Horizon Technology Finance Corp
For the period ended Dec 31, 2025. Filed Mar 3, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Mar 3, 2026
HRZN$3.960.0%Stored close · as of Nov 6, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-03-04.
0001437749-25-006114
Item 1A. Risk FactorsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-03-03.
0001437749-26-006636
Item 1A. Risk FactorsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 284 previous paragraphs and 305 current paragraphs.
253 unchanged; 10 reworded; 42 added; 21 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 55 previous and 71 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (42)
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
The opinions delivered to our Board and the MRCC Board by the respective financial advisors to our Special Committee and the MRCC Special Committee prior to signing the Merger Agreement and the Asset Purchase Agreement do not reflect changes in circumstances after the date of the opinions.
Current report
The opinions of the financial advisors to our Special Committee and the MRCC Special Committee, respectively, were delivered to the parties’ respective boards on, and dated, August 7, 2025. Changes in the operations and prospects of MRCC or us, general market and economic conditions and other factors that may be beyond the control of MRCC or us may significantly alter the value of MRCC or the price of shares of our Common Stock by the time the Merger is completed. The opinions do not speak as of the time the Transactions will be completed or as of any date other than the date of such opinions.
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 September 30, 2025 net asset values of MRCC and us, and including Transaction-related costs and other tax-related distributions, we would issue approximately 23.0 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 65.9% for our current stockholders and 34.1% 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
Our stockholders will experience a reduction in percentage ownership and voting power in the combined company as a result of the Merger.
Current report
Our stockholders will experience a substantial reduction in their respective percentage ownership interests and effective voting power in respect of the combined company relative to their respective ownership interests in us prior to the Merger. Consequently, our stockholders should expect to exercise less influence over the management and policies of the combined company following the Merger than they currently exercise over our management and policies.
Current report
Prior to completion of the Merger, subject to certain restrictions in the Merger Agreement, we and MRCC could each issue additional shares of common stock, which would further reduce the percentage ownership of the combined company held by current our stockholders or to be held by MRCC stockholders, as applicable. After completion of the Merger, we may issue additional shares of our common stock, including, subject to certain restrictions under the 1940 Act, including a requirement to obtain stockholder approval of such issuance, at prices below our common stock’s then-current net asset value per share. The issuance or sale by us of shares of our common stock at a discount to net asset value poses a risk of dilution to our and former MRCC stockholders.
Current report
The Merger and/or Asset Sale may trigger certain“change of control”* provisions and other restrictions in contracts of us, MRCC or their affiliates (e.g., under contracts governing indebtedness), and the failure to obtain any required consents or waivers could adversely impact the combined company.***
Current report
Certain agreements of our and MRCC or their affiliates, which may include agreements governing indebtedness of us or MRCC, will or may require the consent or waiver of one or more counterparties in connection with the Transactions. The failure to obtain any such consent or waiver may permit such counterparties to terminate, or otherwise increase their rights or our or MRCC’s obligations under, any such agreement because the Transactions may violate an anti-assignment, change of control or other similar provision relating to any of such transactions. If this occurs, we may have to seek to replace that agreement with a new agreement or seek an amendment to such agreement. We cannot assure you that we will be able to replace or amend any such agreement on comparable terms or at all. If these types of provisions are triggered in agreements governing indebtedness of us or MRCC, the lender or holder of the debt instrument could accelerate repayment under such indebtedness and negatively affect our business, financial condition, results of operations and cash flows.
Current report
If any such agreement is material, the failure to obtain consents, amendments or waivers under, or to replace on similar terms or at all, any of these agreements could adversely affect the financial performance or results of operations of the combined company following the Merger, including preventing us from operating a material part of MRCC’s business.
Current report
In addition, the consummation of the Transactions may violate, conflict with, result in a breach of provisions of, or the loss of any benefit under, constitute a default (or an event that, with or without notice or lapse of time or both, would constitute a default) under, or result in the termination, cancellation, acceleration or other change of any right or obligation (including any payment obligation) under, certain agreements of ours or MRCC. Any such violation, conflict, breach, loss, default or other effect could, either individually or in the aggregate, have a material adverse effect on the financial condition, results of operations, assets or business of the combined company following completion of the Merger.
