Hercules Capital

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
☒

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020

OR

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from        to        

Commission File No. 814-00702

HERCULES CAPITAL, INC.

(Exact name of Registrant as specified in its charter)

Maryland
(State or other jurisdiction of
incorporation or organization)

74-3113410
(I.R.S. Employer
Identification Number)

400 Hamilton Avenue, Suite 310
Palo Alto, California 94301
(Address of principal executive offices)
(650) 289-3060
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Common Shares, par value $0.001 per share
5.25% Notes due 2025
6.25% Notes due 2033

Trading Symbol(s)
HTGC
HCXZ
HCXY

Name of each exchange on which registered
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes   ☒    No  ☐ 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.     Yes  ☐    No  ☒

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12

months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of

this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☐    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.

See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒   Accelerated filer   ☐ Non-accelerated filer   ☐ Smaller reporting company   ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with a new or revised financial

accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting

under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes   ☐    No   ☒

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed

second fiscal quarter was approximately $1.2 billion based upon a closing price of $10.47 reported for such date on the New York Stock Exchange. Common shares held by each executive
officer and director and by each person who owns 5% or more of the outstanding common shares have been excluded in that such persons may be deemed to be affiliates. This determination
of affiliate status is not intended and shall not be deemed to be an admission that, such persons are affiliates of the Registrant.

On February 16, 2021, there were 115,436,988 shares outstanding of the registrant’s common stock, $0.001 par value.

DOCUMENTS INCORPORATED BY REFERENCE

Documents incorporated by reference: Portions of the registrant’s Proxy Statement for its 2021 Annual Meeting of Shareholders to be filed within 120 days after the close of the

registrant’s year end are incorporated by reference into Part III of this Annual Report on Form 10-K.

 
 
 
 
 
 
 
 
 
   
 
 
Business
Risk Factors
Unresolved SEC Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures

HERCULES CAPITAL, INC.
FORM 10-K
ANNUAL REPORT

Part I.

Part II.

Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Consolidated Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosure About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information

Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.

Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.

Item 10.
Item 11.
Item 12.
Item 13.
Item 14.

Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions and Director Independence
Principal Accountant Fees and Services

Part III.

Part IV.

Item 15.
Item 16.
Signatures

Exhibits and Financial Statement Schedules
Form 10-K Summary

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Hercules Capital, Inc., our logo and other trademarks of Hercules Capital, Inc. are the property of Hercules Capital, Inc. All other trademarks or trade names referred to

in this Annual Report on Form 10-K are the property of their respective owners.

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 In this Annual Report on Form 10-K, or Annual Report, the “Company,” “Hercules,” “we,” “us,” and “our” refer to Hercules Capital, Inc. and its wholly owned

subsidiaries and its affiliated securitization trusts unless the context otherwise requires.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that involve substantial risks and uncertainties that are within the meaning of Section 27A of the Securities Act of
1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). You can identify these statements using
forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “target,” “estimate,” “intend,” “continue” or “believe” or the negatives of, or
other variations on, these terms or comparable terminology. You should read statements that contain these words carefully because they discuss our plans, strategies, prospects,
and expectations concerning our business, operating results, financial condition, and other similar matters. We believe that it is important to communicate our future
expectations to our investors. Our forward-looking statements include information in this report regarding general domestic and global economic conditions, our future
financing plans, our ability to operate as a business development company (“BDC”) and the expected performance of, and the yield on, our portfolio companies. There may be
events in the future, however, that we are not able to predict accurately or control. The factors listed under “Risk Factors” in this annual report on Form 10-K, as well as any
cautionary language in this report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in
our forward-looking statements. The occurrence of the events described in these risk factors and elsewhere in this report could have a material adverse effect on our business,
results of operations and financial position. Any forward-looking statement made by us in this report speaks only as of the date of this report. Factors or events that could cause
our actual results to differ from our forward-looking statements may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to
publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by applicable law.

 Item 1. 

 Business

  PART I

GENERAL

We are a specialty finance company focused on providing senior secured loans to high-growth, innovative venture capital-backed companies in a variety of technology,

life sciences and sustainable and renewable technology industries.

 Our goal is to be the leading structured debt financing provider for venture capital-backed companies in technology-related industries requiring sophisticated and

customized financing solutions. Our strategy is to evaluate and invest in a broad range of technology-related industries including technology, drug discovery and development,
biotechnology, life sciences, healthcare, and sustainable and renewable technology and to offer a full suite of growth capital products. We focus our investments in companies
active in the technology industry sub-sectors characterized by products or services that require advanced technologies, including, but not limited to, computer software and
hardware, networking systems, semiconductors, semiconductor capital equipment, information technology infrastructure or services, internet consumer and business services,
telecommunications, telecommunications equipment, renewable or alternative energy, media and life sciences. Within the life sciences sub-sector, we generally focus on
medical devices, bio-pharmaceutical, drug discovery, drug delivery, health care services and information systems companies. Within the sustainable and renewable technology
sub-sector, we focus on sustainable and renewable energy technologies and energy efficiency and monitoring technologies. We refer to all of these companies as “technology-
related” companies and intend, under normal circumstances, to invest at least 80% of the value of our total assets in such businesses.

We invest primarily in structured debt with warrants and, to a lesser extent, in senior debt and equity investments. We invest primarily in private companies but also
have investments in public companies. We use the term “structured debt with warrants” to refer to any debt investment, such as a senior or subordinated secured loan, that is
coupled with an equity component, including warrants, options or other rights to purchase or convert into common or preferred stock. Our structured debt with warrants
investments typically are secured by some or all of the assets of the portfolio company. We also provide “unitranche” loans, which are loans that combine both senior and
mezzanine debt, generally in a first lien position.

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Our investment objective is to maximize our portfolio total return by generating current income from our debt investments and capital appreciation from our warrant
and equity-related investments. Our primary business objectives are to increase our net income, net operating income and net asset value, or NAV, by investing in structured
debt with warrants and equity of venture capital-backed companies in technology-related industries with attractive current yields and the potential for equity appreciation and
realized gains. Our equity ownership in our portfolio companies may exceed 25% of the voting securities of such companies, which represents a controlling interest under the
Investment Company Act of 1940, as amended, or the 1940 Act. In some cases, we receive the right to make additional equity investments in our portfolio companies in
connection with future equity financing rounds. Capital that we provide directly to venture capital-backed companies in technology-related industries is generally used for
growth and general working capital purposes as well as in select cases for acquisitions or recapitalizations.

Hercules Technology III, L.P. (“HT III”) and Hercules Capital IV, L.P. (“HC IV”) are our wholly owned Delaware limited partnerships that were formed in September

2009 and December 2010, respectively. On May 26, 2010, HT III was licensed to operate as a small business investment company (“SBIC”) under the authority of the Small
Business Administration (“SBA”). HT III holds approximately $201.2 million in tangible assets, which accounted for approximately 7.7% of our total assets at December 31,
2020. At December 31, 2020, we have issued $99.0 million in SBA-guaranteed debentures in our SBIC subsidiaries.

 On October 27, 2020, HC IV  was licensed to operate as a SBIC under the SBA. This additional license has a 10-year term. We have gained access to $175.0 million of
capital through the SBA debenture program, in addition to our regulatory capital commitment of $87.5 million to HC IV which will be used for investment purposes. During the
period, the Company has funded $19.1 million in leverageable capital and has not drawn any debentures. As of December 31, 2020, HC IV has no material assets other than
cash from the regulatory capital provided. See “— Regulation—Small Business Administration Regulations” for additional information regarding our SBIC subsidiaries.

We regularly engage in discussions with third parties with respect to various potential transactions to explore all alternatives. We may acquire an investment or a
portfolio of investments or an entire company or sell portions of our portfolio on an opportunistic basis. We, our subsidiaries or our affiliates, may also agree to manage certain
other funds that invest in debt, equity or provide other financing or services to companies in a variety of industries for which we may earn management or other fees for our
services.

We may also invest in the equity of these funds, along with other third parties, from which we would seek to earn a return and/or future incentive allocations. Some of

these transactions could be material to our business. Consummation of any such transaction will be subject to completion of due diligence, finalization of key business and
financial terms (including price) and negotiation of final definitive documentation as well as a number of other factors and conditions including, without limitation, the approval
of our Board of Directors and required regulatory or third-party consents and, in certain cases, the approval of our stockholders. Accordingly, there can be no assurance that any
such transaction would be consummated. Any of these transactions or funds may require significant management resources either during the transaction phase or on an ongoing
basis depending on the terms of the transaction.

In May 2020, we formed Hercules Adviser LLC, a wholly owned subsidiary and Delaware limited liability company (the "Adviser Subsidiary") and intend to register it

as a registered investment adviser under the Investment Advisers Act of 1940, as amended (“the Advisers Act”). The Adviser Subsidiary intends to provide investment
management and other services to parties other than the Company and its subsidiaries or their portfolio companies ("External Parties"). See “— Regulation—No-action and
Exemptive Relief Obtained” for additional information regarding our Adviser Subsidiary.

CORPORATE STRUCTURE

We are an internally managed, non-diversified closed-end investment company that has elected to be regulated as a business development company, or BDC, under the

1940 Act. As a BDC, 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 U.S. companies, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. As a
BDC, we must also meet a coverage ratio of total net assets to total senior securities, which include all of our borrowings (including accrued interest payable) except for
debentures issued by the SBA and any preferred stock we may issue in the future, of at least 150% subsequent to each borrowing or issuance of senior securities. See
“Regulation.”

Our portfolio is comprised of, and we anticipate that our portfolio will continue to be comprised of, investments primarily in technology-related companies at various

stages of their development. Consistent with regulatory requirements, we invest primarily in United States based companies and, to a lesser extent, in foreign companies.

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We are internally managed under the supervision of our Board of Directors. We do not pay management or advisory fees, but instead incur costs customary for an
operating company. Some of those costs include recruiting and marketing expenses as well as the costs associated with employing management, investment and portfolio
management professionals, and technology, secretarial and other support personnel. In connection with our recruiting, branding and marketing efforts, we may, among other
things, make charitable contributions in amounts we believe to be immaterial and that do not exceed $500,000 in the aggregate in any year. We believe that many of these
contributions help us raise our profile in the communities and benefit us in attracting and retaining talent and investment opportunities.

Effective January 1, 2006, we elected to be treated for tax purposes as a regulated investment company, or RIC, under the Internal Revenue Code of 1986, as amended,
or the Code. Pursuant to this election, we generally will not have to pay corporate-level taxes on any income that we distribute to our stockholders. However, our qualification
and election to be treated as a RIC requires that we comply with provisions contained in the Code. For example, as a RIC we must receive 90% or more of our income from
qualified earnings, typically referred to as “good income,” as well as satisfy asset diversification and income distribution requirements. As an investment company, we follow
accounting and reporting guidance as set forth in Topic 946, Financial Services – Investment Companies, of the Financial Accounting Standards Board’s, or FASB’s,
Accounting Standards Codification, as amended, or ASC.

CORPORATE HISTORY AND OFFICES

We are a Maryland corporation formed in December 2003 that began investment operations in September 2004. On February 25, 2016, we changed our name from

“Hercules Technology Growth Capital, Inc.” to “Hercules Capital, Inc.”

 Our principal executive offices are located at 400 Hamilton Avenue, Suite 310, Palo Alto, California 94301, and our telephone number is (650) 289-3060. We also

have offices in Boston, MA, New York, NY, Bethesda, MD, Hartford, CT, Westport, CT, Chicago, IL, and San Diego, CA.

AVAILABLE INFORMATION

We file with or submit to the SEC periodic and current reports, proxy statements and other information meeting the informational requirements of the Securities
Exchange Act of 1934, as amended (“the Exchange Act”). We maintain a website on the Internet at www.htgc.com. We make available, free of charge, on our website our proxy
statement, annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports and other publicly filed information
available as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission, or SEC. Information
contained on our website is not incorporated by reference into this Annual Report, and you should not consider that information to be part of this Annual Report.

We file annual, quarterly and current periodic reports, proxy statements and other information with the SEC, under the Exchange Act. In addition, the SEC maintains an

Internet website, at www.sec.gov, that contains reports, proxy and information statements, and other information regarding issuers, including us, who file documents
electronically with the SEC.

OUR MARKET OPPORTUNITY

We believe that technology-related companies compete in one of the largest and most rapidly growing sectors of the U.S. economy and that continued growth is

supported by ongoing innovation and performance improvements in technology products as well as the adoption of technology across virtually all industries in response to
competitive pressures. We believe that an attractive market opportunity exists for a specialty finance company focused primarily on investments in structured debt with warrants
in technology-related companies for the following reasons:

•

•

•

technology-related companies have generally been underserved by traditional lending sources;

unfulfilled demand exists for structured debt financing to technology-related companies due to the complexity of evaluating risk in these investments; and

structured debt with warrants products are less dilutive and complement equity financing from venture capital and private equity funds.

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Technology-Related Companies are Underserved by Traditional Lenders. We believe many viable technology-related companies backed by financial sponsors have
been unable to obtain sufficient growth financing from traditional lenders, including financial services companies such as commercial banks and finance companies because
traditional lenders have continued to consolidate and have adopted a more risk-averse approach to lending. More importantly, we believe traditional lenders are typically unable
to underwrite the risk associated with these companies effectively.

The unique cash flow characteristics of many technology-related companies typically include significant research and development expenditures and high projected

revenue growth thus often making such companies difficult to evaluate from a credit perspective. In addition, the balance sheets of these companies often include a
disproportionately large amount of intellectual property assets, which can be difficult to value. Finally, the speed of innovation in technology and rapid shifts in consumer
demand and market share add to the difficulty in evaluating technology-related companies.

Due to the difficulties described above, we believe traditional lenders generally refrain from entering the structured debt financing marketplace, instead preferring the

risk-reward profile of asset-based lending. Traditional lenders generally do not have flexible product offerings that meet the needs of technology-related companies. The
financing products offered by traditional lenders typically impose on borrowers many restrictive covenants and conditions, including limiting cash outflows and requiring a
significant depository relationship to facilitate rapid liquidation.

Unfulfilled Demand for Structured Debt Financing to Technology-Related Companies. Private debt capital in the form of structured debt financing from specialty
finance companies continues to be an important source of funding for technology-related companies. We believe that the level of demand for structured debt financing is a
function of the level of annual venture equity investment activity.

We believe that demand for structured debt financing is currently underserved. The venture capital market for the technology-related companies in which we invest has

been active. Therefore, to the extent we have capital available, we believe this is an opportune time to be active in the structured lending market for technology-related
companies.

Structured Debt with Warrants Products Complement Equity Financing from Venture Capital and Private Equity Funds. We believe that technology-related

companies and their financial sponsors will continue to view structured debt securities as an attractive source of capital because it augments the capital provided by venture
capital and private equity funds. We believe that our structured debt with warrants products provide access to growth capital that otherwise may only be available through
incremental investments by existing equity investors. As such, we provide portfolio companies and their financial sponsors with an opportunity to diversify their capital sources.
Generally, we believe many technology-related companies at all stages of development target a portion of their capital to be debt in an attempt to achieve a higher valuation
through internal growth. In addition, because financial sponsor-backed companies have reached a more mature stage prior to reaching a liquidity event, we believe our
investments could provide the debt capital needed to grow or recapitalize during the extended period sometimes required prior to liquidity events.

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Our strategy to achieve our investment objective includes the following key elements:

OUR BUSINESS STRATEGY

Leverage the Experience and Industry Relationships of Our Management Team and Investment Professionals. We have assembled a team of experienced investment

professionals with extensive experience as venture capitalists, commercial lenders, and originators of structured debt and equity investments in technology-related companies.
Our investment professionals have, on average, more than 10 years of experience as equity investors in, and/or lenders to, technology-related companies. In addition, our team
members have originated structured debt, debt with warrants and equity investments in over 500 technology-related companies, representing more than $11.0 billion in
commitments from inception to December 31, 2020, and have developed a network of industry contacts with investors and other participants within the venture capital and
private equity communities. In addition, members of our management team also have operational, research and development and finance experience with technology-related
companies. We have established contacts with leading venture capital and private equity fund sponsors, public and private companies, research institutions and other industry
participants, which we believe will enable us to identify and attract well-positioned prospective portfolio companies.

We focus our investing activities generally in industries in which our investment professionals have investment experience. We believe that our focus on financing

technology-related companies will enable us to leverage our expertise in structuring prospective investments, to assess the value of both tangible and intangible assets, to
evaluate the business prospects and operating characteristics of technology-related companies and to identify and originate potentially attractive investments with these types of
companies.

Mitigate Risk of Principal Loss and Build a Portfolio of Equity-Related Securities. We expect that our investments have the potential to produce attractive risk-

adjusted returns through current income, in the form of interest and fee income, as well as capital appreciation from warrant and equity-related securities. We believe that we
can mitigate the risk of loss on our debt investments through the combination of loan principal amortization after an initial interest only period, cash interest payments, relatively
short maturities (typically between 36-48 months), security interests in the assets of our portfolio companies, and on select investment covenants requiring prospective portfolio
companies to have certain amounts of available cash at the time of our investment and the continued support from a venture capital or private equity firm at the time we make
our investment. Although we do not currently engage in hedging transactions, we may engage in hedging transactions in the future utilizing instruments such as forward
contracts, currency options and interest rate swaps, caps, collars, and floors.

Historically our structured debt investments to technology-related companies typically include warrants or other equity interests, giving us the potential to realize

equity-like returns on a portion of our investment. In addition, in some cases, we receive the right to make additional equity investments in our portfolio companies, including
the right to convert some portion of our debt into equity, in connection with future equity financing rounds. We believe these equity interests will create the potential for
meaningful long-term capital gains in connection with the future liquidity events of these technology-related companies.

Provide Customized Financing Complementary to Financial Sponsors’ Capital. We offer a broad range of investment structures and possess expertise and experience
to effectively structure and price investments in technology-related companies. Unlike many of our competitors that only invest in companies that fit a specific set of investment
parameters, we have the flexibility to structure our investments to suit the particular needs of our portfolio companies. We offer customized financing solutions ranging from
senior debt, including below-investment grade debt instruments, also known as “junk bonds”, to equity capital, with a focus on structured debt with warrants.

We use our relationships in the financial sponsor community to originate investment opportunities. Because venture capital and private equity funds typically invest

solely in the equity securities of their portfolio companies, we believe that our debt investments will be viewed as an attractive and complimentary source of capital, both by the
portfolio company and by the portfolio company’s financial sponsor. In addition, we believe that many venture capital and private equity fund sponsors encourage their
portfolio companies to use debt financing for a portion of their capital needs as a means of potentially enhancing equity returns, minimizing equity dilution and increasing
valuations prior to a subsequent equity financing round or a liquidity event.

Invest at Various Stages of Development. We provide growth capital to technology-related companies at all stages of development, including select publicly listed

companies and select special opportunity lower middle market companies that require additional capital to fund acquisitions, recapitalizations and refinancings and established-
stage companies. We believe that this provides us with a broader range of potential investment opportunities than those available to many of our competitors, who generally
focus their investments on a particular stage in a company’s development. Because of the flexible structure of our investments and the extensive experience of our investment
professionals, we believe we are well positioned to take advantage of these investment opportunities at all stages of prospective portfolio companies’ development.

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Benefit from Our Efficient Organizational Structure. We believe that the perpetual nature of our corporate structure enables us to be a long-term partner for our

portfolio companies in contrast to traditional investment funds, which typically have a limited life. In addition, because of our access to the equity markets, we believe that we
may benefit from a lower cost of capital than that available to private investment funds. We are not subject to requirements to return invested capital to investors nor do we have
a finite investment horizon. Capital providers that are subject to such limitations are often required to seek a liquidity event more quickly than they otherwise might, which can
result in a lower overall return on an investment.

Deal Sourcing Through Our Proprietary Database. We have developed a proprietary and comprehensive structured query language-based, or SQL, database system to

track various aspects of our investment process including sourcing, originations, transaction monitoring and post-investment performance. As of December 31, 2020, our
proprietary SQL-based database system included approximately 54,000 technology-related companies and approximately 13,000 venture capital firms, private equity sponsors
or investors, as well as various other industry contacts. This proprietary SQL system allows us to maintain, cultivate and grow our industry relationships while providing us
with comprehensive details on companies in the technology-related industries and their financial sponsors.

OUR INVESTMENTS AND OPERATIONS

We principally invest in debt securities and, to a lesser extent, equity securities, with a particular emphasis on structured debt with warrants.

We generally seek to invest in companies that have been operating for at least six to twelve months prior to the date of our investment. We anticipate that such entities

may, at the time of investment, be generating revenues or will have a business plan that anticipates generation of revenues within 24 to 48 months. Further, we anticipate that on
the date of our investment we will generally obtain a lien on available assets, which may or may not include intellectual property, and these companies will have sufficient cash
on their balance sheet to operate as well as potentially amortize their debt for at least three to nine months following our investment. We generally require that a prospective
portfolio company, in addition to having sufficient capital to support leverage, demonstrate an operating plan capable of generating cash flows or raising the additional capital
necessary to cover its operating expenses and service its debt, for an additional six to twelve months subject to market conditions.

We expect that our investments will generally range from $15.0 million to $40.0 million, although we may make investments in amounts above or below this range. We

typically structure our debt securities to provide for amortization of principal over the life of the loan, but may include a period of interest-only payments. Our loans will
typically be collateralized by a security interest in the borrower’s assets, although we may not have the first claim on these assets and the assets may not include intellectual
property. Our debt investments carry fixed or variable contractual interest rates which generally ranged from approximately 7.0% to 11.5% as of December 31, 2020. As of
December 31, 2020, approximately 96.9% of our loans were at floating rates or floating rates with a floor and 3.1% of the loans were at fixed rates.

In addition to the cash yields received on our loans, our loans generally include one or more of the following: exit fees, balloon payment fees, commitment fees, success

fees, or prepayment fees. In some cases, our loans also include contractual payment-in-kind, or PIK, interest arrangements. The increases in loan balances as a result of
contractual PIK arrangements are included in income for the period in which such PIK interest was accrued, which is often in advance of receiving cash payment, and are
separately identified on our statements of cash flows. We also may be required to include in income for tax purposes certain other amounts prior to receiving the related cash.

 In addition, our investments in the structured debt of venture capital-backed companies generally have equity enhancement features, typically in the form of warrants

or other equity-related securities that are considered original issue discounts, or OID, to our loans and are designed to provide us with an opportunity for potential capital
appreciation. The warrants typically will be immediately exercisable upon issuance and generally will remain exercisable for the lesser of five to ten years or three to five years
after completion of an initial public offering, or  IPO. The exercise prices for the warrants varies from nominal exercise prices to exercise prices that are at or above the current
fair market value of the equity for which we receive warrants. We may structure warrants to provide minority rights provisions or on a very select basis put rights upon the
occurrence of certain events. We generally target a total annualized return (including interest, fees and value of warrants) of 12% to 25% for our debt investments.

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Typically, our structured debt and equity investments take one of the following forms:

•

•

•

•

Structured Debt with Warrants. We seek to invest a majority of our assets in structured debt with warrants of prospective portfolio companies. Our investments
in structured debt with warrants may be the only debt capital on the balance sheet of our portfolio companies, and in many cases we have a first priority
security interest in all of our portfolio company’s assets, or in certain investments we may have a negative pledge on intellectual property. Our structured debt
with warrants typically has a maturity of between three and five years, and they may provide for full amortization after an interest only period. Our structured
debt with warrants generally carries a contractual interest rate up to 11.5% and may include an additional exit fee payment or contractual PIK interest
arrangements. We may structure our structured debt with warrants with restrictive affirmative and negative covenants, default penalties, prepayment penalties,
lien protection, equity calls, change-in-control provisions or board observation rights.

Senior Debt. We seek to invest a limited portion of our assets in senior debt. Senior debt may be collateralized by accounts receivable and/or inventory
financing of prospective portfolio companies. Senior debt has a senior position with respect to a borrower’s scheduled interest and principal payments and
holds a first priority security interest in the assets pledged as collateral. Senior debt also may impose covenants on a borrower with regard to cash flows and
changes in capital structure, among other items. We generally collateralize our investments by obtaining security interests in our portfolio companies’ assets,
which may include their intellectual property. In other cases, we may obtain a negative pledge covering a company’s intellectual property. Our senior loans, in
certain instances, may be tied to the financing of specific assets. In connection with a senior debt investment, we may also provide the borrower with a
working capital line-of-credit that will carry an interest rate ranging from Prime or LIBOR plus a spread with a floor, generally maturing in three to five years,
and typically secured by accounts receivable and/or inventory. We also provide “unitranche” loans, which are loans that combine both senior and mezzanine
debt, generally in a first lien position with security interest in all the assets of the portfolio company. The loans can either be “first out” or “last out”, whereby
the “last-out” loans will be subordinated to the “first-out” portion of the unitranche loan in a liquidation, sale or other disposition.

Equipment Loans. We may also invest a limited portion of our assets in equipment-based loans to early-stage prospective portfolio companies. Equipment-
based loans are secured by a first priority security interest in only the specific assets financed. These loans are generally for amounts of $1.0 million to $3.0
million but may be up to $20.0 million, carry an interest rate ranging from Prime or LIBOR and Prime or LIBOR plus 9.0%, and have an average term
between three and four years. Equipment loans may also include exit fee payments.

Equity-Related Securities. The equity-related securities we hold consist primarily of warrants or other equity interests generally obtained in connection with
our structured debt investments. In addition to the warrants received as a part of a structured debt financing, we typically receive the right to make equity
investments in a portfolio company in connection with that company’s next round of equity financing. We may also hold certain debt investments that have the
right to convert a portion of the debt investment into equity. These rights will provide us with the opportunity to further enhance our returns over time through
opportunistic equity investments in our portfolio companies. These equity-related investments are typically in the form of preferred or common equity and
may be structured with a dividend yield, providing us with a current return, and with customary anti-dilution protection and preemptive rights. We may achieve
liquidity through a merger or acquisition of a portfolio company, a public offering of a portfolio company’s stock or by exercising our right, if any, to require a
portfolio company to buy back the equity-related securities we hold. We may also make stand-alone direct equity investments into portfolio companies in
which we may not have any debt investment in the company. As of December 31, 2020, we held warrant and equity-related securities in 138 portfolio
companies.

9

 
 
 
 
 
 
A comparison of the typical features of our various investment alternatives is set forth in the chart below.

  Typical Structure

Term debt with warrants

Term or revolving debt

Term debt with warrants

Preferred stock or common stock

Structured Debt with Warrants

Senior Debt

Equipment Loans

Equity-Related Securities

Investment Horizon

Ranking/Security

Covenants

Risk Tolerance

Coupon/Dividend

Customization or Flexibility

Equity Dilution

Investment Criteria  

Long-term, ranging from 2 to 7 years,
with an average of 3 years

Senior secured, either first out or last out,
or second lien

Usually under 3 years

Ranging from 3 to 4 years

Ranging from 3 to 7 years

Senior / First lien

Secured only by underlying
equipment

None/unsecured

Less restrictive; mostly financial

Generally borrowing base and
financial

Medium / High

Low

None

High

None

High

Cash pay - fixed and floating rate; PIK in
limited cases

Cash pay - fixed or floating rate

Cash pay - fixed or floating rate
and may include PIK

Generally none

More flexible

Low to medium

Little to none

None to low

Little to none

Low

Flexible

High

We have identified several criteria, among others, that we believe are important in achieving our investment objective with respect to prospective portfolio companies.

These criteria, while not inclusive, provide general guidelines for our investment decisions.

Portfolio Composition. While we generally focus our investments in venture capital-backed companies in technology-related industries, we seek to invest across various

financial sponsors as well as across various stages of companies’ development and various technology industry sub-sectors and geographies. As of December 31, 2020,
approximately 87.2% of the fair value of our portfolio was composed of investments in three industries: 33.1% was composed of investments in the "Software" industry, 32.2%
was composed of investments in the "Drug Discovery & Development" industry, 21.9% was composed of investments in the "Internet Consumer & Business Services" industry.

Continuing Support from One or More Financial Sponsors. We generally invest in companies in which one or more established financial sponsors have previously
invested and continue to make a contribution to the management of the business. We believe that having established financial sponsors with meaningful commitments to the
business is a key characteristic of a prospective portfolio company. In addition, we look for representatives of one or more financial sponsors to maintain seats on the Board of
Directors of a prospective portfolio company as an indication of such commitment.

Company Stage of Development. While we invest in companies at various stages of development, we generally require that prospective portfolio companies be beyond

the seed stage of development and generally have received or anticipate having commitments for their first institutional round of equity financing for early stage companies. We
expect a prospective portfolio company to demonstrate progress in its product development or demonstrate a path towards revenue generation or increase its revenues and
operating cash flow over time. The anticipated growth rate of a prospective portfolio company is a key factor in determining the value that we ascribe to any warrants or other
equity securities that we may acquire in connection with an investment in debt securities.

Operating Plan. We generally require that a prospective portfolio company, in addition to having potential access to capital to support leverage, demonstrate an

operating plan capable of generating cash flows or the ability to potentially raise the additional capital necessary to cover its operating expenses and service its debt for a
specific period. Specifically, we require that a prospective portfolio company demonstrate at the time of our proposed investment that in addition to having sufficient capital to
support leverage, it has an operating plan capable of generating cash flows or raising the additional capital necessary to cover its operating expenses and service its debt for an
additional six to twelve months subject to market conditions.

10

 
  
 
 
 
Security Interest. In many instances we seek a first priority security interest in all of the portfolio companies’ tangible and intangible assets as collateral for our debt
investment, subject in some cases to permitted exceptions. In other cases, we may obtain a negative pledge prohibiting a company from pledging or otherwise encumbering
their intellectual property. Although we do not intend to operate as an asset-based lender, the estimated liquidation value of the assets, if any, collateralizing the debt securities
that we hold is an important factor in our credit analysis and subject to assumptions that may change over the life of the investment especially when attempting to estimate the
value of intellectual property. We generally evaluate both tangible assets, such as accounts receivable, inventory and equipment, and intangible assets, such as intellectual
property, customer lists, networks and databases.

Covenants. Our investments may include one or more of the following covenants: cross-default; material adverse change provisions; requirements that the portfolio
company provide periodic financial reports and operating metrics; and limitations on the portfolio company’s ability to incur additional debt, sell assets, dividend recapture,
engage in transactions with affiliates and consummate an extraordinary transaction, such as a merger or recapitalization without our consent. In addition, we may require other
performance or financial based covenants, as we deem appropriate.

Exit Strategy. Prior to making a debt investment that is accompanied by an equity-related security in a prospective portfolio company, we analyze the potential for that

company to increase the liquidity of its equity through a future event that would enable us to realize appreciation in the value of our equity interest. Liquidity events may
include an IPO, a private sale of our equity interest to a third party, a merger or an acquisition of the company or a purchase of our equity position by the company or one of its
stockholders.

Investment Process

We have organized our management team around the four key elements of our investment process:

•

•

•

•

Origination;

Underwriting;

Documentation; and

Loan and Compliance Administration.

Our investment process is summarized in the following chart:

11

 
 
 
 
 
 
Origination

The origination process for our investments includes sourcing, screening, preliminary due diligence and deal structuring and negotiation, all leading to an executed non-
binding term sheet. As of December 31, 2020, our investment origination team, which consists of approximately 43 investment professionals, is headed by our Chief Investment
Officer and Chief Executive Officer. The origination team is responsible for sourcing potential investment opportunities and members of the investment origination team use
their extensive relationships with various leading financial sponsors, management contacts within technology-related companies, trade sources, technology conferences and
various publications to source prospective portfolio companies. Our investment origination team is divided into life sciences, technology, sustainable and renewable technology,
and special situation sub-teams to better source potential portfolio companies.

In addition, we have developed a proprietary and comprehensive SQL-based database system to track various aspects of our investment process including sourcing,
originations, transaction monitoring and post-investment performance. This proprietary SQL system allows our origination team to maintain, cultivate and grow our industry
relationships while providing our origination team with comprehensive details on companies in the technology-related industries and their financial sponsors.

If a prospective portfolio company generally meets certain underwriting criteria, we perform preliminary due diligence, which may include high level company and
technology assessments, evaluation of its financial sponsors’ support, market analysis, competitive analysis, identifying key management, risk analysis and transaction size,
pricing, return analysis and structure analysis. If the preliminary due diligence is satisfactory, and the origination team recommends moving forward, we then structure,
negotiate and execute a non-binding term sheet with the potential portfolio company. Upon execution of a term sheet, the investment opportunity moves to the underwriting
process to complete formal due diligence review and approval.

Underwriting

The underwriting review includes formal due diligence and approval of the proposed investment in the portfolio company.

Due Diligence. Our due diligence on a prospective investment is typically completed by two or more investment professionals whom we define as the underwriting

team. The underwriting team for a proposed investment consists of the deal sponsor who typically possesses general industry knowledge and is responsible for originating and
managing the transaction, other investment professional(s) who perform due diligence, credit and corporate financial analyses and, as needed, our legal professionals. To ensure
consistent underwriting, we generally use our standardized due diligence methodologies, which include due diligence on financial performance and credit risk as well as an
analysis of the operations and the legal and applicable regulatory framework of a prospective portfolio company. The members of the underwriting team work together to
conduct due diligence and understand the relationships among the prospective portfolio company’s business plan, operations and financial performance.

As part of our evaluation of a proposed investment, the underwriting team prepares an investment memorandum for presentation to the investment committee. In

preparing the investment memorandum, the underwriting team typically interviews select key management of the company and select financial sponsors and assembles
information necessary to the investment decision. If and when appropriate, the investment professionals may also contact industry experts and customers, vendors or, in some
cases, competitors of the company. The underwriting team collaborates with the credit and legal teams to ensure the final credit underwriting deal structure meets our standards.
In addition to the aforementioned members of the investment team, each deal is also assigned to a member of the credit team. The credit team is responsible for making sure that
all risks in the transaction are identified and mitigated to the extent possible in the investment memorandum and that the legal documentation properly reflects the transaction as
approved by the investment committee.

Approval Process. The sponsoring managing director or principal presents the investment memorandum to our investment committee for consideration. The approval of
a majority of our investment committee is required before we proceed with any investment. The investment committee members include our Chief Executive Officer and Chief
Investment Officer, Chief Financial Officer, Senior Managing Director of Credit, and Senior Managing Director of Risk Management. The investment committee meets on an
as-needed basis.

Documentation

Our legal department administers the documentation process for our investments. This department is responsible for documenting the transactions approved by our
investment committee with a prospective portfolio company. This department negotiates loan documentation and, subject to appropriate approvals, final documents are prepared
for execution by all parties. The legal department generally uses the services of external law firms to complete the necessary documentation.

12

 
 
Loan and Compliance Administration

Our investment committee, supported by our investment team, credit team, and finance department, administers loans and tracks covenant compliance, if applicable, of
our investments and oversees periodic reviews of our critical functions to ensure adherence with our internal policies and procedures. After funding of a loan in accordance with
the investment committee’s approval, the loan is recorded in our loan administration software and our SQL-based database system. The investment team, credit team, and
finance department are responsible for ensuring timely interest and principal payments and collateral management as well as advising the investment committee on the financial
performance and trends of each portfolio company, including any covenant violations that occur, to aid us in assessing the appropriate course of action for each portfolio
company and evaluating overall portfolio quality. In addition, the investment team and credit team advise the investment committee and the Audit Committee of our Board of
Directors, accordingly, regarding the credit and investment grading for each portfolio company as well as changes in the value of collateral that may occur.

The investment team and credit team monitor our portfolio companies in order to determine whether the companies are meeting our financing criteria and their
respective business plans and also monitors the financial trends of each portfolio company from its monthly or quarterly financial statements to assess the appropriate course of
action for each company and to evaluate overall portfolio quality. In addition, our management team closely monitors the status and performance of each individual company
through our SQL-based database system and periodic contact with our portfolio companies’ management teams and their respective financial sponsors.

Credit and Investment Grading System. Our investment team and credit team use an investment grading system to characterize and monitor our outstanding loans. They

monitor and when appropriate, recommend changes to investment grading. Our investment committee reviews and approves the recommendations and/or changes to the
investment grading. These approved investment gradings are provided on a quarterly basis to the Audit Committee and our Board of Directors, along with valuations for our
investments which are submitted for approval.

From time to time, we will identify investments that require closer monitoring or become workout assets. We develop a workout strategy for workout assets and our

investment committee monitors the progress against the strategy. We may incur losses from our investing activities, however, we work with our troubled portfolio companies in
order to recover as much of our investments as is practicable, including possibly taking control of the portfolio company. There can be no assurance that principal will be
recovered.

We use the following investment grading system approved by our Board of Directors:

Grade 1.

Loans involve the least amount of risk in our portfolio. The borrower is performing above expectations, and the trends and risk profile is generally
favorable.

Grade 2.

The borrower is performing as expected and the risk profile is neutral to favorable. All new loans are initially graded 2.

Grade 3.

Grade 4.

Grade 5.

The borrower may be performing below expectations, and the loan’s risk has increased materially since origination. We typically increase procedures
to monitor a borrower when it is determined that credit risk has increased meaningfully since origination, such as, when the borrower is approaching a
low liquidity point and an expected capital raise event is not imminent, when an expected milestone has slipped or failed, when performance or new
business is materially below our plan, or if the estimated fair value of the enterprise is materially lower than when the loan was originated.

The borrower is performing materially below expectations, and the loan risk has substantially increased since origination with the prospect of raising
additional capital significantly in question. Loans graded 4 may experience some partial loss or full return of principal but are expected to realize some
loss of interest which is not anticipated to be repaid in full, which, to the extent not already reflected, may require the fair value of the loan to be
reduced to the amount we anticipate will be recovered. Grade 4 investments are closely monitored.

The borrower is in workout, materially performing below expectations and a significant risk of principal loss is probable. Loans graded 5 will
experience some partial principal loss or full loss of remaining principal outstanding is expected. Grade 5 loans will require the fair value of the loans
be reduced to the amount, if any, we anticipate will be recovered.

At December 31, 2020, our investments had a weighted average investment grading of 2.16.

13

 
 
 
 
 
 
 
Managerial Assistance

As a BDC, we are required to offer, and provide upon request, managerial assistance to our portfolio companies. This assistance could involve, among other things,

monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and
providing other organizational and financial guidance. We may, from time to time, receive fees for these services. In the event that such fees are received, they are incorporated
into our operating income and are passed through to our stockholders, given the nature of our structure as an internally managed BDC. See “—Regulation—Significant
Managerial Assistance” for additional information.

COMPETITION

Our primary competitors provide financing to prospective portfolio companies and include non-bank financial institutions, federally or state-chartered banks, venture

debt funds, financial institutions, venture capital funds, private equity funds, investment funds and investment banks. Many of these entities have greater financial and
managerial resources than we have, and the 1940 Act imposes certain regulatory restrictions on us as a BDC to which many of our competitors are not subject. However, we
believe that few of our competitors possess the expertise to properly structure and price debt investments to venture capital-backed companies in technology-related industries.
We believe that our specialization in financing technology-related companies will enable us to determine a range of potential values of intellectual property assets, evaluate the
business prospects and operating characteristics of prospective portfolio companies and, as a result, identify investment opportunities that produce attractive risk-adjusted
returns. For additional information concerning the competitive risks we face, see “Item 1A. Risk Factors—Risks Related to our Business Structure—We operate in a highly
competitive market for investment opportunities, and we may not be able to compete effectively.”

HUMAN CAPITAL DISCLOSURES

As an internally managed BDC, the long-term success of our company depends on our people. Our team comprises experienced investment professionals, executive

officers and treasury, finance, risk management, administrative support, IT and human resources professionals.

Our investment team is currently comprised of 43 professionals who have, on average, more than 10 years of experience in venture capital, structured finance,

origination of debt and equity investments, commercial lending and acquisition finance with technology and biomedical companies. We leverage the experience and
relationships of our management team to successfully identify attractive investment opportunities, underwrite prospective portfolio companies and structure customized
financing solutions. From inception to December 31, 2020, our team has originated structured debt, debt with warrants and equity investments in over 500 companies,
representing more than $11.0 billion in commitments.

Our team has established contacts with leading venture capital and private equity fund sponsors, public and private companies, research institutions and other industry

participants, which we believe will enable us to continue to identify and attract well-positioned prospective portfolio companies.  Our goal is to ensure that we have the right
blend of talent supporting our business as a specialty finance company to high-growth, innovative venture capital-backed companies in a variety of technology, life sciences,
and sustainable and renewable technology industries. We seek to accomplish this goal through our commitment to attracting, developing, and retaining our team.

The retention of our key investment personnel is material to the management of our business. The departure of our key investment personnel could adversely affect our
business and cause us to lose current and potential investment opportunities. As such, we offer a competitive compensation and benefits structure that we believe is attractive to
our current and prospective professionals.  We aim to attract, motivate, and retain a diverse group of individuals and to create an inclusive community where all individuals are
welcomed, valued, respected, and heard. In order to support a culture of learning, we provide many training opportunities for our employees to continue to build their skills and
increase their effectiveness as members of a team, including offering a variety of external and internal classes and training sessions as well as hands-on learning and one-on-one
mentorship.  We continue to encourage dialogue between managers and employees and have increased the frequency of our communications with employees during the
COVID-19 pandemic.

14

 
 
Our workforce consists of 82 professionals, of which over 40% are women, and over 35% of our senior leaders are women. Senior leaders include Managing Directors
on the investment team and senior executives on the corporate services team. Additionally, over 35% of our workforce and over 25% of our senior leaders are people of diverse
ethnic backgrounds. We are committed to recruiting, motivating. and developing a diversity of talent.  We strive to continue to create a welcoming and inclusive work
environment for our employees. As we hire and develop individuals, we take succession planning into account and have succession plans in place for each of our senior leaders.

As part of our commitment to recruit and develop talent and provide mentorship, we have an internship program that invites college students to learn and contribute to

our work as temporary employees for a period of approximately six months. Additionally, from time to time, we may contract with employment agencies and work with
independent contractors on a temporary basis.

We are committed to fostering a workplace conducive to the open communication of any concerns regarding unethical, fraudulent or illegal activities. Feedback from

employees on matters related to their employment or our operations including its financial statement disclosures, accounting, internal accounting controls or auditing matters is
greatly appreciated and helps to build a stronger organization. Each director, officer, regular full-time, part-time and temporary employee of the Company has the ability to
report confidentially under this whistleblower policy: (a) questionable or improper accounting, internal controls, auditing matters, disclosure, or fraudulent business practices
and (b) illegal or unethical behavior that has occurred, is ongoing, or is about to occur of an applicable law, rule, regulation or policy of the Company. We protect the
confidentiality of those making reports of possible misconduct to the maximum extent permitted by law. Our no retaliation policy prohibits retaliation against those who report
activities believed in good faith to be a violation of any law, rule, regulation or internal policy.  

We maintain and ensure compliance of all directors, officers and employees to our Code of Business Conduct and Ethics which is acknowledged in writing on joining

and annually by all our employees, as a continued condition of employment. Our Code establishes applicable policies, guidelines, and procedures that promote ethical practices
and conduct by the Company and all its employees, officers, and directors. Our Whistleblower Policy and Code of Business Conduct and Ethics Policy can be found on our
website at investor.htgc.com/governance/governance-documents.

We aim to provide a safe environment at work. During the COVID-19 pandemic, the safety of our employees, clients, customers, and vendors has been at the forefront

of our decisions regarding when it is safe for employees to return to work in the office. Accordingly, we have encouraged employees to work from home in regions where doing
so is recommended by local guidance.  Following local and CDC guidance, we have made our offices accessible to those who prefer to work in the office, with restrictions and
safety protocols in place, including limiting office capacity. For those hesitant to return to the office, we have continued to support remote work as an option during the ongoing
COVID-19 pandemic. In addition to protecting the physical safety of our employees, we seek to promote a safe environment that is free of harassment or bullying. We do not
tolerate discrimination and harassment of any kind including but not limited to sexual, gender identity, race, religion, ethnicity, age, or disability, among others. Our
Environmental, Social and Governance Policy (“ESG Policy”) can be found on our website at investor.htgc.com/governance/governance-documents.

During the pandemic, we have encouraged employee health and wellness by being aware that employees need flexibility during this time and have different needs. We
have made information and services available to support employees and their families’ mental health through our Employee Assistance Program. Additionally, we have made
information available regarding things to do from home during the pandemic to relieve stress and we have hosted numerous virtual events to keep employees engaged and
connected. Wellness activities that keep employees connected include fitness challenges and virtual fitness classes as well as virtual games and activities.

We emphasize employee engagement, particularly during the ongoing pandemic, by encouraging ongoing dialogue with managers, colleagues and leaders. Company

communications have been more frequent during this time so that employees can stay connected and that we understand our employees’ diverse needs. We monitor our attrition
and analyze reasons for leaving the Company. We value employee feedback and make adjustments to employees’ needs and concerns as they are raised.

We have elected to be regulated as a BDC under the 1940 Act. The following discussion is a general summary of the material prohibitions and descriptions governing

business development companies. It does not purport to be a complete description of all of the laws and regulations affecting business development companies.

REGULATION

15

 
 
Regulation as a Business Development Company

A BDC primarily focuses on investing in or lending to private companies and making managerial assistance available to them, while providing its stockholders with the

ability to retain the liquidity of a publicly traded stock. The 1940 Act contains prohibitions and restrictions relating to transactions between business development companies
and their directors and officers and principal underwriters and certain other related persons and requires that a majority of the directors be persons other than “interested
persons,” as that term is defined in the 1940 Act. In addition, the 1940 Act provides that we may not change the nature of our business so as to cease to be, or to withdraw our
election as, a BDC unless approved by a majority of our outstanding voting securities as defined in the 1940 Act. A majority of the outstanding voting securities of a company is
defined under the 1940 Act as the lesser of: (i) 67% or more of such company’s shares present at a meeting if more than 50% of the outstanding shares of such company are
present or represented by proxy, or (ii) more than 50% of the outstanding shares of such company.

Qualifying Assets

Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as qualifying assets,
unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. The principal categories of qualifying assets relevant to our
business are the following:

(1)

Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is
an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or
from any other person, subject to such rules as may be prescribed by the SEC. An eligible portfolio company is defined in the 1940 Act as any issuer which:

(a)

(b)

(c)

is organized under the laws of, and has its principal place of business in, the United States;

is not an investment company (other than a SBIC wholly owned by the BDC) or a company that would be an investment company but for certain
exclusions under the 1940 Act; and

does not have any class of securities listed on a national securities exchange; or if it has securities listed on a national securities exchange such
company has a market capitalization of less than $250 million; is controlled by the BDC and has an affiliate of a BDC on its Board of Directors; or
meets such other criteria as may be established by the SEC.

(2)

(3)

(4)

(5)

Securities of any portfolio company which we control.

Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions
incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities was unable to
meet its obligations as they came due without material assistance other than conventional lending or financing arrangements.

Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and we already
own 60% of the outstanding equity of the eligible portfolio company.

Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of warrants or
rights relating to such securities.

(6)

Cash, cash equivalents, U.S. Government securities or high-quality debt securities maturing in one year or less from the time of investment.

Control, as defined by the 1940 Act, is presumed to exist where a BDC beneficially owns more than 25% of the outstanding voting securities of the portfolio company

or has greater than 50% representation on its board.

We do not intend to acquire securities issued by any investment company, including other business development companies, that exceed the limits imposed by the 1940

Act. Under these limits, we generally cannot acquire more than 3% of the voting stock of any investment company (as defined in the 1940 Act), invest more than 5% of the
value of our total assets in the securities of one such investment company or invest more than 10% of the value of our total assets in the securities of such other investment
companies in the aggregate. SEC rules permit us to exceed these limits, subject to certain conditions. With regard to that portion of our portfolio invested in securities issued by
investment companies, it should be noted that such investments might subject our stockholders to additional expenses.

16

 
 
 
 
 
 
 
 
 
 
 
Significant Managerial Assistance

Business development companies generally must offer to make available to the issuer of the securities significant managerial assistance, except in circumstances where
either (i) the BDC controls such issuer of securities or (ii) the BDC purchases such securities in conjunction with one or more other persons acting together and one of the other
persons in the group makes available such managerial assistance. Making available significant managerial assistance means, among other things, any arrangement whereby the
BDC, through its directors, officers or employees, offers to provide and, if accepted, does so provide, significant guidance and counsel concerning the management, operations
or business objectives and policies of a portfolio company through monitoring of portfolio company operations, selective participation in board and management meetings,
consulting with and advising a portfolio company’s officers or other organizational or financial guidance.

Temporary Investments

Pending investment in other types of qualifying assets, as described above, our investments may consist of cash, cash equivalents, U.S. government securities or high-

quality debt securities maturing in one year or less from the time of investment, which we refer to, collectively, as temporary investments, so that 70% of our assets are
qualifying assets. We may invest in U.S. Treasury bills or in repurchase agreements, provided that such agreements are fully collateralized by cash or securities issued by the
U.S. government or its agencies. A repurchase agreement involves the purchase by an investor, such as us, of a specified security and the simultaneous agreement by the seller to
repurchase it at an agreed upon future date and at a price which is greater than the purchase price by an amount that reflects an agreed-upon interest rate. There is no percentage
restriction on the proportion of our assets that may be invested in such repurchase agreements. However, if more than 25% of our total assets constitute repurchase agreements
from a single counterparty, we generally would not meet the diversification tests imposed on us by the Code in order to qualify as a RIC for federal income tax purposes. Thus,
we do not intend to enter into repurchase agreements with a single counterparty in excess of this limit. We will monitor the creditworthiness of the counterparties with which we
enter into repurchase agreement transactions.

Warrants and Options

 Under the 1940 Act, a BDC is subject to restrictions on the amount of warrants, options, restricted stock or rights to purchase shares of capital stock that it may have

outstanding at any time. In particular, the amount of capital stock that would result from the conversion or exercise of all outstanding warrants, options or other rights to
purchase or convert into capital stock cannot exceed 25% of the BDC’s total outstanding shares of capital stock. This amount is reduced to 20% of the BDC’s total outstanding
shares of capital stock if the amount of warrants, options or rights issued pursuant to an executive compensation plan would exceed 15% of the BDC’s total outstanding shares
of capital stock. We have received exemptive relief from the SEC permitting us to issue stock options and restricted stock to our employees and directors subject to the above
conditions, among others. For a discussion regarding the conditions of this exemptive relief, see “—No action and Exemptive Relief” below and Note 8 to our consolidated
financial statements.

Reduced Asset Coverage Requirements

In accordance with the Small Business Credit Availability Act, or the SBCAA, our Board of Directors and stockholders approved the reduction of our minimum

asset coverage ratio applicable under Section 61(a)(2) of the 1940 Act on September 4, 2018 and December 6, 2018 respectively. As a result, effective December 7, 2018, the
minimum asset coverage ratio under the 1940 Act applicable to us decreased from 200% to 150%, permitting us to incur additional leverage.

Senior Securities; Coverage Ratio

We will be permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to our common stock if our asset coverage, as
defined in the 1940 Act, is at least equal to 150% immediately after each such issuance. In addition, we may not be permitted to declare any cash dividend distribution on our
outstanding common shares, or purchase any such shares, unless, at the time of such declaration or purchase, we have asset coverage of at least 150% after deducting the
amount of such distribution or purchase price. We may also borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes. For a discussion of
the risks associated with the resulting leverage, see “Item 1A. Risk Factors—Risks Related to Our Business Structure—Because we have substantial indebtedness, there could
be increased risk in investing in our company.”

On April 5, 2007, we received approval from the SEC on our request for exemptive relief that permits us to exclude the indebtedness of our wholly owned subsidiaries

that are SBICs from the 150% asset coverage requirement applicable to us.

17

 
 
Capital Structure

We have received the approval from our stockholders to issue shares of our common stock at a price below its then current NAV per share, subject to certain limitations
and with the approval of our independent directors. The approval expires on June 12, 2021. We may sell our common stock, at a price below the current NAV, or sell warrants,
options or other rights to acquire such common stock, at a price below the current NAV if our Board of Directors determines that such sale is in the best interests of our
stockholders.

In connection with the receipt of such stockholder approval, we will limit the number of shares that we issue at a price below NAV pursuant to this authorization so that

the aggregate dilutive effect on our then outstanding shares will not exceed 20%. Our Board of Directors, subject to its fiduciary duties and regulatory requirements, has the
discretion to determine the amount of the discount, and as a result, the discount could be up to 100% of NAV per share.

Other 1940 Act Regulations

As a closed-end investment company that has elected to be regulated as a BDC under the 1940 Act, we are periodically examined by, and required to submit

information to, the SEC for compliance with the Exchange Act and the 1940 Act.

We are also prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our Board of Directors

who are not interested persons and, in some cases, prior approval by the SEC.

We are required by the 1940 Act to provide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement.
Furthermore, as a BDC, we are prohibited from protecting any director or officer against any liability to our stockholders arising from willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such person’s office.

We are required to adopt and implement written policies and procedures reasonably designed to prevent violation of the federal securities laws, review these policies

and procedures annually for their adequacy and the effectiveness of their implementation. Our Chief Compliance Officer is responsible for administering these policies and
procedures.

Code of Ethics

We have adopted and will maintain a code of ethics that establishes procedures for personal investments and restricts certain personal securities transactions. Personnel

subject to the code may invest in securities for their personal investment accounts, including securities that may be purchased or held by us, so long as such investments are
made in accordance with the code’s requirements. Our code of ethics will generally not permit investments by our employees in securities that may be purchased or held by us.
We may be prohibited under the 1940 Act from conducting certain transactions with our affiliates without the prior approval of our directors who are not interested persons
and, in some cases, the prior approval of the SEC.

Our current code of ethics is posted on our website at www.htgc.com. In addition, the code of ethics is available on the EDGAR Database on the SEC’s Internet site at
http://www.sec.gov. You may also obtain copies of the code of ethics, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov.

Privacy Principles

We are committed to maintaining the privacy of our stockholders and safeguarding their non-public personal information. The following information is provided to help

you understand what personal information we collect, how we protect that information and why, in certain cases, we may share information with select other parties.

Generally, we do not receive any non-public personal information relating to our stockholders, although certain non-public personal information of our stockholders

may become available to us. We do not disclose any non-public personal information about our stockholders or former stockholders, except as permitted by law or as is
necessary in order to service stockholder accounts (for example, to a transfer agent).

We restrict access to non-public personal information about our stockholders to our employees with a legitimate business need for the information. We maintain

physical, electronic and procedural safeguards designed to protect the non-public personal information of our stockholders.

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Proxy Voting Policies and Procedures

We vote proxies relating to our portfolio securities in the best interest of our stockholders. Our proxy voting decisions are made by members of the Investment Team,

who review on a case-by-case basis each proposal submitted to a stockholder vote to determine its impact on the portfolio securities held by us. Although we generally vote
against proposals that may have a negative impact on our portfolio securities, we may vote for such a proposal if there exists compelling long-term reasons to do so. We
generally do not believe it is necessary to engage the services of an independent third party to assist in issue analysis and vote recommendation for proxy proposals.

To ensure that our vote is not the product of a conflict of interest, we require that: (i) anyone involved in the decision making process disclose to our Chief Compliance

Officer any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a proxy vote; and (ii) employees involved in
the decision making process or vote administration are prohibited from revealing how we intend to vote on a proposal in order to reduce any attempted influence from
interested parties.

Small Business Administration Regulations

We make investments in qualifying small businesses through our wholly owned SBIC subsidiaries, HT III and HC IV. SBICs are designed to stimulate the flow of
private equity capital to eligible small businesses. Under present SBA regulations, eligible small businesses include businesses that have a tangible net worth not exceeding
$19.5 million and have average annual fully taxed net income not exceeding $6.5 million for the two most recent fiscal years. In addition, SBICs must devote 25.0% of its
investment activity to “smaller” enterprises as defined by the SBA. A smaller enterprise is one that has a tangible net worth not exceeding $6.0 million and has average annual
fully taxed net income not exceeding $2.0 million for the two most recent fiscal years. SBA regulations also provide alternative size standard criteria to determine eligibility,
which depend on the industry in which the business is engaged and are based on such factors as the number of employees and gross sales. According to SBA regulations, SBICs
may make long-term loans to small businesses, invest in the equity securities of such businesses and provide them with consulting and advisory services.

HT III is periodically examined and audited by the SBA’s staff to determine their compliance with SBA regulations. If HT III fails to comply with applicable SBA

regulations, the SBA could, depending on the severity of the violation, limit or prohibit HT III’s use of debentures, declare outstanding debentures immediately due and
payable, and/or limit HT III from making new investments. In addition, HT III may also be limited in its ability to make distributions to us if it does not have sufficient capital
in accordance with SBA regulations. Such actions by the SBA would, in turn, negatively impact us because HT III is our wholly owned subsidiary. HT III was in compliance
with the terms of the SBIC’s leverage as of December 31, 2020 as a result of having sufficient capital as defined under the SBA regulations.

With our net investment of $74.5 million in HT III, we have the capacity to issue $149.0 million of SBA guaranteed debentures, subject to SBA approval. As of
December 31, 2020, we have $99.0 million in SBA guaranteed debentures outstanding in HT III. As we are past our investment period for HT III, we will no longer make any
future commitments to new portfolio companies. We will only satisfy contractually agreed follow-on fundings to existing portfolio companies and may seek to early pay-off a
portion or all of the outstanding debentures as per the available liquidity in HT III. HT III held approximately $201.2 million in tangible assets and accounted for approximately
7.7% of our total assets at December 31, 2020.

With the additional SBIC license issued to HC IV on October 27, 2020, we gained access to up to $175.0 million of capital through the SBA debenture program, in

addition to our regulatory capital commitment of $87.5 million to the SBIC subsidiary which will be used for investment purposes. During the period, the Company has funded
$19.1 million in leverageable capital to HC IV and has not drawn any debentures. As of December 31, 2020, HC IV has no material assets other than cash from the regulatory
capital provided by the Company.

The SBA restricts the ability of SBICs to repurchase their capital stock. SBA regulations also include restrictions on a “change of control” or transfer of an SBIC and
require that SBICs invest idle funds in accordance with SBA regulations. In addition, our SBIC subsidiaries may also be limited in their ability to make distributions to us if
they do not have sufficient capital and/or distributed earnings, in accordance with SBA regulations.

19

 
 
Our SBIC subsidiaries are subject to regulation and oversight by the SBA, including requirements with respect to maintaining certain minimum financial ratios and
other covenants. Receipt of an SBIC license does not assure that our SBIC subsidiaries will receive SBA guaranteed debenture funding, which is dependent upon our SBIC
subsidiaries continuing to be in compliance with SBA regulations and policies. The SBA, as a creditor, will have a superior claim to our SBIC subsidiaries’ assets over our
stockholders in the event we liquidate our SBIC subsidiaries or the SBA exercises its remedies under the SBA-guaranteed debentures issued by our SBIC subsidiaries upon an
event of default.

No-action and Exemptive Relief Obtained

On May 11, 2020, we received approval from the SEC staff on our request for no-action relief that allows us to form the Adviser Subsidiary as a registered investment

adviser under the Advisers Act to provide investment management and other services to External Parties and to receive fee income for such services.

For information regarding our SEC exemptive relief, please see the section entitled “Regulation – Exemptive Relief Obtained” in our Annual Report on Form 10-K for

the year ended December 31, 2019, filed with the SEC on February 20, 2020 (the “2019 10-K”), which is incorporated by reference.

Compliance with the Securities Exchange Act of 1934 and Sarbanes-Oxley Act

We are subject to the reporting and disclosure requirements of the Exchange Act, including the filing of quarterly, annual and current reports, proxy statements and other

required items. In addition, we are subject to the Sarbanes-Oxley Act of 2002, which imposes a wide variety of regulatory requirements on publicly-held companies and their
insiders. For example:

•

•

•

•

pursuant to Rule 13a-14 of the Exchange Act, our Chief Executive Officer and Chief Financial Officer are required to certify the accuracy of the
consolidated financial statements contained in our periodic reports;

pursuant to Item 307 of Regulation S-K, our periodic reports are required to disclose our conclusions about the effectiveness of our disclosure controls and
procedures;

pursuant to Rule 13a-15 of the Exchange Act, our management is required to prepare a report regarding its assessment of our internal control over financial
reporting, which must be audited by our independent registered public accounting firm;

pursuant to Item 308 of Regulation S-K and Rule 13a-15 of the Exchange Act, our periodic reports must disclose whether there were significant changes in
our internal control over financial reporting or in other factors that could significantly affect these controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant deficiencies and material weaknesses.

The Sarbanes-Oxley Act requires us to review our policies and procedures to determine whether we comply with the Sarbanes-Oxley Act and the regulations

promulgated thereunder. We will continue to monitor our compliance with all future regulations that are adopted under the Sarbanes-Oxley Act and will take actions necessary
to ensure that we are in compliance therewith.

Compliance with The New York Stock Exchange (NYSE) Corporate Governance Regulations

Our common stock is listed on the NYSE under the symbol “HTGC.” As a listed company on the NYSE, we are subject to various listing standards including corporate

governance listing standards. We believe we are in compliance with such corporate governance listing standards. We intend to monitor our compliance with all future listing
standards and to take all necessary actions to ensure that we stay in compliance.

20

 
 
 
 
 
 
Brokerage Allocations and Other Practices

Because we generally acquire and dispose of our investments in privately negotiated transactions, we typically do not use brokers in the normal course of business.
However, from time to time, we may work with brokers to sell positions we have acquired in the securities of publicly listed companies or to acquire positions (principally
equity) in companies where we see a market opportunity to acquire such securities at attractive valuations. In cases where we do use a broker, we do not execute transactions
through any particular broker or dealer, but will seek to obtain the best net results for the Company, taking into account such factors as price (including the applicable brokerage
commission or dealer spread), size of order, difficulty of execution, and operational facilities of the firm and the firm’s risk and skill in positioning blocks of securities. While
we generally seek reasonably competitive execution costs, we may not necessarily pay the lowest spread or commission available. Subject to applicable legal requirements, we
may select a broker based partly upon brokerage or research services provided to us. In return for such services, we may pay a higher commission than other brokers would
charge if we determine in good faith that such commission is reasonable in relation to the services provided.
Investment Adviser Regulation

The Adviser Subsidiary, which is wholly owned by us, is subject to regulation under the Advisers Act. The Advisers Act establishes, among other things, recordkeeping

and reporting requirements, disclosure requirements, limitations on transactions between the adviser's account and an advisory client's account, limitations on transactions
between the accounts of advisory clients, and general anti-fraud prohibitions. The Adviser Subsidiary may be examined by the SEC from time to time for compliance with the
Advisers Act.

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following discussion is a general summary of certain material U.S. federal income tax considerations relating to our qualification and taxation as a RIC and the

acquisition, ownership and disposition of our preferred stock or common stock, but does not purport to be a complete description of the income tax considerations relating
thereto. Except as otherwise noted, this discussion assumes you are a taxable U.S. person (as defined for U.S. federal income tax purposes) and that you hold your shares of our
stock as capital assets for U.S. federal income tax purposes (generally, assets held for investment). This discussion is based upon current provisions of the Code, the regulations
promulgated thereunder and judicial and administrative authorities, all of which are subject to change or differing interpretations by the courts or the Internal Revenue Service,
or the IRS, possibly with retroactive effect. No attempt is made to present a detailed explanation of all U.S. federal income tax concerns affecting us and our shareholders
(including shareholders subject to special rules under U.S. federal income tax law).

The discussions set forth herein do not constitute tax advice. We have not sought and will not seek any ruling from the IRS regarding any matters discussed herein. No
assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to those set forth below. This summary does not discuss any aspects
of foreign, state or local tax. Prospective investors must consult their own tax advisers as to the U.S. federal income tax consequences (including the alternative minimum tax
consequences) of acquiring, holding and disposing of shares of our stock, as well as the effects of state, local, and non-U.S. tax laws.

Election to be Subject to Tax as a RIC

Through December 31, 2005, we were subject to U.S. federal income tax as an ordinary corporation under Subchapter C of the Code. Effective beginning on January 1,

2006, we met the criteria specified below to qualify as a RIC and elected to be treated as a RIC under Subchapter M of the Code with the filing of our U.S. federal income tax
return for 2006. To qualify for treatment as a RIC we must, among other things, meet certain source of income and asset diversification requirements (as described below). In
addition, we must distribute to our stockholders, in respect of each taxable year, dividends for federal income tax purposes of an amount generally at least equal to 90% of our
“investment company taxable income,” which is generally equal to the sum of our net ordinary income plus the excess of our realized net short-term capital gains over our
realized net long-term capital losses, determined without regard to any deduction for distributions paid, or the “Annual Distribution Requirement.” Upon satisfying these
requirements in respect of a taxable year, we generally will not be subject to corporate taxes on any income we distribute to our stockholders as dividends for federal income tax
purposes, which will allow us to reduce or eliminate our liability for corporate-level income tax.

21

 
 
 
Taxation as a Regulated Investment Company

For any taxable year in which we:

•

•

qualify as a RIC; and  

distribute dividends for federal income tax purposes to our shareholders of an amount at least equal to the Annual Distribution Requirement;

We generally will not be subject to U.S. federal income tax on the portion of our investment company taxable income and net capital gain (i.e., net realized long-term

capital gains in excess of net realized short-term capital losses) we distribute (or are deemed to distribute) as dividends for U.S. federal income tax purposes to stockholders with
respect to that taxable year.

We made the election to recognize built-in gains as of the effective date of our election to be treated as a RIC and therefore were not subject to built-in gains tax when
we sold those assets. However, if we subsequently acquire built-in gain assets from a C corporation in a carryover basis transaction, then we may be subject to tax on the gains
recognized by us on dispositions of such assets unless we make a special election to pay corporate-level tax on such built-in gain at the time the assets are acquired. We will be
subject to U.S. federal income tax at the regular corporate rates on any income or capital gains not distributed (or deemed distributed) as dividends for U.S. federal income tax
purposes to our stockholders.

In order to qualify as a RIC for federal income tax purposes and obtain the tax benefits of RIC status, in addition to satisfying the Annual Distribution Requirement, we

must, among other things:

•

•

•

have in effect at all times during each taxable year an election to be regulated as a BDC under the 1940 Act;

derive in each taxable year at least 90% of our gross income from (a) dividends, interest, payments with respect to certain securities loans, gains from the sale of
stock or other securities, or other income derived with respect to our business of investing in such stock or securities and (b) net income derived from an interest
in a “qualified publicly traded partnership”, or the 90% Income Test;

diversify our holdings so that at the end of each quarter of the taxable year:  

o

o

at the close of each quarter of each taxable year, at least 50% of the value of our assets consists of cash, cash equivalents, U.S. government
securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of
our assets or more than 10% of the outstanding voting securities of such issuer; and

at the close of each quarter of each taxable year, no more than 25% of the value of our assets is invested in (i) securities (other than U.S.
government securities or securities of other RICs) of one issuer, (ii) securities of two or more issuers that are controlled, as determined under
applicable tax rules, by us and that are engaged in the same or similar or related trades or businesses or (iii) securities of one or more “qualified
publicly traded partnerships”, or the Diversification Tests.

We may invest in partnerships which may result in our being subject to state, local, or foreign income, franchise or other tax liabilities.  In addition, some of the

income and fees that we may recognize will not be qualifying income under the 90% Income Test.  In order to mitigate the risk that such income and fees would disqualify us
as a RIC as a result of a failure to satisfy the 90% Income Test, we may be required to recognize such income and fees indirectly through one or more entities classified as
corporations for U.S. federal income tax purposes. Such corporations generally will be subject to corporate income taxes on their earnings, which ultimately will reduce our
return on such income and fees.

 As a RIC, we will be subject to a 4% nondeductible U.S. federal excise tax on certain undistributed income and gains unless we make distributions treated as
dividends for U.S. federal income tax purposes in a timely manner to our stockholders in respect of each calendar year of an amount at least equal to the sum of (1) 98% of our
ordinary income (taking into account certain deferrals and elections) for each calendar year, (2) 98.2% of our capital gain net income (adjusted for certain ordinary losses) for
the 1-year period ending October 31 of each such calendar year and (3) any ordinary income and capital gain net income realized, but not distributed, in preceding calendar
years, or the Excise Tax Avoidance Requirement. We are not subject to this excise tax on any amount on which we incurred U.S. federal corporate income tax (such as the tax
imposed on a RIC’s retained net capital gains).

Depending on the level of taxable income earned in a taxable year, we may choose to carry over taxable income in excess of current taxable year distributions treated

as dividends for U.S. federal income tax purposes from such taxable income into the next taxable year and incur a 4% excise tax on such taxable income, as required. The
maximum amount of excess taxable income that may be carried over for distribution in the next taxable year under the Code is the total amount of distributions treated as
dividends for U.S.

22

 
 
 
 
 
 
 
 
 
 
 
 
 
 
federal income tax purposes paid in the following taxable year, subject to certain declaration and payment guidelines. To the extent we choose to carry over taxable income into
the next taxable year, distributions declared and paid by us in a taxable year may differ from our taxable income for that taxable year as such distributions may include the
distribution of current taxable year taxable income, the distribution of prior taxable year taxable income carried over into and distributed in the current taxable year, or returns
of capital.

Under applicable Treasury regulations and other administrative guidance issued by the IRS, we are permitted to treat certain distributions payable in our stock as

taxable distributions that will satisfy the Annual Distribution Requirement as well as the Excise Tax Avoidance Requirement provided that shareholders have the opportunity to
elect to receive the distribution in cash. Taxable stockholders receiving such distributions will be required to include the full amount of the such distributions as ordinary income
(or as long-term capital gain to the extent such distribution is properly reported as a capital gain dividend) to the extent of our current and accumulated earnings and profits for
United States federal income tax purposes. As a result, a U.S. stockholder may be subject to tax with respect to such distributions in excess of any cash received. If a U.S.
stockholder sells the stock it receives as a distribution in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the distribution,
depending on the market price of our stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, we may be required to withhold U.S. tax with respect to
such distributions, including in respect of all or a portion of such distribution that is payable in stock. In addition, if a significant number of our stockholders determine to sell
shares of our stock in order to pay taxes owed on distributions, then such sales may put downward pressure on the trading price of our stock. We may in the future determine to
make taxable distributions that are payable in part in our common stock.

We may be required to recognize taxable income in circumstances in which we do not receive a corresponding payment in cash. For example, if we hold debt
obligations that are treated under applicable tax rules as having OID (such as debt instruments with PIK interest provisions or, in certain cases, increasing interest rates or debt
instruments that were issued with warrants), we must include in income each taxable year a portion of the OID that accrues over the life of the obligation, regardless of whether
cash representing such income is received by us in the same taxable year. Because any OID accrued is generally required to be included in our investment company taxable
income for the taxable year of accrual, we may be required to make a distribution to our stockholders in order to satisfy the Annual Distribution Requirement and the Excise Tax
Avoidance Requirement, even though we will not have received any corresponding cash amount.

Gain or loss realized by us from the sale or exchange of warrants acquired by us as well as any loss attributable to the lapse of such warrants generally will be treated as

capital gain or loss. Such gain or loss generally will be long-term or short-term, depending on how long we held a particular warrant.  

We are authorized to borrow funds and to sell assets in order to satisfy the Annual Distribution Requirement and the Excise Tax Avoidance Requirement, or
collectively, the Distribution Requirements. However, under the 1940 Act, we are not permitted to make distributions to our stockholders while our debt obligations and other
senior securities are outstanding unless certain “asset coverage” tests are met. See “Regulation—Senior Securities; Coverage Ratio.” We may be restricted from making
distributions under the terms of our debt obligations themselves unless certain conditions are satisfied. Moreover, our ability to dispose of assets to meet the Distribution
Requirements may be limited by (1) the illiquid nature of our portfolio, or (2) other requirements relating to our status as a RIC, including the Diversification Tests. If we
dispose of assets in order to meet the Distribution Requirements, we may make such dispositions at times that, from an investment standpoint, are not advantageous. If we are
prohibited from making distributions or are unable to obtain cash from other sources to make the distributions, we may fail to be subject to tax as a RIC, which would result in
us becoming subject to corporate-level income taxes.

In addition, we will be partially dependent on our SBIC subsidiaries for cash distributions to enable us to meet the RIC Distribution Requirements. Our SBIC

subsidiaries may be limited by the Small Business Investment Act of 1958, as amended, and SBA regulations governing SBICs, from making certain distributions to us that
may be necessary to maintain our status as a RIC. We may have to request a waiver of the SBA’s restrictions for our SBIC subsidiaries to make certain distributions to maintain
our RIC status. We cannot assure you that the SBA will grant such waiver. If our SBIC subsidiaries are unable to obtain a waiver, compliance with the SBA regulations may
cause us to fail to be subject to tax as a RIC, which would result in us becoming subject to corporate-level income taxes.

Certain of our investment practices are subject to special and complex U.S. federal income tax provisions that may, among other things, (i) convert distributions that

would otherwise constitute qualified dividend income into ordinary income, (ii) treat distributions that would otherwise be eligible for deductions available to certain U.S.
corporations under the Code as ineligible for such treatment, (iii) disallow, suspend or otherwise limit the allowance of certain losses or deductions, (iv) convert long-term
capital gains into short-term capital gains or ordinary income, (v) convert short-term capital losses into long-term capital losses, (vi) convert an ordinary loss or deduction into a
capital loss (the deductibility of which is more limited), (vii) cause us to recognize income or gain without a corresponding receipt of cash, (viii) adversely alter the
characterization of certain complex financial transactions, and (ix)

23

 
 
produce gross income that will not constitute qualifying gross income for purposes of the 90% Income Test. These rules also could affect the amount, timing and character of
distributions to stockholders.

A RIC is limited in its ability to deduct expenses in excess of its “investment company taxable income.” If our otherwise deductible expenses in a given taxable year

exceed our ordinary taxable gross income (e.g., as the result of large amounts of equity-based compensation), we would incur a net operating loss for that taxable year.
However, a RIC is not permitted to carry back or carry forward net operating losses, respectively, to prior and subsequent taxable years, and such net operating losses do not
pass through to the RIC’s stockholders. In addition, deductible expenses can be used only to offset investment company taxable income, not net capital gain. A RIC may not use
any net capital losses (that is, realized capital losses in excess of realized capital gains) to offset the RIC’s investment company taxable income, but may carry forward such net
capital losses, and generally use them to offset capital gains indefinitely. Due to these limits on the deductibility of expenses and net capital losses, we may for tax purposes
have aggregate taxable income for several taxable years that we are required to distribute and that is taxable to our stockholders even if such taxable income is greater than the
aggregate net income we actually earned during those taxable years. Such required distributions may be made from our cash assets or by liquidation of investments, if
necessary. We may realize gains or losses from such liquidations. In the event we realize net capital gains from such transactions, you may receive a larger capital gain
distribution than you would have received in the absence of such transactions.

Investment income received from sources within foreign countries, or capital gains earned by investing in securities of foreign issuers, may be subject to foreign

income taxes withheld at the source. In this regard, withholding tax rates in countries with which the United States does not have a tax treaty are often as high as 35% or more.
The United States has entered into tax treaties with many foreign countries that may entitle us to a reduced rate of tax or exemption from tax on this related income and gains.
The effective rate of foreign tax cannot be determined at this time since the amount of our assets to be invested within various countries is not now known. We do not anticipate
being eligible for the special election that allows a RIC to treat foreign income taxes paid by such RIC as having been paid by its shareholders.

If we acquire the equity securities of certain foreign corporations that earn at least 75% of their annual gross income from passive sources (such as interest, dividends,
rents, royalties or capital gain) or hold at least 50% of their total assets in investments producing such passive income, or PFICs, we could be subject to federal income tax and
additional interest charges on “excess distributions” received from such companies or gain from the sale of stock in such companies, even if all income or gain actually received
by us is timely distributed to our shareholders to the extent that such income or gain is attributable to our ownership of PFIC stock in a prior taxable year. We would not be able
to pass through to our shareholders any credit or deduction for such a tax. Certain elections may, if available, ameliorate these adverse tax consequences, but any such election
could require us to recognize taxable income or gain without the concurrent receipt of cash. We intend to limit and/or manage our holdings in PFICs to minimize our liability
for any such taxes and related interest charges.

If we hold greater than 10% of the interests treated as equity for U.S. federal income tax purposes in a foreign corporation that is treated as a controlled foreign
corporation, or CFC, we may be treated as receiving a deemed distribution (taxable as ordinary income) each taxable year from such foreign corporation in an amount equal to
our pro rata share of the corporation’s income for such taxable year (including both ordinary earnings and capital gains), whether or not the corporation makes an actual
distribution during such taxable year. We would be required to include the amount of a deemed distribution from a CFC when computing our investment company taxable
income as well as in determining whether we satisfy the distribution requirements applicable to RICs, even to the extent the amount of our income deemed recognized from the
CFC exceeds the amount of any actual distributions from the CFC and our proceeds from any sales or other dispositions of CFC stock during a taxable year.  In general, a
foreign corporation will be considered a CFC if greater than 50% of the shares of the corporation, measured by reference to combined voting power or value, is owned (directly,
indirectly or by attribution) by U.S. Shareholders. A “U.S. Shareholder,” for this purpose, is any U.S. person that possesses (actually or constructively) 10% or more of the
combined voting power or value of all classes of shares of a foreign corporation. Income derived by us from a CFC would generally constitute qualifying income for purposes
of determining our ability to be subject to tax as a RIC if the CFC makes distributions of that income to us in the same year of the CFC in which we are treated as having
received a deemed distribution of such income or if the income is derived with respect to our business of investing in stocks and securities. As such, we may limit and/or
manage our holdings in issuers that could be treated as CFCs in order to limit our tax liability or maximize our after-tax return from these investments.

Our functional currency, for U.S. federal income tax purposes, is the U.S. dollar. Under the Code, foreign exchange gains and losses realized by us in connection with
certain transactions involving foreign currencies, or payables or receivables denominated in a foreign currency, as well as certain non-U.S. dollar denominated debt securities,
certain foreign currency futures contracts, foreign currency option contracts, foreign currency forward contracts, and similar financial instruments are subject to Code provisions
that generally treat such gains and losses as ordinary income and losses and may affect the amount, timing and character of distributions to our stockholders. Any such
transactions that are not directly related to our investment in securities (possibly including speculative currency positions or currency derivatives not used for hedging purposes)
also could, under future Treasury regulations, produce income not among the types of “qualifying income” from which a RIC must derive at least 90% of its annual gross
income.

24

 
 
Failure to Qualify as a Regulated Investment Company

If we fail to satisfy the 90% Income Test or the Diversification Tests for any taxable year, we may nevertheless continue to qualify as a RIC for such taxable year if

certain relief provisions are applicable (which may, among other things, require us to pay certain corporate-level federal taxes or to dispose of certain assets).

If we were unable to qualify for treatment as a RIC and the foregoing relief provisions are not applicable, we would be subject to tax on all of our taxable income at

regular corporate rates. We would not be able to deduct distributions to stockholders, nor would they be required to be made. Such distributions would be taxable to our
stockholders and provided certain holding period and other requirements were met, could qualify for treatment as “qualified dividend income” eligible for the 20% maximum
U.S. federal income tax rate if earned by certain U.S. resident non-corporate stockholders to the extent of our current and accumulated earnings and profits. Subject to certain
limitations under the Code, corporate distributions generally would be eligible for the dividends-received deduction with respect to distributions current and accumulated
earnings and profits if earned by certain U.S. resident corporate stockholders. Distributions in excess of our current and accumulated earnings and profits would be treated first
as a return of capital to the extent of the stockholder’s tax basis, and any remaining distributions would be treated as a capital gain. To requalify as a RIC in a subsequent taxable
year, we would be required to satisfy the RIC qualification requirements for that taxable year and dispose of any earnings and profits from any taxable year in which we failed
to qualify as a RIC. Subject to a limited exception applicable to a corporation that qualified as a RIC under Subchapter M of the Code for at least one taxable year prior to
disqualification and that requalify as a RIC no later than the second taxable year following the nonqualifying taxable year, we also could be subject to tax on any unrealized net
built-in gains in the assets held by us during the period in which we failed to qualify as a RIC that are recognized within the subsequent five taxable years, unless we made a
special election to incur a corporate-level income tax on such built-in gain at the time of our requalification as a RIC.

DETERMINATION OF NET ASSET VALUE

We determine the NAV per share of our common stock quarterly. The NAV per share is equal to the value of our total assets minus liabilities and any preferred stock

outstanding divided by the total number of shares of common stock outstanding. As of the date of this report, we do not have any preferred stock outstanding.

At December 31, 2020, approximately 89.7% of our total assets represented investments in portfolio companies whose fair value is determined in good faith by the

Board of Directors. Value, as defined in Section 2(a)(41) of the 1940 Act, is (i) the market price for those securities for which a market quotation is readily available and (ii) for
all other securities and assets, fair value is as determined in good faith by the Board of Directors. Our investments are carried at fair value in accordance with the 1940 Act and
ASC Topic 946 and measured in accordance with ASC Topic 820, Fair Value Measurements and Disclosures. Our debt securities are primarily invested in venture capital-
backed companies in technology-related industries including technology, drug discovery and development, biotechnology, life sciences, healthcare, and sustainable and
renewable technology at all stages of development. Given the nature of lending to these types of businesses, substantially all of our investments in these portfolio companies are
considered Level 3 assets under ASC Topic 820 because there is no known or accessible market or market indexes for these investment securities to be traded or exchanged. As
such, we value substantially all of our investments at fair value as determined in good faith pursuant to a consistent valuation policy by our Board of Directors in accordance
with the provisions of ASC Topic 820 and the 1940 Act. Due to the inherent uncertainty in determining the fair value of investments that do not have a readily available market
value, the fair value of our investments determined in good faith by our Board of Directors may differ significantly from the value that would have been used had a readily
available market existed for such investments, and the differences could be material.

