MFIC 10-K & 10-Q changes, risk factors and insider trading

From time to time, capital markets may experience periods of disruption and instability. Such disruptions may result in, amongst other things, write-offs, the re-pricing of credit risk, the failure of financial institutions or worsening general economic conditions, any of which could materially and adversely impact the broader financial and credit markets and reduce the availability of debt and equity capital for the market as a whole and financial services firms in particular. There can be no assurance these market conditions will not occur or worsen in the future, including economic and political events in or affecting the world’s major economies, such as the ongoing war between Russia and UkraineUkraine, continued conflicts and conflictspolitical unrest in the Middle East.East and South America. Sanctions imposed by the U.S. and other countriescountries, including in connection with hostilities between Russia and Ukraine and the tensions between China and TaiwanTaiwan, have caused additional financial market volatility and affected the global economy. Concerns over future increasesinflation in inflation,volatility, economic recession, as well as interest rate volatility and fluctuations in oil and gas prices resulting from global production and demand levels, as well as geopolitical tension, have exacerbated market volatility. In addition, social unrest, changes regarding immigration and work permit policies and other political and security concerns may not abate, which may cause the debt and equity capital markets and our business to be adversely affected both within and outside of regions experiencing ongoing conflicts. Market uncertainty and volatility have also been magnified as a result of the 2024current U.S. presidential and congressional electionsadministration and resultingongoing uncertainties regarding actual and potential shifts in U.S. and foreign, trade, economic and other policies, including with respect to treaties and tariffs..tariffs. In addition to impacting the capital markets, global economic, political and market conditions could have a significant adverse effect on our business, financial condition and results of operations.

Globally, inflationInflation and rapid fluctuations in inflation rates have had in the pastpast, hadand may in the future have, negative effects on economies and financial markets, particularly in emerging economies,economies. andFor mayexample, do so in the future. Wageswages and prices of inputs increase during periods of inflationinflation, which can negatively impact returns on our investments. In an attempt to stabilize inflation, governmentscountries may impose wage and price controls,controls or otherwise intervene in the economy. Governmental efforts to curb inflation often have negative effects on levelsthe level of economic activity. There can be no assurance that inflation will not become a serious problem in the future and have an adverse impact on the Company’s returns.

Due to federal budget deficit concerns, S&P downgraded the federal government’s credit rating from AAA to AA+ for the first time in history on August 5, 2011. Further, inIn 2023, Fitch downgraded the federal government’s credit rating from AAA to AA+ and, in 2025, Moody's downgraded the federal government's credit rating from Aaa (negative) to Aa1 (stable). Further downgrades or warnings by S&P, Moody’s or other rating agencies, and the government’s credit and deficit concerns in general, could cause interest rates and borrowing costs to rise, which may negatively impact both the perception of credit risk associated with our debt portfolio and our ability to access the debt markets on favorable terms. In addition, a decreased credit rating could create broader financial turmoil and uncertainty, which may weigh heavily on our financial performance and the value of our common stock. Also, to the extent uncertainty regarding any economic recovery in Europe and Brexit continue to negatively impact consumer confidence and consumer credit factors, our business and results of operations could be significantly and adversely affected.

After raising the target range for the federal funds rate in 2017 and 2018, the Federal Reserve lowered the target rate three times in 2019 and two times in 2020. Following recenta period of heightened inflation, the Federal Reserve raised the target rate four times in 2023, raising the fed funds rate by about three percentage points in a six month period. However, the Federal Reserve lowered the target rate three times in 2024,2024 and three times in 2025. In 2026, it is possible that the Federal Reserve will lower interest rates began to decline, with the first Federal Reserve interest rate reduction in September 2024 and further reductions in November 2024 and December 2024.further. Further changes in key economic indicators, such as the unemployment rate or inflation, could lead to additional changes to the target range for the federal funds rate that may cause instability or may negatively impact our ability to access the debt markets on favorable terms.

The election of a new U.S. president for a term that commenced in 2025, coupled with a consolidation of party control of both chambers of Congress, has led to new legislative and regulatory initiatives and the roll-back of certain initiatives of the previous presidential administration, which may impact our business and our clients’ businesses in unpredictable ways. Areas subject to potential change or amendment include the Wall Street Reform and Consumer Protection Act,Act or (the "Dodd-Frank Act,Act") and the authority of the Federal Reserve and the Financial Stability Oversight Council. Additionally, under the narrowly divided control of the Congress, the likelihood of a failure to increase the debt ceiling and a default by the federal government is increased. The U.S. may also further increase tariffs and potentially withdraw from, renegotiate or enter into various trade agreements and take other actions that would change current trade policies of the U.S. We cannot predict which, if any, of these actions will be taken or, if taken, their effect on the financial stability of the U.S. Such actions could have a significant adverse effect on our business, financial condition and results of operations.