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 September 30, 2025, we expect to receive approximately $162 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.
Current report
Regulators are also increasing scrutiny and implementing and considering regulation of the use of artificial intelligence technologies, including with respect to uses of artificial intelligence by investment advisers. While comprehensive U.S. regulation has not been enacted to date, various U.S. governmental agencies and departments, including the SEC and U.S. Department of the Treasury, have recently released reports or otherwise indicated interest in assessing risks relating to uses of artificial intelligence by businesses such as ours. Some specific laws governing artificial intelligence have already been passed in certain U.S. states and in the European Union. We cannot predict what, if any, effects this may have on our business or the nature of future regulations.
Current report
We are currently in a period of capital markets disruption and economic uncertainty.
Current report
In recent years, U.S. capital markets have experienced volatility and disruptions including as a result of certain regional bank failures, an inflationary economic environment, and tariffs and global trade negotiations. These disruptions in the capital markets have in the past and could in the future increase the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets. Such disruptions could adversely affect our business, financial condition, results of operations and cash flows, and future market disruptions and/or illiquidity could negatively impact us. These unfavorable economic conditions could increase our funding costs and limit our access to the capital markets, and could result in a decision by lenders not to extend credit to us in the future. These events could limit our investments, our ability to grow and could negatively impact our operating results and the fair values of our debt and equity investments
Showing the first 40 of 42 passages. Open the source sections for the rest.
Removed paragraphs (21)
Previous report
We are subject to certain risks as a result of our interests in connection with the*** 2022-1 Securitization and our equity interest in the****** 2022-1 Trust.***
Previous report
On November 8, 2022, in connection with the 2022‑1 Securitization and the offering of the 2022 Asset-Backed Notes by the 2022‑1 Trust, we sold and/or contributed to Horizon Funding 2022‑1, LLC or the 2022 Trust Depositor, certain loans, or the 2022 Trust Loans, which the 2022 Trust Depositor in turn sold and/or contributed to the 2022‑1 Trust in exchange for 100% of the equity interest in the 2022‑1 Trust, cash proceeds and other consideration. Following these transfers, the 2022‑1 Trust, and not the 2022 Trust Depositor or us, holds all of the ownership interest in the 2022 Trust Loans.
Previous report
As a result of the 2022‑1 Securitization, we hold, indirectly through the 2022 Trust Depositor, 100% of the equity interest of the 2022‑1 Trust. As a result, we consolidate the financial statements of the 2022 Trust Depositor and the 2022‑1 Trust, as well as our other subsidiaries, in our consolidated financial statements. Because each of the 2022 Trust Depositor and the 2022‑1 Trust is disregarded as an entity separate from its owner for U.S. federal income tax purposes, the sale or contribution by us to the 2022 Trust Depositor, and by the 2022 Trust Depositor to the 2022‑1 Trust, did not constitute a taxable event for U.S. federal income tax purposes. If the U.S. Internal Revenue Service were to take a contrary position, there could be a material adverse effect on our business, financial condition, results of operations or cash flows. Further, a failure of the 2022‑1 Trust to be treated as a disregarded entity for U.S. federal income tax purposes would constitute an event of default pursuant to the indenture under the 2022‑1 Securitization, upon which the trustee under the 2022‑1 Securitization, or the Trustee, may, and will at the direction of a supermajority of the holders of the 2022 Asset-Backed Notes (collectively, the “Noteholders”), declare the 2022 Asset-Backed Notes to be immediately due and payable and exercise remedies under the indenture, including (i) institute proceedings for the collection of all amounts then payable on the 2022 Asset-Backed Notes or under the indenture, enforce any judgment obtained, and collect from the 2022‑1 Trust and any other obligor upon the 2022 Asset-Backed Notes monies adjudged due; (ii) institute proceedings from time to time for the complete or partial foreclosure of the indenture with respect to the property of the 2022‑1 Trust; (iii) exercise any remedies as a secured party under the relevant provisions of the applicable jurisdiction’s UCC and take other appropriate action under applicable law to protect and enforce the rights and remedies of the Trustee and the Noteholders; or (iv) sell the property of the 2022‑1 Trust or any portion thereof or rights or interest therein at one or more public or private sales called and conducted in any matter permitted by law. Any such exercise of remedies could have a material adverse effect on our business, financial condition, results of operations or cash flows.
