Horizon Technology Finance Corporation

merge with and into Horizon through a NAV for NAV share exchange based on the net asset values of each entity determined shortly before the closing date. We believe the merger creates a true win-win for both sets of shareholders. MRCC shareholders will receive shares of common stock in Horizon, with Horizon receiving a corresponding estimated $165 million cash infusion in exchange for those shares. Horizon will be the surviving public entity and will continue to both be managed by Horizon Technology Finance Management, or HTFM, a Monroe affiliated investment advisor, and trade on the NASDAQ under its ticker symbol HRZM. It is important to note that the transactions which we expect to close in December 2025 will be conditioned on the concurrent closing of both the asset sale and the merger as well as receipt of necessary regulatory approvals and applicable approvals of both the MRCC and Horizon shareholders. Slide 5 summarizes the key elements of the transaction which focus on shareholder alignment and protection. In connection with and in support of the transaction, HTFM, the external advisor and the investment advisor of the combined HRZM company has agreed to waive an aggregate amount up to $4 million in advisory fees over the first four full fiscal quarters following the closing, up to $1 million per quarter. These advisory fee waivers are meant to support core net investment income while Horizon focuses on selectively and efficiently deploying the incremental capital to execute its strategic growth initiatives. The fee waivers will not exceed the total amount of fees earned during the applicable quarter. Additionally, Horizon's existing stock repurchase program will remain available for open market repurchases of shares of its common stock following closing. An aggregate of up to 2% of the then outstanding shares at then current market prices at any time the Horizon stock is trading below 90% of the then most recently disclosed NAV per share. Prior to closing of the merger, both MRCC and Horizon intend to declare and pay ordinary course distributions subject to their respective board's approval. In addition, MRCC intends to declare a distribution to its shareholders equal to any undistributed income estimated to be remaining as of the closing of the merger subject to its board approval. Finally, Horizon and MRCC have agreed to a balanced board structure post close with the combined board expected to be comprised of two current independent Horizon directors, one current MRCC independent director and Mike Balkan, the CEO of the combined company. We believe this transaction unlocks value to MRCC shareholders while offering tax efficiency and a compelling long-term upside. By selling the MRCC investment portfolio to MCIP at fair value, MRCC shareholders are expected to realize approximately a 33% premium to the market trading price as of August 5, 2025, based on MRCC's estimated preliminary June 30, 2025 NAV. As the merger is structured as a tax-free reorganization, this enables MRCC shareholders to defer taxes and maintain their investments in a larger, more scalable platform that will benefit from a significant capital fusion to propel its next phase of growth. The larger combined platform presents MRCC shareholders with a greater potential to realize upside through enhanced scale and liquidity, stronger earnings power bolstered by synergies and other operational savings, and accelerated growth. With that, I will now turn the call over to Mike Balkan, Horizon's chief executive officer, who will provide color around the benefits to Horizon's existing shareholders as well as to elaborate on the next phase of Horizon's growth strategy.

