Star Mountain Boosts Net Assets 143% Amid Lower Investment Income

TL;DR

**Star Mountain's operational efficiency is masking a dip in core investment income, but their net asset growth is a bullish sign.**

AI Summary

Star Mountain Lower Middle-Market Capital Corp. reported a net increase in net assets from operations of $5,786,075 for the six months ended June 30, 2025, a significant rise from $2,376,518 in the prior year period. Total investment income decreased to $21,057,245 for the six months ended June 30, 2025, down from $24,016,118 in the same period of 2024, primarily due to a reduction in non-controlled/non-affiliate interest income from $20,110,443 to $16,519,615. Operating expenses also saw a substantial decrease, falling to $10,106,460 for the six months ended June 30, 2025, from $13,038,221 in 2024, driven by lower interest and other financing fees, which dropped from $7,104,501 to $3,840,320. The company experienced a net change in unrealized loss on investments of $(10,504,360) for the six months ended June 30, 2025, compared to $(10,635,896) in the prior year. Net asset value per share slightly increased to $24.44 as of June 30, 2025, from $24.43 at December 31, 2024. Cash increased to $7,880,983 from $4,028,665 at the beginning of the period.

Why It Matters

This filing reveals Star Mountain's ability to significantly increase net assets from operations despite a notable drop in total investment income, primarily by slashing financing costs. For investors, this indicates effective cost management and potentially improved operational efficiency, which could lead to more stable returns. Employees might see this as a sign of a more financially disciplined company, while customers are less directly impacted. In a competitive market for lower middle-market capital, this cost control could give Star Mountain an edge, allowing it to maintain profitability even if investment opportunities yield less.

Risk Assessment

Risk Level: medium — The company reported a net change in unrealized loss on investments of $(10,504,360) for the six months ended June 30, 2025, indicating potential volatility in its investment portfolio. Additionally, non-controlled/non-affiliate investments at fair value decreased from $326,959,520 at December 31, 2024, to $303,816,494 at June 30, 2025, suggesting a decline in the value of a significant portion of its assets.

Analyst Insight

Investors should scrutinize the composition of Star Mountain's investment portfolio, particularly the non-controlled/non-affiliate segment, given the substantial unrealized losses. While cost controls are positive, understanding the drivers of the investment income decline and the future outlook for portfolio valuations is crucial before making any investment decisions.

Financial Highlights

debt To Equity

0.53

revenue

$21,057,245

operating Margin

52.75%

total Assets

$374,161,456

total Debt

$110,997,297

net Income

$5,786,075

eps

$0.58

gross Margin

N/A

cash Position

$7,880,983

revenue Growth

-12.32%

Revenue Breakdown

Key Numbers

• $5,786,075 — Net increase in net assets from operations (For the six months ended June 30, 2025, up from $2,376,518 in 2024.)
• $21,057,245 — Total investment income (For the six months ended June 30, 2025, down from $24,016,118 in 2024.)
• $10,106,460 — Total operating expenses (For the six months ended June 30, 2025, down from $13,038,221 in 2024.)
• $(10,504,360) — Net change in unrealized gain (loss) on investments (For the six months ended June 30, 2025.)
• $24.44 — Net asset value per share (As of June 30, 2025, up from $24.43 at December 31, 2024.)
• $7,880,983 — Cash (As of June 30, 2025, up from $4,028,665 at December 31, 2024.)
• $3,840,320 — Interest and other financing fees (For the six months ended June 30, 2025, down from $7,104,501 in 2024.)
• 10,026,043 — Shares of common stock outstanding (As of August 14, 2025.)

Key Players & Entities

• Star Mountain Lower Middle-Market Capital Corp. (company) — Registrant
• SEC (regulator) — Securities and Exchange Commission
• Bloomberg (company) — Financial news outlet
• Consolidated Machine & Tool Holdings, LLC (company) — Portfolio company
• Douglas Products and Packaging Company, LLC (company) — Portfolio company
• Swyft AcquireCo LLC (company) — Portfolio company (dba Swyft Filings)
• Fremont-Wright, LLC (company) — Portfolio company
• Kassel Mechanical, LLC (company) — Portfolio company
• Kelso Industries (company) — Portfolio company