Previous report
An event of default in connection with the*** 2022-1 Securitization could give rise to a cross-default under our other material indebtedness.***
Previous report
The documents governing our other material indebtedness contain customary cross-default provisions that could be triggered if an event of default occurs in connection with the 2022-1 Securitization. An event of default with respect to our other indebtedness could lead to the acceleration of such indebtedness and the exercise of other remedies as provided in the documents governing such other indebtedness. This could have a material adverse effect on our business, financial condition, results of operations and cash flows and may result in our inability to make distributions sufficient to maintain our status as a RIC.
Previous report
We may not receive cash distributions in respect of our indirect ownership interest in the*** 2022-1 Trust.***
Previous report
Apart from fees payable to us in connection with our role as servicer of the 2022 Trust Loans and the reimbursement of related amounts under the 2022-1 Securitization documents, we receive cash in connection with the 2022-1 Securitization only to the extent that the 2022 Trust Depositor receive payments in respect of its equity interest in the 2022-1 Trust. The holders of the equity interest in the 2022-1 Trust, respectively, are the residual claimant on distributions, if any, made by the 2022-1 Trust after the Noteholders and other claimants have been paid in full on each payment date or upon maturity of the 2022 Asset-Backed Notes, subject to the priority of payment provisions under the 2022-1 Securitization documents. To the extent that the value of the 2022-1 Trust's portfolio of 2022 Trust Loans is reduced as a result of conditions in the credit markets (relevant in the event of a liquidation event), other macroeconomic factors, distressed or defaulted 2022 Trust Loans or the failure of individual portfolio companies to otherwise meet their obligations in respect of the 2022 Trust Loans, or for any other reason, the ability of the 2022-1 Trust to make cash distributions in respect of the 2022 Trust Depositor's equity interest would be negatively affected and, consequently, the value of the equity interest in the 2022-1 Trust would also be reduced. In the event that we fail to receive cash indirectly from the 2022-1 Trust, we could be unable to make distributions in amounts sufficient to maintain our status as a RIC or at all.
Previous report
The interests of the Noteholders may not be aligned with our interests.
Previous report
The 2022 Asset-Backed Notes are debt obligations ranking senior in right of payment to the rights of the holder of the equity interest in the 2022-1 Trust (currently the 2022 Trust Depositor, our wholly owned subsidiary), as residual claimant in respect of distributions, if any, made by the 2022-1 Trust. As such, there are circumstances in which the interests of the Noteholders may not be aligned with the interests of the holder of the equity interests in the 2022-1 Trust. For example, under the terms of the documents governing the 2022-1 Securitization, the Noteholders have the right to receive payments of principal and interest prior to the holder of the equity interest in the 2022-1 Trust.
Previous report
For as long as the 2022 Asset-Backed Notes remain outstanding, the Noteholders have the right to act in certain circumstances with respect to the 2022 Trust Loans in ways that may benefit their interests but not the interests of holder of the equity interest in the 2022-1 Trust, including by exercising remedies under the documents governing the 2022-1 Securitization.
Previous report
If an event of default occurs, the Noteholders will be entitled to determine the remedies to be exercised, subject to the terms of the documents governing the 2022-1 Securitization. For example, upon the occurrence of an event of default with respect to the 2022 Asset-Backed Notes, the Trustee may, and will at the direction of the holders of a supermajority of the 2022 Asset-Backed Notes, declare the principal, together with any accrued interest, of the 2022 Asset-Backed Note to be immediately due and payable. This would have the effect of accelerating the principal on such 2022 Asset-Backed Notes, triggering a repayment obligation on the part of the 2022-1 Trust. The 2022 Asset-Backed Notes then outstanding will be paid in full before any further payment or distribution is made to the holder of the equity interest in the 2022-1 Trust. There can be no assurance that there will be sufficient funds through collections on the 2022 Trust Loans or through the proceeds of the sale of the 2022 Trust Loans in the event of a bankruptcy or insolvency to repay in full the obligations under the 2022 Asset-Backed Notes, or to make any distribution payment to holder of the equity interest in the 2022-1 Trust.