We intend to continue to engage one or more independent valuation firm(s) to provide us with assistance regarding our determination of the fair value of selected
portfolio investments each quarter unless directed by the Board of Directors to cancel such valuation services. Specifically, on a quarterly basis, we will identify portfolio
investments with respect to which an independent valuation firm will assist in valuing. We select these portfolio investments based on a number of factors, including, but not
limited to, the potential for material fluctuations in valuation results, credit quality and the time lapse since the last valuation of the portfolio investment by an independent
valuation firm. The scope of the services rendered by an independent valuation firm is at the discretion of the Board of Directors. Our Board of Directors is ultimately, and
solely, responsible for determining the fair value of our investments in good faith.

See “Note 2 – Summary of Significant Accounting Policies” in the notes to the consolidated financial statements for a detailed discussion of our investment portfolio

valuation process and procedures.

25

 
 
Determinations in Connection with Offerings

We have received approval from our stockholders to issue shares of our common stock at a price below its then NAV per share, subject to certain limitations and with
the approval of our independent directors. The approval expires on June 12, 2021. In connection with each offering of shares of our common stock, the Board of Directors or a
committee thereof is required to make the determination that we are not selling shares of our common stock at a price below our then current NAV at the time at which the sale
is made, unless it is determined by the Board of Directors that such sale is in the best interests of our stockholders. The Board of Directors considers the following factors,
among others, in making such determination:

•

•

•

the NAV of our common stock disclosed in the most recent periodic report we filed with the SEC;

our management’s assessment of whether any material change in the NAV has occurred (including through the realization of net gains on the sale of our
portfolio investments) from the period beginning on the date of the most recently disclosed NAV to the period ending two days prior to the date of the sale of
our common stock; and

the magnitude of the difference between (i) a value that our Board of Directors or an authorized committee thereof has determined reflects the current NAV of
our common stock, which is generally based upon the NAV of our common stock disclosed in the most recent periodic report that we filed with the SEC, as
adjusted to reflect our management’s assessment of any material change in the NAV of our common stock since the date of the most recently disclosed NAV
of our common stock, and (ii) the offering price of the shares of our common stock in the proposed offering.

Importantly, this determination does not require that we calculate NAV in connection with each offering of shares of our common stock, but instead it involves the

determination by the Board of Directors or a committee thereof that we are not selling shares of our common stock at a price below the then current NAV at the time at which
the sale is made.

Moreover, to the extent that there is a possibility that we may (i) issue shares of our common stock at a price below the then current NAV of our common stock at the
time at which the sale is made or (ii) trigger the undertaking (which we will provide to the SEC in a registration statement to which a prospectus will be a part) to suspend the
offering of shares of our common stock pursuant to a prospectus if the NAV fluctuates by certain amounts in certain circumstances until such prospectus is amended, the Board
of Directors or a committee thereof will elect, in the case of clause (i) above, either to postpone the offering until such time that there is no longer the possibility of the
occurrence of such, events or to undertake to determine NAV within two days prior to any such sale to ensure that such sale will not be below our then current NAV, and, in the
case of clause (ii) above, to comply with such undertaking or to undertake to determine NAV to ensure that such undertaking has not been triggered.

These processes and procedures are part of our compliance policies and procedures. Records will be made contemporaneously with all determinations described in this

section and these records will be maintained with other records we are required to maintain under the 1940 Act.

26

 
 
 
 
 
Item 1A.

  Risk Factors

Investing in our securities may be speculative and involves a high degree of risk. You should consider carefully the risks described below and all other information

contained in this Annual Report, including our financial statements and the related notes and the schedules and exhibits to this Annual Report. The risks set forth below are not
the only risks we face. Additional risks and uncertainties not presently known to us or not presently deemed material by us may also impair our operations and performance. If
any of the following risks occur, our business, financial condition, and results of operations could be materially adversely affected. In such case, our NAV and the trading price
of our securities could decline, and you may lose all or part of your investment.

The following is a summary of the principal risk factors associated with an investment in us:

 SUMMARY OF RISK FACTORS

•

•

•

•

•

•

•

•

•

•

•

•

•

As an internally managed BDC, we are subject to certain restrictions that may adversely affect our business and are dependent upon the availability of key
management personnel for our future success. If we are not able to hire and retain qualified personnel, or if we lose any member of our senior management team,
our ability to implement our business strategy could be significantly harmed.

Our business model depends (to a significant extent) upon strong referral relationships with venture capital and private equity fund sponsors, and our inability to
develop or maintain these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business.

We operate in a highly competitive market for investment opportunities.

Regulations governing our operations as a BDC may affect our ability to, and the manner in which, we raise additional capital. If additional funds are unavailable
or not available on favorable terms, our ability to grow will be impaired.  

Our operating flexibility and financial condition could be negatively affected if we fail to qualify as a BDC or RIC.

Because we have substantial indebtedness, there could be increased risk in investing in our company.

There is a risk that you may not receive distributions or that our distributions may not grow over time.

We are exposed to risks associated with changes in interest rates.

The discontinuation of LIBOR may affect the value of the financial obligations to be held or issued by us that are linked to LIBOR.

Our financial results could be negatively affected if a significant portfolio investment fails to perform as expected.

Our investments may be in portfolio companies that have limited operating histories and resources.

Our investment strategy focuses on technology-related companies, which are subject to many risks, including volatility, intense competition, shortened product life
cycles, changes in regulatory and governmental programs and periodic downturns, and you could lose all or part of your investment.

Price declines and illiquidity in the corporate debt markets could adversely affect the fair value of our portfolio investments, reducing our NAV through increased
net unrealized depreciation.

27

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

Economic recessions or slowdowns could impair the ability of our portfolio companies to repay loans, which, in turn, could increase our non-performing assets,
decrease the value of our portfolio, reduce our volume of new loans and have a material adverse effect on our results of operations.

Our portfolio companies may be unable to repay or refinance outstanding principal on their loans at or prior to maturity, and rising interest rates may make it more
difficult for portfolio companies to make periodic payments on their loans.

Any unrealized depreciation we experience on our investment portfolio may be an indication of future realized losses, which could reduce our income available for
distribution and could impair our ability to service our borrowings.

A lack of IPO or merger and acquisition opportunities may cause companies to stay in our portfolio longer, leading to lower returns, unrealized depreciation, or
realized losses.

The majority of our portfolio companies will need multiple rounds of additional financing to repay their debts to us and continue operations. Our portfolio
companies may not be able to raise additional financing, which could harm our investment returns.

If the assets securing the loans that we make decrease in value, then we may lack sufficient collateral to cover losses.  We may suffer a loss if a portfolio company
defaults on a loan and the underlying collateral is not sufficient.

An investment strategy focused on privately-held companies presents certain challenges, including the lack of available information about these companies, a
dependence on the talents and efforts of only a few key portfolio company personnel, and a greater vulnerability to economic downturns.

If our portfolio companies are unable to protect their intellectual property rights or are required to devote significant resources to protecting their intellectual
property rights, then our investments could be harmed.

We generally will not control our portfolio companies.

The lack of liquidity in our investments may adversely affect our business and, if we need to sell any of our investments, we may not be able to do so at a favorable
price.

Our warrant and equity-related investments are highly speculative, and we may not realize gains from these investments.

Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our return on equity.

Our common stock may trade below its NAV per share, which limits our ability to raise additional equity capital.

Our common stock price has been and continues to be volatile and may decrease substantially.

The effects of the outbreak of COVID-19 have negatively affected the global economy and the United States economy, and may disrupt our operations, which
could have an adverse effect on our business, financial condition and results of operations.

We may be the target of litigation.

Changes in laws or regulations governing our business could negatively affect the profitability of our operations.

Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also have a material adverse effect on our business,

financial condition and/or operating results.

28

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risks Related to our Business Structure

As an internally managed BDC, we are subject to certain restrictions that may adversely affect our business.

As an internally managed BDC, the size and categories of our assets under management is limited, and we are unable to offer as wide a variety of financial products to
prospective portfolio companies and sponsors (potentially limiting the size and diversification of our asset base). We therefore may not achieve efficiencies of scale and greater
management resources available to externally managed business development companies. In addition, if we fail to comply with restrictions applicable to an internally managed
BDC, for example with respect to the portion of our assets representing qualifying assets, we may be subject to further restrictions that could have a negative impact on our
business. See “Item 1. Business — Regulation.”

Additionally, as an internally managed BDC, our ability to offer more competitive and flexible compensation structures, such as offering both a profit-sharing plan and

an equity incentive plan, is subject to the limitations imposed by the 1940 Act, which limits our ability to attract and retain talented investment management professionals. As
such, these limitations could inhibit our ability to grow, pursue our business plan and attract and retain professional talent, any or all of which may have a negative impact on
our business, financial condition and results of operations.

 As an internally managed BDC, we are dependent upon the availability of key management personnel for our future success, particularly Scott Bluestein, and if we are
not able to hire and retain qualified personnel, or if we lose any member of our senior management team, our ability to implement our business strategy could be
significantly harmed.

As an internally managed BDC, our ability to achieve our investment objectives and to make distributions to our stockholders depends upon the performance of our

senior management. We depend upon the members of our senior management, particularly Mr. Bluestein, as well as other key personnel for the identification, final selection,
structuring, closing and monitoring of our investments. These employees have critical industry experience and relationships on which we rely to implement our business plan. If
we lose the services of Mr. Bluestein or any senior management members, we may not be able to operate the business as we expect, and our ability to compete could be harmed,
which could cause our operating results to suffer. Furthermore, we do not have an employment agreement with Mr. Bluestein or our senior management that restricts them from
creating new investment vehicles subject to compliance with applicable law. We believe our future success will depend, in part, on our ability to identify, attract and retain
sufficient numbers of highly skilled employees. If we do not succeed in identifying, attracting and retaining such personnel, we may not be able to operate our business as we
expect. In connection with our recruiting, branding and marketing efforts, we may, among other things, make charitable contributions in amounts we believe to be immaterial
and that do not exceed $500,000 in the aggregate in any year. We believe that many of these contributions help us raise our profile in the communities and benefit us in
attracting and retaining talent and investment opportunities.

As an internally managed BDC, our compensation structure is determined and set by our Board of Directors. This structure currently includes salary and bonus and

incentive compensation, which is issued through grants and subsequent vesting of restricted stock. We are not generally permitted by the 1940 Act to employ an incentive
compensation structure that directly ties performance of our investment portfolio and results of operations to compensation owing to our granting of restricted stock as incentive
compensation.

Members of our senior management may receive offers of more flexible and attractive compensation arrangements from other companies, particularly from investment
advisers to externally managed BDCs that are not subject to the same limitations on incentive-based compensation that we, as an internally managed BDC are subject to. We do
not currently have agreements with certain members of our senior management that prohibit them from leaving and competing with our business and certain States limit our
ability to have such agreements. A departure by one or more members of our senior management could have a negative impact on our business, financial condition and results
of operations.

Our business model depends to a significant extent upon strong referral relationships with venture capital and private equity fund sponsors, and our inability to develop
or maintain these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business.

We expect that members of our management team will maintain their relationships with venture capital and private equity firms, and we will rely to a significant extent

upon these relationships to provide us with our deal flow. If we fail to maintain our existing relationships, our relationships become strained as a result of enforcing our rights
with respect to non-performing portfolio companies in protecting our investments or we fail to develop new relationships with other firms or sources of investment
opportunities, then we will not be able to grow our investment portfolio. In addition, persons with whom members of our management team have relationships are not obligated
to provide us with investment opportunities and, therefore, there is no assurance that such relationships will lead to the origination of debt or other investments.

29

 
 
We operate in a highly competitive market for investment opportunities, and we may not be able to compete effectively.

A number of entities compete with us to make the types of investments that we plan to make in prospective portfolio companies. We compete with a large number of
venture capital and private equity firms, as well as with other investment funds, business development companies, investment banks and other sources of financing, including
traditional financial services companies such as commercial banks and finance companies. Many of our competitors are substantially larger and have considerably greater
financial, technical, marketing and other resources than we do. For example, some competitors may have a lower cost of funds and/or access to funding sources that are not
available to us. This may enable some competitors to make loans with interest rates that are comparable to or lower than the rates that we typically offer.

A significant increase in the number and/or the size of our competitors, including traditional commercial lenders and other financing sources, in technology-related

industries could force us to accept less attractive investment terms. We may be unable to capitalize on certain opportunities if we do not match competitors’ pricing, terms and
structure. If we do match competitors’ pricing, terms or structure, we may experience decreased net interest income and increased risk of credit losses. In addition, some of our
competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments, establish more relationships and
build their market shares. An increasing number of competitors may also have the effect of compressing our margins, which could harm our ability to retain employees,
increase our operating costs, and decrease the amount and frequency of future distributions. Furthermore, many potential competitors are not subject to the regulatory
restrictions that the 1940 Act imposes on us as a BDC or that the Code imposes on us as a RIC. If we are not able to compete effectively, our business, financial condition, and
results of operations will be adversely affected. As a result of this competition, there can be no assurance that we will be able to identify and take advantage of attractive
investment opportunities, or that we will be able to fully invest our available capital.

If we are unable to manage our future growth effectively, we may be unable to achieve our investment objective, which could adversely affect our financial condition and
results of operations and cause the value of your investment to decline.

Our ability to achieve our investment objective will depend on our ability to sustain growth. Sustaining growth will depend, in turn, on our senior management team’s

ability to identify, evaluate, finance and invest in suitable companies that meet our investment criteria. Accomplishing this result on a cost-effective basis is largely a function of
our marketing capabilities, our management of the investment process, our ability to provide efficient services and our access to financing sources on acceptable terms.
Organizational growth and scale-up of our investments could strain our existing managerial, investment, financial and other resources. Management of our growth could divert
financial resources from other projects. Failure to manage our future growth effectively could lead to a decrease in our future distributions and have a material adverse effect on
our business, financial condition and results of operations.

Because we intend to distribute substantially all of our income to our stockholders in order to qualify as a RIC, we will continue to need additional capital to finance our
growth. If additional funds are unavailable or not available on favorable terms, our ability to grow will be impaired.

In order to satisfy the tax requirements applicable to a RIC and to minimize or avoid being subject to income and excise taxes, we intend to make distributions to our

stockholders treated as dividends for U.S. federal income tax purposes generally of an amount at least equal to substantially all of our net ordinary income and realized net
capital gains except for certain realized net capital gains, which we may retain, pay applicable income taxes with respect thereto and elect to treat as deemed distributions to our
stockholders. As a BDC, we generally are required to meet a coverage ratio of total assets to total borrowings and other senior securities, which includes all of our borrowings
and any preferred stock that we may issue in the future, of at least 150%, subject to certain disclosure requirements. This requirement limits the amount that we may borrow.
This limitation may prevent us from incurring debt (including under any of our existing revolving credit facilities) and require us to raise additional equity at a time when it may
be disadvantageous to do so. We cannot assure you that debt and equity financing will be available to us on favorable terms, or at all, and debt financings may be restricted by
the terms of any of our outstanding borrowings. If we are unable to incur additional debt, we may be required to raise additional equity at a time when it may be
disadvantageous to do so. In addition, shares of closed-end investment companies, including BDCs, have recently traded at discounts to their NAV.

This characteristic of closed-end investment companies, including BDCs, is separate and distinct from the risk that our NAV per share may decline. We cannot predict

whether shares of our common stock will trade above, at or below our NAV. If our common stock trades below its NAV, we generally will not be able to issue additional
shares of our common stock at its market price without first obtaining the approval for such issuance from our stockholders and our independent directors. If additional funds
are not available to us, we could be forced to curtail or cease new lending and investment activities, and our NAV could decline. In addition, our results of operations and
financial condition could be adversely affected.

30

 
 
 
Because most of our investments typically are not in publicly-traded securities, there is uncertainty regarding the value of our investments, which could adversely affect
the determination of our NAV.

At December 31, 2020, portfolio investments, whose fair value is determined in good faith by the Board of Directors, were approximately 89.7% of our total assets. We
expect our investments to continue to consist primarily of securities issued by privately-held companies, the fair value of which is not readily determinable. In addition, we are
not permitted to maintain a general reserve for anticipated loan losses. Instead, we are required by the 1940 Act to specifically value each investment and record an unrealized
gain or loss for any asset that we believe has increased or decreased in value.

There is no single standard for determining fair value in good faith. We value these securities at fair value as determined in good faith by our Board of Directors, based

on the recommendations of our Audit Committee. In making a good faith determination of the value of these securities, we generally start with the cost basis of each security,
which includes the amortized OID and PIK interest, if any. The Audit Committee uses its best judgment in arriving at the fair value of these securities. As a result, determining
fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while applying a valuation process for the types of investments
we make, which includes but is not limited to deriving a hypothetical exit price.

However, the Board of Directors retains ultimate authority as to the appropriate valuation of each investment. Because such valuations are inherently uncertain and may

be based on estimates, our determinations of fair value may differ materially from the values that would be assessed if a ready market for these securities existed. We adjust
quarterly the valuation of our portfolio to reflect the Board of Directors’ determination of the fair value of each investment in our portfolio. Any changes in fair value are
recorded in our statements of operations as net change in unrealized appreciation or depreciation. Our NAV could be adversely affected if our determinations regarding the fair
value of our investments were materially higher than the values that we ultimately realize upon the disposal of such securities.

Recently passed legislation allows us to incur additional leverage, which may increase the risk of investing with us.

Historically, the 1940 Act generally prevented us, as BDC, from incurring indebtedness unless immediately after such borrowing we had an asset coverage for total
borrowings of at least 200% (i.e., the amount of debt may not exceed 50% of the value of our assets). The SBCAA, which was signed into law in March 2018, modifies this
section of the 1940 Act and decreases this percentage from 200% to 150% (subject to either stockholder approval or approval of both a majority of the board of directors and a
majority of directors who are not interested persons). On September 4, 2018 and December 6, 2018, our Board of Directors, including a “required majority” (as such term is
defined in Section 57(o) of the 1940 Act) and our stockholders, respectively, approved the application to us of the 150% minimum asset coverage ratio set forth in Section 61(a)
(2) of the 1940 Act.  As a result, as of December 7, 2018, we are able to incur additional indebtedness, subject to certain disclosure requirements and, therefore, your risk of an
investment in us may increase. Rating agencies may also decide to review our credit ratings and those of other business development companies in light of this new law as well
as any corresponding changes to asset coverage ratios and consider downgrading such ratings, including a downgrade from an investment grade rating to a non-investment
grade rating. Such a downgrade in our credit ratings may adversely affect our securities. See “—A downgrade, suspension or withdrawal of the credit rating assigned by a
rating agency to us or our debt securities, if any, or change in the debt markets could cause the liquidity or market value of our debt securities to decline significantly.”

Because we have substantial indebtedness, there could be increased risk in investing in our company.

Lenders have fixed dollar claims on our assets that are superior to the claims of stockholders, and we have granted, and may in the future grant, lenders a security

interest in our assets in connection with borrowings. In the case of a liquidation event, those lenders would receive proceeds before our stockholders. In addition, borrowings,
also known as leverage, magnify the potential for gain or loss on amounts invested and, therefore, increase the risks associated with investing in our securities. Leverage is
generally considered a speculative investment technique. If the value of our assets increases, then leverage would cause the NAV attributable to our common stock to increase
more than it otherwise would have had we not leveraged. Conversely, if the value of our assets decreases, leverage would cause the NAV attributable to our common stock to
decline more than it otherwise would have had we not used leverage. Similarly, any increase in our revenue in excess of interest expense on our borrowed funds would cause
our net income to increase more than it would without the leverage. Any decrease in our revenue would cause our net income to decline more than it would have had we not
borrowed funds and could negatively affect our ability to make distributions on common stock. Our ability to service any debt that we incur will depend largely on our financial
performance and will be subject to prevailing economic conditions and competitive pressures. We and, indirectly, our stockholders will bear the cost associated with our
leverage activity. If we are not able to service our substantial indebtedness, our business could be harmed materially.

31

 
 
  Our secured credit facilities with Wells Fargo Capital Finance, LLC, or the Wells Facility, and MUFG Union Bank, N.A., or the Union Bank Facility and, together
with the Wells Facility, our Credit Facilities, our 2022 Notes, our July 2024 Notes, our February 2025 Notes, our April 2025 Notes, our June 2025 Notes, our March 2026 A
Notes, our 2033 Notes, our 2027 Asset-Backed Notes, our 2028 Asset-Backed Notes, and our 2022 Convertible Notes (as each term is defined below) contain financial and
operating covenants that could restrict our business activities, including our ability to declare dividend distributions if we default under certain provisions.

 As of December 31, 2020, we had no borrowings outstanding under the Wells Facility and the Union Bank Facility. As of December 31, 2020, we had approximately

$99.0 million of indebtedness outstanding incurred by our SBIC subsidiary, approximately $150.0 million in aggregate principal amount of 4.625% notes due 2022, or the 2022
Notes, approximately $105.0 million in aggregate principal amount of 4.77% notes due 2024, or the July 2024 Notes, approximately $50.0 million in aggregate principal
amount of 4.28% notes due February 2025, or the February 2025 Notes, approximately $75.0 million in aggregate principal amount of 5.25% notes due April 2025, or the April
2025 Notes, approximately $70.0 million in aggregate principal amount of 4.31% notes due June 2025, or the June 2025 Notes, approximately $50.0 million in aggregate
principal amount of 4.50% notes due March 2026, or the March 2026 A notes, approximately $40.0 million in aggregate principal amount of 6.25% notes due 2033, or the 2033
Notes, approximately $181.0 million in aggregate principal amount of fixed rate asset-backed notes issued in November 2018, or the 2027 Asset-Backed Notes, approximately
$250.0 million in aggregate principal amount of fixed rate asset-backed notes issued in January 2019, or the 2028 Asset-Backed Notes, and approximately $230.0 million in
aggregate principal amount of 4.375% convertible notes due 2022, or the 2022 Convertible Notes.

There can be no assurance that we will be successful in obtaining any additional debt capital on terms acceptable to us or at all. If we are unable to obtain debt capital,

then our equity investors will not benefit from the potential for increased returns on equity resulting from leverage to the extent that our investment strategy is successful and we
may be limited in our ability to make new commitments or fundings to our portfolio companies.

As discussed in the previous risk factor, we are only permitted to incur indebtedness if immediately after such borrowing we have an asset coverage for total borrowings

of at least 150%. In addition, we may not be permitted to declare any cash distribution on our outstanding common shares, or purchase any such shares, unless, at the time of
such declaration or purchase, we have asset coverage of at least 150% after deducting the amount of such distribution or purchase price. If this ratio declines below 150%, we
may not be able to incur additional debt and may need to sell a portion of our investments to repay debt when it is disadvantageous to do so, and we may not be able to make
distributions. As of December 31, 2020, our asset coverage ratio under our regulatory requirements as a BDC was 207.5% excluding our SBIC debentures as a result of our
exemptive order from the SEC that allows us to exclude all SBA leverage from our asset coverage ratio and was 199.3% when including all SBA leverage.

Based on assumed leverage equal to 100.6% of our net assets as of December 31, 2020, our investment portfolio would have been required to experience an annual

return of at least 2.5% to cover annual interest payments.

Illustration. The following table illustrates the effect of leverage on returns from an investment in our common stock assuming that we employ (1) our actual asset

coverage ratio as of December 31, 2020, (excluding our SBA debentures as permitted by our exemptive relief), (2) a hypothetical asset coverage ratio of 200% (excluding our
SBA debentures as permitted by our exemptive relief), and (3) a hypothetical asset coverage ratio of 150% (excluding our SBA debentures as permitted by our exemptive
relief), each at various annual returns on our portfolio as of December 31, 2020, net of expenses.

The calculations in the table below are hypothetical, and actual returns may be higher or lower than those appearing in the table below.

Corresponding return to common stockholder assuming our actual asset coverage of 207.5% as of December
31, 2020 (1)
Corresponding return to common stockholder assuming 200% asset coverage (2)
Corresponding return to common stockholder assuming 150% asset coverage (3)

Annual Return on Our Portfolio
(Net of Expenses)
0%  

-5%  

-10%

5%  

10%  

(25.45 %) 
(26.49 %) 
(41.57 %) 

(15.29 %) 
(15.99 %) 
(26.08 %) 

(5.13 %) 
(5.49 %) 
  (10.58%) 

5.02 % 
5.02 % 
4.92 % 

  15.18 %
  15.52 %
  20.41 %

(1)

(2)

Assumes $2.6 billion in total assets, $1.3 billion in debt outstanding, $1.3 billion in stockholders’ equity, and an average cost of funds of 5.1%, which is the approximate average cost of borrowed
funds, including our SBA debentures, 2022 Notes, July 2024 Notes, February 2025 Notes, April 2025 Notes, June 2025 Notes, March 2026 A Notes, 2033 Notes, 2027 Asset-Backed Notes, 2028
Asset-Backed Notes, 2022 Convertible Notes, and Credit Facilities for the period ended December 31, 2020. Actual interest payments may be different.

Assumes $2.7 billion in total assets including debt issuance costs on a pro forma basis, $1.4 billion in debt outstanding, $1.3 billion in stockholders’ equity, and an average cost of funds of 5.1%,
which is the approximate average cost of borrowed funds, including our SBA debentures, 2022 Notes, July 2024 Notes, February 2025 Notes, April 2025 Notes, June 2025 Notes, March 2026 A
Notes, 2033 Notes, 2027 Asset-Backed Notes, 2028 Asset-Backed Notes, 2022 Convertible Notes, and Credit Facilities for the period ended December 31, 2020, along with the hypothetical
estimated incremental cost of debt that would be incurred on offering the maximum permissible debt under the 200% asset coverage. Actual interest payments may be different.

32

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(3)

Assumes $4.0 billion in total assets including debt issuance costs on a pro forma basis, $2.7 billion in debt outstanding, $1.3 billion in stockholders’ equity, and an average cost of funds of 5.1%,
which is the approximate average cost of borrowed funds, including our SBA debentures, 2022 Notes, July 2024 Notes, February 2025 Notes, April 2025 Notes, June 2025 Notes, March 2026 A
Notes, 2033 Notes, 2027 Asset-Backed Notes, 2028 Asset-Backed Notes, 2022 Convertible Notes, and Credit Facilities for the period ended December 31, 2020, along with the hypothetical
estimated incremental cost of debt that would be incurred on offering the maximum permissible debt under the 150% asset coverage. Actual interest payments may be different.

It is likely that the terms of any current or future long-term or revolving credit or warehouse facility we may enter into in the future could constrain our ability to grow
our business.

Under our borrowings and our Credit Facilities, current lenders have, and any future lender or lenders may have, fixed dollar claims on our assets that are senior to the

claims of our stockholders and, thus, will have a preference over our stockholders with respect to our assets pledged as collateral under the Credit Facilities. Our Credit
Facilities and borrowings also subject us to various financial and operating covenants, including, but not limited to, maintaining certain financial ratios and minimum tangible
net worth amounts. Future credit facilities and borrowings will likely subject us to similar or additional covenants. In addition, we may grant a security interest in our assets in
connection with any such credit facilities and borrowings.

Our Credit Facilities generally contain customary default provisions such as a minimum net worth amount, a profitability test, and a restriction on changing our business

and loan quality standards. In addition, our Credit Facilities require or are expected to require the repayment of all outstanding debt on the maturity date which may disrupt our
business and potentially the business of our portfolio companies that are financed through the facilities. An event of default under these facilities would likely result, among
other things, in termination of the availability of further funds under the facilities and accelerated maturity dates for all amounts outstanding under the facilities, which would
likely disrupt our business and, potentially, the business of the portfolio companies whose loans we finance through the facilities. This could reduce our revenues and, by
delaying any cash payment allowed to us under our facilities until the lender has been paid in full, reduce our liquidity and cash flow and impair our ability to grow our business
and our ability to make distributions sufficient to maintain our ability to be subject to tax as a RIC.

The terms of future available financing may place limits on our financial and operation flexibility. If we are unable to obtain sufficient capital in the future, we may be

forced to reduce or discontinue our operations, not be able to make new investments, or otherwise respond to changing business conditions or competitive pressures.

In addition to regulatory requirements that restrict our ability to raise capital, our 2022 Notes, July 2024 Notes, February 2025 Notes, April 2025 Notes, June 2025 Notes,
March 2026 A Notes, 2033 Notes, 2022 Convertible Notes, and Credit Facilities contain various covenants which, if not complied with, could require accelerated
repayment under the facility or require us to repurchase the 2022 Notes, July 2024 Notes, February 2025 Notes, April 2025 Notes, June 2025 Notes, March 2026 A Notes,
2033 Notes, or 2022 Convertible Notes thereby materially and adversely affecting our liquidity, financial condition, results of operations and ability to pay distributions.

The credit agreements governing our 2022 Notes, July 2024 Notes, February 2025 Notes, April 2025 Notes, June 2025 Notes, March 2026 A Notes, 2033 Notes, 2022

Convertible Notes, and Credit Facilities require us to comply with certain financial and operational covenants. These covenants require us to, among other things, maintain
certain financial ratios, including asset coverage, debt to equity and interest coverage. Our ability to continue to comply with these covenants in the future depends on many
factors, some of which are beyond our control. There are no assurances that we will be able to comply with these covenants. Failure to comply with these covenants would
result in a default which, if we were unable to obtain a waiver from the lenders under our Credit Facilities and could accelerate repayment under the facilities or the 2022 Notes,
July 2024 Notes, February 2025 Notes, April 2025 Notes, June 2025 Notes, March 2026 A Notes, 2033 Notes, or 2022 Convertible Notes and thereby have a material adverse
impact on our liquidity, financial condition, results of operations and ability to pay a sufficient amount of distributions and maintain our ability to be subject to tax as a RIC. We
may not have enough available cash or be able to obtain financing at the time we are required to make repurchases. See “Note 5 – Borrowings”.

The Wells Facility and the Union Bank Facility mature in January 2023 and February 2024, respectively, and any inability to renew, extend or replace our Credit
Facilities could adversely impact our liquidity and ability to find new investments or maintain distributions to our stockholders.

As of December 31, 2020, we had two available secured credit facilities, the Wells Facility and the Union Bank Facility, which mature in January 2023 and February

2024, respectively. There can be no assurance that we will be able to renew, extend or replace our Credit Facilities upon maturity on terms that are favorable to us, if at all. Our
ability to renew, extend or replace the Credit Facility will be constrained by then-current economic conditions affecting the credit markets. In the event that we are not able to
renew, extend or replace either Credit Facility at the time of its 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.

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We are subject to certain risks as a result of our interests in connection with the Debt Securitizations and our equity interest in the Securitization Issuers.

On November 1, 2018, in connection with the 2018 Debt Securitization and the offering of the 2027 Asset-Backed Notes by Hercules Capital Funding Trust 2018-1, or
the 2018 Securitization Issuer, we sold and/or contributed to Hercules Capital Funding 2018-1 LLC, as trust depositor, or the 2018 Trust Depositor, certain senior loans made to
certain of our portfolio companies, or the 2018 Loans, which the 2018 Trust Depositor in turn sold and/or contributed to the 2018 Securitization Issuer in exchange for 100% of
the equity interest in the 2018 Securitization Issuer, cash proceeds and other consideration. Following these transfers, the 2018 Securitization Issuer, and not the 2018 Trust
Depositor or us, held all of the ownership interest in the 2018 Loans.

On January 22, 2019, in connection with the 2019 Debt Securitization and the offering of the 2028 Asset-Backed Notes by Hercules Capital Funding Trust 2019-1, or

the 2019 Securitization Issuer and, together with the 2018 Securitization Issuer, the Securitization Issuers, we sold and/or contributed to Hercules Capital Funding 2019-1 LLC,
as trust depositor, or the 2019 Trust Depositor and, together with the 2018 Trust Depositor, the Trust Depositors, certain senior loans made to certain of our portfolio
companies, or the 2019 Loans and, together with the 2018 Loans, the Securitization Loans, which the 2019 Trust Depositor in turn sold and/or contributed to the 2019
Securitization Issuer in exchange for 100% of the equity interest in the 2019 Securitization Issuer, cash proceeds and other consideration. Following these transfers, the 2019
Securitization Issuer, and not the 2019 Trust Depositor or us, held all of the ownership interest in the 2019 Loans.

As a result of the Debt Securitizations, we hold, indirectly through the Trust Depositors, 100% of the equity interests in the Securitization Issuers. As a result, we

consolidate the financial statements of the Trust Depositors and the Securitization Issuers, as well as our other subsidiaries, in our consolidated financial statements. Because
each of the Trust Depositors and the Securitization Issuers is disregarded as an entity separate from its owners for U.S. federal income tax purposes, the sale or contribution by
us to the Trust Depositors, and by the Trust Depositors to the Securitization Issuers, as applicable, did not constitute a taxable event for U.S. federal income tax purposes. If the
IRS 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 either of the Securitization Issuers to be treated as a disregarded entity for U.S. federal income tax purposes would constitute an event of default

pursuant to the applicable indenture under the Debt Securitizations, upon which the trustee under the 2018 Debt Securitization, or the 2018 Trustee, or the 2019 Debt
Securitization, or the 2019 Trustee and, together with the 2018 Trustee, the Securitization Trustees, as applicable, may and will at the direction of a supermajority of the holders
of the 2027 Asset-Backed Notes, or the 2027 Noteholders, or the holders of the 2028 Asset-Back Notes, or the 2028 Noteholders and, together with the 2027 Noteholders, the
Securitization Noteholders, as the case may be, declare the applicable Asset-Backed Notes, to be immediately due and payable and exercise remedies under the applicable
indenture, including (i) to institute proceedings for the collection of all amounts then payable on the applicable Asset-Backed Notes, or under the applicable indenture, enforce
any judgment obtained, and collect from the applicable Securitization Issuer and any other obligor upon the applicable Asset-Backed Notes monies adjudged due; (ii) institute
proceedings from time to time for the complete or partial foreclosure of the applicable indenture with respect to the property of the applicable Securitization Issuer; (iii) exercise
any remedies as a secured party under the relevant Uniform Commercial Code and take other appropriate action under applicable law to protect and enforce the rights and
remedies of the applicable Securitization Trustee and the applicable Securitization Noteholders; or (iv) sell the property of the applicable Securitization Issuer 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.

An event of default in connection with the Debt Securitizations could give rise to a cross-default under our other material indebtedness.

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 either of the Debt Securitizations. 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 ability to be subject to tax as a RIC.

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We may not receive cash distributions in respect of our indirect ownership interests in the Securitization Issuers.

Apart from fees payable to us in connection with our role as servicer of the Securitization Loans and the reimbursement of related amounts under the documents
governing the Debt Securitizations, we receive cash in connection with the Debt Securitizations only to the extent that the Trust Depositors receive payments in respect of their
equity interests in the Securitization Issuers. The respective holders of the equity interests in the Securitization Issuers are the residual claimants on distributions, if any, made by
the applicable Securitization Issuer after the respective Securitization Noteholders and other claimants have been paid in full on each payment date or upon maturity of the
applicable Asset-Backed Notes, subject to the priority of payments under the documents governing the Debt Securitizations. To the extent that the value of a Securitization
Issuer’s portfolio of 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 loans or the failure of individual portfolio companies to otherwise meet their obligations in respect of the loans, or for any other reason, the ability of either
Securitization Issuer to make cash distributions in respect of the applicable Trust Depositor’s equity interests would be negatively affected and consequently, the value of the
equity interests in such Securitization Issuer would also be reduced. In the event that we fail to receive cash indirectly from the Securitization Issuers, we could be unable to
make distributions, if at all, in amounts sufficient to maintain our ability to be subject to tax as a RIC.

The interests of the Securitization Noteholders may not be aligned with our interests.

The Asset-Backed Notes are debt obligations ranking senior in right of payment to the rights of the holders of the equity interests in the Securitization Issuers, as
residual claimants in respect of distributions, if any, made by the Securitization Issuers. As such, there are circumstances in which the interests of the Securitization Noteholders
may not be aligned with the interests of holders of the equity interests in the Securitization Issuers. For example, under the terms of the documents governing the Debt
Securitizations, the Securitization Noteholders have the right to receive payments of principal and interest prior to holders of the equity interests.

For as long as the Asset-Backed Notes remain outstanding, the respective Securitization Noteholders have the right to act in certain circumstances with respect to the

applicable Securitization Loans in ways that may benefit their interests but not the interests of the respective holders of the equity interests in the Securitization Issuers,
including by exercising remedies under the documents governing the Debt Securitizations.

If an event of default occurs, the applicable Securitization Noteholders will be entitled to determine the remedies to be exercised, subject to the terms of the documents
governing the Debt Securitizations. For example, upon the occurrence of an event of default with respect to the Asset-Backed Notes, the applicable Securitization Trustee may
and will at the direction of the holders of a supermajority of the applicable Asset-Backed Notes declare the principal, together with any accrued interest, of the notes to be
immediately due and payable. This would have the effect of accelerating the principal on such notes, triggering a repayment obligation on the part of the applicable
Securitization Issuer. The applicable Asset-Backed Notes then outstanding will be paid in full before any further payment or distribution on the equity interest is made. There
can be no assurance that there will be sufficient funds through collections on the Securitization Loans or through the proceeds of the sale of the Securitization Loans in the event
of a bankruptcy or insolvency to repay in full the obligations under the Asset-Backed Notes, or to make any distribution to holders of the equity interests in the Securitization
Issuers.

Remedies pursued by the Securitization Noteholders could be adverse to our interests as the indirect holder of the equity interests in the Securitization Issuers. The

Securitization 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
Securitization Noteholders will be consistent with the best interests of the Trust Depositors or that we will receive, indirectly through the Trust Depositors, any payments or
distributions upon an acceleration of the Asset-Backed Notes. Any failure of the Securitization Issuers to make distributions in respect of the equity interests that we indirectly
hold, whether as a result of an event of default and the acceleration of payments on the 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 ability to be subject to tax as a RIC.

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Certain events related to the performance of Securitization Loans could lead to the acceleration of principal payments on the Asset-Backed Notes.

The following constitute rapid amortization events, or Rapid Amortization Events, under the documents governing the Debt Securitizations: (i) the aggregate

outstanding principal balance of delinquent Securitization Loans, and restructured Securitization Loans that would have been delinquent Securitization Loans had such loans not
become restructured loans, in the portfolio of Securitization Loans held by the applicable Securitization Issuer exceeds 10% of the current aggregate outstanding principal
balance of the Securitization Loans held by such Securitization Issuer for a period of three consecutive months; (ii) the aggregate outstanding principal balance of defaulted
Securitization Loans in the portfolio of Securitization Loans held by the applicable Securitization Issuer exceeds 5% of the initial outstanding principal balance of the
Securitization Loans held by such Securitization Issuer determined as of November 1, 2018 (in the case of the 2027 Loans) or January 22, 2019 (in the case of the 2028 Loans)
for a period of three consecutive months; (iii) the aggregate outstanding principal balance of the 2027 Asset-Backed Notes or the 2028 Asset-Backed Notes, as applicable,
exceeds the applicable borrowing base for a period of three consecutive months; (iv) either Securitization Issuer’s pool of Securitization Loans contains Securitization Loans to
ten or fewer obligors, as applicable; and (v) the occurrence of an event of default under the applicable documents governing the Debt Securitizations. After a Rapid
Amortization Event has occurred, subject to the priority of payments under the documents governing the Debt Securitizations, principal collections on the applicable
Securitization Loans will be used to make accelerated payments of principal on the applicable Asset-Backed Notes until the principal balance of such Asset-Backed Notes is
reduced to zero. Such an event could delay, reduce or eliminate the ability of the applicable Securitization Issuer to make distributions in respect of the equity interests 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 ability to be subject to tax as a RIC.

We have certain repurchase obligations with respect to the Securitization Loans transferred in connection with the Debt Securitizations.

As part of each Debt Securitization, we entered into a sale and contribution agreement and a sale and servicing agreement under which we would be required to
repurchase any Securitization Loan (or participation interest therein) which was sold to the applicable Securitization Issuer in breach of certain customary representations and
warranties made by us or by the applicable Trust Depositor with respect to such Securitization Loan or the legal structure of the applicable Debt Securitization. To the extent
that there is a breach of such representations and warranties and we fail to satisfy any such repurchase obligation, the applicable Securitization Trustee may, on behalf of the
applicable Securitization Issuer, bring an action against us to enforce these repurchase obligations.

Our investments in a portfolio company, whether debt, equity, or a combination thereof, may lead to our receiving material non-public information, or MNPI, or
obtaining ‘control’ of the target company.  Our ability to exit an investment where we have MNPI or control could be limited and could result in a realized loss on the
investment.

If we receive MNPI, or a controlling interest in a portfolio company, our ability to divest ourselves from a debt or equity investment could be restricted. Causes of such
restriction could include market factors, such as liquidity in a private stock, or limited trading volume in a public company’s securities, or regulatory factors, such as the receipt
of MNPI or insider blackout periods, where we are under legal obligation not to sell. Additionally, we may choose not to take certain actions to protect a debt investment in a
control investment portfolio company. As a result, we could experience a decrease in the value of our portfolio company holdings and potentially incur a realized loss on the
investment.

Regulations governing our operations as a BDC may affect our ability to, and the manner in which, we raise additional capital, which may expose us to risks.

Our business requires a substantial amount of capital. We may acquire additional capital from the issuance of senior securities, including borrowings, securitization

transactions or other indebtedness, or the issuance of additional shares of our common stock. However, we may not be able to raise additional capital in the future on favorable
terms or at all. We may issue debt securities, other evidences of indebtedness or preferred stock, and we may borrow money from banks or other financial institutions, which we
refer to collectively as “senior securities,” up to the maximum amount permitted by the 1940 Act. As discussed above, under the 1940 Act, we are not permitted to incur
indebtedness unless immediately after such borrowing we have an asset coverage for total borrowings of at least 150%. In addition, we may not be permitted to declare any cash
distribution on our outstanding common shares, or purchase any such shares, unless, at the time of such declaration or purchase, we have asset coverage of at least 150% after
deducting the amount of such distribution or purchase price. Our ability to pay distributions or issue additional senior securities would be restricted if our asset coverage ratio
were not at least 150%.

If the value of our assets decline, we may be unable to satisfy this test. If that happens, we may be required to liquidate a portion of our investments and repay a portion

of our indebtedness at a time when such transaction may be disadvantageous. As a result of

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issuing senior securities, we would also be exposed to risks associated with leverage, including an increased risk of loss. If we issue preferred stock, the preferred stock would
rank “senior” to common stock in our capital structure, preferred stockholders would have separate voting rights and might have rights, preferences, or privileges more
favorable than those of our common stockholders and the issuance of preferred stock could have the effect of delaying, deferring, or preventing a transaction or a change of
control that might involve a premium price for holders of our common stock or otherwise be in your best interest. It is likely that any senior securities or other indebtedness we
issue will be governed by an indenture or other instrument containing covenants restricting our operating flexibility. Additionally, some of these securities or other indebtedness
may be rated by rating agencies, and in obtaining a rating for such securities and other indebtedness, we may be required to abide by operating and investment guidelines that
further restrict operating and financial flexibility.

To the extent that we are constrained in our ability to issue debt or other senior securities, we will depend on issuances of common stock to finance operations. We have

received the approval from our stockholders to issue shares of our common stock at a price below its then current NAV per share, subject to certain limitations and with the
approval of our independent directors. The approval expires on June 12, 2021. In connection with such approval, we will limit the number of shares that we issue at a price
below NAV per share pursuant to the shareholder authorization so that the aggregate dilutive effect on our then outstanding shares will not exceed 20%; however, our Board of
Directors, subject to its fiduciary duties and regulatory requirements, has the discretion to determine the amount of the discount. As a result, the discount could be up to 100% of
NAV per share. If we raise additional funds by issuing more common stock or senior securities convertible into, or exchangeable for, our common stock, then the percentage
ownership of our stockholders at that time will decrease, and you might experience dilution. Moreover, we can offer no assurance that we will be able to issue and sell
additional equity securities in the future, on favorable terms or at all.

Our executive officers and employees, through the Adviser Subsidiary, are expected to manage other investment funds or accounts, including External Parties, that
operate in the same or a related line of business as we do, which may result in significant conflicts of interest.

Our executive officers and employees, through the Adviser Subsidiary, are expected to manage other investment funds that operate in the same or a related line of

business as we do, and which funds may be invested in by us and/or our executive officers and employees. Accordingly, they may have obligations to such other entities, the
fulfillment of which obligations may not be in the interests of us or our stockholders. Our relationship with External Parties may require us to commit resources to achieving the
External Parties’ investment objectives, while such resources were previously solely devoted to achieving our investment objective. Our investment objective and investment
strategies may be very similar to those of External Parties and it is likely that an investment appropriate for us or External Parties would be appropriate for the other entity.
Because the Adviser Subsidiary may receive performance-based fee compensation from External Parties, this may provide an incentive to allocate opportunities to External
Parties instead of us. Accordingly, we and the Adviser Subsidiary will establish policies and procedures governing the allocation investment opportunities between us and
External Parties. We may be limited in or unable to participate in certain investments based upon such allocation policy. Although we will endeavor to allocate investment
opportunities in a fair and equitable manner, we may face conflicts in allocating investment opportunities between us and External Parties managed by the Adviser Subsidiary.

When we are a debt or minority equity investor in a portfolio company, we may not be in a position to control the entity, and management of the company may make
decisions that could decrease the value of our portfolio holdings.

We make both debt and minority equity investments; therefore, we are subject to the risk that a portfolio company may make business decisions with which we
disagree, and the stockholders and management of such company may take risks or otherwise act in ways that do not serve our interests. As a result, a portfolio company may
make decisions that could decrease the value of our portfolio holdings.

 If we do not invest a sufficient portion of our assets in qualifying assets, we could fail to qualify as a BDC or be precluded from investing according to our current
business strategy.

As a BDC, we may not acquire any assets other than “qualifying assets” as defined under the 1940 Act, unless, at the time of and after giving effect to such acquisition,

at least 70% of our total assets are qualifying assets. See “Item 1. Business –Regulation.”

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We believe that most of the senior loans we make will constitute qualifying assets. However, we may be precluded from investing in what we believe are attractive

investments if such investments are not qualifying assets for purposes of the 1940 Act. If we do not invest a sufficient portion of our assets in qualifying assets, we could lose
our status as a BDC, which would have a material adverse effect on our business, financial condition and results of operations. In addition, a rise in the equity markets may
result in increased market valuations of certain of our existing and prospective portfolio companies, which may lead to new investments with such companies being qualified as
non-eligible portfolio company assets and would require that we invest in qualified assets going forward. Similarly, these rules could prevent us from making follow-on
investments in existing portfolio companies (which could result in the dilution of our position) or could require us to dispose of investments at inopportune times in order to
comply with the 1940 Act. If we need to dispose of such investments quickly, it would be difficult to dispose of such investments on favorable terms. For example, we may have
difficulty in finding a buyer and, even if we do find a buyer, we may have to sell the investments at a substantial loss. Although we are exploring alternatives, such as entering
into joint venture arrangements, to increase our flexibility to make investments in assets that are not qualifying assets, there can be no assurance that we will ultimately pursue
such alternatives or that such alternatives will achieve this goal.

A failure on our part to maintain our qualification as a BDC would significantly reduce our operating flexibility.

If we fail to continuously qualify as a BDC, we might be subject to regulation as a registered closed-end investment company under the 1940 Act, which would

significantly decrease our operating flexibility, and lead to situations where we might have to restrict our borrowings, reduce our leverage, sell securities and pursue other
activities that we are allowed to engage in as a BDC. In addition, failure to comply with the requirements imposed on business development companies by the 1940 Act could
cause the SEC to bring an enforcement action against us. For additional information on the qualification requirements of a BDC, see “Item 1. Business – Regulation.”

To the extent OID and PIK interest constitute a portion of our income, we will be exposed to risks associated with such income being required to be included in taxable
and accounting income prior to receipt of cash representing such income.

Our investments may include OID instruments and contractual PIK interest arrangements, which represents contractual interest added to a loan balance and due at the

end of such loan’s term. To the extent OID or PIK interest constitute a portion of our income, we are exposed to risks associated with such income being required to be included
in taxable and accounting income prior to receipt of cash, including the following:

•

•

•

•

•

•

The higher interest rates of OID and PIK instruments reflect the payment deferral and increased credit risk associated with these instruments, and OID and PIK
instruments generally represent a significantly higher credit risk than coupon loans.

Even if the accounting conditions for income accrual are met, the borrower could still default when our actual collection is supposed to occur at the maturity of
the obligation, which could lead to future losses.

OID and PIK instruments may have unreliable valuations because their continuing accruals require continuing judgments about the collectability of the deferred
payments and the value of any associated collateral. OID and PIK income may also create uncertainty about the source of our cash distributions.

For accounting purposes, any cash distributions to stockholders representing OID and PIK income are not treated as coming from paid-in capital, even though
the cash to pay them comes from the offering proceeds. As a result, despite the fact that a distribution representing OID and PIK income could be paid out of
amounts invested by our stockholders, the 1940 Act does not require that stockholders be given notice of this fact by reporting it as a return of capital.

The deferral of PIK interest may have a negative impact on our liquidity as it represents non-cash income that may require cash distributions to our stockholders
in order to maintain our ability to be subject to tax as a RIC.

Tax rules require that income be recognized for tax purposes no later than when recognized for financial reporting purposes.

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If we are unable to satisfy Code requirements for qualification as a RIC, then we will be subject to corporate-level income tax, which would adversely affect our results
of operations and financial condition.

We elected to be treated as a RIC for U.S. federal income tax purposes with the filing of our federal corporate income tax return for 2006. We will not qualify for the tax
treatment allowable to RICs if we are unable to comply with the source of income, asset diversification and distribution requirements contained in Subchapter M of the Code, or
if we fail to maintain our election to be regulated as a BDC under the 1940 Act. If we fail to qualify as a RIC for any reason and become subject to a corporate-level income tax,
the resulting taxes could substantially reduce our net assets, the amount of income available for distribution to our stockholders and the actual amount of our distributions. Such
a failure would have a material adverse effect on us, the NAV of our common stock and the total return, if any, earned from your investment in our common stock.

We may have difficulty paying our required distributions under applicable tax rules if we recognize income before or without receiving cash representing such income.

In accordance with U.S. federal tax requirements, we are required to include in income for tax purposes certain amounts that we have not yet received in cash, such as

OID and contractual PIK interest arrangements, which represent contractual interest added to a loan balance and due at the end of such loan’s term. In addition to the cash yields
received on our loans, in some instances, our loans generally include one or more of the following: exit fees, balloon payment fees, commitment fees, success fees or
prepayment fees. In some cases our loans also include contractual PIK interest arrangements. The increases in loan balances as a result of contractual PIK arrangements are
included in income for the period in which such PIK interest was accrued, which is often in advance of receiving cash payment, and are separately identified on our statements
of cash flows. We also may be required to include in income for tax purposes certain other amounts prior to receiving the related cash. Also, tax rules require that income be
recognized for tax purposes no later than when recognized for financial reporting purposes.

Any warrants that we receive in connection with our debt investments will generally be valued as part of the negotiation process with the particular portfolio company.

As a result, a portion of the aggregate purchase price for the debt investments and warrants will be allocated to the warrants that we receive. This will generally result in OID for
tax purposes, which we must recognize as ordinary income, increasing the amount that we are required to distribute in order to be subject to tax as a RIC. Because these
warrants generally will not produce distributable cash for us at the same time as we are required to make distributions in respect of the related OID, if ever, we would need to
obtain cash from other sources or to pay a portion of our distributions using shares of newly issued common stock, consistent with IRS guidelines and the Code, to satisfy such
distribution requirements.

Other features of the debt instruments that we hold may also cause such instruments to generate OID in excess of current cash interest received. Since in certain cases

we may recognize income before or without receiving cash representing such income, we may have difficulty meeting the RIC tax requirement to make distributions each
taxable year to our stockholders treated as dividends for U.S. federal income tax purposes generally of an amount equal to at least 90% of our investment company taxable
income, determined without regard to any deduction for dividends paid. Under such circumstances, we may have to sell some of our assets, raise additional debt or equity
capital or reduce new investment originations to meet these distribution requirements. If we are unable to obtain cash from other sources and are otherwise unable to satisfy such
distribution requirements, we may fail to qualify to be subject to tax as a RIC and, thus, become subject to a corporate-level income tax on all our taxable income (including any
net realized securities gains).

Furthermore, we may invest in the equity securities of non-U.S. corporations (or other non-U.S. entities classified as corporations for U.S. federal income tax purposes)

that could be treated under the Code and U.S. Treasury regulations as PFICs and/or CFCs. The rules relating to investment in these types of non-U.S. entities are designed to
ensure that U.S. taxpayers are either, in effect, taxed currently (or on an accelerated basis with respect to corporate level events) or taxed at increased tax rates at distribution or
disposition. In certain circumstances, these rules also could require us to recognize taxable income or gains where we do not receive a corresponding payment in cash. Income
derived by us either from a PFIC with respect to which we have made a certain U.S. tax election or from a CFC would generally constitute qualifying income for purposes of
determining our ability to be subject to tax as a RIC if the PFIC or CFC respectively makes distributions of that income to us or if the income is derived with respect to our
business of investing in stocks and securities. As such, we may be restricted in our ability to make qualified electing fund (“QEF”) elections with respect to our holdings in
issuers that could either be treated as PFICs or CFCs in order to limit our tax liability or maximize our after-tax return from these investments.

Our portfolio investments may present special tax issues.

Investments in below-investment grade debt instruments and certain equity securities may present special tax issues for us. U.S. federal income tax rules are not entirely

clear about issues such as when we may cease to accrue interest, OID or market discount, when and to what extent deductions may be taken for bad debts or worthless debt in
equity securities, how payments received on obligations in default should be allocated between principal and interest income, as well as whether exchanges of debt instruments
in a

39

 
 
bankruptcy or workout context are taxable. Such matters could cause us to recognize taxable income for U.S. federal income tax purposes, even in the absence of cash or
economic gain, and require us to make taxable distributions to our stockholders to maintain our RIC status or preclude the imposition of either U.S. federal corporate income or
excise taxation. Additionally, because such taxable income may not be matched by corresponding cash received by us, we may be required to borrow money or dispose of other
investments to be able to make distributions to our stockholders. These and other issues will be considered by us, to the extent determined necessary, in order that we minimize
the level of any U.S. federal income or excise tax that we would otherwise incur. See “Item 1. Business—Certain United States Federal Income Tax Considerations—Taxation
as a Regulated Investment Company.”

There is a risk that you may not receive distributions or that our distributions may not grow over time.

We intend to make distributions on a quarterly basis to our stockholders. We cannot assure you that we will achieve investment results, or our business may not perform
in a manner that will allow us to make a specified level of distributions or year-to-year increases in cash distributions. In addition, due to the asset coverage test applicable to us
as a BDC, we may be limited in our ability to make distributions. Also, our Credit Facilities limit our ability to declare distributions to our stockholders if we default under
certain provisions of our Credit Facilities. Furthermore, while we may have undistributed earnings, those earnings may not yield distributions because we may incur unrealized
losses or otherwise be unable to distribute such earnings.

We have and may in the future choose to pay distributions in our own stock, in which case you may be required to pay tax in excess of the cash you receive.

Under applicable Treasury regulations and other general guidelines issued by the IRS, RICs are permitted to treat certain distributions payable in their stock, as taxable

dividends that will satisfy their annual distribution obligations for U.S. federal income tax and excise tax purposes provided that stockholders have the opportunity to elect to
receive all or a portion of such distribution in cash. Taxable stockholders receiving distributions will be required to include the full amount of such distributions as ordinary
income (or as long-term capital gain to the extent such distribution is properly reported as a capital gain dividend) to the extent of our current and accumulated earnings and
profits for U.S. federal income tax purposes. As a result, a U.S. stockholder may be required to pay tax with respect to such distributions in excess of any cash received. If a U.S.
stockholder sells the stock it receives as a distribution in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the distribution,
depending on the market price of our stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, we may be required to withhold U.S. federal income tax
with respect to such distributions, including in respect of all or a portion of such distribution that is payable in stock. In addition, if a significant number of our stockholders
determine to sell shares of our stock in order to pay taxes owed on such distributions, then such sales may put downward pressure on the trading price of our stock. We may in
the future determine to distribute taxable distributions that are partially payable in our common stock.

 We are exposed to risks associated with changes in interest rates, including fluctuations in interest rates which could adversely affect our profitability or the value of our
portfolio.

General interest rate fluctuations may have a substantial negative impact on our investments and investment opportunities, and, accordingly, may have a material
adverse effect on our investment objective and rate of return on investment capital. A portion of our income will depend upon the difference between the rate at which we
borrow funds and the interest rate on the debt securities in which we invest. Because we will borrow money to make investments and may issue debt securities, preferred stock
or other securities, our net investment income is dependent upon the difference between the rate at which we borrow funds or pay interest or dividends on such debt securities,
preferred stock or other securities and the rate at which we invest these funds. Typically, we anticipate that our interest-earning investments will accrue and pay interest at both
variable and fixed rates, and that our interest-bearing liabilities will generally accrue interest at fixed rates.

A significant increase in market interest rates could harm our ability to attract new portfolio companies and originate new loans and investments. In addition to
potentially increasing the cost of our debt, increasing interest rates may also have a negative impact on our portfolio companies’ ability to repay or service their loans, which
could enhance the risk of loan defaults. We expect that most of our current initial investments in debt securities will be at floating rate with a floor. However, in the event that
we make investments in debt securities at variable rates, a significant increase in market interest rates could also result in an increase in our non-performing assets and a
decrease in the value of our portfolio because our floating-rate loan portfolio companies may be unable to meet higher payment obligations. As of December 31, 2020,
approximately 96.9% of our loans were at floating rates or floating rates with a floor and 3.1% of the loans were at fixed rates.

40

 
 
In periods of rising interest rates, our cost of funds would increase, resulting in a decrease in our net investment income. In addition, a decrease in interest rates may

reduce net income, because new investments may be made at lower rates despite the increased demand for our capital that the decrease in interest rates may produce. We may,
but will not be required to, hedge against the risk of adverse movement in interest rates in our short-term and long-term borrowings relative to our portfolio of assets. If we
engage in hedging activities, it may limit our ability to participate in the benefits of lower interest rates with respect to the hedged portfolio. Adverse developments resulting
from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition, and results of operations.

The discontinuation of LIBOR may affect the value of the financial obligations to be held or issued by us that are linked to LIBOR.

In July 2017, the head of the United Kingdom Financial Conduct Authority announced that it will phase out the use of LIBOR by December 31, 2021. To identify a
successor rate for U.S. dollar LIBOR, the Federal Reserve System, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large
U.S. financial institutions, has identified the Secured Overnight Financing Rate, or SOFR, as its preferred alternative rate for LIBOR. SOFR is a measure of the cost of
borrowing cash overnight, collateralized by U.S. Treasury securities, and is based on directly observable U.S. Treasury-backed repurchase transactions. Although there have
been a few transactions utilizing SOFR or the Sterling Overnight Index Average, or SONIA, an alternative reference rate that is based on transactions, at this time, it is not
possible to predict whether either of these alternative reference rates will attain market traction as a LIBOR replacement tool or the effect of any such changes as the
establishment of alternative reference rates or other reforms to LIBOR may be enacted in the United States, United Kingdom or elsewhere.

On November 30, 2020, ICE Benchmark Administration, the administrator of LIBOR (the “IBA”), announced its intention to continue publication of overnight and one-,

three-, six- and 12-month USD LIBOR rates through June 30, 2023. However, it is impossible to predict whether and to what extent banks will continue to provide LIBOR
submissions to the administrator of LIBOR or whether any additional reforms to LIBOR may be enacted. Concurrent with the IBA’s announcement, the Federal Reserve Board,
the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation released a statement that (i) encouraged banks to cease entering into new contracts
that use US dollar LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021, (ii) indicated that new contracts entered into before December 31,
2021 should either utilize a reference rate other than US dollar LIBOR or have robust fallback language that includes a clearly defined alternative reference rate after US dollar
LIBOR’s discontinuation and (iii) explained that extending the publication of certain US dollar LIBOR tenors until June 30, 2023 would allow most legacy US dollar LIBOR
contracts to mature before LIBOR experiences disruptions. It is possible that the IBA and the panel banks could continue to produce LIBOR after June 30, 2023, or the FCA
could deem LIBOR to be no longer representative of its underlying market prior to that date, but no assurance can be given that LIBOR will survive in its current form, or at all.

In anticipation of the cessation of LIBOR, we are reviewing our loan and credit facility agreements and are working with counsel on making any necessary amendments

to such agreements. We may need to renegotiate any credit agreements with our prospective portfolio companies that utilize LIBOR as a factor in determining the interest rate
to replace LIBOR with the new standard that is established and we may also need to renegotiate the terms of our credit facilities. Any such renegotiations may have a material
adverse effect on our business, financial condition and results of operations, including as a result of changes in interest rates payable to us by our portfolio companies or payable
by us under our credit facilities. Any further changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in
reported LIBOR, which could have an adverse impact on the market value for or value of any LIBOR-linked securities, loans, and other financial obligations or extensions of
credit held by or due to us and could have a material adverse effect on our business, financial condition and results of operations.

Alteration of the terms of a debt instrument or a modification of the terms of other types of contracts to replace an interbank offered rate with a new reference rate could

result in a taxable exchange and the realization of income and gain/loss for U.S. federal income tax purposes. The IRS has issued proposed regulations regarding the tax
consequences of the transition from interbank offered rates to new reference rates in debt instruments and non-debt contracts. Under the proposed regulations, to avoid such
alteration or modification of the terms of a debt instrument being treated as a taxable exchange, the fair market value of the modified instrument or contract must be
substantially equivalent to its fair market value before the qualifying change was made. The IRS may withdraw, amend or finalize, in whole or part, these proposed regulations
and/or provide additional guidance, with potential retroactive effect.

41

 
 
We may expose ourselves to risks if we engage in hedging transactions.

If we engage in hedging transactions, we may expose ourselves to risks associated with such transactions. We may utilize instruments such as forward contracts,
currency options and interest rate swaps, caps, collars and floors to seek to hedge against fluctuations in the relative values of our portfolio positions from changes in currency
exchange rates and market interest rates. Hedging against a decline in the values of our portfolio positions does not eliminate the possibility of fluctuations in the values of such
positions or prevent losses if the values of such positions decline. However, such hedging can establish other positions designed to gain from those same developments, thereby
offsetting the decline in the value of such portfolio positions. Such hedging transactions may also limit the opportunity for gain if the values of the underlying portfolio positions
should increase. It may not be possible to hedge against an exchange rate or interest rate fluctuation that is so generally anticipated that we are not able to enter into a hedging
transaction at an acceptable price. Moreover, for a variety of reasons, we may not seek to establish a perfect correlation between such hedging instruments and there can be no
assurance that any such hedging arrangements will achieve the desired effect. During the year ended December 31, 2020, we did not engage in any hedging activities.

Two of our wholly owned subsidiaries are licensed by the U.S. SBA, and as a result, we will be subject to SBA regulations, which could limit our capital or investment
decisions.

Our wholly owned subsidiaries HT III and HC IV are licensed to act as SBICs and are regulated by the SBA. HT III holds approximately $201.2 million in assets and it

accounted for approximately 7.7% of the Company’s total assets, prior to consolidation at December 31, 2020. HC IV has no material assets other than cash of approximately
$19.1 million from the regulatory capital provided.

The SBIC licenses allow our SBIC subsidiaries to obtain leverage by issuing SBA-guaranteed debentures, subject to the issuance of a capital commitment by the SBA

and other customary procedures. On July 13, 2018, we completed repayment of the remaining outstanding HT II debentures and subsequently surrendered the SBA license with
respect to our wholly owned subsidiary HT II.

The SBA regulations require that a licensed SBIC be periodically examined and audited by the SBA to determine its compliance with the relevant SBA regulations. The

SBA prohibits, without prior SBA approval, a “change of control” of an SBIC or transfers that would result in any person (or a group of persons acting in concert) owning
10.0% or more of a class of capital stock of a licensed SBIC. If our SBIC subsidiaries fail to comply with applicable SBA regulations, the SBA could, depending on the severity
of the violation, limit or prohibit our SBIC subsidiaries’ use of debentures, declare outstanding debentures immediately due and payable, and/or limit HT III or HC IV from
making new investments. Such actions by the SBA would, in turn, negatively affect us because HT III and HC IV are our wholly owned subsidiaries. As of December 31, 2020,
HC IV has not drawn any debentures.

HT III was in compliance with the terms of the SBIC’s leverage as of December 31, 2020 as a result of having sufficient capital as defined under the SBA regulations.
Compliance with SBA requirements may cause our SBIC subsidiaries to forego attractive investment opportunities that are not permitted under SBA regulations. See “Item 1.
Business — Regulation—Small Business Administration Regulations.”

SBA regulations limit the outstanding dollar amount of SBA guaranteed debentures that may be issued by an SBIC or group of SBICs under common control.

The SBA regulations currently limit the dollar amount of SBA-guaranteed debentures that can be issued by any one SBIC to $175.0 million or to a group of SBICs

under common control to $350.0 million. An SBIC may not borrow an amount in excess of two times (and in certain cases, up to three times) its regulatory capital. As of
December 31, 2020, we have $99.0 million in SBA-guaranteed debentures in HT III. Under our existing license, $149.0 million is the maximum capacity for HT III to issue
SBA-guaranteed debentures. As of December 31, 2020, HC IV has not drawn any debentures. During times that we reach the maximum dollar amount of SBA-guaranteed
debentures permitted, and if we require additional capital, our cost of capital is likely to increase, and there is no assurance that we will be able to obtain additional financing on
acceptable terms.

Moreover, the current status of HT III and HC IV as SBICs does not automatically assure that our SBIC subsidiaries will continue to receive SBA-guaranteed debenture

funding. Receipt of SBA leverage funding is dependent upon our SBIC subsidiaries continuing to be in compliance with SBA regulations and policies and available SBA
funding. The amount of SBA leverage funding available to a SBIC is dependent upon annual Congressional authorizations and in the future may be subject to annual
Congressional appropriations. There can be no assurance that there will be sufficient debenture funding available at the times desired by our SBIC subsidiaries.

42

 
 
  The debentures guaranteed by the SBA have a maturity of ten years and require semi-annual payments of interest. HT III has debentures outstanding with maturity

dates scheduled between September 2021 and March 2023. HT III will need to generate sufficient cash flow to make required interest payments on the debentures. If our HT III
is unable to meet its financial obligations under the debentures, the SBA, as a creditor, will have a superior claim to our SBIC subsidiary’s assets over our stockholders in the
event we liquidate our SBIC subsidiary or the SBA exercises its remedies under such debentures as the result of a default by us.

Our wholly owned SBIC subsidiaries may be unable to make distributions to us that will enable us to maintain RIC status, which could result in the imposition of an
entity-level tax.

In order for us to continue to qualify for RIC tax treatment and to minimize corporate-level taxes, we will be required to distribute substantially all of our investment

company taxable income, determined without regard to any deduction for dividends paid, and net capital gains, including income from certain of our subsidiaries, which
includes the income from our SBIC subsidiaries. We will be partially dependent on our SBIC subsidiaries for cash distributions to enable us to meet the RIC distribution
requirements. Our SBIC subsidiaries may be limited by the Small Business Investment Act of 1958, as amended, and SBA regulations governing SBICs, from making certain
distributions to us that may be necessary to maintain our ability to be subject to tax as a RIC. We may have to request a waiver of the SBA’s restrictions for our SBIC
subsidiaries to make certain distributions to maintain our ability to be subject to tax as a RIC. We cannot assure you that the SBA will grant such waiver. If our SBIC
subsidiaries are unable to obtain waivers, compliance with the SBA regulations may result in loss of RIC tax treatment and a consequent imposition of an entity-level tax on us.

Our Board of Directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval, the effects of which may be
adverse.

Our Board of Directors has the authority, except as otherwise provided in the 1940 Act, to modify or waive certain of our operating policies and strategies without prior
notice and without stockholder approval. However, absent stockholder approval, we may not change the nature of our business so as to cease to be, or withdraw our election as,
a BDC. We cannot predict the effect any changes to our current operating policies and strategies would have on our business, operating results and the market price of our
common stock. Nevertheless, any such changes could materially and adversely affect our business and impair our ability to make distributions to our stockholders.

Risks Related to Current Economic and Market Conditions

Depending on funding requirements, we may need to raise additional capital to meet our unfunded commitments through additional borrowings.

As of December 31, 2020, we had approximately $179.8 million of available unfunded commitments, including undrawn revolving facilities, which were available at

the request of the portfolio company and unencumbered by milestones.

Our unfunded contractual commitments may be significant from time to time. A portion of these unfunded contractual commitments are dependent upon the portfolio

company reaching certain milestones before the debt commitment becomes available. Furthermore, our credit agreements contain customary lending provisions which allow us
relief from funding obligations for previously made commitments in instances where the underlying company experiences materially adverse events that affect the financial
condition or business outlook for the company. These commitments will be subject to the same underwriting and ongoing portfolio maintenance as are the on-balance sheet
financial instruments that we hold. Since these commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash
requirements. Closed commitments generally fund 70-80% of the committed amount in aggregate over the life of the commitment. We believe that our assets provide adequate
cover to satisfy all of our unfunded commitments and we intend to use cash flow from normal and early principal repayments and proceeds from borrowings and notes to fund
these commitments. However, there can be no assurance that we will have sufficient capital available to fund these commitments as they come due, which could have a material
adverse effect on our reputation in the market and our ability to generate incremental lending activity and subject us to lender liability claims.

Our ability to secure additional financing and satisfy our financial obligations under indebtedness outstanding from time to time will depend upon our future operating

performance, which is subject to the prevailing general economic and credit market conditions, including interest rate levels and the availability of credit generally, and
financial, business and other factors, many of which are beyond our control. The prolonged continuation or worsening of current economic and capital market conditions could
have a material adverse effect on our ability to secure financing on favorable terms, if at all.

43

 
 
Risks Related to Our Investments

Our investments are concentrated in certain industries and in a number of technology-related companies, which subjects us to the risk of significant loss if any of these
companies default on their obligations under any of their debt securities that we hold, or if any of the technology-related industry sectors experience a downturn.

We have invested and intend to continue investing in a limited number of technology-related companies. A consequence of this limited number of investments is that

the aggregate returns we realize may be significantly adversely affected if a small number of investments perform poorly or if we need to write down the value of any one
investment. Beyond the asset diversification requirements to which we are subject as a BDC and a RIC, we do not have fixed guidelines for diversification or limitations on the
size of our investments in any one portfolio company and our investments could be concentrated in relatively few issuers. In addition, we have invested in and intend to
continue investing, under normal circumstances, at least 80% of the value of our total assets (including the amount of any borrowings for investment purposes) in technology-
related companies.

As of December 31, 2020, approximately 87.2% of the fair value of our portfolio was composed of investments in three industries: 33.1% was composed of investments

in the "Software" industry, 32.2% was composed of investments in the "Drug Discovery & Development" industry, and 21.9% was composed of investments in the "Internet
Consumer & Business Services" industry.

As a result, a downturn in technology-related industry sectors and particularly those in which we are heavily concentrated could materially adversely affect our financial

condition.

We are a non-diversified investment company within the meaning of the 1940 Act, and therefore we generally are not limited with respect to the proportion of our assets
that may be invested in securities of a single issuer.

We are classified as a non-diversified investment company within the meaning of the 1940 Act, which means that we are not limited by the 1940 Act with respect to the

proportion of our assets that we may invest in securities of a single issuer, excluding limitations on investments in other investment companies. To the extent that we assume
large positions in the securities of a small number of issuers, our NAV may fluctuate to a greater extent than that of a diversified investment company as a result of changes in
the financial condition or the market’s assessment of the issuer. We may also be more susceptible to any single economic or regulatory occurrence than a diversified investment
company. Beyond the asset diversification requirements to which we are subject as a BDC and a RIC, we do not have fixed guidelines for portfolio diversification, and our
investments could be concentrated in relatively few portfolio companies or industries. Although we are classified as a non-diversified investment company within the meaning
of the 1940 Act, we maintain the flexibility to operate as a diversified investment company and have done so for an extended period of time. To the extent that we operate as a
non-diversified investment company in the future, we may be subject to greater risk.

44

 
 
Our financial results could be negatively affected if a significant portfolio investment fails to perform as expected.

Our total investment in companies may be significant individually or in the aggregate. As a result, if a significant investment in one or more companies fails to perform

as expected, our financial results could be more negatively affected, and the magnitude of the loss could be more significant than if we had made smaller investments in more
companies.

The following table shows the fair value of the totals of investments held in portfolio companies at December 31, 2020 that represent greater than 5% of our net assets:

(in thousands)
BridgeBio Pharma LLC
EverFi, Inc.
Tricida, Inc.

December 31, 2020

Fair Value

Percentage of Net Assets

$

93,206  
84,987  
79,945  

7.2 %
6.6 %
6.2 %

•

•

•

BridgeBio Pharma LLC is a clinical-stage biopharmaceutical company that discovers and develops drugs for patients with genetic diseases.

EverFi, Inc. is a technology company that offers a web-based media platform to teach and certify students in the core concepts of financial literacy, from
student loan defaults and sub-prime mortgages to credit card debt and rising bankruptcy rates.

Tricida, Inc. is a biopharmaceutical company that focuses on the discovery and clinical development of novel therapeutics to address renal, metabolic, and
cardiovascular diseases.

Our financial results could be materially adversely affected if these portfolio companies or any of our other significant portfolio companies encounter financial

difficulty and fail to repay their obligations or to perform as expected.

Our investments may be in portfolio companies that have limited operating histories and resources.

We expect that our portfolio will continue to consist of investments that may have relatively limited operating histories. These companies may be particularly

vulnerable to U.S. and foreign economic downturns may have more limited access to capital and higher funding costs, may have a weaker financial position and may need more
capital to expand or compete. These businesses also may experience substantial variations in operating results. They may face intense competition, including from larger, more
established companies with greater financial, technical and marketing resources. Furthermore, some of these companies do business in regulated industries and could be
affected by changes in government regulation applicable to their given industry. Accordingly, these factors could impair their cash flow or result in other events, such as
bankruptcy, which could limit their ability to repay their obligations to us, and may adversely affect the return on, or the recovery of, our investment in these companies. We
cannot assure you that any of our investments in our portfolio companies will be successful. We may lose our entire investment in any or all of our portfolio companies.

Investing in publicly traded companies can involve a high degree of risk and can be speculative.

We have invested, and expect to continue to invest, a portion of our portfolio in publicly traded companies or companies that are in the process of completing their IPO.
As publicly traded companies, the securities of these companies may not trade at high volumes, and prices can be volatile, particularly during times of general market volatility,
which may restrict our ability to sell our positions and may have a material adverse impact on us.

Our ability to invest in public companies may be limited in certain circumstances.

To maintain our status as a BDC, we are not permitted to 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).

Subject to certain exceptions for follow-on investments and distressed companies, an investment in an issuer that has outstanding securities listed on a national

securities exchange may be treated as a qualifying asset only if such issuer has a market capitalization that is less than $250.0 million at any point in the 60 days prior to the
time of such investment and meets the other specified requirements.

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Our investment strategy focuses on technology-related companies, which are subject to many risks, including volatility, intense competition, shortened product life cycles,
changes in regulatory and governmental programs and periodic downturns, and you could lose all or part of your investment.

We have invested and will continue investing primarily in technology-related companies, many of which may have narrow product lines and small market shares, which
tend to render them more vulnerable to competitors’ actions and market conditions, as well as to general economic downturns. The revenues, income (or losses), and valuations
of technology-related companies can and often do fluctuate suddenly and dramatically. In addition, technology-related industries are generally characterized by abrupt business
cycles and intense competition. Overcapacity in technology-related industries, together with cyclical economic downturns, may result in substantial decreases in the market
capitalization of many technology-related companies. Such decreases in market capitalization may occur again, and any future decreases in technology-related company
valuations may be substantial and may not be temporary in nature. Therefore, our portfolio companies may face considerably more risk of loss than do companies in other
industry sectors.

Because of rapid technological change, the average selling prices of products and some services provided by technology-related companies have historically decreased

over their productive lives. As a result, the average selling prices of products and services offered by technology-related companies may decrease over time, which could
adversely affect their operating results, their ability to meet obligations under their debt securities and the value of their equity securities. This could, in turn, materially
adversely affect our business, financial condition and results of operations.

Our investments in sustainable and renewable technology companies are subject to substantial operational risks, such as underestimated cost projections, unanticipated

operation and maintenance expenses, loss of government subsidies, and inability to deliver cost-effective alternative energy solutions compared to traditional energy products. In
addition, sustainable and renewable technology companies employ a variety of means of increasing cash flow, including increasing utilization of existing facilities, expanding
operations through new construction or acquisitions, or securing additional long-term contracts. Thus, some energy companies may be subject to construction risk, acquisition
risk or other risks arising from their specific business strategies. Furthermore, production levels for solar, wind and other renewable energies may be dependent upon adequate
sunlight, wind, or biogas production, which can vary from market to market and period to period, resulting in volatility in production levels and profitability. Demand for
sustainable and renewable technology is also influenced by the available supply and prices for other energy products, such as coal, oil and natural gases. A change in prices in
these energy products could reduce demand for alternative energy.

A natural disaster may also impact the operations of our portfolio companies, including our technology-related portfolio companies. The nature and level of natural

disasters cannot be predicted and may be exacerbated by global climate change. A portion of our technology-related portfolio companies rely on items assembled or produced in
areas susceptible to natural disasters, and may sell finished goods into markets susceptible to natural disasters. A major disaster, such as an earthquake, tsunami, flood or other
catastrophic event could result in disruption to the business and operations of our technology-related portfolio companies.

We will invest in technology-related companies that are reliant on U.S. and foreign regulatory and governmental programs. Any material changes or discontinuation,

due to change in administration or U.S. Congress or otherwise could have a material adverse effect on the operations of a portfolio company in these industries and, in turn,
impair our ability to timely collect principal and interest payments owed to us to the extent applicable.

We have invested in and may continue investing in technology-related companies that do not have venture capital or private equity firms as equity investors, and these
companies may entail a higher risk of loss than do companies with institutional equity investors, which could increase the risk of loss of your investment.

Our portfolio companies will often require substantial additional equity financing to satisfy their continuing working capital and other cash requirements and, in most
instances, to service the interest and principal payments on our investment. Portfolio companies that do not have venture capital or private equity investors may be unable to
raise any additional capital to satisfy their obligations or to raise sufficient additional capital to reach the next stage of development. Portfolio companies that do not have
venture capital or private equity investors may be less financially sophisticated and may not have access to independent members to serve on their boards, which means that
they may be less successful than portfolio companies sponsored by venture capital or private equity firms. Accordingly, financing these types of companies may entail a higher
risk of loss than would financing companies that are sponsored by venture capital or private equity firms.

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Sustainable and renewable technology companies are subject to extensive government regulation and certain other risks particular to the sectors in which they operate
and our business and growth strategy could be adversely affected if government regulations, priorities and resources impacting such sectors change or if our portfolio
companies fail to comply with such regulations.

As part of our investment strategy, we plan to invest in portfolio companies in sustainable and renewable technology sectors that may be subject to extensive regulation

by foreign, U.S. federal, state and/or local agencies. Changes in existing laws, rules or regulations, or judicial or administrative interpretations thereof, or new laws, rules or
regulations could have an adverse impact on the business and industries of our portfolio companies. In addition, changes in government priorities or limitations on government
resources could also adversely impact our portfolio companies. We are unable to predict whether any such changes in laws, rules or regulations will occur and, if they do occur,
the impact of these changes on our portfolio companies and our investment returns. Furthermore, if any of our portfolio companies fail to comply with applicable regulations,
they could be subject to significant penalties and claims that could materially and adversely affect their operations, which would also impact our ability to realize value since
our exit from the investment may be subject to the portfolio company obtaining the necessary regulatory approvals. Our portfolio companies may be subject to the expense,
delay and uncertainty of the regulatory approval process for their products and, even if approved, these products may not be accepted in the marketplace.

In addition, there is considerable uncertainty about whether foreign, U.S., state and/or local governmental entities will enact or maintain legislation or regulatory

programs that mandate reductions in greenhouse gas emissions or provide incentives for sustainable and renewable technology companies. Without such regulatory policies,
investments in sustainable and renewable technology companies may not be economical and financing for sustainable and renewable technology companies may become
unavailable, which could materially adversely affect the ability of our portfolio companies to repay the debt they owe to us. Any of these factors could materially and adversely
affect the operations and financial condition of a portfolio company and, in turn, the ability of the portfolio company to repay the debt they owe to us.

Cyclicality within the energy sector may adversely affect some of our portfolio companies.

Industries within the energy sector are cyclical with fluctuations in commodity prices and demand for, and production of commodities driven by a variety of factors. The
highly cyclical nature of the industries within the energy sector may lead to volatile changes in commodity prices, which may adversely affect the earnings of energy companies
in which we may invest and the performance and valuation of our portfolio.

Our investments in the life sciences industry are subject to extensive government regulation, litigation risk, and certain other risks particular to that industry.

We have invested and plan to continue investing in companies in the life sciences industry that are subject to extensive regulation by the FDA and to a lesser extent,

other federal, state, and other foreign agencies. If any of these portfolio companies fail to comply with applicable regulations, they could be subject to significant penalties and
claims that could materially and adversely affect their operations. Portfolio companies that produce medical devices or drugs are subject to the expense, delay and uncertainty of
the regulatory approval process for their products and, even if approved, these products may not be accepted in the marketplace. In addition, governmental budgetary
constraints effecting the regulatory approval process, new laws, regulations or judicial interpretations of existing laws and regulations might adversely affect a portfolio
company in this industry. Portfolio companies in the life sciences industry may also have a limited number of suppliers of necessary components or a limited number of
manufacturers for their products, and therefore face a risk of disruption to their manufacturing process if they are unable to find alternative suppliers when needed. Any of these
factors could materially and adversely affect the operations of a portfolio company in this industry and, in turn, impair our ability to timely collect principal and interest
payments owed to us.

