactions of this type and include an aggregate of $10.8 million in termination fees payable by a third-party acquiror under certain circumstances, may discourage an interested party that might have an interest in combining with us from considering or proposing such a transaction even if it were prepared to value such a combination more highly than the amounts agreed in the Merger.

Current report

We and MRCC are subject to operational uncertainties and contractual restrictions while the Transactions are pending.

Current report

Uncertainties about the impact of the Transactions may have an adverse effect on us and on MRCC and, consequently, on the combined company following completion of the Merger. These uncertainties may cause those that deal with us and MRCC to change their existing business relationships with us and MRCC. In addition, the Merger Agreement contains representations, warranties and covenants, including covenants relating to the operation of each of MRCC’s business and our business during the period prior to the closing of the Merger. These provisions may restrict us and MRCC from taking actions that we might otherwise consider to be in our best interests. Also, these restrictions may prevent us and MRCC from pursuing certain business opportunities that may arise prior to the completion of the Transactions.

Current report

We, MRCC and MCIP may waive one or more conditions to the Transactions without resoliciting stockholder approval.

Current report

Certain conditions to our, MRCC’s and MCIP’s obligations to complete the Transactions may be waived, in whole or in part, to the extent legally allowed, either unilaterally or by the agreement of us and MRCC or MRCC and MCIP, as applicable. In the event that any such waiver does not require any re-solicitation of stockholders, the parties to the Merger Agreement and Asset Purchase Agreement will have the discretion to complete the Transactions without seeking further stockholder approval. However, the conditions requiring the approval of the Transactions by our stockholders cannot be waived.

Current report

The market price of our common stock after the Merger will be affected by factors different from those affecting our common stock price prior to our signing the Merger Agreement.

Current report

Our existing business after the Merger closes will be impacted by the increase in cash and outstanding shares of our stock as a result of the Merger. Accordingly, the results of operations of the combined company, and the market price of our common stock after the Merger, may be affected by factors different from those currently affecting our independent operations. Accordingly, the historical trading prices and financial results of MRCC may not be indicative of these matters for the combined company following the Merger.

Current report

We may not replicate our historical performance, or the historical success of MRCC.

Current report

Following the consummation of the Transactions, we cannot provide any assurance that we will replicate our own historical performance, the historical success of MRCC or the historical performance of other companies advised by HTFM and MC Advisors in the past. Accordingly, our investment returns could be substantially lower than the returns achieved by us in the past, by MRCC, or by such other funds managed by HTFM or MC Advisors.