To finance investments, we have and may continue to securitize certain of our investments, including through the formation of one or more CLOs,CLOs (any such CLO we form, a "CLO Transaction" and the issuer of such CLO Transaction, a "CLO Issuer"), while retaining all or most of the exposure to the performance of these investments. This involves contributing a pool of assets to a special purpose entity, and selling debt interests in such entity on a non-recourse or limited-recourse basis to purchasers and retaining a debt and/or equity interest in the special purpose entity. Any interest in any such CLO held by us will be considered a “non-qualifying asset” for purposes of Section 55 of the 1940 Act.

Recent technological advances in artificial intelligence, including machine learning technology (“Machine Learning Technology”), pose risks to us and our portfolio companies. We and our portfolio companies could be exposed to the risks of Machine Learning Technology if third-party service providers or any counterparties use Machine Learning Technology in their business activities. We and the Investment Adviser are not in a position to control the use of Machine Learning Technology in third-party products or services. Use of Machine Learning Technology could include the input of confidential information in contravention of applicable policies, contractual or other obligations or restrictions, resulting in such confidential information becoming partly accessible by other third-party Machine Learning Technology applications and users. Machine Learning Technology has the potential to result in significant and disruptive changes in companies, sectors or industries, including those in which we invest, and any such changes could create new and unpredictable operational, legal and/or regulatory risks. Machine Learning Technology and its applications continue to develop rapidly, and we cannot predict the risks that may arise from such developments.

Machine Learning Technology is generally highly reliant on the collection and analysis of large amounts of data, and it is not possible or practicable to incorporate all relevant data into the model that Machine Learning Technology utilizes to operate. Certain data in such models will inevitably contain a degree of inaccuracy and error and could otherwise be inadequate or flawed, which would be likely to degrade the effectiveness of Machine Learning Technology. To the extent we or our portfolio companies are exposed to the risks of Machine Learning Technology use, any such inaccuracies or errors could adversely impact us or our portfolio companies. In the current period of technological and commercial innovation, startup and other companies have found success disrupting traditional approaches to industry or market practices, and the frequency of such disruptions is expected to increase. Such disruptions could negatively impact us and our investments, alter market practices on which our investment strategy depends to create investment returns, significantly disrupt the market in which we operate or subject us to increased competition.

BDCs may issue and sell common stock at a price below net asset value per share only in limited circumstances, one of which is during the one-year period after stockholder approval. In the past, our stockholders have approved a plan so that during the subsequent 12 month period we could, in one or more public or private offerings of our common stock, sell or otherwise issue shares of our common stock at a price below the then current net asset value per share, subject to certain conditions including parameters on the level of permissible dilution, approval of the sale by a major1itymajority of our independent directors and a requirement that the sale price be not less than approximately the market price of the shares of our common stock at specified times, less the expenses of the sale. Although we currently do not have such authority, we may in the future seek to receive such authority on terms and conditions set forth in the corresponding proxy statement. There is no assurance such approvals will be obtained.

As of December 31, 2024,2025, we had approximately $970.1$941.0 million of outstanding borrowings under our senior secured credit facility, $232.0$456.0 million outstanding Class A-1A-1, A-2, B, and C Notes under the Bethesda CLO 1, $350.0$399.0 million in aggregate amount outstanding ofClass A-1, A-2, B, and C Notes under the 2025Bethesda Notes,CLO 2, $125.0 million aggregate principal amount of our 2026 Notes and $80.0 million in aggregate amount outstanding of the 2028 Notes. In order for us to cover our annual interest payments on our outstanding indebtedness at December 31, 2024,2025, we must achieve annual returns on our December 31, 20242025 total assets of at least 3.51%.3.34%. The weighted average stated interest rate charged on our principal amount of outstanding indebtedness as of December 31, 20242025 was 6.38%.5.55%. We intend to continue borrowing under our senior secured credit facility in the future and we may increase the size of it or issue additional debt securities or other evidences of indebtedness (although there can be no assurance that we will be successful in doing so). For more information on our indebtedness, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Financial Condition, Liquidity and Capital Resources.” Our ability to service our debt depends largely on our financial performance and is subject to prevailing economic conditions and competitive pressures. The amount of leverage that we employ at any particular time will depend on our Investment Adviser’s and our Boards’ assessments of market and other factors at the time of any proposed borrowing.

Our senior secured credit facility, the CLO Transactions, the 2025 Notes, the 2026 Notes and the 2028 Notes impose financial and operating covenants that restrict our business activities, including limitations that could hinder our ability to finance additional loans and investments or to make the distributions required to maintain our status as a RIC. A failure to renew our senior secured credit facility or to add new or replacement debt facilities or to issue additional debt securities or other evidences of indebtedness could have a material adverse effect on our business, financial condition and results of operations.