Previous report
Remedies pursued by the Noteholders could be adverse to our interests as the indirect holder of the equity interest in the 2022-1 Trust. The Noteholders have no obligation to consider any possible adverse effect on such other interests. Thus, there can be no assurance that any remedies pursued by the Noteholders will be consistent with the best interests of the 2022 Trust Depositor or that we will receive, indirectly through the 2022 Trust Depositor, any payments or distributions upon an acceleration of the 2022 Asset-Backed Notes. Any failure of the 2022-1 Trust to make distributions in respect of the equity interest that we indirectly hold through the 2022 Trust Depositor, whether as a result of an event of default and the acceleration of payments on the 2022 Asset-Backed Notes or otherwise, could have a material adverse effect on our business, financial condition, results of operations and cash flows and may result in our inability to make distributions sufficient to maintain our status as a RIC.
Previous report
Certain events related to the performance of 2022 Trust Loans could lead to the acceleration of principal payments on the 2022 Asset-Backed Notes.
Previous report
The following constitute rapid amortization events, or Rapid Amortization Events, under the documents governing the 2022-1 Securitization: (i) the aggregate outstanding principal balance of all delinquent 2022 Trust Loans exceeds twenty percent (20%) of the aggregate outstanding principal balance of the 2022 Trust Loans; (ii) the aggregate outstanding principal balance of defaulted 2022 Trust Loans plus the aggregate outstanding principal balance of all liquidated 2022 Trust Loans exceeds fifteen percent (15%) of the aggregate outstanding principal balance of the 2022 Trust Loans; (iii) the aggregate outstanding principal balance of the 2022 Asset-Backed Notes exceeds the borrowing base (which is a percentage of the outstanding principal balance of the 2022 Trust Loans less delinquent 2022 Trust Loans and 2022 Trust Loans to issuers that exceed given thresholds) for a period of sixty consecutive days; (iv) the 2022‑1 Trust’s pool of 2022 Trust Loans contains 2022 Trust Loans to nine or fewer obligors during the amortization period; or (v) the occurrence of an event of default under the documents governing the 2022‑1 Securitization. After a Rapid Amortization Event has occurred, subject to the priority of payment provisions under the documents governing the 2022‑1 Securitization, principal collections on the 2022 Trust Loans will be used to make accelerated payments of principal on the 2022 Asset-Backed Notes until the payment of principal balance of the 2022 Asset-Backed Notes is reduced to zero. Such an event could delay, reduce or eliminate the ability of the 2022‑1 Trust to make payments or distributions in respect of the equity interest that we indirectly hold, which could have a material adverse effect on our business, financial condition, results of operations and cash flows and may result in our inability to make distributions sufficient to maintain our status as a RIC.
Previous report
We have certain repurchase obligations with respect to the 2022 Trust Loans transferred in connection withthe 2022-1 Securitization.
Previous report
As part of the 2022‑1 Securitization, we entered into a sale and contribution agreement and a sale and servicing agreement under which we would be required to repurchase any 2022 Trust Loan (or participation interest therein) which was sold to the 2022‑1 Trust in breach of certain customary representations and warranties made by us or by the 2022 Trust Depositor with respect to such 2022 Trust Loan or the legal structure of the 2022‑1 Securitization. To the extent that there is such a breach of such representations and warranties and we fail to satisfy any such repurchase obligation, the Trustee may, on behalf of the 2022‑1 Trust, bring an action against us to enforce these repurchase obligations.
Previous report
The capital markets may experience periods of disruption and economic uncertainty. Such market conditions may materially and adversely affect debt and equity capital markets, which may have, a negative impact on our business and operations.
Previous report
The U.S. capital markets have experienced extreme disruption. Such disruptions have been evidenced by volatility in global stock markets. Despite actions of the U.S. federal government and foreign governments, this disruption has contributed to worsening general economic conditions that are materially and adversely impacting broader financial and credit markets and reducing the availability of debt and equity capital for the market as a whole. These conditions could continue for a prolonged period of time or worsen in the future. Market uncertainty and volatility have also been magnified as a result of the 2024 U.S. presidential and congressional elections and resulting uncertainties regarding actual and potential shifts in U.S. and foreign, trade, economic and other policies, including with respect to treaties and tariffs.