Thank you, Ted. First, let me say how excited I am to be on board here at Horizon and to lead the company into the next phase of its growth. Second, I want to express my firm belief to Horizon shareholders that this strategic rationale and benefits of this merger are very clear. Horizon will receive an immediate boost in size and scale as it will add approximately $165 million in equity to its capital base, based on June 30, 2025 numbers, bringing the combined company's estimated NAB to approximately $446 million. In addition, Horizon will be able to leverage this capital infusion with debt to provide more investment capital, which may produce more core NII growth. This increased scale is expected to help reduce Horizon's per share operating expenses to provide access to lower cost financing and to further solidify the firm as a leading venture debt and growth capital provider. With a larger market capitalization and bigger public flow, we believe trading liquidity and Horizon will be enhanced. We believe all of these traits are increasingly rewarded by investors in the public BDC space. Next, the merger is expected to be accreted to core net investment income over time, driven by GNA savings, portfolio optimization, and potential access to lower cost financing. As mentioned earlier, HTFM has agreed to supplement net investment income through meaningful fee waivers during the first year following the closing of the transaction. And notably, the fresh capital from the merger provides Horizon with the fuel and the runway to execute its next phase of growth, while allowing HTFM to scale its venture debt platform through more investments in its origination capabilities, as well as enhancing its investment mandate. Turning to slide 8, while we will continue to provide venture debt to sponsor-backed private companies in technology, healthcare, life sciences, and sustainability industries, we also expect to leverage our existing platform to more actively provide loans to public small cap companies. To supplement my 35 plus years of working with small cap public companies, we've strengthened our existing leadership team with the addition of Paul Seitz as our chief investment officer. Paul is a seasoned lending professional who has extensive experience in the venture debt market, as well as helping lead Monroe Software and Technology Lending In order to achieve our growth objectives, we will need to be hyper-focused on efficiently, yet prudently deploying the capital resulting from the merger into attractive and accretive portfolio assets that align with our core investment objectives. We have then, and will continue, diligently plan to rapidly deploy the proceeds from the merger. This plan includes deployment of debt in both the venture and public small cap growth company space, as well as leveraging the strength of the overall Monroe platform for deployment into more assets in the technology sector. Additionally, we are augmenting our team and further scaling our platform by adding select new talent that is strictly focused on sourcing new origination opportunities to further accelerate our capital deployment. We have already commenced that process and expect to continue onboarding new talent in the months ahead. All of this is to ensure that Horizon is able to ramp the portfolio quickly post-merger and efficiently accelerate earnings growth. This is not just going to be a larger portfolio, it's going to be a more sophisticated and diversified portfolio supported by deeper origination channels and more robust credit governance. Management will be fully aligned with shareholders given the management and incentive fee waivers in year one. In short, we succeed when shareholders succeed. The cost savings for the pro forma company are real and identifiable. We expect to eliminate approximately $2.5 million of GNA expenses from the current GNA expenses of the two combined companies, which translates to an immediate 30% reduction when compared to the aggregate levels for the standalone entities. This expected per share reduction operating expenses on a pro forma basis comes from consolidation of legal, audit, administration, board and regulatory costs. Because of the complementary nature of our organizations, we don't anticipate integration risk. There's minimal overlap operationally and maximum efficiency to gain as we continue to scale. In addition, we will have the support and resources of the entire Monroe Capital Asset Management Platform, which is currently approximately $22 billion in assets under management. Moving to slide 10, we have outlined the mechanics for the NAV for NAV exchange. The illustrative exchange ratio of 1.1313 to 1.1373 shares of Horizon Common Stock for each share of MRCC Common Stock is based on estimated Horizon NAV per share of $6.70 after giving effect to estimated transaction expenses as of June 30, 2025 and an estimated June 30, 2025 preliminary MRCC NAV per share range of $7.58 to $7.62 after giving effect to estimated transaction expenses. Distribution of all undistributed earnings to MRCC shareholders and other transaction related NAV adjustments. Based on this illustrative exchange ratio, we expect MRCC shareholders to own approximately 37% of the combined company immediately following closing. The final NAVs utilized to determine the exchange ratio will be determined no earlier than 48 hours prior to the closing of this transaction. I will now turn the call back over to Ted, who will walk you through the expected transaction timeline before we open the line for any questions.

Thanks, Mike. With that, here's our expected timeline for the merger. The next major step will occur as soon as this month as the MRCC and Horizon Joint Proxy Statements and Horizon Prospectus and Registration Statement are being prepared and will be filed with the SEC. Based on this timing, we expect we will be in a position to hold a joint MRCC and Horizon shareholder meeting as soon as December 2025 to obtain the required shareholder votes, with the transactions finalized and the merger closing shortly thereafter. Until closing, both companies will continue to operate independently while preparing for capital deployment and Our focus will remain on ensuring continuity for our borrowers, stability for our investors, and strong alignments across all teams. We believe this transaction takes the best attributes of both MRCC and Horizon and creates a better business development company with more capital, more scale, more earnings power, better efficiency, and better and attractive, sustainable returns for our shareholders. It is a strategic, transparent, and long-term focused combination designed to benefit all shareholders. We're excited about the future and confident in the value we will unlock together. To our shareholders and MRCC, thank you for your support and partnership. We believe this merger is a natural next step in our strategic journey and a catalyst for future growth. With that, we will now open up the line to take your questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment

while we poll for questions. First question comes from Christopher Nolan with Lattenberg-Bellman. Please go ahead.