We have analyzed the potential impact of changes in interest rates on interest income net of interest expense. Assuming no changes to our balance sheet as of December 31, 2024,2025, a hypothetical one percent increase in SOFR on our floating rate assets and liabilities would Increase our earnings by thirteenten cents per average share over the next twelve months. Assuming no changes to our balance sheet as of December 31, 2024,2025, a hypothetical two percent increase in SOFR on our floating rate assets and liabilities would increase our earnings by twenty sevencents per average share over the next twelve months. Assuming no changes to our balance sheet as of December 31, 2025, a hypothetical three percent increase in SOFR on our floating rate assets and liabilities would increase our earnings by thirty cents per average share over the next twelve months. Assuming no changes to our balance sheet as of December 31, 2024,2025, a hypothetical threefour percent increase in SOFR on our floating rate assets and liabilities would increase our earnings by forty cents per average share over the next twelve months. Assuming no changes to our balance sheet as of December 31, 2024, a hypothetical four percent increase in SOFR on our floating rate assets and liabilities would increase our earnings by fifty three cents per average share over the next twelve months. Assuming no changes to our balance sheet as of December 31, 2024,2025, a hypothetical one percent decrease in SOFR on our floating rate assets and liabilities would decrease our earnings by thirteenten cents per average share over the next twelve months. In addition, we believe that our interest rate matching strategy and our ability to hedge mitigates the effects any changes in interest rates may have on our investment income. Although management believes that this is indicative of our sensitivity to interest rate changes, it does not adjust for potential changes in credit quality, size and composition of the assets on the balance sheet and other business developments that could affect net increase or decrease in net assets resulting from operations, or net income. Accordingly, no assurances can be given that actual results would not differ materially from the potential outcome simulated by this estimate.

We are prohibited under the 1940 Act from knowingly participating in certain transactions with certain of our affiliates without the prior approval of our independent directors and, in some cases, of the SEC. Any person that owns, directly or indirectly, 5% or more of our outstanding voting securities will be our affiliate for purposes of the 1940 Act and we are generally prohibited from buying or selling any security (other than our securities) from or to such affiliate, absent the prior approval of our independent directors. The 1940 Act also prohibits certain “joint” transactions with certain of our affiliates, which could include investments in the same portfolio company (whether at the same or different times), without prior approval of our independent directors and, in some cases, of the SEC. We are prohibited from buying or selling any security from or to any person who owns more than 25% of our voting securities or certain of that person’s affiliates, or entering into prohibited joint transactions with such persons, absent the prior approval of the SEC through an exemptive order (the “Order”) (other than in certain limited situations pursuant to current regulatory guidance). The analysis of whether a particular transaction constitutes a joint transaction requires a review of the relevant facts and circumstances then existing. Similar restrictions limit our ability to transact business with our officers or directors or their affiliates.

In certain circumstances, negotiated co-investments may be made only in accordance with the terms of the exemptive order we received from the SEC permitting us to do so.Order. The Order is subject to certain terms and conditions so there can be no assurance that we will be permitted to co-invest with certain of our affiliates other than in the circumstances currently permitted by regulatory guidance and the Order.

We have entered into a royalty-free license agreement with AGM, pursuant to which AGM has agreed to grant us a non-exclusive license to use the name “MidCap FinancialFinancial.”. Under the license agreement, we have the right to use the “MidCap Financial” name for so long as AIM or one of its affiliates remains the Investment Adviser. In addition, we rent office space from AIA, an affiliate of AIM, and pay AIA our allocable portion of overhead and other expenses incurred by AIA in performing its obligations under the administration agreement, including our allocable portion of the compensation, rent and other expenses of our Chief Financial Officer, Chief Legal Officer and Chief Compliance Officer and their respective staffs, which can create conflicts of interest that our Board must monitor.

The Maryland General Corporation Law, our charter and our bylaws contain provisions that may discourage, delay or make more difficult a change in control or the removal of our directors. We are subject to Subtitle 6 of Title 3 of the Maryland General Corporate Law, the Maryland Business Combination Act, subject to any applicable requirements of the 1940 Act. Our Board has adopted a resolution exempting from the Business Combination Act any business combination between us and any other person, subject to prior approval of such business combination by our Board, including approval by a majority of our disinterestedindependent directors. If the resolution exempting business combinations is repealed or our Board does not approve a business combination, the Business Combination Act may discourage third parties from trying to acquire control of us and increase the difficulty of consummating such an offer. We are subject to Subtitle 7 of Title 3 of the Maryland General Corporate Law, the Maryland Control Share Acquisition Act. Our bylaws exempt from the Maryland Control Share Acquisition Act acquisitions of our common stock by any person. If we amend our bylaws to repeal the exemption from the Control Share Acquisition Act, the Control Share Acquisition Act also may make it more difficult for a third party to obtain control of us and increase the difficulty of consummating such an offer. We intend to give the SEC prior notice should our Board elect to amend our bylaws to repeal the exemption from the Control Share Acquisition Act.