Previous report
Significant changes or volatility in the capital markets may negatively affect the valuations of our investments. While most of our investments are not publicly traded, applicable accounting standards require us to assume as part of our valuation process that our investments are sold in a principal market to market participants (even if we plan to hold an investment to maturity). Our valuations, and particularly valuations of private investments and private companies, are inherently uncertain, fluctuate over short periods of time and are often based on estimates, comparisons and qualitative evaluations of private information that may not reflect the full impact of these disruptions and measures taken in response thereto. These disruptions, or the threat thereof, and the resulting financial and economic market uncertainty could have a significant adverse impact on us and the fair value of our investments and our portfolio companies.
Previous report
Significant changes in the capital markets have limited and could continue to limit our investment originations, limit our ability to grow and have a material negative impact on our and our portfolio companies’ operating results and the fair values of our debt and equity investments. Additionally, the recent disruption in economic activity has had, and may continue to have, a negative effect on the potential for liquidity events involving our investments. The illiquidity of our investments may make it difficult for us to sell such investments to access capital, if required. As a result, we could realize significantly less than the value at which we have recorded our investments if we were required to sell them to increase our liquidity. An inability on our part to raise incremental capital, and any required sale of all or a portion of our investments as a result, could have a material adverse effect on our business, financial condition or results of operations.
Previous report
Further, current market conditions may make it difficult to raise equity capital, extend the maturity of or refinance our existing indebtedness or obtain new indebtedness with similar terms and any failure to do so could have a material adverse effect on our business. The debt capital available to us in the future, if available at all, may bear a higher interest rate and may be available only on terms and conditions less favorable than those of our existing debt and such debt may need to be incurred in an elevated interest rate environment. If we are unable to raise new debt or refinance our existing debt, then our equity investors will not benefit from the potential for increased returns on equity resulting from leverage, and we may be unable to make new commitments or to fund existing commitments to our portfolio companies. Any inability to extend the maturity of or refinance our existing debt, or to obtain new debt, could have a material adverse effect on our business, financial condition or results of operations.
Reworded paragraphs (10)
Previous wording
In addition, if any two of the four of Mr. Pomeroy, our Chief Executive Officer, Mr. Michaud, our President, Mr. Devorsetz, our Chief Investment Officer or Mr. Trolio, our Chief Financial Officer, ceases to be actively involved with us or our Advisor, and is not replaced by an individual satisfactory to Key within 90 days, Key could, absent a waiver or cure, demand repayment of any outstanding obligations under the Key Facility. If any two of the four of Mr. Pomeroy, Mr. Michaud, Mr. Trolio or Mr. Devorsetz ceases to be actively involved with us, the NYL Noteholders could, absent a waiver or cure, redeem any outstanding obligations under the NYL Facility. In such an event, if we do not have sufficient cash to repay our outstanding obligations, we may be required to sell investments which, due to their illiquidity, may be difficult to sell on favorable terms or at all. We may also be unable to make new investments, cover our existing obligations to extend credit or meet other obligations as they come due, which could adversely impact our results of operations.
Current wording
In addition, if any two of the three of Mr. Balkin, our Chief Executive Officer, Mr. Seitz, our Chief Investment Officer or Mr. Trolio, our Chief Financial Officer, ceases to be actively involved with us or our Advisor, and is not replaced by an individual satisfactory to Key within 90 days, Key could, absent a waiver or cure, demand repayment of any outstanding obligations under the Key Facility. If any two of the four of our Chief Executive Officer, Chief Investment Officer, Chief Financial Officer or President ceases to be actively involved with us, the NYL Noteholders could, absent a waiver or cure, redeem any outstanding obligations under the NYL Facility. In such an event, if we do not have sufficient cash to repay our outstanding obligations, we may be required to sell investments which, due to their illiquidity, may be difficult to sell on favorable terms or at all. We may also be unable to make new investments, cover our existing obligations to extend credit or meet other obligations as they come due, which could adversely impact our results of operations.