Our investments in the drug discovery industry are subject to numerous risks, including competition, extensive government regulation, product liability, and commercial
difficulties.

Our investments in the drug discovery industry are subject to numerous risks. The successful and timely implementation of the business model of our drug discovery

portfolio companies depends on their ability to adapt to changing technologies and introduce new products. As competitors continue to introduce competitive products, the
development and acquisition of innovative products and technologies that improve efficacy, safety, patient’s and clinician’s ease of use and cost-effectiveness are important to
the success of such portfolio companies. The success of new product offerings will depend on many factors, including the ability to properly anticipate and satisfy customer
needs, obtain regulatory approvals on a timely basis, develop and manufacture products in an economic and timely manner, obtain or maintain advantageous positions with
respect to intellectual property, and differentiate products from those of competitors. Failure by our portfolio companies to introduce planned products or other new products or
to introduce products on schedule could have a material adverse effect on our business, financial condition and results of operations.

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Further, the development of products by drug discovery companies requires significant research and development, clinical trials and regulatory approvals. The results of

product development efforts may be affected by a number of factors, including the ability to innovate, develop and manufacture new products, complete clinical trials, obtain
regulatory approvals and reimbursement in the U.S. and abroad, or gain and maintain market approval of products. In addition, regulatory review processes by U.S. and foreign
agencies may extend longer than anticipated as a result of decreased funding and tighter fiscal budgets. Further, patents attained by others can preclude or delay the
commercialization of a product. There can be no assurance that any products now in development will achieve technological feasibility, obtain regulatory approval, or gain
market acceptance. Failure can occur at any point in the development process, including after significant funds have been invested. Products may fail to reach the market or may
have only limited commercial success because of efficacy or safety concerns, failure to achieve positive clinical outcomes, inability to obtain necessary regulatory approvals,
failure to achieve market adoption, limited scope of approved uses, excessive costs to manufacture, the failure to establish or maintain intellectual property rights, or the
infringement of intellectual property rights of others.

Future legislation, and/or regulations and policies adopted by the FDA or other U.S. or foreign regulatory authorities may increase the time and cost required by some of
our portfolio companies to conduct and complete clinical trials for the product candidates that they develop, and there is no assurance that these companies will obtain
regulatory approval to market and commercialize their products in the U.S. and in foreign countries.

The FDA has established regulations, guidelines and policies to govern the drug development and approval process, as have foreign regulatory authorities, which affect
some of our portfolio companies. Any change in regulatory requirements due to the adoption by the FDA and/or foreign regulatory authorities of new legislation, regulations, or
policies may require some of our portfolio companies to amend existing clinical trial protocols or add new clinical trials to comply with these changes. Such amendments to
existing protocols and/or clinical trial applications or the need for new ones, may significantly impact the cost, timing and completion of the clinical trials.

In addition, increased scrutiny by the U.S. Congress of the FDA’s and other authorities’ approval processes may significantly delay or prevent regulatory approval, as
well as impose more stringent product labeling and post-marketing testing and other requirements. Foreign regulatory authorities may also increase their scrutiny of approval
processes resulting in similar delays. Increased scrutiny and approvals processes may limit the ability of our portfolio companies to market and commercialize their products in
the U.S. and in foreign countries.

Life sciences companies, including drug development companies, device manufacturers, service providers and others, are also subject to material pressures when there
are changes in the outlook for healthcare insurance markets. The ability for individuals, along with private and public insurers, to account for the costs of paying for healthcare
insurance can place strain on the ability of new technology, devices and services to enter those markets, particularly when they are new or untested.  As a result, it is not
uncommon for changes in the insurance marketplace to lead to a slower rate of adoption, price pressure and other forces that may materially limit the success of companies
bringing such technologies to market.  Changes in the health insurance sector might then have an impact on the value of companies in our portfolio or our ability to invest in the
sector generally.

Changes in healthcare laws and other regulations, or the enforcement or interpretation of such laws or regulations, applicable to some of our portfolio companies’
businesses may constrain their ability to offer their products and services.

Changes in healthcare or other laws and regulations, or the enforcement or interpretation of such laws or regulations, applicable to the businesses of some of our

portfolio companies may occur that could increase their compliance and other costs of doing business, require significant systems enhancements, or render their products or
services less profitable or obsolete, any of which could have a material adverse effect on their results of operations. There has also been an increased political and regulatory
focus on healthcare laws in recent years, and new legislation could have a material effect on the business and operations of some of our portfolio companies.

Additionally, because of the possibility of additional changes to healthcare laws and regulations under the new U.S. presidential administration, we cannot quantify or

predict with any certainty the likely impact on our portfolio companies, our business model, prospects, financial condition or results of operations. We also anticipate that
Congress, state legislatures, and third-party payors may continue to review and assess alternative healthcare delivery and payment systems and may in the future propose and
adopt legislation or policy changes or implementations effecting additional fundamental changes in the healthcare delivery system. We cannot assure you as to the ultimate
content, timing, or effect of changes, nor is it possible at this time to estimate the impact of any such potential legislation on certain of our portfolio companies, our business
model, prospects, financial condition or results of operations.

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Price declines and illiquidity in the corporate debt markets could adversely affect the fair value of our portfolio investments, reducing our NAV through increased net
unrealized depreciation.

As a BDC, we are required to carry our investments at market value or, if no market value is ascertainable, at fair market value as determined in good faith by or under
the direction of our Board of Directors. As part of the valuation process, we may take into account the following types of factors, if relevant, in determining the fair value of our
investments: the enterprise value of a portfolio company (an estimate of the total fair value of the portfolio company’s debt and equity), the nature and realizable value of any
collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business, a comparison
of the portfolio company’s securities to similar publicly traded securities, changes in the interest rate environment and the credit markets generally that may affect the price at
which similar investments may be made in the future and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale
occurs, we use the pricing indicated by the external event to corroborate our valuation. 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 on holding an investment through
its maturity). As a result, volatility in the capital markets can also adversely affect our investment valuations. Decreases in the market values or fair values of our investments are
recorded as unrealized depreciation. The effect of all of these factors on our portfolio can reduce our NAV by increasing net unrealized depreciation in our portfolio.

Depending on market conditions, we could incur substantial realized losses and may suffer substantial unrealized depreciation in future periods, which could have a

material adverse impact on our business, financial condition and results of operations.

Economic recessions or slowdowns could impair the ability of our portfolio companies to repay loans, which, in turn, could increase our non-performing assets, decrease
the value of our portfolio, reduce our volume of new loans and have a material adverse effect on our results of operations.

Many of our portfolio companies may be susceptible to economic slowdowns or recessions in both the U.S. and foreign countries, and may be unable to repay our loans

during such periods. Therefore, during such periods, our non-performing assets are likely to increase and the value of our portfolio is likely to decrease. 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 funding costs, limit our access to
the capital markets or result in a decision by lenders not to extend credit to us. These events could prevent us from increasing investments and harm our operating results.

In particular, intellectual property owned or controlled by our portfolio companies may constitute an important portion of the value of the collateral of our loans to our

portfolio companies. Adverse economic conditions may decrease the demand for our portfolio companies’ intellectual property and consequently its value in the event of a
bankruptcy or required sale through a foreclosure proceeding. As a result, our ability to fully recover the amounts owed to us under the terms of the loans may be impaired by
such events.

A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, termination of the

portfolio company’s loans 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 securities that we hold. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a
defaulting portfolio company.

Our portfolio companies may be unable to repay or refinance outstanding principal on their loans at or prior to maturity, and rising interest rates may make it more
difficult for portfolio companies to make periodic payments on their loans.

Our portfolio companies may be unable to repay or refinance outstanding principal on their loans at or prior to maturity. This risk and the risk of default is increased to

the extent that the loan documents do not require the portfolio companies to pay down the outstanding principal of such debt prior to maturity. In addition, if general interest
rates rise, there is a risk that our portfolio companies will be unable to pay escalating interest amounts, which could result in a default under their loan documents with us. Any
failure of one or more portfolio companies to repay or refinance its debt at or prior to maturity or the inability of one or more portfolio companies to make ongoing payments
following an increase in contractual interest rates could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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The disposition of our investments may result in contingent liabilities.

We currently expect that a portion of our investments will involve private securities. In connection with the disposition of an investment in private securities, we may be

required to make representations about the business and financial affairs of the portfolio company typical of those made in connection with the sale of a business. We may also
be required to indemnify the purchasers of such investment to the extent that any such representations turn out to be inaccurate or with respect to certain potential liabilities.
These arrangements may result in contingent liabilities that ultimately yield funding obligations that must be satisfied through our return of certain distributions previously
made to us.

The health and performance of our portfolio companies could be adversely affected by political and economic conditions in the countries in which they conduct business.

Some of the products of our portfolio companies are developed, manufactured, assembled, tested or marketed outside the U.S. Any conflict or uncertainty in these

countries, including due to natural disasters, public health concerns, political unrest or safety concerns, among other things, could harm their business, financial condition and
results of operations. In addition, if the government of any country in which their products are developed, manufactured or sold sets technical or regulatory standards for
products developed or manufactured in or imported into their country that are not widely shared, it may lead some of their customers to suspend imports of their products into
that country, require manufacturers or developers in that country to manufacture or develop products with different technical or regulatory standards and disrupt cross-border
manufacturing, marketing or business relationships which, in each case, could harm their businesses.

Any unrealized depreciation we experience on our investment portfolio may be an indication of future realized losses, which could reduce our income available for
distribution and could impair our ability to service our borrowings.

As a BDC, we are required to carry our investments at market value or, if no market value is ascertainable, at fair value as determined in good faith by our Board of

Directors. Decreases in the market values or fair values of our investments will be recorded as unrealized depreciation. Any unrealized depreciation in our investment portfolio
could be an indication of a portfolio company’s inability to meet its repayment obligations to us with respect to the affected investments. This could result in realized losses in
the future and ultimately in reductions of our income available for distribution in future periods and could materially adversely affect our ability to service our outstanding
borrowings.

A lack of IPO or merger and acquisition opportunities may cause companies to stay in our portfolio longer, leading to lower returns, unrealized depreciation, or realized
losses.

A lack of IPO or merger and acquisition, or M&A, opportunities for venture capital-backed companies could lead to companies staying longer in our portfolio as private

entities still requiring funding. This situation may adversely affect the amount of available funding for early-stage companies in particular as, in general, venture-capital firms
are being forced to provide additional financing to late-stage companies that cannot complete an IPO or M&A transaction. In the best case, such stagnation would dampen
returns, and in the worst case, could lead to unrealized depreciation and realized losses as some companies run short of cash and have to accept lower valuations in private
fundings or are not able to access additional capital at all. A lack of IPO or M&A opportunities for venture capital-backed companies can also cause some venture capital firms
to change their strategies, leading some of them to reduce funding of their portfolio companies and making it more difficult for such companies to access capital and to fulfill
their potential, which can result in unrealized depreciation and realized losses in such companies by other companies such as ourselves who are co-investors in such companies.

The majority of our portfolio companies will need multiple rounds of additional financing to repay their debts to us and continue operations. Our portfolio companies
may not be able to raise additional financing, which could harm our investment returns.

The majority of our portfolio companies will often require substantial additional equity financing to satisfy their continuing working capital and other cash requirements

and, in most instances, to service the interest and principal payments on our investment. Each round of venture financing is typically intended to provide a company with only
enough capital to reach the next stage of development. We cannot predict the circumstances or market conditions under which our portfolio companies will seek additional
capital. It is possible that one or more of our portfolio companies will not be able to raise additional financing or may be able to do so only at a price or on terms unfavorable to
us, either of which would negatively impact our investment returns. Some of these companies may be unable to obtain sufficient financing from private investors, public capital
markets or traditional lenders. This may have a significant impact if the companies are unable to obtain certain federal, state or foreign agency approval for their products or the
marketing thereof, of if regulatory review processes extend longer than anticipated, and the companies need continued funding for their operations during these times.

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Accordingly, financing these types of companies may entail a higher risk of loss than would financing companies that are able to utilize traditional credit sources.

If the assets securing the loans that we make decrease in value, then we may lack sufficient collateral to cover losses.

To attempt to mitigate credit risks, we will typically take a security interest in the available assets of our portfolio companies. There is no assurance that we will obtain

or properly perfect our liens.

There is a risk that the collateral securing our loans may decrease in value over time, may be difficult to sell in a timely manner, may be difficult to appraise and may

fluctuate in value based upon the success of the business and market conditions, including as a result of the inability of a portfolio company to raise additional capital. In some
circumstances, our lien could be subordinated to claims of other creditors. Consequently, the fact that a loan is secured does not guarantee that we will receive principal and
interest payments according to the loan’s terms, or that we will be able to collect on the loan should we be forced to enforce our remedies.

In addition, because we invest in technology-related companies, a substantial portion of the assets securing our investment may be in the form of intellectual property, if
any, inventory and equipment and, to a lesser extent, cash and accounts receivable. Intellectual property, if any, that is securing our loan could lose value if, among other things,
the company’s rights to the intellectual property are challenged or if the company’s license to the intellectual property is revoked or expires, the technology fails to achieve its
intended results or a new technology makes the intellectual property functionally obsolete. Inventory may not be adequate to secure our loan if our valuation of the inventory at
the time that we made the loan was not accurate or if there is a reduction in the demand for the inventory.  

Similarly, any equipment securing our loan may not provide us with the anticipated security if there are changes in technology or advances in new equipment that render

the particular equipment obsolete or of limited value, or if the company fails to adequately maintain or repair the equipment. Any one or more of the preceding factors could
materially impair our ability to recover earned interest and principal in a foreclosure.

In most cases, we collateralize our investments by obtaining a first priority security interest in a portfolio company’s assets, which may include its intellectual property.
In other cases, we may obtain a negative pledge covering a company’s intellectual property. As of December 31, 2020, approximately 84.2% of our debt investments were in a
senior secured first lien position, with 43.5% secured by a first priority security in all of the assets of the portfolio company, including its intellectual property, 31.0% secured by
a first priority security in all of the assets of the portfolio company and the portfolio company was prohibited from pledging or encumbering its intellectual property. 0.6% of
our debt investments were senior secured by the equipment of the portfolio company, and 9.1% were in a first lien “last-out” senior secured position with security interest in all
of the assets of the portfolio company, whereby the “last-out” loans will be subordinated to the “first-out” portion of the unitranche loan in a liquidation, sale or other
disposition. Another 15.1% of our debt investments were secured by a second priority security interest in all of the portfolio company’s assets, and 0.7% were unsecured.

We may suffer a loss if a portfolio company defaults on a loan and the underlying collateral is not sufficient.

In the event of a default by a portfolio company on a secured loan, we will only have recourse to the assets collateralizing the loan. If the underlying collateral value is

less than the loan amount, we will suffer a loss. In addition, we sometimes make loans that are unsecured, which are subject to the risk that other lenders may be directly
secured by the assets of the portfolio company. In the event of a default, those collateralized lenders would have priority over us with respect to the proceeds of a sale of the
underlying assets. In cases described above, we may lack control over the underlying asset collateralizing our loan or the underlying assets of the portfolio company prior to a
default, and as a result the value of the collateral may be reduced by acts or omissions by owners or managers of the assets.

In the event of bankruptcy of a portfolio company, we may not have full recourse to its assets in order to satisfy our loan, or our loan may be subject to “equitable
subordination.” This means that depending on the facts and circumstances, including the extent to which we actually provided significant “managerial assistance,” if any, to that
portfolio company, a bankruptcy court might re-characterize our debt holding and subordinate all or a portion of our claim to that of other creditors. In addition, certain of our
loans are subordinate to other debt of the portfolio company. If a portfolio company defaults on our loan or on debt senior to our loan, or in the event of a portfolio company
bankruptcy, our loan will be satisfied only after the senior debt receives payment. Where debt senior to our loan exists, the presence of intercreditor arrangements may limit our
ability to amend our loan documents, assign our loans, accept prepayments, exercise our remedies (through “standstill” periods) and control decisions made in bankruptcy
proceedings relating to the portfolio company. Bankruptcy and portfolio company litigation can significantly increase collection losses and the time needed for us to acquire the
underlying collateral in the event of a default, during which time the collateral may decline in value, causing us to suffer losses.

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If the value of collateral underlying our loan declines or interest rates increase during the term of our loan, a portfolio company may not be able to obtain the necessary

funds to repay our loan at maturity through refinancing. Decreasing collateral value and/or increasing interest rates may hinder a portfolio company’s ability to refinance our
loan because the underlying collateral cannot satisfy the debt service coverage requirements necessary to obtain new financing. If a borrower is unable to repay our loan at
maturity, we could suffer a loss which may adversely impact our financial performance.

The inability of our portfolio companies to commercialize their technologies or create or develop commercially viable products or businesses would have a negative
impact on our investment returns.

The possibility that our portfolio companies will not be able to commercialize their technology, products or business concepts presents significant risks to the value of

our investment. Additionally, although some of our portfolio companies may already have a commercially successful product or product line when we invest, technology-
related products and services often have a more limited market or life-span than have products in other industries. Thus, the ultimate success of these companies often depends
on their ability to continually innovate, or raise additional capital, in increasingly competitive markets. Their inability to do so could affect our investment return. In addition,
the intellectual property held by our portfolio companies often represents a substantial portion of the collateral, if any, securing our investments. We cannot assure you that any
of our portfolio companies will successfully acquire or develop any new technologies, or that the intellectual property the companies currently hold will remain viable. Even if
our portfolio companies are able to develop commercially viable products, the market for new products and services is highly competitive and rapidly changing. Neither our
portfolio companies nor we have any control over the pace of technology development. Commercial success is difficult to predict, and the marketing efforts of our portfolio
companies may not be successful.

An investment strategy focused on privately-held companies presents certain challenges, including the lack of available information about these companies, a
dependence on the talents and efforts of only a few key portfolio company personnel, and a greater vulnerability to economic downturns.

We invest primarily in privately-held companies. Generally, very little public information exists about these companies, and we are required to rely on the ability of our
management and investment teams to obtain adequate information to evaluate the potential returns from investing in these companies. Such small, privately held companies as
we routinely invest in may also lack quality infrastructures, thus leading to poor disclosure standards or control environments. If we are unable to uncover all material
information about these companies, then we may not make a fully informed investment decision, and we may not receive the expected return on our investment or lose some or
all of the money invested in these companies.

Also, privately-held companies frequently have less diverse product lines and a smaller market presence than do larger competitors. Privately-held companies are, thus,
generally more vulnerable to economic downturns and may experience more substantial variations in operating results than do larger competitors. These factors could affect our
investment returns and our results of operations and financial condition.

In addition, our success depends, in large part, upon the abilities of the key management personnel of our portfolio companies, who are responsible for the day-to-day
operations of our portfolio companies. Competition for qualified personnel is intense at any stage of a company’s development, and high turnover of personnel is common in
technology-related companies. The loss of one or more key managers can hinder or delay a company’s implementation of its business plan and harm its financial condition. Our
portfolio companies may not be able to attract and retain qualified managers and personnel. Any inability to do so may negatively impact our investment returns and our results
of operations and financial condition.

If our portfolio companies are unable to protect their intellectual property rights or are required to devote significant resources to protecting their intellectual property
rights, then our investments could be harmed.

Our future success and competitive position depend in part upon the ability of our portfolio companies to obtain and maintain proprietary technology used in their

products and services, which will often represent a significant portion of the collateral, if any, securing our investment. The portfolio companies will rely, in part, on patent,
trade secret and trademark law to protect that technology, but competitors may misappropriate their intellectual property, and disputes as to ownership of intellectual property
may arise. Portfolio companies may, from time to time, be required to institute litigation in order to enforce their patents, copyrights or other intellectual property rights, to
protect their trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement. Such litigation could result in
substantial costs and diversion of resources. Similarly, if a portfolio company is found to infringe upon or misappropriate a third party’s patent or other proprietary rights, that
portfolio company could be required to pay damages to such third party, alter its own products or processes, obtain a license from the third party and/or cease activities utilizing
such proprietary rights, including making or selling products utilizing such proprietary rights. Any of the foregoing events could negatively affect both the portfolio company’s
ability to service our debt investment and the value of any related debt and equity securities that we own, as well as any collateral securing our investment.

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We generally will not control our portfolio companies.

In some instances, we may control our portfolio companies or provide our portfolio companies with significant managerial assistance. However, we generally do not,

and do not expect to, control the decision making in many of our portfolio companies, even though we may have board representation or board observation rights, and our debt
agreements may contain certain restrictive covenants. As a result, we are subject to the risk that a portfolio company in which we invest will make business decisions with which
we disagree and the management of such company, as representatives of the holders of their common equity, will take risks or otherwise act in ways that do not serve our
interests as debt investors. Due to the lack of liquidity for our investments in non-traded companies, we may not be able to dispose of our interests in our portfolio companies as
readily as we would like or at an appropriate valuation. As a result, a portfolio company may make decisions that would decrease the value of our portfolio holdings.

Our financial condition, results of operations and cash flows could be negatively affected if we are unable to recover our principal investment as a result of a negative
pledge or lack of a security interest on the intellectual property of our venture growth stage companies.

In some cases, we collateralize our loans with a secured collateral position in a portfolio company's assets, which may include a negative pledge or, to a lesser extent, no
security on their intellectual property. In the event of a default on a loan, the intellectual property of the portfolio company will most likely be liquidated to provide proceeds to
pay the creditors of the company. There can be no assurance that our security interest, if any, in the proceeds of the intellectual property will be enforceable in a court of law or
bankruptcy court or that there will not be others with senior or pari passu credit interests.

Our relationship with certain portfolio companies may expose us to our portfolio companies' trade secrets and confidential information which may require us to be
parties to non-disclosure agreements and restrict us from engaging in certain transactions.

Our relationship with some of our portfolio companies may expose us to our portfolio companies' trade secrets and confidential information (including transactional

data and personal data about their employees and clients) which may require us to be parties to non-disclosure agreements and restrict us from engaging in certain transactions.
Unauthorized access or disclosure of such information may occur, resulting in theft, loss or other misappropriation. Any theft, loss, improper use, such as insider trading or
other misappropriation of confidential information could have a material adverse impact on our competitive positions, our relationship with our portfolio companies and our
reputation and could subject us to regulatory inquiries, enforcement and fines, civil litigation (which may cause us to incur significant expense or expose us to losses) and
possible financial liability or costs.

Portfolio company litigation could result in additional costs, the diversion of management time and resources and have an adverse impact on the fair value of our
investment.

To the extent that litigation arises with respect to any of our portfolio companies, we may be named as a defendant, which could result in additional costs and the

diversion of management time and resources. Furthermore, if we are providing managerial assistance to the portfolio company or have representatives on the portfolio
company’s board of directors, our costs and diversion of our management’s time and resources in assessing the portfolio company could be substantial in light of any such
litigation regardless of whether we are named as a defendant. In addition, litigation involving a portfolio company may be costly and affect the operations of the portfolio
company’s business, which could in turn have an adverse impact on the fair value of our investment in such company.

We may not be able to realize our entire investment on equipment-based loans, if any, in the case of default.

We may from time-to-time provide loans that will be collateralized only by equipment of the portfolio company. If the portfolio company defaults on the loan we would

take possession of the underlying equipment to satisfy the outstanding debt. The residual value of the equipment at the time we would take possession may not be sufficient to
satisfy the outstanding debt and we could experience a loss on the disposition of the equipment.

Our investments in foreign securities may involve significant risks in addition to the risks inherent in U.S. investments.

Our investment strategy contemplates that a portion of our investments may be in securities of foreign companies. Our total investments at value in foreign companies

were approximately $126.7 million or 5.4% of total investments at December 31, 2020. Investing in foreign companies may expose us to additional risks not typically
associated with investing in U.S. companies.

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These risks include changes in exchange control regulations, political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less

available information than is generally the case in the U.S., higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy
laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility, among other things.

If our investments do not meet our performance expectations, you may not receive distributions.

We intend to make distributions on a quarterly basis to our stockholders. We may not be able to achieve operating results that will allow us to make distributions at a
specific level or to increase the amount of these distributions from time to time. In addition, due to the asset coverage test applicable to us as a BDC, we may be limited in our
ability to make distributions. Also, restrictions and provisions in any future credit facilities may limit our ability to make distributions. As a RIC, if we do not distribute at least a
certain percentage of our income each taxable year as dividends for U.S. federal income tax purposes to our stockholders, we will suffer adverse tax consequences, including the
inability to be subject to tax as a RIC. We cannot assure you that you will receive distributions at a particular level or at all.

We may not have sufficient funds to make follow-on investments. Our decision not to make a follow-on investment may have a negative impact on a portfolio company in
need of such an investment or may result in a missed opportunity for us.

After our initial investment in a portfolio company, we may be called upon from time to time to provide additional funds to such company or have the opportunity or

need to increase our investment in a successful situation or attempt to preserve or enhance the value of our initial investment, for example, the exercise of a warrant to purchase
common stock, or a negative situation, to protect an existing investment. We have the discretion to make any follow-on investments, subject to the availability of capital
resources and regulatory considerations. We may elect not to make follow-on investments or otherwise lack sufficient funds to make those investments. Any decision we make
not to make a follow-on investment or any inability on our part to make such an investment may have a negative impact on a portfolio company in need of such an investment
or may result in a missed opportunity for us to increase our participation in a successful operation and may dilute our equity interest or otherwise reduce the expected yield on
our investment. Moreover, a follow-on investment may limit the number of companies in which we can make initial investments. In determining whether to make a follow-on
investment, our management will exercise its business judgment and apply criteria similar to those used when making the initial investment. There is no assurance that we will
make, or will have sufficient funds to make, follow-on investments and this could adversely affect our success and result in the loss of a substantial portion or all of our
investment in a portfolio company.   

The lack of liquidity in our investments may adversely affect our business and, if we need to sell any of our investments, we may not be able to do so at a favorable price.
As a result, we may suffer losses.

We generally invest in debt securities with terms of up to seven years and hold such investments until maturity, and we do not expect that our related holdings of equity

securities will provide us with liquidity opportunities in the near-term. We invest and expect to continue investing in companies whose securities have no established trading
market and whose securities are and will be subject to legal and other restrictions on resale or whose securities are and will be less liquid than publicly traded securities. The
illiquidity of these investments may make it difficult for us to sell these investments when desired. In addition, if we are required to liquidate all or a portion of our portfolio
quickly, we may realize significantly less than the value at which we had previously recorded these investments. As a result, we do not expect to achieve liquidity in our
investments in the near-term. However, to maintain our qualification as a BDC and as a RIC, we may have to dispose of investments if we do not satisfy one or more of the
applicable criteria under the respective regulatory frameworks.

Our portfolio companies may incur debt or issue equity securities that rank equally with, or senior to, our investments in such companies.

We invest primarily in debt securities issued by our portfolio companies. In some cases, portfolio companies will be permitted to incur other debt, or issue other equity
securities, that rank equally with, or senior to, our investment. Such instruments may provide that the holders thereof are entitled to receive payment of distributions, interest or
principal on or before the dates on which we are entitled to receive payments in respect of our investments. These debt instruments would usually prohibit the portfolio
companies from paying interest on or repaying our investments in the event and during the continuance of a default under such debt. Also, in the event of insolvency,
liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of securities ranking senior to our investment in that portfolio company would typically
be entitled to receive payment in full before we receive any distribution in respect of our investment. After repaying such holders, the portfolio company might not have any
remaining assets to use for repaying its obligation to us. In the case of securities ranking equally with our investments, we would have to share on a pari passu basis any
distributions with other security holders in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.

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The rights we may have with respect to the collateral securing any junior priority loans we make to our portfolio companies may also be limited pursuant to the terms of

one or more intercreditor agreements that we enter into with the holders of senior debt. Under such an intercreditor agreement, at any time that senior obligations are
outstanding, we may forfeit certain rights with respect to the collateral to the holders of the senior obligations. These rights may include the right to commence enforcement
proceedings against the collateral, the right to control the conduct of such enforcement proceedings, the right to approve amendments to collateral documents, the right to release
liens on the collateral and the right to waive past defaults under collateral documents. We may not have the ability to control or direct such actions, even if as a result our rights
as junior lenders are adversely affected.

Our warrant and equity-related investments are highly speculative, and we may not realize gains from these investments. If our warrant and equity-related investments
do not generate gains, then the return on our invested capital will be lower than it would otherwise be, which could result in a decline in the value of shares of our
common stock.

When we invest in debt securities, we generally expect to acquire warrants or other equity-related securities as well. Our goal is ultimately to dispose of these equity

interests and realize gains upon disposition of such interests. Over time, the gains that we realize on these equity interests may offset, to some extent, losses that we experience
on defaults under debt and other securities that we hold. However, the equity interests that we receive may not appreciate in value and, in fact, may decline in value.
Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to
offset any other losses that we experience. In addition, we anticipate that approximately 50% of our warrants may not realize and exit or generate any returns. Furthermore,
because of the financial reporting requirements under U.S. generally accepted accounting principles, or U.S. GAAP, of those approximately 50% of warrants that we do not
realize and exit, the assigned costs to the initial warrants may lead to realized write-offs when the warrants either expire or are not exercised.

Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our return on equity.

During the year ended December 31, 2020, we received debt investment early principal repayments and pay down of working capital debt investments of approximately
$781.2 million. We are subject to the risk that the investments we make in our portfolio companies may be repaid prior to maturity. When this occurs, we will generally reinvest
these proceeds in temporary investments, pending their future investment in new portfolio companies. These temporary investments will typically have substantially lower
yields than the debt being prepaid and we could experience significant delays in reinvesting these amounts. Any future investment in a new portfolio company may also be at
lower yields than the debt that was repaid. As a result, our results of operations could be materially adversely affected if one or more of our portfolio companies elect to prepay
amounts owed to us. Additionally, prepayments could negatively impact our return on equity, which could result in a decline in the market price of our common stock.

We may choose to waive or defer enforcement of covenants in the debt securities held in our portfolio, which may cause us to lose all or part of our investment in these
companies.

We structure the debt investments in our portfolio companies to include business and financial covenants placing affirmative and negative obligations on the operation
of the company’s business and its financial condition. However, from time to time we may elect to waive breaches of these covenants, including our right to payment, or waive
or defer enforcement of remedies, such as acceleration of obligations or foreclosure on collateral, depending upon the financial condition and prospects of the particular
portfolio company. These actions may reduce the likelihood of receiving the full amount of future payments of interest or principal and be accompanied by a deterioration in the
value of the underlying collateral as many of these companies may have limited financial resources, may be unable to meet future obligations and may go bankrupt. This could
negatively impact our ability to pay distributions, could adversely affect our results of operation and financial condition and cause the loss of all or part of your investment.

We may also be subject to lender liability claims for actions taken by us with respect to a borrower’s business or instances where we exercise control over the borrower.
It is possible that we could become subject to a lender’s liability claim, including as a result of actions taken in rendering significant managerial assistance or actions to compel
and collect payments from the borrower outside the ordinary course of business.

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Our loans could be subject to equitable subordination by a court which would increase our risk of loss with respect to such loans or we could be subject to lender liability
claims.

Courts may apply the doctrine of equitable subordination to subordinate the claim or lien of a lender against a borrower to claims or liens of other creditors of the

borrower, when the lender or its affiliates is found to have engaged in unfair, inequitable or fraudulent conduct. The courts have also applied the doctrine of equitable
subordination when a lender or its affiliates is found to have exerted inappropriate control over a client, including control resulting from the ownership of equity interests in a
client or providing of significant managerial assistance. We have made direct equity investments or received warrants in connection with loans. These investments represent
approximately 11.0% of the outstanding value of our investment portfolio as of December 31, 2020. Payments on one or more of our loans, particularly certain loans to clients
in which we also hold equity interests, may be subject to claims of equitable subordination. If we were deemed to have the ability to control or otherwise exercise influence over
the business and affairs of one or more of our portfolio companies resulting in economic hardship to other creditors of that company, this control or influence may constitute
grounds for equitable subordination and a court may treat one or more of our loans as if it were unsecured or common equity in the portfolio company. In that case, if the
portfolio company were to liquidate, we would be entitled to repayment of our loan on a pro-rata basis with other unsecured debt or, if the effect of subordination was to place
us at the level of common equity, then on an equal basis with other holders of the portfolio company’s common equity only after all of its obligations relating to its debt and
preferred securities had been satisfied.

In addition to these risks, in the event we elect to convert our debt position to equity, or otherwise take control of a portfolio company (such as through placing a

member of our management team on its board of directors), as part of a restructuring, we face additional risks acting in that capacity.  It is not uncommon for unsecured, or
otherwise unsatisfied creditors, to sue parties that elect to use their debt positions to later control a company following a restructuring or bankruptcy.  Apart from lawsuits, key
customers and suppliers might act in a fashion contrary to the interests of a portfolio company if they were left unsatisfied in a restructuring or bankruptcy.  Any combination of
these factors might lead to the loss in value of a company subject to such activity and may divert the time and attention of our management team and investment team to help to
address such issues in a portfolio company.

The potential inability of our portfolio companies’ in the healthcare industry to charge desired prices with respect to prescription drugs could impact their revenues and in
turn their ability to repay us.

Some of our portfolio companies in the healthcare industry are subject to risks associated with the pricing for prescription drugs. It is uncertain whether customers of

our healthcare industry portfolio companies will continue to utilize established prescription drug pricing methods, or whether other pricing benchmarks will be adopted for
establishing prices within the industry. Legislation may lead to changes in the pricing for Medicare and Medicaid programs. Regulators have conducted investigations into the
use of prescription drug pricing methods for federal program payment, and whether such methods have inflated drug expenditures by the Medicare and Medicaid programs.
Federal and state proposals have sought to change the basis for calculating payment of certain drugs by the Medicare and Medicaid programs. Any changes to the method for
calculating prescription drug costs may reduce the revenues of our portfolio companies in the healthcare industry which could in turn impair their ability to timely make any
principal and interest payments owed to us.

Risks Related to Our Securities

Investing in shares of our common stock involves an above average degree of risk.

The investments we make in accordance with our investment objective may result in a higher amount of risk, volatility or loss of principal than alternative investment

options. Our investments in portfolio companies may be highly speculative and aggressive, and therefore, an investment in our common stock may not be suitable for investors
with lower risk tolerance.

Our common stock may trade below its NAV per share, which limits our ability to raise additional equity capital.

If our common stock is trading below its NAV per share, we will generally not be able to issue additional shares of our common stock at its market price without first

obtaining the approval for such issuance from our independent directors. If our common stock trades below NAV, the higher cost of equity capital may result in it being
unattractive to raise new equity, which may limit our ability to grow. The risk of trading below NAV is separate and distinct from the risk that our NAV per share may decline.
We cannot predict whether shares of our common stock will trade above, at or below our NAV.

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Provisions of our charter and bylaws could deter takeover attempts and have an adverse impact on the price of our common stock.

Our charter and bylaws contain provisions that may have the effect of discouraging, delaying, or making difficult a change in control of our company or the removal of
our incumbent directors. Under our charter, our Board of Directors is divided into three classes serving staggered terms, which will make it more difficult for a hostile bidder to
acquire control of us. In addition, our Board of Directors may, without stockholder action, authorize the issuance of shares of stock in one or more classes or series, including
preferred stock. Subject to compliance with the 1940 Act, our Board of Directors may, without stockholder action, amend our charter to increase the number of shares of stock
of any class or series that we have authority to issue. The existence of these provisions, among others, may have a negative impact on the price of our common stock and may
discourage third party bids for ownership of our company. These provisions may prevent any premiums being offered to you for shares of our common stock in connection with
a takeover.

Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock.

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 our 2022 Convertible
Notes, issued in January 2017, into common stock), could adversely affect the prevailing market prices for our common stock, which may also lead to further dilution of our
earnings per share. If this occurs and continues, it could impair our ability to raise additional capital through the sale of securities should we desire to do so.

We have received the approval from our stockholders to issue shares of our common stock at prices below the then current NAV per share of our common stock, subject to
certain limitations and with the approval from our independent directors. If we receive such approval from the independent directors, we may periodically issue shares of
our common stock at a price below the then current NAV per share of common stock. Any such issuance could materially dilute your interest in our common stock and
reduce our NAV per share.

We have received the approval from our stockholders to issue shares of our common stock at prices below the then current NAV per share of our common stock. The

approval expires on June 12, 2021. Such approval has allowed and may again allow us to access the capital markets in a way that we typically are unable to do as a result of
restrictions that, absent stockholder approval, apply to business development companies under the 1940 Act. Any decision to sell shares of our common stock below the then
current NAV per share of our common stock is subject to the determination by our Board of Directors that such issuance and sale is in our and our stockholders’ best interests.

Any sale or other issuance of shares of our common stock at a price below NAV per share has resulted and will continue to result in an immediate dilution to your

interest in our common stock and a reduction of our NAV per share. This dilution would occur as a result of a proportionately greater decrease in a stockholder’s interest in our
earnings and assets and voting interest in us than the increase in our assets resulting from such issuance. Because the number of future shares of common stock that may be
issued below our NAV per share and the price and timing of such issuances are not currently known, we cannot predict the actual dilutive effect of any such issuance. We also
cannot determine the resulting reduction in our NAV per share of any such issuance at this time. We caution you that such effects may be material, and we undertake to
describe all the material risks and dilutive effects of any offering that we make at a price below our then current NAV in the future in a prospectus supplement issued in
connection with any such offering. We cannot predict whether shares of our common stock will trade above, at or below our NAV.

If we conduct an offering of our common stock at a price below NAV, investors are likely to incur immediate dilution upon the closing of the offering.

We are not generally able to issue and sell our common stock at a price below NAV per share. We may, however, sell our common stock, at a price below the current

NAV of the common stock, or sell warrants, options or other rights to acquire such common stock, at a price below the current NAV of the common stock if our Board of
Directors determines that such sale is in our best interests and the best interests of our stockholders and our stockholders have approved the practice of making such sales.

In connection with the receipt of such stockholder approval, we will limit the number of shares that it issues at a price below NAV pursuant to this authorization so that

the aggregate dilutive effect on our then outstanding shares will not exceed 20%. Our Board of Directors, subject to its fiduciary duties and regulatory requirements, has the
discretion to determine the amount of the discount, and as a result, the discount could be up to 100% of NAV per share. If we were to issue shares at a price below NAV, such
sales would result in an immediate dilution to existing common stockholders, which would include a reduction in the NAV per share as a result of the issuance. This dilution
would also include a proportionately greater decrease in a stockholder’s interest in our earnings and assets and voting interest in us than the increase in our assets resulting from
such issuance.

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In addition, if we determined to conduct additional offerings in the future there may be even greater dilution if we determine to conduct such offerings at prices below

NAV. As a result, investors will experience further dilution and additional discounts to the price of our common stock. Because the number of shares of common stock that
could be so issued and the timing of any issuance is not currently known, the actual dilutive effect of an offering cannot be predicted. We did not sell any of our securities at a
price below NAV during the year ended December 31, 2020.

We may allocate the net proceeds from an offering in ways with which you may not agree.

We have significant flexibility in investing the net proceeds of an offering and may use the net proceeds from an offering in ways with which you may not agree or for

purposes other than those contemplated at the time of the offering.

If we issue preferred stock, debt securities or convertible debt securities, the NAV and market value of our common stock may become more volatile.

We cannot assure you that the issuance of preferred stock and/or debt securities would result in a higher yield or return to the holders of our common stock. The

issuance of preferred stock, debt securities or convertible debt would likely cause the NAV and market value of our common stock to become more volatile. If the distribution
rate on the preferred stock, or the interest rate on the debt securities, were to approach the net rate of return on our investment portfolio, the benefit of leverage to the holders of
our common stock would be reduced. If the distribution rate on the preferred stock, or the interest rate on the debt securities, were to exceed the net rate of return on our
portfolio, the use of leverage would result in a lower rate of return to the holders of common stock than if we had not issued the preferred stock or debt securities. Any decline
in the NAV of our investment would be borne entirely by the holders of our common stock. Therefore, if the market value of our portfolio were to decline, the leverage would
result in a greater decrease in NAV to the holders of our common stock than if we were not leveraged through the issuance of preferred stock. This decline in NAV would also
tend to cause a greater decline in the market price for our common stock.

There is also a risk that, in the event of a sharp decline in the value of our net assets, we would be in danger of failing to maintain required asset coverage ratios which
may be required by the preferred stock, debt securities, convertible debt or units or of a downgrade in the ratings of the preferred stock, debt securities, convertible debt or our
current investment income might not be sufficient to meet the distribution requirements on the preferred stock or the interest payments on the debt securities. If we do not
maintain our required asset coverage ratios, we may not be permitted to declare dividend distributions. In order to counteract such an event, we might need to liquidate
investments in order to fund redemption of some or all of the preferred stock, debt securities or convertible debt. In addition, we would pay (and the holders of our common
stock would bear) all costs and expenses relating to the issuance and ongoing maintenance of the preferred stock, debt securities, convertible debt or any combination of these
securities. Holders of preferred stock, debt securities, convertible debt or any combination of these securities may have different interests than holders of common stock and
may at times have disproportionate influence over our affairs.

Holders of any preferred stock that we may issue will have the right to elect members of the Board of Directors and have class voting rights on certain matters.

The 1940 Act requires that holders of shares of preferred stock must be entitled as a class to elect two directors at all times and to elect a majority of the directors if

distributions on such preferred stock are in arrears by two years or more, until such arrearage is eliminated. In addition, certain matters under the 1940 Act require the separate
vote of the holders of any issued and outstanding preferred stock, including changes in fundamental investment restrictions and conversion to open-end status and, accordingly,
preferred stockholders could veto any such changes. Restrictions imposed on the declarations and payment of dividends or other distributions to the holders of our common
stock and preferred stock, both by the 1940 Act and by requirements imposed by rating agencies, might impair our ability to maintain our ability to be subject to tax as a RIC.

Terms relating to redemption may materially adversely affect your return on any debt securities that we may issue.

If you are holding debt securities issued by us and such securities are redeemable at our option, we may choose to redeem your debt securities at times when prevailing
interest rates are lower than the interest rate paid on your debt securities. In addition, if you are holding debt securities issued by us and such securities are subject to mandatory
redemption, we may be required to redeem your debt securities at times when prevailing interest rates are lower than the interest rate paid on your debt securities. In this
circumstance, you may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as your debt securities being redeemed.

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We may redeem the 2022 Notes after September 23, 2022, the July 2024 Notes after January 16, 2024, the February 2025 Notes after August 5, 2024, the April 2025

Notes after April 30, 2021, the June 2025 Notes after December 3, 2024, the March 2026 A Notes after May 4, 2025, and the 2033 Notes after October 30, 2033 at a
redemption price of 100% of the outstanding principal amount thereof plus accrued and unpaid interest payments. If we choose to redeem the 2022 Notes, July 2024 Notes,
February 2025 Notes, April 2025 Notes, June 2025 Notes, March 2026 A Notes, or 2033 Notes when the fair market value of the 2022 Notes, February 2025 Notes, April 2025
Notes, June 2025 Notes, March 2026 A Notes, or 2033 Notes is above par value, you would experience a loss of any potential premium.

A downgrade, suspension, or withdrawal of the credit rating assigned by a rating agency to us or our debt securities, if any, or change in the debt markets could cause
the liquidity or market value of our debt securities to decline significantly.  

Our credit ratings are an assessment by rating agencies of our ability to pay our debts when due. Consequently, real or anticipated changes in our credit ratings will

generally affect the market value of our outstanding debt and equity securities and our ability to raise capital. These credit ratings may not reflect the potential impact of risks
relating to the structure or marketing of such debt and equity securities. Credit ratings are not a recommendation to buy, sell or hold any security, and may be revised or
withdrawn at any time by the issuing organization in its sole discretion.

Neither we nor any underwriter undertakes any obligation to maintain our credit ratings or to advise holders of our debt and equity securities of any changes in our
credit ratings. There can be no assurance that a credit rating will remain for any given period of time or that such credit ratings will not be lowered or withdrawn entirely if
future circumstances relating to the basis of the credit rating, such as adverse changes in our company, so warrant. An increase in the competitive environment, inability to cover
distributions, or increase in leverage could lead to a downgrade in our credit ratings and limit our access to the debt and equity markets capability impairing our ability to grow
the business. The conditions of the financial markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future.

Our shares may trade at discounts from NAV or at premiums that are unsustainable over the long term.

Shares of business development companies may trade at a market price that is less than the NAV that is attributable to those shares. Our shares have historically traded

above and below our NAV. The possibility that our shares of common stock will trade at a discount from NAV or at a premium that is unsustainable over the long term is
separate and distinct from the risk that our NAV may decrease. It is not possible to predict whether our shares will trade at, above or below NAV in the future.

Our stockholders may experience dilution upon the conversion of our 2022 Convertible Notes.

Our 2022 Convertible Notes, issued in January 2017, are convertible into shares of our common stock beginning on August 1, 2021 or, under certain circumstances,

earlier. Upon conversion of the 2022 Convertible Notes, we have the choice to pay or deliver, as the case may be, at our election, cash, shares of our common stock or a
combination of cash and shares of our common stock. The initial conversion price of the 2022 Convertible Notes is $16.41, subject to adjustment in certain circumstances. If we
elect to deliver shares of common stock upon a conversion at the time our NAV per share exceeds the conversion price in effect at such time, our stockholders may incur
dilution. In addition, our stockholders will experience dilution in their ownership percentage of common stock upon our issuance of common stock in connection with the
conversion of the 2022 Convertible Notes and any distributions paid on our common stock will also be paid on shares issued in connection with such conversion after such
issuance.

Our stockholders will experience dilution in their ownership percentage if they opt out of our dividend reinvestment plan.

All distributions in cash payable to stockholders that are participants in our dividend reinvestment plan are automatically reinvested in shares of our common stock. As

a result, our stockholders that opt out of our dividend reinvestment plan will experience dilution in their ownership percentage of our common stock over time.

Our distribution proceeds may exceed our earnings. Therefore, portions of the distributions that we make may represent a return of capital to stockholders, which will
lower their tax basis in their shares.

The tax treatment and characterization of our distributions may vary significantly from time to time due to the nature of our investments. The ultimate tax
characterization of our distributions made during a taxable year generally will not finally be determined until after the end of that taxable year. We may make distributions
during a taxable year that exceed our investment company taxable income, determined without regard to any deduction for dividends paid, and net capital gains for that taxable
year. In such a situation, the amount by which our total distributions exceed investment company taxable income, determined without regard to any deduction for dividends
paid, and net capital gains generally would be treated as a return of capital up to the amount of a stockholder’s tax basis in the shares, with any amounts exceeding such tax basis
generally treated as a gain from the sale or exchange of such shares. A return

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of capital generally is a return of a stockholder’s investment rather than a return of earnings or gains derived from our investment activities. Moreover, we may pay all or a
substantial portion of our distributions from the proceeds of the sale of shares of our common stock or from borrowings in anticipation of future cash flow, which could
constitute a return of stockholders’ capital and will lower such stockholders’ tax basis in our shares, which may result in increased tax liability to stockholders when they sell
such shares. The tax liability to stockholders upon the sale of shares may increase even if such shares are sold at a loss.

Our common stock price has been and continues to be volatile and may decrease substantially.

As with any company, the price of our common stock will fluctuate with market conditions and other factors, which include, but are not limited to, the following:

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price and volume fluctuations in the overall stock market from time to time;

significant volatility in the market price and trading volume of securities of RICs, business development companies or other financial services companies;

any inability to deploy or invest our capital;

fluctuations in interest rates;

any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts;

the financial performance of specific industries in which we invest in on a recurring basis;

announcement of strategic developments, acquisitions, and other material events by us or our competitors, or operating performance of companies comparable
to us;

changes in regulatory policies or tax guidelines with respect to RICs, SBICs or business development companies;

losing our ability to either qualify or be subject to U.S. federal income tax as a RIC;

actual or anticipated changes in our earnings or fluctuations in our operating results, or changes in the expectations of securities analysts;

changes in the value of our portfolio of investments;

realized losses in investments in our portfolio companies;

general economic conditions and trends;

inability to access the capital markets;

loss of a major funded source; or

departure of key personnel.

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company.
Due to the potential volatility of our stock price, we may be the target of securities litigation in the future. Securities litigation could result in substantial costs and could divert
management’s attention and resources from our business.

We may be unable to invest a significant portion of the net proceeds from an offering or from exiting an investment or other capital on acceptable terms, which could
harm our financial condition and operating results.

Delays in investing the net proceeds raised in an offering or from exiting an investment or other capital may cause our performance to be worse than that of other fully

invested business development companies or other lenders or investors pursuing comparable investment strategies. We cannot assure you that we will be able to identify any
investments that meet our investment objective or that any investment that we make will produce a positive return. We may be unable to invest the net proceeds of any offering
or from exiting an investment or other capital on acceptable terms within the time period that we anticipate or at all, which could harm our financial condition and operating
results.

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We anticipate that, depending on market conditions and the amount of the capital, it may take us a substantial period of time to invest substantially all the capital in

securities meeting our investment objective. During this period, we will invest the capital primarily in cash equivalents, U.S. government securities and other high-quality debt
investments that mature in one year or less or use the net proceeds from such offerings to reduce then-outstanding debt obligations, which may produce returns that are
significantly lower than the returns which we expect to achieve when our portfolio is fully invested in securities meeting our investment objective. As a result, any distributions
that we pay during such period may be substantially lower than the distributions that we may be able to pay when our portfolio is fully invested in securities meeting our
investment objective. In addition, until such time as the net proceeds of any offering or from exiting an investment or other capital are invested in new securities meeting our
investment objective, the market price for our securities may decline. Thus, the initial return on your investment may be lower than when, if ever, our portfolio is fully invested
in securities meeting our investment objective.

Your interest in us may be diluted if you do not fully exercise your subscription rights in any rights offering. In addition, if the subscription price is less than our NAV
per share, then you will experience an immediate dilution of the aggregate NAV of your shares.

In the event we issue subscription rights, stockholders who do not fully exercise their subscription rights should expect that they will, at the completion of a rights
offering, own a smaller proportional interest in us than would otherwise be the case if they fully exercised their rights. We cannot state precisely the amount of any such dilution
in share ownership because we do not know at this time what proportion of the shares will be purchased as a result of such rights offering.

In addition, if the subscription price is less than the NAV per share of our common stock, then our stockholders would experience an immediate dilution of the
aggregate NAV of their shares as a result of the offering. The amount of any decrease in NAV is not predictable because it is not known at this time what the subscription price
and NAV per share will be on the expiration date of a rights offering or what proportion of the shares will be purchased as a result of such rights offering. Such dilution could
be substantial.

The trading market or market value of our publicly issued debt securities may fluctuate.

Our publicly issued debt securities may or may not have, and may never develop, an established trading market. In addition to our creditworthiness, many factors may

materially adversely affect the trading market for, and market value of, our publicly issued debt securities. These factors include, but are not limited to, the following:

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the time remaining to the maturity of these debt securities;

the outstanding principal amount of debt securities with terms identical to these debt securities;

the ratings assigned by national statistical ratings agencies;

the general economic environment;

the supply of debt securities trading in the secondary market, if any;

the redemption or repayment features, if any, of these debt securities;

the level, direction and volatility of market interest rates generally; and

market rates of interest higher or lower than rates borne by the debt securities. You should also be aware that there may be a limited number of buyers when
you decide to sell your debt securities. This too may materially adversely affect the market value of the debt securities or the trading market for the debt
securities.

The 2022 Notes, July 2024 Notes, February 2025 Notes, April 2025 Notes, June 2025 Notes, March 2026 A Notes, 2033 Notes, and 2022 Convertible Notes are unsecured
and therefore are effectively subordinated to any secured indebtedness we have currently incurred or may incur in the future.

The 2022 Notes, July 2024 Notes, February 2025 Notes, April 2025 Notes, June 2025 Notes, March 2026 A Notes, 2033 Notes, and 2022 Convertible Notes are not
secured by any of our assets or any of the assets of our subsidiaries. As a result, while the 2022 Notes, July 2024 Notes, February 2025 Notes, April 2025 Notes, June 2025
Notes, March 2026 A Notes, 2033 Notes, and 2022 Convertible Notes remain senior in priority to our equity securities, they are effectively subordinated to any secured
indebtedness we or our subsidiaries have currently incurred and may incur in the future (or any indebtedness that is initially unsecured to which we subsequently grant security)
to the extent of the value of the assets securing such indebtedness. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or
future secured indebtedness and the secured indebtedness of our subsidiaries may assert rights against the assets pledged to secure that indebtedness in order to receive full
payment of their indebtedness before the assets may be used to pay other creditors, including the holders of the 2022 Notes, July 2024 Notes, February 2025 Notes, April 2025
Notes, June 2025 Notes, March 2026 A Notes, 2033 Notes, and 2022 Convertible Notes.

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The 2022 Notes, July 2024 Notes, February 2025 Notes, April 2025 Notes, June 2025 Notes, March 2026 A Notes, 2033 Notes, and 2022 Convertible Notes are
structurally subordinated to the indebtedness and other liabilities of our subsidiaries.

The 2022 Notes, July 2024 Notes, February 2025 Notes, April 2025 Notes, June 2025 Notes, March 2026 A Notes, 2033 Notes, and 2022 Convertible Notes are
obligations exclusively of Hercules Capital, Inc. and not of any of our subsidiaries. None of our subsidiaries are or act as guarantors of the 2022 Notes, July 2024 Notes,
February 2025 Notes, April 2025 Notes, June 2025 Notes, March 2026 A Notes, 2033 Notes, and 2022 Convertible Notes. Furthermore, the 2022 Notes, July 2024 Notes,
February 2025 Notes, April 2025 Notes, June 2025 Notes, March 2026 A Notes, 2033 Notes, and 2022 Convertible Notes are not required to be guaranteed by any subsidiaries
we may acquire or create in the future. Our secured indebtedness with respect to the SBA debentures is held through our SBIC subsidiary. The assets of any such subsidiary are
not directly available to satisfy the claims of our creditors, including holders of the 2022 Notes, July 2024 Notes, February 2025 Notes, April 2025 Notes, June 2025 Notes,
March 2026 A Notes, 2033 Notes, and 2022 Convertible Notes.

Except to the extent we are a creditor with recognized claims against our subsidiaries, all claims of creditors (including holders of preferred stock, if any, of our

subsidiaries) will have priority over our equity interests in such subsidiaries (and therefore the claims of our creditors, including holders of the 2022 Notes, July 2024 Notes,
February 2025 Notes, April 2025 Notes, June 2025 Notes, March 2026 A Notes, 2033 Notes, and 2022 Convertible Notes) with respect to the assets of such subsidiaries. Even
if we are recognized as a creditor of one or more of our subsidiaries, our claims would still be subordinated to any security interests in the assets of any such subsidiary and to
any indebtedness or other liabilities of any such subsidiary senior to our claims. As a result of not having a direct claim against any of our subsidiaries, the 2022 Notes, July
2024 Notes, February 2025 Notes, April 2025 Notes, June 2025 Notes, March 2026 A Notes, 2033 Notes, and 2022 Convertible Notes are structurally subordinated to all
indebtedness and other liabilities (including trade payables) of our subsidiaries and any subsidiaries that we may in the future acquire or establish as financing vehicles or
otherwise. In addition, our subsidiaries may incur substantial additional indebtedness in the future, all of which would be structurally senior to the 2022 Notes, July 2024 Notes,
February 2025 Notes, April 2025 Notes, June 2025 Notes, March 2026 A Notes, 2033 Notes, and 2022 Convertible Notes.

The respective indentures under which the 2022 Notes, April 2025 Notes, 2033 Notes, and 2022 Convertible Notes were issued contain limited protections for the holders
of the 2022 Notes, April 2025 Notes, 2033 Notes, and 2022 Convertible Notes.

The indenture under which 2022 Notes, April 2025 Notes, 2033 Notes, and 2022 Convertible Notes were issued offers limited protections to the holders of the 2022

Notes, April 2025 Notes, 2033 Notes, and 2022 Convertible Notes. The terms of the respective indentures and the 2022 Notes, 2025 Notes, 2033 Notes, and 2022 Convertible
Notes do not restrict our or any of our subsidiaries’ ability to engage in, or otherwise be a party to, a variety of corporate transactions, circumstances or events that could have
an adverse impact on an investment in the 2022 Notes, April 2025 Notes, 2033 Notes, or 2022 Convertible Notes. In particular, the terms of the respective indentures and the
2022 Notes, April 2025 Notes, 2033 Notes, and 2022 Convertible Notes do not place any restrictions on our or our subsidiaries’ ability to:

•

•

issue securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be equal in right of
payment to the 2022 Notes, April 2025 Notes, 2033 Notes, or 2022 Convertible Notes, (2) any indebtedness or other obligations that would be secured and
therefore rank effectively senior in right of payment to the 2022 Notes, April 2025 Notes, 2033 Notes, or 2022 Convertible Notes to the extent of the values of
the assets securing such debt, (3) indebtedness of ours that is guaranteed by one or more of our subsidiaries and which therefore would rank structurally senior to
the 2022 Notes, April 2025 Notes, 2033 Notes, or 2022 Convertible Notes and (4) securities, indebtedness or other obligations issued or incurred by our
subsidiaries that would be senior in right of payment to our equity interests in our subsidiaries and therefore would rank structurally senior in right of payment to
the 2022 Notes, April 2025 Notes, 2033 Notes, or 2022 Convertible Notes with respect to the assets of our subsidiaries, in each case other than an incurrence of
indebtedness or other obligation that would cause a violation of Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act or any successor provisions,
whether or not we continue to be subject to such provisions of the 1940 Act, but giving effect to any exemptive relief granted to us by the SEC (currently, these
provisions generally prohibit us from making additional borrowings, including through the issuance of additional debt or the sale of additional debt securities,
unless our asset coverage, as defined in the 1940 Act, equals at least 150% thereafter after such borrowings);

pay distributions on, or purchase or redeem or make any payments in respect of, capital stock or other securities ranking junior in right of payment to the 2022
Notes, 2025 Notes, 2033 Notes, or 2022 Convertible Notes, in each case other than distributions, purchases, redemptions or payments that would cause a
violation of Section 18(a)(1)(B) as modified by Section 61(a)(1) of the 1940 Act or any successor provisions, giving effect to (i) any exemptive relief granted to
us by the SEC and (ii) no-action relief granted by the SEC to another BDC (or to us if we determine to seek such similar no-action or other relief) permitting the
BDC to declare any cash distribution notwithstanding the prohibition contained in Section 18(a)(1)(B) as modified by Section 61(a)(1) of the 1940 Act in order
to maintain the BDC’s status as a RIC under Subchapter M of the Code (currently, these provisions generally prohibit us from declaring any cash dividend or
distribution upon any class of our capital stock, or purchasing any such capital stock if our asset coverage, as defined in the

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1940 Act, is below 150% at the time of the declaration of the dividend or distribution or the purchase and after deducting the amount of such dividend,
distribution or purchase);

sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our assets);

enter into transactions with affiliates;

create liens (including liens on the shares of our subsidiaries) or enter into sale and leaseback transactions;

make investments; or

create restrictions on the payment of distributions or other amounts to us from our subsidiaries.

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•

In addition, the indenture and the April 2025 Notes and 2033 Notes do not require us to purchase the April 2025 Notes or 2033 Notes in connection with a change of

control or any other event.

Furthermore, the terms of the respective indentures and the 2022 Notes, April 2025 Notes, 2033 Notes, and 2022 Convertible Notes do not protect their respective

holders in the event that we experience changes (including significant adverse changes) in our financial condition, results of operations or credit ratings, as they do not require
that we or our subsidiaries adhere to any financial tests or ratios or specified levels of net worth, revenues, income, cash flow or liquidity, except as required under the 1940 Act.

Our ability to recapitalize, incur additional debt and take a number of other actions that are not limited by the terms of the 2022 Notes, April 2025 Notes, 2033 Notes,

and 2022 Convertible Notes may have important consequences for their holders, including making it more difficult for us to satisfy our obligations with respect to the 2022
Notes, April 2025 Notes, 2033 Notes, and 2022 Convertible Notes or negatively affecting their trading value.

Certain of our current debt instruments include more protections for their respective holders than the indenture and 2022 Notes, April 2025 Notes, 2033 Notes, and

2022 Convertible Notes. See “—In addition to regulatory requirements that restrict our ability to raise capital, our 2022 Notes, April 2025 Notes, 2033 Notes, 2022 Convertible
Notes, and Credit Facilities contain various covenants which, if not complied with, could require accelerated repayment under the facility or require us to repurchase the 2022
Notes, April 2025 Notes, 2033 Notes, or 2022 Convertible Notes thereby materially and adversely affecting our liquidity, financial condition, results of operations and ability to
pay distributions.” In addition, other debt we issue or incur in the future could contain more protections for its holders than the respective indentures and the 2022 Notes, April
2025 Notes, 2033 Notes, and 2022 Convertible Notes, including additional covenants and events of default. The issuance or incurrence of any such debt with incremental
protections could affect the market for and trading levels and prices of the 2022 Notes, April 2025 Notes, 2033 Notes, and 2022 Convertible Notes.

An active trading market for the April 2025 Notes or 2033 Notes may not develop or be sustained, which could limit the market price of the April 2025 Notes or 2033
Notes or your ability to sell them.

Although the April 2025 Notes and 2033 Notes are listed on the NYSE under the symbols “HCXZ” and “HCXY,” respectively, we cannot provide any assurances that

an active trading market will develop or be sustained for the April 2025 Notes or 2033 Notes or that the April 2025 Notes or 2033 Notes will be able to be sold. At various
times, the April 2025 Notes or 2033 Notes may trade at a discount from their initial offering price depending on prevailing interest rates, the market for similar securities, our
credit ratings, general economic conditions, our financial condition, performance and prospects and other factors. To the extent an active trading market is not sustained, the
liquidity and trading price for the April 2025 Notes or 2033 Notes may be harmed.

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If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the 2022 Notes, July 2024 Notes, February 2025 Notes, April
2025 Notes, June 2025 Notes, March 2026 A Notes, 2033 Notes, 2022 Convertible Notes, 2027 Asset-Backed Notes, or 2028 Asset-Backed Notes.

Any default under the agreements governing our indebtedness, including a default under the Wells Facility, the Union Bank Facility, 2022 Notes, July 2024 Notes,

February 2025 Notes, April 2025 Notes, June 2025 Notes, March 2026 A Notes, 2033 Notes, 2022 Convertible Notes, 2027 Asset-Backed Notes, 2028 Asset-Backed Notes or
other indebtedness to which we may be a party, that is not waived by the required lenders or holders, and the remedies sought by the holders of such indebtedness, could make
us unable to pay principal, premium, if any, and interest on any of our indebtedness, including the 2022 Notes, July 2024 Notes, February 2025 Notes, April 2025 Notes, June
2025 Notes, March 2026 A Notes, 2033 Notes, 2022 Convertible Notes, 2027 Asset-Backed Notes, or 2028 Asset-Backed Notes and substantially decrease the market value of
the 2022 Notes, July 2024 Notes, February 2025 Notes, April 2025 Notes, June 2025 Notes, March 2026 A Notes, 2033 Notes, 2022 Convertible Notes, 2027 Asset-Backed
Notes, and 2028 Asset-Backed Notes. 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 Wells Facility and
the Union Bank Facility 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 Wells Facility or Union Bank Facility or the required holders of our 2022 Notes, July 2024 Notes, February 2025 Notes, April 2025 Notes, June
2025 Notes, March 2026 A Notes, 2033 Notes, 2022 Convertible Notes, 2027 Asset-Backed Notes, 2028 Asset-Backed Notes or other debt that we may incur in the future to
avoid being in default. If we breach our covenants under the Wells Facility, Union Bank Facility, 2022 Notes, July 2024 Notes, February 2025 Notes, April 2025 Notes, June
2025 Notes, March 2026 A Notes, 2033 Notes, 2022 Convertible Notes, 2027 Asset-Backed Notes, 2028 Asset-Backed Notes 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 under the Wells Facility, Union Bank Facility, 2022 Notes, July 2024 Notes,
February 2025 Notes, April 2025 Notes, June 2025 Notes, March 2026 A Notes, 2033 Notes, 2022 Convertible Notes, 2027 Asset-Backed Notes, 2028 Asset-Backed Notes or
other debt, the lenders or 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 Wells Facility and the Union Bank Facility, could proceed against the collateral securing the debt. Because the Wells
Facility and the Union Bank Facility have, and any future credit facilities will likely have, customary cross-default provisions, if the indebtedness under the 2022 Notes, July
2024 Notes, February 2025 Notes, April 2025 Notes, June 2025 Notes, March 2026 A Notes, 2033 Notes, 2022 Convertible Notes, 2027 Asset-Backed Notes, 2028 Asset-
Backed Notes, Wells Facility, Union Bank Facility or under any future credit facility is accelerated, we may be unable to repay or finance the amounts due.

We may not be able to prepay the July 2024, February 2025 Notes, June 2025 Notes, or March 2026 A Notes upon a change in control.

The Note Purchase Agreements governing the July 2024 Notes, February 2025 Notes, June 2025 Notes and March 2026 A Notes require us to offer to prepay all of the
issued and outstanding notes upon a change in control and election by the holders, which could have a material adverse effect on our business, financial condition and results of
operations. A change in control under the Note Purchase Agreements occurs upon the consummation of a transaction which results in a “person” or “group” (as those terms are
used in the Exchange Act and the rules promulgated thereunder) becoming the beneficial owner of more than 50% of our outstanding voting stock.

Upon a change in control event, holders of the notes may require us to prepay for cash some or all of the notes at a prepayment price equal to 100% of the aggregate
principal amount of the notes being prepaid, plus accrued and unpaid interest to, but not including, the date of prepayment. If a change in control were to occur, we may not
have sufficient funds to prepay any such accelerated indebtedness.

General Risk Factors

The effects of the outbreak of COVID-19 have negatively affected the global economy and the United States economy, and may disrupt our operations, which could have
an adverse effect on our business, financial condition and results of operations.

 The ongoing COVID-19 global and national health emergency has caused, and may continue to cause, significant disruption in the United States and global economies

and financial markets. The spread of COVID-19 has caused quarantines, cancellation of

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events and travel, business and school shutdowns, reduction in business activity and financial transactions, labor shortages, supply chain interruptions and overall economic and
financial market instability. The COVID-19 outbreak may disrupt our operations through its impact on our employees, our portfolio companies and their businesses, and certain
industries in which our portfolio companies operate.  Disruptions to our portfolio companies may impair their ability to fulfill their obligations to us and could result in
increased risk of delinquencies, defaults, declining collateral values associated with our existing loans, and impairments or losses on our loans. Further, the spread of the
COVID-19 outbreak has caused severe disruptions in the United States economy and may materially disrupt financial activity generally and in the areas in which we operate.
This would likely result in a decline in demand for our loans which would negatively impact our liquidity position and our growth strategy.  Any one or more of these
developments could have a material adverse effect on our business, operations, consolidated financial condition, and consolidated results of operations.  We are taking
precautions to protect the safety and well-being of our employees. However, no assurance can be given that the steps being taken will be deemed to be adequate or appropriate,
nor can we predict the level of disruption which will occur to our employees’ ability to service the portfolio. In the earlier part of the 2020, the U.S. capital markets experienced
extreme volatility and disruption following the COVID-19 pandemic, which appear to have subsided and returned to pre-COVID-19 levels by the later part of the year.
Nonetheless, certain economists and major investment banks have expressed concern that the continued spread of the virus globally could lead to a prolonged period of world-
wide economic downturn.

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which contains provisions intended to

mitigate the adverse economic effects of the coronavirus pandemic. On December 27, 2020, the U.S. government enacted further legislation intended to make additional
funding available to mitigate the adverse economic effects of the coronavirus pandemic (the “December 2020 COVID Relief Package”). It is uncertain to what extent our
portfolio companies will be able to benefit from the CARES Act, the December 2020 COVID Relief Package, or any other subsequent legislation intended to provide financial
relief or assistance. The new U.S. presidential administration has demonstrated willingness to more actively address the economic effects of the ongoing COVID-19 pandemic
through government intervention, but it is unclear to what extent such intervention will occur and whether it will be successful. As a result of this disruption and the pressures on
their liquidity, certain of our portfolio companies have been, or may continue to be, incentivized to draw on most, if not all, of the unfunded portion of any revolving or delayed
draw term loans made by us, subject to availability under the terms of such loans.

The COVID-19 pandemic has worsened over the winter months as people in the U.S. spend more time indoors where the virus can spread more easily. In addition, more
contagious, and possibly more virulent, variants of COVID-19 have emerged and are spreading within the U.S. Although the process of distributing vaccines for COVID-19 has
begun, the vaccine is currently available only to certain populations as supply and distribution sites remain limited. The ultimate success of the COVID-19 vaccination rollout in
the U.S. will depend on many factors beyond our control, including the coordination of federal, state and local officials and private companies; the granting of FDA Emergency
Use Authorization of new vaccines and increased production of currently authorized vaccines; widespread public acceptance of vaccination programs; and the effectiveness of
the vaccines against new strains of COVID-19.  As the COVID-19 pandemic continues, an extended period of global supply chain and economic disruption could materially
affect our business, results of operations, access to sources of liquidity and financial condition. The extent of the impact of the COVID-19 pandemic on our operational and
financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, will depend to a large extent on future developments
regarding the duration and severity of the coronavirus, effectiveness of vaccination deployment and the actions taken by governments (including stimulus measures or the lack
thereof) and their citizens to contain the coronavirus or treat its impact, all of which are beyond our control. An extended period of global supply chain and economic disruption
could materially affect our business, results of operations, access to sources of liquidity and financial condition. Given the fluidity of the situation, we cannot estimate the long-
term impact of COVID-19 on our business, future results of operations, financial position, or cash flows at this time.

We may be the target of litigation.

We may be the target of securities litigation in the future, particularly if the trading price of our common stock and our debt securities fluctuates significantly. We could

also generally be subject to litigation, including derivative actions by our stockholders. Any litigation could result in substantial costs and divert management’s attention and
resources from our business and cause a material adverse effect on our business, financial condition and results of operations.

Acquisitions or investments that we may pursue could be unsuccessful, consume significant resources and require the incurrence of additional indebtedness.

We regularly consider acquisitions and investments that complement our existing business. These possible acquisitions and investments involve or may involve

significant cash expenditures, debt incurrence, operating losses and expenses that could have a material effect on our financial condition and operating results.

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In particular, if we incur additional debt, our liquidity and financial stability could be impaired as a result of using a significant portion of available cash or borrowing

capacity to finance an acquisition. Moreover, we may face an increase in interest expense or financial leverage if additional debt is incurred to finance an acquisition, which
may, among other things, adversely affect our various financial ratios and our compliance with the conditions of our existing indebtedness. In addition, such additional
indebtedness may be secured by liens on our assets.

Acquisitions involve numerous other risks, including:

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•

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•

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diversion of management time and attention;

failures to identify material problems and liabilities of acquisition targets or to obtain sufficient indemnification rights to fully offset possible liabilities related
to the acquired businesses;

difficulties integrating the operations, technologies and personnel of the acquired businesses;

inefficiencies and complexities that may arise due to unfamiliarity with new assets, businesses or markets;

disruptions to our ongoing business;

inaccurate estimates of fair value made in the accounting for acquisitions and amortization of acquired intangible assets which would reduce future reported
earnings;

the inability to obtain required financing for the new acquisition or investment opportunities and our existing business;

the need or obligation to divest portions of an acquired business;

challenges associated with operating in new geographic regions;

difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects;

potential loss of our or the acquired business’ key employees, contractual relationships, suppliers or customers; and

inability to obtain required regulatory approvals.

To the extent we pursue an acquisition that causes us to incur unexpected costs or that fails to generate expected returns, our financial position, results of operations and

cash flows may be adversely affected, and our ability to service indebtedness, including our outstanding notes, may be negatively impacted.

In addition, we may fail in our pursuit of an acquisition and, instead, one of our competitors may successfully obtain the target and deprive us of an important

opportunity and allow them to grow larger giving them the ability to have a lower cost of capital and competitive advantage in the market (including by being able to offer better
pricing and larger loans) and, as a larger company, potentially giving them more valuable equity currency to do other transactions.

We may be unable to obtain debt capital on favorable terms or at all, in which case we would not be able to use leverage to increase the return on our investments.

If we are unable to obtain debt capital, then our equity investors will not benefit from the potential for increased returns on equity resulting from leverage to the extent

that our investment strategy is successful and we may be limited in our ability to make new commitments or fundings to our portfolio companies. An inability to obtain debt
capital may also limit our ability to refinance existing indebtedness, particularly during periods of adverse credit market conditions when refinancing indebtedness may not be
available under interest rates and other terms acceptable to us or at all.

FATCA withholding may apply to payments made to certain foreign entities.

The Foreign Account Tax Compliance Act provisions of the Code and the related Treasury Regulations and other administrative guidance promulgated thereunder, or

collectively, FATCA, generally requires us to withhold U.S. tax (at a 30% rate) on payments of interest and taxable dividends made to a foreign financial institution or non-
financial foreign entity (including such an institution or entity acting as an intermediary) unless the foreign financial institution or non-financial foreign entity complies with
certain information reporting, withholding, identification, certification and related requirements imposed by FATCA. Persons located in jurisdictions that have entered into an
intergovernmental agreement with the United States to implement FATCA may be subject to different rules. Stockholders may be requested to provide additional information to
enable us to determine whether such withholding is required.  

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Legislative or regulatory tax changes could adversely affect you.

At any time, the U.S. federal income tax laws governing RICs or the administrative interpretations of those laws or regulations may be amended.  Any of those new

laws, regulations or interpretations may take effect retroactively and could adversely affect the taxation of us or of you as a stockholder.  Therefore, changes in tax laws,
regulations or administrative interpretations or any amendments thereto could diminish the value of an investment in our shares or the value or the resale potential of our
investments.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a
result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common stock.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and
procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail
to meet our reporting obligations.

In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, or the subsequent

testing by our independent registered public accounting firm (when undertaken, as noted below), may reveal deficiencies in our internal controls over financial reporting that
are deemed to be material weaknesses or that may require prospective or retroactive changes to our consolidated financial statements or identify other areas for further attention
or improvement. Inferior internal controls could also cause investors and lenders to lose confidence in our reported financial information, which could have a negative effect on
the trading price of our common stock.

Changes in laws or regulations governing our business could negatively affect the profitability of our operations.

Changes in the laws or regulations, or the interpretations of the laws and regulations, which govern business development companies, SBICs, RICs or non-depository

commercial lenders could significantly affect our operations and our cost of doing business. We are subject to federal, state and local laws and regulations, in addition to
applicable foreign and international laws and regulations, and are subject to judicial and administrative decisions that affect our operations, including our loan originations
maximum interest rates, fees and other charges, disclosures to portfolio companies, the terms of secured transactions, collection and foreclosure procedures, and other trade
practices. If these laws, regulations or decisions change, or if we expand our business into jurisdictions that have adopted more stringent requirements than those in which we
currently conduct business, then we may have to incur significant expenses in order to comply or we may have to restrict our operations. In addition, if we do not comply with
applicable laws, regulations and decisions, then we may lose licenses needed for the conduct of our business and be subject to civil fines and criminal penalties, any of which
could have a material adverse effect upon our business results of operations or financial condition.

Economic sanction laws in the United States and other jurisdictions may prohibit us and our affiliates from transacting with certain countries, individuals and
companies.

Economic sanction laws in the United States and other jurisdictions may prohibit us or our affiliates from transacting with certain countries, individuals and companies.
In the United States, the U.S. Department of the Treasury’s Office of Foreign Assets Control administers and enforces laws, executive orders and regulations establishing U.S.
economic and trade sanctions, which prohibit, among other things, transactions with, and the provision of services to, certain non-U.S. countries, territories, entities and
individuals. These types of sanctions may significantly restrict or completely prohibit investment activities in certain jurisdictions, and if we, our portfolio companies or other
issuers in which we invest were to violate any such laws or regulations, we may face significant legal and monetary penalties.

The U.S. Foreign Corrupt Practices Act (“FCPA”), and other anti-corruption laws and regulations, as well as anti-boycott regulations, may also apply to and restrict our

activities, our portfolio companies and other issuers of our investments. If an issuer or we were to violate any such laws or regulations, such issuer or we may face significant
legal and monetary penalties. The U.S. government has indicated that it is particularly focused on FCPA enforcement, which may increase the risk that an issuer or us becomes
the subject of such actual or threatened enforcement. In addition, certain commentators have suggested that private investment firms and the funds that they manage may face
increased scrutiny and/or liability with respect to the activities of their underlying portfolio companies. As such, a violation of the FCPA or other applicable regulations by us or
an issuer of our portfolio investments could have a material adverse effect on us. We are committed to complying with the FCPA and other anti-corruption laws and regulations,
as well as anti-boycott regulations, to which we are subject. As a result, we may be adversely affected because of our unwillingness to enter into transactions that violate any
such laws or regulations.

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Uncertainty about presidential administration initiatives could negatively impact our business, financial condition and results of operations.

It is unclear whether the new U.S. presidential administration will propose or implement significant changes to U.S. trade, healthcare, immigration, foreign and
government regulatory policy. In this regard, there is significant uncertainty with respect to legislation, regulation and government policy at the federal level, as well as the state
and local levels. There has been a corresponding meaningful increase in the uncertainty surrounding interest rates, inflation, foreign exchange rates, trade volumes and fiscal
and monetary policy. Recent events, including the 2020 U.S. presidential election, have created a climate of heightened uncertainty and introduced new and difficult-to-quantify
macroeconomic and political risks with potentially far-reaching implications. To the extent the U.S. Congress or the presidential administration implements changes to U.S.
policy, those changes may impact, among other things, the U.S. and global economy, international trade and relations, unemployment, immigration, corporate taxes, healthcare,
the U.S. regulatory environment, inflation and other areas. Although we cannot predict the impact, if any, of these changes to our business, they could adversely affect our
business, financial condition, operating results and cash flows. Until we know what policy changes are made and how those changes impact our business and the business of our
competitors over the long term, we will not know if, overall, we will benefit from them or be negatively affected by them.

Our business is subject to increasingly complex corporate governance, public disclosure and accounting requirements that could adversely affect our business and
financial results.

We are subject to changing rules and regulations of federal and state government as well as the stock exchange on which our common stock is listed. These entities,

including the Public Company Accounting Oversight Board, the SEC and the New York Stock Exchange, or NYSE, have issued a significant number of new and increasingly
complex requirements and regulations over the course of the last several years and continue to develop additional regulations and requirements in response to laws enacted by
Congress. The Dodd-Frank Wall Street Reform and Protection Act, as amended, or the Dodd-Frank Act, contains significant corporate governance and executive compensation-
related provisions, and the SEC has adopted, and will continue to adopt, additional rules and regulations that may impact us. Our efforts to comply with these requirements have
resulted in, and are likely to continue to result in, an increase in expenses and a diversion of management’s time from other business activities. While we cannot predict what
effect any changes in the laws or regulations or their interpretations would have on our business as a result of recent financial reform legislation, these changes could be
materially adverse to us and our stockholders.

In addition, our failure to maintain compliance with such rules, or for our management to appropriately address issues relating to our compliance with such rules fully

and in a timely manner, exposes us to an increasing risk of inadvertent non-compliance.  While our management team takes reasonable efforts to ensure that we are in full
compliance with all laws applicable to its operations, the increasing rate and extent of regulatory change increases the risk of a failure to comply, which may result in our ability
to operate our business in the ordinary course or may subject us to potential fines, regulatory findings or other matters that may materially impact our business.

We incur significant costs as a result of being a publicly traded company.

As a publicly traded company, we incur legal, accounting and other expenses, including costs associated with the periodic reporting requirements applicable to a
company whose securities are registered under the Exchange Act as well as additional corporate governance requirements, including requirements under the Sarbanes-Oxley Act
and other rules implemented by the SEC.

Results may fluctuate and may not be indicative of future performance.

Our operating results may fluctuate and, therefore, you should not rely on current or historical period results to be indicative of our performance in future reporting

periods. Factors that could cause operating results to fluctuate include, but are not limited to, variations in the investment origination volume and fee income earned, changes in
the accrual status of our debt investments, variations in timing of prepayments, variations in and the timing of the recognition of net realized gains or losses and changes in
unrealized appreciation or depreciation, the level of our expenses, the degree to which we encounter competition in our markets, and general economic conditions.

We face cyber-security risks and the failure in cyber security systems, as well as the occurrence of events unanticipated in our disaster recovery systems and management
continuity planning could impair our ability to conduct business effectively.

Our business operations rely upon secure information technology systems for data processing, storage and reporting. Despite careful security and controls design,
implementation and updating, our information technology systems could become subject to cyber-attacks. Network, system, application and data breaches could result in
operational disruptions or information misappropriation, which could have a material adverse effect on our business, results of operations and financial condition.

68

 
 
The occurrence of a disaster such as a cyber-attack, a natural catastrophe, an industrial accident, a terrorist attack or war, events unanticipated in our disaster recovery
systems, or a support failure from external providers, could have an adverse effect on our ability to conduct business and on our results of operations and financial condition,
particularly if those events affect our computer-based data processing, transmission, storage, and retrieval systems or destroy data. If a significant number of our managers were
unavailable in the event of a disaster, our ability to effectively conduct our business could be severely compromised.

We depend heavily upon computer systems to perform necessary business functions. Despite our implementation of a variety of security measures, our computer

systems could be subject to cyber-attacks and unauthorized access, such as physical and electronic break-ins or unauthorized tampering. Like other companies, we may
experience threats to our data and systems, including malware and computer virus attacks, unauthorized access, system failures and disruptions. If one or more of these events
occurs, it could potentially jeopardize the confidential, proprietary and other information processed and stored in, and transmitted through, our computer systems and networks,
or otherwise cause interruptions or malfunctions in our operations, which could result in damage to our reputation, financial losses, litigation, increased costs, regulatory
penalties and/or customer dissatisfaction or loss.