Hey guys, can you hear me? Yes. Yes. Hi. Okay. Let's

see. The two steps. If I understand Ted correctly that the portfolio is going to be the MRCC portfolio is going to be sold to Monroe's non-traded BDC. I presume pretty close to the marks. The debt paid down and then the cash proceeds basically sold to

Horizon. Is that a fair summary? Yes.

Okay. I estimate just back of the envelope, $430 million in terms of MRCC's share value in the first quarter. $270 million in revolvers and the 2026 notes. That's $160 million cash, give or take, to Horizon. What premium, because this is effectively an equity raise from Horizon's perspective, is this cash being sold one times book or a little bit above book?

The transaction will be NAV to NAV. And the NAV will be struck at the time, right before the merger is complete. That's how you should think about it.

Okay. So from Horizon's standpoint, this is just a very cost-efficient equity raise, correct?

Very much so, yes.

Okay, got it. And then the $2.5 million in G&A expenses and the waiving of the management fees for 12 months. I applaud that. Do you guys have any particular targets in terms of yield, net investment income yield on NAV or anything? See, one of the issues with both companies has always been slightly heavier expense structure. And while I appreciate the sentiments in terms of lowering that, try to see whether or not you guys have any hard targets that you want to try to achieve.

No, we usually don't put in hard targets. We try to run the company as efficiently as possible. As you know, venture debt is a high-yielding portfolio. And so we'll continue to run it out as we have been.

Okay. And then is there going to be, because Horizon is going to have significantly larger portfolios, what is the time in terms of deploying this capital?

Yeah, we believe we're going to be able to deploy this capital fairly rapidly. We've been going through discussions and looking at opportunities there. So we think that, as we've mentioned in our presentation, that we will be able to make this neutral, at least to shareholders in the first year. And hopefully we can do better.

When you say neutral, do you mean neutral to EPS, neutral to NAV? Just trying to clarify. Yeah,

neutral to our

EPS. Okay, great.

Okay, I guess the final question is, does this start moving you up in terms of larger, does this start moving Horizon up to larger deals or is it going to stay sort of within the same type of size deals that it traditionally has?

Yeah, I think it certainly allows us the opportunity to do deals that would be a little bit larger. We'll have a larger capital base to work with. But also the relationship with Monroe gives us the opportunity to do deals that are substantially larger when you combine both companies. So we're already seeing that go into practice now with some of the deals that we've got term sheets out on.

All right, good show. You guys know how to make an earnings call a lot more exciting. Thank you.

Thank you. Thank you. Thank you, Chris. You hit most of the key points as usual. Our view on this is it's a win-win for everyone, the MRCC shareholders and the Horizon shareholders.

Yeah, no, it's an interesting transaction. It's creative. Kudos to whoever structured it. It does address issues overhanging MRCC. And I think it does provide a neat way to leverage the Horizon platform because Horizon is trading above book and is able to utilize the ATM. So I think the venture debt space in general is a good place to be. It has natural barriers to entry. And I think the deal makes a lot of sense. Okay, thank you.

Yeah, you watch. We've got big plans. Thank you.

Oh, Ted, are you hosting the Cubs game this year?

Yeah, come on. I come to Chicago.

Okay.

Once again, if you would like to ask a question, please press star 1 on your telephone keypad. Next question comes from Paul Johnson with KBW. Please go ahead.

Good evening. Thanks for taking my questions. Is there any sort of lockup at all in place for the Monroe shareholders after receiving Horizon shares?

No, I don't believe there's any contemplated in the transaction. Got it. Okay.

And then 2500 or sorry, the 2.5 million of GNA expense synergies. What is kind of like the trailing combined four quarter or trailing year of GNA expenses between the two BDCs

prior to the

synergies?

I think if you look on slide nine in the presentation, it'll give you the information that you're looking for. If you see the in horizon is a point four and then the combined afterwards is the 5.8. And that's a savings that Mike spoke about in

the script. Got it. Okay. And then

more of a technical question, but I mean, does the merger at all? Does that affect the total return hurdle?

Calculation look back anyway? No, it does not.

It'll

still be

calculated as normal calculated with the look back and the same features.

Great. Thanks. It's all for

me.

At this time, there are no further questions. This concludes today's teleconference. We thank you for your participation. You may now disconnect your lines.