Previous wording
Since June 30, 2023, we and our Advisor have relied on exemptive relief from the SEC granted to certain affiliates of Monroe on October 15, 2014, as amended on January 10, 2023. The exemptive relief affords our Advisor greater flexibility to negotiate the terms of co-investments if our Board determines in advance that it would be advantageous for us to co-invest with other accounts sponsored or managed by our Advisor, or Monroe or their affiliates in a manner consistent with our investment objective, positions, policies, strategies and restrictions, as well as regulatory requirements and other relevant factors. We cannot assure you, however, that we will develop opportunities that comply with such limitations.
Current wording
From June 30, 2023 through December 17, 2025, we and our Advisor relied on exemptive relief under the Old Order. The exemptive relief afforded our Advisor greater flexibility to negotiate the terms of co-investments if our Board determined in advance that it would be advantageous for us to co-invest with other accounts sponsored or managed by our Advisor, or Monroe or their affiliates in a manner consistent with our investment objective, positions, policies, strategies and restrictions, as well as regulatory requirements and other relevant factors. On December 17, 2025, the U.S. Securities and Exchange Commission granted our New Order which, among other things, modifies the requirements for co-investments under the Old Order. We are required to comply with all terms and conditions required in the New Order. We cannot assure you, however, that we will develop opportunities that comply with such terms and conditions.
Previous wording
Accordingly, we may need to sell some of our assets at times that we would not consider advantageous, raise additional debt or equity capital or forego new investment opportunities or otherwise take actions that are disadvantageous to our business (or be unable to take actions that we believe are necessary or advantageous to our business) in order to satisfy the Annual Distribution Requirement. If we are unable to obtain cash from other sources to satisfy the Annual Distribution Requirement, we may become subject to a corporate-level income taxes on all of our income. The proportion of our income, consisting of interest and fee income that resulted from the portion of original issue discount classified as such in accordance with GAAP not received in cash for the years ended December 31, 2024, 2023 and 2022 was 8.5%, 7.0% and 11.2%, respectively.
Current wording
Accordingly, we may need to sell some of our assets at times that we would not consider advantageous, raise additional debt or equity capital or forego new investment opportunities or otherwise take actions that are disadvantageous to our business (or be unable to take actions that we believe are necessary or advantageous to our business) in order to satisfy the Annual Distribution Requirement. If we are unable to obtain cash from other sources to satisfy the Annual Distribution Requirement, we may become subject to a corporate-level income taxes on all of our income. The proportion of our income, consisting of interest and fee income that resulted from the portion of original issue discount classified as such in accordance with GAAP not received in cash for the years ended December 31, 2025, 2024 and 2023 was 6.5%, 8.5% and 7.0%, respectively.
Previous wording
Based on our outstanding indebtedness of $472 million as of December 31, 2024 and the average cost of borrowed funds of 7.75% as of that date, our investment portfolio would have needed to experience an annual return of at least 5.39% to cover annual interest payments on the outstanding debt. Actual interest payments may be different.
Current wording
Based on our outstanding indebtedness of $478 million as of December 31, 2025 and the average cost of borrowed funds of 6.49% as of that date, our investment portfolio would have needed to experience an annual return of at least 5.15% to cover annual interest payments on the outstanding debt. Actual interest payments may be different.
Previous wording
Based on an outstanding indebtedness of $672 million on an assumed 150% asset coverage ratio and an average cost of borrowed funds of 7.75%, our investment portfolio would need to experience an annual return of at least 7.67% to cover annual interest payments on the outstanding debt. Actual interest payments may be different.
Current wording
Based on an outstanding indebtedness of $638 million on an assumed 150% asset coverage ratio and an average cost of borrowed funds of 6.49%, our investment portfolio would need to experience an annual return of at least 6.88% to cover annual interest payments on the outstanding debt. Actual interest payments may be different.