In addition, the costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means. Furthermore, cybersecurity has
become a top priority for regulators around the world, and some jurisdictions have enacted laws requiring companies to notify individuals of data security breaches involving
certain types of personal data. If we fail to comply with the relevant laws and regulations, we could suffer financial losses, a disruption of our businesses, liability to investors,
regulatory intervention or reputational damage.

Terrorist attacks, acts of war, natural disasters or pandemics may affect any market for our securities, impact the businesses in which we invest and harm our business,
operating results and financial condition.

Terrorist acts, acts of war, natural disasters or pandemics may disrupt our operations, as well as the operations of the businesses in which we invest. Such acts have

created, and continue to create, economic and political uncertainties and have contributed to global economic instability. Future terrorist activities, military or security
operations, natural disasters or pandemics could further weaken the domestic/global economies and create additional uncertainties, which may negatively impact the businesses
in which we invest directly or indirectly and, in turn, could have a material adverse impact on our business, operating results and financial condition. Losses from terrorist
attacks, natural disasters and pandemics are generally uninsurable.

We are dependent on information systems and systems failures could significantly disrupt our business, which may, in turn, negatively affect the market price of our
common stock and our ability to pay distributions.

Our business is dependent on our and third parties’ communications and information systems. Any failure or interruption of those systems, including as a result of the

termination of an agreement with any third-party service providers, could cause delays or other problems in our activities. Our financial, accounting, data processing, backup or
other operating systems and facilities may fail to operate properly or become disabled or damaged as a result of a number of factors including events that are wholly or partially
beyond our control and adversely affect our business. There could be:

•

•

•

•

•

sudden electrical or telecommunication outages;

natural disasters such as earthquakes, tornadoes and hurricanes;

disease pandemics;

events arising from local or larger scale political or social matters, including terrorist acts; and

cyber-attacks.

These events, in turn, could have a material adverse effect on our operating results and negatively affect the market price of our common stock and our ability to pay

distributions to our stockholders.

69

 
 
 
 
 
 
 
We may be subject to restrictions on our ability to make distributions to our stockholders.

Restrictions imposed on the declaration of dividends or other distributions to holders of our common stock, by both the 1940 Act and by requirements imposed by rating

agencies, might impair our ability to make the required distributions to our stockholders in order to be subject to tax as a RIC. While we intend to prepay our Notes and other
debt to the extent necessary to enable us to distribute our income as required to maintain our ability to be subject to tax as a RIC, there can be no assurance that such actions can
be effected in time or in a manner to satisfy the requirements set forth in the Code.

Downgrades of the U.S. credit rating, automatic spending cuts or another government shutdown could negatively impact our liquidity, financial condition and earnings.

U.S. debt ceiling and budget deficit concerns have increased the possibility of additional credit-rating downgrades and economic slowdowns, or a recession in the U.S.

Although U.S. lawmakers passed legislation to raise the federal debt ceiling on multiple occasions, ratings agencies have lowered or threatened to lower the long-term sovereign
credit rating on the United States. The impact of this or any further downgrades to the U.S. government’s sovereign credit rating or its perceived creditworthiness could
adversely affect the U.S. and global financial markets and economic conditions. These developments could cause interest rates and borrowing costs to rise, which may
negatively impact our ability to access the debt markets on favorable terms.

In addition, disagreement over the federal budget has caused the U.S. federal government to shut down for periods of time resulting in, among other things, inadequate
funding for and/or the shutdown of certain government agencies, including the SEC, SBA, and U.S. Food and Drug Administration, or the FDA, on which the operation of our
business may rely. Inadequate funding for and/or the shutdown of these government agencies prevents them from performing their normal business functions, which could
impact, among other things, (i) our and our portfolio companies’ ability to access the public markets and obtain necessary capital in order to, among other things, properly
capitalize, continue or expand operations, or, in the case of portfolio investments held by us, liquidate such investments; (ii) our ability to originate SBA loans; and (iii) the
ability of the FDA and other governmental agencies to timely review and process regulatory submissions of our portfolio companies. Continued adverse political and economic
conditions, including a prolonged U.S. federal government shutdown, could have a material adverse effect on our business, financial condition and results of operations.

Our business and operations could be negatively affected if we become subject to stockholder activism, which could cause us to incur significant expense, hinder the
execution of our investment strategy or impact our stock price.

Stockholder activism, which could take many forms, including making public demands that we consider certain strategic alternatives, engaging in public campaigns to

attempt to influence our corporate governance and/or our management, and commencing proxy contests to attempt to elect the activists’ representatives or others to our Board of
Directors, or arise in a variety of situations, has been increasing in the BDC industry recently. While we are currently not subject to any stockholder activism, due to the
potential volatility of our stock price and for a variety of other reasons, we may in the future become the target of stockholder activism. Stockholder activism could result in
substantial costs and divert management’s and our Board of Directors’ attention and resources from our business. Additionally, such stockholder activism could give rise to
perceived uncertainties as to our future and adversely affect our relationships with service providers and our portfolio companies. Also, we may be required to incur significant
legal and other expenses related to any activist stockholder matters. Further, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the
events, risks and uncertainties of any stockholder activism.

Capital markets may experience periods of disruption and instability and we cannot predict when these conditions will occur. Such market conditions could materially
and adversely affect debt and equity capital markets in the United States and abroad, which could have a negative impact on our business, financial condition and results
of operations.

The global capital markets have experienced a period of disruption as evidenced by a lack of liquidity in the debt capital markets, write-offs in the financial services

sector, the re-pricing of credit risk and the failure of certain major financial institutions. While the capital markets have improved, these conditions could deteriorate again in the
future. During such market disruptions, we may have difficulty raising debt or equity capital, especially as a result of regulatory constraints.

Market conditions may in the future make it difficult to extend the maturity of or refinance our existing indebtedness and any failure to do so could have a material

adverse effect on our business. The illiquidity of our investments may make it difficult for us to sell such investments if required.

70

 
 
As a result, we may realize significantly less than the value at which we have recorded our investments. In addition, significant changes in the capital markets, including

the disruption and volatility, have had, and may in the future have, a negative effect on the valuations of our investments and on the potential for liquidity events involving our
investments. An inability to raise capital, and any required sale of our investments for liquidity purposes, could have a material adverse impact on our business, financial
condition and results of operations.

 Various social and political tensions in the United States and around the world, including in the Middle East, Eastern Europe, Asia, and Russia, may continue to

contribute to increased market volatility, may have long-term effects on the United States and worldwide financial markets, and may cause further economic uncertainties or
deterioration in the United States and worldwide. In addition, continuing uncertainty arising from the United Kingdom’s decision to leave the European Union, or Brexit, could
lead to further market disruptions and currency volatility, potentially weakening consumer, corporate and financial confidence and resulting in lower economic growth for
companies that rely significantly on Europe for their business activities and revenues. In December 2020, the United Kingdom reached the end of the transition period which
followed its exit from the European Union on January 31, 2020. The new Trade and Cooperation Agreement reached between the European Union and United Kingdom in late
2020 is untested and may lead to ongoing political and economic uncertainty and periods of exacerbated volatility in both the United Kingdom and in wider European and
global markets for some time. Although the United Kingdom officially left the European Union on January 31, 2020, the withdrawal agreement setting forth the terms of the
United Kingdom’s departure allowed for a transition period which ended on December 31, 2020. The longer term economic, legal, political and social implications of Brexit are
unclear at this stage. Brexit has led to ongoing political and economic uncertainty and periods of increased volatility in both the United Kingdom and in wider European markets
for some time. We may in the future have difficulty accessing debt and equity capital markets, and a severe disruption in the global financial markets, deterioration in credit and
financing conditions or uncertainty regarding U.S. government spending and deficit levels, Brexit or other global economic conditions could have a material adverse effect on
our business, financial condition and results of operations.

The broader fundamentals of the United States economy remain mixed. In the event that the United States economy contracts, it is likely that the financial results of

small to mid-sized companies, like many of our portfolio companies, could experience deterioration or limited growth from current levels, which could ultimately lead to
difficulty in meeting their debt service requirements and an increase in defaults. In addition, declines in oil and natural gas prices could adversely affect the credit quality of our
debt investments and the underlying operating performance of our equity investments in energy-related businesses.

In addition, volatility in the equity markets could impact our portfolio companies’ access to the debt and equity capital markets, which could ultimately limit their
ability to grow, satisfy existing financing and other arrangements and impact their ability to perform.  Volatility in the equity markets could also impact our ability to liquidate or
achieve value from warrants and other equity investments we have in our portfolio companies. Consequently, we can provide no assurance that the performance of certain
portfolio companies will not be negatively impacted by economic cycles, industry cycles or other conditions, which could also have a negative impact on our future results.

These market and economic disruptions affect, and these and other similar market and economic disruptions may in the future affect, the U.S. capital markets, which

could adversely affect our business and that of our portfolio companies. We cannot predict the duration of the effects related to these or similar events in the future on the
United States economy and securities markets or on our investments. We monitor developments and seek to manage our investments in a manner consistent with achieving our
investment objective, but there can be no assurance that we will be successful in doing so.

71

 
 
 
 
Item 1B.

  Unresolved Staff Comments

None.

Item 2.

  Properties

Neither we nor any of our subsidiaries own any real estate or other physical properties materially important to our operation or any of our subsidiaries. Currently, we
lease approximately 14,500 square feet of office space in Palo Alto, CA for our corporate headquarters. We also lease office space in Boston, MA, New York, NY, Bethesda,
MD, Hartford, CT, Westport, CT, Chicago, IL, and San Diego, CA.

Item 3.

  Legal Proceedings

We may, from time to time, be involved in litigation arising out of our operations in the normal course of business or otherwise. Furthermore, third parties may try to
seek to impose liability on us in connection with the activities of our portfolio companies. While the outcome of any current legal proceedings cannot at this time be predicted
with certainty, we do not expect any current matters will materially affect our financial condition or results of operations; however, there can be no assurance whether any
pending legal proceedings will have a material adverse effect on our financial condition or results of operations in any future reporting period.

Item 4.

  Mine Safety Disclosures

Not applicable.

72

 
 
 
 
Item 5.

  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 PART II

PRICE RANGE OF COMMON STOCK

Our common stock is traded on the NYSE under the symbol “HTGC.” As of February 18, 2021, we had approximately 84,204 stockholders of record. Most of the
shares of our common stock are held by brokers and other institutions on behalf of stockholders. There are currently approximately 104 additional beneficial holders of our
common stock.

Shares of BDCs may trade at a market price that is less than the NAV per share. The possibilities that our shares of common stock will trade at a discount from NAV or
at premiums that are unsustainable over the long term are separate and distinct from the risk that our NAV will decrease. At times, our shares of common stock have traded at a
premium to NAV or at a significant discount to the NAV per share.

Price Range of Common Stock and Distributions

The following table sets forth the range of high and low closing sales prices of our common stock, the sales price as a percentage of NAV and the distributions declared

by us for each fiscal quarter. The stock quotations are interdealer quotations and do not include markups, markdowns or commissions.

2018

First quarter
Second quarter
Third quarter
Fourth quarter

2019

First quarter
Second quarter
Third quarter
Fourth quarter

2020

First quarter
Second quarter
Third quarter
Fourth quarter

Price Range

Premium/
Discount of
High Sales

Premium/
Discount of
Low Sales

NAV(1)

High

Low

Price to NAV  

Price to NAV  

Cash
  Distribution  
per Share(2)

$
$
$
$

$
$
$
$

$
$
$
$

9.72  
10.22  
10.38  
9.90  

10.26  
10.59  
10.38  
10.55  

9.92  
10.19  
10.26  
11.26  

  $
  $
  $
  $

  $
  $
  $
  $

  $
  $
  $
  $

13.25  
12.97  
13.64  
13.28  

14.04  
13.75  
13.44  
14.44  

15.99  
11.83  
11.97  
14.42  

  $
  $
  $
  $

  $
  $
  $
  $

  $
  $
  $
  $

11.89  
11.99  
12.71  
10.63  

11.23  
12.57  
12.66  
12.98  

6.81  
6.64  
10.02  
11.13  

36.3 %    
26.9 %    
31.4 %    
34.1 %    

36.8 %    
29.8 %    
29.5 %    
36.9 %    

61.2 %    
16.1 %    
16.7 %    
28.1 %    

22.3 %   $
17.3 %   $
22.4 %   $
7.4 %   $

9.5 %   $
18.7 %   $
22.0 %   $
23.0 %   $

-31.4 %   $
-34.8 %   $
-2.3 %   $
-1.2 %   $

0.310  
0.310  
0.330  
0.310  

0.330  
0.340  
0.350  
0.400  

0.320  
0.320  
0.340  
0.370

(1)

(2)

NAV per share is generally determined as of the last day in the relevant quarter and therefore may not reflect the NAV per share on the date of the high and low sales prices. The NAVs shown are
based on outstanding shares at the end of each period.
Represents the dividend or distribution declared in the relevant quarter.

SALES OF UNREGISTERED SECURITIES

 During 2020, the Board of Directors did not elect to receive compensation in the form of unregistered securities. During 2019 and 2018, the Board of Directors elected
to receive approximately $302,000 and $500,000, respectively, of their compensation in the form of common stock, and we issued 22,554 and 38,245 shares, respectively, to the
directors based on the closing prices of the common stock on the specified election dates.

During 2020, 2019, and 2018, we issued 280,690, 180,135, and 159,560 shares, respectively, of common stock to shareholders in connection with the dividend
reinvestment plan. These issuances were not subject to the registration requirements of the Securities Act of 1933, as amended, or the Securities Act. The aggregate value of the
shares of our common stock issued under our dividend reinvestment plan during the years ended December 31, 2020, 2019, and 2018 were approximately $3.3 million, $2.4
million, and $2.0 million, respectively.

73

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
   
   
 
 
 
See “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”

EQUITY COMPENSATION PLAN INFORMATION

ISSUER PURCHASES OF EQUITY SECURITIES

On December 17, 2018, our Board of Directors authorized a stock repurchase plan permitting us to repurchase up to $25.0 million of our common stock until June 18,

2019, after which the plan expired. The Company had no common stock repurchases during the years ended 2020 and 2019. During the year ended December 31, 2018, the
Company repurchased 376,466 shares of its common stock at an average price per share of $10.77 and a total cost of approximately $4.1 million.

DISTRIBUTION POLICY

In order to be subject to tax as a RIC, we must distribute to our stockholders, in respect of each taxable year, dividends for U.S. federal income tax purposes of an
amount generally at least equal to the Annual Distribution Requirement. Upon satisfying this requirement in respect of a taxable year, we generally will not be subject to
corporate taxes on any income we distribute to our stockholders as dividends for U.S. federal income tax purposes.

However, as a RIC we will be subject to a 4% nondeductible U.S. federal excise tax on certain undistributed income and gains unless we make distributions treated as
dividends for U.S. federal income tax purposes in a timely manner to our stockholders in respect of each calendar year of an amount at least equal to the Excise Tax Avoidance
Requirement. We will not be subject to this excise tax on any amount on which we incurred U.S. federal corporate income tax (such as the tax imposed on a RIC’s retained net
capital gains). Depending on the level of taxable income earned in a taxable year, we may choose to carry over taxable income in excess of current taxable year distributions
treated as dividends for U.S. federal income tax purposes from such taxable income into the next taxable year and incur a 4% excise tax on such taxable income, as required.
The maximum amount of excess taxable income that may be carried over for distribution in the next taxable year under the Code is the total amount of distributions treated as
dividends for U.S. federal income tax purposes paid in the following taxable year, subject to certain declaration and payment guidelines. To the extent we choose to carry over
taxable income into the next taxable year, distributions declared and paid by us in a taxable year may differ from our taxable income for that taxable year as such distributions
may include the distribution of current taxable year taxable income, the distribution of prior taxable year taxable income carried over into and distributed in the current taxable
year, or returns of capital.

We can offer no assurance that we will achieve results that will permit the payment of any cash distributions and, if we issue senior securities, we will be prohibited

from making distributions if doing so causes us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or if distributions are limited by the terms of any of our
borrowings. Our ability to make distributions will be limited by the asset coverage requirements under the 1940 Act. See “Item 1. Business— Regulation.”

On February 17, 2021, the Board of Directors declared a cash distribution of $0.32 per share to be paid on March 15, 2021 to shareholders of record as of March 8,
2021. In addition to the cash distribution, on February 17, 2021, the Board of Directors declared a supplemental cash distribution of $0.05 per share to be paid on March 15,
2021 to stockholders of record as of March 8, 2021.  

Our Board of Directors maintains a variable distribution policy with the objective of distributing four quarterly distributions in an amount that approximates 90 - 100%

of our taxable quarterly income or potential annual income for a particular taxable year.

We maintain an “opt-out” dividend reinvestment plan that provides for reinvestment of our distribution on behalf of our stockholders, unless a stockholder elects to

receive cash. As a result, if our Board of Directors authorizes, and we declare a cash distribution, then our stockholders who have not “opted out” of our dividend reinvestment
plan will have their cash distribution automatically reinvested in additional shares of our common stock, rather than receiving the cash distributions. During 2020, 2019, and
2018, we issued 280,690, 180,135 and 159,560 shares, respectively, of common stock to shareholders in connection with the dividend reinvestment plan.

74

 
 
The following stock performance graph compares the cumulative stockholder return assuming that, on December 31, 2015, a person invested $100 in each of our
common stock, the NYSE Composite Index, the NASDAQ Financial 100 Index, and the Wells Fargo BDC Index. The graph measures total shareholder return, which takes into
account both changes in stock price and distributions. It assumes that distributions paid are reinvested in like securities.

PERFORMANCE GRAPH

This graph and other information furnished under Part II. Item 5 of the Form 10-K shall not be deemed to be “soliciting material” or to be “filed” with the SEC or

subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act. The stock price performance included in the above graph is not necessarily indicative
of future stock price performance.

Copyright© 2021 S&P, a division of S&P Global. All rights reserved.

75

 
 
 
 
Item 6.

  Selected Consolidated Financial Data

The following consolidated financial data is derived from our audited consolidated financial statements. The selected consolidated financial data should be read in

conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes
included elsewhere herein. Historical data is not necessarily indicative of results to be expected for any future period. 

Selected Consolidated Financial Data

(in thousands, except per share amounts)
Balance sheet data:
Investments, at value
Cash and cash equivalents
Total assets
Total liabilities
Total net assets
Other Data:
Total return (1)
Total debt investments, at value
Total warrant investments, at value
Total equity investments, at value
Total investment funds & vehicles investments, at value
Unfunded Commitments (2)
Net asset value per share (3)

2020

For the Year Ended December 31,
2018

2019

2017

  $

2,354,078  
198,282  
2,623,997  
1,332,293  
1,291,704  

  $

2,314,526  
64,393  
2,461,968  
1,328,919  
1,133,049  

  $

1,880,373  
34,212  
1,945,191  
989,747  
955,444  

  $

1,542,214  
91,309  
1,654,715  
813,748  
840,967  

2016

1,423,942  
13,044  
1,464,204  
676,260  
787,944  

14.31 % 

39.36 % 

(7.56 %) 

1.47 % 

26.87 % 

2,094,435  
34,622  
224,679  
342  
179,771  
11.26  

  $

2,148,592  
20,881  
145,053  
—  
133,671  
10.55  

  $

1,733,492  
26,669  
120,212  
—  
138,982  
9.90  

  $

1,415,984  
36,869  
89,361  
—  
73,604  
9.96  

  $

1,328,803  
27,485  
67,654  
—  
59,683  
9.90  

  $

  $

(1)

(2)

(3)

The total return equals the change in the ending market value over the beginning of the period price per share plus distributions paid per share during the period, divided by the beginning price
assuming the distribution is reinvested on the date of the issuance. The total return does not reflect any sales load that must be paid by investors.
Amount represents unfunded commitments, including undrawn revolving facilities, which are available at the request of the portfolio company. Amount excludes unfunded commitments which are
unavailable due to the borrower having not met certain milestones. Additionally, amount includes uncalled capital commitments in a private equity fund.
Based on common shares outstanding at period end.

2020

For the Year Ended December 31,
2018

2019

2017

2016

  $

  $

263,379  
23,879  
287,258  

  $

247,513  
20,361  
267,874  

  $

190,636  
17,117  
207,753  

  $

172,196  
18,684  
190,880  

 (in thousands, except per share amounts)
Investment income:

Interest and dividend income
Fee income

Total investment income
Operating expenses:

Interest
Loan fees
General and administrative
Tax expenses
Employee Compensation:

Compensation and benefits
Stock-based compensation

Total employee compensation

Total operating expenses
Other income (loss)
Net investment income
Net realized gain (loss) on investments
Net change in unrealized appreciation (depreciation) on investments
Total net realized and unrealized gain (loss)
Net increase in net assets resulting from operations

Change in net assets per common share (basic)
Distributions declared per common share:

  $
  $
  $

54,596  
7,078  
19,183  
2,226  

30,993  
10,526  
41,519  
124,602  
—  
143,272  
16,523  
13,803  
30,326  
173,598  
1.71  

1.33  

  $
  $

  $

39,435  
7,260  
14,517  
971  

25,062  
11,779  
36,841  
99,024  
—  
108,729  
(11,087 )
(21,146 )
(32,233 )
76,496  
0.83  

1.26  

  $
  $

  $

37,857  
8,728  
15,668  
437  

24,555  
7,191  
31,746  
94,436  
—  
96,444  
(26,711 )
9,265  
(17,446 )
78,998  
0.95  

1.24  

  $
  $

  $

59,605  
7,269  
18,910  
4,285  

28,996  
11,053  
40,049  
130,118  
—  
157,140  
(56,105 )
126,226  
70,121  
227,261  
2.02  

1.38  

  $
  $

  $

76

158,727  
16,324  
175,051  

32,016  
5,042  
15,732  
374  

22,500  
7,043  
29,543  
82,707  
8,000  
100,344  
4,576  
(36,217 )
(31,641 )
68,703  
0.91  

1.24  

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
   
   
   
   
 
 
 
   
   
   
   
 
 
 
   
   
   
   
   
   
   
   
   
 
 
 
   
   
   
   
 
 
 
   
   
   
   
 
 
 
 
 
   
   
   
 
 
 
 
 
   
   
   
 
 
 
   
   
   
   
   
   
   
   
   
 
 
 
   
   
   
   
 
 
 
   
   
   
   
 
 
 
   
   
   
   
 
 
 
   
   
   
   
 
 
 
   
   
   
   
 
 
 
   
   
   
   
 
 
 
   
   
   
   
 
 
 
   
   
   
   
 
 
 
   
   
   
   
 
 
 
 
 
 
Item 7.

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

FORWARD-LOOKING STATEMENTS

The matters discussed in this report, as well as in future oral and written statements by management of Hercules Capital, Inc. that are forward-looking statements are

based on current management expectations that involve substantial risks and uncertainties which could cause actual results to differ materially from the results expressed in, or
implied by, these forward-looking statements. Forward-looking statements relate to future events or our future financial performance. We generally identify forward-looking
statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,”
“predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Important assumptions include our ability to originate new investments, achieve
certain margins and levels of profitability, the availability of additional capital, and the ability to maintain certain debt to asset ratios. In light of these and other uncertainties, the
inclusion of a projection or forward-looking statement in this report should not be regarded as a representation by us that our plans or objectives will be achieved. The forward-
looking statements contained in this report include statements as to:

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

our current and future management structure;

our future operating results;

our business prospects and the prospects of our prospective portfolio companies;

the impact of investments that we expect to make;

our informal relationships with third parties including in the venture capital industry;

the expected market for venture capital investments and our addressable market;

the dependence of our future success on the general economy and its impact on the industries in which we invest;

our ability to access debt markets and equity markets;

the ability of our portfolio companies to achieve their objectives;

our expected financings and investments;

our regulatory structure and tax status;

our ability to operate as a BDC, a SBIC and a RIC;

the adequacy of our cash resources and working capital;

the timing of cash flows, if any, from the operations of our portfolio companies;

the timing, form and amount of any distributions;

the impact of fluctuations in interest rates on our business;

the valuation of any investments in portfolio companies, particularly those having no liquid trading market; and

our ability to recover unrealized losses.

For a discussion of factors that could cause our actual results to differ from forward-looking statements contained in this report, please see the discussion under “Item

1A. Risk Factors.” You should not place undue reliance on these forward-looking statements. The forward-looking statements made in this report relate only to events as of the
date on which the statements are made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances occurring after the date of this
report.

The following discussion should be read in conjunction with our consolidated financial statements and related notes and other financial information appearing
elsewhere in this report. In addition to historical information, the following discussion and other parts of this report contain forward-looking information that involves risks and
uncertainties. Our actual results could differ materially from those anticipated by such forward-looking information due to the factors discussed under “Item 1A—Risk Factors”
and “Forward-Looking Statements” of this Item 7.

77

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Use of Non-GAAP Measures

In Item 1. Business, Item 6. Selected Financial Data and throughout this MD&A, we present our financial condition and results of operations in the way we believe will
be most meaningful and representative of our business results. Some of the measurements we use are “non-GAAP financial measures” under SEC rules and regulations. GAAP
is the acronym for “generally accepted accounting principles” in the United States. The non-GAAP financial measures we present may not be comparable to similarly-named
measures reported by other companies.

COVID-19 Developments

We are continuing to closely monitor the impact of the outbreak of COVID-19 on all aspects of our business, including how it impacts our portfolio companies,
employees, due diligence and underwriting processes, and financial markets. In the earlier part of the year, the U.S. capital markets experienced extreme volatility and disruption
following the COVID-19 pandemic, which appear to have subsided and returned to pre-COVID-19 levels by the later part of the year. Nonetheless, certain economists and
major investment banks have expressed concern that the continued spread of the virus globally could lead to a prolonged period of world-wide economic downturn.

On March 27, 2020, the U.S. government enacted the CARES Act, which contains provisions intended to mitigate the adverse economic effects of the coronavirus

pandemic. On December 27, 2020, the U.S. government enacted the December 2020 COVID Relief Package. It is uncertain whether, or to what extent, our portfolio companies
will be able to benefit from the CARES Act, the December 2020 COVID Relief Package, or any other subsequent legislation intended to provide financial relief or assistance.
As a result of this disruption and the pressures on their liquidity, certain of our portfolio companies have been, or may continue to be, incentivized to draw on most, if not all, of
the unfunded portion of any revolving or delayed draw term loans made by us, subject to availability under the terms of such loans.

The extent of the impact of the COVID-19 pandemic on our operational and financial performance, including our ability to execute our business strategies and
initiatives in the expected time frame, will depend to a large extent on future developments regarding the duration and severity of the coronavirus, effectiveness of vaccination
deployment and the actions taken by governments (including stimulus measures or the lack thereof) and their citizens to contain the coronavirus or treat its impact, all of which
are beyond our control. An extended period of global supply chain and economic disruption could materially affect our business, results of operations, access to sources of
liquidity and financial condition. Given the fluidity of the situation, we cannot estimate the long-term impact of COVID-19 on our business, future results of operations,
financial position, or cash flows at this time.

Overview

We are a specialty finance company focused on providing senior secured loans to high-growth, innovative venture capital-backed companies in a variety of technology,

life sciences, and sustainable and renewable technology industries. We source our investments through our principal office located in Palo Alto, CA, as well as through our
additional offices in Boston, MA, New York, NY, Bethesda, MD, Hartford, CT, Westport, CT, Chicago, IL, and San Diego, CA.

Our goal is to be the leading structured debt financing provider for venture capital-backed companies in technology-related industries requiring sophisticated and
customized financing solutions. Our strategy is to evaluate and invest in a broad range of technology-related industries including technology, drug discovery and development,
biotechnology, life sciences, healthcare, and sustainable and renewable technology and to offer a full suite of growth capital products. We invest primarily in structured debt
with warrants and, to a lesser extent, in senior debt and equity investments. We invest primarily in private companies but also have investments in public companies.

We use the term “structured debt with warrants” to refer to any debt investment, such as a senior or subordinated secured loan, that is coupled with an equity

component, including warrants, options or other rights to purchase or convert into common or preferred stock. Our structured debt with warrants investments typically are
secured by some or all of the assets of the portfolio company. We also provide “unitranche” loans, which are loans that combine both senior and mezzanine debt, generally in a
first lien position.

78

 
 
Our investment objective is to maximize our portfolio total return by generating current income from our debt investments and capital appreciation from our warrant
and equity-related investments. Our primary business objectives are to increase our net income, net operating income, and NAV by investing in structured debt with warrants
and equity of venture capital-backed companies in technology-related industries with attractive current yields and the potential for equity appreciation and realized gains. Our
equity ownership in our portfolio companies may exceed 25% of the voting securities of such companies, which represents a controlling interest under the 1940 Act. In some
cases, we receive the right to make additional equity investments in our portfolio companies in connection with future equity financing rounds. Capital that we provide directly
to venture capital-backed companies in technology-related industries is generally used for growth and general working capital purposes as well as in select cases for acquisitions
or recapitalizations.

We also make investments in qualifying small businesses through HT III, which is our wholly owned SBIC. HT III holds approximately $201.2 million in tangible

assets, which accounted for approximately 7.7% of our total assets at December 31, 2020.

We have qualified as and have elected to be treated for tax purposes as a RIC under Subchapter M of the Code. Pursuant to this election, we generally will not be

subject to corporate-level taxes on any income and gains that we distribute as dividends for federal income tax purposes to our stockholders. However, our qualification and
election to be treated as a RIC requires that we comply with provisions contained in Subchapter M of the Code. For example, as a RIC we must earn 90% or more of our gross
income during each taxable year from qualified sources, typically referred to as “good income,” as well as satisfy certain quarterly asset diversification and annual income
distribution requirements.

We are an internally managed, non-diversified, closed-end investment company that has elected to be regulated as a BDC under the 1940 Act. As a BDC, 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,” which includes
securities of private U.S. companies, cash, cash equivalents, and high-quality debt investments that mature in one year or less.

Our portfolio is comprised of, and we anticipate that our portfolio will continue to be comprised of, investments primarily in technology related companies at various

stages of their development. Consistent with requirements under the 1940 Act, we invest primarily in United-States based companies and to a lesser extent in foreign companies.

We regularly engage in discussions with third parties with respect to various potential transactions. We may acquire an investment or a portfolio of investments or an

entire company or sell a portion of our portfolio on an opportunistic basis. We, our subsidiaries or our affiliates, may also agree to manage certain other funds that invest in
debt, equity or provide other financing or services to companies in a variety of industries for which we may earn management or other fees for our services. We may also invest
in the equity of these funds, along with other third parties, from which we would seek to earn a return and/or future incentive allocations. Some of these transactions could be
material to our business. Consummation of any such transaction will be subject to completion of due diligence, finalization of key business and financial terms (including
price), and negotiation of final definitive documentation as well as a number of other factors and conditions including, without limitation, the approval of our board of directors
and required regulatory or third-party consents and, in certain cases, the approval of our stockholders. Accordingly, there can be no assurance that any such transaction would
be consummated. Any of these transactions or funds may require significant management resources either during the transaction phase or on an ongoing basis depending on the
terms of the transaction.

Portfolio and Investment Activity

The total fair value of our investment portfolio was approximately $2.4 billion at December 31, 2020 as compared to approximately $2.3 billion at December 31, 2019.

The fair value of our debt investment portfolio at December 31, 2020 was approximately $2.1 billion, compared to a fair value of approximately $2.1 billion at December 31,
2019. The fair value of the equity portfolio at December 31, 2020 was approximately $224.7 million, compared to a fair value of approximately $145.0 million at December 31,
2019. The fair value of the warrant portfolio at December 31, 2020 was approximately $34.6 million, compared to a fair value of approximately $20.9 million at December 31,
2019.

Portfolio Activity

Our investments in portfolio companies take a variety of forms, including unfunded contractual commitments and funded investments. From time to time, unfunded

contractual commitments depend upon a portfolio company reaching certain milestones before the debt commitment is available to the portfolio company, which is expected to
affect our funding levels. These commitments are subject to the same underwriting and ongoing portfolio maintenance as the on-balance sheet financial instruments that we
hold. Debt commitments generally fund over the two succeeding quarters from close. Not all debt commitments represent future cash requirements. Similarly, unfunded
contractual commitments may expire without being drawn and thus do not represent future cash requirements.

79

 
 
Prior to entering into a contractual commitment, we generally issue a non-binding term sheet to a prospective portfolio company. Non-binding term sheets are subject to

completion of our due diligence and final investment committee approval process, as well as the negotiation of definitive documentation with the prospective portfolio
companies. These non-binding term sheets generally convert to contractual commitments in approximately 90 days from signing. Not all non-binding term sheets are expected
to close and do not necessarily represent future cash requirements.

Our portfolio activity for the years ended December 31, 2020 and 2019 was comprised of the following:  

(in millions)
Debt Commitments (1)

New portfolio company
Existing portfolio company
Total

Funded and Restructured Debt Investments (2)

New portfolio company
Existing portfolio company
Total

Funded Equity Investments and Investment Funds & Vehicles

New portfolio company
Existing portfolio company
Total

Unfunded Contractual Commitments (3)

Total

Non-Binding Term Sheets
New portfolio company
Existing portfolio company
Total

December 31, 2020

December 31, 2019

$

$

$

$

$

$

$

$

834.0  
339.1  
1,173.1  

420.5  
331.3  
751.8  

8.2  
1.3  
9.5  

179.8  

247.5  
—  
247.5  

  $

  $

  $

  $

  $

  $

  $

  $

  $

1,101.3  
355.8  
1,457.1  

640.6  
367.3  
1,007.9  

6.1  
11.7  
17.8  

133.7  

50.0  
144.0  
194.0

(1)
(2)
(3)

Includes restructured loans and renewals in addition to new commitments.
Funded amounts include borrowings on revolving facilities.
Amount represents unfunded commitments, including undrawn revolving facilities, which are available at the request of the portfolio company. Amount excludes unfunded commitments which are
unavailable due to the borrower having not met certain milestones. Additionally, amount includes uncalled capital commitments in a private equity fund.

We receive principal payments on our debt investment portfolio based on scheduled amortization of the outstanding balances. In addition, we receive principal
repayments for some of our loans prior to their scheduled maturity date. The frequency or volume of these early principal repayments may fluctuate significantly from period to
period. During the year ended December 31, 2020, we received approximately $781.2 million in aggregate principal repayments. Of the approximately $781.2 million of
aggregate principal repayments, approximately $72.2 million were scheduled principal payments, and approximately $709.0 million were early principal repayments related to
41 portfolio companies. Of the approximately $709.0 million early principal repayments, approximately $127.3 million were early repayments due to M&A transactions for six
portfolio companies.  

Total portfolio investment activity (inclusive of unearned income and excluding activity related to taxes payable, and escrow receivables) as of and for each of the years

ended December 31, 2020, and 2019 was as follows:

(in millions)
Beginning portfolio
New fundings and restructures
Warrants not related to current period fundings
Principal payments received on investments
Early payoffs
Accretion of loan discounts and paid-in-kind principal
Net acceleration of loan discounts and loan fees due to early payoff or restructure
New loan fees
Sale of investments
Gain (loss) on investments due to sales or write offs
Net change in unrealized appreciation (depreciation)
Ending portfolio

80

December 31, 2020

December 31, 2019

$

$

2,314.5  
761.3  

(0.1 )  
(72.2 )  
(709.0 )  
44.7  
(12.5 )  
(9.9 )  
(32.5 )  
(56.4 )  
126.2  
2,354.1  

$

$

1,880.4  
1,025.7  
0.8  
(73.4 )
(526.8 )
43.3  
(9.7 )
(15.3 )
(29.1 )
6.0  
12.6  

2,314.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
   
   
   
 
 
 
   
 
 
 
   
   
   
 
 
 
 
   
 
 
 
   
   
   
 
 
 
   
   
   
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2020, we held warrants or equity positions in three companies that have filed definitive agreements for reverse merger initial public offerings with

special purpose acquisition companies. There can be no assurance that companies that have yet to complete their initial public offerings will do so in a timely manner or at all.

The following table presents certain selected information regarding our debt investment portfolio:

Number of portfolio companies with debt outstanding
Percentage of debt bearing a floating rate
Percentage of debt bearing a fixed rate
Weighted average core yield (1)
Weighted average effective yield (2)
Prime rate at the end of the period

As of December 31,

2020

2019

97  

96.9 %  
3.1 %  
11.6 %  
12.9 %  
3.3 %  

97  
97.4 %
2.6 %
12.5 %
13.4 %
4.8 %

(1)

(2)

The core yield on our debt investments excludes the effects of fee and income accelerations attributed to early payoffs, restructuring, loan modifications, other one-time events, and includes income from expired commitments.

The effective yield on our debt investments includes the effects of fee and income accelerations attributed to early payoffs, restructuring, loan modifications, and other one-time events. The effective yield is derived by dividing total investment income by the
weighted average earning investment portfolio assets outstanding during the year, excluding non-interest earning assets such as warrants and equity investments.

Income from Portfolio

We generate revenue in the form of interest income, primarily from our investments in debt securities, and fee income primarily comprising of commitment and facility
fees. Interest income is recognized in accordance with the contractual terms of the loan agreement to the extent that such amounts are expected to be collected. Fees generated in
connection with our debt investments are recognized over the life of the loan or, in some cases, recognized as earned. In addition, we generate revenue in the form of capital
gains, if any, on warrants or other equity-related securities that we acquire from our portfolio companies. Our investments generally range from $15.0 million to $40.0 million,
although we may make investments in amounts above or below that range. As of December 31, 2020, our debt investments have a term of between two and seven years and
typically bear interest at a rate ranging from approximately 7.0% to approximately 11.5%. In addition to the cash yields received on our debt investments, in some instances, our
debt investments may also include any of the following: exit fees, balloon payment fees, commitment fees, success fees, PIK provisions or prepayment fees which may be
required to be included in income prior to receipt.

Interest on debt securities is generally payable monthly, with amortization of principal typically occurring over the term of the investment. In addition, our loans may
include an interest-only period ranging from three to eighteen months or longer. In limited instances in which we choose to defer amortization of the loan for a period of time
from the date of the initial investment, the principal amount of the debt securities and any accrued but unpaid interest become due at the maturity date.

Loan origination and commitment fees received in full at the inception of a loan are deferred and amortized into fee income as an enhancement to the related loan’s
yield over the contractual life of the loan. We recognize nonrecurring fees amortized over the remaining term of the loan commencing in the quarter relating to specific loan
modifications. We had approximately $39.2 million of unamortized fees at December 31, 2020, of which approximately $32.2 million was included as an offset to the cost basis
of our current debt investments and approximately $7.0 million was deferred contingent upon the occurrence of a funding or milestone. At December 31, 2019, we had
approximately $42.0 million of unamortized fees, of which approximately $34.6 million was included as an offset to the cost basis of our current debt investments and
approximately $7.4 million was deferred contingent upon the occurrence of a funding or milestone.

Loan exit fees to be paid at the termination of the loan are accreted into interest income over the contractual life of the loan. At December 31, 2020, we had
approximately $40.9 million in exit fees receivable, of which approximately $37.6 million was included as a component of the cost basis of our current debt investments and
approximately $3.3 million was a deferred receivable related to expired commitments. At December 31, 2019, we had approximately $33.5 million in exit fees receivable, of
which approximately $31.9 million was included as a component of the cost basis of our current debt investments and approximately $1.6 million was a deferred receivable
related to expired commitments.

81

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
We have debt investments in our portfolio that contain a PIK provision. The PIK interest, computed at the contractual rate specified in each loan agreement, is recorded

as interest income and added to the principal balance of the loan on specified capitalization dates. To maintain our ability to be subject to tax as a RIC, this non-cash source of
income must be distributed to stockholders with other sources of income in the form of dividend distributions even though we have not yet collected the cash. Amounts
necessary to pay these distributions may come from available cash or the liquidation of certain investments. We recorded approximately $9.0 million and $8.7 million in PIK
income in the years ended December 31, 2020 and December 31, 2019, respectively.

 The core yield on our debt investments, a non-GAAP measure, which excludes the effects of fee and income accelerations attributed to early payoffs, restructuring,

loan modifications, other one-time events, and includes income from expired commitments, was 11.6% and 12.5% during the years ended December 31, 2020 and 2019,
respectively. The core yield is derived by dividing total GAAP investment income by the weighted average earning investment portfolio assets at amortized cost outstanding
during the year, excluding fee and income accelerations attributed to early payoffs, restructuring, loan modifications, and other one-time events, but including income from
expired commitments. We believe this measure is useful for our investors as it provides the yield at which our debt investments are originated and eliminates one-off items that
can fluctuate significantly from period to period, thereby allowing for a more meaningful comparison with our peer companies. The effective yield on our debt investments,
which includes the effects of fee and income accelerations attributed to early payoffs, restructuring, loan modifications, and other one-time events, was 12.9%  and 13.4% for
the years ended December 31, 2020 and 2019, respectively. The effective yield is derived by dividing total GAAP investment income by the weighted average earning
investment portfolio assets at amortized cost outstanding during the year, excluding non-interest earning assets such as warrants and equity investments. We believe this
measure is useful for our investors as it provides the yield for our entire debt portfolio, which investors can compare with that of our peer companies. Both the core yield and
effective yield may be higher than what our common stockholders may realize as the core yield and effective yield do not reflect our expenses and any sales load paid by our
common stockholders. The total yield, a non-GAAP measure, on our investment portfolio was 11.7% and 12.0% for the years ended December 31, 2020 and 2019, respectively.
The total yield is derived by dividing total GAAP investment income by the weighted average investment portfolio assets outstanding during the year, including non-interest
earning assets such as warrants and equity investments at amortized cost. We believe this measure is useful for our investors as it provides the total yield for our investments
comprising of debt, equity, and warrants at origination to allow a more meaningful comparison with our peer companies. The comparable total yield calculated on a GAAP basis
on our investment portfolio was 12.4% and 14.2% for the years ended December 31, 2020 and 2019, respectively. The comparable GAAP measure is calculated by dividing
total GAAP investment income by our total investment portfolio assets at fair value outstanding at the beginning of the year.

The total return for our investors was approximately 14.3% and 39.4% during the years ended December 31, 2020 and 2019, respectively. The total return equals the

change in the ending market value over the beginning of the period price per share plus distributions paid per share during the period, divided by the beginning price assuming
the distribution is reinvested on the date of the distribution. The total return does not reflect any sales load that must be paid by investors. See “Note 10 – Financial Highlights”
included in the notes to our consolidated financial statements appearing elsewhere in this report.

Portfolio Composition

Our portfolio companies are primarily privately held companies and public companies which are active in sectors characterized by high margins, high growth rates,

consolidation, and product and market extension opportunities.

The following table presents the fair value of the Company’s portfolio by industry sector at December 31, 2020 and December 31, 2019:

(in thousands)
Software
Drug Discovery & Development
Internet Consumer & Business Services
All other industries (1)
Total

December 31, 2020

December 31, 2019

Investments at
Fair Value

Percentage of
Total Portfolio

Investments at
Fair Value

Percentage of
Total Portfolio

  $

  $

780,045  
757,163  
514,538  
302,332  
2,354,078  

82

33.1 %   $
32.2 %  
21.9 %  
12.8 %  
100.0 %   $

582,445  
747,955  
495,132  
488,994  
2,314,526  

25.2 %
32.2 %
21.4 %
21.2 %
100.0 %

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) See “Note 4 – Investments” for complete list of industry sectors and corresponding amounts of investments at fair value as a percentage of the total portfolio. As of December 31, 2020 the fair value as a

percentage of total portfolio does not exceed 2.5% for any individual industry sector other than “Software”, “Drug Discovery & Development”, or “Internet Consumer & Business Services”.

Industry and sector concentrations vary as new loans are recorded and loans pay off. Loan revenue, consisting of interest, fees, and recognition of gains on equity and
warrants or other equity-related interests, can fluctuate materially when a loan is paid off or a warrant or equity interest is sold. Revenue recognition in any given year can be
highly concentrated in several portfolio companies.

For the years ended December 31, 2020 and 2019, our ten largest portfolio companies represented approximately 27.9% and 27.8% of the total fair value of our

investments in portfolio companies, respectively. At December 31, 2020 and December 31, 2019, we had three and six investments that represented 5% or more of our net
assets, respectively. At December 31, 2020 and December 31, 2019, we had four and six equity investments representing approximately 63.7% and 63.3%, respectively, of the
total fair value of our equity investments, and each represented 5% or more of the total fair value of our equity investments. No single portfolio investment represents more than
10% of the fair value of our total investments as of December 31, 2020 and 2019.

As of December 31, 2020, approximately 96.9% of the debt investment portfolio was priced at floating interest rates or floating interest rates with a Prime or LIBOR-

based interest rate floor. Changes in interest rates, including Prime and LIBOR rates, may affect the interest income and the value of our investment portfolio for portfolio
investments with floating rates.

Our investments in senior secured debt with warrants have detachable equity enhancement features, typically in the form of warrants or other equity-related securities
designed to provide us with an opportunity for capital appreciation. These features are treated as OID and are accreted into interest income over the term of the loan as a yield
enhancement. Our warrant coverage generally ranges from 3% to 20% of the principal amount invested in a portfolio company, with a strike price generally equal to the most
recent equity financing round. As of December 31, 2020, we held warrants in 100 portfolio companies, with a fair value of approximately $34.6 million. The fair value of our
warrant portfolio increased by approximately $13.7 million, as compared to a fair value of $20.9 million at December 31, 2019, primarily related to an increase in the valuation
of the portfolio.

Our existing warrant holdings would require us to invest approximately $63.8 million to exercise such warrants as of December 31, 2020. Warrants may appreciate or

depreciate in value depending largely upon the underlying portfolio company’s performance and overall market conditions. As attractive investment opportunities arise, we may
exercise certain of our warrants to purchase stock, and could ultimately monetize our investments. Of the warrants that we have monetized since inception, we have realized
multiples in the range of approximately 1.02x to 37.74x based on the historical rate of return on our investments. However, our warrants may not appreciate in value and, in
fact, may decline in value. Accordingly, we may experience losses from our warrant portfolio.

Portfolio Grading

We use an investment grading system, which grades each debt investment on a scale of 1 to 5 to characterize and monitor our expected level of risk on the debt
investments in our portfolio with 1 being the highest quality. See “Item 1. Business—Investment Process—Loan and Compliance Administration.” The following table shows
the distribution of our outstanding debt investments on the 1 to 5 investment grading scale at fair value as of December 31, 2020 and 2019, respectively:

December 31, 2020
Debt Investments
at Fair Value

Percentage of
Total Portfolio

(in thousands)

Investment Grading  

1
2
3
4
5

Number of
Companies
16
46
28
3
4
97

  $

  $

410,955  
1,027,931  
621,323  
25,313  
8,913  
2,094,435  

  Number of Companies  
14
52
23
6
2
97

19.6 % 
49.1 % 
29.7 % 
1.2 % 
0.4 % 
100.0 % 

  $

  $

December 31, 2019
Debt Investments
at Fair Value

Percentage of
Total Portfolio

387,327  
1,180,536  
509,940  
69,016  
1,773  
2,148,592  

18.0 %
55.0 %
23.7 %
3.2 %
0.1 %
100.0 %

As of December 31, 2020, our debt investments had a weighted average investment grading of 2.16 on a cost basis, as compared to 2.15 at December 31, 2019. Our

policy is to lower the grading on our portfolio companies as they approach the point in time when they will require additional equity capital. Additionally, we may downgrade
our portfolio companies if they are not meeting our financing criteria or are underperforming relative to their respective business plans. Various companies in our portfolio will
require additional funding in the near term or have not met their business plans and therefore have been downgraded until their funding is complete or their operations improve.

83

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As the COVID-19 situation evolves, we continue to maintain close communications with our portfolio companies to proactively assess and manage potential risks
across our debt investment portfolio. We have also increased oversight and analysis of credits in vulnerable industry sectors in an attempt to improve loan performance and
reduce credit risk.

Non-accrual Investments

The following table shows the amortized cost of our performing and non-accrual investments:

(in millions)
Performing
Non-accrual

Total Investments

2020

2,284  
31  
2,315  

Amortized Cost

  $

  $

As of December 31,

Percentage of Total
Portfolio at Amortized
Cost

Amortized Cost

98.7 %   $
1.3 %  
100.0 %   $

2019

2,393  
9  
2,402  

Percentage of Total
Portfolio at Amortized
Cost

99.6 %
0.4 %
100.0 %

Debt investments are placed on non-accrual status when it is probable that principal, interest or fees will not be collected according to contractual terms. When a debt
investment is placed on non-accrual status, we cease to recognize interest and fee income until the portfolio company has paid all principal and interest due or demonstrated the
ability to repay our current and future contractual obligations. We may not apply the non-accrual status to a loan where the investment has sufficient collateral value to collect
all of the contractual amount due and is in the process of collection. Interest collected on non-accrual investments are generally applied to principal.

Results of Operations

Comparison of periods ended December 31, 2020 and 2019. A comparison of the fiscal years ended December 31, 2019 and December 31, 2018 can be found in our Form 10-
K for the fiscal year ended December 31, 2019 within “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Investment Income

Interest Income

The following table summarizes the components of interest income for the years ended December 31, 2020 and 2019:

(in thousands)
Contractual interest income and dividend income
Exit fee interest income
PIK interest income
Other interest income(1)
Total interest income

(1)

Other interest income includes OID interest income and interest recorded on other assets.

Year Ended December 31,

2020

2019

$

$

208,017  
41,191  
9,009  
5,162  
263,379  

$

$

201,889  
31,845  
8,718  
5,061  

247,513

Interest income for the year ended December 31, 2020 totaled approximately $263.4 million as compared to approximately $247.5 million for the year ended
December 31, 2019. The increase in interest income for the year ended December 31, 2020 as compared to the year ended December 31, 2019 is primarily attributable to an
increase in the weighted average principal outstanding between the periods, and the acceleration of income due to early repayments and other one-time events during the period.

Of the $263.4 million in interest income for the year ended December 31, 2020, approximately $245.9 million represents recurring income from the contractual
servicing of our loan portfolio and approximately $17.5 million represents income related to the acceleration of income due to early loan repayments, dividends received, and
other one-time events during the period. Income from the contractual servicing of our loan portfolio and the acceleration of interest income due to early loan repayments and
other one-time events represented $239.2 million and $8.3 million, respectively, of the $247.5 million interest income for the year ended December 31, 2019.

84

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The following table shows the PIK-related activity for the years ended December 31, 2020 and 2019, at cost: 

(in thousands)
Beginning PIK interest receivable balance
PIK interest income during the period
PIK accrued (capitalized) to principal but not recorded as income during the period
Payments received from PIK loans
Realized loss
Ending PIK interest receivable balance

Year Ended December 31,

2020

2019

$

$

14,498  
9,009  
(5,704 )  
(2,973 )  
(13 )  

14,817  

$

$

12,717  
8,718  
—  
(6,937 )
—  

14,498

The increase in PIK interest income during the year ended December 31, 2020 as compared to the year ended December 31, 2019 is due to an increase in the weighted

average principal outstanding for loans which bear PIK interest. PIK accrued (capitalized) to principal but not recorded as income during the year ended December 31, 2020
include the portion of PIK receivable that is capitalized as principal on the restructuring of loans. Payments on PIK loans are normally received only in the event of payoffs. PIK
receivable for both December 31, 2020 and December 31, 2019 represents approximately 1% of total debt investments.

Fee Income

Fee income from commitment, facility, and loan related fees for the year ended December 31, 2020 totaled approximately $23.9 million as compared to approximately

$20.4 million for the year ended December 31, 2019. The increase in fee income is primarily due to an increase in the acceleration of unamortized fees, one-time fees due to
early repayments.

Of the $23.9 million in fee income from commitment, facility, and loan related fees for the year ended December 31, 2020, approximately $7.8 million represents
income from recurring fee amortization, approximately $3.1 million represents the acceleration of unamortized fees from expired commitments, and approximately $13.0
million represents income related to the acceleration of unamortized fees during the period. Income from recurring fee amortization and the acceleration of unamortized fees
due to early loan repayments represented $9.7 million and $10.7 million, respectively, of the $20.4 million income for the year ended December 31, 2019.

In certain investment transactions, we may earn income from advisory services; however, we had no income from advisory services in the years ended December 31,

2020 and 2019, respectively.

Operating Expenses

Our operating expenses are comprised of interest and fees on our borrowings, general and administrative expenses, and employee compensation and benefits. Our

operating expenses totaled approximately $130.1 million and $124.6 million during the years ended December 31, 2020 and 2019, respectively.

Interest and Fees on our Borrowings

Interest and fees on our borrowings totaled approximately $66.9 million and $61.7 million for the years ended December 31, 2020 and 2019, respectively. Interest and

fee expense for the year ended December 31, 2020 as compared to December 31, 2019 increased primarily due to the issuance of our July 2024 Notes in July 2019, the issuance
of our February 2025 Notes in February 2020, the issuance of our June 2025 Notes in June 2020, and the issuance of our March 2026 A Notes in November 2020.

We had a weighted average cost of debt, comprised of interest and fees, of approximately 5.1% and 5.2% for the years ended December 31, 2020 and 2019,

respectively. The decrease between comparative periods was primarily driven by a reduction in the weighted average principal outstanding on our higher yielding debt
instruments compared to the prior period.

85

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
General and Administrative Expenses

General and administrative expenses include legal fees, consulting fees, accounting fees, printer fees, insurance premiums, taxes, rent, expenses associated with the

workout of underperforming investments and various other expenses. Our general and administrative expenses increased to $23.2 million from $21.4 million for the years ended
December 31, 2020 and 2019, respectively. The increase in general and administrative expenses for the year ended December 31, 2020 is due to an increase in excise taxes
related to undistributed income carried forward to the next tax year.

Employee Compensation

Employee compensation and benefits totaled approximately $29.0 million for the year ended December 31, 2020 as compared to approximately $31.0 million for the

year ended December 31, 2019. The decrease between comparative periods was primarily due to decreased variable compensation.

Employee stock-based compensation totaled approximately $11.1 million for the year ended December 31, 2020 as compared to approximately $10.5 million for the

year ended December 31, 2019. The increase between comparative periods was primarily related to an increase in expenses related to performance stock units.

Net Investment Realized Gains and Losses and Net Unrealized Appreciation and Depreciation

Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the cost basis of an investment without regard to
unrealized appreciation or depreciation previously recognized, and includes investments written off during the period, net of recoveries. Net change in unrealized appreciation or
depreciation primarily reflects the change in portfolio investment values during the reporting period, including the reversal of previously recorded unrealized appreciation or
depreciation when gains or losses are realized.

A summary of realized gains and losses for the years ended December 31, 2020 and 2019 is as follows:

(in thousands)
Realized gains
Realized losses
Net realized gains (losses)

Year Ended December 31,

2020

2019

$

$

23,856  
(79,961 )  
(56,105 )  

$

$

27,190  
(10,667 )
16,523

During the year ended December 31, 2020, we recognized net realized losses of approximately $56.1 million on the portfolio. These net realized losses included gross
realized losses of approximately $80.0 million, primarily from the full or partial write-off of our debt investments in Patron Technology, Motif BioSciences, Inc., and Sebacia,
Inc., as well as the write-off of our debt, equity, and warrant investments in Optiscan Biomedical, Inc. during the period. These losses were partially offset by gross realized
gains of approximately $23.9 million, primarily from the sale of public equity positions and the sale of our holdings due to merger and acquisition transactions.

During the year ended December 31, 2019, we recognized net realized gains of approximately $16.5 million on the portfolio. These net realized gains included gross

realized gains of approximately $27.2 million, primarily from the sale of our public equity holdings and sale of our holdings due to merger and acquisition transactions. These
gains were partially offset by gross realized losses of approximately $10.7 million, primarily from the liquidation or write-off of our debt, equity or warrant investments during
the period.

The net unrealized appreciation and depreciation of our investments is based on the fair value of each investment determined in good faith by our Board of Directors.

The following table summarizes the change in net unrealized appreciation or depreciation of investments for the years ended December 31, 2020, and 2019:

(in thousands)
Gross unrealized appreciation on portfolio investments
Gross unrealized depreciation on portfolio investments
Reversal of prior period net unrealized appreciation (depreciation) upon a realization event
Net unrealized appreciation (depreciation) on debt, equity, warrant investments
Other net unrealized appreciation (depreciation)
Total net unrealized appreciation (depreciation) on investments

  $

  $

86

Year Ended December 31,

2020

2019

  $

221,301  
(148,238 )  
53,163  
126,226  
—  
126,226  

  $

123,501  
(98,624 )
(12,232 )
12,645  
1,158  

13,803

  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
During the year ended December 31, 2020, we recorded approximately $126.2 million of net unrealized appreciation, all of which is net unrealized appreciation from

our debt, equity and warrant investments. We recorded $16.6 million of net unrealized appreciation on our debt investments which was primarily related to $23.4 million of net
unrealized depreciation on the debt portfolio offset against $40.0 million of net unrealized appreciation on the debt portfolio due to the reversal of unrealized depreciation upon
pay-off or write-off of our portfolio companies.

We recorded $86.7 million of net unrealized appreciation on our equity investments and $23.0 million of net unrealized appreciation on our warrant investments during

the year ended December 31, 2020. This net unrealized appreciation of $109.7 million was primarily attributable to $96.5 million of unrealized appreciation on the equity and
warrant portfolio and $13.2 million of net unrealized appreciation due to reversal of unrealized depreciation upon write-off, acquisition, or liquidation of our equity and warrant
investments.

  During the year ended December 31, 2019, we recorded approximately $13.8 million of net unrealized appreciation, of which $12.6 million is net unrealized
appreciation from our debt, equity and warrant investments. We recorded $2.1 million of net unrealized depreciation on our debt investments which was primarily related to net
$8.8 million of net unrealized depreciation on the debt portfolio partially offset by $6.7 million of net unrealized appreciation on the debt portfolio due to the reversal of
unrealized depreciation upon pay-off or write-off of our portfolio companies.

We recorded $19.8 million of net unrealized appreciation on our equity investments and $5.1 million of net unrealized depreciation on our warrant investments during

the year ended December 31, 2019. This net unrealized appreciation of $14.7 million was primarily attributable to $33.6 million of unrealized appreciation on the equity and
warrant portfolio partially offset by $18.9 million of net unrealized depreciation due to reversal of unrealized appreciation upon acquisition or liquidation of our equity and
warrants investments.

Income and Excise Taxes

We account for income taxes in accordance with the provisions of ASC Topic 740 Income Taxes, under which income taxes are provided for amounts currently payable
and for amounts deferred based upon the estimated future tax effects of differences between the financial statements and tax basis of assets and liabilities given the provisions of
the enacted tax law. Valuation allowances may be used to reduce deferred tax assets to the amount likely to be realized. We intend to timely distribute to our stockholders
substantially all of our annual taxable income for each year, except that we may retain certain net capital gains for reinvestment and, depending upon the level of taxable
income earned in a year, we may choose to carry forward taxable income for distribution in the following year and pay any applicable U.S. federal excise tax.

Because federal income tax regulations differ from accounting principles generally accepted in the United States, distributions in accordance with tax regulations may

differ from net investment income and realized gains recognized for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are
reclassified among capital accounts in the financial statements to reflect their appropriate tax character. Permanent differences may also result from the classification of certain
items, such as the treatment of short-term gains as ordinary income for tax purposes. Temporary differences arise when certain items of income, expense, gain or loss are
recognized at some time in the future.

Net Change in Net Assets Resulting from Operations and Earnings Per Share

For the years ended December 31, 2020 and 2019, we had a net increase in net assets resulting from operations totaling approximately $227.3 million and

approximately $173.6 million, respectively.

The basic and fully diluted net change in net assets per common share for the year ended December 31, 2020 was $2.02, and $2.01, respectively, whereas the basic and

fully diluted net change in net assets per common share for the year ended December 31, 2019 was $1.71.

For the purpose of calculating diluted earnings per share for year ended December 31, 2020, the dilutive effect of the 2022 Convertible Notes, outstanding options,

restricted stock units and awards and retention performance stock unit awards under the

87

 
 
 
treasury stock method was considered. The effect of the 2022 Convertible Notes was excluded from these calculations for the year ended December 31, 2020 as our share price
was less than the conversion price in effect which results in anti-dilution.

Financial Condition, Liquidity, and Capital Resources

Our liquidity and capital resources are derived from our SBA debentures, 2022 Notes, July 2024 Notes, February 2025 Notes, April 2025 Notes, June 2025 Notes,

March 2026 A Notes, 2033 Notes, 2027 Asset-Backed Notes, 2028 Asset-Backed Notes, 2022 Convertible Notes, Credit Facilities, and cash flows from operations, including
investment sales and repayments, and income earned. Our primary use of funds from operations includes investments in portfolio companies and payments of fees and other
operating expenses we incur. We have used, and expect to continue to use, our borrowings and the proceeds from the turnover of our portfolio and from public and private
offerings of securities to finance our investment objectives. We may also raise additional equity or debt capital through registered offerings off a shelf registration, At-the-
Market (“ATM”), and private offerings of securities, by securitizing a portion of our investments, or by borrowing from the SBA through our SBIC subsidiaries. This
“Financial Condition, Liquidity and Capital Resources” section should be read in conjunction with the “COVID-19 Developments” section above.

 SBA Debentures

On July 13, 2018, we completed repayment of the remaining outstanding HT II debentures and subsequently surrendered the SBA license with respect to HT II.

 On March 1, 2020, and September 1, 2020, we paid down $38.7 million and $11.3 million of SBA debentures, respectively.

2022 Notes

On October 23, 2017, we issued $150.0 million in aggregate principal amount of the 2022 Notes pursuant to the 2022 Notes Indenture. The sale of the 2022 Notes
generated net proceeds of approximately $147.4 million, including a public offering discount of $826,500. Aggregate estimated offering expenses in connection with the
transaction, including the underwriter’s discount and commissions of approximately $975,000, were approximately $1.8 million.

July 2024 Notes

On July 16, 2019, we issued $105.0 million in aggregate principal amount of July 2024 Notes. The sale of the July 2024 Notes generated net proceeds of approximately

$103.5 million. Aggregate estimated offering expenses in connection with the transaction, including the underwriter’s discount and commissions, were approximately $1.5
million.

February 2025 Notes

On February 5, 2020, we issued $50.0 million in aggregate principal amount of February 2025 Notes pursuant to the 2025 Note Purchase Agreement. The sale of the

February 2025 Notes generated net proceeds of approximately $49.4 million. Aggregate estimated offering expenses in connection with the transaction, including the
underwriter’s discount and commissions, were approximately $581,000.

April 2025 Notes
On April 26, 2018, we issued $75.0 million in aggregate principal amount of the April 2025 Notes pursuant to the April 2025 Notes Indenture. The sale of the April

2025 Notes generated net proceeds of approximately $72.4 million. Aggregate estimated offering expenses in connection with the transaction, including the underwriter’s
discount and commissions, were approximately $2.6 million.

June 2025 Notes
On June 3, 2020, we issued $70.0 million in aggregate principal amount of June 2025 Notes pursuant to the 2025 Note Purchase Agreement. The sale of the June 2025
Notes generated net proceeds of approximately $69.2 million. Aggregate estimated offering expenses in connection with the transaction, including the underwriter’s discount
and commissions, were approximately $819,000.

88

 
 
March 2026 A Notes
On November 4, 2020, we issued $50.0 million in aggregate principal amount of March 2026 A Notes pursuant to the First Supplement to the 2025 Note Purchase

Agreement. The sale of the March 2026 A Notes generated net proceeds of approximately $49.5 million. Aggregate estimated offering expenses in connection with the
transaction, including the underwriter’s discount and commissions, were approximately $464,000.

 The First Supplement to the 2025 Note Purchase Agreement also provides for the issuance of an additional $50.0 million aggregate principal amount of senior

unsecured notes due March 2026 with a fixed interest rate of 4.55% per year that are expected to be issued in March 2021, subject to the satisfaction of customary closing
conditions contained in the First Supplement to the 2025 Note Purchase Agreement.

2033 Notes

On September 20, 2018, we issued $40.0 million in aggregate principal amount of the 2033 Notes pursuant to the 2033 Notes Indenture. The sale of the 2033 Notes
generated net proceeds of approximately $38.4 million. Aggregate estimated offering expenses in connection with the transaction, including the underwriter’s discount and
commissions, were approximately $1.6 million.

2027 Asset-Backed Notes
On November 1, 2018, we issued $200.0 million in aggregate principal amount of the 2027 Asset-Backed Notes. The sale of the 2027 Asset-Backed Notes generated net

proceeds of approximately $197.0 million. Aggregate estimated offering expenses in connection with the transaction, including the underwriter’s discount and commissions,
were approximately $3.0 million.

2028 Asset-Backed Notes
On January 22, 2019, we issued $250.0 million in aggregate principal amount of the 2028 Asset-Backed Notes. The sale of the 2028 Asset-Backed Notes generated net

proceeds of approximately $247.1 million. Aggregate estimated offering expenses in connection with the transaction, including the underwriter’s discount and commissions,
were approximately $2.9 million.

Fully Redeemed Notes
On December 7, 2018, our Board of Directors approved a full redemption, in two equal transactions, of $83.5 million of the outstanding aggregate principal amount of

the 2024 Notes. The 2024 Notes were fully redeemed on January 14, 2019 and February 4, 2019.

2022 Convertible Notes
On January 25, 2017, we issued $230.0 million in aggregate principal amount of 2022 Convertible Notes, which amount includes the additional $30.0 million aggregate

principal amount issued pursuant to the initial purchaser’s exercise in full of its overallotment option. The sale generated net proceeds of approximately $225.5 million,
including $4.5 million of debt issuance costs.

Credit Facilities
Wells Facility

On January 11, 2019, Hercules Funding II entered into the Wells Facility Seventh Amendment. The Wells Facility Seventh Amendment, among other things, amends

certain key provisions of the Wells Facility to reduce the current interest rate to LIBOR plus 3.00% with an interest rate floor of 3.00% and extends the maturity date to January
2023. In addition, the Wells Fargo Capital Finance, LLC has committed $75.0 million in credit capacity under a $125.0 million accordion credit facility, subject to borrowing
base, leverage and other restrictions.

89

 
 
Union Bank Facility

On February 20, 2019, we, through a special purpose wholly owned subsidiary, Hercules Funding IV, as borrower, entered into the 2019 Union Bank Facility. The 2019

Union Bank Facility replaced the Prior Union Bank Facility. Any references to amounts related to the 2019 Union Bank Facility prior to February 20, 2019 were incurred and
relate to the Prior Union Bank Facility. Under the 2019 Union Bank Facility, the lenders have made commitments of $200.0 million.

On June 28, 2019, Hercules Funding IV entered into the Union Bank Facility Amendment to the 2019 Union Bank Facility. The Union Bank Facility Amendment
amends certain provisions of the 2019 Union Bank Facility to, among other things, (i) delete the financial covenant with respect to maintaining minimum portfolio funding
liquidity, (ii) add a covenant prohibiting Hercules Funding IV from acquiring or owning unfunded commitments to makers of certain notes receivable, and (iii) revise certain
provisions thereof to further permit a third party special servicer to act as servicer after an event of default instead of us with respect to split-funded notes receivable owned by
Hercules Funding IV and an affiliate thereof (including Hercules Funding II).

On February 20, 2020, we, through a special purpose wholly owned subsidiary, Hercules Funding IV, as borrower, entered into the Union Bank Facility. The Union

Bank Facility replaced the 2019 Union Bank Facility. Any references to amounts related to the Union Bank Facility from February 20, 2019 to February 20, 2020 were incurred
and relate to the 2019 Union Bank Facility. Under the Union Bank Facility, the lenders have made commitments of $400.0 million.

Equity Distribution Agreement
On May 6, 2019, we entered into the 2019 Equity Distribution Agreement. The 2019 Equity Distribution Agreement provided that we may offer and sell up to 12.0

million shares of our common stock from time to time through JMP, as our sales agent.

On July 2, 2020, we terminated the 2019 Equity Distribution Agreement and entered into a new ATM equity distribution agreement with JMP (the “2020 Equity

Distribution Agreement”). As a result, the remaining shares that were available under the 2019 Equity Distribution Agreement are no longer available for issuance.

The 2020 Equity Distribution Agreement provides that we may offer and sell up to 16.5 million shares of our common stock from time to time through JMP, as our

sales agent. Sales of our common stock, if any, may be made in negotiated transactions or transactions that are deemed to be “at the market,” as defined in Rule 415 under the
Securities Act, including sales made directly on the NYSE or similar securities exchange or sales made to or through a market maker other than on an exchange, at prices related
to the prevailing market prices or at negotiated prices.

During the year ended December 31, 2020, the Company sold 6.3 million shares of common stock, of which 6.0 million shares and 306,000 shares were issued under

the 2019 Equity Distribution Agreement and the 2020 Equity Distribution Agreement, respectively. As of December 31, 2020, approximately 16.2 million shares remain
available for issuance and sale under the 2020 Equity Distribution Agreement.

Equity Offerings
On June 17, 2019, we closed the June 2019 Equity Offering. The offering generated net proceeds, before expenses, of $70.5 million, including the underwriting discount

and commissions of $2.2 million.

Stock Repurchase
We may from time to time seek to retire or repurchase our common stock through cash purchases, as well as retire, cancel or purchase our outstanding debt through
cash purchases and/or exchanges, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing
market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors. The amounts involved may be material.

On December 17, 2018, our Board of Directors authorized a stock repurchase plan permitting us to repurchase up to $25.0 million of our common stock until June 18,

2019, after which the plan expired. We had no common stock repurchases during 2019.

90

 
 
Available liquidity and capital resources as of December 31, 2020

At December 31, 2020, we had $99.0 million of SBA debentures, $150.0 million of 2022 Notes, $105.0 million of July 2024 Notes, $50.0 million of February 2025

Notes, $75.0 million of April 2025 Notes, $70.0 million of June 2025 Notes, $50.0 million of March 2026 A Notes, $40.0 million of 2033 Notes, $181.0 million of 2027 Asset-
Backed Notes, $250.0 million of 2028 Asset-Backed Notes, and $230.0 million of 2022 Convertible Notes payable, along with no borrowings outstanding on the Wells Facility,
and no borrowings outstanding on the Union Bank Facility.

At December 31, 2020, we had $673.3 million in available liquidity, including $198.3 million in cash and cash equivalents. We had available borrowing capacity of

$75.0 million under the Wells Facility and $400.0 million under the Union Bank Facility, both subject to existing terms, borrowing base, advance rates, and regulatory
requirements. We primarily invest cash on hand in interest bearing deposit accounts.

At December 31, 2020, we had $74.5 million of capital related to our SBIC subsidiary, HT III. With our net investment of $74.5 million in HT III, we have the capacity

to issue a total of $149.0 million of SBA guaranteed debentures, subject to SBA approval. At December 31, 2020, we have $99.0 million in SBA guaranteed debentures
outstanding in our SBIC subsidiaries. As we are past our investment period for HT III, we will no longer make any future commitments to new portfolio companies. We will
only satisfy contractually agreed follow-on fundings to existing portfolio companies and may seek to early pay-off a portion or all of the outstanding debentures as per the
available liquidity in HT III. Additionally, we have funded $19.1 million of leverageable capital to our SBIC subsidiary HC IV, which has not drawn any debentures as of
December 31, 2020.

At December 31, 2020, we had approximately $39.3 million of restricted cash, which consists of collections of interest and principal payments on assets that are
securitized. In accordance with the terms of the related securitized 2027 Asset-Backed Notes and 2028 Asset-Backed Notes, based on current characteristics of the securitized
debt investment portfolios, the restricted funds may be used to pay monthly interest and principal on the securitized debt with any excess distributed to us or available for our
general operations.

During the year ended December 31, 2020, we principally funded our operations from (i) cash receipts from interest, dividend, and fee income from our investment
portfolio, (ii) cash proceeds from the realization of portfolio investments through the repayments of debt investments and the sale of debt and equity investments, (iii) debt
offerings along with borrowings on our credit facilities, and (iv) equity offerings.

During the year ended December 31, 2020, our operating activities provided $207.8 million of cash and cash equivalents, compared to $240.7 million used during the
year ended December 31, 2019. The $448.5 million increase in cash provided by operating activities is primarily due to a net increase in net assets resulting from operations of
$53.7 million, and an increase in investment repayments of $181.1 million, and a decrease in investment purchases of $264.5 million.

During the year ended December 31, 2020, our investing activities used $137,000 of cash, compared to $595,000 used during the year ended December 31, 2019. The

$458,000 decrease in cash used by investing activities was due to a decrease in purchases of capital equipment.

During the year ended December 31, 2020, our financing activities used $85.0 million of cash, compared to $310.4 million provided during the year ended December
31, 2019. The $395.4 million decrease in cash provided by financing activities was primarily due to a $325.0 million decrease in net proceeds from new note issuances and
borrowings of credit facilities, and a $55.4 million decrease in proceeds from the sales of common stock under our ATM equity distribution agreements.

As of December 31, 2020, net assets totaled $1.3 billion, with a NAV per share of $11.26. We intend to continue to operate in order to generate cash flows from
operations, including income earned from investments in our portfolio companies. Our primary use of funds will be investments in portfolio companies and cash distributions to
holders of our common stock.

As described above, our diverse and well-structured balance sheet is designed to provide a long-term focused and sustainable investment platform. Currently, we

believe we have ample liquidity to support our near-term capital requirements. As the impact of the COVID-19 continues to unfold, we will continue to evaluate our overall
liquidity position and take proactive steps to maintain the appropriate liquidity position based upon the current circumstances.

The SBCAA, which was signed into law in March 2018, decreased the minimum asset coverage ratio in Section 61(a) of the 1940 Act for business development
companies from 200% to 150% (subject to either stockholder approval or approval of both a majority of the board of directors and a majority of directors who are not interested
persons). On September 4, 2018 and December 6, 2018, our Board of Directors, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act) and
our

91

 
 
stockholders, respectively, approved the application to us of the 150% minimum asset coverage ratio set forth in Section 61(a)(2) of the 1940 Act. As a result, effective
December 7, 2018, the asset coverage ratio under the 1940 Act applicable to us decreased from 200% to 150%, permitting us to incur additional leverage. As of December 31,
2020, our asset coverage ratio under our regulatory requirements as a BDC was 207.5%, excluding our SBA debentures as a result of our exemptive order from the SEC that
allows us to exclude all SBA leverage from our asset coverage ratio. As a result of the SEC exemptive order, our ratio of total assets on a consolidated basis to outstanding
indebtedness may be less than 150%, which while providing increased investment flexibility, also may increase our exposure to risks associated with leverage. Total asset
coverage when including our SBA debentures was 199.3% at December 31, 2020.

Refer to “Note 5 – Borrowings” included in the notes to our consolidated financial statements appearing elsewhere in this report for a discussion of our borrowings.

Commitments

In the normal course of business, we are party to financial instruments with off-balance sheet risk. These consist primarily of unfunded contractual commitments to
extend credit, in the form of loans, to our portfolio companies. Unfunded contractual commitments to provide funds to portfolio companies are not reflected on our balance
sheet. Our unfunded contractual commitments may be significant from time to time. A portion of these unfunded contractual commitments are dependent upon the portfolio
company reaching certain milestones before the debt commitment becomes available. Furthermore, our credit agreements contain customary lending provisions which allow us
relief from funding obligations for previously made commitments in instances where the underlying company experiences materially adverse events that affect the financial
condition or business outlook for the company. These commitments will be subject to the same underwriting and ongoing portfolio maintenance as are the on-balance sheet
financial instruments that we hold. Since these commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash
requirements. As such, our disclosure of unfunded contractual commitments includes only those which are available at the request of the portfolio company and unencumbered
by milestones.

In addition to our unfunded contractual commitments to extend credit to portfolio companies, Hercules has $5.5 million of uncalled capital commitments to make

investments in a private equity fund.

At December 31, 2020, we had approximately $179.8 million of unfunded commitments, including undrawn revolving facilities, which were available at the request of

the portfolio company and unencumbered by milestones, as well as uncalled capital commitments to make investments in a private equity fund. We intend to use cash flow from
normal and early principal repayments, and proceeds from borrowings and notes to fund these commitments.

We also had approximately $247.5 million of non-binding term sheets outstanding to three new companies, which generally convert to contractual commitments within
approximately 90 days of signing. Non-binding outstanding term sheets are subject to completion of our due diligence and final investment committee approval process, as well
as the negotiation of definitive documentation with the prospective portfolio companies. Not all non-binding term sheets are expected to close and do not necessarily represent
future cash requirements.

The fair value of our unfunded commitments is considered to be immaterial as the yield determined at the time of underwriting is expected to be materially consistent

with the yield upon funding, given that interest rates are generally pegged to market indices and given the existence of milestones, conditions and/or obligations imbedded in the
borrowing agreements.

Contractual Obligations

The following table shows our contractual obligations as of December 31, 2020:

Contractual Obligations (1)
Borrowings (2)(3)
Lease and License Obligations (4)
Total

  $

  $

Total

Less than 1 year

1 - 3 years

3 - 5 years

After 5 years

1,299,988  
10,581  
1,310,569  

  $

  $

25,000  
3,031  
28,031  

  $

  $

454,000  
5,345  
459,345  

  $

  $

300,000  
1,427  
301,427  

  $

  $

520,988  
778  

521,766

Payments due by period (in thousands)

(1)
(2)

Excludes commitments to extend credit to our portfolio companies and uncalled capital commitments.
Includes $99.0 million principal outstanding under the SBA debentures, $150.0 million of the 2022 Notes, $105.0 million of the July 2024 Notes, $50.0 million of the February 2025 Notes, $75.0
million of the April 2025 Notes, $70.0 million of the June 2025 Notes, $50.0 million of the March 2026 A Notes, $40.0

92

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
million of the 2033 Notes, $181.0 million of the 2027 Asset-Backed Notes, $250.0 million of the 2028 Asset-Backed Notes, $230.0 million of the 2022 Convertible Notes. There were no
outstanding borrowings under the Union Bank Facility or the Wells Facility as of  December 31, 2020.
Amounts represent future principal repayments and not the carrying value of each liability. See Note 4 to the Company’s consolidated financial statements.
Facility leases and licenses including short-term leases.

(3)
(4)

Certain premises are leased or licensed under agreements which expire at various dates through June 2027. Total rent expense, including short-term leases, amounted to

approximately $3.1 million, $2.7 million, and $2.1 million during the years ended December 31, 2020, 2019, and 2018, respectively.

Indemnification Agreements

We have entered into indemnification agreements with our directors and executive officers. The indemnification agreements are intended to provide our directors and

executive officers the maximum indemnification permitted under Maryland law and the 1940 Act. Each indemnification agreement provides that we shall indemnify the
director or executive officer who is a party to the agreement, or an “Indemnitee,” including the advancement of legal expenses, if, by reason of his or her corporate status, the
Indemnitee is, or is threatened to be, made a party to or a witness in any threatened, pending, or completed proceeding, to the maximum extent permitted by Maryland law and
the 1940 Act.

We and our executives and directors are covered by Directors and Officers Insurance, with the directors and officers being indemnified by us to the maximum extent

permitted by Maryland law subject to the restrictions in the 1940 Act.

Distributions

Our Board of Directors maintains a variable distribution policy with the objective of distributing four quarterly distributions in an amount that approximates 90% -

100% of our taxable quarterly income or potential annual income for a particular taxable year. In addition, at the end of our taxable year, our Board of Directors may choose to
pay additional special distributions, so that we may distribute approximately all of our annual taxable income in the taxable year in which it was earned, or may elect to maintain
the option to spill over our excess taxable income into the following taxable year as part of any future distribution payments.

Distributions from our taxable income (including gains) to a stockholder generally will be treated as a dividend for U.S. federal income tax purposes to the extent of

such stockholder’s allocable share of our current or accumulated earnings and profits. Distributions in excess of our current and accumulated earnings and profits would
generally be treated first as a return of capital to the extent of a stockholder’s tax basis in our shares, and any remaining distributions would be treated as a capital gain. The
determination of the tax attributes of our distributions is made annually as of the end of our taxable year based upon our taxable income for the full taxable year and
distributions paid for the full taxable year. Of the distributions declared during the years ended December 31, 2020, 2019, and 2018, 100% were distributions derived from our
current and accumulated earnings and profits. There can be no certainty to stockholders that this determination is representative of what the tax attributes of our 2021
distributions to stockholders will actually be.

We maintain an “opt out” dividend reinvestment plan that provides for reinvestment of our distribution on behalf of our stockholders, unless a stockholder elects to

receive cash. As a result, if our Board of Directors authorizes, and we declare a cash distribution, then our stockholders who have not “opted out” of our dividend reinvestment
plan will have their cash distribution automatically reinvested in additional shares of our common stock, rather than receiving the cash distributions.

Shortly after the close of each calendar year information identifying the source of the distribution (i.e., paid from ordinary income, paid from net capital gains on the

sale of securities, and/or a return of paid-in-capital surplus which is a nontaxable distribution, if any) will be provided to our stockholders subject to information reporting. To
the extent our taxable earnings fall below the total amount of our distributions for any taxable year, a portion of those distributions may be deemed a tax return of capital to our
stockholders.

We expect to qualify to be subject to tax as a RIC under Subchapter M of the Code. In order to be subject to tax as a RIC, we are required to satisfy certain annual gross

income and quarterly asset composition tests, as well as make distributions to our stockholders each taxable year treated as dividends for federal income tax purposes of an
amount at least equal to 90% of the sum of our investment company taxable income, determined without regard to any deduction for dividends paid, plus our net tax-exempt
income, if any. Upon being eligible to be subject to tax as a RIC, we would be entitled to deduct such distributions we pay to our stockholders in determining the overall
components of our “taxable income.” Components of our taxable income include our taxable interest, dividend and fee income, reduced by certain deductions, as well as
taxable net realized securities gains. Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the
recognition of income and expenses and generally excludes net unrealized appreciation or depreciation as such gains or losses are not included in taxable income until they

93

 
 
are realized. In connection with maintaining our ability to be subject to tax as a RIC, among other things, we have made and intend to continue to make the requisite
distributions to our stockholders each taxable year, which generally should relieve us from corporate-level U.S. federal income taxes.