FAQ

Risk Factors

• Investment Valuation and Unrealized Losses [medium — financial]: The company experienced a net change in unrealized loss on investments of $(10,504,360) for the six months ended June 30, 2025. While this is a slight improvement from $(10,635,896) in the prior year, significant unrealized losses can impact net asset value and overall financial performance.
• Interest Rate Sensitivity [medium — financial]: A significant portion of investment income is derived from interest. Fluctuations in interest rates, particularly a decrease in non-controlled/non-affiliate interest income from $20,110,443 to $16,519,615, directly impact revenue. The company's ability to generate consistent interest income is crucial.
• Operating Expense Management [low — operational]: While operating expenses decreased substantially from $13,038,221 to $10,106,460 for the six months ended June 30, 2025, driven by lower interest and financing fees ($3,840,320 vs $7,104,501), continued vigilance in expense control is necessary to maintain profitability.
• Credit Facility Dependence [medium — financial]: The company utilizes a credit facility, with a payable of $108,700,000 as of June 30, 2025. Changes in credit market conditions or the company's ability to service this debt could pose a financial risk.

Industry Context

Star Mountain Lower Middle-Market Capital Corp. operates within the specialized finance sector, focusing on providing capital to lower middle-market companies. This segment is characterized by a high volume of smaller transactions and often requires tailored financing solutions. The industry is competitive, with various private debt funds, business development companies (BDCs), and traditional lenders vying for deal flow. Trends include increasing demand for flexible capital solutions and a focus on niche markets.

Regulatory Implications

As a publicly traded investment company, Star Mountain is subject to regulations from the Securities and Exchange Commission (SEC) and potentially other financial regulatory bodies. Compliance with reporting requirements, investment company regulations, and fair valuation practices is critical. Changes in accounting standards or regulatory frameworks could impact reporting and operations.

What Investors Should Do

1. Monitor investment income trends, particularly non-controlled/non-affiliate interest income, to assess revenue sustainability.
2. Analyze the drivers of unrealized losses and their impact on net asset value.
3. Evaluate the company's expense management strategy, especially the reduction in interest and financing fees.
4. Assess the company's liquidity and debt management, given the significant credit facility payable.

Key Dates

• 2025-06-30: Six months ended June 30, 2025 financial reporting period — Shows a significant increase in net assets from operations ($5,786,075 vs $2,376,518) despite a decrease in total investment income.
• 2025-06-30: Net asset value per share as of June 30, 2025 — Slight increase to $24.44 from $24.43 at December 31, 2024, indicating stable underlying asset value growth.
• 2025-06-30: Cash position as of June 30, 2025 — Increased to $7,880,983 from $4,028,665 at December 31, 2024, providing improved liquidity.
• 2024-12-31: Year-end financial position — Provides the comparative baseline for the current period's performance and financial condition.

Glossary

Net increase in net assets from operations

The total profit or loss generated by the company's core business activities during a specific period. (Key indicator of the company's profitability and operational success for the period.)

Non-controlled/non-affiliate investments

Investments in companies where Star Mountain does not have significant influence or control, typically held at fair value. (Represents a major asset class for the company, and its income and valuation significantly impact financial results.)

PIK interest income

Payment-in-Kind interest income, where interest is paid in the form of additional debt or equity rather than cash. (A component of investment income that does not provide immediate cash flow but increases the principal amount of the investment.)

Net change in unrealized gain (loss) on investments

The change in the fair value of investments that have not been sold, reflecting market fluctuations. (Indicates the impact of market volatility on the company's investment portfolio, affecting net asset value.)

Net asset value per share

The total value of a company's assets minus its liabilities, divided by the number of outstanding shares. (A key metric for investors to assess the per-share value of their investment in the company.)

Credit facility payable

The amount owed under a line of credit or loan agreement that provides the company with access to funds. (Represents a significant source of leverage and a key liability for the company.)

Year-Over-Year Comparison

Compared to the prior year period, Star Mountain Lower Middle-Market Capital Corp. reported a substantial increase in net increase in net assets from operations, rising to $5,786,075 from $2,376,518. This improvement occurred despite a decrease in total investment income, which fell from $24,016,118 to $21,057,245, primarily due to lower non-controlled/non-affiliate interest income. Operating expenses saw a significant reduction, dropping from $13,038,221 to $10,106,460, largely driven by decreased interest and financing fees. The net asset value per share saw a marginal increase to $24.44, and the company's cash position more than doubled, indicating improved liquidity.