Previous wording
We may want to obtain additional debt financing, or need to do so upon maturity of the Key Facility, NYL Facility, Nuveen Facility, 2026 Notes, 2027 Notes, 2031 Convertible Notes or the 2022 Asset-Backed Notes, in order to obtain funds which may be made available for investments. We may borrow under the Key Facility until June 20, 2027. After such date, we must repay the outstanding advances under the Key Facility in accordance with its terms and conditions. All outstanding advances under the Key Facility are due and payable on June 20, 2029, unless such date is extended in accordance with the terms of the Key Facility. We may borrow under the NYL Facility until June 5, 2025. After such date, we must repay the outstanding advances under the NYL Facility in accordance with its terms and conditions. All outstanding advances under the NYL Facility are due and payable on June 15, 2030, unless such date is extended in accordance with the terms of the NYL Facility. We may borrow under the Nuveen Facility until June 21, 2027. After such date, we must repay the outstanding advances under the Nuveen Facility in accordance with its terms and conditions. All outstanding advances under the Nuveen Facility are due and payable on June 21, 2027, unless such date is extended in accordance with the terms of the Nuveen Facility. All outstanding amounts on our 2026 Notes are due and payable on March 30, 2026 unless redeemed prior to that date. All outstanding amounts on our 2027 Notes are due and payable on June 15, 2027 unless redeemed prior to that date. All outstanding amounts on our 2031 Convertible Notes are due and payable on October 17, 2031 unless redeemed or converted into our common stock prior to that date. The 2022 Asset-Backed Notes have a stated maturity of November 15, 2030. If we are unable to increase, renew or replace the Credit Facilities or enter into other new debt financings on commercially reasonable terms, our liquidity may be reduced significantly. In addition, if we are unable to repay amounts outstanding under any such debt financings and are declared in default or are unable to renew or refinance these debt financings, we may not be able to make new investments or operate our business in the normal course. These situations may arise due to circumstances that we may be unable to control, such as lack of access to the credit markets, a severe decline in the value of the U.S. dollar, an economic downturn or an operational problem that affects third parties or us, and could materially damage our business.
Current wording
We may want to obtain additional debt financing, or need to do so upon maturity of the Key Facility, NYL Facility, Nuveen Facility, 2027 Notes, 2028 Notes, 2030 Convertible Notes or 2031 Convertible Notes, in order to obtain funds which may be made available for investments. We may borrow under the Key Facility until June 20, 2027. After such date, we must repay the outstanding advances under the Key Facility in accordance with its terms and conditions. All outstanding advances under the Key Facility are due and payable on June 20, 2029, unless such date is extended in accordance with the terms of the Key Facility. We may borrow under the NYL Facility until June 5, 2027. After such date, we must repay the outstanding advances under the NYL Facility in accordance with its terms and conditions. All outstanding advances under the NYL Facility are due and payable on June 15, 2030, unless such date is extended in accordance with the terms of the NYL Facility. We may borrow under the Nuveen Facility until June 21, 2028. After such date, we must repay the outstanding advances under the Nuveen Facility in accordance with its terms and conditions. All outstanding advances under the Nuveen Facility are due and payable on June 10, 2034, unless such date is extended in accordance with the terms of the Nuveen Facility. All outstanding amounts on our 2027 Notes are due and payable on June 15, 2027 unless redeemed prior to that date. All outstanding amounts on our 2028 Notes are due and payable on December 15, 2028 unless redeemed prior to that date. All outstanding amounts on our 2030 Convertible Notes are due and payable on September 4, 2030 unless redeemed or converted into our common stock prior to that date. All outstanding amounts on our 2031 Convertible Notes are due and payable on October 17, 2031 unless redeemed or converted into our common stock prior to that date. On December 29, 2025, we gave notice of our intent to redeem the outstanding principal balance of the 2026 Notes plus accrued interest on January 28, 2026. If we are unable to increase, renew or replace the Credit Facilities or enter into other new debt financings on commercially reasonable terms, our liquidity may be reduced significantly. In addition, if we are unable to repay amounts outstanding under any such debt financings and are declared in default or are unable to renew or refinance these debt financings, we may not be able to make new investments or operate our business in the normal course. These situations may arise due to circumstances that we may be unable to control, such as lack of access to the credit markets, a severe decline in the value of the U.S. dollar, an economic downturn or an operational problem that affects third parties or us, and could materially damage our business.
Previous wording
The 2031 Convertible Notes and the Debt Securities present other risks to holders of our common stock, including the possibility that such notes could discourage an acquisition of us by a third party and accounting uncertainty.
Current wording
The Convertible Notes and the Debt Securities present other risks to holders of our common stock, including the possibility that such notes could discourage an acquisition of us by a third party and accounting uncertainty.