As a RIC, we will be subject to a 4% nondeductible U.S. federal excise tax on certain undistributed income and gains unless we make distributions treated as dividends

for U.S. federal income tax purposes in a timely manner to our stockholders in respect of each calendar year of an amount at least equal to the Excise Tax Avoidance
Requirement. We will not be subject to this excise tax on any amount on which we incurred U.S. federal corporate income tax (such as the tax imposed on a RIC’s retained net
capital gains).

Depending on the level of taxable income earned in a taxable year, we may choose to carry over taxable income in excess of current taxable year distributions treated as

dividends for U.S. federal income tax purposes from such taxable income into the next taxable year and incur a 4% excise tax on such taxable income, as required. The
maximum amount of excess taxable income that may be carried over for distribution in the next taxable year under the Code is the total amount of distributions treated as
dividends for U.S. federal income tax purposes paid in the following taxable year, subject to certain declaration and payment guidelines. To the extent we choose to carry over
taxable income into the next taxable year, distributions declared and paid by us in a taxable year may differ from our taxable income for that taxable year as such distributions
may include the distribution of current taxable year taxable income, the distribution of prior taxable year taxable income carried over into and distributed in the current taxable
year, or returns of capital.  

We can offer no assurance that we will achieve results that will permit the payment of any cash distributions and, if we issue senior securities, we will be prohibited

from making distributions if doing so causes us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or if distributions are limited by the terms of any of our
borrowings. Our ability to make distributions will be limited by the asset coverage requirements under the 1940 Act.

We intend to timely distribute to our stockholders substantially all of our annual taxable income for each year, except that we may retain certain net capital gains for
reinvestment and, depending upon the level of taxable income earned in a year, we may choose to carry forward taxable income for distribution in the following year and pay
any applicable U.S. federal excise tax.

Critical Accounting Policies

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported

amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and revenues and expenses during the
period reported. On an ongoing basis, our management evaluates its estimates and assumptions, which are based on historical experience and on various other assumptions that
we believe to be reasonable under the circumstances. Actual results could differ from those estimates. Changes in our estimates and assumptions could materially impact our
results of operations and financial condition.

Valuation of Investments

The most significant estimate inherent in the preparation of our consolidated financial statements is the valuation of investments and the related amounts of unrealized

appreciation and depreciation of investments recorded.

94

 
 
At December 31, 2020, approximately 89.7% of our total assets represented investments in portfolio companies whose fair value is determined in good faith by the

Board of Directors. Value, as defined in Section 2(a)(41) of the 1940 Act, is (i) the market price for those securities for which a market quotation is readily available and (ii) for
all other securities and assets, fair value is as determined in good faith by the Board of Directors. Our investments are carried at fair value in accordance with the 1940 Act and
ASC Topic 946 and measured in accordance with ASC Topic 820. Our debt securities are primarily invested in venture capital-backed companies in technology-related
industries including technology, drug discovery and development, biotechnology, life sciences, healthcare, and sustainable and renewable technology at all stages of
development. Given the nature of lending to these types of businesses, substantially all of our investments in these portfolio companies are considered Level 3 assets under ASC
Topic 820 because there is no known or accessible market or market indexes for these investment securities to be traded or exchanged. As such, we value substantially all of our
investments at fair value as determined in good faith pursuant to a consistent valuation policy by our Board of Directors in accordance with the provisions of ASC Topic 820
and the 1940 Act. Due to the inherent uncertainty in determining the fair value of investments that do not have a readily available market value, the fair value of our investments
determined in good faith by our Board of Directors may differ significantly from the value that would have been used had a readily available market existed for such
investments, and the differences could be material. See “Determination of Net Asset Value” for a discussion of our investment valuation process.

 We intend to continue to engage one or more independent valuation firm(s) to provide us with assistance regarding our determination of the fair value of selected
portfolio investments each quarter unless directed by the Board of Directors to cancel such valuation services. Specifically, on a quarterly basis, we will identify portfolio
investments with respect to which an independent valuation firm will assist in valuing. We select these portfolio investments based on a number of factors, including, but not
limited to, the potential for material fluctuations in valuation results, credit quality and the time lapse since the last valuation of the portfolio investment by an independent
valuation firm. The scope of the services rendered by an independent valuation firm is at the discretion of the Board of Directors. Our Board of Directors is ultimately, and
solely, responsible for determining the fair value of our investments in good faith.

Refer to “Note 2 – Summary of Significant Accounting Policies” included in the notes to our consolidated financial statements appearing elsewhere in this report for a

discussion of our valuation policies for the years ended December 31, 2020 and 2019.

Income Recognition

See “— Income from Portfolio” for a discussion of our income recognition policies and results during the years ended December 31, 2020 and 2019. See “— Results of

Operations” for a comparison of investment income for the years ended December 31, 2020 and 2019.

Stock Based Compensation

We have issued and may, from time to time, issue stock options and restricted stock to employees under the 2018 Equity Incentive Plan and the Director Plan. We

follow the guidelines set forth under ASC Topic 718 Compensation – Stock Compensation, to account for stock options and restricted stock granted. Under ASC Topic 718,
compensation expense associated with stock-based compensation is measured at the grant date based on the fair value of the award and is recognized over the vesting period.
Determining the appropriate fair value model and calculating the fair value of stock-based awards at the grant date requires judgment, including estimating stock price volatility,
forfeiture rate, and expected option life.

Income Taxes

See “— Income and Excise Taxes” and “— Distributions” for a discussion of our income tax policies.

Subsequent Events

Distribution Declaration

On February 17, 2021, the Board of Directors declared a cash distribution of $0.32 per share to be paid on March 15, 2021 to shareholders of record as of March 8,
2021. In addition to the cash distribution, on February 17, 2021, the Board of Directors declared a supplemental cash distribution of $0.05 per share to be paid on March 15,
2021 to stockholders of record as of March 8, 2021.

Restricted Stock Award Grants

On January 12, 2021, we granted 654,479 restricted stock awards pursuant to the 2018 Equity Incentive Plan.

95

 
 
Item 7A.

  Quantitative and Qualitative Disclosure About Market Risk

We are subject to financial market risks, including changes in interest rates. Interest rate risk is defined as the sensitivity of our current and future earnings to interest
rate volatility, variability of spread relationships, the difference in re-pricing intervals between our assets and liabilities and the effect that interest rates may have on our cash
flows. Changes in interest rates may affect both our cost of funding and our interest income from portfolio investments, cash and cash equivalents and idle fund investments.
Our investment income will be affected by changes in various interest rates, including LIBOR and Prime rates, to the extent our debt investments include variable interest rates.
As of December 31, 2020, approximately 96.9% of the loans in our portfolio had variable rates based on floating Prime or LIBOR rates with a floor. Our borrowings under the
Credit Facilities bear interest at a floating rate and the borrowings under our SBA debentures, 2022 Notes, July 2024 Notes, February 2025 Notes, April 2025 Notes, June 2025
Notes, March 2026 A Notes, 2033 Notes, 2027 Asset-Backed Notes, 2028 Asset-Backed Notes, and 2022 Convertible Notes bear interest at a fixed rate. Changes in interest
rates can also affect, among other things, our ability to acquire and originate loans and securities and the value of our investment portfolio.

Based on our Consolidated Statement of Assets and Liabilities as of December 31, 2020, the following table shows the approximate annualized increase (decrease) in

components of net assets resulting from operations of hypothetical base rate changes in interest rates, assuming no changes in our investments and borrowings.

(in thousands)
 Basis Point Change
(75)
(50)
(25)
25
50
75
100
200

Interest Income

$
$
$
$
$
$
$
$

(9 )  
(9 )  
(9 )  
2,259    
4,517    
6,589    
8,907    
20,110    

Interest Expense  
(83 )
$
(55 )
$
(28 )
$
28  
$
55  
$
83  
$
110  
$
221  
$

  $
  $
  $
  $
  $
  $
  $
  $

Net Income

EPS

74     $
46     $
19     $
2,231     $
4,462     $
6,506     $
8,797     $
19,889     $

—  
—  
—  
0.02  
0.04  
0.06  
0.08  
0.17

We do not currently engage in any hedging activities. However, we may, in the future, hedge against interest rate fluctuations (and foreign currency) by using standard
hedging instruments such as futures, options, and forward contracts. While hedging activities may insulate us against changes in interest rates (and foreign currency), they may
also limit our ability to participate in the benefits of lower interest rates with respect to our borrowed funds and higher interest rates with respect to our portfolio of investments.
During the year ended December 31, 2020, we did not engage in interest rate (or foreign currency) hedging activities.

Although we believe that the foregoing analysis is indicative of our sensitivity to interest rate changes, it does not adjust for potential changes in the credit market, credit

quality, size and composition of the assets in our portfolio. It also does not adjust for other business developments, including borrowings under our SBA debentures, 2022
Notes, July 2024 Notes, February 2025 Notes, April 2025 Notes, June 2025 Notes, March 2026 A Notes, 2033 Notes, 2027 Asset-Backed Notes, 2028 Asset-Backed Notes,
2022 Convertible Notes, and Credit Facilities that could affect the net increase in net assets resulting from operations, or net income. It also does not assume any repayments
from borrowers. Accordingly, no assurances can be given that actual results would not differ materially from the statement above.

Because we currently borrow, and plan to borrow in the future, money to make investments, our net investment income is dependent upon the difference between the

rate at which we borrow funds and the rate at which we invest the funds borrowed. Accordingly, there can be no assurance that a significant change in market interest rates will
not have a material adverse effect on our net investment income. In periods of rising interest rates, our cost of funds would increase, which could reduce our net investment
income if there is not a corresponding increase in interest income generated by variable rate assets in our investment portfolio.

 For additional information regarding the interest rate associated with each of our SBA debentures, 2022 Notes, July 2024 Notes, February 2025 Notes, April 2025

Notes, June 2025 Notes, March 2026 A Notes, 2033 Notes, 2027 Asset-Backed Notes, 2028 Asset-Backed Notes,  2022 Convertible Notes, and Credit Facilities, refer to “Note
2 – Summary of Significant Accounting Policies” included in the notes to our consolidated financial statements in this report on Form 10-K.

96

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 8.

  Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm
Consolidated Statements of Assets and Liabilities as of December 31, 2020 and 2019
Consolidated Statements of Operations for the three years ended December 31, 2020
Consolidated Statements of Changes in Net Assets for the three years ended December 31, 2020
Consolidated Statements of Cash Flows for the three years ended December 31, 2020
Consolidated Schedule of Investments as of December 31, 2020
Consolidated Schedule of Investments as of December 31, 2019
Notes to Consolidated Financial Statements
Consolidated Schedule of Investments in and Advances to Affiliates as of December 31, 2020

97

98
101
103
104
105
107
118
128
177

 
 
 
 
  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Hercules Capital, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated statements of assets and liabilities, including the consolidated schedules of investments, of Hercules Capital, Inc. and its
subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, changes in net assets and cash flows for each of the
three years in the period ended December 31, 2020, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the
“consolidated financial statements”).  We also have audited the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and
2019, and the results of its operations, changes in its net assets and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with
accounting principles generally accepted in the United States of America.  Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

We have also previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of assets
and liabilities, including the consolidated schedules of investments, of Hercules Capital, Inc. and its subsidiaries as of December 31, 2018, 2017, 2016, 2015, 2014, 2013, 2012
and 2011, and the related consolidated statements of operations, changes in net assets and cash flows for each of the years ended December 31, 2011 through 2017 (none of
which are presented herein), and we expressed unqualified opinions on those consolidated financial statements. In our opinion, the information set forth in the Senior Securities
table of Hercules Capital, Inc. and its subsidiaries as of December 31, 2020, 2019, 2018, 2017, 2016, 2015, 2014, 2013, 2012 and 2011, appearing on page 172, is fairly stated,
in all material respects, in relation to the consolidated financial statements from which it has been derived.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment
of the effectiveness of internal control over financial reporting, included in Management's Annual Report on Internal Control over Financial Reporting appearing under Item
9A.  Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our
audits.  We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.  Those standards require that we plan and perform the audits to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was
maintained in all material respects.  

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks.  Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements.  Our audits also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements.  Our procedures included confirmation of securities owned as of December 31, 2020 and 2019 by
correspondence with the custodians, agent banks and portfolio company investees; when replies were not received, we performed other auditing procedures.  Our audit of
internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.  Our audits also included performing such other procedures as we
considered necessary in the circumstances.  We believe that our audits provide a reasonable basis for our opinions.

98

 
 
 
 
 
 
 
 
 
 
 
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles.  A company’s internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;
and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be
communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken
as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which
it relates.

Valuation of Investments - Level 3 Investments in Senior Secured Debt, Unsecured Debt, Preferred Stock, Common Stock and Warrants

As described in Note 2 to the consolidated financial statements, approximately 89.9% of the Company’s $2,450 million total investments in securities as of December 31, 2020
represents investments in level 3 senior secured debt, unsecured debt, preferred stock, common stock and warrants whose fair value, as disclosed by management, is determined
in good faith by the Board of Directors. Management applied significant judgment in determining the fair value of these level 3 investments, which involved the use of
significant unobservable inputs related to i) hypothetical market yields and premiums/(discounts) for debt securities; ii) the probability weighting of alternative outcomes for
impaired debt securities; and iii) the revenue and/or EBITDA multiples, market equity adjustments, discounts for lack of marketability, tangible book value multiple, and
estimated time to exit for warrant and equity-related securities.

The principal considerations for our determination that performing procedures relating to the valuation of level 3 investments in senior secured debt, unsecured debt, preferred
stock, common stock and warrants is a critical audit matter are the significant judgment by management to determine the fair value of these level 3 investments, including the
use of the aforementioned significant unobservable inputs, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing audit procedures and
evaluating the audit evidence obtained relating to the significant unobservable inputs. The audit effort involved the use of professionals with specialized skill and knowledge to
assist in performing procedures and evaluating the audit evidence obtained.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.
These procedures included testing the effectiveness of controls relating to the valuation of level 3 investments in senior secured debt, unsecured debt, preferred stock, common
stock and warrants, including controls over the Company’s methods and significant unobservable inputs. These procedures also included, among others, (i) testing the
completeness and accuracy of data provided by management, evaluating the appropriateness of management’s methods, and evaluating the reasonableness of significant
unobservable inputs used in those methods related to the hypothetical market yields and premiums/(discounts) for debt securities; the probability weighting of alternative
outcomes for impaired debt securities; and the revenue and/or EBITDA multiples, market equity adjustments, discounts for lack of marketability, tangible book value multiple
(equity-related security only), and estimated time to exit for warrant and equity-related securities, and (ii) the involvement of professionals with specialized skill and knowledge
to assist in developing an independent fair value range for a sample of securities and comparison of management’s estimate to each of the independently developed fair value
range. Developing the independent fair

99

 
 
 
 
 
 
 
 
 
value range involved testing the completeness and accuracy of data provided by management and developing independent significant unobservable inputs in order to evaluate
the reasonableness of management’s fair value estimate of these certain level 3 investments.

/s/ PricewaterhouseCoopers LLP
San Francisco, California
February 23, 2021

We have served as the Company’s auditor since 2010.

100

 
 
 
 
 
 
 
 
 
 
 
HERCULES CAPITAL, INC.
  CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except per share data)

  December 31, 2020  

  December 31, 2019  

Assets
Investments, at fair value:

Non-control/Non-affiliate investments (cost of $2,175,651 and $2,248,524, respectively)
Control investments (cost of $65,257 and $65,333, respectively)
Affiliate investments (cost of $74,450 and $88,175, respectively)

Total investments, at fair value (cost of $2,315,358 and $2,402,032, respectively)
Cash and cash equivalents
Restricted cash
Interest receivable
Right of use asset
Other assets
Total assets

Liabilities
Accounts payable and accrued liabilities
Operating lease liability
SBA Debentures, net (principal of $99,000 and $149,000, respectively) (1)
2022 Notes, net (principal of $150,000 and $150,000, respectively) (1)
July 2024 Notes, net (principal of $105,000 and $105,000, respectively) (1)
February 2025 Notes, net (principal of $50,000 and $0, respectively) (1)
April 2025 Notes, net (principal of $75,000 and $75,000, respectively) (1)
June 2025 Notes, net (principal of $70,000 and $0, respectively) (1)

March 2026 A Notes, net (principal of $50,000 and $0, respectively) (1)
2033 Notes, net (principal of $40,000 and $40,000, respectively) (1)
2027 Asset-Backed Notes, net (principal of $180,988 and $200,000, respectively)  (1)
2028 Asset-Backed Notes, net (principal of $250,000 and $250,000, respectively)  (1)
2022 Convertible Notes, net (principal of $230,000 and $230,000, respectively)  (1)
Credit Facilities
Total liabilities
Commitments and Contingencies (Note 11)

Net assets consist of:

Common stock, par value
Capital in excess of par value
Total distributable earnings (loss)

Total net assets
Total liabilities and net assets

Shares of common stock outstanding ($0.001 par value and 200,000,000 authorized)
Net asset value per share

  $

  $

  $

  $

  $
  $

  $

2,288,338  
57,400  
8,340  
2,354,078  
198,282  
39,340  
19,077  
9,278  
3,942  
2,623,997  

36,343  
9,312  
98,716  
149,039  
103,942  
49,522  
73,351  
69,272  

49,550  
38,610  
178,812  
247,647  
228,177  
—  
1,332,293  

  $

  $

  $

  $

115  
1,158,198  
133,391  
1,291,704  
2,623,997  

  $
  $

114,726  
11.26  

  $

2,232,972  
59,746  
21,808  
2,314,526  
64,393  
50,603  
20,207  
11,659  
580  
2,461,968  

30,306  
11,538  
148,165  
148,514  
103,685  
—  
72,970  
—  

—  
38,501  
197,312  
247,395  
226,614  
103,919  
1,328,919  

108  
1,145,106  
(12,165 )
1,133,049  
2,461,968  

107,364  
10.55

(1)

The Company’s SBA debentures, 2022 Notes, 2024 Notes, July 2024 Notes, February 2025 Notes, April 2025 Notes, June 2025 Notes, March 2026 A Notes, 2033 Notes, 2027 Asset-Backed Notes,
2028 Asset-Backed Notes, and 2022 Convertible Notes, as each term is defined herein, are presented net of the associated debt issuance costs for each instrument. See “Note 5 – Borrowings.”

See notes to consolidated financial statements.  
101

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The following table presents the assets and liabilities of our consolidated securitization trusts for the 2027 Asset-Backed Notes and the 2028 Asset-Backed Notes (see

“Note 5 - Borrowings”), which are variable interest entities, or VIEs. The assets of our securitization VIEs can only be used to settle obligations of our consolidated
securitization VIEs, these liabilities are only the obligations of our consolidated securitization VIEs, and the creditors (or beneficial interest holders) do not have recourse to our
general credit. These assets and liabilities are included in the Consolidated Statements of Assets and Liabilities above.

(Dollars in thousands)
 Assets
Restricted Cash
2027 Asset-Backed Notes, investments in securities, at value (cost of $267,657 and $283,891, respectively)
2028 Asset-Backed Notes, investments in securities, at value (cost of $355,236 and $347,295, respectively)
Total assets

Liabilities
2027 Asset-Backed Notes, net (principal of $180,988 and $200,000, respectively)  (1)
2028 Asset-Backed Notes, net (principal of $250,000 and $250,000, respectively)  (1)
Total liabilities

  December 31, 2020  

  December 31, 2019  

  $

  $

  $

  $

39,340  
269,551  
356,097  
664,988  

  $

  $

178,812  
247,647  
426,459  

  $

  $

50,603  
283,658  
347,929  
682,190  

197,312  
247,395  
444,707

(1)

The Company’s 2027 Asset-Backed Notes and 2028 Asset-Backed Notes are presented net of the associated debt issuance costs. See “Note 5 – Borrowings”.

See notes to consolidated financial statements.  
102

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands, except per share data)

Investment income:

Interest and dividend income

Non-control/Non-affiliate investments
Control investments
Affiliate investments

Total interest and dividend income

Fee income

Non-control/Non-affiliate investments
Control investments
Affiliate investments
Total fee income

Total investment income
Operating expenses:
Interest
Loan fees
General and administrative
Tax expenses
Employee compensation:

Compensation and benefits
Stock-based compensation

Total employee compensation

Total operating expenses
Net investment income
Net realized gain (loss) on investments

Non-control/Non-affiliate investments
Control investments
Affiliate investments

Total net realized gain (loss) on investments

Net change in unrealized appreciation (depreciation) on investments

Non-control/Non-affiliate investments
Control investments
Affiliate investments

Total net unrealized appreciation (depreciation) on investments

Total net realized and unrealized gain (loss)
Net increase (decrease) in net assets resulting from operations

Net investment income before investment gains and losses per common share:

Basic

Change in net assets resulting from operations per common share:

Basic

Diluted

Weighted average shares outstanding

Basic

Diluted

Distributions paid per common share:

Basic

HERCULES CAPITAL, INC.
  CONSOLIDATED STATEMENTS OF OPERATIONS

2020

For the Year Ended December 31,
2019

2018

  $

  $

  $

  $

  $

  $

259,989  
2,857  
533  
263,379  

23,858  
21  
—  
23,879  
287,258  

59,605  
7,269  
18,910  
4,285  

28,996  
11,053  
40,049  
130,118  
157,140  

(41,956 )  

—  

(14,149 )  
(56,105 )  

128,238  

(2,271 )  
259  
126,226  
70,121  
227,261  

  $

  $

241,491  
4,014  
2,008  
247,513  

20,157  
18  
186  
20,361  
267,874  

54,596  
7,078  
19,183  
2,226  

30,993  
10,526  
41,519  
124,602  
143,272  

16,523  
—  
—  
16,523  

15,074  
1,595  
(2,866 )  
13,803  
30,326  
173,598  

  $

1.39  

  $

1.41  

  $

2.02  

  $

2.01  

  $

1.71  

  $

1.71  

  $

111,985  

112,267  

101,132  

101,569  

  $

1.38  

  $

1.33  

  $

See notes to consolidated financial statements.  
103

185,187  
3,391  
2,058  
190,636  

16,776  
5  
336  
17,117  
207,753  

39,435  
7,260  
14,517  
971  

25,062  
11,779  
36,841  
99,024  
108,729  

(4,721 )
(4,308 )
(2,058 )
(11,087 )

(13,082 )
(1,222 )
(6,842 )
(21,146 )
(32,233 )
76,496  

1.19  

0.83  

0.83  

90,929  

91,057  

1.26

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HERCULES CAPITAL, INC.
  CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(dollars and shares in thousands)

Balance at December 31, 2017

Net increase in net assets resulting from operations
Public offering, net of offering expenses
Issuance of common stock due to stock option exercises
Retired shares from net issuance of stock options exercises
Issuance of common stock under restricted stock plan
Acquisition of common stock under repurchase plan
Retired shares for restricted stock vesting
Distributions reinvested in common stock
Distributions
Stock-based compensation (1)
Tax reclassification of stockholders' equity in accordance with generally accepted accounting
principles

Balance at December 31, 2018

Net increase in net assets resulting from operations
Public offering, net of offering expenses
Issuance of common stock due to stock option exercises
Retired shares from net issuance of stock options exercises
Issuance of common stock under restricted stock plan
Retirement of common stock under repurchase plan
Retired shares for restricted stock vesting
Distributions reinvested in common stock
Distributions
Stock-based compensation (1)
Tax reclassification of stockholders' equity in accordance with generally accepted accounting
principles

Balance at December 31, 2019

Net increase in net assets resulting from operations
Public offering, net of offering expenses
Issuance of common stock due to stock option exercises
Retired shares from net issuance of stock options exercises
Issuance of common stock under restricted stock plan
Retired shares for restricted stock vesting
Distributions reinvested in common stock
Distributions
Stock-based compensation (1)
Tax reclassification of stockholders' equity in accordance with generally accepted accounting
principles

Balance at December 31, 2020

Common Stock

Shares

  Par Value 
85  
  $
—  
11  
—  
—  
—  
—  
—  
—  
—  
—  

84,424  
—  
12,047  
63  
(57 )  
336  
(376 )  
(95 )  
159  
—  
—  

—  
96,501  

  $

—  
10,377  
72  
(44 )  
832  
—  
(554 )  
180  
—  
—  

—  
96  

—  
11  
—  
—  
1  
—  
—  
—  
—  
—  

—  
107,364  

  $

—  
108  

—  
6,272  
54  
(47 )  
862  
(59 )  
280  
—  
—  

—  
6  
—  
—  
1  
—  
—  
—  
—  

Capital in
excess
of par value

  Distributable  
  Earnings

(loss)

Treasury
Stock

  $

  $

908,501  
—  
144,680  
704  
(718 )  
—  
—  
(1,179 )  
2,007  
—  
11,266  

(67,619 )   $
76,496  
—  
—  
—  
—  
—  
—  
—  

(114,728 )  

—  

  $

—  
—  
—  
—  
—  
—  
(4,062 )  
—  
—  
—  
—  

Net
Assets
840,967  
76,496  
144,691  
704  
(718 )
—  
(4,062 )
(1,179 )
2,007  
(114,728 )
11,266  

(12,992 )  

  $

1,052,269  

  $

12,992  
(92,859 )   $

—  
(4,062 )   $

—  
955,444  

—  
132,525  
910  
(616 )  
(1 )  
(4,062 )  
(5,412 )  
2,402  
—  
8,642  

(41,551 )  

  $

1,145,106  

  $

—  
77,174  
662  
(682 )  
(1 )  
(1,817 )  
3,339  
—  
8,473  

173,598  
—  
—  
—  
—  
—  
—  
—  

(134,455 )  

—  

41,551  
(12,165 )   $

227,261  
—  
—  
—  
—  
—  
—  

(155,761 )  

—  

—  
—  
—  
—  
—  
4,062  
—  
—  
—  
—  

—  
—  

—  
—  
—  
—  
—  
—  
—  
—  
—  

173,598  
132,536  
910  
(616 )
—  
—  
(5,412 )
2,402  
(134,455 )
8,642  

—  
  $ 1,133,049  

227,261  
77,180  
662  
(682 )
—  
(1,817 )
3,339  
(155,761 )
8,473  

—  
114,726  

  $

—  
115  

(74,056 )  

  $

1,158,198  

  $

74,056  
133,391  

  $

—  
—  

—  
  $ 1,291,704

(1)

Stock-based compensation includes $106, $78, and $41 of restricted stock and option expense related to director compensation for the years ended December 31, 2020, 2019 and 2018, respectively.

See notes to consolidated financial statements.  
104

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
 
 
 
   
 
 
 
 
   
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HERCULES CAPITAL, INC.
  CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

Cash flows from operating activities:

Net increase in net assets resulting from operations
Adjustments to reconcile net increase in net assets resulting from operations
to net cash provided by (used in) operating activities:

Purchase of investments
Principal and fee payments received on investments
Proceeds from the sale of investments
Net unrealized depreciation (appreciation) on investments
Net realized loss (gain) on investments
Accretion of paid-in-kind principal
Accretion of loan discounts
Accretion of loan discount on convertible notes
Accretion of loan exit fees
Change in deferred loan origination revenue
Unearned fees related to unfunded commitments
Amortization of debt fees and issuance costs
Depreciation
Stock-based compensation and amortization of restricted stock grants  (1)
Change in operating assets and liabilities:

Interest and fees receivable
Prepaid expenses and other assets
Accounts payable
Accrued liabilities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

Purchases of capital equipment
Net cash (used in) investing activities

Cash flows from financing activities:

Issuance of common stock, net
Repurchase of common stock, net
Retirement of employee shares
Distributions paid
Issuance of July 2024 Notes
Issuance of April 2025 Notes
Issuance of 2033 Notes
Issuance of 2027 Asset-Backed Notes
Issuance of 2028 Asset-Backed Notes
Issuance of February 2025 Notes
Issuance of June 2025 Notes
Issuance of March 2026 Notes Tranche A
Repayments of 2024 Notes
Repayment of 2018 Asset-Backed Notes
Repayments of 2021 Asset-Backed Notes
Repayments of Long-Term SBA Debentures
Borrowings of credit facilities
Repayments of credit facilities
Cash paid for debt issuance costs
Fees paid for credit facilities and debentures
Net cash (used in) provided by financing activities
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period

Cash, cash equivalents and restricted cash at end of period

Supplemental disclosures of cash flow information and non-cash investing and financing activities:

Interest paid
Income tax, including excise tax, paid
Distributions reinvested

For the Year Ended December 31,
2019

2020

2018

  $

227,261  

  $

173,598  

  $

76,496  

(761,258 )
781,240  
32,777  
(126,226 )
56,105  
(9,039 )
(4,356 )
671  
(25,648 )
16,780  
(291 )
5,154  
415  
8,473  

1,130  
802  
(16 )
3,828  
207,802  

(137 )
(137 )

77,180  
—  
(1,837 )
(152,422 )
—  
—  
—  
—  
—  
50,000  
70,000  
50,000  
—  

(19,012 )  

—  
(50,000 )
654,474  
(758,393 )
(1,419 )
(3,610 )
(85,039 )
122,626  
114,996  
237,622  

  $

(1,025,711 )  
600,161  
39,573  
(13,803 )  
(16,523 )  
(8,605 )  
(3,532 )  
671  
(24,295 )  
18,177  
1,403  
5,899  
262  
8,642  

(3,248 )  
(10,373 )  
(205 )  

17,245  
(240,664 )  

(595 )  
(595 )  

132,536  
—  
(5,118 )  
(132,053 )  
105,000  
—  
—  
—  
250,000  
—  
—  
—  

(83,510 )  

—  
—  
—  
687,226  
(636,263 )  
(4,554 )  
(2,866 )  

310,398  
69,139  
45,857  
114,996  

  $

58,274  
2,458  
3,339  

  $
  $
  $

51,818  
1,430  
2,402  

  $
  $
  $

(960,844 )
593,502  
19,886  
21,146  
11,087  
(9,363 )
(3,914 )
671  
(17,025 )
6,095  
1,064  
6,105  
199  
11,266  

(4,697 )
(1,099 )
11  
444  
(248,970 )

(475 )
(475 )

144,391  
(4,062 )
(893 )
(112,721 )
—  
75,000  
40,000  
200,000  
—  
—  
—  
—  
(100,000 )
—  
(49,153 )
(41,200 )
353,597  
(300,641 )
(3,782 )
(229 )
200,307  
(49,138 )
94,995  
45,857  

38,960  
713  
2,007

  $

  $
  $
  $

(1)

Stock-based compensation includes $106, $78, and $41 of restricted stock and option expense related to director compensation for the years ended December 31, 2020, 2019, and 2018,
respectively.

See notes to consolidated financial statements.  
105

 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
   
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
   
 
 
 
 
   
 
 
 
 
   
 
 
 
   
 
 
 
   
 
 
 
   
 
 
 
   
 
 
 
 
   
 
 
 
   
 
 
 
 
   
 
 
 
 
   
 
 
 
 
   
 
 
 
 
   
 
 
 
 
 
 
 
 
   
 
 
   
 
 
   
 
 
 
   
 
 
 
   
 
 
 
   
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
   
 
 
 
 
   
 
 
 
   
 
 
 
   
 
 
 
 
   
 
 
 
 
   
 
 
 
 
   
 
 
 
 
   
 
 
 
 
   
 
 
 
 
   
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
   
 
 
 
 
   
 
 
 
 
   
 
 
 
   
 
 
 
   
 
 
 
   
 
 
 
 
   
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 The following table presents a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Statements of Assets and Liabilities that

sum to the total of the same such amounts in the Consolidated Statements of Cash Flows:

(Dollars in thousands)
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents and restricted cash presented in the Consolidated Statements of Cash Flows

2020

For the Year Ended December 31,
2019

2018

  $

  $

198,282  
39,340  
237,622  

  $

  $

64,393  
50,603  
114,996  

  $

  $

34,212  
11,645  
45,857

See “Note 2 – Summary of Significant Accounting Policies” for a description of restricted cash and cash equivalents.

See notes to consolidated financial statements.  
106

 
 
 
 
 
 
 
 
 
 
 
 
   
   
  
 
 Portfolio Company
Debt Investments
Communications & Networking
1-5 Years Maturity
Cytracom Holdings LLC (11)(17)(18)

HERCULES CAPITAL, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2020
(dollars in thousands)

Sub-Industry

Type of
Investment (1)

Maturity
Date

Interest Rate and Floor  (2)

Principal
Amount

Cost (3)

  Value (4)

Communications & Networking

Senior Secured

February 2025

Interest rate 3-month LIBOR + 9.25% or Floor rate of
10.25%

$

7,000   $

6,819   $

6,955  

Subtotal: 1-5 Years Maturity
Subtotal: Communications & Networking (0.59%)*
Diversified Financial Services
1-5 Years Maturity
Gibraltar Business Capital, LLC (7)
Subtotal: 1-5 Years Maturity
Subtotal: Diversified Financial Services (1.28%)*
Drug Delivery
1-5 Years Maturity
Antares Pharma Inc. (10)(11)(15)

Drug Delivery

Diversified Financial Services

Unsecured

March 2023

Interest rate FIXED 14.50%

$

15,000  

6,819  
6,819  

6,955  
6,955  

14,838  
14,838  
14,838  

14,970  
14,970  
14,970  

Senior Secured

July 2022

Interest rate PRIME + 4.50% or Floor rate of 4.50%,
4.14% Exit Fee

$

40,000  

41,104  

41,242  

Subtotal: 1-5 Years Maturity
Subtotal: Drug Delivery (3.52%)*
Drug Discovery & Development
Under 1 Year Maturity
Genocea Biosciences, Inc. (11)

Petros Pharmaceuticals, Inc. (p.k.a. Metuchen
Pharmaceuticals LLC)
Stealth Bio Therapeutics Corp. (10)(11)

Subtotal: Under 1 Year Maturity
1-5 Years Maturity
Acacia Pharma Inc. (5)(10)(11)

Drug Discovery & Development

Senior Secured

May 2021

Drug Discovery & Development

Senior Secured

December 2021

Drug Discovery & Development

Senior Secured

July 2021

Interest rate PRIME + 3.00% or Floor rate of 8.00%,
5.90% Exit Fee
Interest rate PRIME + 7.25% or Floor rate of 11.50%,
3.05% Exit Fee
Interest rate PRIME + 5.50% or Floor rate of 9.50%,
7.69% Exit Fee

Drug Discovery & Development

Senior Secured

January 2022

Albireo Pharma, Inc. (10)(11)

Drug Discovery & Development

Senior Secured

July 2024

Aldeyra Therapeutics, Inc. (11)

Drug Discovery & Development

Senior Secured

October 2023

Applied Genetic Technologies Corporation (11)

Drug Discovery & Development

Senior Secured

December 2023

Aveo Pharmaceuticals, Inc. (11)

Drug Discovery & Development

Senior Secured

September 2023

Axsome Therapeutics, Inc. (10)(17)

Drug Discovery & Development

Senior Secured

October 2025

Bicycle Therapeutics PLC (5)(10)(11)(17)

Drug Discovery & Development

Senior Secured

October 2024

BridgeBio Pharma LLC (12)(13)(16)

Drug Discovery & Development

Senior Secured

November 2023

Drug Discovery & Development

Senior Secured

November 2023

Drug Discovery & Development

Senior Secured

November 2023

Total BridgeBio Pharma LLC
Century Therapeutics (11)

Drug Discovery & Development

Senior Secured

April 2024

Chemocentryx, Inc. (10)(11)(15)

Drug Discovery & Development

Senior Secured

December 2022

Drug Discovery & Development

Senior Secured

February 2024

Total Chemocentryx, Inc.
Codiak Biosciences, Inc. (11)(17)

Drug Discovery & Development

Senior Secured

October 2024

Dermavant Sciences Ltd. (10)(13)

Drug Discovery & Development

Senior Secured

June 2023

Eidos Therapeutics, Inc. (10)(13)

Drug Discovery & Development

Senior Secured

October 2023

G1 Therapeutics, Inc. (10)(11)(17)

Drug Discovery & Development

Senior Secured

June 2024

Geron Corporation (10)(17)

Drug Discovery & Development

Senior Secured

October 2024

Kaleido Biosciences, Inc. (13)

Drug Discovery & Development

Senior Secured

January 2024

Mesoblast (5)(10)(11)(13)

Drug Discovery & Development

Senior Secured

March 2022

Nabriva Therapeutics (5)(10)

Drug Discovery & Development

Senior Secured

June 2023

Interest rate PRIME + 4.50% or Floor rate of 9.25%,
3.95% Exit Fee
Interest rate PRIME + 5.90% or Floor rate of 9.15%,
6.95% Exit Fee
Interest rate PRIME + 3.10% or Floor rate of 9.10%,
6.95% Exit Fee
Interest rate PRIME + 6.50% or Floor rate of 9.75%,
6.95% Exit Fee
Interest rate PRIME + 6.40% or Floor rate of 9.65%,
6.95% Exit Fee
Interest rate PRIME + 5.90% or Floor rate of 9.15%,
4.85% Exit Fee
Interest rate PRIME + 5.60% or Floor rate of 8.85%,
5.00% Exit Fee
Interest rate PRIME + 3.85% or Floor rate of 8.75%,
6.35% Exit Fee
Interest rate PRIME + 2.85% or Floor rate of 8.60%,
5.75% Exit Fee
Interest rate PRIME + 3.10% or Floor rate of 8.85%,
5.75% Exit Fee

Interest rate PRIME + 6.30% or Floor rate of 9.55%,
3.95% Exit Fee
Interest rate PRIME + 3.30% or Floor rate of 8.05%,
6.25% Exit Fee
Interest rate PRIME + 3.25% or Floor rate of 8.50%,
7.15% Exit Fee

Interest rate PRIME + 3.75% or Floor rate of 9.00%,
5.50% Exit Fee
Interest rate PRIME + 4.45% or Floor rate of 9.95%,
6.95% Exit Fee
Interest rate PRIME + 3.25% or Floor rate of 8.50%,
5.95% Exit Fee

Interest rate PRIME + 6.40% or Floor rate of 9.65%,
6.95% Exit Fee
Interest rate PRIME + 5.75% or Floor rate of 9.00%,
6.55% Exit Fee
Interest rate PRIME + 6.10% or Floor rate of 9.35%,
7.55% Exit Fee
Interest rate PRIME + 4.95% or Floor rate of 9.70%,
8.70% Exit Fee
Interest rate PRIME + 4.30% or Floor rate of 9.80%,
7.01% Exit Fee

See notes to consolidated financial statements.  
107

41,104  
41,104  

41,242  
41,242  

12,922  

13,892  

13,892  

6,653  

7,167  

7,156  

9,027  

10,463  

10,463  

31,522  

31,511  

5,452  

5,775  

5,754  

10,000  

9,995  

10,106  

15,000  

15,349  

15,623  

10,000  

10,025  

10,163  

15,000  

15,069  

15,069  

50,000  

49,023  

49,023  

15,000  

14,984  

14,984  

35,000  

36,163  

36,930  

20,000  

20,541  

20,977  

20,000  

20,400  

20,822  

75,000  
10,000  

77,104  
9,897  

78,729  
9,897  

20,000  

20,704  

21,031  

5,000  

5,039  

5,332  

25,000  
25,000  

25,743  
25,099  

26,363  
25,223  

20,000  

20,615  

20,553  

8,750  

8,905  

9,182  

20,000  

20,053  

20,404  

16,250  

16,158  

16,158  

22,500  

22,916  

23,135  

50,000  

53,043  

53,086  

5,000  

5,259  

5,251  

$

$

$

$

$

$

$

$

$

$

$

$

$

$
$

$

$

$
$

$

$

$

$

$

$

$

 
 
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HERCULES CAPITAL, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2020
(dollars in thousands)

 Portfolio Company
Seres Therapeutics, Inc. (11)

Sub-Industry

Type of
Investment (1)

Maturity
Date

Drug Discovery & Development

Senior Secured

November 2023

Syndax Pharmaceutics Inc. (13)

Drug Discovery & Development

Senior Secured

September 2023

TG Therapeutics, Inc. (10)(13)

Drug Discovery & Development

Senior Secured

March 2022

Tricida, Inc. (11)(13)(15)(16)

Drug Discovery & Development

Senior Secured

April 2023

uniQure B.V. (5)(10)(11)

Drug Discovery & Development

Senior Secured

June 2023

Unity Biotechnology, Inc. (10)

Drug Discovery & Development

Senior Secured

August 2024

Valo Health, LLC (p.k.a. Integral Health Holdings,
LLC) (11)
X4 Pharmaceuticals, Inc. (11)

Drug Discovery & Development

Senior Secured

May 2024

Drug Discovery & Development

Senior Secured

July 2024

Yumanity Therapeutics, Inc. (11)

Drug Discovery & Development

Senior Secured

January 2024

Interest Rate and Floor  (2)

Interest rate PRIME + 4.40% or Floor rate of 9.65%,
4.85% Exit Fee
Interest rate PRIME + 5.10% or Floor rate of 9.85%,
4.99% Exit Fee
Interest rate PRIME + 4.75% or Floor rate of 10.25%,
3.25% Exit Fee
Interest rate PRIME + 2.35% or Floor rate of 8.35%,
11.04% Exit Fee
Interest rate PRIME + 3.35% or Floor rate of 8.85%,
4.95% Exit Fee
Interest rate PRIME + 6.10% or Floor rate of 9.35%,
6.25% Exit Fee
Interest rate PRIME + 6.45% or Floor rate of 9.70%,
3.85% Exit Fee
Interest rate PRIME + 3.75% or Floor rate of 8.75%,
8.80% Exit Fee
Interest rate PRIME + 4.00% or Floor rate of 8.75%,
7.25% Exit Fee

$

$

$

$

$

$

$

$

$

Principal
Amount

Cost (3)

  Value (4)

25,000   $

25,238   $

25,990  

20,000  

20,221  

20,582  

30,000  

30,423  

30,820  

75,000  

78,266  

79,452  

35,000  

35,660  

36,849  

25,000  

24,938  

24,938  

11,500  

11,279  

11,394  

32,500  

33,082  

33,097  

15,000  

15,129  

15,350  

679,248  
710,770  

687,175  
718,686  

Senior Secured

February 2021

Interest rate PRIME + 6.20% or Floor rate of 10.45%,
PIK Interest 1.75%, 5.03% Exit Fee

$

1,631  

2,145  

2,145  

Subtotal: 1-5 Years Maturity
Subtotal: Drug Discovery & Development (61.26%)*
Electronics & Computer Hardware
Under 1 Year Maturity
Glo AB (8)(10)(14)

Electronics & Computer Hardware

Subtotal: Under 1 Year Maturity
Subtotal: Electronics & Computer Hardware (0.18%)*
Healthcare Services, Other
1-5 Years Maturity
The CM Group LLC (17)

Healthcare Services, Other

Velocity Clinical Research, Inc. (13)(17)(18)

Healthcare Services, Other

Senior Secured

November 2024

Senior Secured

June 2024

Interest rate 1-month LIBOR + 9.35% or Floor rate of
10.35%
Interest rate 1-month LIBOR + 9.08% or Floor rate of
10.08%

Subtotal: 1-5 Years Maturity
Subtotal: Healthcare Services, Other (1.70%)*
Information Services
Under 1 Year Maturity
Sapphire Digital, Inc. (p.k.a. MDX Medical, Inc.)
(14)(15)(19)

Subtotal: Under 1 Year Maturity
1-5 Years Maturity
Planet Labs, Inc. (11)

Information Services

Senior Secured

December 2021

Interest rate PRIME + 6.25% or Floor rate of 9.50%,
PIK Interest 1.70%, 5.30% Exit Fee

Yipit, LLC (11)(17)(18)

Information Services

Senior Secured

May 2024

Information Services

Senior Secured

June 2022

Interest rate PRIME + 5.50% or Floor rate of 11.00%,
3.00% Exit Fee
Interest rate 1-month LIBOR + 8.88% or Floor rate of
9.88%

Subtotal: 1-5 Years Maturity
Subtotal: Information Services (4.53%)*
Internet Consumer & Business Services
Under 1 Year Maturity
Black Crow AI, Inc. (8)(9)

Total Black Crow AI, Inc.
Intent (p.k.a. Intent Media, Inc.) (8)(14)
Snagajob.com, Inc. (13)

Total Snagajob.com, Inc.
Tectura Corporation (7)(8)(14)

Total Tectura Corporation
Subtotal: Under 1 Year Maturity

Internet Consumer & Business Services
Internet Consumer & Business Services

Convertible Debt
Convertible Debt

October 2021
October 2021

PIK Interest 1.00%
PIK Interest 1.00%

Internet Consumer & Business Services
Internet Consumer & Business Services

Senior Secured
Senior Secured

September 2021
June 2021

Internet Consumer & Business Services

Senior Secured

June 2021

PIK Interest 10.13%, 1.20% Exit Fee
Interest rate PRIME + 6.90% or Floor rate of 10.15%,
3.05% Exit Fee
Interest rate PRIME + 7.80% or Floor rate of 11.05%,
3.05% Exit Fee

Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services

Senior Secured
Senior Secured
Senior Secured

March 2021
March 2021
March 2021

PIK Interest 5.00%
Interest rate FIXED 8.25%
PIK Interest 5.00%

See notes to consolidated financial statements.  
108

2,145  
2,145  

2,145  
2,145  

10,358  

10,229  

10,086  

9,823  

9,511  

9,887  

19,740  
19,740  

19,973  
19,973  

15,825  

16,216  

16,216  

16,216  

16,216  

25,000  

24,902  

24,957  

12,000  

11,782  

12,000  

36,684  
52,900  

36,957  
53,173  

3,000  
1,000  
4,000  
4,125  
43,005  

2,993  
1,000  
3,993  
4,150  
43,917  

1,565  
643  
2,208  
1,413  
43,754  

5,173  

5,281  

5,255  

48,178  
10,680  
8,250  
13,023  
31,953  

49,198  
240  
8,250  
13,023  
21,513  
78,854  

49,009  
—  
8,250  
350  
8,600  
61,230  

$

$

$

$

$

$
$
$
$
$

$

$
$
$
$
$

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HERCULES CAPITAL, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2020
(dollars in thousands)

Sub-Industry

Type of
Investment (1)

Maturity
Date

Interest Rate and Floor  (2)

Principal
Amount

Cost (3)

  Value (4)

 Portfolio Company
1-5 Years Maturity
AppDirect, Inc. (11)

Internet Consumer & Business Services

Senior Secured

August 2024

ePayPolicy Holdings, LLC (11)(17)

Internet Consumer & Business Services

Senior Secured

December 2024

EverFi, Inc. (13)(14)(16)

Internet Consumer & Business Services

Senior Secured

May 2022

Houzz, Inc. (13)(14)

Internet Consumer & Business Services

Senior Secured

November 2022

Nextroll, Inc. (14)(19)

Internet Consumer & Business Services

Senior Secured

June 2022

SeatGeek, Inc. (14)

Skyword, Inc. (14)

Internet Consumer & Business Services

Senior Secured

June 2023

Internet Consumer & Business Services

Senior Secured

September 2024

Thumbtack, Inc. (13)(14)

Internet Consumer & Business Services

Senior Secured

September 2023

Varsity Tutors LLC (13)(14)(17)

Internet Consumer & Business Services

Senior Secured

August 2023

Wheels Up Partners LLC (11)

Internet Consumer & Business Services

Senior Secured

July 2022

Xometry, Inc. (13)

Internet Consumer & Business Services

Senior Secured

May 2022

Internet Consumer & Business Services

Senior Subordinate

May 2022

Total Xometry, Inc.
Subtotal: 1-5 Years Maturity
Subtotal: Internet Consumer & Business Services (36.06%)*
Media/Content/Info
1-5 Years Maturity
Bustle (14)(15)

Media/Content/Info

Interest rate PRIME + 5.90% or Floor rate of 9.15%,
7.95% Exit Fee
Interest rate 3-month LIBOR + 9.00% or Floor rate of
10.00%
Interest rate PRIME + 3.90% or Floor rate of 9.15%,
PIK Interest 2.30%
Interest rate PRIME + 3.20% or Floor rate of 8.45%,
PIK Interest 2.50%, 4.50% Exit Fee
Interest rate PRIME + 3.85% or Floor rate of 9.35%,
PIK Interest 2.95%, 3.50% Exit Fee
Interest rate PRIME + 5.00% or Floor rate of 10.50%,
PIK Interest 0.50%
Interest rate PRIME + 3.88% or Floor rate of 9.38%,
PIK Interest 1.90%, 4.00% Exit Fee
Interest rate PRIME + 3.45% or Floor rate of 8.95%,
PIK Interest 1.50%, 3.95% Exit Fee
Interest rate PRIME + 5.25% or Floor rate of 10.75%,
PIK Interest 0.55%, 3.00% Exit Fee
Interest rate 3-month LIBOR + 8.55% or Floor rate of
9.55%
Interest rate PRIME + 3.95% or Floor rate of 8.70%,
6.18% Exit Fee
Interest rate PRIME + 3.95% or Floor rate of 8.70%,
6.25% Exit Fee

$

$

$

$

$

$

$

$

$

$

$

$

$

30,790   $

30,712   $

30,712  

8,000  

7,799  

8,080  

84,081  

83,900  

84,987  

51,403  

51,854  

52,151  

20,921  

21,240  

21,526  

60,301  

59,292  

57,561  

12,196  

12,291  

12,021  

25,231  

25,096  

25,348  

39,264  

39,438  

40,272  

13,436  

13,387  

13,337  

11,000  

11,431  

11,556  

4,000  

4,157  

4,219  

15,000  

15,588  
360,597  
439,451  

15,775  
361,770  
423,000  

Senior Secured

June 2023

Interest rate PRIME + 4.35% or Floor rate of 9.35%,
PIK Interest 1.95%, 4.45% Exit Fee

$

21,045  

21,279  

21,555  

Subtotal: 1-5 Years Maturity
Subtotal: Media/Content/Info (1.84%)*
Medical Devices & Equipment
Under 1 Year Maturity
Intuity Medical, Inc. (11)(15)

Medical Devices & Equipment

Senior Secured

June 2021

Quanterix Corporation (11)

Medical Devices & Equipment

Senior Secured

October 2021

Medical Devices & Equipment

Senior Secured

January 2021

Interest rate PRIME + 5.00% or Floor rate of 9.25%,
6.95% Exit Fee
Interest rate PRIME + 2.75% or Floor rate of 8.00%,
0.96% Exit Fee
Interest rate PRIME + 4.35% or Floor rate of 8.85%

21,279  
21,279  

21,555  
21,555  

11,217  

12,365  

12,365  

7,688  

7,752  

7,752  

1,000  

1,000  
21,117  
21,117  

—  
20,117  
20,117  

30,000  

30,509  

30,509  

30,509  

30,509  

10,000  

9,762  

9,754  

38,457  

37,993  

38,264  

2,312  

2,273  

2,296  

40,769  
12,500  

40,266  
12,289  

40,560  
12,289  

33,650  

33,248  

33,640  

7,650  

7,532  

7,579  

41,300  

40,780  

41,219  

$

$

$

$

$

$

$

$
$

$

$

$

Senior Secured

August 2021

Interest rate PRIME + 6.20% or Floor rate of 10.95%,
2.00% Exit Fee

Senior Secured

February 2025

Senior Secured

March 2023

Senior Secured

March 2023

Senior Secured

November 2025

Senior Secured

May 2023

Senior Secured

May 2023

Interest rate 3-Month LIBOR + 9.28% or Floor rate of
10.28%
Interest rate 3-month LIBOR + 7.88% or Floor rate of
8.88%
Interest rate 3-month LIBOR + 5.96% or Floor rate of
6.96%

Interest rate PRIME + 6.75% or Floor rate of 10.00%,
3.50% Exit Fee
Interest rate 6-month LIBOR + 7.50% or Floor rate of
8.50%
Interest rate 6-month LIBOR + 7.50% or Floor rate of
8.50%

See notes to consolidated financial statements.  
109

Sebacia, Inc. (8)
Subtotal: Under 1 Year Maturity
Subtotal: Medical Devices & Equipment (1.71%)*
Software
Under 1 Year Maturity
ZocDoc (11)(19)

Software

Subtotal: Under 1 Year Maturity
1-5 Years Maturity
3GTMS, LLC. (11)(17)(18)

Abrigo (18)

Total Abrigo
Bitsight Technologies, Inc. (19)

Businessolver.com, Inc. (11)(17)

Total Businessolver.com, Inc.

Software

Software

Software

Software

Software

Software

 
 
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HERCULES CAPITAL, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2020
(dollars in thousands)

Sub-Industry

 Portfolio Company
Campaign Monitor Limited (11)(19)

Clarabridge, Inc. (12)(13)(14)(17)

Cloud 9 Software (13)

CloudBolt Software Inc. (17)(19)

Cloudian, Inc. (11)

Couchbase, Inc. (11)(15)(19)

Dashlane, Inc. (11)(14)(17)(19)

Total Dashlane, Inc.
Delphix Corp. (13)(19)

Envisage Technologies, LLC (13)(18)

ExtraHop Networks, Inc. (19)

FreedomPay, Inc. (13)(19)

Software

Software

Software

Software

Software

Software

Software

Software

Software

Software

Software

Software

Type of
Investment (1)

Maturity
Date

Senior Secured

November 2025

Senior Secured

May 2024

Senior Secured

April 2024

Senior Secured

October 2024

Senior Secured

November 2022

Senior Secured

June 2024

Senior Secured

April 2022

Senior Secured

March 2023

Senior Secured

February 2023

Senior Secured

March 2025

Senior Secured

September 2023

Senior Secured

June 2023

Ikon Science Limited (5)(10)(11)(17)(18)

Software

Senior Secured

October 2024

Jolt Software, Inc. (14)

Software

Senior Secured

October 2022

Kazoo, Inc. (p.k.a. YouEarnedIt, Inc.) (11)(18)

Software

Senior Secured

July 2023

Khoros (p.k.a Lithium Technologies) (11)

Software

Senior Secured

October 2022

Logicworks (17)
Mixpanel, Inc. (14)(19)

Mobile Solutions Services (17)(18)

Total Mobile Solutions Services
Nuvolo Technologies Corporation (13)(17)(19)
Optimizely Mergerco, Inc. (17)(18)

Pollen, Inc. (14)(15)(17)

Pymetrics, Inc. (14)

Regent Education (14)

Reltio, Inc. (13)(14)(17)(19)

Software
Software

Software

Software

Software
Software

Software

Software

Software

Software

Senior Secured
Senior Secured

January 2024
August 2024

Senior Secured

December 2025

Senior Secured

December 2025

Senior Secured
Senior Secured

April 2023
October 2025

Senior Secured

November 2023

Senior Secured

October 2022

Senior Secured

January 2022

Senior Secured

July 2023

SingleStore, Inc. (p.k.a. memsql, Inc.) (11)(14)(17) Software

Senior Secured

May 2023

Tact.ai Technologies, Inc. (11)(14)

ThreatConnect, Inc. (13)(17)(18)

Udacity, Inc. (14)(17)

Software

Software

Software

Senior Secured

February 2023

Senior Secured

May 2024

Senior Secured

September 2024

Vela Trading Technologies (11)(14)(18)

Software

Senior Secured

July 2022

Interest Rate and Floor  (2)
Interest rate 6-month LIBOR + 8.90% or Floor rate of
9.90%
Interest rate PRIME + 5.30% or Floor rate of 8.55%,
PIK Interest 2.25%
Interest rate 3-month LIBOR + 8.20% or Floor rate of
9.20%
Interest rate PRIME + 6.70% or Floor rate of 9.95%,
2.95% Exit Fee
Interest rate PRIME + 3.25% or Floor rate of 8.25%,
9.75% Exit Fee
Interest rate PRIME + 5.25% or Floor rate of 10.75%,
3.75% Exit Fee
Interest rate PRIME + 4.05% or Floor rate of 8.55%,
PIK Interest 1.10%, 8.50% Exit Fee
Interest rate PRIME + 4.05% or Floor rate of 8.55%,
PIK Interest 1.10%, 4.95% Exit Fee

$

$

$

$

$

$

$

$

$
$

$

$

$

$

Interest rate PRIME + 5.50% or Floor rate of 10.25%,
5.00% Exit Fee
Interest rate 3-month LIBOR + 9.00% or Floor rate of
10.00%
Interest rate PRIME + 7.00% or Floor rate of 10.25%,
2.50% Exit Fee
Interest rate PRIME + 7.70% or Floor rate of 10.95%,
3.55% Exit Fee
Interest rate 3-month LIBOR + 9.00% or Floor rate of
10.00%
Interest rate PRIME + 3.00% or Floor rate of 8.50%,
PIK Interest 1.75%, 4.50% Exit Fee
Interest rate 3-month LIBOR + 10.15% or Floor rate of
11.15%
Interest rate 6-month LIBOR + 8.00% or Floor rate of
9.00%
Interest rate PRIME + 7.50% or Floor rate of 10.75% $
$
Interest rate PRIME + 4.70% or Floor rate of 7.95%,
PIK Interest 1.80%, 3.00% Exit Fee
Interest rate 6-month LIBOR + 9.87% or Floor rate of
10.87%
Interest rate 6-month LIBOR + 9.87% or Floor rate of
10.87%

$

$

$

$

$

$
Interest rate PRIME + 7.25% or Floor rate of 11.50% $
$
Interest rate 6-month LIBOR + 10.00% or Floor rate of
11.00%
Interest rate PRIME + 4.75% or Floor rate of 8.00%,
PIK Interest 0.50%, 4.50% Exit Fee
Interest rate PRIME + 5.50% or Floor rate of 8.75%,
PIK Interest 1.75%, 4.00% Exit Fee

$

$

Interest rate FIXED 10.00%, PIK Interest 2.00%,
7.94% Exit Fee
Interest rate PRIME + 5.70% or Floor rate of 8.95%,
PIK Interest 1.70%, 4.95% Exit Fee
Interest rate PRIME + 4.70% or Floor rate of 7.95%,
PIK Interest 0.75%, 3.95% Exit Fee
Interest rate PRIME + 4.00% or Floor rate of 8.75%,
PIK Interest 2.00%, 5.50% Exit Fee
Interest rate 3-month LIBOR + 8.26% or Floor rate of
9.26%
Interest rate PRIME + 4.50% or Floor rate of 7.75%,
PIK Interest 2.00%, 3.00% Exit Fee
Interest rate 3-month LIBOR + 12.00% or Floor rate of
11.50%, PIK Interest 2.50%

$

$

$

$

$

$

$

Principal
Amount

Cost (3)

  Value (4)

33,000   $

32,348   $

33,304  

55,823  

55,359  

56,940  

10,000  

9,867  

10,030  

5,000  

4,867  

4,867  

15,000  

15,883  

15,883  

25,000  

25,167  

25,761  

10,294  

10,808  

10,838  

10,195  

10,312  

10,343  

20,489  
60,000  

21,120  
59,932  

21,181  
61,159  

9,750  

9,525  

9,750  

15,000  

14,745  

14,745  

10,000  

9,972  

10,126  

7,000  

6,744  

7,639  

7,725  

8,695  

8,477  

6,724  

7,828  

8,509  

56,208  

55,585  

56,207  

10,000  
20,062  

9,801  
19,703  

9,801  
19,703  

5,500  

5,323  

5,400  

13,150  

12,731  

12,672  

18,650  
15,000  
50,000  

18,054  
14,867  
48,561  

7,420  

7,366  

9,497  

9,409  

18,072  
14,993  
48,559  

7,366  

9,409  

3,220  

3,315  

3,316  

10,073  

9,928  

10,136  

5,021  

5,012  

5,081  

4,995  

4,500  

4,391  

5,137  

4,970  

4,441  

35,130  

34,700  

34,700  

18,131   $

17,826   $

14,505  

See notes to consolidated financial statements.  
110

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HERCULES CAPITAL, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2020
(dollars in thousands)

 Portfolio Company
ZeroFox, Inc. (13)

Sub-Industry

Software

Type of
Investment (1)

Senior Secured

Maturity
Date
January 2023

Interest Rate and Floor  (2)
Interest rate PRIME + 4.75% or Floor rate of 10.25%,
3.00% Exit Fee

Software

Senior Secured

January 2027

Interest rate 3-month LIBOR + 7.75% or Floor rate of
8.75%

Sustainable and Renewable Technology

Senior Secured

January 2021

PIK Interest 10.00%

Subtotal: 1-5 Years Maturity
Greater than 5 Years Maturity
Imperva, Inc. (19)

Subtotal: Greater than 5 Years Maturity
Subtotal: Software (61.60%)*
Sustainable and Renewable Technology
Under 1 Year Maturity
Solar Spectrum Holdings LLC (p.k.a. Sungevity,
Inc.) (6)(8)(14)
Subtotal: Under 1 Year Maturity
1-5 Years Maturity
Impossible Foods, Inc. (12)(13)

Sustainable and Renewable Technology

Senior Secured

July 2022

Interest rate PRIME + 3.95% or Floor rate of 8.95%,
9.00% Exit Fee
PIK Interest 10.00%

Pineapple Energy LLC (6)(8)(9)
Subtotal: 1-5 Years Maturity
Subtotal: Sustainable and Renewable Technology (4.27%)*
Total: Debt Investments (178.54%)*

Sustainable and Renewable Technology

Senior Secured

December 2023

$

$

$

$

$

Principal
Amount

Cost (3)

  Value (4)

20,000  

20,118  

20,118  

668,459  

672,062  

20,000  

19,828  

20,000  

19,828  
718,796  

20,000  
722,571  

681  

681  

681  

—  

—  

38,868  

42,285  

42,548  

7,500  

  $

7,500  
49,785  
50,466  
2,099,425   $

7,500  
50,048  
50,048  
2,094,435

See notes to consolidated financial statements.  
111

 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
Portfolio Company
Equity Investments
Communications & Networking
Peerless Network Holdings, Inc.

Total Peerless Network Holdings, Inc.

Subtotal: Communications & Networking (0.29%)*
Consumer & Business Products
Intelligent Beauty, Inc.
Subtotal: Consumer & Business Products (0.06%)*
Diversified Financial Services
Gibraltar Business Capital, LLC (7)

Total Gibraltar Business Capital, LLC

Subtotal: Diversified Financial Services (2.62%)*
Drug Delivery
AcelRx Pharmaceuticals, Inc. (4)
BioQ Pharma Incorporated (15)
Kaleo, Inc.
Neos Therapeutics, Inc. (4)(15)
PDS Biotechnology Corporation (p.k.a. Edge Therapeutics,
Inc.) (4)
Subtotal: Drug Delivery (0.38%)*
Drug Discovery & Development
Albireo Pharma, Inc. (4)(10)
Aveo Pharmaceuticals, Inc. (4)(15)
Bicycle Therapeutics PLC (4)(5)(10)
BridgeBio Pharma LLC (4)(16)
Cerecor, Inc. (4)
Chemocentryx, Inc. (4)(10)(15)
Concert Pharmaceuticals, Inc. (4)(10)
Dare Biosciences, Inc. (4)
Dynavax Technologies (4)(10)
Eidos Therapeutics, Inc. (4)(10)
Genocea Biosciences, Inc. (4)
Paratek Pharmaceuticals, Inc. (4)
Rocket Pharmaceuticals, Ltd. (4)
Savara, Inc. (4)(15)
Sio Gene Therapies, Inc. (p.k.a. Axovant Gene Therapies Ltd.)
(4)(10)
Tricida, Inc. (4)(15)(16)
uniQure B.V. (4)(5)(10)
Valo Health, LLC (p.k.a. Integral Health Holdings, LLC)
X4 Pharmaceuticals, Inc. (4)
Subtotal: Drug Discovery & Development (2.16%)*
Healthcare Services, Other
23andMe, Inc.
Subtotal: Healthcare Services, Other (0.58%)*
Internet Consumer & Business Services
Contentful, Inc. (5)(10)

Total Contentful, Inc.

Countable Corporation (p.k.a. Brigade Group, Inc.)
DoorDash, Inc. (4)
Fastly, Inc. (4)
Lyft, Inc. (4)
Nextdoor.com, Inc.
OfferUp, Inc.

Total OfferUp, Inc.

HERCULES CAPITAL, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2020
(dollars in thousands)

  Sub-Industry

Type of
Investment (1)

  Series

Shares

Cost (3)

Value (4)

  Communications & Networking
  Communications & Networking

  Equity
  Equity

  Common Stock
  Preferred Series A

  3,328

$

1,135,000  
1,138,328  

  Consumer & Business Products

  Equity

  Preferred Series B

111,156  

  Diversified Financial Services
  Diversified Financial Services

  Equity
  Equity

  Common Stock
  Preferred Series A

  Drug Delivery
  Drug Delivery
  Drug Delivery
  Drug Delivery
Drug Delivery

  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
Drug Discovery & Development

  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development

  Equity
  Equity
  Equity
  Equity
Equity

  Equity
  Equity
  Equity
  Equity
  Equity
  Equity
  Equity
  Equity
  Equity
  Equity
  Equity
  Equity
  Equity
  Equity
Equity

  Equity
  Equity
  Equity
  Equity

  Common Stock
  Preferred Series D
  Preferred Series B
  Common Stock
Common Stock

  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
Common Stock

  Common Stock
  Common Stock
  Preferred Series B
  Common Stock

830,000  
10,602,752  
11,432,752  

176,730  
165,000  
82,500  
125,000  

2,498  

25,000  
190,175  
98,100  
203,579  
119,087  
17,241  
70,796  
13,550  
20,000  
15,000  
27,932  
76,362  
944  
11,119  

16,228  
68,816  
17,175  
510,308  
83,334  

  Healthcare Services, Other

  Equity

  Common Stock

360,000  

Internet Consumer & Business Services
Internet Consumer & Business Services

Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services

  Equity
  Equity

  Equity
  Equity
  Equity
  Equity
  Equity
  Equity
  Equity

  Preferred Series C
  Preferred Series D

  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Preferred Series A
  Preferred Series A-1

82  
217  
299  
9,023  
525,000  
6,238  
200,738  
328,190  
286,080  
108,710  
394,790  

See notes to consolidated financial statements.  
112

  $

—  
1,230  
1,230  
1,230  

230  
230  

1,884  
26,122  
28,006  
28,006  

1,329  
500  
1,007  
1,500  

309  
4,645  

1,000  
1,715  
1,871  
2,000  
1,000  
1,000  
1,367  
1,000  
550  
255  
2,000  
2,744  
1,500  
203  

1,269  
863  
332  
3,000  
641  
24,310  

5,094  
5,094  

138  
500  
638  
93  
6,051  
8  
10,487  
4,854  
1,663  
632  
2,295  

8  
3,800  
3,808  
3,808  

743  
743  

2,276  
31,554  
33,830  
33,830  

219  
504  
4,117  
78  

5  
4,923  

938  
1,097  
1,761  
14,476  
314  
1,068  
895  
18  
89  
1,974  
67  
478  
52  
13  

45  
485  
621  
3,000  
536  
27,927  

7,546  
7,546  

270  
785  
1,055  
—  
58,706  
545  
9,862  
8,994  
1,867  
709  
2,576  

 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
   
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
 
 
   
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
   
   
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
   
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
 
 
 
 
 
 
 
 
 
   
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
 
 
 
 
 
 
 
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
   
   
 
 
   
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
Portfolio Company
Oportun (4)
Reischling Press, Inc. (p.k.a. Blurb, Inc.)
Tectura Corporation (7)

Total Tectura Corporation

Uber Technologies, Inc. (p.k.a. Postmates, Inc.) (4)
Subtotal: Internet Consumer & Business Services (6.53%)*
Medical Devices & Equipment
Flowonix Medical Incorporated
Gelesis, Inc.

Total Gelesis, Inc.

Medrobotics Corporation (15)

Total Medrobotics Corporation

Outset Medical, Inc. (4)
ViewRay, Inc. (4)(15)
Subtotal: Medical Devices & Equipment (0.29%)*
Software
CapLinked, Inc.
Docker, Inc.
Druva Holdings, Inc. (p.k.a. Druva, Inc.)

Total Druva Holdings, Inc. (p.k.a. Druva, Inc.)

HighRoads, Inc.
Lightbend, Inc.
Palantir Technologies (4)
SingleStore, Inc. (p.k.a. memsql, Inc.)
Sprinklr, Inc.
Subtotal: Software (3.87%)*
Surgical Devices
Gynesonics, Inc. (15)

Total Gynesonics, Inc.

TransMedics Group, Inc. (p.k.a Transmedics, Inc.) (4)
Subtotal: Surgical Devices (0.32%)*
Sustainable and Renewable Technology
Impossible Foods, Inc.
Modumetal, Inc.
Pineapple Energy LLC (6)
Proterra, Inc.
Solar Spectrum Holdings LLC (p.k.a. Sungevity, Inc.) (6)
Subtotal: Sustainable and Renewable Technology (0.29%)*
Total: Equity Investments (17.39%)*

HERCULES CAPITAL, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2020
(dollars in thousands)

  Sub-Industry

Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services

  Equity
  Equity
  Equity
  Equity

Type of
Investment (1)

  Series
  Common Stock
  Common Stock
  Common Stock
  Preferred Series BB

Internet Consumer & Business Services

  Equity

  Common Stock

  $

Shares

48,365  
1,163  
414,994,863  
1,000,000  
415,994,863  
32,991  

  Medical Devices & Equipment
  Medical Devices & Equipment
  Medical Devices & Equipment
  Medical Devices & Equipment

  Medical Devices & Equipment
  Medical Devices & Equipment
  Medical Devices & Equipment

  Medical Devices & Equipment
  Medical Devices & Equipment

  Software
  Software
  Software
  Software

  Software
  Software
  Software
  Software
  Software

  Surgical Devices
  Surgical Devices
  Surgical Devices
  Surgical Devices
  Surgical Devices
  Surgical Devices

  Surgical Devices

  Sustainable and Renewable Technology
  Sustainable and Renewable Technology
  Sustainable and Renewable Technology
  Sustainable and Renewable Technology
  Sustainable and Renewable Technology

  Equity
  Equity
  Equity
  Equity

  Equity
  Equity
  Equity

  Equity
  Equity

  Equity
  Equity
  Equity
  Equity

  Equity
  Equity
  Equity
  Equity
  Equity

  Equity
  Equity
  Equity
  Equity
  Equity
  Equity

  Equity

  Equity
  Equity
  Equity
  Equity
  Equity

  Preferred Series AA
  Common Stock
  Preferred Series A-1
  Preferred Series A-2

  Preferred Series E
  Preferred Series F
  Preferred Series G

  Common Stock
  Common Stock

  Preferred Series A-3
  Common Stock
  Preferred Series 2
  Preferred Series 3

  Common Stock
  Preferred Series D
  Common Stock
  Preferred Series E
  Common Stock

  Preferred Series B
  Preferred Series C
  Preferred Series D
  Preferred Series E
  Preferred Series F
  Preferred Series F-1

  Common Stock

  Preferred Series E-1
  Preferred Series A-1
  Class A Units
  Preferred Series 5
  Common Stock

221,893  
227,013  
191,210  
191,626  
609,849  
136,798  
73,971  
163,934  
374,703  
38,243  
36,457  

53,614  
20,000  
458,841  
93,620  
552,461  
190  
384,616  
1,668,337  
580,983  
700,000  

219,298  
656,538  
1,991,157  
2,786,367  
1,523,693  
2,418,125  
9,595,178  
162,617  

188,611  
103,584  
17,647  
99,280  
488  

See notes to consolidated financial statements.  
113

Cost (3)

Value (4)

  $

577  
15  
900  
—  
900  
317  
26,235  

1,500  
—  
425  
500  
925  
250  
155  
500  
905  
527  
333  
4,190  

51  
4,284  
1,000  
300  
1,300  
307  
265  
10,198  
2,000  
3,749  
22,154  

250  
282  
712  
429  
118  
150  
1,941  
2,550  
4,491  

937  
—  
—  
—  
—  
1,683  
84,358  

—  
626  
554  
540  
1,720  
—  
—  
—  
—  
1,947  
139  
3,806  

78  
24  
3,644  
777  
4,421  
—  
165  
36,015  
2,153  
7,088  
49,944  

14  
44  
137  
213  
181  
259  
848  
3,236  
4,084  

2,000  
500  
4,767  
500  
61,502  
69,269  
189,854  

  $

2,540  
1  
840  
329  
—  
3,710  
224,679  

  $

 
 
 
 
   
 
 
 
 
 
 
 
   
   
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
 
   
   
 
 
   
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
   
   
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
   
   
 
 
   
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
   
 
 
   
Portfolio Company
Warrant Investments
Communications & Networking
Spring Mobile Solutions, Inc.
Subtotal: Communications & Networking (0.00%)*
Consumer & Business Products
Gadget Guard (15)
The Neat Company
Whoop, Inc.
Subtotal: Consumer & Business Products (0.09%)*
Drug Delivery
Aerami Therapeutics (p.k.a. Dance Biopharm, Inc.) (15)
BioQ Pharma Incorporated
Neos Therapeutics, Inc. (4)(15)
PDS Biotechnology Corporation (p.k.a. Edge Therapeutics,
Inc.) (4)
Subtotal: Drug Delivery (0.04%)*
Drug Discovery & Development
Acacia Pharma Inc. (4)(5)(10)
ADMA Biologics, Inc. (4)
Albireo Pharma, Inc. (4)(10)
Axsome Therapeutics, Inc. (4)(10)
Brickell Biotech, Inc. (4)
Century Therapeutics
Concert Pharmaceuticals, Inc. (4)(10)(15)
CytRx Corporation (15)
Dermavant Sciences Ltd. (10)
Evofem Biosciences, Inc. (4)(15)
Genocea Biosciences, Inc. (4)
Motif BioSciences Inc. (10)
Myovant Sciences, Ltd. (4)(10)
Ology Bioservices, Inc. (15)
Paratek Pharmaceuticals, Inc. (4)(15)
Stealth Bio Therapeutics Corp. (4)(10)
TG Therapeutics, Inc. (4)(10)
Tricida, Inc. (4)(15)(16)
Urovant Sciences, Ltd. (4)(10)
Valo Health, LLC (p.k.a. Integral Health Holdings, LLC)
X4 Pharmaceuticals, Inc. (4)
Yumanity Therapeutics, Inc. (4)
Subtotal: Drug Discovery & Development (0.79%)*
Electronics & Computer Hardware
908 Devices, Inc. (4)(15)

Subtotal: Electronics & Computer Hardware (0.09%)*
Information Services
InMobi Inc. (10)
NetBase Solutions, Inc.
Planet Labs, Inc.
Sapphire Digital, Inc. (p.k.a. MDX Medical, Inc.) (15)
Subtotal: Information Services (0.10%)*
Internet Consumer & Business Services
Aria Systems, Inc.
Cloudpay, Inc. (5)(10)
First Insight, Inc. (15)
Houzz, Inc.
Intent (p.k.a. Intent Media, Inc.)
Interactions Corporation
Just Fabulous, Inc.
Lendio, Inc.

HERCULES CAPITAL, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2020
(dollars in thousands)

Type of
Investment (1)

  Series

  Sub-Industry

Shares

Cost (3)

Value (4)

  Communications & Networking

  Warrant

  Common Stock

2,834,375  

  $

  Consumer & Business Products
  Consumer & Business Products
  Consumer & Business Products

  Drug Delivery
  Drug Delivery
  Drug Delivery
Drug Delivery

  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development

  Warrant
  Warrant
  Warrant

  Warrant
  Warrant
  Warrant
Warrant

  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant

  Common Stock
  Common Stock
  Preferred Series C

  Common Stock
  Common Stock
  Common Stock
Common Stock

  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Units
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Units
  Common Stock
  Common Stock

1,662,441  
54,054  
68,627  

110,882  
459,183  
70,833  

3,929  

201,330  
89,750  
5,310  
15,541  
9,005  
40,540  
61,273  
105,694  
223,642  
7,806  
41,176  
121,337,041  
73,710  
171,389  
469,388  
500,000  
147,058  
31,353  
99,777  
102,216  
108,334  
15,414  

  Electronics & Computer Hardware

  Warrant

  Common Stock

49,078  

Information Services
Information Services
Information Services
Information Services

Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services

  Warrant
  Warrant
  Warrant
  Warrant

  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant

  Common Stock
  Preferred Series 1
  Common Stock
  Common Stock

  Preferred Series G
  Preferred Series B
  Preferred Series B
  Common Stock
  Common Stock
  Preferred Series G-3
  Preferred Series B
  Preferred Series D

65,587  
60,000  
357,752  
2,812,500  

231,535  
6,763  
75,917  
529,661  
140,077  
68,187  
206,184  
127,032  

See notes to consolidated financial statements.  
114

  $

418  
418  

228  
365  
18  
611  

74  
1  
285  

390  
750  

304  
295  
61  
681  
119  
37  
178  
160  
101  
266  
165  
282  
460  
838  
644  
158  
563  
280  
383  
257  
673  
110  
7,015  

101  

101  

82  
356  
615  
283  
1,336  

73  
54  
96  
20  
168  
204  
1,102  
39  

—  
—  

—  
—  
1,152  
1,152  

—  
579  
—  

—  
579  

184  
5  
97  
682  
—  
43  
183  
—  
460  
3  
20  
—  
1,031  
—  
960  
—  
5,307  
8  
744  
296  
87  
98  
10,208  

1,215  

1,215  

—  
498  
273  
566  
1,337  

—  
126  
91  
150  
—  
549  
2,791  
32  

 
 
 
 
   
 
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
 
   
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
 
 
 
 
 
 
 
 
 
   
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
   
   
 
 
   
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
   
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
HERCULES CAPITAL, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2020
(dollars in thousands)

Type of
Investment (1)

Portfolio Company
LogicSource
RumbleON, Inc. (4)
SeatGeek, Inc.
ShareThis, Inc.
Skyword, Inc.
Snagajob.com, Inc.

Total Snagajob.com, Inc.

Tapjoy, Inc.
The Faction Group LLC
Thumbtack, Inc.
Xometry, Inc.
Subtotal: Internet Consumer & Business Services (0.56%)*
Media/Content/Info
WP Technology, Inc. (Wattpad, Inc.) (5)(10)
Zoom Media Group, Inc.
Subtotal: Media/Content/Info (0.00%)*
Medical Devices & Equipment
Aspire Bariatrics, Inc. (15)
Flowonix Medical Incorporated

Total Flowonix Medical Incorporated

Gelesis, Inc.
InspireMD, Inc. (4)(5)(10)
Intuity Medical, Inc. (15)
Medrobotics Corporation (15)
NinePoint Medical, Inc.
Outset Medical, Inc. (4)
Sebacia, Inc.
SonaCare Medical, LLC
Tela Bio, Inc. (4)
Subtotal: Medical Devices & Equipment (0.20%)*
Semiconductors
Achronix Semiconductor Corporation

Total Achronix Semiconductor Corporation

Subtotal: Semiconductors (0.07%)*
Software
Bitsight Technologies, Inc.
CloudBolt Software Inc.
Cloudian, Inc.
Couchbase, Inc.

Dashlane, Inc.
Delphix Corp.
DNAnexus, Inc.
Evernote Corporation
ExtraHop Networks, Inc.
Fuze, Inc. (15)
Lightbend, Inc. (15)
Mixpanel, Inc.
Nuvolo Technologies Corporation
OneLogin, Inc. (15)
Poplicus, Inc.
Pymetrics, Inc.
RapidMiner, Inc.
Reltio, Inc.
SignPost, Inc.