MidCap FinCo is discretionarily managed by Apollo Capital Management, L.P., an affiliate of our Investment Adviser. As a result, MidCap FinCo is currently under common control with us. Additionally, MidCap FinCo originates a significant amount of senior secured first lien loans in which we participate pursuant to our co-investment order. Our Investment Adviser reviews, evaluates and negotiates, as applicable, each such potential investment to ensure it is appropriate for us. While Apollo’sAGM investment management relationship with MidCap FinCo currently allows us to access MidCap FinCo’s origination volume, ApolloAGM and MidCap FinCo are distinct and separate legal entities with different businesses and interests. Thus, if MidCap FinCo were to terminate its investment management agreement with Apollo,AGM, we may no longer have the same access to MidCap FinCo’s origination volume. MidCap FinCo is not an investment adviser, subadviser or fiduciary to us or to our Investment Adviser. MidCap FinCo is not obligated to take into account our interests (or those of other potential participants in its originations) when originating loans across its platform. Various factors, including its ability to retain and attract personnel with origination experience, relationships and expertise, will affect MidCap FinCo’s business. There can be no guarantee that MidCap FinCo will continue to originate loans at its historic levels of quality or volume.

InvestmentInvestments in middle-market companies isare speculative and involves a number of significant risks including a high degree of risk of credit loss. Middle-market companies may have limited financial resources and may be unable to meet their obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any guarantees we may have obtained in connection with our investment. In addition, they typically have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns. Middle-market companies are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio companycompanies and, in turn, on us. Middle-market companies also generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position. In addition, our executive officers, directors and our Investment Adviser may, in the ordinary course of business, be named as defendants in litigation arising from our investments in the portfolio companies.

Many of ourthe portfolio companies in which we make investments may be susceptible to economic slowdowns or recessions and during these periods may be unable to repay ourthe loans duringwe thesemade periods.to them. See “Item 1A. Risk Factors—Risks Relating to the Current Environment—Certain of our portfolio companies’ businesses could be adversely affected by the effects of health pandemics or epidemics, which could have a negative impact on our and our portfolio companies’ businesses and operations.”. Therefore, our non-performing assets may increase and the value of our portfolio may decrease during these periods ifas we are required to write down the values ofrecord our investments.investments at their current fair value. Adverse economic conditions also may decrease the value of collateral securing some of our loans and the value of our equity investments. Economic slowdowns or recessions could lead to financial losses in our portfolio and a decrease in revenues, net income and assets. Unfavorable economic conditions also could increase our and our portfolio companies’ funding costs, limit our and our portfolio companies’ access to the capital markets or result in a decision by lenders not to extend credit to us.us or our portfolio companies. These events could prevent us from increasing investments and harm our operating results.

A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, acceleration of the time when the loans are due and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize the portfolio company’s ability to meet its obligations under the debt that we hold. We may incur additional expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting portfolio company. In addition, if one of our portfolio companies were to go bankrupt, depending on the facts and circumstances, including the extent to which we will actually provide significant managerial assistance to that portfolio company, a bankruptcy court might subordinate all or a portion of our claim to that of other creditors.

In August 2022, Rule 18f-4 under the Investment Company1940 Act, regarding the ability of a BDC (or a registered investment company) to use derivatives and other transactions that create future payment or delivery obligations (except reverse repurchase agreements and similar financing transactions), became effective. Under the new rule, BDCs that make significant use of derivatives are required to operate subject to a value-at-risk leverage limit, adopt a derivatives risk management program and appoint a derivatives risk manager, and comply with various testing and board reporting requirements. These new requirements apply unless the BDC qualifies as a “limited derivatives user,” as defined under the adopted rules. Under the new rule, a BDC may enter into an unfunded commitment agreement that is not a derivatives transaction, such as an agreement to provide financing to a portfolio company, if the BDC has, among other things, a reasonable belief, at the time it enters into such an agreement, that it will have sufficient cash and cash equivalents to meet its obligations with respect to all of its unfunded commitment agreements, in each case as it becomes due. We currently operate as a “limited derivatives user” which may limit our ability to use derivatives and/or enter into certain other financial contracts.

Our senior secured credit facility beginshas begun amortizing in October 2028 and any inability to renew, extend or replace the facility could adversely impact our liquidity and ability to find new investments or maintain distributions to our stockholders.

The Company has a senior secured credit facility. On October 17,1, 2024,2025, the Company amended and restated its senior secured, multi-currency, revolving credit facility (the “Senior Secured Facility”), previously amended and restated as of October 17, 2024, April 19, 2023, December 22, 2020 and November 19, 2018. The amended and restated agreement extended the final maturity date through October 17,1, 2029.2030. Lender commitments under the Senior Secured Facility will increasedecreased from $1,705,000$1,660,000 to $1,815,000 until December 22, 2024 and will decrease to $1,660,000 thereafter.$1,610,000. The Senior Secured Facility includes an “accordion” feature that allows the Company to increase the size of the Facility to $2,722,500.$2,415,000. The Senior Secured Facility is secured by substantially all of the assets in the Company’s portfolio, including cash and cash equivalents.