Previous wording
Certain provisions of the 2031 Convertible Notes and the Debt Securities could make it more difficult or more expensive for a third party to acquire us. Upon the occurrence of certain transactions constituting a fundamental change, holders of the 2031 Convertible Notes and the Debt Securities will have the right, at their option, to require us to repurchase all of their notes or any portion of the principal amount of such notes in integral multiples of $1,000. We may also be required to increase the conversion rate or provide for conversion into the acquirer’s capital stock in the event of certain fundamental changes with respect to the 2031 Convertible Notes. These provisions could discourage an acquisition of us by a third party.
Current wording
Certain provisions of the Convertible Notes and the Debt Securities could make it more difficult or more expensive for a third party to acquire us. Upon the occurrence of certain transactions constituting a fundamental change, holders of the Convertible Notes and the Debt Securities will have the right, at their option, to require us to repurchase all of their notes or any portion of the principal amount of such notes in integral multiples of $1,000. We may also be required to increase the conversion rate or provide for conversion into the acquirer’s capital stock in the event of certain fundamental changes with respect to the Convertible Notes. These provisions could discourage an acquisition of us by a third party.
Previous wording
Sales of substantial amounts of our common stock, or the availability of such common stock for sale (including as a result of the conversion of the 2031 Convertible Notes into common stock), whether or not actually sold, could adversely affect the prevailing market price of our common stock. If this occurs and continues, it could impair our ability to raise additional capital through the sale of equity securities should we desire to do so.
Current wording
Sales of substantial amounts of our common stock, or the availability of such common stock for sale (including as a result of the conversion of the Convertible Notes into common stock), whether or not actually sold, could adversely affect the prevailing market price of our common stock. If this occurs and continues, it could impair our ability to raise additional capital through the sale of equity securities should we desire to do so.
Previous wording
Any default under the agreements governing our indebtedness, including a default under the Credit Facilities, the 2022-1 Securitization, or other indebtedness to which we may be a party that is not waived by the required lenders or holders thereunder, and the remedies sought by the holders of such indebtedness could make us unable to pay principal, premium, if any, and interest on our Debt Securities and substantially decrease the market value of our Debt Securities. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness, we could be in default under the terms of the agreements governing such indebtedness. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under the Credit Facilities, the 2022-1 Securitization or other debt we may incur in the future could elect to terminate their commitments, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. If our operating performance declines, we may in the future need to seek to obtain waivers from the required lenders under the Credit Facilities, the 2022-1 Securitization or other debt that we may incur in the future to avoid being in default. If we breach our covenants under the Credit Facilities, the 2022-1 Securitization or other debt and seek a waiver, we may not be able to obtain a waiver from the required lenders or holders. If this occurs, we would be in default and our lenders or debt holders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation. If we are unable to repay debt, lenders having secured obligations, including the lenders under the Credit Facilities or the 2022-1 Securitization, could proceed against the collateral securing the debt. Because the Credit Facilities or the 2022-1 Securitization have, and any future credit facilities will likely have, customary cross-default provisions, if the indebtedness thereunder or under any future credit facility is accelerated, we may be unable to repay or finance the amounts due.
Current wording
Any default under the agreements governing our indebtedness, including a default under the Credit Facilities or other indebtedness to which we may be a party that is not waived by the required lenders or holders thereunder, and the remedies sought by the holders of such indebtedness could make us unable to pay principal, premium, if any, and interest on our Debt Securities and substantially decrease the market value of our Debt Securities. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness, we could be in default under the terms of the agreements governing such indebtedness. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders under the Credit Facilities or other debt we may incur in the future could elect to terminate their commitments, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. If our operating performance declines, we may in the future need to seek to obtain waivers from the required lenders under the Credit Facilities or other debt that we may incur in the future to avoid being in default. If we breach our covenants under the Credit Facilities or other debt and seek a waiver, we may not be able to obtain a waiver from the required lenders or holders. If this occurs, we would be in default and our lenders or debt holders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation. If we are unable to repay debt, lenders having secured obligations, including the lenders under the Credit Facilities, could proceed against the collateral securing the debt. Because the Credit Facilities have, and any future credit facilities will likely have, customary cross-default provisions, if the indebtedness thereunder or under any future credit facility is accelerated, we may be unable to repay or finance the amounts due.