  Sub-Industry

Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services

Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services

  Media/Content/Info
  Media/Content/Info

  Medical Devices & Equipment
  Medical Devices & Equipment
  Medical Devices & Equipment

  Medical Devices & Equipment
  Medical Devices & Equipment
  Medical Devices & Equipment
  Medical Devices & Equipment
  Medical Devices & Equipment
  Medical Devices & Equipment
  Medical Devices & Equipment
  Medical Devices & Equipment
  Medical Devices & Equipment

  Semiconductors
  Semiconductors

  Software
  Software
  Software
  Software

  Software
  Software
  Software
  Software
  Software
  Software
  Software
  Software
  Software
  Software
  Software
  Software
  Software
  Software
  Software

  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant

  Warrant
  Warrant
  Warrant
  Warrant

  Warrant
  Warrant

  Warrant
  Warrant
  Warrant

  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant

  Warrant
  Warrant

  Warrant
  Warrant
  Warrant
  Warrant

  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant

  Series
  Preferred Series C
  Common Stock
  Common Stock
  Preferred Series C
  Preferred Series B
  Common Stock
  Preferred Series A
  Preferred Series B

  Preferred Series D
  Preferred Series AA
  Common Stock
  Preferred Series B

  Common Stock
  Preferred Series A

  Preferred Series B-1
  Preferred Series AA
  Preferred Series BB

  Preferred Series A-1
  Common Stock
  Preferred Series B-1
  Preferred Series E
  Preferred Series A-1
  Common Stock
  Preferred Series D
  Preferred Series A
  Common Stock

  Preferred Series C
  Preferred Series D-2

  Common Stock
  Common Stock
  Common Stock
  Common Stock

  Common Stock
  Common Stock
  Preferred Series C
  Common Stock
  Common Stock
  Preferred Series F
  Preferred Series C-1
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Preferred Series C-1
  Common Stock
  Series Junior 1 Preferred

Shares

Cost (3)

Value (4)

  $

79,625  
5,139  
1,379,761  
493,502  
444,444  
600,000  
1,800,000  
1,211,537  
3,611,537  
748,670  
8,076  
190,953  
87,784  

255,818  
1,204  

112,858  
155,325  
725,806  
881,131  
74,784  
23  
3,076,323  
455,539  
587,840  
62,794  
778,301  
6,464  
15,712  

360,000  
750,000  
1,110,000  

29,691  
158,506  
477,454  
263,377  

346,747  
718,898  
909,091  
62,500  
154,784  
256,158  
854,787  
82,362  
50,000  
381,620  
132,168  
150,943  
4,982  
69,120  
474,019  

  $

30  
87  
842  
547  
83  
16  
782  
62  
860  
316  
234  
553  
47  
5,355  

3  
348  
351  

455  
362  
351  
713  
78  
0  
294  
370  
170  
402  
133  
188  
61  
2,864  

160  
99  
259  
259  

208  
91  
72  
462  

303  
1,594  
97  
106  
191  
89  
130  
252  
88  
305  
—  
77  
24  
215  
314  

104  
32  
1,548  
—  
78  
53  
58  
27  
138  
16  
736  
262  
527  
7,180  

—  
—  
—  

—  
—  
—  
—  
156  
—  
394  
—  
—  
1,982  
—  
—  
9  
2,541  

175  
717  
892  
892  

208  
132  
29  
1,023  

297  
1,857  
153  
70  
265  
—  
169  
516  
192  
610  
—  
182  
46  
216  
—  

See notes to consolidated financial statements.  
115

 
 
 
 
   
 
 
 
 
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
   
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
   
   
 
 
   
   
 
 
   
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
   
   
 
 
   
   
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
 
 
   
   
 
 
   
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
   
   
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
   
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
  Specialty Pharmaceuticals

  Warrant

  Common Stock

30,581  

HERCULES CAPITAL, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2020
(dollars in thousands)

  Sub-Industry
  Software
  Software
  Software
  Software

Type of
Investment (1)

  Warrant
  Warrant
  Warrant
  Warrant

  Series
  Preferred Series D
  Common Stock
  Common Stock
  Preferred Series C-1

  Surgical Devices
  Surgical Devices

  Sustainable and Renewable Technology
  Sustainable and Renewable Technology
  Sustainable and Renewable Technology
  Sustainable and Renewable Technology

  Sustainable and Renewable Technology
  Sustainable and Renewable Technology
  Sustainable and Renewable Technology
  Sustainable and Renewable Technology

  Warrant
  Warrant

  Warrant
  Warrant
  Warrant
  Warrant

  Warrant
  Warrant
  Warrant
  Warrant

  Preferred Series C
  Common Stock

  Preferred Series D
  Preferred Series C-1
  Preferred Series A
  Preferred Series B

  Preferred Series D
  Preferred Series C
  Common Stock
  Preferred Series 4

  Sustainable and Renewable Technology

  Warrant

  Class A Units

Portfolio Company
SingleStore, Inc. (p.k.a. memsql, Inc.)
Tact.ai Technologies, Inc.
Udacity, Inc.
ZeroFox, Inc.
Subtotal: Software (0.58%)*
Specialty Pharmaceuticals
Alimera Sciences, Inc. (4)
Subtotal: Specialty Pharmaceuticals (0.00%)*
Surgical Devices
Gynesonics, Inc. (15)
TransMedics Group, Inc. (p.k.a Transmedics, Inc.) (4)
Subtotal: Surgical Devices (0.04%)*
Sustainable and Renewable Technology
Agrivida, Inc.
Fulcrum Bioenergy, Inc.
Kinestral Technologies, Inc.

Total Kinestral Technologies, Inc.
NantEnergy, Inc. (p.k.a. Fluidic, Inc.)
Polyera Corporation (15)
Proterra, Inc.

Total Proterra, Inc.

Solar Spectrum Holdings LLC (p.k.a. Sungevity, Inc.) (6)
Subtotal: Sustainable and Renewable Technology (0.12%)*
Total: Warrant Investments (2.68%)*

Total: Investments in Securities (182.22%)*

Investment Funds & Vehicles
Forbion Growth Opportunities Fund I C.V. (5)(10)(17)
Total: Investments in Investment Funds & Vehicles (0.03%)*
Total: Investments before Cash and Cash Equivalents (182.25%)*

  Drug Discovery & Development

Cash & Cash Equivalents
GS Financial Square Government Fund
Total: Investments in Cash & Cash Equivalents (7.43%)*
Total: Investments after Cash and Cash Equivalents (189.68%)*

Investment Funds & Vehicles

  Cash & Cash Equivalents

Shares

Cost (3)

Value (4)

  $

312,596  
1,041,667  
486,359  
648,350  

151,123  
64,441  

471,327  
280,897  
325,000  
131,883  
456,883  
61,804  
311,609  
36,630  
477,517  
514,147  
1  

  $

  $

$

$

103  
206  
218  
100  
5,245  

132  
132  

67  
139  
206  

120  
274  
155  
63  
218  
102  
338  
1  
41  
42  
—  
1,094  
25,737  

2,315,016  

342  
342  
2,315,358  

96,000  
96,000  
2,411,358  

  $

  $

  $

  $

  $

714  
204  
284  
363  
7,530  

5  
5  

10  
487  
497  

—  
744  
261  
91  
352  
—  
—  
14  
376  
390  
—  
1,486  
34,622  
2,353,736  

342  
342  
2,354,078  

96,000  
96,000  
2,450,078

*
(1)
(2)
(3)

(4)

(5)
(6)
(7)
(8)

(9)
(10)

(11)

Value as a percent of net assets
Preferred and common stock, warrants, and equity interests are generally non-income producing.
Interest rate PRIME represents 3.25% at December 31, 2020. 1-month LIBOR, 3-month LIBOR, and 6-month LIBOR represent, 0.14%, 0.24%, and 0.36%, respectively, at December 31, 2020.
Gross unrealized appreciation, gross unrealized depreciation, and net unrealized depreciation for federal income tax purposes totaled $166.2 million, $126.1 million, and $40.1 million, respectively. The tax cost of
investments is $2.3 billion.
Except for warrants in 27 publicly traded companies and common stock in 30 publicly traded companies, all investments are restricted at December 31, 2020 and were valued at fair value using Level 3 significant
unobservable inputs as determined in good faith by the Company’s board of directors (the “Board of Directors”). No unrestricted securities of the same issuer are outstanding. The Company uses the Standard
Industrial Code for classifying the industry grouping of its portfolio companies.
Non-U.S. company or the company’s principal place of business is outside the United States.
Affiliate investment as defined under the Investment Company Act of 1940, as amended, (the “1940 Act”) in which Hercules owns at least 5% but generally less than 25% of the company’s voting securities.
Control investment as defined under the 1940 Act in which Hercules owns at least 25% of the company’s voting securities or has greater than 50% representation on its board.
Debt is on non-accrual status at December 31, 2020, and is therefore considered non-income producing. Note that only the PIK portion is on non-accrual for the Company’s debt investments in Glo AB 
Corporation.
Denotes that all or a portion of the debt investment is convertible debt.
Indicates assets that the Company deems not “qualifying assets” under section 55(a) of 1940 Act. Qualifying assets must represent at least 70% of the Company’s total assets at the time of acquisition of any additional
non-qualifying assets.
Denotes that all or a portion of the debt investment secures the notes offered in the Debt Securitization (as defined in “Note 5 — Borrowings”).

and Tectura

See notes to consolidated financial statements.  
116

 
 
 
 
   
 
 
 
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
   
   
 
 
   
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
   
   
 
 
   
   
 
 
   
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
   
   
 
 
   
   
   
 
 
   
 
 
   
 
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
HERCULES CAPITAL, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2020
(dollars in thousands)

(12)
(13)
(14)
(15)
(16)
(17)
(18)

(19)

Denotes that all or a portion of the debt investment is pledged as collateral under the Wells Facility (as defined in “Note 5 — Borrowings”).
Denotes that all or a portion of the debt investment is pledged as collateral under the Union Bank Facility (as defined in “Note 5 — Borrowings”).
Denotes that all or a portion of the debt investment principal includes accumulated PIK interest and is net of repayments.
Denotes that all or a portion of the investment in this portfolio company is held by HT III, the Company’s wholly owned small business investment company, or SBIC, subsidiary.
Denotes that the fair value of the Company’s total investments in this portfolio company represent greater than 5% of the Company’s total net assets at December 31, 2020.
Denotes that there is an unfunded contractual commitment available at the request of this portfolio company at December 31, 2020. Refer to “Note 11 — Commitments and Contingencies”.
Denotes unitranche debt with first lien “last-out” senior secured position and security interest in all assets of the portfolio company whereby the “last-out” portion will be subordinated to the “first-out” portion in a
liquidation, sale or other disposition.
Denotes second lien senior secured debt.

See notes to consolidated financial statements.  
117

 
 
HERCULES CAPITAL, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2019
(dollars in thousands)

Sub-Industry

Type of
Investment (1)

Maturity
Date

Interest Rate and Floor  (2)

Principal
Amount

Cost (3)

Value (4)

Biotechnology Tools

Senior Secured

March 2020

Interest rate PRIME + 6.45% or Floor rate of
9.95%, 5.52% Exit Fee

Diversified Financial Services
Diversified Financial Services

Unsecured
Senior Secured

March 2023
June 2024

Interest rate FIXED 14.50%
Interest rate 1-month LIBOR + 8.60% or Floor
rate of 9.60%

$

$
$

15,000  
30,000  

4,999   $

5,067   $

Subtotal: 1-5 Years Maturity
Subtotal: Diversified Financial Services (3.84%)*
Drug Delivery
1-5 Years Maturity
Antares Pharma Inc. (10)(11)(15)

Drug Delivery

Senior Secured

July 2022

Interest rate PRIME + 4.50% or Floor rate of
4.50%, 4.14% Exit Fee

$

40,000  

 Portfolio Company
Debt Investments
Biotechnology Tools
Under 1 Year Maturity
Exicure, Inc. (11)

Subtotal: Under 1 Year Maturity
Subtotal: Biotechnology Tools (0.45%)*
Diversified Financial Services
1-5 Years Maturity
Gibraltar Business Capital, LLC (7)
Pico Quantitative Trading LLC (18)

Subtotal: 1-5 Years Maturity
Subtotal: Drug Delivery (3.60%)*
Drug Discovery & Development
Under 1 Year Maturity
Metuchen Pharmaceuticals LLC (14)

Subtotal: Under 1 Year Maturity
1-5 Years Maturity
Acacia Pharma Inc. (5)(10)(11)

Drug Discovery & Development

Senior Secured

October 2020

Interest rate PRIME + 7.25% or Floor rate of
10.75%, PIK Interest 1.35%, 2.25% Exit Fee

Drug Discovery & Development

Senior Secured

January 2022

Aldeyra Therapeutics, Inc

Drug Discovery & Development

Senior Secured

October 2023

Aveo Pharmaceuticals, Inc. (11)

Drug Discovery & Development

Senior Secured

July 2021

Total Aveo Pharmaceuticals, Inc.

Axovant Gene Therapies Ltd. (p.k.a. Axovant
Sciences Ltd.) (5)(10)(11)
BridgeBio Pharma LLC (12)(13)(16)

Drug Discovery & Development

Senior Secured

July 2021

Drug Discovery & Development

Senior Secured

March 2021

Drug Discovery & Development

Senior Secured

January 2023

Drug Discovery & Development

Senior Secured

January 2023

Drug Discovery & Development

Senior Secured

January 2023

Total BridgeBio Pharma LLC

Chemocentryx, Inc. (10)(15)

Drug Discovery & Development

Senior Secured

December 2022

Codiak Biosciences, Inc. (11)(17)

Drug Discovery & Development

Senior Secured

October 2024

Constellation Pharmaceuticals, Inc. (12)(17)

Drug Discovery & Development

Senior Secured

April 2023

Dermavant Sciences Ltd. (5)(10)(13)

Drug Discovery & Development

Senior Secured

June 2022

Eidos Therapeutics, Inc. (10)(17)

Drug Discovery & Development

Senior Secured

October 2023

Genocea Biosciences, Inc. (11)

Drug Discovery & Development

Senior Secured

May 2021

Kaleido Biosciences, Inc.

Drug Discovery & Development

Senior Secured

January 2024

Mesoblast (5)(10)(11)

Drug Discovery & Development

Senior Secured

March 2022

Motif BioSciences Inc. (5)(8)(10)

Drug Discovery & Development

Senior Secured

September 2021

Nabriva Therapeutics (5)(10)

Drug Discovery & Development

Senior Secured

June 2023

Paratek Pharmaceuticals, Inc. (11)(15)(16)

Drug Discovery & Development

Senior Secured

September 2021

Drug Discovery & Development

Senior Secured

August 2022

Total Paratek Pharmaceuticals, Inc.

Interest rate PRIME + 4.50% or Floor rate of
9.25%, 3.95% Exit Fee
Interest rate PRIME + 3.10% or Floor rate of
9.10%, 6.95% Exit Fee
Interest rate PRIME + 4.70% or Floor rate of
9.45%, 5.40% Exit Fee
Interest rate PRIME + 4.70% or Floor rate of
9.45%, 3.00% Exit Fee

Interest rate PRIME + 6.80% or Floor rate of
11.55%
Interest rate PRIME + 3.85% or Floor rate of
8.85%, 6.35% Exit Fee
Interest rate PRIME + 2.85% or Floor rate of
8.60%, 5.75% Exit Fee
Interest rate PRIME + 3.10% or Floor rate of
9.10%, 5.75% Exit Fee

Interest rate PRIME + 3.30% or Floor rate of
8.05%, 6.25% Exit Fee
Interest rate PRIME + 3.75% or Floor rate of
9.00%, 5.50% Exit Fee
Interest rate PRIME + 2.55% or Floor rate of
8.55%, 6.35% Exit Fee
Interest rate PRIME + 4.45% or Floor rate of
9.95%, 6.95% Exit Fee
Interest rate PRIME + 3.25% or Floor rate of
8.50%, 5.95% Exit Fee
Interest rate PRIME + 3.00% or Floor rate of
8.00%, 13.43% Exit Fee
Interest rate PRIME + 4.20% or Floor rate of
8.95%, 7.55% Exit Fee
Interest rate PRIME + 4.95% or Floor rate of
9.45%, 6.95% Exit Fee
Interest rate PRIME + 5.50% or Floor rate of
10.00%, 2.87% Exit Fee
Interest rate PRIME + 4.30% or Floor rate of
9.80%, 6.95% Exit Fee
Interest rate PRIME + 2.75% or Floor rate of
8.50%, 4.13% Exit Fee
Interest rate PRIME + 2.10% or Floor rate of
7.85%, 6.95% Exit Fee

$

$

$

$

$

$
$

$

$

$

$
$

$

$

$

$

$

$

$

$

$

$

$

$

12,775  

10,000  

15,000  

8,084  

8,084  

16,168  
15,731  

35,000  

20,000  

20,000  

75,000  
20,000  

10,000  

30,000  

20,000  

8,750  

12,922  

22,500  

50,000  

6,738  

35,000  

60,000  

10,000  

70,000  

See notes to consolidated financial statements.  
118

5,067  
5,067  

14,780  
29,556  

44,336  
44,336  

40,626  

40,626  
40,626  

13,730  

13,730  

10,115  

14,969  

8,404  

8,280  

16,684  
15,608  

35,684  

20,264  

20,062  

76,010  
20,306  

9,955  

30,139  

20,085  

8,728  

13,502  

22,372  

51,552  

6,732  

35,259  

61,905  

10,241  

72,146  

5,067  

5,067  
5,067  

14,780  
28,773  

43,553  
43,553  

40,773  

40,773  
40,773  

13,731  

13,731  

10,043  

14,969  

8,340  

8,274  

16,614  
15,608  

35,721  

20,495  

20,284  

76,500  
20,501  

9,955  

30,636  

20,113  

8,728  

13,542  

22,373  

51,547  

—  

35,536  

62,131  

10,295  

72,426  

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HERCULES CAPITAL, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2019
(dollars in thousands)
Maturity
Date
August 2023

Type of
Investment (1)

Senior Secured

 Portfolio Company
Replimune Group, Inc. (5)(10)(11)

Sub-Industry

Drug Discovery & Development

Seres Therapeutics, Inc. (11)

Drug Discovery & Development

Senior Secured

November 2023

Stealth Bio Therapeutics Corp. (5)(10)(11)

Drug Discovery & Development

Senior Secured

January 2021

TG Therapeutics, Inc. (10)(13)

Drug Discovery & Development

Senior Secured

March 2022

Tricida, Inc. (11)(15)(16)(17)

Drug Discovery & Development

Senior Secured

April 2023

uniQure B.V. (5)(10)(11)

Drug Discovery & Development

Senior Secured

June 2023

Urovant Sciences, Ltd. (5)(10)(13)

Drug Discovery & Development

Senior Secured

March 2023

Verastem, Inc. (11)

Drug Discovery & Development

Senior Secured

December 2022

Drug Discovery & Development

Senior Secured

December 2022

Drug Discovery & Development

Senior Secured

December 2022

Drug Discovery & Development

Senior Secured

December 2022

Drug Discovery & Development

Senior Secured

December 2022

Interest Rate and Floor  (2)

Interest rate PRIME + 2.75% or Floor rate of
8.75%, 4.95% Exit Fee
Interest rate PRIME + 4.40% or Floor rate of
9.65%, 4.85% Exit Fee
Interest rate PRIME + 5.50% or Floor rate of
9.50%, 6.68% Exit Fee
Interest rate PRIME + 4.75% or Floor rate of
10.25%, 3.25% Exit Fee
Interest rate PRIME + 2.35% or Floor rate of
8.35%, 11.92% Exit Fee
Interest rate PRIME + 3.35% or Floor rate of
8.85%, 7.72% Exit Fee
Interest rate PRIME + 4.65% or Floor rate of
10.15%, 4.25% Exit Fee
Interest rate PRIME + 4.25% or Floor rate of
9.75%, 5.25% Exit Fee
Interest rate PRIME + 4.25% or Floor rate of
9.75%, 5.25% Exit Fee
Interest rate PRIME + 4.25% or Floor rate of
9.75%, 5.25% Exit Fee
Interest rate PRIME + 4.25% or Floor rate of
9.75%, 5.25% Exit Fee
Interest rate PRIME + 4.25% or Floor rate of
9.75%, 5.25% Exit Fee

Total Verastem, Inc.

X4 Pharmaceuticals, Inc. (11)(17)

Drug Discovery & Development

Senior Secured

July 2023

Yumanity Therapeutics, Inc.

Drug Discovery & Development

Senior Secured

January 2024

Interest rate PRIME + 2.75% or Floor rate of
8.75%, 7.98% Exit Fee
Interest rate PRIME + 4.00% or Floor rate of
8.75%, 5.25% Exit Fee

Subtotal: 1-5 Years Maturity
Subtotal: Drug Discovery & Development (64.22%)*
Electronics & Computer Hardware
1-5 Years Maturity
Glo AB (5)(10)(13)(14)

Electronics & Computer Hardware

Subtotal: 1-5 Years Maturity
Subtotal: Electronics & Computer Hardware (0.39%)*
Healthcare Services, Other
1-5 Years Maturity
Oak Street Health (11)(16)

Healthcare Services, Other

Senior Secured

February 2021

Interest rate PRIME + 6.20% or Floor rate of
10.45%, PIK Interest 1.75%, 5.03% Exit Fee

Senior Secured

June 2022

The CM Group LLC (17)

Healthcare Services, Other

Senior Secured

June 2024

Velocity Clinical Research, Inc. (18)

Healthcare Services, Other

Senior Secured

November 2024

Subtotal: 1-5 Years Maturity
Subtotal: Healthcare Services, Other (8.61%)*
Information Services
1-5 Years Maturity
Planet Labs, Inc. (11)

Information Services

Senior Secured

June 2022

Information Services

Senior Secured

June 2021

Information Services

Senior Secured

May 2024

Interest rate PRIME + 5.00% or Floor rate of
9.75%, 5.95% Exit Fee
Interest rate 1-month LIBOR + 8.35% or Floor
rate of 9.35%
Interest rate 3-month LIBOR + 9.08% or Floor
rate of 10.08%

Interest rate PRIME + 5.50% or Floor rate of
11.00%, 3.00% Exit Fee
Interest rate PRIME + 2.75% or Floor rate of
9.50%, PIK Interest 1.70%, 2.80% Exit Fee
Interest rate 3-month LIBOR + 7.99% or Floor
rate of 8.99%

Sapphire Digital, Inc. (p.k.a. MDX Medical,
Inc.) (14)(15)(19)
Yipit, LLC (17)(18)

Subtotal: 1-5 Years Maturity
Subtotal: Information Services (4.02%)*
Internet Consumer & Business Services
Under 1 Year Maturity
Snagajob.com, Inc. (13)(14)

Total Snagajob.com, Inc.

Subtotal: Under 1 Year Maturity
1-5 Years Maturity

Internet Consumer & Business Services Senior Secured

August 2020

Internet Consumer & Business Services Senior Secured

August 2020

Interest rate PRIME + 5.15% or Floor rate of
9.15%, PIK Interest 1.95%, 2.55% Exit Fee
Interest rate PRIME + 5.65% or Floor rate of
10.65%, PIK Interest 1.95%, 2.55% Exit Fee

See notes to consolidated financial statements.  
119

Principal
Amount

Cost (3)

Value (4)

10,000   $

9,974   $

9,974  

25,000  

16,509  

30,000  

60,000  

35,000  

45,000  

5,000  

5,000  

5,000  

10,000  

10,000  

35,000  
20,000  

15,000  

8,215  

24,804  

17,502  

29,726  

60,442  

36,090  

44,622  

5,028  

5,048  

5,060  

10,066  

10,035  

35,237  
20,088  

14,732  

24,804  

17,501  

29,849  

61,193  

36,419  

44,622  

5,073  

5,094  

5,083  

10,157  

10,125  

35,532  
20,165  

14,732  

717,379  
731,109  

713,882  
727,613  

8,730  

8,730  
8,730  

4,410  

4,410  
4,410  

80,000  

81,190  

81,270  

9,429  

7,500  

20,000  

15,554  

10,625  

42,676  

5,134  

47,810  

9,268  

7,226  

97,684  
97,684  

19,526  

15,647  

10,415  

45,588  
45,588  

43,344  

5,127  

48,471  
48,471  

9,114  

7,226  

97,610  
97,610  

19,583  

15,682  

10,272  

45,537  
45,537  

43,344  

5,127  

48,471  
48,471  

$

$

$

$

$

$

$

$

$

$

$

$

$
$

$

$

$

$

$

$

$

$

$

$

$

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HERCULES CAPITAL, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2019
(dollars in thousands)
Maturity
Date
January 2022

Type of
Investment (1)

 Portfolio Company
AppDirect, Inc. (11)(19)

Sub-Industry

Internet Consumer & Business Services Senior Secured

Arctic Wolf Networks, Inc. (13)(19)

Internet Consumer & Business Services Senior Secured

April 2023

Cloudpay, Inc. (5)(10)(11)

Internet Consumer & Business Services Senior Secured

April 2022

Contentful, Inc. (5)(10)(11)(14)

Internet Consumer & Business Services Senior Secured

July 2022

ePayPolicy Holdings, LLC (17)

Internet Consumer & Business Services Senior Secured

December 2024

EverFi, Inc. (11)(14)(16)

Internet Consumer & Business Services Senior Secured

May 2022

Greenphire, Inc.

Internet Consumer & Business Services Senior Secured

January 2021

Internet Consumer & Business Services Senior Secured

January 2021

Total Greenphire, Inc.

Houzz, Inc. (14)

Internet Consumer & Business Services Senior Secured

November 2022

Intent (p.k.a. Intent Media, Inc.) (12)

Internet Consumer & Business Services Senior Secured

September 2021

Lendio, Inc. (11)(19)

Internet Consumer & Business Services Senior Secured

April 2023

Nextroll, Inc. (14)(19)

Internet Consumer & Business Services Senior Secured

June 2022

Patron Technology (18)

Internet Consumer & Business Services Senior Secured

June 2024

Internet Consumer & Business Services Senior Secured

June 2024

Total Patron Technology

Postmates, Inc. (19)

Internet Consumer & Business Services Senior Secured

September 2022

SeatGeek, Inc. (14)(17)

Internet Consumer & Business Services Senior Secured

June 2023

Skyword, Inc. (14)

Internet Consumer & Business Services Senior Secured

September 2023

Tectura Corporation (7)(8)(9)(14)

Total Tectura Corporation

Varsity Tutors LLC (14)

Internet Consumer & Business Services Senior Secured
Internet Consumer & Business Services Senior Secured

June 2021
June 2021

Internet Consumer & Business Services Senior Secured

August 2023

Wheels Up Partners LLC (11)

Internet Consumer & Business Services Senior Secured

July 2022

Xometry, Inc. (13)(19)

Internet Consumer & Business Services Senior Secured

November 2021

Interest Rate and Floor  (2)

Interest rate PRIME + 5.70% or Floor rate of
9.95%, 3.45% Exit Fee
Interest rate 3-month LIBOR + 7.75% or Floor
rate of 10.10%, 7.55% Exit Fee
Interest rate PRIME + 4.05% or Floor rate of
8.55%, 6.95% Exit Fee
Interest rate PRIME + 2.95% or Floor rate of
7.95%, PIK Interest 1.25%, 3.55% Exit Fee
Interest rate 3-month LIBOR + 9.00% or Floor
rate of 10.00%
Interest rate PRIME + 3.90% or Floor rate of
9.15%, PIK Interest 2.30%
Interest rate 3-month LIBOR + 8.00% or Floor
rate of 9.00%
Interest rate PRIME + 3.75% or Floor rate of
8.75%

Interest rate PRIME + 3.20% or Floor rate of
8.45%, PIK Interest 2.50%, 4.50% Exit Fee
Interest rate PRIME + 5.13% or Floor rate of
10.13%, 2.00% Exit Fee
Interest rate PRIME + 4.45% or Floor rate of
9.95%, 5.25% Exit Fee
Interest rate PRIME + 3.85% or Floor rate of
9.35%, PIK Interest 2.95%, 3.50% Exit Fee
Interest rate 3-month LIBOR + 8.30% or Floor
rate of 9.30%
Interest rate 3-month LIBOR + 8.30% or Floor
rate of 9.30%

$

$

$

$

$

$

$

$

$
$

$

$

$

$

$

$
$

$

$

Interest rate PRIME + 3.85% or Floor rate of
8.85%, 8.05% Exit Fee
Interest rate PRIME + 5.00% or Floor rate of
10.50%, PIK Interest 0.50%
Interest rate PRIME + 3.88% or Floor rate of
9.38%, PIK Interest 1.25%, 2.75% Exit Fee
Interest rate FIXED 6.00%, PIK Interest 3.00% $
$
PIK Interest 8.00%
$
$

Interest rate PRIME + 5.25% or Floor rate of
10.75%, PIK Interest 0.55%, 3.00% Exit Fee
Interest rate 3-month LIBOR + 8.55% or Floor
rate of 9.55%
Interest rate PRIME + 3.95% or Floor rate of
8.45%, 7.09% Exit Fee

$

$

1,612  

2,000  

3,612  
50,115  

15,200  

5,000  

20,303  

35,750  

1,500  

37,250  
20,000  

23,043  

12,042  

21,407  
10,680  
32,087  
35,052  

17,129  

11,000  

Subtotal: 1-5 Years Maturity
Subtotal: Internet Consumer & Business Services (40.26%)*
Media/Content/Info
1-5 Years Maturity
Bustle (14)(15)

Media/Content/Info

Senior Secured

June 2023

Interest rate PRIME + 4.35% or Floor rate of
9.35%, PIK Interest 1.95%, 4.34% Exit Fee

$

20,632  

Subtotal: 1-5 Years Maturity
Subtotal: Media/Content/Info (1.83%)*
Medical Devices & Equipment
1-5 Years Maturity
Flowonix Medical Incorporated (11)

Medical Devices & Equipment

Senior Secured

October 2021

Intuity Medical, Inc. (11)(15)

Medical Devices & Equipment

Senior Secured

June 2021

Quanterix Corporation (11)

Medical Devices & Equipment

Senior Secured

October 2021

Rapid Micro Biosystems, Inc. (11)(15)

Medical Devices & Equipment

Senior Secured

April 2022

Interest rate PRIME + 4.00% or Floor rate of
9.00%, 7.95% Exit Fee
Interest rate PRIME + 5.00% or Floor rate of
9.25%, 6.95% Exit Fee
Interest rate PRIME + 2.75% or Floor rate of
8.00%, 0.96% Exit Fee
Interest rate PRIME + 5.15% or Floor rate of
9.65%, 7.25% Exit Fee

$

$

$

$

7,561  

14,188  

7,688  

18,000  

See notes to consolidated financial statements.  
120

Principal
Amount

Cost (3)

Value (4)

20,000   $

20,288   $

20,239  

30,000  

15,000  

3,794  

8,000  

30,214  

15,304  

3,793  

7,758  

30,280  

15,169  

3,786  

7,758  

72,208  

71,905  

72,277  

1,612  

2,000  

3,612  
49,720  

15,141  

4,985  

20,268  

34,776  

1,500  

36,276  
20,313  

22,382  

11,886  

21,407  
240  
21,647  
34,822  

17,026  

11,345  

1,610  

2,000  

3,610  
49,720  

15,034  

4,999  

20,459  

35,400  

1,500  

36,900  
20,274  

22,471  

11,886  

9,586  
—  
9,586  
34,822  

16,988  

11,401  

418,685  
467,156  

407,659  
456,130  

20,647  

20,647  
20,647  

8,178  

14,906  

7,683  

18,586  

20,786  

20,786  
20,786  

8,158  

14,810  

7,728  

18,454  

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HERCULES CAPITAL, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2019
(dollars in thousands)
Maturity
Date
January 2021

Type of
Investment (1)

Senior Secured

Interest Rate and Floor  (2)

Interest rate PRIME + 4.35% or Floor rate of
8.85%, 6.05% Exit Fee

Principal
Amount

Cost (3)

Value (4)

$

11,000   $

11,503   $

11,426  

Senior Secured

February 2022

Interest rate PRIME + 4.25% or Floor rate of
9.75%, PIK Interest 2.25%, 5.00% Exit Fee

$

10,187  

 Portfolio Company
Sebacia, Inc. (11)(15)

Sub-Industry

Medical Devices & Equipment

Subtotal: 1-5 Years Maturity
Subtotal: Medical Devices & Equipment (5.35%)*
Semiconductors
1-5 Years Maturity
Elenion Technologies Corporation (13)(14)

Semiconductors

Subtotal: 1-5 Years Maturity
Subtotal: Semiconductors (0.91%)*
Software
Under 1 Year Maturity
Delphix Corp. (19)

Software

Senior Secured

September 2020

Evernote Corporation (11)(14)(15)(19)

Software

Senior Secured

October 2020

Lightbend, Inc. (14)(15)

Pollen, Inc. (15)

Subtotal: Under 1 Year Maturity
1-5 Years Maturity
Abrigo (18)

Total Abrigo

Businessolver.com, Inc. (11)(16)

Total Businessolver.com, Inc.
Clarabridge, Inc. (12)(13)(14)(17)

Cloud 9 Software (13)(17)

Cloudian, Inc. (11)

Couchbase, Inc. (11)(15)(19)

Dashlane, Inc. (11)(14)(17)(19)

Software

Software

Software

Software

Software

Software

Software

Software

Software

Software

Software

Software

Senior Secured

June 2020

Senior Secured

October 2020

Senior Secured

March 2023

Senior Secured

March 2023

Senior Secured

May 2023

Senior Secured

May 2023

Senior Secured

April 2022

Senior Secured

April 2024

Senior Secured

November 2022

Senior Secured

May 2023

Senior Secured

April 2022

Senior Secured

March 2023

Total Dashlane, Inc.

Evernote Corporation (11)(14)(15)(19)

Software

Senior Secured

July 2021

Total Evernote Corporation
Ikon Science Limited (5)(10)(18)

Software

Software

Senior Secured

July 2022

Senior Secured

October 2024

Insurance Technologies Corporation (11)(18)

Software

Senior Secured

March 2023

Jolt Software, Inc. (14)

Software

Senior Secured

October 2022

Kazoo, Inc. (p.k.a. YouEarnedIt, Inc.) (11)(18) Software

Senior Secured

July 2023

Khoros (p.k.a Lithium Technologies) (11)

Software

Senior Secured

October 2022

Senior Secured

October 2022

Total Khoros (p.k.a Lithium Technologies)

Lastline, Inc. (19)

Software

Software

60,856  
60,856  

10,316  

10,316  
10,316  

9,878  

5,494  

2,026  

7,339  

60,576  
60,576  

10,316  

10,316  
10,316  

9,878  

5,494  

2,026  

7,339  

24,737  

24,737  

38,649  

2,304  

40,953  
57,776  

2,550  

60,326  
47,907  

9,332  

15,323  

49,575  

10,457  

9,920  

20,377  
4,055  

5,012  

9,067  
6,688  

38,826  

2,304  

41,130  
57,760  

2,550  

60,310  
48,006  

9,374  

15,211  

49,932  

10,481  

9,899  

20,380  
4,038  

5,065  

9,103  
6,688  

13,750  

13,526  

13,330  

5,017  

8,785  

12,000  

43,000  

55,000  
6,000  

5,004  

8,589  

11,835  

42,233  

54,068  
5,834  

5,004  

8,531  

11,825  

42,049  

53,874  
5,844  

10,000  

5,549  

2,026  

7,000  

39,303  

2,362  

41,665  
58,650  

2,550  

61,200  
48,268  

9,500  

15,000  

50,000  

10,180  

10,081  

20,261  
4,126  

5,077  

9,203  
7,000  

Interest rate PRIME + 5.25% or Floor rate of
10.25%, 7.00% Exit Fee
Interest rate PRIME + 5.45% or Floor rate of
8.95%
Interest rate PRIME + 4.25% or Floor rate of
9.25%, PIK Interest 2.00%, 12.95% Exit Fee
Interest rate PRIME + 4.25% or Floor rate of
8.50%, 5.95% Exit Fee

Interest rate 3-month LIBOR + 7.88% or Floor
rate of 8.88%
Interest rate 3-month LIBOR + 5.92% or Floor
rate of 6.92%

Interest rate 3-month LIBOR + 7.50% or Floor
rate of 8.50%
Interest rate 3-month LIBOR + 7.50% or Floor
rate of 8.50% and Interest rate PRIME + 6.5% or
Floor rate of 8.50%

Interest rate PRIME + 4.80% or Floor rate of
8.55%, PIK Interest 2.25%
Interest rate 3-month LIBOR + 8.20% or Floor
rate of 9.20%
Interest rate PRIME + 3.25% or Floor rate of
8.25%, 9.75% Exit Fee
Interest rate PRIME + 5.25% or Floor rate of
10.75%, 3.75% Exit Fee
Interest rate PRIME + 4.05% or Floor rate of
8.55%, PIK Interest 1.10%, 8.50% Exit Fee
Interest rate PRIME + 4.05% or Floor rate of
8.55%, PIK Interest 1.10%, 4.95% Exit Fee

Interest rate PRIME + 6.00% or Floor rate of
9.50%, PIK Interest 1.25%
Interest rate PRIME + 6.00% or Floor rate of
9.50%, PIK Interest 1.25%

Interest rate LIBOR + 9.00% or Floor rate of
10.00%
Interest rate 3-month LIBOR + 7.90% or Floor
rate of 8.90%
Interest rate PRIME + 3.00% or Floor rate of
8.50%, PIK Interest 1.75%, 4.50% Exit Fee
Interest rate 1-month LIBOR + 8.65% or Floor
rate of 9.65%
Interest rate 6-month LIBOR + 8.00% or Floor
rate of 9.00%
Interest rate 6-month LIBOR + 8.00% or Floor
rate of 9.00%

$

$

$

$

$

$

$
$

$

$
$

$

$

$

$

$

$
$

$

$
$

$

$

$

$

$

$
$

Senior Secured

July 2022

Interest rate PRIME + 5.45% or Floor rate of
10.95%

See notes to consolidated financial statements.  
121

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HERCULES CAPITAL, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2019
(dollars in thousands)
Maturity
Date
February 2022

Type of
Investment (1)

Senior Secured

 Portfolio Company
Lightbend, Inc. (14)(15)

Sub-Industry

Software

Mobile Solutions Services (17)(18)

Software

Senior Secured

October 2024

Nuvolo Technologies Corporation (19)

Software

Senior Secured

October 2022

OrthoFi, Inc. (13)(18)

Quid, Inc. (11)(14)(15)

Regent Education (14)

Salsa Labs, Inc. (11)(17)

Total Salsa Labs, Inc.

Software

Software

Software

Software

Software

Senior Secured

April 2024

Senior Secured

November 2022

Senior Secured

January 2022

Senior Secured

April 2023

Senior Secured

April 2023

ThreatConnect, Inc. (13)(17)(18)

Software

Senior Secured

May 2024

Vela Trading Technologies (11)(18)

Software

Senior Secured

July 2022

Senior Secured

January 2023

Senior Secured

August 2021

Interest Rate and Floor  (2)

Interest rate PRIME + 4.25% or Floor rate of
9.25%, PIK Interest 2.00%, 3.00% Exit Fee
Interest rate 3-month LIBOR + 8.80% or Floor
rate of 9.80%
Interest rate PRIME + 6.25% or Floor rate of
11.75%
Interest rate 3-month LIBOR + 8.28% or Floor
rate of 9.28%
Interest rate PRIME + 4.45% or Floor rate of
9.95%, PIK Interest 2.25%, 3.61% Exit Fee
Interest rate FIXED 10.00%, PIK Interest 2.00%,
7.94% Exit Fee
Interest rate 3-month LIBOR + 8.15% or Floor
rate of 9.15%
Interest rate 3-month LIBOR + 8.15% or Floor
rate of 9.15%

Interest rate 3-month LIBOR + 8.26% or Floor
rate of 9.26%
Interest rate 3-month LIBOR + 10.50% or Floor
rate of 11.50%
Interest rate PRIME + 4.75% or Floor rate of
10.25%, 3.00% Exit Fee
Interest rate PRIME + 6.20% or Floor rate of
10.95%, 2.00% Exit Fee

Senior Secured

November 2025

Senior Secured

November 2025

Interest rate 1-month LIBOR + 8.50% or Floor
rate of 9.50%
Interest rate 1-month LIBOR + 8.50% or Floor
rate of 9.50%

Senior Secured

January 2027

Interest rate 3-month LIBOR + 7.75% or Floor
rate of 8.75%

Software

Software

Software

Software

Software

ZeroFox, Inc.

ZocDoc (11)(19)

Subtotal: 1-5 Years Maturity
Greater than 5 Years Maturity
Campaign Monitor Limited (11)(17)(19)

Total Campaign Monitor Limited

Imperva, Inc. (19)

Subtotal: Greater than 5 Years Maturity

Subtotal: Software (49.58%)*
Sustainable and Renewable Technology

1-5 Years Maturity
Impossible Foods, Inc. (12)(13)

Sustainable and Renewable Technology Senior Secured

January 2022

Proterra, Inc. (11)(14)(19)

Sustainable and Renewable Technology Senior Secured

May 2021

Solar Spectrum Holdings LLC (p.k.a.
Sungevity, Inc.) (6)(8)(14)(19)

Sustainable and Renewable Technology Senior Secured

December 2020

Sustainable and Renewable Technology Senior Secured
Sustainable and Renewable Technology Senior Secured

December 2020
December 2020

Total Solar Spectrum Holdings LLC (p.k.a. Sungevity, Inc.)

Subtotal: 1-5 Years Maturity
Subtotal: Sustainable and Renewable Technology (6.57%)*
Total: Debt Investments (189.63%)*

$

Interest rate PRIME + 3.95% or Floor rate of
8.95%, 9.00% Exit Fee
Interest rate PRIME + 5.05% or Floor rate of
10.55%, PIK Interest 1.75%
Interest rate FIXED 6.73%, PIK Interest 6.73%,
6.67% Exit Fee
PIK Interest 10.00%
$
Interest rate FIXED 8.85%, PIK Interest 8.85% $
$

$

$

See notes to consolidated financial statements.  
122

$

$

$

$

$

$

$

$

$
$

$

$

$

$

$

$
$

Principal
Amount

Cost (3)

Value (4)

16,509   $

16,384   $

16,333  

5,500  

13,000  

17,853  

13,251  

3,155  

6,000  

150  

6,150  
4,500  

19,095  

15,000  

30,000  

5,329  

12,815  

17,417  

13,235  

3,214  

5,915  

150  

6,065  
4,365  

18,721  

14,927  

30,241  

5,329  

12,877  

17,283  

13,235  

1,773  

5,959  

151  

6,110  
4,387  

18,721  

14,948  

30,287  

489,282  

488,000  

29,333  

28,676  

28,511  

688  

30,021  
20,000  

50,000  

10,101  

10,000  

683  
1,492  
12,175  

672  

29,348  
19,806  

49,154  

672  

29,183  
19,806  

48,989  

563,173  

561,726  

51,843  

10,059  

10,775  

683  
1,492  
12,950  
74,852  
74,852  
2,170,140  

51,780  

10,100  

10,512  

664  
1,439  
12,615  
74,495  
74,495  
2,148,592

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
   
 
 
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
   
 
   
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
   
 
 
 
 
   
 
 
 
HERCULES CAPITAL, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2019
(dollars in thousands)

Type of
Investment (1)

Series

Shares

Cost (3)

Value (4)

Preferred Series A

1,135,000  

  $

1,230  

  $

3,955  

1,230  

3,955  

  Sub-Industry

  Communications & Networking

  Diversified Financial Services
  Diversified Financial Services

  Drug Delivery
  Drug Delivery
  Drug Delivery
  Drug Delivery
  Drug Delivery

  Drug Discovery & Development
  Drug Discovery & Development

  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development

  Healthcare Services, Other
  Healthcare Services, Other

Portfolio Company
Equity Investments
Communications & Networking
Peerless Network Holdings, Inc.
Subtotal: Communications & Networking (0.35%)*
Diversified Financial Services
Gibraltar Business Capital, LLC (7)

Total Gibraltar Business Capital, LLC

Subtotal: Diversified Financial Services (3.11%)*
Drug Delivery
AcelRx Pharmaceuticals, Inc. (4)
BioQ Pharma Incorporated (15)
Kaleo, Inc.
Neos Therapeutics, Inc. (4)(15)
PDS Biotechnology Corporation (p.k.a. Edge
Therapeutics, Inc.) (4)
Subtotal: Drug Delivery (0.39%)*
Drug Discovery & Development
Aveo Pharmaceuticals, Inc. (4)(15)
Axovant Gene Therapies Ltd. (p.k.a. Axovant
Sciences Ltd.) (4)(5)(10)
BridgeBio Pharma LLC (4)(16)
Cerecor, Inc. (4)
Concert Pharmaceuticals, Inc. (4)(10)
Dare Biosciences, Inc. (4)
Dynavax Technologies (4)(10)
Eidos Therapeutics, Inc. (4)(10)
Genocea Biosciences, Inc. (4)
Insmed, Incorporated (4)
Melinta Therapeutics (4)
Paratek Pharmaceuticals, Inc. (4)(16)
Rocket Pharmaceuticals, Ltd. (4)
Savara, Inc. (4)(15)
uniQure B.V. (4)(5)(10)
X4 Pharmaceuticals, Inc. (4)
Subtotal: Drug Discovery & Development (1.28%)*
Healthcare Services, Other
23andMe, Inc.
Chromadex Corporation (4)
Subtotal: Healthcare Services, Other (0.48%)*
Information Services
DocuSign, Inc. (4)
Subtotal: Information Services (1.22%)*
Internet Consumer & Business Services
Blurb, Inc.
Contentful, Inc. (5)(10)
Countable Corporation (p.k.a. Brigade Group,
Inc.)
DoorDash, Inc.
Lyft, Inc. (4)
Nextdoor.com, Inc.
OfferUp, Inc.

Total OfferUp, Inc.

Oportun (4)
Tectura Corporation (7)

Total Tectura Corporation

Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services

Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services

Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services

Subtotal: Internet Consumer & Business Services (2.92%)*
Medical Devices & Equipment
Flowonix Medical Incorporated
Gelesis, Inc.

  Medical Devices & Equipment
  Medical Devices & Equipment
  Medical Devices & Equipment
  Medical Devices & Equipment

Total Gelesis, Inc.

Medrobotics Corporation (15)

Total Medrobotics Corporation

  Medical Devices & Equipment
  Medical Devices & Equipment
  Medical Devices & Equipment

Equity

Equity
Equity

Equity
Equity
Equity
Equity
Equity

Equity
Equity

Equity
Equity
Equity
Equity
Equity
Equity
Equity
Equity
Equity
Equity
Equity
Equity
Equity
Equity

Equity
Equity

  Common Stock

Preferred Series A

  Common Stock

Preferred Series D
Preferred Series B

  Common Stock
  Common Stock

  Common Stock
  Common Stock

  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock

  Common Stock
  Common Stock

Equity
Equity
Equity

Equity
Equity
Equity
Equity
Equity

Equity
Equity
Equity

Equity
Equity
Equity
Equity

Equity
Equity
Equity

Preferred Series B
Preferred Series D

  Common Stock

  Common Stock
  Common Stock
  Common Stock

Preferred Series A
Preferred Series A-1

  Common Stock
  Common Stock

Preferred Series BB

Preferred Series AA

  Common Stock

Preferred Series A-1
Preferred Series A-2

Preferred Series E
Preferred Series F
Preferred Series G

See notes to consolidated financial statements.  
123

Information Services

Equity

  Common Stock

830,000  
10,602,752  
11,432,752  

1,884  
26,122  
28,006  

2,380  
33,000  
35,380  

28,006  

35,380  

176,730  
165,000  
82,500  
125,000  

2,498  

1,329  
500  
1,007  
1,500  

309  

4,645  

1,901,791  

1,715  

16,228  
203,579  
119,087  
70,796  
13,550  
20,000  
15,000  
27,932  
50,771  
10,364  
76,362  
944  
11,119  
17,175  
83,334  

360,000  
44,264  

251,000  

220,653  
217  

9,023  
105,000  
200,738  
328,190  
286,080  
108,710  
394,790  
37,393  
414,994,863  
1,000,000  
415,994,863  

221,893  
227,013  
191,210  
191,626  
609,849  
136,798  
73,971  
163,934  
374,703  

1,269  
2,000  
1,000  
1,367  
1,000  
550  
255  
2,000  
717  
2,000  
2,744  
1,500  
203  
332  
640  
19,292  

5,094  
157  

5,251  

3,871  

3,871  

175  
500  

93  
6,051  
10,487  
4,854  
1,663  
632  
2,295  
500  
900  
—  
900  
25,855  

1,500  
—  
425  
500  
925  
250  
155  
500  
905  

373  
768  
3,067  
189  

7  
4,404  

1,189  

83  
7,135  
642  
653  
11  
114  
861  
58  
1,212  
6  
307  
21  
50  
1,231  
891  
14,464  

5,196  
191  

5,387  

13,795  

13,795  

46  
443  

—  
14,422  
8,636  
6,692  
1,470  
559  
2,029  
890  
—  
—  
—  
33,158  

—  
679  
598  
584  
1,861  
—  
—  
—  
—  

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
   
   
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
   
   
 
 
 
 
 
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
   
   
 
 
 
 
 
 
 
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
 
 
   
   
   
   
   
 
 
 
 
 
   
   
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
 
   
   
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
 
   
   
 
 
 
   
   
 
 
 
 
 
   
   
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
 
   
   
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
HERCULES CAPITAL, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2019
(dollars in thousands)

Type of
Investment (1)

  Equity
  Equity
  Equity
  Equity

  Equity
  Equity

  Equity
  Equity
  Equity
  Equity

  Equity
  Equity
  Equity
  Equity

Series
Preferred Series B
Preferred Series C
Preferred Series D
Preferred Series E

Preferred Series B

  Common Stock

Preferred Series A-3

  Common Stock

Preferred Series 2
Preferred Series 3

  Common Stock

Preferred Series D
Preferred Series E
Preferred Series G

  Equity

  Common Stock

  Equity
  Equity
  Equity
  Equity
  Equity
  Equity

Preferred Series B
Preferred Series C
Preferred Series D
Preferred Series E
Preferred Series F
Preferred Series F-1

Portfolio Company
Optiscan Biomedical, Corp. (6)

Total Optiscan Biomedical, Corp.

  Sub-Industry
  Medical Devices & Equipment
  Medical Devices & Equipment
  Medical Devices & Equipment
  Medical Devices & Equipment

  Medical Devices & Equipment
  Medical Devices & Equipment

Outset Medical, Inc.
ViewRay, Inc. (4)(15)
Subtotal: Medical Devices & Equipment (1.03%)*
Software
CapLinked, Inc.
Docker, Inc.
Druva Holdings, Inc. (p.k.a. Druva, Inc.)

  Software
  Software
  Software
  Software

  Software
  Software
  Software
  Software

  Software

  Surgical Devices
  Surgical Devices
  Surgical Devices
  Surgical Devices
  Surgical Devices
  Surgical Devices

Total Druva Holdings, Inc. (p.k.a. Druva, Inc.)

HighRoads, Inc.
Palantir Technologies

Total Palantir Technologies

Sprinklr, Inc.
Subtotal: Software (1.52%)*
Surgical Devices
Gynesonics, Inc. (15)

Total Gynesonics, Inc.

TransMedics Group, Inc. (p.k.a Transmedics, Inc.)
(4)
Subtotal: Surgical Devices (0.32%)*
Sustainable and Renewable Technology

  Surgical Devices

  Equity

  Common Stock

Impossible Foods, Inc.
Modumetal, Inc.
Proterra, Inc.
Solar Spectrum Holdings LLC (p.k.a. Sungevity,
Inc.) (6)
Subtotal: Sustainable and Renewable Technology (0.18%)*
Total: Equity Investments (12.80%)*

  Sustainable and Renewable Technology
  Sustainable and Renewable Technology
  Sustainable and Renewable Technology
  Sustainable and Renewable Technology

Warrant Investments
Communications & Networking
Peerless Network Holdings, Inc.
Spring Mobile Solutions, Inc.
Subtotal: Communications & Networking (0.00%)*
Consumer & Business Products

  Communications & Networking
  Communications & Networking

  Consumer & Business Products
  Consumer & Business Products
  Consumer & Business Products
  Consumer & Business Products

Gadget Guard (15)
Intelligent Beauty, Inc.
The Neat Company
Whoop, Inc.
Subtotal: Consumer & Business Products (0.05%)*
Drug Delivery
Aerami Therapeutics (p.k.a. Dance Biopharm,
Inc.) (15)
Agile Therapeutics, Inc. (4)
BioQ Pharma Incorporated
Neos Therapeutics, Inc. (4)(15)
PDS Biotechnology Corporation (p.k.a. Edge
Therapeutics, Inc.) (4)
Pulmatrix Inc. (4)
ZP Opco, Inc. (4)
Subtotal: Drug Delivery (0.09%)*
Drug Discovery & Development
Acacia Pharma Inc. (4)(5)(10)
ADMA Biologics, Inc. (4)
Brickell Biotech, Inc. (4)
Cerecor, Inc. (4)
Concert Pharmaceuticals, Inc. (4)(10)(15)
CTI BioPharma Corp. (4)

  Drug Delivery

  Drug Delivery
  Drug Delivery
  Drug Delivery
  Drug Delivery

  Drug Delivery
  Drug Delivery

  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development

  Equity
  Equity
  Equity
  Equity

Preferred Series E-1
Preferred Series A-1
Preferred Series 5

  Common Stock

  Warrant
  Warrant

  Common Stock
  Common Stock

  Warrant
  Warrant
  Warrant
  Warrant

  Common Stock

Preferred Series B

  Common Stock

Preferred Series C

  Warrant

  Common Stock

  Warrant
  Warrant
  Warrant
  Warrant

  Warrant
  Warrant

  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant

  Common Stock
  Common Stock
  Common Stock
  Common Stock

  Common Stock
  Common Stock

  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock

See notes to consolidated financial statements.  
124

Shares

Cost (3)

Value (4)

61,855  
19,273  
551,038  
507,103  
1,139,269  
232,061  
36,457  

53,614  
20,000  
458,841  
93,620  
552,461  
190  
9,535  
1,749,089  
326,797  
2,085,421  
700,000  

219,298  
656,538  
1,991,157  
2,786,367  
1,523,693  
2,418,125  
9,595,178  

162,617  

188,611  
103,584  
99,280  

488  

3,328  
2,834,375  

1,662,441  
190,234  
54,054  
68,627  

110,882  
180,274  
459,183  
70,833  

3,929  
2,515  
3,618  

201,330  
89,750  
9,005  
22,328  
61,273  
29,239  

  $

$  

3,000  
655  
5,257  
4,239  
13,151  
527  
333  
17,341  

51  
4,284  
1,000  
300  
1,300  
307  
47  
10,489  
2,211  
12,747  
3,749  

463  
127  
3,784  
4,610  
8,984  
615  
154  
11,614  

95  
22  
1,883  
432  
2,315  
—  
49  
8,932  
1,668  
10,649  
4,159  

22,438  

17,240  

250  
282  
712  
429  
118  
150  
1,941  

2,550  

4,491  

2,000  
500  
500  

61,502  

64,502  

196,922  

—  
418  

418  

228  
230  
365  
18  

7  
21  
70  
121  
148  
201  
568  

3,091  

3,659  

1,496  
8  
493  

—  
1,997  

145,053  

7  
—  

7  

—  
475  
—  
55  

841  

530  

74  
730  
1  
285  

390  
116  
265  

1,861  

304  
295  
119  
70  
178  
165  

$  

—  
113  
928  
—  

—  
—  
—  
1,041  

109  
39  
—  
12  
75  
—  

  $

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
 
   
   
 
 
   
   
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
   
   
 
 
   
   
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
   
   
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
   
   
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
   
 
 
   
 
 
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
 
 
 
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
   
   
 
 
   
   
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
   
   
 
 
 
   
   
 
 
   
   
 
 
 
   
   
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
 
 
 
 
 
   
   
 
 
   
   
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
   
   
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
HERCULES CAPITAL, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2019
(dollars in thousands)

Portfolio Company
CytRx Corporation (4)(15)
Dare Biosciences, Inc. (4)
Dermavant Sciences Ltd. (5)(10)
Dicerna Pharmaceuticals, Inc. (4)
Evofem Biosciences, Inc. (4)(15)
Genocea Biosciences, Inc. (4)
Immune Pharmaceuticals (4)
Melinta Therapeutics (4)
Motif BioSciences Inc. (4)(5)(10)(15)
Myovant Sciences, Ltd. (4)(5)(10)
Ology Bioservices, Inc. (15)
Paratek Pharmaceuticals, Inc. (4)(15)(16)
Sorrento Therapeutics, Inc. (4)(10)
Stealth Bio Therapeutics Corp. (4)(5)(10)
TG Therapeutics, Inc. (4)(10)
Tricida, Inc. (4)(15)(16)
Urovant Sciences, Ltd. (4)(5)(10)
X4 Pharmaceuticals, Inc. (4)
XOMA Corporation (4)(10)(15)
Yumanity Therapeutics, Inc.
Subtotal: Drug Discovery & Development (0.51%)*
Electronics & Computer Hardware
908 Devices, Inc. (15)
Subtotal: Electronics & Computer Hardware (0.00%)*
Information Services
InMobi Inc. (5)(10)
Netbase Solutions, Inc.
Planet Labs, Inc.
RichRelevance, Inc.
Sapphire Digital, Inc. (p.k.a. MDX Medical, Inc.)
(15)
Subtotal: Information Services (0.07%)*
Internet Consumer & Business Services
Aria Systems, Inc.
Blurb, Inc. (15)
Cloudpay, Inc. (5)(10)
Contentful, Inc. (5)(10)
Fastly, Inc. (4)
First Insight, Inc. (15)
Houzz, Inc.
Intent (p.k.a. Intent Media, Inc.)
Interactions Corporation
Just Fabulous, Inc.
Lendio, Inc.
LogicSource
Oportun (4)
Postmates, Inc.
RumbleON, Inc. (4)
SeatGeek, Inc.
ShareThis, Inc.
Skyword, Inc.
Snagajob.com, Inc.

  Sub-Industry
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development
  Drug Discovery & Development

  Electronics & Computer Hardware

Information Services
Information Services
Information Services
Information Services
Information Services

Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services

Total Snagajob.com, Inc.

Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services
Internet Consumer & Business Services

Tapjoy, Inc.
The Faction Group LLC
Thumbtack, Inc.
Xometry, Inc.
Subtotal: Internet Consumer & Business Services (0.52%)*
Media/Content/Info
Machine Zone, Inc.
Napster
WP Technology, Inc. (Wattpad, Inc.) (5)(10)
Zoom Media Group, Inc.
Subtotal: Media/Content/Info (0.03%)*

  Media/Content/Info
  Media/Content/Info
  Media/Content/Info
  Media/Content/Info

Type of
Investment (1)

Series

Shares

Cost (3)

Value (4)

  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant

  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  American Depositary Shares
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Class B Preferred Units

  Warrant

Preferred Series D

  Warrant
  Warrant
  Warrant
  Warrant
  Warrant

  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant

  Warrant
  Warrant
  Warrant
  Warrant

  Warrant
  Warrant
  Warrant
  Warrant

  Common Stock

Preferred Series 1

  Common Stock

Preferred Series E

  Common Stock

Preferred Series G
Preferred Series C
Preferred Series B
Preferred Series C

  Common Stock

Preferred Series B

  Common Stock
  Common Stock

Preferred Series G-3
Preferred Series B
Preferred Series D
Preferred Series C

  Common Stock
  Common Stock
  Common Stock
  Common Stock

Preferred Series C
Preferred Series A
Preferred Series A
Preferred Series B

Preferred Series D
Preferred Series AA

  Common Stock

Preferred Series B

  Common Stock
  Common Stock
  Common Stock

Preferred Series A

105,694  
17,190  
223,642  
200  
7,806  
41,176  
10,742  
8,109  
73,452  
73,710  
171,389  
94,841  
306,748  
41,667  
147,058  
131,998  
99,777  
108,334  
9,063  
34,946  

79,856  

65,587  
60,000  
274,160  
112,612  

2,812,500  

231,535  
234,280  
6,763  
82  
76,098  
75,917  
529,661  
140,077  
68,187  
206,184  
127,032  
79,625  
23,514  
189,865  
102,768  
689,880  
493,502  
444,444  
1,800,000  
1,211,537  
3,011,537  
748,670  
8,076  
190,953  
87,784  

1,552,710  
715,755  
255,818  
1,204  

160  
369  
101  
28  
266  
165  
164  
625  
282  
460  
838  
204  
889  
158  
564  
1,102  
383  
673  
279  
110  

8,951  

101  

101  

82  
356  
565  
98  

283  

1,384  

73  
636  
54  
1  
71  
96  
20  
168  
204  
1,102  
39  
30  
78  
317  
87  
662  
547  
83  
782  
62  
844  
316  
234  
553  
47  
6,262  

1,960  
384  
3  
348  

—  
—  
108  
—  
19  
15  
—  
—  
—  
485  
—  
20  
270  
2  
920  
2,667  
715  
302  
6  
114  

5,878  

52  

52  

—  
416  
224  
—  

122  

762  

—  
13  
18  
17  
617  
151  
14  
214  
445  
1,622  
14  
122  
279  
83  
6  
596  
—  
43  
40  
15  
55  
2  
395  
958  
180  

5,844  

285  
—  
—  
—  

See notes to consolidated financial statements.  
125

2,695  

285  

 
 
 
 
 
 
 
 
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
   
   
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
   
   
 
 
 
 
   
   
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
 
 
 
 
 
 
   
   
   
   
   
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
   
   
 
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
   
   
 
 
   
   
 
 
   
   
 
 
 
   
   
 
 
 
 
 
 
   
   
HERCULES CAPITAL, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2019
(dollars in thousands)

Type of
Investment (1)

Series

Shares

Cost (3)

Value (4)

Portfolio Company
Medical Devices & Equipment
Aspire Bariatrics, Inc. (15)
Flowonix Medical Incorporated

Total Flowonix Medical Incorporated

  Sub-Industry

  Medical Devices & Equipment
  Medical Devices & Equipment
  Medical Devices & Equipment

Gelesis, Inc.
InspireMD, Inc. (4)(5)(10)
Intuity Medical, Inc. (15)
Medrobotics Corporation (15)
NinePoint Medical, Inc.
Optiscan Biomedical, Corp. (6)
Outset Medical, Inc.
Sebacia, Inc.
SonaCare Medical, LLC
Tela Bio, Inc. (4)
Subtotal: Medical Devices & Equipment (0.10%)*
Semiconductors
Achronix Semiconductor Corporation

  Medical Devices & Equipment
  Medical Devices & Equipment
  Medical Devices & Equipment
  Medical Devices & Equipment
  Medical Devices & Equipment
  Medical Devices & Equipment
  Medical Devices & Equipment
  Medical Devices & Equipment
  Medical Devices & Equipment
  Medical Devices & Equipment

Semiconductors
Semiconductors

Semiconductors

Software
Software

Software
Software
Software

Software
Software
Software
Software
Software
Software
Software
Software
Software
Software
Software

Software
Software
Software
Software
Software

Software
Software
Software
Software

Total Achronix Semiconductor Corporation

Elenion Technologies Corporation
Subtotal: Semiconductors (0.03%)*
Software
Actifio, Inc.

Total Actifio, Inc.
BryterCX, Inc. (p.k.a. ClickFox, Inc.) (15)

Total BryterCX, Inc. (p.k.a. ClickFox, Inc.)

CareCloud Corporation (15)
Cloudian, Inc.
Couchbase, Inc.
Dashlane, Inc.
Delphix Corp.
DNAnexus, Inc.
Evernote Corporation
Fuze, Inc. (15)
Lastline, Inc.
Lightbend, Inc. (15)

Message Systems, Inc. (15)
Nuvolo Technologies Corporation
OneLogin, Inc. (15)
Poplicus, Inc.
Quid, Inc. (15)

Total Quid, Inc.

RapidMiner, Inc.
RedSeal Inc. (15)
Signpost, Inc.
ZeroFox, Inc.
Subtotal: Software (0.31%)*
Specialty Pharmaceuticals
Alimera Sciences, Inc. (4)
Subtotal: Specialty Pharmaceuticals (0.00%)*
Surgical Devices
Gynesonics, Inc. (15)

Total Gynesonics, Inc.

TransMedics Group, Inc. (p.k.a Transmedics, Inc.)
(4)
Subtotal: Surgical Devices (0.04%)*
Sustainable and Renewable Technology

  Warrant
  Warrant
  Warrant

  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant

  Warrant
  Warrant

Preferred Series B-1
Preferred Series AA
Preferred Series BB

Preferred Series A-1

  Common Stock

Preferred Series 5
Preferred Series E
Preferred Series A-1
Preferred Series E
Preferred Series A
Preferred Series D
Preferred Series A

  Common Stock

Preferred Series C
Preferred Series D-2

  Warrant

Preferred Series C

  Warrant
  Warrant

  Warrant
  Warrant
  Warrant

  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant
  Warrant

  Warrant
  Warrant
  Warrant
  Warrant
  Warrant

  Warrant
  Warrant
  Warrant
  Warrant

  Common Stock

Preferred Series F

Preferred Series B
Preferred Series C
Preferred Series C-A

  Common Stock
  Common Stock
  Common Stock
  Common Stock
  Common Stock

Preferred Series C

  Common Stock

Preferred Series F

  Common Stock

Preferred Series C-1
Preferred Series C

  Common Stock
  Common Stock
  Common Stock

Preferred Series D
Preferred Series E

Preferred Series C-1
Preferred Series C-Prime
Series Junior 1 Preferred
Preferred Series C-1

Specialty Pharmaceuticals

  Warrant

  Common Stock

Surgical Devices
Surgical Devices

Surgical Devices

  Warrant
  Warrant

Preferred Series C
Preferred Series D

  Warrant

  Common Stock

Agrivida, Inc.
Calera, Inc.
Fulcrum Bioenergy, Inc.

Sustainable and Renewable Technology
Sustainable and Renewable Technology
Sustainable and Renewable Technology

  Warrant
  Warrant
  Warrant

Preferred Series D
Preferred Series C
Preferred Series C-1

See notes to consolidated financial statements.  
126

  $

112,858  
155,325  
725,806  
881,131  
74,784  
1,105  
1,819,078  
455,539  
587,840  
74,424  
500,000  
778,301  
6,464  
15,712  

360,000  
750,000  
1,110,000  
225  

73,584  
31,673  
105,257  
492,877  
592,019  
2,218,214  
3,303,110  
13,499  
477,454  
263,377  
346,747  
203,541  
909,091  
62,500  
256,158  
363,636  
854,787  
503,718  

30,000  
381,620  
132,168  
71,576  
40,261  
111,837  
4,982  
640,603  
474,019  
486,263  

114,513  

180,480  
1,575,965  
1,756,445  

64,441  

471,327  
44,529  
280,897  

$  

455  
362  
351  
713  
78  
—  
294  
370  
170  
572  
402  
133  
188  
61  
3,436  

160  
99  
259  
8  
267  

249  
343  
592  
152  
730  
230  
1,112  
258  
71  
462  
303  
407  
97  
106  
89  
133  
130  
334  

43  
305  
—  
1  
1  
2  
24  
66  
314  
57  
4,905  

861  

861  

74  
320  
394  

139  

533  

120  
513  
275  

—  
—  
—  
—  
172  
—  
338  
—  
38  
209  
382  
4  
—  
8  
1,151  

6  
330  
336  
6  
342  

93  
91  
184  
—  
—  
1  
1  
—  
24  
409  
424  
529  
68  
67  
—  
136  
122  
731  

73  
602  
—  
—  
—  
—  
20  
2  
—  
87  
3,479  

36  

36  

4  
13  
17  

444  

461  

—  
—  
537  

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
 
   
   
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
   
   
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
 
   
   
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
   
   
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
 
   
   
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
 
   
   
 
 
 
   
   
 
 
 
 
   
   
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
   
   
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
   
   
   
 
 
 
 
   
   
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
   
 
 
   
 
 
   
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
   
   
HERCULES CAPITAL, INC.
CONSOLIDATED SCHEDULE OF INVESTMENTS
December 31, 2019
(dollars in thousands)

Series

Shares

Cost (3)

Value (4)

Portfolio Company
GreatPoint Energy, Inc. (15)
Kinestral Technologies, Inc.

Total Kinestral Technologies, Inc.
NantEnergy, Inc. (p.k.a. Fluidic, Inc.)
Polyera Corporation (15)
Proterra, Inc.

Total Proterra, Inc.

  Sub-Industry
  Sustainable and Renewable Technology
  Sustainable and Renewable Technology
  Sustainable and Renewable Technology

  Sustainable and Renewable Technology
  Sustainable and Renewable Technology
  Sustainable and Renewable Technology
  Sustainable and Renewable Technology

Type of
Investment (1)

  Warrant
  Warrant
  Warrant

  Warrant
  Warrant
  Warrant
  Warrant

Preferred Series D-1
Preferred Series A
Preferred Series B

Preferred Series D
Preferred Series C

  Common Stock

Preferred Series 4

Solar Spectrum Holdings LLC (p.k.a. Sungevity,
Inc.) (6)
TAS Energy, Inc.
Subtotal: Sustainable and Renewable Technology (0.09%)*
Total: Warrant Investments (1.84%)*

  Sustainable and Renewable Technology

  Sustainable and Renewable Technology

Total Investments in Securities (204.27%)*

  Warrant

  Class A Units

  Warrant

Preferred Series AA

393,212  
325,000  
131,883  
456,883  
61,804  
311,609  
36,630  
477,517  
514,147  

0.69  
428,571  

  $

  $
  $

$  

548  
155  
63  
218  
102  
338  
1  
41  
42  

—  
299  

2,455  

34,970  

2,402,032  

  $
  $

—  
168  
52  
220  
—  
—  
4  
252  
256  

—  
—  
1,013  

20,881  

2,314,526

*
(1)
(2)
(3)

(4)

(5)
(6)
(7)
(8)

(9)
(10)

(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)

(19)

Value as a percent of net assets
Preferred and common stock, warrants, and equity interests are generally non-income producing.
Interest rate PRIME represents 4.75% at December 31, 2019. 1-month LIBOR, 3-month LIBOR, and 12-month LIBOR represent, 1.76%, 1.91%, and 2.00%, respectively, at December 31, 2019.
Gross unrealized appreciation, gross unrealized depreciation, and net unrealized depreciation for federal income tax purposes totaled $70.3 million, $144.1 million, and $73.8 million, respectively. The tax cost of
investments is $2.4 billion.
Except for warrants in 35 publicly traded companies and common stock in 25 publicly traded companies, all investments are restricted at December 31, 2019 and were valued at fair value using Level 3 significant
unobservable inputs as determined in good faith by the Company’s board of directors (the “Board of Directors”). No unrestricted securities of the same issuer are outstanding. The Company uses the Standard
Industrial Code for classifying the industry grouping of its portfolio companies.
Non-U.S. company or the company’s principal place of business is outside the United States.
Affiliate investment as defined under the Investment Company Act of 1940, as amended, (the “1940 Act”) in which Hercules owns at least 5% but generally less than 25% of the company’s voting securities.
Control investment as defined under the 1940 Act in which Hercules owns at least 25% of the company’s voting securities or has greater than 50% representation on its board.
Debt is on non-accrual status at December 31, 2019, and is therefore considered non-income producing. Note that only the PIK portion is on non-accrual for the Company’s debt investments in 
Holdings LLC (p.k.a. Sungevity, Inc.), and Tectura Corporation.
Denotes that all or a portion of the debt investment is convertible debt.
Indicates assets that the Company deems not “qualifying assets” under section 55(a) of 1940 Act. Qualifying assets must represent at least 70% of the Company’s total assets at the time of acquisition of any additional
non-qualifying assets.
Denotes that all or a portion of the debt investment secures the notes offered in the Debt Securitization (as defined in Note 4).
Denotes that all or a portion of the debt investment is pledged as collateral under the Wells Facility (as defined in Note 4).
Denotes that all or a portion of the debt investment is pledged as collateral under the Union Bank Facility (as defined in Note 4).
Denotes that all or a portion of the debt investment principal includes accumulated PIK interest and is net of repayments.
Denotes that all or a portion of the investment in this portfolio company is held by HT III, the Company’s wholly owned small business investment company, or SBIC, subsidiary.
Denotes that the fair value of the Company’s total investments in this portfolio company represent greater than 5% of the Company’s total net assets at December 31, 2019.
Denotes that there is an unfunded contractual commitment available at the request of this portfolio company at December 31, 2019. Refer to Note 10.
Denotes unitranche debt with first lien “last-out” senior secured position and security interest in all assets of the portfolio company whereby the “last-out” portion will be subordinated to the “first-out” portion in a
liquidation, sale or other disposition.
Denotes second lien senior secured debt.

Solar Spectrum

See notes to consolidated financial statements.  
127

 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
 
   
   
 
 
 
   
   
 
 
   
   
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
 
   
   
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
1. Description of Business

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Hercules Capital, Inc. (the “Company”) is a specialty finance company focused on providing senior secured loans to high-growth, innovative venture capital-backed

companies in a variety of technology, life sciences, and sustainable and renewable technology industries. The Company sources its investments through its principal office
located in Palo Alto, CA, as well as through its additional offices in Boston, MA, New York, NY, Bethesda, MD, Hartford, CT, Westport, CT, Chicago, IL, and San Diego, CA.
The Company was incorporated under the General Corporation Law of the State of Maryland in December 2003.

The Company is an internally managed, non-diversified closed-end investment company that has elected to be regulated as a Business Development Company (“BDC”)

under the 1940 Act. From incorporation through December 31, 2005, the Company was subject to tax as a corporation under Subchapter C of the Code. Effective January 1,
2006, the Company elected to be treated for tax purposes as a RIC under Subchapter M of the Code (see “Note 6 – Income Taxes”).

The Company does not currently use Commodity Futures Trading Commission, or CFTC, derivatives however to the extent that it uses CFTC derivatives in the future,

it intends to do so below prescribed levels and will not market itself as a “commodity pool” or a vehicle for trading such instruments. The Company has claimed an exclusion
from the definition of the term “commodity pool operator” under the Commodity Exchange Act, or CEA, pursuant to Rule 4.5 under the CEA. The Company is not, therefore,
subject to registration or regulation as a “commodity pool operator” under the CEA.

Hercules Technology III, L.P. (“HT III”) and Hercules Capital IV, L.P. (“HC IV”) are Delaware limited partnerships that were formed in September 2009 and

December 2010, respectively. HT III, and HC IV were licensed to operate as small business investment companies (“SBICs”) under the authority of the Small Business
Administration (“SBA”) on May 26, 2010, and October 27, 2020, respectively. Hercules Technology II, L.P. (“HT II”) was a Delaware limited partnership formed in January
2005 to operate as an SBIC. On July 13, 2018, the Company completed repayment of the remaining outstanding HT II debentures and subsequently surrendered the SBA
license with respect to HT II.

 As SBICs, HT III and HC IV are subject to a variety of regulations concerning, among other things, the size and nature of the companies in which it may invest and the

structure of those investments. As of December 31, 2020, and since receiving the license to operate as an SBIC on October 27, 2020, HC IV has not drawn any debentures and
has no material assets other than cash from regulatory capital provided.

The Company also formed Hercules Technology SBIC Management, LLC (“HTM”), a limited liability company, in November 2003. HTM is a wholly owned

subsidiary of the Company and serves as the limited partner and general partner of HT II, HT III and HC IV (see “Note 5 – Borrowings”).

The Company also established wholly owned subsidiaries, all of which are structured as Delaware corporations or limited liability companies, to hold portfolio
companies organized as limited liability companies, or LLCs (or other forms of pass-through entities). These subsidiaries are consolidated for financial reporting purposes and
in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). These taxable subsidiaries are not consolidated with Hercules for
income tax purposes and may generate income tax expense, or benefit, and tax assets and liabilities as a result of their ownership of certain portfolio investments.

128

 
 
 
 
 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with U.S GAAP and pursuant to Regulation S-X. The Company’s functional

currency is U.S. dollars (“USD”) and these consolidated financial statements have been prepared in that currency.

As an investment company, the Company follows accounting and reporting guidance as set forth in Topic 946 (“Financial Services – Investment Companies”) of the

FASB Accounting Standards Codification, as amended (“ASC”). As provided under Regulation S-X and ASC Topic 946, the Company will not consolidate its investment in a
portfolio company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. Rather, an
investment company’s interest in portfolio companies that are not investment companies should be measured at fair value in accordance with ASC Topic 946.

Financial statements prepared on a U.S. GAAP basis require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at

the date of the consolidated financial statements and the reported amounts of income, expenses, gains and losses during the reported periods. Changes in the economic and
regulatory environment, financial markets, the credit worthiness of our portfolio companies, the global outbreak of the novel coronavirus (“COVID-19”) during the first quarter
of 2020, and any other parameters used in determining these estimates and assumptions could cause actual results to differ from these estimates and assumptions.

Principles of Consolidation

The Consolidated Financial Statements include the accounts of the Company and its subsidiaries and all VIEs of which the Company is the primary beneficiary. All

intercompany accounts and transactions have been eliminated in consolidation.

A VIE is an entity that either (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support or (ii) has equity

investors who lack the characteristics of a controlling financial interest. The primary beneficiary of a VIE is the party with both the power to direct the activities of the VIE that
most significantly impact the VIE’s economic performance and the obligation to absorb the losses or the right to receive benefits that could be significant to the VIE.

To assess whether the Company has the power to direct the activities of a VIE that most significantly impact its economic performance, the Company considers all the

facts and circumstances including its role in establishing the VIE and its ongoing rights and responsibilities. This assessment includes identifying the activities that most
significantly impact the VIE’s economic performance and identifying which party, if any, has power over those activities. In general, the party that makes the most significant
decisions affecting the VIE is determined to have the power to direct the activities of a VIE. To assess whether the Company has the obligation to absorb the losses or the right
to receive benefits that could potentially be significant to the VIE, the Company considers all of its economic interests, including debt and equity interests, servicing rights and
fee arrangements, and any other variable interests in the VIE. If the Company determines that it is the party with the power to make the most significant decisions affecting the
VIE, and the Company has a potentially significant interest in the VIE, then it consolidates the VIE.

The Company performs periodic reassessments, usually quarterly, of whether it is the primary beneficiary of a VIE. The reassessment process considers whether the

Company has acquired or divested the power to direct the activities of the VIE through changes in governing documents or other circumstances. The Company also reconsiders
whether entities previously determined not to be VIEs have become VIEs, based on certain events, and therefore are subject to the VIE consolidation framework.

As of December 31, 2020, the VIEs consolidated by the Company are its securitization VIEs formed in conjunction with the issuance of the 2027 Asset-Backed Notes

and the 2028 Asset-Backed Notes (as defined herein). See “Note 5 – Borrowings”.

129

 
 
Fair Value Measurements

The Company follows guidance in ASC Topic 820, Fair Value Measurement (“ASC Topic 820”), where fair value is defined as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 establishes a framework for measuring the
fair value of assets and liabilities and outlines a three-tier hierarchy which maximizes the use of observable market data input and minimizes the use of unobservable inputs to
establish a classification of fair value measurements. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including
assumptions about risk, such as the risk inherent in a particular valuation technique used to measure fair value using a pricing model and/or the risk inherent in the inputs for the
valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on
market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s own assumptions about the assumptions market participants would
use in pricing the asset or liability based on the information available. The inputs or methodology used for valuing assets or liabilities may not be an indication of the risks
associated with investing in those assets or liabilities. ASC Topic 820 also requires disclosure for fair value measurements based on the level within the hierarchy of the
information used in the valuation. ASC Topic 820 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value.

The Company categorizes all investments recorded at fair value in accordance with ASC Topic 820 based upon the level of judgment associated with the inputs used to

measure their fair value. Hierarchical levels, defined by ASC Topic 820 and directly related to the amount of subjectivity associated with the inputs to fair valuation of these
assets and liabilities, are as follows:

Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets at the measurement date. The types of assets carried at Level 1 fair value generally are
equities listed in active markets.

Level 2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset in connection with market data at the measurement
date and for the extent of the instrument’s anticipated life. Fair valued assets that are generally included in this category are publicly held debt investments and warrants
held in a public company.

Level 3—Inputs reflect management’s best estimate of what market participants would use in pricing the asset at the measurement date. It includes prices or valuations
that require inputs that are both significant to the fair value measurement and unobservable. Generally, assets carried at fair value and included in this category are the
debt investments and warrants and equities held in a private company.

 Valuation of Investments

The most significant estimate inherent in the preparation of the Company’s consolidated financial statements is the valuation of investments and the related amounts of

unrealized appreciation and depreciation of investments recorded.

At December 31, 2020, approximately 89.7% of the Company’s total assets represented investments in portfolio companies whose fair value is determined in good faith
by the Board of Directors. Value, as defined in Section 2(a)(41) of the 1940 Act, is (i) the market price for those securities for which a market quotation is readily available and
(ii) for all other securities and assets, fair value is as determined in good faith by the Board of Directors. The Company’s investments are carried at fair value in accordance with
the 1940 Act and ASC Topic 946 and measured in accordance with ASC Topic 820. The Company’s debt securities are primarily invested in venture capital-backed companies
in technology-related industries including technology, drug discovery and development, biotechnology, life sciences, healthcare, and sustainable and renewable technology at
all stages of development. Given the nature of lending to these types of businesses, substantially all of the Company’s investments in these portfolio companies are considered
Level 3 assets under ASC Topic 820 because there is no known or accessible market or market indexes for these investment securities to be traded or exchanged. As such, the
Company values substantially all of its investments at fair value as determined in good faith pursuant to a consistent valuation policy by the Board of Directors in accordance
with the provisions of ASC Topic 820 and the 1940 Act. Due to the inherent uncertainty in determining the fair value of investments that do not have a readily available market
value, the fair value of the Company’s investments determined in good faith by its Board of Directors may differ significantly from the value that would have been used had a
readily available market existed for such investments, and the differences could be material.

130

 
 
The Company intends to continue to engage one or more independent valuation firm(s) to provide management with assistance regarding the Company’s determination
of the fair value of selected portfolio investments each quarter unless directed by the Board of Directors to cancel such valuation services. Specifically, on a quarterly basis, the
Company will identify portfolio investments with respect to which an independent valuation firm will assist in valuing. The Company selects these portfolio investments based
on a number of factors, including, but not limited to, the potential for material fluctuations in valuation results, size, credit quality and the time lapse since the last valuation of
the portfolio investment by an independent valuation firm. The scope of services rendered by the independent valuation firm is at the discretion of the Board of Directors. The
Board of Directors are ultimately, and solely, responsible for determining the fair value of the Company’s investments in good faith. In addition, changes in the market
environment, portfolio company performance and other events that may occur over the lives of the investments may cause the gains or losses ultimately realized on these
investments to be materially different than the valuations currently assigned. The Company determines the fair value of each individual investment and records changes in fair
value as unrealized appreciation or depreciation.

With respect to investments for which market quotations are not readily available or when such market quotations are deemed not to represent fair value, the Board of

Directors have approved a multi-step valuation process each quarter, as described below:

(1) the Company’s quarterly valuation process begins with each portfolio company being initially valued by the investment professionals responsible for the portfolio
investment;

(2) preliminary valuation conclusions are then documented and business-based assumptions are discussed with the Company’s investment committee;

(3) the Audit Committee of the Board of Directors reviews the preliminary valuation of the investments in the portfolio as provided by the investment committee which
incorporates the results of the independent valuation firm as appropriate; and

(4) the Board of Directors, upon the recommendation of the Audit Committee, discusses valuations and determines the fair value of each investment in the Company’s
portfolio in good faith based on the input of, where applicable, the respective independent valuation firm and the investment committee.