Commencing October 17,1, 2028,2029, the Company is required to repay, the outstanding amount under the Senior Secured Facility as of October 17,1, 20282029 out of the proceeds of certain asset sales and other recovery events and equity and debt issuances. The stated interest rates on outstanding borrowings under the Senior Secured Facility depend on the type of borrowing and the “gross borrowing base” at the time. USD borrowings accrue at (a) either Term SOFR plus 1.85%1.75% per annum or Term SOFR plus 1.975%1.875% per annum, or (b) either AlternateAlternative Base Rate plus 0.75%0.65% per annum or AlternateAlternative Base Rate plus 0.875%0.775% per annum. Theannum.The Company is required to pay a commitment fee of 0.375%0.325% per annum on any unused portion of the Senior Secured Facility and fronting fees (which fronting fee is exclusive of the applicable margin) of 0.25% per annum on the letters of credit issued.

Our unsecured notes mature in 2025, 2026 and 2028, and any inability to replace or repay our unsecured notes could adversely impact our liquidity and ability to fund new investments or maintain distributions to our stockholders.

There can be no assurance that we will be able to replace the 2025 Notes, the 2026 Notes or the 2028 Notes upon their maturity on terms that are favorable to us, if at all. Our ability to replace the 2025 Notes, the 2026 Notes or the 2028 Notes will be constrained by then-current economic conditions affecting the credit markets. In the event that we are not able to replace or repay the 2025 Notes, the 2026 Notes or the 2028 Notes at the time of their maturity, this could have a material adverse effect on our liquidity and ability to fund new investments, our ability to make distributions to our stockholders and our ability to qualify as a RIC.

We are subject to certain risks as a result of our interests in the membership interests in the CLO Issuers.Issuers (the "Membership Interests").

Under the terms of the master loan sale agreements governing the CLO Issuers, we sold and/or contributed to the CLO Issuers all of our ownership interest in our portfolio loans and participations for the purchase price and other consideration set forth in such master loan sale agreements (including an increase in the value of the "Membership Interests"). As a result of the CLO Transactions, we hold all of the Membership Interests, which comprise 100% of the equity interests, in the CLO Issuers. As a result, we expect to consolidate the financial statements of the CLO Issuers, as well as our other subsidiaries, in our consolidated financial statements. However, once contributed to a CLO, the underlying loans and participation interests have been securitized and are no longer our direct investment, and the risk return profile has been altered. In general, rather than holding interests in the underlying loans and participation interests, the CLO Transactions resulted in us holding membership interests in the CLO Issuers, with each CLO holding the underlying loans. As a result, we are subject both to the risks and benefits associated with the equity interests of each CLO (i.e., the Membership Interests) and the risks and benefits associated with the underlying loans and participation interests held by the CLO Issuers.

We will manage the assets of the CLO Issuers pursuant to a collateral management agreement with Bethesdathe applicable CLO Issuer 1 (the “Bethesda CLO Issuer 1 Collateral Management Agreement”) and a collateral management agreement with Bethesda CLO Issuer 2 (the “Bethesda CLO Issuer 2 Collateral Management Agreement” and, together with the Bethesda CLO Issuer 1 Collateral Management Agreement,Issuer, the “Collateral Management Agreement”). The indentures governing the notes (“CLO Notes”) issued by the CLO Transactions (the “CLO Indenture”) and the Collateral Management Agreement place significant restrictions on our ability to advise the CLO Issuers to buy and sell collateral obligations, and we are subject to compliance with the CLO Indenture and the Collateral Management Agreement. As a result of the restrictions contained in the CLO Indenture and the Collateral Management Agreement, the CLO Issuers may be unable to buy or sell collateral obligations or to take other actions that we might consider in the interest of the CLO Issuers and the holders of CLO Notes, and we may be required to make investment decisions on behalf of the CLO Issuers that are different from those made for our other clients.

Changes in laws or regulations governing our operations or the operations of our portfolio companies, or newly enacted laws or regulations, such as the Dodd-Frank WallAct, Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), Public Law No. 115-97 (the “Tax Cuts and Jobs Act”),Act, the Coronavirus Aid, Relief, and Economic Security Act and the Small Business Credit Availability Act (the “SBCAA”),SBCAA, could require changes to certain of our business, practices or that of our portfolio companies. These changes could negatively impact the operations, cash flows or financial condition of us or our portfolio companies, impose additional costs on us or our portfolio companies or otherwise adversely affect our business, or business of our portfolio companies.

As a RIC, we will be subject to a 4% non-deductible federal excise tax on certain undistributed income unless we distribute in a timely manner for each calendar year an amount at least equal to the sum of : (1) 98% of our ordinary income for that calendar year,year; (2) 98.2% of our capital gain net income for the one-year period ending October 31 in that calendar year; and (3) any income recognized, but not distributed, in preceding years. We will not be subject to excise taxes on amounts on which we are required to pay corporate income taxes (such as retained net capital gains). Finally, if more stockholders opt to receive cash distributions rather than participate in our dividend reinvestment plan, we may be forced to liquidate some of our investments and raise cash in order to make cash distribution payments.