Key Financial Figures

• $0.001 — had 10,026,043 shares of common stock, $0.001 par value, outstanding. Table of Conte

Filing Documents

• ef20050398_10q.htm (10-Q) — 8475KB
• ef20050398_ex31-1.htm (EX-31.1) — 13KB
• ef20050398_ex31-2.htm (EX-31.2) — 13KB
• ef20050398_ex32-1.htm (EX-32.1) — 6KB
• ef20050398_ex32-2.htm (EX-32.2) — 6KB
• 0001140361-25-031295.txt ( ) — 24893KB
• star-20250630.xsd (EX-101.SCH) — 162KB
• star-20250630_cal.xml (EX-101.CAL) — 50KB
• star-20250630_def.xml (EX-101.DEF) — 513KB
• star-20250630_lab.xml (EX-101.LAB) — 894KB
• star-20250630_pre.xml (EX-101.PRE) — 502KB
• ef20050398_10q_htm.xml (XML) — 6714KB

Financial Statements

Financial Statements Consolidated Statements of Assets and Liabilities as of June 30, 2025 (Unaudited) and December 31, 2024 2 Consolidated Statements of Operations for the three and six months ended June 30, 2025 and 2024 (Unaudited) 3 Consolidated Statements of Changes in Net Assets for the three and six months ended June 30, 2025 and 2024 (Unaudited) 4 Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2024 (Unaudited) 5 Consolidated Schedules of Investments as of June 30, 2025 (Unaudited) and December 31, 2024 6

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) 16 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 40 Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Quantitative and Qualitative Disclosures about Market Risk 50 Item 4.

Controls and Procedures

Controls and Procedures 51 Part II OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 51 Item 1A.

Risk Factors

Risk Factors 51 Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 51 Item 3. Defaults Upon Senior Securities 51 Item 4. Mine Safety Disclosures 51 Item 5. Other Information 51 Item 6. Exhibits 52

Signatures

Signatures 53 1 Table of Contents

Financial Information

Part I. Financial Information Item 1.

Financial Statements

Financial Statements. STAR MOUNTAIN LOWER MIDDLE-MARKET CAPITAL CORP. Consolidated Statements of Assets and Liabilities June 30, 2025 (unaudited) December 31, 2024 ASSETS Non-controlled/non-affiliate investments at fair value (amortized cost of $ 313,666,345 and $ 325,265,220 as of June 30 , 2025 and December 31, 2024 , respectively) $ 303,816,494 $ 326,959,520 Controlled/affiliate investments at fair value (amortized cost of $ 53,680,357 and $ 52,910,374 as of June 30 , 2025 and December 31, 2024 , respectively) 52,490,572 50,680,798 Cash 7,880,983 4,028,665 Interest receivable 4,714,443 3,887,028 Deferred financing cost 1,845,836 2,169,211 Paydown receivable 1,828,526 341,471 Other receivable 1,182,154 - Receivable for investments sold 367,810 - Prepaid expenses 34,638 6,748 Total assets 374,161,456 388,073,441 LIABILITIES Credit facility payable 108,700,000 122,500,000 Redemptions payable 5,955,830 5,637,890 Incentive fees payable (Note 6) 4,955,762 2,813,724 Deferred tax liabilities 4,384,229 6,094,196 Credit facility interest payable 2,307,297 2,267,199 Management fees payable (Note 6) 1,460,804 1,157,509 Professional fees payable 624,732 434,744 Taxes payable 391,259 - Reimbursement expense payable 156,006 77,275 Distributions payable 78,358 5,322,771 Legal fees payable 66,935 37,883 Subscriptions received in advance 32,500 - Other payable - 900,145 Total liabilities 129,113,712 147,243,336 Commitments and contingencies (Note 11) Net assets $ 245,047,744 $ 240,830,105 NET ASSETS Common shares, $ 0.001 par value ( 200,000,000 shares authorized, 10,026,343 and 9,857,301 shares issued and outstanding as of June 30 , 2025 and December 31, 2024 respectively) $ 10,027 $ 9,858 Additional paid-in capital 250,792,551 246,622,366 Accumulated undistributed (overdistributed) earnings ( 5,754,834 ) ( 5,802,119

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