Debt Investments

The Company follows the guidance set forth in ASC Topic 820 which establishes a framework for measuring the fair value of assets and liabilities and outlines a fair

value hierarchy, which prioritizes the inputs used to measure fair value and the effect of fair value measures on earnings. The Company’s debt securities are primarily invested
in venture capital-backed companies in technology-related industries including technology, drug discovery and development, biotechnology, life sciences, healthcare, and
sustainable and renewable technology at all stages of development. Given the nature of lending to these types of businesses, substantially all of the Company’s investments in
these portfolio companies are considered Level 3 assets under ASC Topic 820 because there is no known or accessible market or market indexes for debt instruments for these
investment securities to be traded or exchanged. In addition, the Company may, from time to time, invest in public debt of companies that meet the Company’s investment
objectives. These investments are considered Level 2 assets.

In making a good faith determination of the value of the Company’s investments, the Company generally starts with the cost basis of the investment, which includes the
value attributed to the original issue discount (“OID”), if any, and payment-in-kind (“PIK”) interest or other receivables which have been accrued as earned. The Company then
applies the valuation methods as set forth below.

The Company applies a procedure for debt investments that assumes the sale of each investment in a hypothetical market to a hypothetical market participant where

buyers and sellers are willing participants. The hypothetical market does not include scenarios where the underlying security was simply repaid or extinguished, but includes an
exit concept. The Company determines the yield at inception for each debt investment. The Company then uses senior secured, leveraged loan yields provided by third party
providers to determine the change in market yields between inception of the debt investment and the measurement date. Industry specific indices and other relevant market data
are used to benchmark and assess market-based movements.

Under this process, the Company also evaluates the collateral for recoverability of the debt investments. The Company considers each portfolio company’s credit rating,

security liens and other characteristics of the investment to adjust the baseline yield to derive a credit adjusted hypothetical yield for each investment as of the measurement
date. The anticipated future cash flows from each investment are then discounted at the hypothetical yield to estimate each investment’s fair value as of the measurement date.

131

 
 
The Company’s process includes an analysis of, among other things, the underlying investment performance, the current portfolio company’s financial condition and

market changing events that impact valuation, estimated remaining life, current market yield and interest rate spreads of similar securities as of the measurement date. The
Company values its syndicated debt investments using broker quotes and bond indices amongst other factors. If there is a significant deterioration of the credit quality of a debt
investment, the Company may consider other factors to estimate fair value, including the proceeds that would be received in a liquidation analysis.

The Company records unrealized depreciation on investments when it believes that an investment has decreased in value, including where collection of a debt
investment is doubtful or, if under the in-exchange premise, when the value of a debt investment is less than amortized cost of the investment. Conversely, where appropriate,
the Company records unrealized appreciation if it believes that the underlying portfolio company has appreciated in value and, therefore, that its investment has also appreciated
in value or, if under the in-exchange premise, the value of a debt investment is greater than amortized cost.

When originating a debt instrument, the Company generally receives warrants or other equity-related securities from the borrower. The Company determines the cost
basis of the warrants or other equity-related securities received based upon their respective fair values on the date of receipt in proportion to the total fair value of the debt and
warrants or other equity-related securities received. Any resulting discount on the debt investments from recordation of the warrant or other equity instruments is accreted into
interest income over the life of the debt investment.

Debt investments that are traded on a public exchange are valued at the prevailing market price as of the valuation date.

Equity-Related Securities and Warrants

Securities that are traded in the over-the-counter markets or on a stock exchange will be valued at the prevailing bid price at period end. The Company has a limited

amount of equity securities in public companies. In accordance with the 1940 Act, unrestricted publicly traded securities for which market quotations are readily available are
valued at the closing market quote on the measurement date.

The Company estimates the fair value of warrants using a Black Scholes OPM. At each reporting date, privately held warrant and equity-related securities are valued

based on an analysis of various factors including, but not limited to, the portfolio company’s operating performance and financial condition and general market conditions, price
to enterprise value or price to equity ratios, discounted cash flow, valuation comparisons to comparable public companies or other industry benchmarks. When an external event
occurs, such as a purchase transaction, public offering, or subsequent equity sale, the pricing indicated by that external event is utilized to corroborate the Company’s valuation
of the warrant and equity-related securities. The Company periodically reviews the valuation of its portfolio companies that have not been involved in a qualifying external
event to determine if the enterprise value of the portfolio company may have increased or decreased since the last valuation measurement date.

Investment Funds & Vehicles

 The Company applies the practical expedient provided by the ASC Topic 820 relating to investments in certain entities that calculate net asset value (“NAV”) per share

(or its equivalent). ASC Topic 820 permits an entity holding investments in certain entities that either are investment companies, or have attributes similar to an investment
company, and calculate NAV  per share or its equivalent for which the fair value is not readily determinable, to measure the fair value of such investments on the basis of that
NAV per share, or its equivalent, without adjustment. Investments which are valued using NAV per share as a practical expedient are not categorized within the fair value
hierarchy as per ASU 2015-07, “Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share (Or its
Equivalent)”.

Cash, Restricted Cash, and Cash Equivalents

Cash and cash equivalents consist solely of funds deposited with financial institutions and short-term liquid investments in money market deposit accounts. Cash and
cash equivalents are carried at cost, which approximates fair value. Restricted cash and cash equivalents include amounts that are collected and are held by trustees who have
been appointed as custodians of the assets securing certain of the Company’s financing transactions.

Other Assets

Other assets generally consist of prepaid expenses, deferred financing costs net of accumulated amortization, fixed assets net of accumulated depreciation, deferred

revenues and deposits and other assets, including escrow receivable.

132

 
 
Escrow Receivables

Escrow receivables are collected in accordance with the terms and conditions of the escrow agreement. Escrow balances are typically distributed over a period greater
than one year and may accrue interest during the escrow period. Escrow balances are measured for collectability on at least a quarterly basis and fair value is determined based
on the amount of the estimated recoverable balances and the contractual maturity date. As of December 31, 2020, there were no material past due escrow receivables. The
escrow receivable balance as of December 31, 2020 and December 31, 2019 was approximately $64,000 and $955,000, respectively, and was fair valued and held in accordance
with ASC Topic 820.

Leases

The Company determines if an arrangement is a lease at inception. Operating leases are included in right-of-use (“ROU”) assets, and operating lease liability obligations

in our Consolidated Statements of Assets and Liabilities. The Company recognizes a ROU asset and an operating lease liability for all leases, with the exception of short-term
leases which have a term of 12 months or less. ROU assets represent the right to use an underlying asset for the lease term and operating lease liability obligations represent the
obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at lease commencement date based on the present value of lease payments
over the lease term. The Company has lease agreements with lease and non-lease components and has separated these components when determining the ROU assets and the
related lease liabilities. As most of the Company’s leases do not provide an implicit rate, the Company estimated its incremental borrowing rate based on the information
available at the lease commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The ROU asset
also includes any lease payments made and excludes lease incentives and lease direct costs. The Company’s lease terms may include options to extend or terminate the lease
when it is reasonably certain that we will exercise that option. Lease expense is recognized on a straight-line basis over the lease term. See “Note 11 – Commitments and
Contingencies”.

Income Recognition

The Company records interest income on an accrual basis and recognizes it as earned in accordance with the contractual terms of the loan agreement, to the extent that
such amounts are expected to be collected. OID initially represents the value of detachable equity warrants obtained in conjunction with the acquisition of debt securities and is
accreted into interest income over the term of the loan as a yield enhancement. Debt investments are placed on non-accrual status when it is probable that principal, interest or
fees will not be collected according to contractual terms. When a debt investment is placed on non-accrual status, the Company ceases to recognize interest and fee income until
the portfolio company has paid all principal and interest due or demonstrated the ability to repay its current and future contractual obligations to the Company. The Company
may not apply the non-accrual status to a loan where the investment has sufficient collateral value to collect all of the contractual amount due and is in the process of collection.
Interest collected on non-accrual investments are generally applied to principal.

Fee income, generally collected in advance, includes loan commitment and facility fees for due diligence and structuring, as well as fees for transaction services and

management services rendered by the Company to portfolio companies and other third parties. Loan commitment and facility fees are amortized into income over the
contractual life of the loan. Management fees are generally recognized as income when the services are rendered. Loan origination fees are capitalized and then amortized into
interest income using the effective interest rate method. In certain loan arrangements, warrants or other equity interests are received from the borrower as additional origination
fees. The Company had approximately $39.2 million of unamortized fees at December 31, 2020, of which approximately $32.2 million was included as an offset to the cost
basis of its current debt investments and approximately $7.0 million was deferred contingent upon the occurrence of a funding or milestone. At December 31, 2019, the
Company had approximately $42.0 million of unamortized fees, of which approximately $34.6 million was included as an offset to the cost basis of the Company’s current debt
investments and approximately $7.4 million was deferred contingent upon the occurrence of a funding or milestone.

The Company recognizes nonrecurring fees amortized over the remaining term of the loan commencing in the quarter relating to specific loan modifications. Certain

fees may still be recognized as one-time fee income, including prepayment penalties, fees related to select covenant default waiver fees and acceleration of previously deferred
loan fees and OID related to early loan pay-off or material modification of the specific debt outstanding. The Company recorded approximately $8.3 million and $6.0 million in
one-time fee income during the years ended December 31, 2020 and December 31, 2019, respectively.

133

 
 
In addition, the Company may also be entitled to an exit fee that is amortized into income over the life of the loan. Loan exit fees to be paid at the termination of the

loan are accreted into interest income over the contractual life of the loan. At December 31, 2020, the Company had approximately $40.9 million in exit fees receivable, of
which approximately $37.6 million was included as a component of the cost basis of its current debt investments and approximately $3.3 million was a deferred receivable
related to expired commitments. At December 31, 2019, the Company had approximately $33.5 million in exit fees receivable, of which approximately $31.9 million was
included as a component of the cost basis of its current debt investments and approximately $1.6 million was a deferred receivable related to expired commitments.

The Company has debt investments in its portfolio that contain a PIK provision. Contractual PIK interest, which represents contractually deferred interest added to the

loan balance that is generally due at the end of the loan term, is generally recorded on an accrual basis to the extent such amounts are expected to be collected. The Company
will generally cease accruing PIK interest if there is insufficient value to support the accrual or management does not expect the portfolio company to be able to pay all principal
and interest due. The Company recorded approximately $9.0 million and $8.7 million in PIK income in the years ended December 31, 2020 and 2019, respectively.

To maintain the Company’s ability to be subject to tax as a RIC, PIK and exit fee income generally must be accrued and distributed to stockholders in the form of

dividends for U.S. federal income tax purposes even though the cash has not yet been collected. Amounts necessary to pay these distributions may come from available cash or
the liquidation of certain investments.

In certain investment transactions, the Company may provide advisory services. For services that are separately identifiable and external evidence exists to substantiate

fair value, income is recognized as earned, which is generally when the investment transaction closes. The Company had no income from advisory services in the years ended
December 31, 2020 and December 31, 2019.

Equity Offering Expenses

The Company’s offering costs are charged against the proceeds from equity offerings when received as a reduction of capital upon completion of an offering of

registered securities.

Borrowings

The borrowings of the Company are carried at amortized cost which comprise of the principal amount borrowed net of any unamortized discount and debt issuance

costs. Discounts and issuance costs are accreted to interest expense and loan fees, respectively, using the straight-line method, which closely approximates the effective yield
method, over the remaining life of the underlying debt obligations (see “Note 6 - Borrowings”).  Accrued but unpaid interest is included within Accounts payable and accrued
liabilities on the Consolidated Statements of Assets and Liabilities.

Debt Issuance Costs

Debt issuance costs and other direct incremental costs incurred by the Company in obtaining debt financing are amortized over the life of the related debt instrument

using the straight-line method, which closely approximates the effective yield method. In accordance with ASC Subtopic 835-30 (“Interest – Imputation of Interest”), debt
issuance costs are presented as a reduction to the associated liability balance on the Consolidated Statements of Assets and Liabilities, except for debt issuance costs associated
with line-of-credit arrangements which are included within Other Assets on the Consolidated Statements of Assets and Liabilities.

Stock Based Compensation

The Company has issued and may, from time to time, issue stock options and restricted stock to employees under the 2018 Equity Incentive Plan and the Director Plan.

Management follows the guidelines set forth under ASC Topic 718, to account for stock options and restricted stock granted. Under ASC Topic 718, compensation expense
associated with stock-based compensation is measured at the grant date based on the fair value of the award and is recognized over the vesting period. Determining the
appropriate fair value model and calculating the fair value of stock-based awards at the grant date requires judgment, including estimating stock price volatility, forfeiture rate
and expected option life.

Income Taxes

The Company intends to operate so as to qualify to be subject to tax as a RIC under Subchapter M of the Code and, as such, will not be subject to federal income tax on

the portion of taxable income (including gains) distributed as dividends for U.S. federal income tax purposes to stockholders. Taxable income includes the Company’s taxable
interest, dividend and fee income, reduced by certain deductions, as well as taxable net realized securities gains. Taxable income generally differs from net income for financial

134

 
 
reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized appreciation or depreciation,
as such gains or losses are not included in taxable income until they are realized.

As a RIC, the Company will be subject to a 4% nondeductible U.S. federal excise tax on certain undistributed income unless the Company makes distributions treated

as dividends for U.S. federal income tax purposes in a timely manner to its stockholders in respect of each calendar year of an amount at least equal to the Excise Tax Avoidance
Requirement. The Company will not be subject to this excise tax on any amount on which the Company incurred U.S. federal corporate income tax (such as the tax imposed on
a RIC’s retained net capital gains).

Depending on the level of taxable income earned in a taxable year, the Company may choose to carry over taxable income in excess of current taxable year distributions

treated as dividends for U.S. federal income tax purposes from such taxable income into the next taxable year and incur a 4% excise tax on such taxable income, as required.
The maximum amount of excess taxable income that may be carried over for distribution in the next taxable year under the Code is the total amount of distributions treated as
dividends for U.S. federal income tax purposes paid in the following taxable year, subject to certain declaration and payment guidelines. To the extent the Company chooses to
carry over taxable income into the next taxable year, distributions declared and paid by the Company in a taxable year may differ from the Company’s taxable income for that
taxable year as such distributions may include the distribution of current taxable year taxable income, the distribution of prior taxable year taxable income carried over into and
distributed in the current taxable year, or returns of capital.

The Company intends to timely distribute to its stockholders substantially all of its annual taxable income for each year, except that it may retain certain net capital

gains for reinvestment and, depending upon the level of taxable income earned in a year, the Company may choose to carry forward taxable income for distribution in the
following year and pay any applicable U.S. federal excise tax.

Because federal income tax regulations differ from accounting principles generally accepted in the United States, distributions in accordance with tax regulations may

differ from net investment income and net realized securities gains recognized for financial reporting purposes. Differences may be permanent or temporary. Permanent
differences are reclassified among capital accounts in the financial statements to reflect their appropriate tax character. Permanent differences may also result from the change in
the classification of certain items, such as the treatment of short-term gains as ordinary income for tax purposes. Temporary differences arise when certain items of income,
expense, gain or loss are recognized at some time in the future. Also, recent tax legislation requires that income be recognized for tax purposes no later than when recognized for
financial reporting purposes.

Earnings Per Share (“EPS”)

Basic EPS is calculated by dividing net earnings applicable to common shareholders by the weighted average number of common shares outstanding. Common shares

outstanding includes common stock and restricted stock for which no future service is required as a condition to the delivery of the underlying common stock. Diluted EPS
includes the determinants of basic EPS and, in addition, reflects the dilutive effect of the common stock deliverable pursuant to stock options and to restricted stock for which
future service is required as a condition to the delivery of the underlying common stock.

In accordance with ASC 260-10-45-60A, the Company uses the two-class method in the computation of basic EPS and diluted EPS, if applicable.

Comprehensive Income

The Company reports all changes in comprehensive income in the Consolidated Statements of Operations. The Company did not have other comprehensive income in

2020, 2019, or 2018. The Company’s comprehensive income is equal to its net increase in net assets resulting from operations.

Distributions

Distributions to common stockholders are approved by the Board of Directors on a quarterly basis and the distribution payable is recorded on the ex-dividend date.

135

 
 
The Company maintains an “opt out” dividend reinvestment plan that provides for reinvestment of the Company’s distribution on behalf of the Company’s
stockholders, unless a stockholder elects to receive cash. As a result, if the Company declares a distribution, cash distributions will be automatically reinvested in additional
shares of its common stock unless the stockholder specifically “opts out” of the dividend reinvestment plan and chooses to receive cash distributions. During 2020, 2019, and
2018, the Company issued 280,690, 180,135, and 159,560 shares, respectively, of common stock to shareholders in connection with the dividend reinvestment plan.

Segments

The Company lends to and invests in portfolio companies in various technology-related industries including technology, drug discovery and development,

biotechnology, life sciences, healthcare, and sustainable and renewable technology. The Company separately evaluates the performance of each of its lending and investment
relationships. However, because each of these loan and investment relationships has similar business and economic characteristics, they have been aggregated into a single
reportable segment.

Recent Accounting Pronouncements

Recently Issued or Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to Disclosure Requirements for Fair Value

Measurement”, which is intended to improve the effectiveness of fair value measurement disclosures. The amendment, among other things, affects certain disclosure
requirements related to transfers between level 1 and level 2 of the fair value hierarchy, and level 3 fair value measurements as they relate to valuation process, unrealized gains
and losses, measurement uncertainty, and significant unobservable inputs. The new guidance is effective for interim and annual periods beginning after December 15, 2019.
The Company partially adopted the standard effective July 1, 2019 and fully adopted this standard effective January 1, 2020, which did not have a material impact, on its
consolidated financial statements and related disclosures for the periods presented.

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting”.

This guidance provides optional expedients and exceptions for applying U.S. GAAP to certain contracts, hedging relationships and other transactions, subject to meeting certain
criteria, that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. The Company has agreements that have LIBOR as a reference
rate with certain portfolio companies and also with certain lenders. These agreements include language for choosing an alternative successor rate if LIBOR reference is no
longer considered to be appropriate. The change from LIBOR to a successor rate will result in an amendment to such agreements. The Company has adopted this amendment as
of March 12, 2020 and there was no material impact on the Company’s consolidated financial statements and disclosures for the periods presented.

In August 2020, the FASB issued ASU 2020-6, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in
Entity’s Own Equity (Subtopic 815-40)”, which is intended to address issues identified as a result of the complexity associated with applying U.S. GAAP for certain financial
instruments with characteristics of liabilities and equity. The amendment, among other things, reduces the number of accounting models for convertible debt instruments and
convertible preferred stock and enhances information transparency by making targeted improvements to the disclosures for convertible instruments and earnings-per-share. The
new guidance is effective for interim and annual periods beginning after December 15, 2021. The Company does not intend to early adopt the standard and is in the process of
assessing the impact, if any, on its consolidated financial statements and related disclosures.

The Company adopted ASU 2018-15, “Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40).” This ASU aligns the requirements for capitalizing

certain implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to
develop or obtain internal-use software. The guidance provides flexibility in adoption, allowing for either retrospective adjustment or prospective adjustment for all
implementation costs incurred after the date of adoption. The Company adopted this guidance prospectively as of January 1, 2020. The adoption of this guidance did not have a
material effect on the Company’s consolidated financial statements.

SEC Disclosures Update and Simplification

In May 2020, the SEC revised its measure of “significant subsidiary” set forth in Rule 1-02(w)(2) for investment companies. The new definition includes an alternative

income measure to determine a “significant subsidiary”. The final rule will be effective on January 1, 2021, but voluntary compliance is permitted in advance of the effective
date. The Company has elected to implement this

136

 
 
new rule effective June 30, 2020 which is expected to require the Company to provide separate audited financial statements and summarized financial information for fewer of
its controlled portfolio companies going forward.

In August 2020, the SEC issued Final Rule Release Nos. 33-10825 and 34-89670 (collectively, the “Modernization of Regulation S-K Items 101, 103, and 105”). These

rules amend certain SEC disclosure requirements to improve disclosures for investors, and to simplify compliance obligations for registrants. The final rules are effective on
November 9, 2020. The Company has adopted this guidance, which did not have a material effect on the Company’s consolidated financial statements.

3. Fair Value of Financial Instruments

Fair value estimates are made at discrete points in time based on relevant information. These estimates may be subjective in nature and involve uncertainties and matters

of significant judgment and, therefore, cannot be determined with precision.

Investments measured at fair value on a recurring basis are categorized in the tables below based upon the lowest level of significant input to the valuations as of

December 31, 2020 and December 31, 2019.

(in thousands)
Description
Cash and cash equivalents
Money Market Fund (1)

Other assets

Escrow Receivable

Investments
Senior Secured Debt
Unsecured Debt
Preferred Stock
Common Stock
Warrants

Investment Funds & Vehicles measured at Net Asset Value (2)
Total Investments before cash and cash equivalents

Total Investments after cash and cash equivalents

(in thousands)
Description

Other assets
Escrow Receivable

Investments
Senior Secured Debt
Unsecured Debt
Preferred Stock
Common Stock

Warrants
Total Investments

Balance
December 31, 2020

Quoted Prices In
  Active Markets For    
Identical Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
  Unobservable Inputs  
(Level 3)

96,000  

  $

96,000  

  $

—  

  $

65  

  $

—  

  $

—  

  $

—  
—  
—  
138,300  
—  
138,300  

  $

  $

—  
—  
—  
—  
13,139  
13,139  

  $

  $

  $

  $

2,079,465  
14,970  
58,981  
165,698  
34,622  
2,353,736  
342  
2,354,078  

2,450,078  

—  

65  

2,079,465  
14,970  
58,981  
27,398  
21,483  
2,202,297  

Balance
December 31, 2019

Quoted Prices In
  Active Markets For    
Identical Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
  Unobservable Inputs  
(Level 3)

955  

  $

—  

  $

—  

  $

955  

2,133,812  
14,780  
69,717  

75,336  
20,881  
2,314,526  

  $

  $

  $

—  
—  
—  

41,789  
—  
41,789  

  $

  $

—  
—  
—  

—  
7,159  
7,159  

  $

2,133,812  
14,780  
69,717  

33,547  
13,722  

2,265,578

  $

  $

  $

  $

  $

  $

  $

  $

  $

(1)
(2)

This investment is included in cash and cash equivalents in the accompanying Consolidated Statement of Assets and Liabilities.
In accordance with US GAAP, certain investments are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient and are not categorized within the fair
value hierarchy as per ASU 2015-07. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the accompanying
Consolidated Statement of Assets and Liabilities.

137

 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The table below presents a reconciliation for all financial assets and liabilities measured at fair value on a recurring basis, excluding accrued interest components, using

significant unobservable inputs (Level 3) for the years ended December 31, 2020 and December 31, 2019.

Balance
January 1, 2020  

Net
Realized
Gains

Net Change in
Unrealized
Appreciation

Gross
Transfers
into

(Losses) (1)    

(Depreciation) (2)    

Purchases (5)

Sales

  Repayments (6)  

Level 3 (3)    

Gross
Transfers
out of
Level 3 (3)

Balance
December 31, 2020  

  $

  $

2,133,812  
14,780  
69,717  
33,547  
13,722  

(53,642 )   $
(408 )  
(13,286 )  
1,240  
(5,917 )  

  $

16,426  
132  
11,124  
9,587  
13,603  

  $

781,341  
466  
5,648  
—  
3,659  

  $

—  
—  
(40 )  
(1,240 )  
(2,603 )  

(793,705 )   $
—  
—  
—  
—  

  $

—  
—  
—  
4,767  
—  

(4,767 )   $
—  

(14,182 )  
(20,503 )  
(981 )  

2,079,465  
14,970  
58,981  
27,398  
21,483  

  $

955  
2,266,533  

  $

194  
(71,819 )   $

—  
50,872  

  $

1,440  
792,554  

  $

(2,524 )  
(6,407 )   $

—  
(793,705 )   $

—  
4,767  

  $

—  
(40,433 )   $

65  
2,202,362  

Balance
January 1, 2019  

Net
Realized
Gains

Net Change in
Unrealized
Appreciation

Gross
Transfers
into

(Losses) (1)    

(Depreciation) (2)    

Purchases (5)

Sales

  Repayments (6)  

Level 3 (4)    

Gross
Transfers
out of
Level 3 (4)

Balance
December 31, 2019  

  $

  $

1,719,091  
14,401  
68,625  
24,241  
22,673  

(5,513 )   $
—  
(1,146 )  
(750 )  
6,270  

(2,424 )   $
329  
12,566  
4,962  
(7,922 )  

  $

1,031,832  
50  
4,638  
5,094  
3,532  

  $

—  
—  
(16 )  
—  
(8,981 )  

(609,174 )   $
—  
—  
—  
—  

  $

—  
—  
—  
—  
3  

  $

—  
—  

(14,950 )  

—  
(1,853 )  

2,133,812  
14,780  
69,717  
33,547  
13,722  

  $

970  
1,850,001  

  $

(875 )  
(2,014 )   $

—  
7,511  

  $

897  
1,046,043  

  $

(37 )  
(9,034 )   $

—  
(609,174 )   $

—  
3  

  $

—  
(16,803 )   $

955  
2,266,533

(in thousands)
Investments
Senior Secured
Debt
Unsecured Debt
Preferred Stock
Common Stock
Warrants
Other assets
Escrow
Receivable
Total

(in thousands)
Investments
Senior
Secured  Debt
Unsecured Debt
Preferred Stock
Common Stock
Warrants
Other assets
Escrow
Receivable
Total

(1)
(2)
(3)

(4)

(5)

(6)

Included in net realized gains or losses in the accompanying Consolidated Statements of Operations.
Included in net change in unrealized appreciation (depreciation) in the accompanying Consolidated Statements of Operations.
Transfers out of Level 3 during the year ended December 31, 2020 relate to the initial public offerings of Palantir Technologies, Outset Medical, Doordash, Inc., 908 Devices, Inc. and Yumanity
Therapeutics, Inc., the acquisition of Postmates, Inc. by Uber, Inc., and the conversion of Level 3 debt investments into Level 3 common stock investments. Transfers into Level 3 during the  year
ended December 31, 2020 related to the conversion of Level 3 debt investments into Level 3 common stock investments.
Transfers out of Level 3 during the year ended December 31, 2019  relate to the initial public offerings of Lightspeed POS, Inc., Lyft, Inc., Avedro, Inc., Stealth Bio Therapeutics Corp., X4
Pharmaceuticals, Inc., BridgeBio Pharma LLC, Pinterest, Inc., TransMedics Group, Inc., Fastly, Inc., Brickell Biotech, Inc., Oportun, and Tela Bio, Inc.. Transfers into Level 3 for the year ended
December 31, 2019 relate to the delisting of Motif BioSciences Inc. common stock.
Amounts listed above are inclusive of loan origination fees received at the inception of the loan which are deferred and amortized into fee income as well as the accretion of existing loan discounts
and fees during the period. Escrow receivable purchases may include additions due to proceeds held in escrow from the liquidation of level 3 investments.
Amounts listed above include the acceleration and payment of loan discounts and loan fees due to early payoffs or restructures along with regularly scheduled amortization.

For the year ended December 31, 2020, approximately $6.8 million and $9.6 million in net unrealized appreciation was recorded for preferred stock and common stock

Level 3 investments, respectively, relating to assets still held at the reporting date. For the same period, approximately $6.7 million and $6.2 million in net unrealized
appreciation was recorded for debt and warrant Level 3 investments, respectively, relating to assets still held at the reporting date.

138

 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
   
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
   
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the year ended December 31, 2019, approximately $11.6 million and $4.6 million in net unrealized appreciation was recorded for preferred stock and common stock

Level 3 investments, respectively, relating to assets still held at the reporting date. For the same period, approximately $5.9 million and $1.5 million in net unrealized
depreciation was recorded for debt and warrant Level 3 investments, respectively, relating to assets still held at the reporting date.

The following tables provide quantitative information about the Company’s Level 3 fair value measurements as of December 31, 2020 and December 31, 2019. In

addition to the techniques and inputs noted in the tables below, according to the Company’s valuation policy the Company may also use other valuation techniques and
methodologies when determining the Company’s fair value measurements. The tables below are not intended to be all-inclusive, but rather provide information on the
significant Level 3 inputs as they relate to the Company’s fair value measurements. See the accompanying Consolidated Schedule of Investments for the fair value of the
Company’s investments. The methodology for the determination of the fair value of the Company’s investments is discussed in “Note 2 – Summary of Significant Accounting
Policies”. The significant unobservable input used in the fair value measurement of the Company’s escrow receivables is the amount recoverable at the contractual maturity date
of the escrow receivable.

Investment Type - Level Three
Debt Investments
Pharmaceuticals

Fair Value at
December 31, 2020
(in thousands)

Valuation Techniques/
Methodologies

  $

130,068  
574,149  

  Originated Within 4-6 Months
  Market Comparable Companies

Technology

Sustainable and Renewable
Technology

Medical Devices

Lower Middle Market

114,136  
867,892  

  Originated Within 4-6 Months
  Market Comparable Companies

18,126  
15,775  

  Liquidation (3)
  Market Comparable Companies

7,500  
41,242  

  Liquidation (3)
  Market Comparable Companies

—  
106,877  

  Liquidation (3)
  Market Comparable Companies

8,600  

  Liquidation (3)

Unobservable Input (1)

  Origination Yield
  Hypothetical Market Yield
  Premium/(Discount)
  Origination Yield
  Hypothetical Market Yield
  Premium/(Discount)
  Probability weighting of alternative outcomes  
  Hypothetical Market Yield

  Premium/(Discount)
  Probability weighting of alternative outcomes  
  Hypothetical Market Yield
  Premium/(Discount)
  Probability weighting of alternative outcomes  
  Hypothetical Market Yield
  Premium/(Discount)
  Probability weighting of alternative outcomes  

Range
10.94% - 13.56%
8.43% - 14.66%
(0.50%) - 1.50%
11.49% - 13.78%
7.61% - 17.71%
(0.25%) - 2.50%
10.00% - 75.00%
9.61% - 10.04%

0.00%
0.00% - 100.00%
9.52% - 9.52%
(0.25%)
0.00%
10.26% - 15.86%
(1.00%) - 1.00%
20.00% - 80.00%

Weighted
Average (2)
11.84%
10.87%

12.05%
11.67%

9.72%

9.52%

11.81%

78,016  
38,148  
93,906  
2,094,435  

  Debt Investments Where Fair Value Approximates Cost
  Debt Investments originated within 3 months

Imminent Payoffs  (4)

  Debt Investments Maturing in Less than One Year
  Total Level Three Debt Investments

  $

(1)
The significant unobservable inputs used in the fair value measurement of the Company’s debt securities are hypothetical market yields and premiums/(discounts). The hypothetical market yield
is defined as the exit price of an investment in a hypothetical market to hypothetical market participants where buyers and sellers are willing participants. The premiums/(discounts) relate to company specific
characteristics such as underlying investment performance, security liens, and other characteristics of the investment. Significant increases (decreases) in the inputs in isolation may result in a significantly
lower (higher) fair value measurement, depending on the materiality of the investment. Debt investments in the industries noted in the Company’s Consolidated Schedule of Investments are included in the
industries noted above as follows:

•

•

•

•
•

Pharmaceuticals, above, is comprised of debt investments in the “Drug Discovery & Development” and “Healthcare Services, Other” industries in the Consolidated Schedule of
Investments.
Technology, above, is comprised of debt investments in the “Communications & Networking”, “Information Services”, “Internet Consumer & Business Services”, “Media/Content/Info”
and “Software” industries in the Consolidated Schedule of Investments.
Sustainable and Renewable Technology, above, is comprised of debt investments in the “Sustainable and Renewable Technology”, “Internet Consumer & Business Services”, and
“Electronics & Computer Hardware” industries in the Consolidated Schedule of Investments.
Medical Devices, above, is comprised of debt investments in the “Drug Delivery”, and “Medical Devices & Equipment” industries in the Consolidated Schedule of Investments.
Lower Middle Market, above, is comprised of debt investments in the “Healthcare Services – Other”, “Internet Consumer & Business Services”, “Diversified Financial Services”,
“Sustainable and Renewable Technology”, and “Software” industries in the Consolidated Schedule of Investments.

(2)
(3)
(4)

The weighted averages are calculated based on the fair market value of each investment.
The significant unobservable input used in the fair value measurement of impaired debt securities is the probability weighting of alternative outcomes.
Imminent payoffs represent debt investments that the Company expects to be fully repaid within the next three months, prior to their scheduled maturity date.

139

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
   
 
 
 
 
 
 
   
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Technology

Sustainable and Renewable
Technology

Investment Type - Level
Three Debt Investments
Pharmaceuticals

Fair Value at
December 31, 2019
(in thousands)

Valuation Techniques/
Methodologies

  $

34,898  
563,725  

  Originated Within 4-6 Months
  Market Comparable Companies

—  

  Liquidation (3)

21,365  
844,169  

  Originated Within 4-6 Months
  Market Comparable Companies

1,773  

  Liquidation (3)

Unobservable Input (1)

  Origination Yield
  Hypothetical Market Yield
  Premium/(Discount)
  Probability weighting of alternative

outcomes

  Origination Yield
  Hypothetical Market Yield
  Premium/(Discount)
  Probability weighting of alternative

outcomes

Range
10.87% - 12.01%
9.26% - 14.06%
(0.50%) - 0.50%
0.00% - 100.00%

9.40% - 13.04%
10.56% - 16.13%
(0.50%) - 0.50%
40.00% - 60.00%

Weighted
Average (2)
11.38%
11.43%

12.33%
12.36%

34,115  

  Market Comparable Companies

  Hypothetical Market Yield

11.49% - 21.59%

13.67%

Medical Devices

101,349  

  Market Comparable Companies

4,410  

  Liquidation (3)

Lower Middle Market

34,822  
188,841  

  Originated Within 4-6 Months
  Market Comparable Companies

9,587  

  Liquidation (3)

  Premium/(Discount)
  Probability weighting of alternative

outcomes

  Hypothetical Market Yield
  Premium/(Discount)
  Origination Yield
  Hypothetical Market Yield
  Premium/(Discount)
  Probability weighting of alternative

outcomes

(0.50%) - 3.00%
50.00%

9.13% - 14.74%
(0.50%) - 0.50%
13.24%
10.71% - 16.02%
(0.50%) - 0.00%
20.00% - 80.00%

12.07%

13.24%
13.09%

149,358  
78,052  
82,128  
2,148,592  

  Debt Investments Where Fair Value Approximates Cost
  Debt Investments originated within 3 months

Imminent Payoffs  (4)

  Debt Investments Maturing in Less than One Year
  Total Level Three Debt Investments

  $

(1)

The significant unobservable inputs used in the fair value measurement of the Company’s debt securities are hypothetical market yields and premiums/(discounts). The hypothetical market yield is
defined as the exit price of an investment in a hypothetical market to hypothetical market participants where buyers and sellers are willing participants. The premiums/(discounts) relate to company
specific characteristics such as underlying investment performance, security liens, and other characteristics of the investment. Significant increases (decreases) in the inputs in isolation may result in a
significantly lower (higher) fair value measurement, depending on the materiality of the investment. Debt investments in the industries noted in the Company’s Consolidated Schedule of Investments
are included in the industries noted above as follows:

•

•

•

•
•

Pharmaceuticals, above, is comprised of debt investments in the “Healthcare Services, Other”, “Biotechnology Tools”, “Drug Delivery”, and “Drug Discovery & Development” industries in
the Consolidated Schedule of Investments.
Technology, above, is comprised of debt investments in the “Software”, “Media/Content/Info”, “Internet Consumer & Business Services”, “Semiconductors”, “Diversified Financial
Services”, and “Information Services” industries in the Consolidated Schedule of Investments.
Sustainable and Renewable Technology, above, is comprised of debt investments in the “Sustainable and Renewable Technology”, “Internet Consumer & Business Services”, and
“Electronics & Computer Hardware” industries in the Consolidated Schedule of Investments.
Medical Devices, above, is comprised of debt investments in the “Drug Delivery”, and “Medical Devices & Equipment” industries in the Consolidated Schedule of Investments.
Lower Middle Market, above, is comprised of debt investments in the “Healthcare Services – Other”, “Internet Consumer & Business Services”, “Diversified Financial Services”,
“Sustainable and Renewable Technology”, and “Software” industries in the Consolidated Schedule of Investments.

(2)
(3)
(4)

The weighted averages are calculated based on the fair market value of each investment.
The significant unobservable input used in the fair value measurement of impaired debt securities is the probability weighting of alternative outcomes.
Imminent payoffs represent debt investments that the Company expects to be fully repaid within the next three months, prior to their scheduled maturity date.

140

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
   
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
   
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
   
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
   
 
 
 
 
 
 
 
   
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment Type - Level Three
Equity and Warrant Investments
Level Three Equity Investments

Fair Value at
December 31, 2020
(in thousands)

Valuation Techniques/
Methodologies

  $

46,669  

  Market Comparable Companies

Level Three Warrant Investments

12,666  

  Market Adjusted OPM Backsolve

—  

  Liquidation

27,044  
10,284  

  Other (7)
  Market Comparable Companies

11,199  

  Market Adjusted OPM Backsolve

Unobservable Input (1)

  EBITDA Multiple (2)
  Revenue Multiple (2)
  Tangible Book Value Multiple  (2)
  Discount for Lack of Marketability  (3)
  Average Industry Volatility (4)
  Risk-Free Interest Rate
  Estimated Time to Exit (in months)
  Market Equity Adjustment (5)
  Average Industry Volatility (4)
  Risk-Free Interest Rate
  Estimated Time to Exit (in months)
  Revenue Multiple (2)
  Discount for Lack of Marketability  (3)

  EBITDA Multiple (2)
  Revenue Multiple (2)
  Discount for Lack of Marketability  (3)
  Average Industry Volatility (4)
  Risk-Free Interest Rate
  Estimated Time to Exit (in months)
  Market Equity Adjustment (5)
  Average Industry Volatility (4)
  Risk-Free Interest Rate
  Estimated Time to Exit (in months)

Range
5.0x - 9.8x
2.0x - 19.5x
4.1x

22.59% - 27.53%  
66.14% - 116.71%  

0.10%
10 - 13

(79.34%) - 53.87%  
39.29% - 152.09%  

0.14% - 2.64%
10 - 40
1.4x - 1.4x
75%

4.1x - 19.2x
0.6x - 10.7x

21.56% - 34.61%  
59.33% - 95.76%  

0.10% - 0.31%
10 - 48

(45.5%) - 57.42%  
38.87% - 152.09%  

0.13% - 2.64%
10 - 43

Weighted
Average (6)
7.5x
4.5x
4.1x

24.56%  
102.66%  
0.10%
11
(12.70%)
98.23%  
0.42%
25
1.4x
75%

16.4x
6.0x

28.02%  
82.21%  
0.14%
25
(12.27%)
85.53%  
0.32%
22

Total Level Three Warrant and
Equity Investments

  $

107,862  

(1)

(2)
(3)
(4)
(5)
(6)
(7)

The significant unobservable inputs used in the fair value measurement of the Company’s warrant and equity-related securities are revenue and/or EBITDA multiples, market equity adjustment
factors, and discounts for lack of marketability. Additional inputs used in the OPM include industry volatility, risk free interest rate and estimated time to exit. Significant increases/(decreases) in
the inputs in isolation would result in a significantly higher/(lower) fair value measurement, depending on the materiality of the investment. For some investments, additional consideration may be
given to data from the last round of financing or merger/acquisition events near the measurement date. The significant unobservable input used in the fair value measurement of impaired equity
securities is the probability weighting of alternative outcomes.
Represents amounts used when the Company has determined that market participants would use such multiples when pricing the investments.
Represents amounts used when the Company has determined market participants would take into account these discounts when pricing the investments.
Represents the range of industry volatility used by market participants when pricing the investment.
Represents the range of changes in industry valuations since the portfolio company's last external valuation event.
Weighted averages are calculated based on the fair market value of each investment.
The fair market value of these investments is derived based on recent private market and merger and acquisition transaction prices.

141

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
   
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
   
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment Type - Level Three
Equity and Warrant Investments
Equity Investments

Fair Value at
December 31, 2019
(in thousands)

Valuation Techniques/
Methodologies

  $

45,205  

  Market Comparable Companies

14,910  

  Market Adjusted OPM Backsolve

Warrant Investments

-  
43,149  
9,074  

  Liquidation
  Other (7)
  Market Comparable Companies

4,648  

  Market Adjusted OPM Backsolve

Total Level Three Warrant and
Equity Investments

  $

116,986  

Unobservable Input (1)

  EBITDA Multiple (2)
  Revenue Multiple (2)
  Discount for Lack of Marketability  (3)
  Average Industry Volatility (4)
  Risk-Free Interest Rate
  Estimated Time to Exit (in months)
  Market Equity Adjustment (5)
  Average Industry Volatility (4)
  Risk-Free Interest Rate
  Estimated Time to Exit (in months)
  EBITDA Multiple (2)
  Revenue Multiple (2)

  EBITDA Multiple (2)
  Revenue Multiple (2)
  Discount for Lack of Marketability  (3)
  Average Industry Volatility (4)
  Risk-Free Interest Rate
  Estimated Time to Exit (in months)
  Market Equity Adjustment (5)
  Average Industry Volatility (4)
  Risk-Free Interest Rate
  Estimated Time to Exit (in months)

Range
5.4x
0.5x - 13.6x

15.92% - 25.07%  
54.15% - 106.47%  

1.59% - 1.60%
11 - 31

(19.78%) - 26.70%  
32.48% - 90.07%  

1.42% - 2.68%
11 - 40

Weighted
Average (6)
5.4x
4.0x
19.31%
74.87%
1.59%
11
8.17%
79.18%
1.94%
16

2.0x - 4.0x

3.0x

5.4x - 14.7x
0.4x - 13.4x

8.42% - 35.81%  
35.81% - 97.06%  

1.57% - 1.66%
4 - 48

(42.45%) - 23.22%  
26.31% - 98.99%  

1.61% - 2.73%
7 - 39

14.6x
9.9x
19.46%
57.26%
1.60%
21
7.05%
62.78%
1.78%
18

(1)

(2)
(3)
(4)
(5)
(6)
(7)

The significant unobservable inputs used in the fair value measurement of the Company’s warrant and equity-related securities are revenue and/or EBITDA multiples, market equity adjustment
factors, and discounts for lack of marketability. Additional inputs used in the OPM include industry volatility, risk free interest rate and estimated time to exit. Significant increases/(decreases) in
the inputs in isolation would result in a significantly higher/(lower) fair value measurement, depending on the materiality of the investment. For some investments, additional consideration may be
given to data from the last round of financing or merger/acquisition events near the measurement date. The significant unobservable input used in the fair value measurement of impaired equity
securities is the probability weighting of alternative outcomes.
Represents amounts used when the Company has determined that market participants would use such multiples when pricing the investments.
Represents amounts used when the Company has determined market participants would take into account these discounts when pricing the investments.
Represents the range of industry volatility used by market participants when pricing the investment.
Represents the range of changes in industry valuations since the portfolio company's last external valuation event.
Weighted averages are calculated based on the fair market value of each investment.
The fair market value of these investments is derived based on recent private market and merger and acquisition transaction prices.

The Company believes that the carrying amounts of its financial instruments other than investments and borrowings, which consist of cash and cash equivalents,
receivables including escrow receivables, accounts payable and accrued liabilities, approximate the fair values of such items due to the short maturity of such instruments. The
borrowings of the Company are recorded at amortized cost and not at fair value on the Consolidated Statements of Assets and Liabilities. The fair value of the Company’s
outstanding borrowings is based on observable market trading prices or quotations and unobservable market rates as applicable for each instrument.   

 Based on market quotations on or around December 31, 2020, the 2022 Notes, 2027 Asset-Backed Notes, 2028 Asset-Backed Notes, and 2022 Convertible Notes were

quoted for 1.017, 1.001, 1.002, and 1.027 per dollar at par value, respectively. At December 31, 2020, the April 2025 Notes and 2033 Notes were trading on the NYSE for
$25.50 and $26.80 per unit at par value, respectively. The par value at underwriting for the April 2025 Notes and 2033 Notes was  $25.00 per unit. The fair values of the SBA
debentures, July 2024 Notes, February 2025 Notes, June 2025 Notes, and March 2026 A Notes are calculated based on the net present value of payments over the term of the
notes using estimated market rates for similar notes and remaining terms. The fair values of the outstanding borrowings under the Union Bank Facility and the Wells Facility are
equal to their outstanding principal balances. The

142

 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
   
 
 
 
   
 
 
 
 
   
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
   
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
table below provides the approximate fair values and level in the fair value hierarchy of the Company’s outstanding borrowings at December 31, 2020 and December 31, 2019:

 (in thousands)
Description
SBA Debentures
2022 Notes
April 2025 Notes
2033 Notes
July 2024 Notes
February 2025 Notes
June 2025 Notes
March 2026 A Notes
2027 Asset-Backed Notes
2028 Asset-Backed Notes
2022 Convertible Notes
Wells Facility
Union Bank Facility
Total

(in thousands)
Description
SBA Debentures
2022 Notes
July 2024 Notes
April 2025 Notes
2033 Notes
2027 Asset-Backed Notes
2028 Asset-Backed Notes
2022 Convertible Notes
Wells Facility
Union Bank Facility
Total

4. Investments

Carrying
Value

Approximate
Fair Value

Identical Assets
(Level 1)

  Observable Inputs  
(Level 2)

Unobservable
Inputs
(Level 3)

December 31, 2020

98,716  
149,039  
73,351  
38,610  
103,942  
49,522  
69,272  
49,550  
178,812  
247,647  
228,177  
—  
—  
1,286,638  

  $

  $

102,815  
152,490  
76,500  
42,880  
106,061  
49,664  
69,592  
50,092  
181,087  
250,469  
236,164  
—  
—  
1,317,814  

  $

  $

—  
—  
—  
—  
—  
—  
—  
—  
—  
—  
—  
—  
—  
—  

  $

  $

—  
152,490  
76,500  
42,880  
—  
—  
—  
—  
181,087  
250,469  
236,164  
—  
—  
939,590  

  $

  $

102,815  
—  
—  
—  
106,061  
49,664  
69,592  
50,092  
—  
—  
—  
—  
—  

378,224

Carrying
Value

Approximate
Fair Value

Identical Assets
(Level 1)

  Observable Inputs  
(Level 2)

Unobservable
Inputs
(Level 3)

December 31, 2019

148,165  
148,514  
103,685  
72,970  
38,501  
197,312  
247,395  
226,614  
—  
103,919  
1,287,075  

  $

  $

152,963  
151,215  
107,028  
77,430  
42,160  
200,750  
251,094  
234,922  
—  
103,919  
1,321,481  

  $

  $

—  
—  
—  
—  
—  
—  
—  
—  
—  
—  
—  

  $

  $

—  
151,215  
—  
77,430  
42,160  
200,750  
251,094  
234,922  
—  
—  
957,571  

  $

  $

152,963  
—  
107,028  
—  
—  
—  
—  
—  
—  
103,919  
363,910

  $

  $

  $

  $

Control and affiliate investments

As required by the 1940 Act, the Company classifies its investments by level of control. “Control investments” are defined in the 1940 Act as investments in those

companies that the Company is deemed to “control”. Under the 1940 Act, the Company is generally deemed to “control” a company in which it has invested if it owns 25% or
more of the voting securities of such company or has greater than 50% representation on its board. “Affiliate investments” are investments in those companies that are
“affiliated companies” of the Company, as defined in the 1940 Act, which are not control investments. The Company is deemed to be an “affiliate” of a company in which it has
invested if it owns 5% or more, but generally less than 25%, of the voting securities of such company. “Non-control/non-affiliate investments” are investments that are neither
control investments nor affiliate investments.

143

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The following table summarizes the Company’s realized gains and losses and changes in unrealized appreciation and depreciation on control and affiliate investments

for the years ended December 31, 2020, 2019, and 2018.
(in thousands)

Year Ended December 31, 2020

Portfolio Company
Control Investments
Gibraltar Business Capital, LLC
Tectura Corporation
Total Control Investments

Affiliate Investments
Optiscan BioMedical, Corp.
Pineapple Energy LLC
Solar Spectrum Holdings LLC (p.k.a. Sungevity, Inc.)
Total Affiliate Investments
Total Control & Affiliate Investments

(in thousands)

Portfolio Company
Control Investments
Gibraltar Business Capital, LLC
Tectura Corporation
Total Control Investments

Affiliate Investments
Optiscan BioMedical, Corp.
Solar Spectrum Holdings LLC (p.k.a. Sungevity, Inc.)
Total Affiliate Investments
Total Control & Affiliate Investments

(in thousands)

Portfolio Company
Control Investments
Achilles Technology Management Co II, Inc.
Gibraltar Business Capital, LLC
Second Time Around (Simplify Holdings, LLC)
Tectura Corporation
Total Control Investments

Affiliate Investments
Optiscan BioMedical, Corp.
Solar Spectrum Holdings LLC (p.k.a. Sungevity, Inc.)
Stion Corporation
Total Affiliate Investments
Total Control & Affiliate Investments

Type

Control
Control

Affiliate
Affiliate
Affiliate

Type

Control
Control

Affiliate
Affiliate

Type

Control
Control
Control
Control

Affiliate
Affiliate
Affiliate

  $

  $

  $

  $
  $

  $

  $

  $

  $
  $

  $

  $

  $

  $
  $

Fair Value at

December 31, 2020  

Interest
Income

Fee Income

48,800  
8,600  
57,400  

  $

  $

—  
8,340  
—  
8,340  
65,740  

  $

  $
  $

2,249  
608  
2,857  

  $

  $

13  
—  
520  
533  
3,390  

  $

  $
  $

Net Change in
Unrealized
Appreciation/
(Depreciation)

Realized
Gain/(Loss)

21  
—  
21  

  $

  $

—  
—  
—  
—  
21  

  $

  $
  $

(1,419 )   $
(852 )  

(2,271 )

  $

4,532  
(3,927 )
(346 )
259  
(2,012 )

  $

  $
  $

—  
—  
—  

(14,146 )
—  
(3 )
(14,149 )
(14,149 )

Fair Value at

December 31, 2019  

Interest
Income

Fee Income

Net Change in
Unrealized
Appreciation/
(Depreciation)

Realized
Gain/(Loss)

Year Ended December 31, 2019

50,160  
9,586  
59,746  

  $

  $

9,193  
12,615  
21,808  
81,554  

  $

  $
  $

2,238  
1,776  
4,014  

  $

  $

—  
2,008  
2,008  
6,022  

  $

  $
  $

18  
—  
18  

  $

  $

—  
186  
186  
204  

  $

  $
  $

10,619  
(9,024 )  
1,595  

  $

  $

585  
(3,451 )
(2,866 )
(1,271 )

  $

  $
  $

—  
—  
—  

—  
—  
—  
—  

Fair Value at

December 31, 2018  

Interest
Income

Fee Income

Net Change in
Unrealized
Appreciation/
(Depreciation)

Realized
Gain/(Loss)

Year Ended December 31, 2018

—  
1,508  
—  
1,883  
3,391  

—  
2,058  
—  
2,058  
5,449  

  $

  $

  $

  $
  $

—  
5  
—  
—  
5  

—  
336  
—  
336  
341  

  $

  $

  $

  $
  $

—  
39,491  
—  
18,128  
57,619  

6,977  
14,519  
—  
21,496  
79,115  

  $

  $

  $

  $
  $

144

  $

2,858  
(3,244 )
1,781  
(2,617 )  
(1,222 )

  $

65  
(8,285 )
1,378  
(6,842 )
(8,064 )

  $

  $
  $

(2,900 )
—  
(1,743 )
335  
(4,308 )

(680 )
—  
(1,378 )
(2,058 )
(6,366 )

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
   
   
   
   
   
   
   
 
 
 
 
   
   
   
   
 
 
 
   
   
   
   
 
 
 
 
 
   
 
 
   
 
 
 
 
 
 
   
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
   
   
   
   
   
   
   
 
 
 
 
   
   
   
   
 
 
 
 
 
   
 
 
   
 
 
 
 
 
 
   
 
 
   
 
 
 
 
 
   
 
 
   
 
 
 
 
 
 
   
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
   
   
   
   
   
   
   
 
 
 
 
   
   
   
   
 
 
 
 
 
 
 
 
 
 
 
 
92.2 %
0.6 %
3.0 %
3.3 %
0.9 %
0.0 %
100.0 %

93.1 %
2.2 %
1.6 %
1.4 %
1.5 %
0.2 %
100.0 %

Portfolio Composition

The following table shows the fair value of the Company’s portfolio of investments by asset class as of December 31, 2020 and December 31, 2019:

(in thousands)
Senior Secured Debt
Unsecured Debt
Preferred Stock
Common Stock
Warrants
Investment Funds & Vehicles
Total

December 31, 2020

December 31, 2019

Investments at
Fair Value

Percentage of
Total Portfolio

Investments at
Fair Value

Percentage of
Total Portfolio

2,079,465  
14,970  
58,981  
165,698  
34,622  
342  
2,354,078  

  $

88.4 %    
0.6 %    
2.5 %    
7.0 %    
1.5 %    
0.0 %    
100.0 %   $

2,133,812  
14,780  
69,717  
75,336  
20,881  
-  
2,314,526  

A summary of the Company’s investment portfolio, at value, by geographic location as of December 31, 2020 and December 31, 2019 is shown as follows:

(in thousands)
United States
Australia
Netherlands
United Kingdom
Ireland
Germany
Total

December 31, 2020

December 31, 2019

Investments at
Fair Value

Percentage of
Total Portfolio

Investments at
Fair Value

Percentage of
Total Portfolio

$

$

2,227,341  
53,086  
37,812  
29,533  
5,251  
1,055  
2,354,078  

94.6 % 
2.3 % 
1.6 % 
1.3 % 
0.2 % 
0.0 % 
100.0 % 

$

$

2,153,521  
51,547  
37,650  
32,027  
35,536  
4,245  
2,314,526  

The following table shows the fair value of the Company’s portfolio by industry sector at December 31, 2020 and December 31, 2019:

(in thousands)
Software
Drug Discovery & Development
Internet Consumer & Business Services
Sustainable and Renewable Technology
Information Services
Diversified Financial Services
Drug Delivery
Healthcare Services, Other
Medical Devices & Equipment
Media/Content/Info
Communications & Networking
Surgical Devices
Electronics & Computer Hardware
Consumer & Business Products
Semiconductors
Specialty Pharmaceuticals
Biotechnology Tools
Total

December 31, 2020

December 31, 2019

Investments at
Fair Value

Percentage of
Total Portfolio

Investments at
Fair Value

Percentage of
Total Portfolio

  $

780,045  
757,163  
514,538  
55,244  
54,510  
48,800  
46,744  
27,519  
26,464  
21,555  
10,763  
4,581  
3,360  
1,895  
892  
5  

                            -

  $

2,354,078  

33.1 %   $
32.2 %  
21.9 %  
2.4 %  
2.3 %  
2.1 %  
2.0 %  
1.2 %  
1.1 %  
0.9 %  
0.4 %  
0.2 %  
0.1 %  
0.1 %  
0.0 %  
0.0 %  
0.0 %  
100.0 %   $

582,445  
747,955  
495,132  
77,505  
60,094  
78,933  
46,218  
102,997  
73,341  
21,071  
3,962  
4,120  
4,462  
530  
10,658  
36  
5,067  
2,314,526  

25.2 %
32.2 %
21.4 %
3.3 %
2.6 %
3.4 %
2.0 %
4.5 %
3.2 %
0.9 %
0.2 %
0.2 %
0.2 %
0.0 %
0.5 %
0.0 %
0.2 %
100.0 %

No single portfolio investment represents more than 10% of the fair value of the Company’s total investments as of December 31, 2020 or December 31, 2019.

145

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
 
 
   
 
 
 
 
   
   
 
 
   
   
 
 
   
   
 
 
   
   
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unconsolidated Subsidiaries

In accordance with Rules 3-09 and 4-08(g) of Regulation S-X (“Rule 3-09” and “Rule 4-08(g),” respectively), the Company must determine if its unconsolidated

subsidiaries are considered “significant subsidiaries.” As of December 31, 2020 and December 31, 2019, there were no unconsolidated subsidiaries that are considered
“significant subsidiaries”.

Concentrations of Credit Risk

The Company’s customers are primarily privately held companies and public companies which are active in the “Software”, “Drug Discovery & Development”,
“Internet Consumer & Business Services”, “Sustainable and Renewable Technology”, and “Information Services” sectors. These sectors are characterized by high margins, high
growth rates, consolidation and product and market extension opportunities. Value for companies in these sectors is often vested in intangible assets and intellectual property.

Industry and sector concentrations vary as new loans are recorded and loans are paid off. Loan revenue, consisting of interest, fees, and recognition of gains on equity

and warrant or other equity-related interests, can fluctuate materially when a loan is paid off or a related warrant or equity interest is sold. Revenue recognition in any given year
can be highly concentrated among several portfolio companies.

For the years ended December 31, 2020 and December 31, 2019, the Company’s ten largest portfolio companies represented approximately 27.9% and 27.8% of the
total fair value of the Company’s investments in portfolio companies, respectively. At December 31, 2020 and December 31, 2019, the Company had three and six portfolio
companies, respectively, that represented 5% or more of the Company’s net assets. At December 31, 2020, the Company had four equity investments representing
approximately 63.7% of the total fair value of the Company’s equity investments, and each represented 5% or more of the total fair value of the Company’s equity investments.
At December 31, 2019, the Company had six equity investments which represented approximately 63.3% of the total fair value of the Company’s equity investments, and each
represented 5% or more of the total fair value of such investments.

Investment Collateral

In the majority of cases, the Company collateralizes its investments by obtaining a first priority security interest in a portfolio company’s assets, which may include its

intellectual property. In other cases, the Company may obtain a negative pledge covering a company’s intellectual property. At December 31, 2020, approximately 84.2% of
the Company’s debt investments at fair value were in a senior secured first lien position, with 43.5% secured by a first priority security in all of the assets of the portfolio
company, including its intellectual property, 31.0% secured by a first priority security in all of the assets of the portfolio company and the portfolio company was prohibited
from pledging or encumbering its intellectual property, 0.6% of the Company’s debt investments at fair value were senior secured by the equipment of the portfolio company,
and 9.1% of the Company’s debt investments at fair value were in a first lien “last-out” senior secured position with security interest in all of the assets of the portfolio company,
whereby the “last-out” loans will be subordinated to the “first-out” portion of the unitranche loan in a liquidation, sale or other disposition. Another 15.1% of the Company’s
debt investments at fair value were secured by a second priority security interest in the portfolio company’s assets, and 0.7% were unsecured.

146

 
 
 
5. Borrowings

Outstanding Borrowings

At December 31, 2020 and December 31, 2019, the Company had the following available and outstanding borrowings:

December 31, 2020

Principal

Carrying Value
(1)

(in thousands)
SBA Debentures (2)
2022 Notes
July 2024 Notes
April 2025 Notes
2033 Notes
February 2025 Notes
June 2025 Notes
March 2026 A Notes
2027 Asset-Backed Notes
2028 Asset-Backed Notes
2022 Convertible Notes
Wells Facility (3)
Union Bank Facility (3)
Total

  Total Available  
99,000  
  $
150,000  
105,000  
75,000  
40,000  
50,000  
70,000  
50,000  
180,988  
250,000  
230,000  
75,000  
400,000  
1,774,988  

  $

  $

  $

99,000  
150,000  
105,000  
75,000  
40,000  
50,000  
70,000  
50,000  
180,988  
250,000  
230,000  
—  
—  
1,299,988  

  $

  $

  $

    Total Available  
149,000  
150,000  
105,000  
75,000  
40,000  
—  
—  
—  
200,000  
250,000  
230,000  
75,000  
200,000  
1,474,000  

  $

98,716  
149,039  
103,942  
73,351  
38,610  
49,522  
69,272  
49,550  
178,812  
247,647  
228,177  
—  
—  
1,286,638  

December 31, 2019

Principal

$

$

149,000  
150,000  
105,000  
75,000  
40,000  
—  
—  
—  
200,000  
250,000  
230,000  
—  
103,919  
1,302,919  

  Carrying Value (1)  
148,165  
  $
148,514  
103,685  
72,970  
38,501  
—  
—  
—  
197,312  
247,395  
226,614  
—  
103,919  
1,287,075

  $

(1)

(2)
(3)

Except for the Wells Facility and Union Bank Facility, all carrying values represent the principal amount outstanding less the remaining unamortized debt issuance costs and unaccreted premium or
discount, if any, associated with the loan as of the balance sheet date.
At December 31, 2020 and December 31, 2019, the total available borrowings under the SBA debentures were $99.0 million and $149.0 million, respectively.
Availability subject to the Company meeting the borrowing base requirements.

Debt issuance costs, net of accumulated amortization, were as follows as of December 31, 2020 and December 31, 2019:

(in thousands)
SBA Debentures
2022 Notes
July 2024 Notes
February 2025 Notes
June 2025 Notes
March 2026 A Notes
April 2025 Notes
2033 Notes
2027 Asset-Backed Notes
2028 Asset-Backed Notes
2022 Convertible Notes
Wells Facility (1)
Union Bank Facility (1)
Total

December 31, 2020

December 31, 2019

$

$

284  
660  
1,058  
478  
728  
450  
1,649  
1,390  
2,176  
2,353  
1,040  
198  
2,485  
14,949  

  $

835  
1,020  
1,315  
—  
—  
—  
2,030  
1,499  
2,688  
2,605  
1,932  
373  
1,497  

  $

15,794

(1)

 As the Wells Facility and Union Bank Facility are line-of-credit arrangements, the debt issuance costs associated with these instruments are included within Other Assets on the Consolidated
Statements of Assets and Liabilities in accordance with ASC Subtopic 835-30.

Long-Term SBA Debentures

 On May 26, 2010, HT III received a license to operate as a SBIC under the SBIC program in which HT III can borrow funds from the SBA against eligible investments

and additional contributions to regulatory capital. The Company paid down $38.7 million and $11.3 million of SBA debentures on March 1, 2020, and September 1, 2020,
respectively. With the Company’s net investment of $74.5 million in HT III as of December 31, 2020, HT III has the capacity to issue a total of $149.0 million of SBA
guaranteed debentures, subject to SBA approval, of which $99.0 million was outstanding as of December 31, 2020 . As the Company is past its investment period for HT III, it
will no longer make any future commitments to new portfolio companies. The Company will only satisfy contractually agreed upon follow-on fundings to existing portfolio
companies and may seek to pay-off a portion or all of the outstanding debentures early as per the available liquidity in HT III.

147

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Additionally, on October 27, 2020, HC IV was licensed to operate as a SBIC under the SBA. This additional license has a 10-year term. With the additional license, HC

IV gained access to $175.0 million of capital through the SBA debenture program, in addition to the Company’s regulatory capital commitment of $87.5 million to HC IV
which will be used for investment purposes. During the period, the Company funded $19.1 million in leverageable capital and has not drawn any debentures. As of December
31, 2020, HC IV has no material assets other than cash from the regulatory capital provided.

As of December 31, 2020, HT III has paid the SBA commitment fees and facility fees of approximately $1.5 million and $3.6 million, respectively. As of December
31, 2020, the Company held investments in HT III in 29 companies with a fair value of approximately $137.4 million, accounting for approximately 5.8% of the Company’s
total investment portfolio at December 31, 2020. HT III held approximately $201.2 million in tangible assets which accounted for approximately 7.7% of the Company’s total
assets at December 31, 2020.

SBICs are designed to stimulate the flow of private equity capital to eligible small businesses. SBICs are subject to a variety of regulations and oversight by the SBA

concerning the size and nature of the companies in which they may invest as well as the structures of those investments.

HT III is periodically examined and audited by the SBA’s staff to determine its compliance with SBA regulations. HT III was in compliance with the terms of the

SBIC’s leverage as of December 31, 2020 as a result of having sufficient capital as defined under the SBA regulations. The average amount of debentures outstanding for the
year ended December 31, 2020 for HT III was approximately $113.0 million with an average interest rate of approximately 3.07%.

For the years ended December 31, 2020, 2019, and 2018, the components of interest expense and related fees and cash paid for interest expense for the SBA debentures

are as follows:

(in thousands)
Interest expense
Amortization of debt issuance cost (loan fees)

Total interest expense and fees

Cash paid for interest expense

2020

Year Ended December 31,
2019

2018

$

$

$

3,464  
551  
4,015  

4,285  

$

$

$

5,107  
510  
5,617  

5,080  

$

$

$

6,370  
714  
7,084  

6,942

The Company reported the following SBA debentures outstanding principal balances as of December 31, 2020 and 2019:

(in thousands)
Issuance / Pooling Date
September 22, 2010
March 29, 2011
September 21, 2011
March 21, 2012
March 21, 2012
September 19, 2012
March 27, 2013
Total SBA Debentures

(1)

Interest rate includes annual charge.

Maturity Date

  September 1, 2020
  March 1, 2021
  September 1, 2021
  March 1, 2022
  March 1, 2022
  September 1, 2022
  March 1, 2023

Interest Rate (1)
3.50%
4.37%
3.16%
3.28%
3.05%
3.05%
3.16%

  $

  $

December 31, 2020

December 31, 2019

—  
—  
25,000  
25,000  
—  
24,250  
24,750  
99,000  

  $

  $

10,000  
28,750  
25,000  
25,000  
11,250  
24,250  
24,750  
149,000

148

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
   
 
 
 
 
   
 
 
 
 
 
 
 
 
2022 Notes

On October 23, 2017, the Company issued $150.0 million in aggregate principal amount of the 2022 Notes. The 2022 Notes were issued pursuant to the Fourth
Supplemental Indenture to the Base Indenture, dated October 23, 2017 (the “2022 Notes Indenture”), between the Company and U.S. Bank, National Association, as trustee (the
“2022 Trustee”). The sale of the 2022 Notes generated net proceeds of approximately $147.4 million, including a public offering discount of $826,500. Aggregate estimated
offering expenses in connection with the transaction, including the underwriter’s discounts and commissions of approximately $975,000, were approximately $1.8 million.

The 2022 Notes mature on October 23, 2022, unless previously repurchased in accordance with their terms. The 2022 Notes bear interest at a rate of 4.625% per year

payable semiannually in arrears on April 23 and October 23 of each year, commencing on April 23, 2018.

The 2022 Notes are unsecured obligations of the Company that rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly

subordinated, or junior, in right of payment to the 2022 Notes. The 2022 Notes are not guaranteed by any of the Company’s current or future subsidiaries. The 2022 Notes rank
pari passu, or equally, in right of payment with all of the Company’s existing and future liabilities that are not so subordinated, or junior. The 2022 Notes effectively rank
subordinated, or junior, to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets
securing such indebtedness. The 2022 Notes rank structurally subordinated, or junior, to all existing and future indebtedness (including trade payables) incurred by subsidiaries,
financing vehicles or similar facilities of the Company.

  The Company may redeem some or all of the 2022 Notes at any time, or from time to time, at the redemption price set forth under the terms of the indenture after

September 23, 2022. No sinking fund is provided for the 2022 Notes. The 2022 Notes were issued in denominations of $2,000 and integral multiples of $1,000 thereof. As of
December 31, 2020, the Company was in compliance with the terms of the 2022 Notes Indenture.

As of December 31, 2020 and December 31, 2019, the components of the carrying value of the 2022 Notes were as follows:

(in thousands)
Principal amount of debt
Unamortized debt issuance cost
Original issue discount, net of accretion
Carrying value of 2022 Notes

$

$

December 31, 2020

December 31, 2019

150,000  

(660 )  
(301 )  

149,039  

$

$

150,000  
(1,020 )
(466 )

148,514

For the years ended December 31, 2020, 2019, and 2018, the components of interest expense and related fees and cash paid for interest expense for the 2022 Notes are

as follows:

(in thousands)
Interest expense
Amortization of debt issuance cost (loan fees)
Accretion of original issue discount
Total interest expense and fees

Cash paid for interest expense

 2024 Notes

2020

Year Ended December 31,
2019

2018

$

$
$

7,142  
360  
165  
7,667  
6,938  

$

$
$

6,938  
360  
165  
7,563  
6,938  

$

$
$

6,938  
351  
165  
7,454  
6,938

On July 14, 2014, the Company and U.S. Bank, N.A. (the “2024 Trustee”), entered into the Third Supplemental Indenture to the Base Indenture between the Company
and the 2024 Trustee, dated July 14, 2014, relating to the Company’s issuance, offer and sale of $100.0 million aggregate principal amount the 2024 Notes. On August 6, 2014,
the underwriters issued notification to exercise their over-allotment option for an additional $3.0 million in aggregate principal amount of the 2024 Notes.

On May 2, 2016, the Company closed an underwritten public offering of an additional $72.9 million in aggregate principal amount of the 2024 Notes. The $72.9
million in aggregate principal amount includes $65.4 million from the initial offering on April 21, 2016 and $7.5 million as a result of underwriters exercising a portion of their
option to purchase up to an additional $9.8 million in aggregate principal to cover overallotments on April 29, 2016.

149

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
On June 27, 2016, the Company closed an underwritten public offering of an additional $60.0 million in aggregate principal amount of the 2024 Notes. On June 30,

2016, the underwriters exercised their option to purchase up to an additional $9.0 million in aggregate principal to cover overallotments, resulting in total aggregate principal of
$69.0 million from the offering.

On October 11, 2016, the Company entered into a debt distribution agreement, pursuant to which it may offer for sale, from time to time, up to $150.0 million in

aggregate principal amount of 2024 Notes through FBR Capital Markets & Co. acting as its sales agent. Sales of the 2024 Notes may be made in negotiated transactions or
transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act, including sales made directly on the NYSE, or similar securities
exchange or sales made through a market maker other than on an exchange at prices related to prevailing market prices or at negotiated prices.

On October 24, 2017, the Board of Directors approved a redemption of $75.0 million of outstanding aggregate principal amount of the 2024 Notes, which were
redeemed on November 23, 2017. On February 9, 2018, the Board of Directors approved a redemption of $100.0 million of outstanding aggregate principal amount of the 2024
Notes, which were redeemed on April 2, 2018. Further, on December 7, 2018, the Board of Directors approved a full redemption, in two equal transactions, of $83.5 million of
the outstanding aggregate principal amount of the 2024 Notes. The 2024 Notes were fully redeemed on January 14, 2019 and February 4, 2019.

For the years ended December 31, 2020, 2019, and 2018, the components of interest expense and related fees and cash paid for interest expense for the 2024 Notes are

as follows: 

(in thousands)
Interest expense
Amortization of debt issuance cost (loan fees)
Amortization of original issue premium
Total interest expense and fees

Cash paid for interest expense

July 2024 Notes

2020

Year Ended December 31,
2019

2018

—  
—  
—  
—  
—  

$

$
$

210  
1,686  
110  
2,006  
1,305  

$

$
$

6,830  
2,905  
(54 )
9,681  
7,858

$

$
$

On July 16, 2019, the Company issued $105.0 million in aggregate principal amount of the July 2024 Notes to qualified institutional investors in a private placement

pursuant to a note purchase agreement. The sale of the July 2024 Notes generated net proceeds of approximately $103.5 million. Aggregate estimated offering expenses in
connection with the transaction, including fees and commissions, were approximately $1.5 million.

The July 2024 Notes have a fixed interest rate of 4.77% and are due on July 16, 2024, unless redeemed, purchased or prepaid prior to such date by the Company or its

affiliates in accordance with their terms. Interest on the July 2024 Notes is due semiannually and the July 2024 Notes are general unsecured obligations of the Company that
rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by the Company.

As of December 31, 2020 and December 31, 2019, the components of the carrying value of the July 2024 Notes were as follows:

(in thousands)
Principal amount of debt
Unamortized debt issuance cost

Carrying value of July 2024 Notes

December 31, 2020

December 31, 2019

$

$

105,000    
(1,058 )  
103,942    

$

$

105,000  
(1,315 )

103,685

For the years ended December 31, 2020, 2019, and 2018, the components of interest expense and related fees and cash paid for interest expense for the July 2024 Notes

are as follows: 

(in thousands)
Interest expense
Amortization of debt issuance cost (loan fees)

Total interest expense and fees

Cash paid for interest expense

2020

Year Ended December 31,
2019

2018

5,009  
294  
5,303  

5,009  

$

$

$

2,302  
115  
2,417  

—  

$

$

$

—  
—  
—  

—

$

$

$

150

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2020, the Company was in compliance with the terms of the note purchase agreement governing the July 2024 Notes.

February 2025 Notes

On February 5, 2020, the Company issued $50.0 million in aggregate principal amount of senior unsecured notes due February 2025 (the “February 2025 Notes”) to

qualified institutional investors in a private placement pursuant to a note purchase agreement (“2025 Note Purchase Agreement”). The sale of the February 2025 Notes generated
net proceeds of approximately $49.4 million. Aggregate estimated offering expenses in connection with the transaction, including fees and commissions, were approximately
$581,000.

The February 2025 Notes have a fixed interest rate of 4.28% and are due February 2025, unless redeemed, purchased or prepaid prior to such date by the Company or

its affiliates in accordance with their terms. Interest on the February 2025 Notes is due semiannually and the February 2025 Notes are general unsecured obligations of the
Company that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by the Company.

The 2025 Note Purchase Agreement also provided for the issuance of an additional $70.0 million aggregate principal amount of senior unsecured notes due June 2025

with a fixed interest rate of 4.31% per year that were issued in June 2020 and is described below.

As of December 31, 2020 and December 31, 2019, the components of the carrying value of the February 2025 Notes were as follows:

(in thousands)
Principal amount of debt
Unamortized debt issuance cost

Carrying value of February 2025 Notes

December 31, 2020

December 31, 2019

$

$

50,000    
(478 )  

49,522  

$

$

—  
—  
—

For the years ended December 31, 2020, 2019, and 2018, the components of interest expense and related fees and cash paid for interest expense for the February 2025

Notes are as follows:

(in thousands)
Interest expense
Amortization of debt issuance cost (loan fees)

Total interest expense and fees

Cash paid for interest expense

2020

Year Ended December 31,
2019

2018

$

$

$

1,938  
103  
2,041  

1,070  

$

$

$

—  
—  
—  

—  

$

$

$

—  
—  
—  

—

As of December 31, 2020, the Company was in compliance with the terms of the 2025 Note Purchase Agreement.

April 2025 Notes

On April 26, 2018, the Company issued $75.0 million in aggregate principal amount of the April 2025 Notes. The April 2025 Notes were issued pursuant to the April
2025 Notes Indenture. The sale of the April 2025 Notes generated net proceeds of approximately $72.4 million. Aggregate estimated offering expenses in connection with the
transaction, including the underwriter’s discount and commissions, were approximately $2.6 million.

The April 2025 Notes will mature on April 30, 2025, unless previously repurchased in accordance with their terms. The April 2025 Notes bear interest at a rate of
5.25% per year payable quarterly in arrears on January 30, April 30, July 30, and October 30 of each year, commencing on July 30, 2018 and trade on the NYSE under the
symbol “HCXZ”. The April 2025 Notes are the Company’s direct unsecured obligations and rank pari passu, or equally in right of payment, with all outstanding and future
unsecured unsubordinated indebtedness issued by the Company.

The Company may redeem some or all of the April 2025 Notes at any time, or from time to time, at the redemption price set forth under the terms of the indenture after

April 30, 2021. No sinking fund is provided for the April 2025 Notes. The April 2025 Notes were issued in denominations of $25 and integral multiples of $25 thereof.

151

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2020 and December 31, 2019, the components of the carrying value of the April 2025 Notes were as follows:

(in thousands)
Principal amount of debt
Unamortized debt issuance cost

Carrying value of April 2025 Notes

December 31, 2020

December 31, 2019

$

$

75,000    
(1,649 )  
73,351  

$

$

75,000  
(2,030 )
72,970

For the years ended December 31, 2020, 2019, and 2018, the components of interest expense and related fees and cash paid for interest expense for the April 2025

Notes are as follows:

(in thousands)
Interest expense
Amortization of debt issuance cost (loan fees)

Total interest expense and fees

Cash paid for interest expense

2020

Year Ended December 31,
2019

2018

$

$
$

3,938  
381  
4,319  
3,938  

$

$
$

3,938  
381  
4,319  
3,938  

$

$
$

2,680  
221  
2,901  
2,013

As of December 31, 2020, the Company was in compliance with the terms of the April 2025 Notes Indenture.

June 2025 Notes

On June 3, 2020, the Company issued $70.0 million in aggregate principal amount of senior unsecured notes due June 2025 (the “June 2025 Notes”) to qualified

institutional investors in a private placement pursuant to the 2025 Note Purchase Agreement. The sale of the June 2025 Notes generated net proceeds of approximately $69.2
million. Aggregate estimated offering expenses in connection with the transaction, including fees and commissions, were approximately $819,000.

 The June 2025 Notes have a fixed interest rate of 4.31% and are due June 2025, unless redeemed, purchased or prepaid prior to such date by the Company or its

affiliates in accordance with their terms. Interest on the June 2025 Notes is due semiannually and the June 2025 Notes are general unsecured obligations of the Company that
rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by the Company.

As of December 31, 2020 and December 31, 2019, the components of the carrying value of the June 2025 Notes were as follows:

(in thousands)
Principal amount of debt
Unamortized debt issuance cost

Carrying value of June 2025 Notes

December 31, 2020

December 31, 2019

$

$

70,000    
(728 )  

69,272  

$

$

—  
—  
—

For the years ended December 31, 2020, 2019, and 2018, the components of interest expense and related fees and cash paid for interest expense for the June 2025 are as

follows:

(in thousands)
Interest expense
Amortization of debt issuance cost (loan fees)

Total interest expense and fees

Cash paid for interest expense

2020

Year Ended December 31,
2019

2018

$

$
$

1,743  
92  
1,835  
1,509  

$

$
$

—  
—  
—  
—  

$

$
$

—  
—  
—  
—

As of December 31, 2020, the Company was in compliance with the terms of the 2025 Note Purchase Agreement.

March 2026 A Notes

On November 4, 2020, the Company issued $50.0 million in aggregate principal amount of senior unsecured notes due March 2026 (the “March 2026 A Notes”) to

qualified institutional investors in a private placement pursuant to the First Supplement to the 2025 Note Purchase Agreement. The sale of the March 2026 A Notes generated
net proceeds of approximately $49.5 million.

152

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate estimated offering expenses in connection with the transaction, including fees and commissions, were approximately $464,000.

The March 2026 A Notes have a fixed interest rate of 4.50% and are due March 2026, unless redeemed, purchased or prepaid prior to such date by the Company or its

affiliates in accordance with their terms. Interest on the March 2026 A Notes is due semiannually and the March 2026 A Notes are general unsecured obligations of the
Company that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by the Company.

The First Supplement to the 2025 Note Purchase Agreement also provides for the issuance of an additional $50.0 million aggregate principal amount of senior

unsecured notes due March 2026 with a fixed interest rate of 4.55% per year that are expected to be issued in March 2021, subject to the satisfaction of customary closing
conditions contained in the First Supplement to the 2025 Note Purchase Agreement.

As of December 31, 2020 and December 31, 2019, the components of the carrying value of the March 2026 A Notes were as follows:

(in thousands)
Principal amount of debt
Unamortized debt issuance cost

Carrying value of March 2026 A Notes

December 31, 2020

December 31, 2019

$

$

50,000    
(450 )  

49,550  

$

$

—  
—  
—

For the years ended December 31, 2020, 2019, and 2018, the components of interest expense and related fees and cash paid for interest expense for the March 2026 A

Notes are as follows:

(in thousands)
Interest expense
Amortization of debt issuance cost (loan fees)

Total interest expense and fees

Cash paid for interest expense

2020

Year Ended December 31,
2019

2018

$

$
$

356  
14  
370  
—  

$

$
$

—  
—  
—  
—  

$

$
$

—  
—  
—  
—

As of December 31, 2020, the Company was in compliance with the terms of the First Supplement to the 2025 Note Purchase Agreement.

2033 Notes

On September 24, 2018, the Company issued $40.0 million in aggregate principal amount of the 2033 Notes. The 2033 Notes were issued pursuant to the 2033 Notes

Indenture. The sale of the 2033 Notes generated net proceeds of approximately $38.4 million. Aggregate estimated offering expenses in connection with the transaction,
including the underwriter’s discount and commissions, were approximately $1.6 million.

The 2033 Notes will mature on October 30, 2033, unless previously repurchased in accordance with their terms. The 2033 Notes bear interest at a rate of 6.25% per year

payable quarterly in arrears on January 30, April 30, July 30, and October 30 of each year, commencing on October 30, 2018 and trade on the NYSE under the symbol
“HCXY.”

The 2033 Notes are the Company’s direct unsecured obligations and rank pari passu, or equally in right of payment, with all outstanding and future unsecured

unsubordinated indebtedness issued by the Company.

The Company may redeem some or all of the 2033 Notes at any time, or from time to time, at the redemption price set forth under the terms of the 2033 Notes
Indenture after October 30, 2023. No sinking fund is provided for the 2033 Notes. The 2033 Notes were issued in denominations of $25 and integral multiples of $25 thereof.

As of December 31, 2020 and December 31, 2019, the components of the carrying value of the 2033 Notes were as follows:

(in thousands)
Principal amount of debt
Unamortized debt issuance cost

Carrying value of 2033 Notes

December 31, 2020

December 31, 2019

40,000  
(1,390 )  
38,610  

$

$

40,000  
(1,499 )
38,501

$

$

153

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the years ended December 31, 2020, 2019, and 2018, the components of interest expense and related fees and cash paid for interest expense for the 2033 Notes are

as follows:

 (in thousands)
Interest expense
Amortization of debt issuance cost (loan fees)

Total interest expense and fees

Cash paid for interest expense

2020

Year Ended December 31,
2019

2018

$

$

$

2,500  
108  
2,608  

2,500  

$

$

$

2,500  
108  
2,608  

2,500  

$

$

$

674  
25  
699  

250

As of December 31, 2020, the Company was in compliance with the terms of the 2033 Notes Indenture.

2027 Asset-Backed Notes

On November 1, 2018, the Company completed a term debt securitization in connection with which an affiliate of the Company made an offering of $200.0 million in

aggregate principal amount of the 2027 Asset-Backed Notes.