The $19.1 million increase in total investment income of $25.3 million for the year ended December 31, 20242025, compared to the year ended December 31, 20232024, was primarily driven by thea $21.2 million increase in total interest income ofincluding $25.6 million.PIK. The increase in total interest income was dueattributable to ana increasehigher inincome-bearing investment portfolio, reflecting the averagefirst yieldfull portfolioyear givenof operations following the mergers with AFT and AIF on July 22, 2024.AIF.

We have elected to be treated as a RIC under Subchapter M of the Code, and we intend to operate in a manner so as to continue to qualify for the tax treatment applicable to RICs. To qualify for tax treatment as a RIC, we must, among other things, distribute to our shareholdersstockholders in each taxable year generally at least 90% of the sum of our investment company taxable income, as defined by the Code (without regard to the deduction for dividends paid), and net tax-exempt income for that taxable year. To maintain our tax treatment as a RIC, we, among other things, intend to make the requisite distributions to our shareholders,stockholders, which generally relieve us from corporate-level U.S. federal income taxes. Depending on the level of taxable income earned in a tax year, we may carry forward taxable income (including net capital gains, if any) in excess of current year dividend distributions from the current tax year into the next tax year and pay a nondeductible 4% U.S. federal excise tax on such taxable income, as required. To the extent that we determine that our estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such income, we will accrue excise tax on estimated excess taxable income.

For the year ended December 31, 20242025 and December 31, 2023,2024, the Company incurred none and $1.1 million,none, respectively, of U.S. federal excise tax. The excise tax was included in other general and administrative expenses for the year ended December 31, 2023.

During the year ended December 31, 2024,2025, we recognized gross unrealizedrealized gains of $106.6$7.8 million and gross unrealizedrealized losses of $64.1$54.6 million,million includingfrom the impact of transferring unrealized to realized gains (losses),investments, resulting in net changerealized in unrealized gainslosses of $42.5$46.7 million.million from investments. During the year ended December 31, 2025, we recognized realized loss of $3.4 million from extinguishment of debt. Net changerealized inlosses unrealizedfrom gains (losses)investments for the year ended December 31, 20242025 waswere primarily driven by Spottedthe Hawk,write-off MSEAof TankersAmbrosia LLC,Buyer PelicanCorp., wereSolarplicity exitedGroup Limited (f/k/a AMP Solar UK), and ViewRayRenovo, wasas writtenwell off duringas the periodrestructuring asof noNew proceedsEra wereTechnology, expectedInc. to be realized. TheSignificant realized gain(losses) on these investments were previously recorded as unrealized gain(losses). Additional significant changes in unrealized gains (losses) from investments for the year ended December 31, 20242025 are summarized below:

During the year ended December 31, 2023,2025, we recognized gross unrealized gains of 29.7$76.3 million and gross unrealized losses of 27.2$104.9 million, including the impact of transferring unrealized to realized gains (losses), resulting in net change in unrealized losses of $2.6$28.7 million. NetThe net change in unrealized gains (losses) for the year ended December 31, 20232025 was primarily driven by the increaserestructuring of LendingPoint and declines in cashthe flowsvaluation fromof MerxAmplity, AviationChyronHego Finance,Corporation, LLC,Bird increaseRides, and Kauffman due to underperformance. The net change in fairunrealized value from securitization assets owned by US Auto, whichlosses was partially offset by the financialincrease under-performancein withMerx ongoinggiven bankruptcysettlement procedureson fromRussian ViewRayinsurance claims and wideningcertain creditrecoveries. spreads. Additional significantSignificant changes in unrealized gains (losses) for the year ended December 31, 20232025 are summarized below:

We believe that our current cash and cash equivalents on hand, our short-term investments, proceeds from the sale of our 20252026 Notes and 2028 Notes, 2026the Notes,upsize 2028of NotesBethesda CLO 1, and Bethesda CLO 1,2, together with our available borrowing capacity under our Senior Secured Facility and our anticipated cash flows from operations will be adequate to meet our cash needs for our daily operations for at least the next twelve months.

As of December 31, 2024,2025, aggregate lender commitments under the Senior Secured Facility totaled $1.66$1.61 billion and have $0.68$0.67 billion of unused commitments. As of December 31, 2024,2025, there were $7.8$— million of letters of credit issued under the Senior Secured Facility as shown as part of total commitments in Note 78 to the consolidated financial statements.

We may from time to time issue and sell shares of our common stock through public or at-the-market ("“ATM”) offerings. On August 13, 2024, we entered into (i) an equity distribution agreement by and among us, the Investment Adviser, the Administrator and Truist Securities, Inc. (“Truist”) and (ii) an equity distribution agreement by and among us, the Investment Adviser, the Administrator and Jefferies LLC (“Jefferies,” and together with Truist, the “Sales Agents”). The equity distribution agreements with Sales Agents described in the preceding sentence are collectively referred to herein as the “Equity Distribution Agreements.” For further details regarding the Equity Distribution Agreements, see Note 87 "Stockholders’ Equity—Equity Issuances — At-the-market (“ATM”) Offering” to our consolidated financial statements included in this report.

In addition to the other information set forth in this report, and as provided below you should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the twelvefiscal monthsyear ended December 31, 2025,2025 and in Part II, “Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, which could materially affect our business, financial condition and/or operating results. These risks are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.

MidCap Financial Investment Corporation (the “Company,” “we,” “us,” or “our”) was incorporated under the Maryland General Corporation Law in February 2004. We have elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). As such, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70% of our total assets in “qualifying assets,” including securities of private or thinly traded public U.S. companies, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. In addition, for federal income tax purposes we have elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). Pursuant to this election and assuming we qualify as a RIC, we generally do not have to pay corporate-level federal income taxes on any income we distribute to our stockholders. We commenced operations on April 8, 2004 upon completion of our initial public offering that raised $870 million in net proceeds from selling 62 million shares of common stock at a price of $15.00 per share (20.7 million shares at a price of $45.00 per share adjusted for the one-for-three reverse stock split). Since then, and through MarchJune 31,30, 2026, we have raised approximately $2.68 billion in net proceeds from additional offerings of common stock and we have repurchased common stock for $343.1$375.0 million.

Our level of investment activity can and does vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle-market companies, the level of merger and acquisition activity for such companies, the general economic environment, and the competitive environment for the types of investments we make. As a BDC, we must not acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). As of MarchJune 31,30, 2026, non-qualifying assets represented approximately 8.3%7.7% of the total assets of the Company.

Our portfolio and investment activity during the three and six months ended MarchJune 31,30, 2026 and 2025, was as follows:

Our portfolio composition and weighted average yields as of MarchJune 31,30, 2026 and December 31, 2025 were as follows:

Since the initial public offering of the Company in April 2004 and through MarchJune 31,30, 2026, invested capital totaled $26.9 billion in 850 portfolio companies. Over the same period, the Company completed transactions with more than 100 different financial sponsors.

As of MarchJune 31,30, 2026, $2.93$2.73 billion or 98.6% of the Company’s investments were classified as Level 3. The high proportion of Level 3 investments relative to our total investments is directly related to our investment philosophy and target portfolio, which consists primarily of long-term secured debt, as well as unsecured and mezzanine positions of private middle-market companies. A fundamental difference exists between our investments and those of comparable publicly traded fixed income investments, namely high-yield bonds, and this difference affects the valuation of our private investments relative to comparable publicly traded instruments.

Investments in all asset classes are valued utilizing a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that we may take into account in fair value pricing our investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, seniority of investment in the investee company’s capital structure, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, our principal market (as the reporting entity) and enterprise values, among other factors. When readily available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process. During the threesix months ended MarchJune 31,30, 2026, there were no significant changes to the Company’s valuation techniques and related inputs considered in the valuation process.

Operating results for the three and six months ended MarchJune 31,30, 2026 and 2025 were as follows:

The decrease in total investment income for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025 was primarily driven by a decrease in recurring interest income (including PIK) of $7.0$13.5 million. The decrease in recurring interest income was due to a decrease in the average yield for the total debt portfolio, from 10.7%10.5% for the three months ended MarchJune 31,30, 2025 to 9.6%9.5% for the three months ended MarchJune 31,30, 2026 combined with a decrease in the overall income-bearing investment portfolio.

Net expenses decreased by $6.9$9.4 million for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025, due to the fact that incentive fees were not accrued in the current quarter, as the Company did not meet its total return threshold. Interest and other debt expenses also decreased, driven by lower base rates and a lower average debt outstanding during the period. This was partially offset by an increase in administrative service and other G&A expenses.

During the three months ended MarchJune 31,30, 2026, we recognized gross realized gains of $1.6$0.7 million and gross realized losses of $14.0$1.2 million, resulting in net realized losses of $12.4$0.5 million.

During the three months ended MarchJune 31,30, 2025, we recognized gross realized gains of $4.5$0.1 million and gross realized losses of $1.4$17.1 million, resulting in net realized gainslosses of $3.1$17.0 million. Net realized gains for the three months ended MarchJune 31,30, 2025 was primarily due to the exitrestructure of Orgain, Inc.Renovo and theMitel Networks and partial exitwrite off of Heubach..Ambrosia Buyer Corp. Significant realized gains (losses) for the three months ended MarchJune 31,30, 2025 are summarized below:

During the threesix months ended MarchJune 31,30, 2026, we recognized gross unrealizedrealized gains of $16.1$2.2 million and gross unrealizedrealized losses of $64.8$15.1 million, resulting in a net unrealizedrealized losslosses of $48.7$12.9 million.

NetGross unrealizedrealized losses on investments for the threesix months ended MarchJune 31,30, 2026,2026 totaled $64.8$10.8 million and was primarily driven by market-widethe spreadwrite widening,off concentratedof in softwareRenovo and technologythe as well as credit stress in a handfulsale of positions.Carestream. NetGross unrealizedrealized gains on investments for the threesix months ended MarchJune 31,30, 2026 totaled $12.0$1.0 millionmillion, andresulting wasin driven by the unrealized tonet realized fliplosses on investments of Renovo$9.8 and Carestream.million.

The Company also had a unrealizedrealized gain of $0.8$1.2 million on openthe settlement of foreign currency forward contracts andduring the period. This was offset by a $3.3$4.3 million unrealizedrealized gainloss on foreign currencies driven by the principal repayment of the CAD, EUR, and GBP contracts on the Senior SecuritySecured Facility.

Significant unrealizedrealized gains (losses) for the threesix months ended MarchJune 31,30, 2026 are summarized below:

During the threesix months ended MarchJune 31,30, 2025, we recognized gross unrealizedrealized gains of $12.5$4.6 million and gross unrealizedrealized losses of $19.5$18.1 million, including the impact of transferring unrealized to realized gains (losses), resulting in net change in unrealizedrealized losses in investments of $7.0$13.5 million. Net changerealized in unrealized gains (losses) for the threesix months ended MarchJune 31,30, 2025 was primarily driven by the the underperformancerestructure of Renovo, AVAD, LLCRenovo and Modern Campus, the recent restructure in Mitel Networks and partial write off of Ambrosia Buyer Corp, offset by the saleexit of Orgain, Inc. Theand changepartial in unrealized losses were partially offset by an increase in Merx equity, expected sale proceedingsexit of The Club Company, performance improvement in Congruex and recent equity infusion in the Sequential Brands Inc.Heubach. Significant changes in unrealizedrealized gains (losses) for the threesix months ended MarchJune 31,30, 2025 are summarized below:

We believe that our current cash and cash equivalents on hand, our short-term investments, proceeds from the sale of our 2026 Notes andNotes, 2028 Notes, Bethesda CLO 1, and Bethesda CLO 2, together with our available borrowing capacity under our Senior Secured Facility and our anticipated cash flows from operations will be adequate to meet our cash needs for our daily operations for at least the next twelve months.

The following table shows the contractual maturities of our debt obligations as of MarchJune 31,30, 2026:

As of MarchJune 31,30, 2026, aggregate lender commitments under the Senior Secured Facility totaled $1.61 billion and $0.79$0.93 millionbillion of unused capacity. As of MarchJune 31,30, 2026, the Company had $— million of letters of credit issued under the Senior Secured Facility as shown as part of total commitments in Note 8 to the consolidated financial statements.

We may from time to time issue and sell shares of our common stock through public or at-the-market ("ATM”) offerings. On August 13, 2024, we entered into (i) an equity distribution agreement by and among us, the Investment Adviser, the Administrator and Truist Securities, Inc. (“Truist”) and (ii) an equity distribution agreement by and among us, the Investment Adviser, the Administrator and Jefferies LLC (“Jefferies,” and together with Truist, the “Sales Agents”). The equity distribution agreements with Sales Agents described in the preceding sentence are collectively referred to herein as the “Equity Distribution Agreements.” For further details regarding the Equity Distribution Agreements, see Note 7 "Stockholders’ Equity—Equity Issuances — At-the-marketAt-the market (“ATM”) Offering” to our consolidated financial statements included in this report. The ATM program effectively expired on April 12, 2026.

Distributions paid to stockholders during the three and six months ended MarchJune 31,30, 2026 totaled $28.1$25.5 million ($0.31 per share). and $53.6 million ($0.62 per share), respectively. Distributions paid to stockholders during the three and six months ended MarchJune 31,30, 2025 totaled $35.6$35.5 million ($0.38 per share). and $71.1 million ($0.76 per share), respectively. For income tax purposes, distributions made to stockholders are reported as ordinary income, capital gains, non-taxable return of capital, or a combination thereof. Although the tax character of distributions paid to stockholders through MarchJune 31,30, 2026 may include return of capital, the exact amount cannot be determined at this point. The final determination of the tax character of distributions will not be made until we file our tax return for the tax year ended December 31, 2026. Tax characteristics of all distributions will be reported to stockholders on Form 1099 after the end of the calendar year. Our quarterly distributions, if any, will be determined by our Board.

For the three and six months ended MarchJune 31,30, 2026, PIK income totaled $3.4$4.2 million and $8.1 million on total investment income of $71.8.$68.2 million and $140.1 million, respectively. For the three and six months ended MarchJune 31,30, 2025, PIK income totaled $3.5$5.2 million and $9.9 million on total investment income of $78.7$81.2 million.million and $159.9 million, respectively. In order to maintain the Company’s status as a RIC, this non-cash source of income must be paid out to stockholders annually in the form of distributions, even though the Company has not yet collected the cash. See Note 5 to the consolidated financial statements for more information on the Company’s PIK income.