  The 2027 Asset-Backed Notes were issued by the 2018 Securitization Issuer pursuant to a note purchase agreement, dated as of October 25, 2018, by and among the
Company, the 2018 Trust Depositor, the 2018 Securitization Issuer, and Guggenheim Securities, LLC, as initial purchaser , and are backed by a pool of senior loans made to
certain portfolio companies of the Company and secured by certain assets of those portfolio companies and are to be serviced by the Company. As of October 21, 2020, the
securitization is past its reinvestment period, and it may no longer reinvest principal collections into additional eligible loans.  Accordingly, available funds from principal
collections were used to pay $19.0 of the outstanding principal balance on the 2027 Asset-Backed Notes during the year ended December 31, 2020. Interest on the 2027 Asset-
Backed Notes will be paid, to the extent of funds available, at a fixed rate of 4.605% per annum. The 2027 Asset-Backed Notes have a stated maturity of November 22, 2027.

At December 31, 2020 and December 31, 2019, the 2027 Asset-Backed Notes had an outstanding principal balance of $181.0 million, and $200.0 million, respectively.

For the years ended December 31, 2020, 2019, and 2018, the components of interest expense and related fees and cash paid for interest expense for the 2027 Asset-

Backed Notes are as follows:

 (in thousands)
Interest expense
Amortization of debt issuance cost (loan fees)

Total interest expense and fees

Cash paid for interest expense

2020

Year Ended December 31,
2019

2018

$

$
$

9,116  
512  
9,628  
9,139  

$

$
$

9,209  
279  
9,488  
9,210  

$

$
$

1,509  
44  
1,553  
1,254

Under the terms of the 2027 Asset-Backed Notes, the Company is required to maintain a reserve cash balance, funded through proceeds from the sale of the 2027 Asset-

Backed Notes and through interest and principal collections from the underlying securitized debt portfolio, which may be used to pay monthly interest and principal payments
on the 2027 Asset-Backed Notes. The Company has segregated these funds and classified them as restricted cash. At December 31, 2020 and December 31, 2019, there was
approximately $19.1 million and $20.9 million, respectively, of funds segregated as restricted cash related to the 2027 Asset-Backed Notes.

As of December 31, 2020, the Company was in compliance with the terms of the note purchase agreement governing the 2027 Asset-Backed Notes.

2028 Asset-Backed Notes

On January 22, 2019, the Company completed a term debt securitization in connection with which an affiliate of the Company made an offering of $250.0 million in

aggregate principal amount of the 2028 Asset-Backed Notes.

The 2028 Asset-Backed Notes were issued by the 2019 Securitization Issuer, pursuant to a note purchase agreement, dated as of January 14, 2019, by and among the
Company, Hercules Capital Funding 2019-1 LLC, as trust depositor, the 2019 Securitization Issuer, and Guggenheim Securities, LLC, as initial purchaser, MUFG Securities
Americas Inc., as a co-manager, and Wells Fargo Securities, LLC., as a co-manager, and are backed by a pool of senior loans made to certain portfolio companies of the
Company and secured by certain assets of those portfolio companies and are to be serviced by the Company. As of January 21, 2021, the

154

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
securitization is past its reinvestment period, and it may no longer reinvest principal collections into additional eligible loans. Interest on the 2028 Asset-Backed Notes will be
paid, to the extent of funds available, at a fixed rate of 4.703% per annum. The 2028 Asset-Backed Notes have a stated maturity of February 22, 2028.

At both December 31, 2020 and December 31, 2019, the 2028 Asset-Backed Notes had an outstanding principal balance of $250.0 million.

For the years ended December 31, 2020, 2019, and 2018, the components of interest expense and related fees and cash paid for interest expense for the 2028 Asset-

Backed Notes are as follows:

(in thousands)
Interest expense
Amortization of debt issuance cost (loan fees)

Total interest expense and fees

Cash paid for interest expense

2020

Year Ended December 31,
2019

2018

$

$

$

11,758  
257  
12,015  

11,756  

$

$

$

11,071  
253  
11,324  

10,744  

$

$

$

—  
—  
—  

—

Under the terms of the 2028 Asset-Backed Notes, the Company is required to maintain a reserve cash balance, funded through proceeds from the sale of the 2028 Asset-

Backed Notes and through interest and principal collections from the underlying securitized debt portfolio, which may be used to pay monthly interest and principal payments
on the 2028 Asset-Backed Notes. The Company has segregated these funds and classified them as restricted cash. At December 31, 2020 and December 31, 2019, there was
approximately $20.2 million and $29.7 million, respectively, of funds segregated as restricted cash related to the 2028 Asset-Backed Notes.

As of December 31, 2020, the Company was in compliance with the terms of the note purchase agreement governing the 2028 Asset-Backed Notes.

2022 Convertible Notes

On January 25, 2017, the Company issued $230.0 million in aggregate principal amount of the 2022 Convertible Notes, which amount includes the additional $30.0

million aggregate principal amount of 2022 Convertible Notes issued pursuant to the initial purchaser’s exercise in full of its overallotment option. The 2022 Convertible Notes
were issued pursuant to an Indenture, dated January 25, 2017 (the “2022 Convertible Notes Indenture”), between the Company and the 2022 Trustee. The sale of the 2022
Convertible Notes generated net proceeds of approximately $225.5 million, including $4.5 million of debt issuance costs.

The 2022 Convertible Notes mature on February 1, 2022, unless previously converted or repurchased in accordance with their terms. The 2022 Convertible Notes bear

interest at a rate of 4.375% per year payable semiannually in arrears on February 1, and August 1 of each year, commencing on August 1, 2017.

The 2022 Convertible Notes are unsecured obligations of the Company and rank senior in right of payment to the Company’s future indebtedness that is expressly

subordinated in right of payment to the 2022 Convertible Notes; equal in right of payment to the Company’s existing and future indebtedness that is not so subordinated;
effectively junior in right of payment to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value
of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries,
financing vehicles or similar facilities.

Prior to the close of business on the business day immediately preceding August 1, 2021, holders may convert their 2022 Convertible Notes only under certain
circumstances set forth in the 2022 Convertible Notes Indenture. On or after August 1, 2021 until the close of business on the scheduled trading day immediately preceding the
maturity date, holders may convert their 2022 Convertible Notes at any time. Upon conversion, the Company will pay or deliver, as the case may be, at its election, cash,
shares of its common stock or a combination of cash and shares of its common stock. The conversion rate is initially 60.9366 shares of common stock per $1,000 principal
amount of 2022 Convertible Notes (equivalent to an initial conversion price of approximately $16.41 per share of common stock). The conversion rate will be subject to
adjustment in some events but will not be adjusted for any accrued and unpaid interest. In addition, if certain corporate events occur prior to the maturity date, the Company will
increase the conversion rate for a holder who elects to convert its 2022 Convertible Notes in connection with such a corporate event in certain circumstances. As of December
31, 2020, the conversion rate was 60.9366 shares of common stock per $1,000 principal amount of Convertible Senior Notes (equivalent to an adjusted conversion price of
approximately $16.41 per share of common stock).

The Company may not redeem the 2022 Convertible Notes at its option prior to maturity. No sinking fund is provided for the 2022 Convertible Notes. In addition, if

certain corporate events occur, holders of the 2022 Convertible Notes may require the

155

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Company to repurchase for cash all or part of their 2022 Convertible Notes at a repurchase price equal to 100% of the principal amount of the 2022 Convertible Notes to be
repurchased, plus accrued and unpaid interest through, but excluding, the required repurchase date.

    The 2022 Convertible Notes are accounted for in accordance with ASC Subtopic 470-20 (“Debt with Conversion and Other Options”). In accounting for the 2022

Convertible Notes, the Company estimated at the time of issuance that the values of the debt and the embedded conversion feature of the 2022 Convertible Notes were
approximately 98.5% and 1.5%, respectively . The original issue discount of 1.5% or $3.4 million, attributable to the conversion feature of the 2022 Convertible Notes was
recorded in “capital in excess of par value” in the Consolidated Statements  of Assets and Liabilities. As a result, the Company records interest expense comprised of both stated
interest expense as well as accretion of the original issue discount resulting in an estimated effective interest rate of approximately 4.76%.

As of December 31, 2020 and December 31, 2019, the components of the carrying value of the 2022 Convertible Notes were as follows:

(in thousands)
Principal amount of debt
Unamortized debt issuance cost
Original issue discount, net of accretion

Carrying value of 2022 Convertible Notes

$

$

December 31, 2020

December 31, 2019

230,000  

(1,040 )  
(783 )  

228,177  

$

$

230,000  
(1,932 )
(1,454 )

226,614

For the years ended December 31, 2020, 2019, and 2018, the components of interest expense, fees and cash paid for interest expense for the 2022 Convertible Notes

were as follows:

(in thousands)
Interest expense
Amortization of debt issuance cost (loan fees)
Accretion of original issue discount
Total interest expense and fees

Cash paid for interest expense

2020

Year Ended December 31,
2019

2018

$

$
$

10,062  
892  
671  
11,625  
10,062  

$

$
$

10,063  
892  
671  
11,626  
10,062  

$

$
$

10,063  
892  
671  
11,626  
10,062

As of December 31, 2020, the Company was in compliance with the terms of the indentures governing the 2022 Convertible Notes.

Credit Facilities

As of December 31, 2020 and December 31, 2019, the Company has two available credit facilities, the Wells Facility and the Union Bank Facility.

Wells Facility

On June 29, 2015, the Company, through a special purpose wholly owned subsidiary, Hercules Funding II LLC (“Hercules Funding II”), entered into an Amended and
Restated Loan and Security Agreement with Wells Fargo Capital Finance, LLC, as a lender and as the arranger and the administrative agent, and the lenders party thereto from
time to time.

On January 11, 2019, Hercules Funding II entered into the Seventh Amendment to the Wells Facility (the “Wells Facility Seventh Amendment”). Among others, the
Wells Facility Seventh Amendment amends certain key provisions of the Wells Facility to reduce the current interest rate to LIBOR plus 3.00% with an interest rate floor of
3.00%. The Wells Facility Seventh Amendment also extends the maturity date to January 2023, unless terminated earlier in accordance with its terms. In addition, the Wells
Fargo Capital Finance, LLC has committed $75.0 million in credit capacity with an accordion feature, in which the Company can increase the credit line up to an aggregate of
$125.0 million, funded by additional lenders and with the agreement of Wells Fargo and subject to other customary conditions. The Wells Facility has an advance rate of 55%
against eligible debt investments, and it is secured by all of the assets of Hercules Funding II. The Wells Facility requires payment of a non-use fee of up to 0.375% depending
on the average monthly outstanding balance under the facility relative to the maximum amount of commitments at such time.

156

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Wells Facility also includes various financial and other covenants applicable to the Company and the Company’s subsidiaries, in addition to those applicable to

Hercules Funding II, including covenants relating to certain changes of control of the Company and Hercules Funding II. Among other things, these covenants also require the
Company to maintain certain financial ratios, including a maximum debt to worth ratio, minimum interest coverage ratio, and a minimum tangible net worth ratio.

On July 2, 2019, Hercules Funding II entered into the Eighth Amendment to the Wells Facility (the “Wells Facility Eighth Amendment”). The Wells Facility Eighth
Amendment amends certain provisions of the Wells Facility to, among other things, revise certain provisions thereof to further permit a third party special servicer to act as
servicer after an event of default instead of the Company with respect to split-funded notes receivable owned by Hercules Funding II and an affiliate thereof (including Hercules
Funding IV LLC).

The Wells Facility provides for customary events of default, including, without limitation, with respect to payment defaults, breach of representations and covenants,

certain key person provisions, cross acceleration provisions to certain other debt, lien, and judgment limitations, and bankruptcy.

 As of December 31, 2020, the Company has no borrowings outstanding on the Wells Facility. The Company had no borrowings outstanding on the Wells Facility at

 December 31, 2019.

For the years ended December 31, 2020, 2019, and 2018, the components of interest expense and related fees and cash paid for interest expense for the Wells Facility

are as follows:

(in thousands)
Interest expense
Amortization of debt issuance cost (loan fees)
Unused facility and other fees (loan fees)
Total interest expense and fees

Cash paid for interest expense

2020

Year Ended December 31,
2019

2018

25  
175  
519  
719  
26  

$

$
$

435  
263  
628  
1,326  
449  

$

$
$

1,181  
178  
756  
2,115  
1,181

$

$
$

As of December 31, 2020, the Company was in compliance with the terms of the Wells Facility.

Union Bank Facility

 On February 20, 2020, the Company, through a special purpose wholly owned subsidiary, Hercules Funding IV LLC (“Hercules Funding IV”), as borrower, entered
into the credit facility (the “Union Bank Facility”) with MUFG Union Bank, as the arranger and administrative agent, and the lenders party to the Union Bank Facility from
time to time. The Union Bank Facility replaced the Company’s credit facility (the “2019 Union Bank Facility”) entered into on February 20, 2019 with MUFG Union Bank, as
the arranger and administrative agent, and the lenders party thereto. The 2019 Union Bank Facility replaced the Company’s credit facility (the “Prior Union Bank Facility”)
entered into on May 5, 2016 with MUFG Union Bank, as the arranger and administrative agent, and the lenders party thereto. Any references to amounts related to the Union
Bank Facility prior to February 20, 2020 were incurred and relate to the Prior Union Bank Facility or the 2019 Union Bank Facility, as applicable.

Under the Union Bank Facility, the lenders have made commitments of $400.0 million. The Union Bank Facility contains an accordion feature, in which the Company

can increase the credit line up to an aggregate of $200.0 million, funded by existing or additional lenders and with the agreement of MUFG Union Bank and subject to other
customary conditions. There can be no assurances that additional lenders will join the Union Bank Facility to increase available borrowings. Borrowings under the Union Bank
Facility generally bear interest at a rate per annum equal to LIBOR plus 2.50%. The Union Bank Facility matures on February 22, 2024, unless sooner terminated in accordance
with its terms. The Union Bank Facility is secured by all of the assets of Hercules Funding IV.

The Union Bank Facility requires payment of a non-use fee during the revolving credit availability period as follows: (i) 0.50% if less than or equal to 50% utilization;

(ii) 0.375% if more than 50% utilization but less than or equal to 80% utilization; and (iii) 0.20% if more than 80% is utilized.

The Union Bank Facility also includes financial and other covenants applicable to the Company and the Company’s subsidiaries, in addition to those applicable to
Hercules Funding IV, including covenants relating to certain changes of control of Hercules Funding IV. Among other things, these covenants also require the Company to
maintain certain financial ratios, including a minimum interest coverage ratio with respect to Hercules Funding IV and a minimum tangible net worth in an amount that is in
excess of $723.0 million.

157

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Union Bank Facility provides for customary events of default, including with respect to payment defaults, breach of representations and covenants, servicer

defaults, certain key person provisions, cross default provisions to certain other debt, lien and judgment limitations, and bankruptcy.

 As of December 31, 2020, the Company has no borrowings outstanding on the Union Bank Facility . The Company had borrowings outstanding of $103.9 million on

the Union Bank Facility at December 31, 2019.

For the years ended December 31, 2020, 2019, and 2018, the components of interest expense and related fees and cash paid for interest expense for the previous and

current Union Bank Facility are as follows:

(in thousands)
Interest expense
Amortization of debt issuance cost (loan fees)
Unused facility and other fees (loan fees)
Total interest expense and fees

Cash paid for interest expense

2020

Year Ended December 31,
2019

2018

$

$

$

1,718  
1,266  
1,745  
4,729  

2,042  

$

$

$

1,877  
834  
769  
3,480  

1,592  

$

$

$

1,667  
338  
387  
2,392  

1,629

As of December 31, 2020, the Company was in compliance with the terms of the Union Bank Facility.

6. Income Taxes

The Company intends to operate so as to qualify to be subject to tax as a RIC under Subchapter M of the Code and, as such, will not be subject to U.S. federal income
tax on the portion of taxable income (including gains) distributed as dividends for U.S. federal income tax purposes to stockholders. Taxable income includes the Company’s
taxable interest, dividend and fee income, reduced by certain deductions, as well as taxable net realized securities gains. Taxable income generally differs from net income for
financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized appreciation or
depreciation, as such gains or losses are not included in taxable income until they are realized.

To qualify and be subject to tax as a RIC, the Company is required to meet certain income and asset diversification tests in addition to distributing dividends of an
amount generally at least equal to 90% of its investment company taxable income, as defined by the Code and determined without regard to any deduction for distributions paid,
to its stockholders. The amount to be paid out as a distribution is determined by the Board of Directors each quarter and is based upon the annual earnings estimated by the
management of the Company. To the extent that the Company’s earnings fall below the amount of dividend distributions declared, however, a portion of the total amount of the
Company’s distributions for the fiscal year may be deemed a return of capital for tax purposes to the Company’s stockholders.

Because federal income tax regulations differ from accounting principles generally accepted in the United States, distributions in accordance with tax regulations may
differ from net investment income and realized gains recognized for financial reporting purposes. Differences may be permanent or temporary in nature. Permanent differences
are reclassified among capital accounts in the financial statements to reflect their appropriate tax character. Permanent differences may also result from the change in the
classification of short-term gains as ordinary income for tax purposes. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some
time in the future. Also, recent tax legislation requires that income be recognized for tax purposes no later than when recognized for financial reporting purposes.

During the year ended December 31, 2020, the Company reclassified $67.7 million from accumulated realized gains (losses) to additional paid-in capital for book
purposes primarily related to realized losses in four portfolio companies which are held in taxable subsidiaries and are not consolidated with the Company for income tax
purposes. In addition, the Company reclassified $6.6 million from undistributed ordinary income to additional paid-in capital for book purposes during the year ended December
31, 2020 relating to accelerated revenue recognition for the tax years prior to December 31, 2017, which are closed tax years. During the years ended December 31, 2020 and
2019, the Company reclassified amounts from undistributed ordinary income or accumulated realized gains (losses) to additional paid-in capital for book purposes, as follows:

(in thousands)
Undistributed net investment income (distributions in excess of investment income)
Accumulated realized gains (losses)
Additional paid-in capital

Year Ended December 31,

2020

2019

$

$

(26,297 )  
100,353  
(74,056 )  

11,831  
29,720  
(41,551 )

158

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For income tax purposes, distributions paid to shareholders are reported as ordinary income, return of capital, long-term capital gains, or a combination thereof. The tax

character of distributions paid for the year ended December 31, 2020 was ordinary income in the amount of $118.0 million and long-term capital gains in the amount of $36.7
million. The tax character of distributions paid for the year ended December 31, 2019 was ordinary income in the amount of $122.2 million and long-term capital gains in the
amount of $12.0 million.

The aggregate gross unrealized appreciation of the Company’s investments over cost for U.S. federal income tax purposes was $166.2 million and $70.3 million as of

December 31, 2020 and 2019, respectively. The aggregate gross unrealized depreciation of the Company’s investments under cost for U.S. federal income tax purposes was
$126.1 million and $144.1 million as of December 31, 2020 and 2019, respectively. The net unrealized depreciation over cost for U.S. federal income tax purposes was $40.1
million and $73.8 million as December 31, 2020 and 2019, respectively. The aggregate cost of securities for U.S. federal income tax purposes was $2.3 billion and $2.4 billion
as of December 31, 2020 and 2019, respectively.

At December 31, 2020 and 2019, the components of distributable earnings on a tax basis detailed below differ from the amounts reflected in the Company’s

Consolidated Statements of Assets and Liabilities by temporary book or tax differences primarily arising from the treatment of loan related yield enhancements.

(in thousands)
Accumulated capital gains
Other temporary differences
Undistributed ordinary income
Unrealized appreciation (depreciation)
Components of distributable earnings

Year Ended December 31,

2020

2019

$

$

9,923  
(11,711 )  
97,401  
37,778  
133,391  

$

$

4,722  
(6,728 )
63,271  
(73,430 )
(12,165 )

As a RIC, the Company will be subject to a 4% nondeductible U.S. federal excise tax on certain undistributed income unless the Company makes distributions treated

as dividends for U.S. federal income tax purposes in a timely manner to its stockholders in respect of each calendar year of an amount at least equal to the Excise Tax Avoidance
Requirement. The Company will not be subject to this excise tax on any amount on which the Company incurred U.S. federal corporate income tax (such as the tax imposed on
a RIC’s retained net capital gains).

Depending on the level of taxable income earned in a taxable year, the Company may choose to carry over taxable income in excess of current taxable year distributions

from such taxable income into the next taxable year and incur a 4% excise tax on such taxable income, as required. The maximum amount of excess taxable income that may
be carried over for distribution in the next taxable year under the Code is the total amount of distributions paid in the following taxable year, subject to certain declaration and
payment guidelines. To the extent the Company chooses to carry over taxable income into the next taxable year, distributions declared and paid by the Company in a taxable
year may differ from the Company’s taxable income for that taxable year as such distributions may include the distribution of current taxable year taxable income, the
distribution of prior taxable year taxable income carried over into and distributed in the current taxable year, or returns of capital.

The Company has taxable subsidiaries which hold certain portfolio investments in an effort to limit potential legal liability and/or comply with source-income type
requirements contained in the RIC tax provisions of the Code. These taxable subsidiaries are consolidated for U.S. GAAP and the portfolio investments held by the taxable
subsidiaries are included in the Company’s consolidated financial statements and are recorded at fair value. These taxable subsidiaries are not consolidated with the Company
for income tax purposes and may generate income tax expense, or benefit, and tax assets and liabilities as a result of their ownership of certain portfolio investments. Any
income generated by these taxable subsidiaries generally would be subject to tax at normal corporate tax rates based on its taxable income.

For the year ended December 31, 2020, the Company paid approximately $2.5 million of income tax, including excise tax, and had $3.0 million accrued but unpaid tax

expense as of December 31, 2020 . For the year ended December 31, 2019, the Company paid approximately $1.4 million of income tax, including excise tax, and had $1.3
million accrued but unpaid tax expense as of the balance sheet date.

The Company evaluates tax positions taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” to be
sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold, or uncertain tax positions, would be recorded as a tax
expense in the current year. It is the Company’s policy to recognize accrued interest and penalties, if any, related to unrecognized tax benefits as a component of provision for
income taxes.

159

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Based on an analysis of the Company’s tax position, there are no uncertain tax positions that met the recognition or measurement criteria. The Company is currently not

undergoing any tax examinations. The Company does not anticipate any significant increase or decrease in unrecognized tax benefits for the next twelve months. The 2017 -
2019 federal tax years for the Company remain subject to examination by the Internal Revenue Service. The 2016 – 2019 state tax years for the Company remain subject to
examination by the state taxing authorities.

7. Stockholders’ Equity

On September 7, 2017, the Company entered into an At-The-Market (“ATM”) equity distribution agreement (the “2017 Equity Distribution Agreement”), with JMP
Securities LLC (“JMP”). The 2017 Equity Distribution Agreement provided that the Company may offer and sell up to 12.0 million shares of its common stock from time to
time through JMP, as its sales agent.

On May 6, 2019, the Company terminated the 2017 Equity Distribution Agreement and entered into a new ATM equity distribution agreement with JMP (the “2019

Equity Distribution Agreement”). As a result, the remaining shares that were available under the 2017 Equity Distribution agreement are no longer available for issuance. The
2019 Equity Distribution Agreement provides that the Company may offer and sell up to 12.0 million shares of its common stock from time to time through JMP, as its sales
agent.

On July 2, 2020, the Company terminated the 2019 Equity Distribution Agreement and entered into a new ATM equity distribution agreement with JMP (the “2020

Equity Distribution Agreement”). As a result, the remaining shares that were available under the 2019 Equity Distribution Agreement are no longer available for issuance. The
2020 Equity Distribution Agreement provides that the Company may offer and sell up to 16.5 million shares of its common stock from time to time through JMP, as its sales
agent. Sales of the Company’s common stock, if any, may be made in negotiated transactions or transactions that are deemed to be “at the market,” as defined in Rule 415 under
the Securities Act of 1933, as amended (the “Securities Act”), including sales made directly on the NYSE or similar securities exchange or sales made to or through a market
maker other than on an exchange, at prices related to the prevailing market prices or at negotiated prices.

During the year ended December 31, 2020, the Company sold 6.3 million shares of common stock, of which 6.0 million shares and 306,000 shares were issued under

the 2019 Equity Distribution Agreement and the 2020 Equity Distribution Agreement, respectively. For the same period, the Company received total accumulated net proceeds
of approximately $77.2 million, including $1.0 million of offering expenses, from these sales, of which $73.6 million, including offering expenses of $810,000, was received
under the 2019 Equity Distribution Agreement, and $3.6 million, including offering expenses of $190,000, was received under the 2020 Equity Distribution Agreement.

During the year ended December 31, 2019, the Company sold 4.6 million shares of common stock, of which 679,000 shares and 3.9 million shares were issued under

the 2017 Equity Distribution Agreement and the 2019 Equity Distribution Agreement, respectively. For the same period, the Company received total accumulated net proceeds
of approximately $62.7 million, including $652,000 of offering expenses, from these sales, of which $8.5 million, including offering expenses of $146,000, was received under
the 2017 Equity Distribution Agreement, and $54.2 million, including offering expenses of $506,000, was received under the 2019 Equity Distribution Agreement.

The Company generally uses net proceeds from these offerings to make investments, to repurchase or pay down liabilities and for general corporate purposes. As of

December 31, 2020, approximately 16.2 million shares remain available for issuance and sale under the 2020 Distribution Agreement.

On June 14, 2018, the Company closed the June 2018 Equity Offering. The June 2018 Equity Offering generated net proceeds, before expenses, of $81.3 million,

including the underwriting discount and commissions of $2.6 million.

On December 17, 2018, the Board of Directors authorized a stock repurchase plan permitting the Company to repurchase up to $25.0 million of its common stock until

June 18, 2019, after which the plan expired. The Company had no common stock repurchases during 2019. During the year ended December 31, 2018, the Company
repurchased 376,466 shares of its common stock at an average price per share of $10.77 and a total cost of approximately $4.1 million.

On June 17, 2019, the Company closed the June 2019 Equity Offering. The June 2019 Equity Offering generated net proceeds, before expenses, of $70.5 million,

including the underwriting discount and commissions of $2.2 million.

 The Company has issued stock options for common stock subject to future issuance, of which 438,809 and 449,116 were outstanding at December 31, 2020 and

December 31, 2019, respectively.

160

 
 
8. Equity Incentive Plans

The Company and its stockholders authorized and adopted the 2004 Equity Incentive Plan (the “2004 Plan”) for purposes of attracting and retaining the services of its

executive officers and key employees. The Company and its stockholders authorized and adopted the 2006 Non-Employee Director Plan (the “2006 Plan”) for purposes of
attracting and retaining the services of its Board of Directors. On June 21, 2017, the 2006 Plan expired in accordance with its terms and no additional awards may be granted
under the 2006 Plan.

   On May 13, 2018, the Board of Directors further amended and restated the 2004 Plan and renamed it the Hercules Capital, Inc. Amended and Restated 2018 Equity
Incentive Plan (the “2018 Equity Incentive Plan”). Under the 2004 Plan, prior to the amendment and restatement, the Company was authorized to issue 12.0 million shares of
common stock. The 2018 Equity Incentive Plan, among other things, increased the number of shares available for issuance to eligible participants by an additional 6.7 million
shares. Unless earlier terminated by the Board, the 2018 Equity Incentive Plan will terminate on May 12, 2028. On May 13, 2018, the Board of Directors adopted the Hercules
Capital, Inc. 2018 Non-Employee Director Plan (the “Director Plan”). The Director Plan provides equity compensation in the form of restricted stock to the Company’s non-
employee directors. Subject to certain adjustments, the maximum aggregate number of shares of stock that may be authorized for issuance as restricted stock awards granted
under the Director Plan is 300,000 shares. Unless sooner terminated by the Board, the Director Plan will terminate on May 12, 2028. The 2018 Equity Incentive Plan and the
Director Plan were each approved by stockholders on June 28, 2018. Except for the Retention PSUs (as described below), these employee awards generally vest 33% one year
after the date of grant and ratably over the succeeding 24 months.

On May 29, 2018, the Company filed an exemptive application with the SEC and an amendment to the application on September 27, 2018, with respect to the 2018

Equity Incentive Plan and the Director Plan for exemptive relief from certain provisions of the 1940 Act. On January 30, 2019, the Company received approval from the SEC
on its request for exemptive relief that permits it to issue restricted stock to non-employee directors under the Director Plan and restricted stock and restricted stock units to
certain of its employees, officers, and directors (excluding non-employee directors) under the 2018 Equity Incentive Plan. The exemptive order also allows participants in the
Director Plan and the 2018 Equity Incentive Plan to (i) elect to have the Company withhold shares of its common stock to pay for the exercise price and applicable taxes with
respect to an option exercise (“net issuance exercise”) and/or (ii) permit the holders of restricted stock to elect to have the Company withhold shares of its stock to pay the
applicable taxes due on restricted stock at the time of vesting. Each individual employee would be able to make a cash payment to satisfy applicable tax withholding at the time
of option exercise or vesting on restricted stock.

The following table summarizes the common stock options activities for each of the three years ended December 31, 2020, 2019, and 2018:

Common Stock Options

Weighted Average Exercise Price

Shares Outstanding at December 31, 2017

Granted
Exercised
Forfeited
Expired

Shares Outstanding at December 31, 2018

Granted
Exercised
Forfeited
Expired

Shares Outstanding at December 31, 2019

Granted
Exercised
Forfeited
Expired

Shares Outstanding at December 31, 2020
Shares Expected to Vest at December 31, 2020

590,525  
114,000  
(63,769 )  
(53,438 )  
(106,286 )  
481,032  
123,500  
(48,914 )  
(53,837 )  
(52,665 )  
449,116  
97,000  
(53,803 )  
(40,532 )  
(12,972 )  
438,809  
133,203  

$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

13.60  
12.55  
11.05  
13.27  
15.08  
13.40  
13.00  
12.47  
12.61  
14.82  
13.32  
12.04  
12.30  
13.26  
12.89  
13.18  
13.57

All options may be exercised for a period ending seven to ten years after the date of grant. At December 31, 2020, options for approximately 438,809 shares were

outstanding at a weighted average exercise price of approximately $13.18 per share with weighted average of remaining contractual term of 4.04 years and an aggregate
intrinsic value of $661,000. At December 31, 2020, options for

161

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
approximately 305,606 shares were exercisable at a weighted average exercise price of approximately $13.57 per share with weighted average of remaining contractual term of
3.13 years and an aggregate intrinsic value of $373,000.

The Company determined that the fair value of options granted under the Plans during the years ended December 31, 2020, 2019, and 2018 was approximately $10,000,
$43,000 and $57,000, respectively. During the years ended December 31, 2020, 2019, and 2018, approximately $28,000, $41,000, and $54,000 of share-based cost due to stock
option grants was expensed, respectively. As of December 31, 2020, there was approximately $24,000 of total unrecognized compensation costs related to stock options. These
costs are expected to be recognized over a weighted average period of 1.59 years.

The Company follows ASC Topic 718 (“Compensation – Stock Compensation”) to account for stock options granted. Under ASC Topic 718, compensation expense

associated with stock-based compensation is measured at the grant date based on the fair value of the award and is recognized over the vesting period. Determining the
appropriate fair value model and calculating the fair value of stock-based awards at the grant date requires judgment, including estimating stock price volatility, forfeiture rate
and expected option life. The fair value of options granted is based upon a Black Scholes OPM using the assumptions in the following table for each of the years ended
December 31, 2020, 2019, and 2018 and is as follows:

Expected Volatility
Expected Dividends
Expected term (in years)
Risk-free rate

2020
15.71%
10.00%
4.5
0.10% - 1.60%

Year Ended December 31,
2019
18.40%
10.00%
4.5
1.33% - 2.62%

2018
21.19%
10.00%
4.5
2.19% - 3.08%

 In 2020, 2019, and 2018, the Company granted approximately 693,248, 136,081, and 334,995 shares, respectively, of restricted stock awards pursuant to the Plans. The

Company determined that the fair values, based on grant date close price, of restricted stock awards granted under the Plans during the years ended December 31, 2020, 2019,
and 2018 were approximately $9.7 million, $1.7 million and $4.4 million. As of December 31, 2020, there was approximately $7.2 million of total unrecognized compensation
cost related to restricted stock awards. These costs are expected to be recognized over a weighted average period of 1.97  years.

162

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The following table summarizes the activities for the Company’s unvested restricted stock awards for each of the three years ended, December 31, 2020, 2019, and

2018:

Unvested at December 31, 2017

Granted
Vested
Forfeited

Unvested at December 31, 2018

Granted
Vested
Forfeited

Unvested at December 31, 2019

Granted
Vested
Forfeited

Unvested at December 31, 2020

Unvested Restricted Stock Awards

Restricted
Stock Awards

Weighted Average
Grant Date Fair Value

261,245  
334,995  
(212,285 )  
(3,085 )  

380,870  
136,081  
(204,195 )  
(134,247 )  
178,509  
693,248  
(100,279 )  
(20,677 )  
750,801  

$
$
$
$
$
$
$
$
$
$
$
$
$

12.43  
13.04  
12.47  
11.70  
12.95  
12.80  
12.86  
13.04  
12.88  
14.01  
12.89  
14.15  
13.89

In 2020, no shares of restricted stock units were granted by the Company pursuant to the Plans. In 2019 and 2018, the Company granted approximately, 1,029,836, and

411,689 shares, respectively, of restricted stock units pursuant to the Plans. In 2020, 2019, and 2018, the Company also granted approximately 85,963, 147,842, and 103,774
shares, respectively, of distribution equivalent units pursuant to the Plans. The Company determined that the fair values, based on grant date close price, of restricted stock units
granted under the Plans during the years ended December 31, 2020, 2019, and 2018, were approximately $1.2 million, $15.5 million, and $6.8 million, respectively. As of
December 31, 2020, there was approximately $2.1 million of total unrecognized compensation cost related to restricted stock units. These costs are expected to be recognized
over a weighted average period of 1.14 years.

The following table summarizes the activities for the Company’s unvested restricted stock units for each of the three years ended December 31, 2020, 2019, and 2018:

Unvested Restricted Stock Units

Restricted
Stock Units

Weighted Average
Grant Date Fair Value

Unvested at December 31, 2017

Granted
Distribution Equivalent Unit Granted
Vested (1)
Forfeited

Unvested at December 31, 2018

Granted
Distribution Equivalent Unit Granted
Vested (1)
Forfeited

Unvested at December 31, 2019

Granted
Distribution Equivalent Unit Granted
Vested (1)
Forfeited

Unvested at December 31, 2020

594,322    
411,689  
103,774  
(362,630 )  
(14,622 )  
732,533  
1,029,836  
147,842  
(661,412 )  
(644,962 )  
603,837  
—  
85,963  
(443,207 )  
(8,294 )  

238,299  

$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$

12.99  
13.04  
—  
14.21  
13.38  
13.50  
13.11  
—  
13.38  
13.33  
13.13  
—  
—  
13.21  
13.00  
13.06

(1) With respect to restricted stock units granted prior to January 1, 2019, receipt of the shares of the Company’s common stock underlying vested restricted stock units will be deferred for four years

from grant date unless certain conditions are met. Accordingly, such vested restricted stock units will not be issued as common stock upon vesting until the completion of the deferral period.  

During the years ended December 31, 2020, 2019, and 2018, the Company expensed approximately $6.7 million, $8.8 million, and $8.2 million of compensation

expense related to restricted stock awards and restricted stock units, respectively.

163

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
On May 2, 2018, the Company granted long-term Retention Performance Stock Unit awards (the “Retention PSUs”) under the 2004 Plan and separate cash bonus
awards with similar terms (the “Cash Awards”) to senior personnel. The awards are designed to provide incentives that increase along with the total shareholder return (“TSR”).
On May 2, 2018, the target number of Retention PSUs granted to senior personnel was 1,299,757 in the aggregate and the target amount of the Cash Awards granted to senior
personnel was $4.0 million in the aggregate. As of December 31, 2020, there were 487,409 Retention PSUs outstanding at target and the target amount of the Cash Awards was
$3.0 million in the aggregate. During the year ended December 31, 2020, no Retention PSUs at target were forfeited. The Retention PSUs and Cash Awards do not vest until the
fourth anniversary “cliff vest” of the grant date (or a change in control of the Company, if earlier) and the Retention PSUs must generally be held and not disposed of until the
fifth anniversary of the grant date, except in the event of death, disability or a change in control (the “Performance Period”). Distribution equivalent units will accrue in respect
only of the Retention PSUs in the form of additional Retention PSUs, but will not be paid unless the Retention PSUs to which such distribution equivalent units relate actually
vest. The Cash Awards are not eligible to accrue distribution equivalent units.

The Company follows ASC Topic 718 to account for the Retention PSUs and Cash Awards granted. Under ASC Topic 718, compensation cost associated with
Retention PSUs is measured at the grant date based on the fair value of the award and is recognized over the Performance Period. As the Cash Awards are settled in cash, the
award is expensed as a liability, and will be re-measured at each reporting period until the Performance Period is complete. The compensation expense for these awards is based
on the per unit grant date valuation using a Monte-Carlo simulation multiplied by the target payout level. The payout level is calculated based the Company’s TSR relative to
specified BDCs during the Performance Period.

As of December 31, 2020, all outstanding Retention PSUs and Cash Awards were unvested and there was approximately $2.3 million of total unrecognized

compensation costs related to the Retention PSUs. These costs are expected to be recognized over a weighted average remaining vesting period of 1.33 years. As of December
31, 2020, there was approximately $4.0 million of accumulated compensation expense related to the Cash Awards. The accumulated expense related to the Cash Awards is
included within the Consolidated Statements of Assets and Liabilities.

 9 . Earnings Per Share

Shares used in the computation of the Company’s basic and diluted earnings per share are as follows:

(in thousands, except per share data)
Numerator

Net increase in net assets resulting from operations
Less: Distributions declared-common and restricted shares
Undistributed earnings
Undistributed earnings-common shares
Add: Distributions declared-common shares

Numerator for basic and diluted change in net assets per common share

Denominator
Basic weighted average common shares outstanding
Common shares issuable
Weighted average common shares outstanding assuming dilution

Change in net assets per common share
Basic
Diluted

  $

  $

  $
  $

2020

Year Ended December 31,
2019

2018

  $

227,261  
(155,761 )  
71,500  
70,995  
154,658  
225,653  

  $

  $

173,598  
(134,455 )  
39,143  
39,062  
134,174  
173,236  

  $

111,985  
282  
112,267  

101,132  
437  
101,569  

2.02  
2.01  

  $
  $

1.71  
1.71  

  $
  $

76,496  
(114,728 )
(38,232 )
(38,232 )
114,153  
75,921  

90,929  
128  
91,057  

0.83  
0.83

In the table above, unvested share-based payment awards that have non-forfeitable rights to distributions or distribution equivalents are treated as participating securities

for calculating earnings per share. Unvested common stock options and restricted stock units are also considered for the purpose of calculating diluted earnings per share.

For the years ended December 31, 2020, 2019, and 2018, the effect of the 2022 Convertible Notes under the treasury stock method was anti-dilutive and, accordingly,

was excluded from the calculation of diluted earnings per share.

164

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The calculation of change in net assets resulting from operations per common share—assuming dilution, excludes all anti-dilutive shares. For the year ended December

31, 2020, the number of anti-dilutive shares, as calculated based on the weighted average closing price of the Company’s common stock for the periods, consisted of 5.5 million
shares of 2022 Convertible Notes, 66,578 shares of unvested common stock options, no shares of unvested restricted stock units, 10,049 shares of unvested restricted stock
awards, and no shares of unvested Retention PSUs. For the year ended December 31, 2019, the number of anti-dilutive shares consisted of 3.4 million shares of 2022
Convertible Notes, 24,448 shares of unvested common stock options, no shares of unvested restricted stock units, and no shares of unvested Retention PSUs. For the year ended
December 31, 2018, the number of anti-dilutive shares consisted of 4.2 million shares of 2022 Convertible Notes, 62,462 shares of unvested common stock options, no shares of
unvested restricted stock units, and 13,444 shares of unvested Retention PSUs.

At December 31, 2020 and 2019, the Company was authorized to issue 200.0 million shares of common stock with a par value of $0.001. Each share of common stock

entitles the holder to one vote.

10. Financial Highlights

Following is a schedule of financial highlights for the five years ended December 31, 2020, 2019, 2018, 2017, and 2016:

2020

2019

Year Ended December 31,
2018

2017

2016

Per share data (1):
Net asset value at beginning of period

Net investment income
Net realized gain (loss) on investments
Net unrealized appreciation (depreciation) on investments
Total from investment operations
Net increase (decrease) in net assets from capital share transactions  (1)
Distributions of net investment income (6)
Distributions of capital gains (6)
Stock-based compensation expense included in investment income  (2)

Net asset value at end of period

Ratios and supplemental data:
Per share market value at end of period
Total return (3)
Shares outstanding at end of period
Weighted average number of common shares outstanding
Net assets at end of period
Ratio of total expense to average net assets  (4)
Ratio of net investment income before investment gains and losses to average net assets  (4)
Portfolio turnover rate (5)
Weighted average debt outstanding
Weighted average debt per common share

  $

  $

  $

  $

  $
  $

  $

  $

10.55  
1.39  
(0.50 )  
1.13  
2.02  
0.01  
(1.03 )  
(0.36 )  
0.07  
11.26  

9.90  
1.41  
0.16  
0.14  
1.71  
0.20  
(1.15 )  
(0.18 )  
0.07  
10.55  

  $

  $

  $

14.42  
14.31 %  

114,726  
111,985  
1,291,704  

  $

11.30 % 
13.64 % 
32.38 % 

  $

14.02  
39.36 % 

107,364  
101,132  
1,133,049  

  $

11.95 % 
13.74 % 
31.30 % 

9.96  
1.20  
(0.12 )
(0.23 )
0.85  
0.23  
(1.26 )
—  
0.12  
9.90  

  $

  $

  $

11.05  
(7.56 %)  

96,501  
90,929  
955,444  

  $

10.73 %  
11.78 %  
38.76 %  

  $

9.90  
1.17  
(0.32 )  
0.11  
0.96  
0.26  
(1.07 )  
(0.18 )  
0.09  
9.96  

  $

13.12  

  $

1.47 % 

84,424  
82,519  
840,967  

  $

11.37 % 
11.61 % 
49.03 % 

1,309,903  
11.70  

  $
  $

1,177,379  
11.64  

  $
  $

826,931  
9.09  

  $
  $

784,455  
9.51  

  $
  $

9.94  
1.36  
0.06  
(0.49 )
0.93  
0.18  
(1.14 )
(0.11 )
0.10  
9.90  

14.11  
26.87 %
79,555  
73,753  
787,944  

11.25 %
13.65 %
36.22 %

635,365  
8.61

(1)

(2)

(3)

(4)

(5)

(6)

All per share activity is calculated based on the weighted average shares outstanding for the relevant period, except net increase (decrease) in net assets from capital share transactions, which is
based on the common shares outstanding as of the relevant balance sheet date.

Stock option expense is a non-cash expense that has no effect on net asset value. Pursuant to ASC Topic 718, net investment income includes the expense associated with the granting of stock
options which is offset by a corresponding increase in paid-in capital.

The total return for the years ended December 31, 2020, 2019, 2018, 2017, and 2016 equals to the change in the ending market value over the beginning of the period price per share plus
distributions paid per share during the period, divided by the beginning price assuming the distribution is reinvested on the date of the distribution. As such, the total return is not annualized. The
total return does not reflect any sales load that must be paid by investors.

The ratios are calculated based on weighted average net assets for the relevant period and are annualized.

The portfolio turnover rate for the years ended December 31, 2020, 2019, 2018, 2017, and 2016 equals to the lesser of investment portfolio purchases or sales during the period, divided by the
average investment portfolio value during the period. As such, portfolio turnover rate is not annualized.

Includes distributions on unvested restricted stock awards.

165

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11. Commitments and Contingencies

The Company’s commitments and contingencies consist primarily of unused commitments to extend credit in the form of loans to the Company’s portfolio companies.

A portion of these unfunded contractual commitments as of December 31, 2020 are dependent upon the portfolio company reaching certain milestones before the debt
commitment becomes available. Furthermore, the Company’s credit agreements contain customary lending provisions which allow the Company relief from funding obligations
for previously made unfunded commitments in instances where the underlying company experiences materially adverse events that affect the financial condition or business
outlook for the Company. Since a portion of these commitments may expire without being drawn, unfunded contractual commitments do not necessarily represent future cash
requirements. As such, the Company’s disclosure of unfunded contractual commitments includes only those which are available at the request of the portfolio company and
unencumbered by future or unachieved milestones.

At December 31, 2020, the Company had approximately $179.8 million of unfunded commitments, including undrawn revolving facilities, which were available at the

request of the portfolio company and unencumbered by future or unachieved milestones.

The fair value of the Company’s unfunded commitments is considered to be immaterial as the yield determined at the time of underwriting is expected to be materially

consistent with the yield upon funding, given that interest rates are generally pegged to market indices and given the existence of milestones, conditions and/or obligations
imbedded in the borrowing agreements.

As of December 31, 2020, the Company’s unfunded contractual commitments available at the request of the portfolio company, including undrawn revolving facilities,

and unencumbered by milestones are as follows:

(in thousands)

Portfolio Company
Debt Investments:
SingleStore, Inc. (p.k.a. memsql, Inc.)
Codiak Biosciences, Inc.
Bicycle Therapeutics PLC
Udacity, Inc.
Pollen, Inc.
Dashlane, Inc.
Axsome Therapeutics, Inc.
G1 Therapeutics, Inc.
Clarabridge, Inc.
Geron Corporation
Businessolver.com, Inc.
Varsity Tutors LLC
3GTMS, LLC.
CloudBolt Software Inc.
Nuvolo Technologies Corporation
Reltio, Inc.
Optimizely Mergerco, Inc.
Logicworks
ThreatConnect, Inc.
Ikon Science Limited
Mobile Solutions Services
The CM Group LLC
Velocity Clinical Research, Inc.
Yipit, LLC
ePayPolicy Holdings, LLC
Cytracom Holdings LLC

Total Unfunded Debt Commitments:

Investment Funds & Vehicles:
Forbion Growth Opportunities Fund I C.V.

Unfunded Commitments
(1)

$

25,000  
20,000  
15,000  
15,000  
13,000  
10,000  
10,000  
10,000  
7,500  
6,500  
6,375  
5,210  
5,036  
5,000  
5,000  
5,000  
2,500  
2,000  
1,800  
1,050  
848  
750  
750  
425  
250  
250  
174,244  

5,527  
5,527  

Total Unfunded Commitments in Investment Funds & Vehicles:

Total Unfunded Commitments

$

179,771

166

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)

For debt investments, amount represents unfunded commitments, including undrawn revolving facilities, which are available at the request of the portfolio company. Amount excludes unfunded
commitments which are unavailable due to the borrower having not met certain milestones. For investment funds and vehicles, amount represents uncalled capital commitments in a private
equity fund.

The following table provides additional information on the Company’s unfunded commitments regarding milestones, expirations and type:

(in thousands)
Unfunded Debt Commitments:
Expiring during:

2021
2022
2023
2024
2025

Total Unfunded Debt Commitments

Unfunded Commitments in Investment Funds & Vehicles:
Expiring during:

2030

Total Unfunded Commitments in Investment Funds & Vehicles
Total Unfunded Commitments

The Company’s contractual obligations as of December 31, 2020 include:

$

$

129,710  
15,000  
6,375  
14,892  
8,267  
174,244  

5,527  
5,527  

179,771

Contractual Obligations (1)
Borrowings (2)(3)
Lease and License Obligations (4)
Total

  $

  $

Total

Less than 1 year

1 - 3 years

3 - 5 years

After 5 years

1,299,988  
10,581  
1,310,569  

  $

  $

25,000  
3,031  
28,031  

  $

  $

454,000  
5,345  
459,345  

  $

  $

300,000  
1,427  
301,427  

  $

  $

520,988  
778  

521,766

Payments due by period (in thousands)

(1)
(2)

(3)
(4)

Excludes commitments to extend credit to the Company’s portfolio companies and uncalled capital commitments in a private equity fund.
Includes $99.0 million in principal outstanding under the SBA debentures, $150.0 million of the 2022 Notes, $105.0 million of the July 2024 Notes, $50.0 million of the February 2025 Notes, $75.0
million of the April 2025 Notes, $70.0 million of the June 2025 Notes, $50.0 million of the March 2026 A Notes, $40.0 million of the 2033 Notes, $181.0 million of the 2027 Asset-Backed Notes,
$250.0 million of the 2028 Asset-Backed Notes, and $230.0 million of the 2022 Convertible Notes. There were no outstanding borrowings under the Union Bank Facility and no outstanding
borrowings under the Wells Facility as of December 31, 2020.
Amounts represent future principal repayments and not the carrying value of each liability. See “Note 5 – Borrowings”.
Facility leases and licenses including short-term leases.

Certain premises are leased or licensed under agreements which expire at various dates through June 2027. Total rent expense, including short-term leases, amounted to

approximately $3.1 million, $2.7 million, and $2.1 million, during the years ended December 31, 2020, 2019, and 2018, respectively. The Company recognizes an operating
lease liability and a ROU asset for all leases, with the exception of short-term leases. The lease payments on short-term leases are recognized as rent expense on a straight-line
basis. The discount rate applied to measure each ROU asset and lease liability is based on the Company’s weighted average cost of debt. The Company considers the general
economic environment and its credit rating and factors in various financing and asset specific adjustments to ensure the discount rate applied is appropriate to the intended use
of the underlying lease. While some of the leases contained options to extend and terminate, it is not reasonably certain that either option will be utilized and therefore, only the
payments in the initial term of the leases were included in the lease liability and ROU asset.

The following table sets forth information related to the measurement of the Company’s operating lease liabilities and supplemental cash flow information related to

operating leases for the year ended December 31, 2020:

(in thousands)
Total operating lease cost
Cash paid for amounts included in the measurement of lease liabilities
ROU assets obtained in exchange for lease liabilities

Year Ended December 31,
2020

$
$
$

2,951  
2,795  
—

167

 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
   
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average remaining lease term (in years)
Weighted-average discount rate

As of December 31, 2020

4.10  
5.44 %

The following table shows future minimum lease payments under the Company’s operating leases and a reconciliation to the operating lease liability as of December

31, 2020:

(in thousands)
2021
2022
2023
2024
2025
Thereafter

Total lease payments
Less: imputed interest

Total operating lease liability

$

$

2,903  
3,002  
2,342  
693  
734  
778  
10,452  
(1,140 )
9,312

The Company may, from time to time, be involved in litigation arising out of its operations in the normal course of business or otherwise. Furthermore, third parties
may try to seek to impose liability on the Company in connection with the activities of its portfolio companies. While the outcome of any current legal proceedings cannot at
this time be predicted with certainty, the Company does not expect any current matters will materially affect the Company’s financial condition or results of operations;
however, there can be no assurance whether any pending legal proceedings will have a material adverse effect on the Company’s financial condition or results of operations in
any future reporting period.

12. Indemnification

The Company has entered into indemnification agreements with its directors and executive officers. The indemnification agreements are intended to provide its

directors and executive officers the maximum indemnification permitted under Maryland law and the 1940 Act. Each indemnification agreement provides that the Company
shall indemnify the director or executive officer who is a party to the agreement, or an “Indemnitee,” including the advancement of legal expenses, if, by reason of his or her
corporate status, the Indemnitee is, or is threatened to be, made a party to or a witness in any threatened, pending, or completed proceeding, to the maximum extent permitted by
Maryland law and the 1940 Act.

The Company and its executives and directors are covered by Directors and Officers Insurance, with the directors and officers being indemnified by the Company to the

maximum extent permitted by Maryland law subject to the restrictions in the 1940 Act.

13. Selected Quarterly Data (Unaudited)

The following tables set forth certain quarterly financial information for each of the last eight quarters ended December 31, 2020. This information was derived from

the Company’s unaudited consolidated financial statements. Results for any quarter are not necessarily indicative of results for the full year or for any further quarter.

(in thousands, except per share data)
Total investment income
Net investment income
Net increase (decrease) in net assets resulting from operations
Change in net assets resulting from operations per common share (basic)

  March 31, 2020
  $

73,619  
40,580  
(28,723 )

  $

  $

(0.27 )   $

June 30, 2020

67,968  
35,684  
61,765  
0.55  

  September 30, 2020  
  $
70,339  
38,714  
43,047  
0.38  

  $

  December 31, 2020  
  $
75,332  
42,162  
151,172  
1.32  

  $

Quarter Ended

Total investment income
Net investment income
Net increase (decrease) in net assets resulting from operations
Change in net assets resulting from operations per common share (basic)

  March 31, 2019
  $

Quarter Ended

June 30, 2019

  $

  $

69,264  
35,267  
48,131  
0.49  

  September 30, 2019  
  $
69,238  
38,873  
19,271  
0.18  

  $

  December 31, 2019  
  $
70,577  
40,099  
44,611  
0.42

  $

58,795  
29,033  
61,585  
0.64  

  $

168

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
   
 
 
   
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
   
   
 
 
   
   
   
 
14. Subsequent Events

Distribution Declaration

 On February 17, 2021, the Board of Directors declared a cash distribution of $0.32 per share to be paid on March 15, 2021 to shareholders of record as of March 8,
2021 . In addition to the cash distribution, on February 17, 2021, the Board of Directors declared a supplemental cash distribution of $0.05 per share to be paid on March 15,
2021 to stockholders of record as of March 8, 2021.

Restricted Stock Award Grants

On January 12, 2021, the Company granted 654,479 restricted stock awards pursuant to the 2018 Equity Incentive Plan.

169

 
 
 
 
 
Item 9.

 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not Applicable.

Item 9A.

 Controls and Procedures

1. Disclosure Controls and Procedures

The Company’s chief executive and chief financial officers, under the supervision and with the participation of the Company’s management, conducted an evaluation of

the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. As of the end of the period covered by this Annual
Report, the Company’s chief executive and chief financial officers have concluded that the Company’s disclosure controls and procedures were effective to ensure that
information required to be disclosed by the Company in reports that the Company files or submits under the Exchange Act is recorded, processed, summarized, and reported
within the time periods specified in SEC rules and forms, and that information required to be disclosed by the Company in the reports that the Company files or submits under
the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s chief executive and chief financial officers, as appropriate to
allow timely decisions regarding required disclosure.

2. Internal Control Over Financial Reporting

a. Management’s Annual Report on Internal Control over Financial Reporting

The Company is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal

control over financial reporting. As defined by the SEC, internal control over financial reporting is a process designed under the supervision of the Company’s principal
executive and principal financial and accounting officer, approved and monitored by the Company’s Board of Directors, and implemented by management and other personnel,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP.

The Company’s internal control over financial reporting is supported by written policies and procedures, that (1) pertain to the maintenance of records that, in

reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the Company are being made only in accordance
with authorizations of the Company’s management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use
or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness

to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.

Management of the Company conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020 based
on criteria established in Internal Control— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, or the COSO
Framework. Based on this assessment, management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2020.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2020 has been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm who also audited the Company’s consolidated financial statements, as stated in their report, which is included in this Annual
Report on Form 10K.

Changes in Internal Control over Financial Reporting in 2020

 There have been no changes in the Company’s internal control over financing reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act, which

occurred during the Company’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control
over financial reporting.

170

 
 
Item 9B.

 Other Information

The following tables are being provided to update, as of December 31, 2020, certain information in the Company’s registration statement on Form N-2 (File No. 333-

231089) filed with the SEC on April 29, 2019.

Fees and Expenses

The following table is intended to assist you in understanding the various costs and expenses that an investor in our common stock will bear directly or indirectly.

However, we caution you that some of the percentages indicated in the table below are estimates and may vary. The footnotes to the fee table state which items are estimates.
Except where the context suggests otherwise, whenever this prospectus contains a reference to fees or expenses paid by “you” or “us” or that “we” will pay fees or expenses,
stockholders will indirectly bear such fees or expenses as investors in Hercules Capital, Inc.
Stockholder Transaction Expenses (as a percentage of the public offering price):
Sales load (as a percentage of offering price)(1)
Offering expenses
Dividend reinvestment plan fees
Total stockholder transaction expenses (as a percentage of the public offering price)

—   %  
—   % (2)
—   % (3)
—   % (4)

Annual Expenses (as a percentage of net assets attributable to common stock):(5)
Operating expenses
Interest and fees paid in connection with borrowed funds
Total annual expenses

5.49   % (6)(7)
5.81   % (8)
11.30   % (9)

(1)
(2)
(3)

 In the event that our securities are sold to or through underwriters, a corresponding prospectus supplement to the Prospectus will disclose the applicable sales load.
In the event that we conduct an offering of our securities, a corresponding prospectus supplement to this prospectus will disclose the estimated offering expenses.
The expenses associated with the administration of our dividend reinvestment plan are included in “Operating expenses.” We pay all brokerage commissions incurred with respect to open market
purchases, if any, made by the administrator under the plan. For more details about the plan, see “Dividend Reinvestment Plan.”
Total stockholder transaction expenses may include sales load and will be disclosed in a future prospectus supplement, if any.
“Net assets attributable to common stock” equals the weighted average net assets for the year ended December 31, 2020, which is approximately $1,151.7 million.
“Operating expenses” represent our actual operating expenses incurred for the twelve months ended December 31, 2020.

(4)
(5)
(6)
(7) We do not have an investment adviser and are internally managed by our executive officers under the supervision of our Board of Directors. As a result, we do not pay investment advisory fees, but

(8)

(9)

instead we pay the operating costs associated with employing investment management professionals.
“Interest and fees paid in connection with borrowed funds” represent our interest, fees, and credit facility expenses incurred for the year ended December 31, 2020, including our Wells Facility, Union
Bank Facility, the 2033 Notes, the April 2025 Notes, February 2025 Notes, June 2025 Notes, March 2026 A Notes, 2022 Notes, the 2027 Asset-Backed Notes, the 2028 Asset-Backed Notes, the
Convertible Notes and the SBA Debentures, each of which is defined herein.
“Total annual expenses” is the sum of “operating expenses” and “interest and fees paid in connection with borrowed funds.” “Total annual expenses" is presented as a percentage of weighted average
net assets attributable to common stockholders, because the holders of shares of our common stock (and not the holders of our debt securities or preferred stock, if any) bear all of our fees and
expenses, including the fees and expenses of our wholly-owned consolidated subsidiaries, all of which are included in this fee table presentation.

171

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Senior Securities

Information about our senior securities is shown in the following table for the periods as of December 31, 2020, 2019, 2018, 2017, 2016, 2015, 2014, 2013, 2012 and

2011 which is derived from our audited financial statements for these periods, which have been audited by PricewaterhouseCoopers LLP, our independent registered public
accounting firm. The “N/A” indicates information that the SEC expressly does not require to be disclosed for certain types of senior securities.

Class and Year
Securitized Credit Facility with Wells Fargo Capital Finance
December 31, 2011
December 31, 2012(6)
December 31, 2013(6)
December 31, 2014(6)
December 31, 2015
December 31, 2016
December 31, 2017(6)
December 31, 2018
December 31, 2019(6)
December 31, 2020(6)
Securitized Credit Facility with Union Bank, NA
December 31, 2011(6)
December 31, 2012(6)
December 31, 2013(6)
December 31, 2014(6)
December 31, 2015(6)
December 31, 2016(6)
December 31, 2017(6)
December 31, 2018
December 31, 2019
December 31, 2020(6)
Small Business Administration Debentures (HT II) (4)
December 31, 2011
December 31, 2012
December 31, 2013
December 31, 2014
December 31, 2015
December 31, 2016
December 31, 2017
December 31, 2018
Small Business Administration Debentures (HT III) (5)
December 31, 2011
December 31, 2012
December 31, 2013

December 31, 2014
December 31, 2015
December 31, 2016
December 31, 2017
December 31, 2018
December 31, 2019
December 31, 2020
2016 Convertible Notes
December 31, 2011
December 31, 2012
December 31, 2013
December 31, 2014
December 31, 2015
December 31, 2016
April 2019 Notes
December 31, 2012
December 31, 2013
December 31, 2014
December 31, 2015
December 31, 2016

Total Amount
Outstanding
Exclusive of
Treasury
Securities (1)

Asset Coverage
per Unit (2)

Average
Market
Value
per Unit(3)

10,186,830   $

—  
—  
—  

50,000,000   $
5,015,620   $

—  

13,106,582   $

—  
—  

—  
—  
—  
—  
—  
—  
—  

39,849,010   $
103,918,736   $

—  

125,000,000   $
76,000,000   $
76,000,000   $
41,200,000   $
41,200,000   $
41,200,000   $
41,200,000   $

—  

100,000,000   $
149,000,000   $
149,000,000   $

149,000,000   $
149,000,000   $
149,000,000   $
149,000,000   $
149,000,000   $
149,000,000   $
99,000,000   $

75,000,000   $
75,000,000   $
75,000,000   $
17,674,000   $
17,604,000   $

—  

84,489,500   $
84,489,500   $
84,489,500   $
64,489,500   $
64,489,500   $

73,369  
—  
—  
—  
26,352  
290,234  
—  
147,497  
—  
—  

—  
—  
—  
—  
—  
—  
—  
48,513  
23,423  
—  

5,979  
14,786  
16,075  
31,535  
31,981  
35,333  
39,814  
—  

7,474  
7,542  
8,199  

8,720  
8,843  
9,770  
11,009  
12,974  
16,336  
26,168  

10,623  
15,731  
16,847  
74,905  
74,847  
—  

13,300  
14,460  
15,377  
20,431  
22,573  

N/A  
N/A  
N/A  
N/A  
N/A  
N/A  
N/A  
N/A  
N/A  
N/A  

N/A  
N/A  
N/A  
N/A  
N/A  
N/A  
N/A  
N/A  
N/A  
N/A  

N/A  
N/A  
N/A  
N/A  
N/A  
N/A  
N/A  
N/A  

N/A  
N/A  
N/A  

N/A  
N/A  
N/A  
N/A  
N/A  
N/A  
N/A  

885  
1,038  
1,403  
1,290  
1,110  
N/A  

986  
1,021  
1,023  
1,017  
1,022  

$
$
$
$
$

$
$
$
$
$

$

$
$

$

$
$

$
$
$
$
$
$
$

$
$
$

$
$
$
$
$
$
$

$
$
$
$
$

$
$
$
$
$

172

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
December 31, 2017
September 2019 Notes
December 31, 2012
December 31, 2013
December 31, 2014
December 31, 2015
December 31, 2016
December 31, 2017
2022 Notes
December 31, 2017
December 31, 2018
December 31, 2019
December 31, 2020
2024 Notes
December 31, 2014
December 31, 2015
December 31, 2016
December 31, 2017
December 31, 2018
December 31, 2019
2025 Notes
December 31, 2018
December 31, 2019
December 31, 2020
2033 Notes
December 31, 2018
December 31, 2019
December 31, 2020
July 2024 Notes
December 31, 2019
December 31, 2020
February 2025 Notes
December 31, 2020
June 2025 Notes
December 31, 2020
March 2026 A Notes
December 31, 2020
2017 Asset-Backed Notes
December 31, 2012
December 31, 2013
December 31, 2014
December 31, 2015
2021 Asset-Backed Notes
December 31, 2014
December 31, 2015
December 31, 2016
December 31, 2017
December 31, 2018

2027 Asset-Backed Notes
December 31, 2018
December 31, 2019
December 31, 2020
2028 Asset-Backed Notes
December 31, 2019
December 31, 2020
2022 Convertible Notes
December 31, 2017
December 31, 2018
December 31, 2019
December 31, 2020
Total Senior Securities (7)
December 31, 2011
December 31, 2012
December 31, 2013
December 31, 2014
December 31, 2015
December 31, 2016
December 31, 2017

—  

85,875,000   $
85,875,000   $
85,875,000   $
45,875,000   $
45,875,000   $

—  

150,000,000   $
150,000,000   $
150,000,000   $
150,000,000   $

103,000,000   $
103,000,000   $
252,873,175   $
183,509,600   $
83,509,600   $

—  

75,000,000   $
75,000,000   $
75,000,000   $

40,000,000   $
40,000,000   $
40,000,000   $

105,000,000   $
105,000,000   $

50,000,000   $

70,000,000   $

50,000,000   $

129,300,000   $
89,556,972   $
16,049,144   $

—  

129,300,000   $
129,300,000   $
109,205,263   $
49,152,504   $

—  

200,000,000   $
200,000,000   $
180,988,022   $

250,000,000   $
250,000,000   $

230,000,000   $
230,000,000   $
230,000,000   $
230,000,000   $

310,186,830   $
599,664,500   $
559,921,472   $
626,587,644   $
600,468,500   $
667,658,558   $
802,862,104   $

—  

13,086  
14,227  
15,129  
28,722  
31,732  
—  

10,935  
12,888  
16,227  
17,271  

12,614  
12,792  
5,757  
8,939  
23,149  
—  

25,776  
32,454  
34,541  

48,330  
60,851  
64,765  

23,181  
24,672  

51,812  

37,009  

51,812  

8,691  
13,642  
80,953  
—  

10,048  
10,190  
13,330  
33,372  
—  

9,666  
12,170  
14,314  

9,736  
10,362  

7,132  
8,405  
10,583  
11,264  

2,409  
1,874  
2,182  
2,073  
2,194  
2,180  
2,043  

$
$
$
$
$

$
$
$
$

$
$
$
$
$

$
$
$

$
$
$

$
$
$

$
$
$
$

$
$
$

$
$

$
$
$
$

N/A  

1,003  
1,016  
1,026  
1,009  
1,023  
N/A  

1,014  
976  
1,008  
1,017  

1,010  
1,014  
1,016  
1,025  
1,011  
N/A  

962  
1,032  
1,020  

934  
1,054  
1,072  

N/A  
N/A  

N/A  

N/A  

N/A  

1,000  
1,004  
1,375  
N/A  

1,000  
996  
1,002  
1,001  
N/A  

1,006  
1,004  
1,001  

1,004  
1,002  

1,028  
946  
1,021  
1,027  

N/A  
N/A  
N/A  
N/A  
N/A  
N/A  
N/A  

$
$
$
$
$

$
$
$
$

$
$
$
$
$

$
$
$

$
$
$

$
$

$

$

$

$
$
$

$
$
$
$

$
$
$

$
$

$
$
$
$

$
$
$
$
$
$
$

173

 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
December 31, 2018
December 31, 2019
December 31, 2020

$
$
$

980,465,192   $
1,302,918,736   $
1,299,988,022   $

1,972  
1,868  
1,993  

N/A  
N/A  
N/A

(1)
(2)

(3)
(4)

(5)

(6)
(7)

Total amount of each class of senior securities outstanding at the end of the period presented.
The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities,
including senior securities not subject to asset coverage requirements under the 1940 Act due to exemptive relief from the SEC, divided by senior securities representing indebtedness. This asset
coverage ratio is multiplied by $1,000 to determine the Asset Coverage per Unit.
Not applicable because senior securities are not registered for public trading.
Issued by Hercules Technology II, L.P., or HT II, one of our prior SBIC subsidiaries, to the Small Business Association, or SBA. On July 13, 2018, we completed repayment of the remaining
outstanding HT II debentures and subsequently surrendered the SBA license with respect to HT II. These categories of senior securities were not subject to the asset coverage requirements of the 1940
Act as a result of exemptive relief granted to us by the SEC.
Issued by HT III, one of our SBIC subsidiaries, to the SBA. These categories of senior securities were not subject to the asset coverage requirements of the 1940 Act as a result of exemptive relief
granted to us by the SEC.
The Company’s Wells Facility and Union Bank Facility had no borrowings outstanding during the periods noted above.
The total senior securities and Asset Coverage per Unit shown for those securities do not represent the asset coverage ratio requirement under the 1940 Act, because the presentation includes senior
securities not subject to the asset coverage requirements of the 1940 Act as a result of exemptive relief granted to us by the SEC. As of December 31, 2020, our asset coverage ratio under our
regulatory requirements as a business development company was 207.5% excluding our SBA debentures as a result of our exemptive order from the SEC which allows us to exclude all SBA leverage
from our asset coverage ratio.

174

 
 
 
 
 
 
Item 10.

  Directors, Executive Officers and Corporate Governance

  PART III

Information in response to this Item is incorporated herein by reference to the information provided in the Company’s definitive Proxy Statement for the Company’s

2021 Annual Meeting of Shareholders, or the 2021 Proxy Statement, to be filed with the SEC pursuant to Regulation 14A under the Exchange Act under the headings “Proposal
I: Election Of Directors,” “Information About Executive Officers Who Are Not Directors” and “Certain Relationships And Transactions.”

The Company has adopted a code of business conduct and ethics that applies to directors, officers and employees. The code of business conduct and ethics is available
on the Company’s website at http//www.htgc.com. The Company will report any amendments to or waivers of a required provision of the code of business conduct and ethics
on the Company’s website or in a Form 8-K.

Item 11.

  Executive Compensation

The information with respect to compensation of executives and directors is contained under the caption “Executive Compensation” in the Company’s 2021 Proxy

Statement and is incorporated in this Annual Report by reference in response to this item.

Item 12.

  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information with respect to security ownership of certain beneficial owners and management is contained under the captions “Security Ownership of Certain
Beneficial Owners and Management” and “Executive Compensation” in the Company’s 2021 Proxy Statement and is incorporated in this Annual Report by reference in
response to this item.

Item 13.

  Certain Relationships and Related Transactions and Director Independence

The information with respect to certain relationships and related transactions is contained under the caption “Certain Relationships and Transactions” and the caption

“Proposal I: Election of Directors” in the Company’s 2021 Proxy Statement and is incorporated in this Annual Report by reference in response to this item.

Item 14.

  Principal Accountant Fees and Services

The information with respect to principal accountant fees and services is contained under the captions “Principal Accountant Fees and Services” and “Proposal III:

Ratification of Selection of Independent Registered Public Accountants” in the Company’s 2021 Proxy Statement and is incorporated in this Annual Report by reference to this
item.

175

 
 
 
 
 
 
Item 15.

  Exhibits and Financial Statement Schedules

1.

  Financial Statements

 PART IV

  The following financial statements of the “Company” are filed herewith:

  AUDITED FINANCIAL STATEMENTS
  Consolidated Statements of Assets and Liabilities as of December 31, 2020 and December 31, 2019
  Consolidated Statements of Operations for the three years ended December 31, 2020
  Consolidated Statements of Changes in Net Assets for the three years ended December 31, 2020
  Consolidated Statements of Cash Flows for the three years ended December 31, 2020
  Consolidated Schedule of Investments as of December 31, 2020
  Consolidated Schedule of Investments as of December 31, 2019
  Notes to Consolidated Financial Statements

2.

  The following financial statement schedule is filed herewith:

  Consolidated Schedule of Investments In and Advances to Affiliates as of December 31, 2020

3.

  Exhibits required to be filed by Item 601 of Regulation S-K.

Item 16.

  Form 10-K Summary

Not applicable.

176

101
103
104
105
107
118
128

177

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
HERCULES CAPITAL, INC.

  CONSOLIDATED SCHEDULE OF INVESTMENTS IN AND ADVANCES TO AFFILIATES
As of and for the year ended December 31, 2020
(in thousands)

Schedule 12-14

Portfolio Company

Investment(1)

Income(2)

    Gain (Loss)  

  Fair Value  

  Amount of  
Interest
  Credited to  

As of
  December 31, 
2019

  Realized  

Gross
Additions
(3)

Gross
Reductions
(4)

  Net Change in  
  Unrealized  
  Appreciation/  

As of
  December 31, 
2020

    (Depreciation)  

  Fair Value  

Control Investments

Majority Owned Control Investments
Gibraltar Business Capital, LLC  (5)

                    Total Majority Owned Control Investments

Other Control Investments
Tectura Corporation (6)

                     Total Other Control Investments
   Total Control Investments

Affiliate Investments

Optiscan BioMedical, Corp.  (7)

Pineapple Energy LLC  (8)
Solar Spectrum Holdings LLC (p.k.a. Sungevity,
Inc.) (9)

Total Affiliate Investments

Total Control and Affiliate Investments

  Unsecured Debt
  Preferred Stock
  Common Stock

  Senior Debt
  Preferred Stock
  Common Stock

  $

  $

  $

  $
  $

  $

  Convertible Debt
  Preferred Warrants  
  Preferred Stock
  Senior Debt

  Common Stock
  Senior Debt
  Common Stock

  $
  $

  $

  $

  $

  $
  $

  $

2,249  
—  
—  
2,249  

608  
—  
—  
608  
2,857  

13  
—  
—  
—  

—  
520  
—  
533  
3,390  

  $
  $

—  
—  
—  
—  

—  
—  
—  
—  
—  

  $

  $

  $

  $
  $

(421 )   $
(573 )  
(13,152 )  

—  

—  
(3 )  
—  
(14,149 )   $
(14,149 )   $

14,780  
33,000  
2,380  
50,160  

9,586  
—  
—  
9,586  
59,746  

—  
209  
8,984  
—  

—  
12,615  
—  
21,808  
81,554  

  $

  $

  $

  $
  $

  $

  $
  $

59  
—  
—  
59  

—  
—  
—  
—  
59  

408  
—  
—  
7,500  

4,767  
—  
—  
12,675  
12,734  

  $

  $

  $

  $
  $

  $

  $
  $

—  
—  
—  
—  

  $

  $

  $

131  
(1,446 )  
(104 )  
(1,419 )   $

(134 )   $

(852 )   $

—  
—  

—  
—  

(134 )   $
(134 )   $

(852 )   $
(2,271 )   $

(408 )   $
(573 )  
(13,152 )  

—  

—  

(12,269 )  

—  
(26,402 )   $
(26,536 )   $

  $

—  
364  
4,168  
—  

(3,927 )  
(346 )  
—  
259  
  $
(2,012 )   $

14,970  
31,554  
2,276  
48,800  

8,600  
—  
—  
8,600  
57,400  

—  
—  
—  
7,500  

840  
—  
—  
8,340  
65,740

(1) Stock and warrants are generally non-income producing and restricted.
(2) Represents the total amount of interest or dividends credited to income for the period an investment was an affiliate or control investment.
(3) Gross additions include increases in the cost basis of investments resulting from new portfolio investments, paid-in-kind interest or dividends, the amortization of discounts and closing fees and the

exchange of one or more existing securities for one or more new securities.

(4) Gross reductions include decreases in the cost basis of investments resulting from principal repayments or sales and the exchange of one or more existing securities for one or more new securities. Gross

reductions also include previously recognized depreciation on investments that become control or affiliate investments during the period.

(5) As of March 31, 2018, the Company's investment in Gibraltar Business Capital, LLC became classified as a control investment as a result of obtaining a controlling financial interest.
(6) As of March 31, 2017, the Company's investment in Tectura Corporation became classified as a control investment as of result of obtaining more than 50% representation on the portfolio company's

board. In May 2018, the Company purchased common shares, thereby obtaining greater than 25% of voting securities of Tectura as of June 30, 2018.

(7) As of December 31, 2020, the Company’s investments in Optiscan BioMedical, Corp. were deemed wholly worthless and written off for a realized loss.
(8) As of December 11, 2020, the Company’s investment in Pineapple Energy LLC became classified as an affiliate investment as a result of obtaining more than 5% but less than 25% of the voting

securities of the portfolio company.

(9) As of September 30, 2017, the Company's investment in Solar Spectrum Holdings LLC (p.k.a. Sungevity, Inc.) became classified as an affiliate investment due to a reduction in equity ownership.

177

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
HERCULES CAPITAL, INC.

CONSOLIDATED SCHEDULE OF INVESTMENTS IN AND ADVANCES TO AFFILIATES

As of and for the year ended December 31, 2020

Schedule 12-14

Portfolio Company

Industry

Control Investments
        Majority Owned Control Investments

Type of Investment
(1)

(in thousands)
Maturity
Date

Interest Rate and Floor

Principal
or Shares

Cost

Value
(2)

Gibraltar Business Capital, LLC   Diversified Financial

  Unsecured Debt

  March 2023   Interest rate FIXED 14.50%

  $

15,000  

  $

14,838  

  $ 14,970 

Services

  Diversified Financial

  Preferred Series A

Services

Equity

  Diversified Financial

  Common Stock

Total Gibraltar Business Capital, LLC

Services

Total Majority Owned Control Investments (3.78%)*
Other Control Investments
Tectura Corporation

  Internet Consumer &
Business Services
  Internet Consumer &
Business Services
  Internet Consumer &
Business Services
  Internet Consumer &
Business Services
  Internet Consumer &
Business Services

Total Tectura Corporation

Total Other Control Investments (0.67%)*
Total Control Investments (4.44%)*

Affiliate Investments

  Senior Secured Debt

  March 2021   PIK Interest 5.00%

  Senior Secured Debt

  March 2021   Interest rate FIXED 8.25%

  Senior Secured Debt

  March 2021   PIK Interest 5.00%

  Preferred Series BB

Equity

  Common Stock

  10,602,752  

26,122  

  31,554 

830,000  

1,884  

  2,276  

  $
  $

42,844  
42,844  

  $ 48,800 
  $ 48,800 

  $

  $

  $

10,680  

  $

240  

  $ —  

8,250  

8,250  

  8,250  

13,023  

13,023  

350  

1,000,000  

  414,994,863 

—  

900  

—  

—  

  $
  $
  $

22,413  
22,413  
65,257  

  $ 8,600  
  $ 8,600  
  $ 57,400 

Pineapple Energy LLC

  Sustainable and Renewable

  Senior Secured Debt

  December

  PIK Interest 10.00%

7,500  

  $

7,500  

  $ 7,500  

Total Pineapple Energy LLC
Solar Spectrum Holdings LLC,
(p.k.a. Sungevity, Inc.)

Technology

2023

  Sustainable and Renewable

  Common Stock

Technology

  Sustainable and Renewable

  Senior Secured Debt

  January 2021   PIK Interest 10.00%

  $

Technology

  Sustainable and Renewable

  Common Stock

Technology

  Sustainable and Renewable

  Class A Warrants

Technology

Total Solar Spectrum Holdings LLC (p.k.a. Sungevity, Inc.)

     Total Affiliate Investments (0.65%)*
     Total Control and Affiliate Investments (5.09%)*

*     Value as a percent of net assets
(1) Stock and warrants are generally non-income producing and restricted.
(2) All of the Company’s control and affiliate investments are Level 3 investments valued using significant unobservable inputs.

17,647  

4,767  

840  

  $
  $

12,267  
681

  $ 8,340  
—  

61,502  

—  

—  

—  

681  

488  

0.69  

62,183  
  $
  $
74,450  
  $ 139,707  

  $ —  
  $ 8,340  
  $ 65,740

178

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   3. Exhibits

Please note that the agreements included as exhibits to this Form 10-K are included to provide information regarding their terms and are not intended to provide any

other factual or disclosure information about us or the other parties to the agreements. The agreements contain representations and warranties by each of the parties to the
applicable agreement that have been made solely for the benefit of the other parties to the applicable agreement and may not describe the actual state of affairs as of the date
they were made or at any other time.

Exhibit
Number

 Description

3(a)

3(b)

3(c)

3(d)

3(e)

3(f)

4(a)

4(b)

4(c)

4(d)

4(e)

4(f)

4(g)

4(h)

4(i)

4(j)

4(k)

4(l)

4(m)

4(n)

4(o)

4(p)

4(q)

4(r)

 Articles of Amendment and Restatement.(2)

 Articles of Amendment, dated March 6, 2007.(4)

 Articles of Amendment, dated April 5, 2011.(9)

 Articles of Amendment, dated April 3, 2015.(14)

 Articles of Amendment, dated February 23, 2016.(17)

 Amended and Restated Bylaws.(17)

 Specimen certificate of the Company’s common stock, par value $.001 per share. (43)  

 Form of Dividend Reinvestment Plan.(1)

 Indenture between the Registrant and U.S. Bank National Association, dated as of March 6, 2012.(10)

 First Supplemental Indenture between the Registrant and U.S. Bank National Association, dated as of April 17, 2012.(10)

 Second Supplemental Indenture between the Registrant and U.S. Bank National Association, dated as of September 24, 2012.(11)

 Third Supplemental Indenture between the Registrant and U.S. Bank National Association, dated as of July 14, 2014.(12)

 Form of 6.25% Note due 2024, dated as of July 14, 2014 (July 2024 Note) (included as part of Exhibit 4(f)).(12)

 Form of 6.25% Note due 2024, dated as of August 11, 2014 (Over-Allotment July 2024 Note).(13)

 Form of 6.25% Note due 2024, dated as of May 2, 2016 (Additional July 2024 Note).(20)

 Form of 6.25% Note due 2024, dated as of June 27, 2016 (Additional July 2024 Note).(21)

 Form of 6.25% Note due 2024, dated as of July 5, 2016 (Additional July 2024 Note).(22)

 Form of 6.25% Note due 2024, dated as of October 11, 2016 (Additional July 2024 Note).(24)

 Indenture, dated January 25, 2017, between Hercules Capital, Inc. and U.S. Bank National Association, as Trustee.(25)

 Form of 4.375% Convertible Senior Note Due 2022, dated as of January 25, 2017 (included as part of Exhibit 4(m)).(25)

 Statement of Eligibility of Trustee on Form T-1.(30)

 Fourth Supplemental Indenture, dated as of October 23, 2017, between the Registrant and U.S. Bank National Association.(31)

 Form of 4.625% Note due 2022, dated as of October 23, 2017 (included as part of Exhibit 4(p)).(31)

 Fifth Supplemental Indenture, dated as of April 26, 2018, between the Registrant and U.S. Bank National Association.(34)

179

 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
Exhibit
Number

 Description

4(s)

4(t)

4(u)

4(v)

4(w)

4(x)

4(y)

4(z)*

10(a)

10(b)

10(c)

10(d)

10(e)

10(f)

10(g)

10(h)

10(i)

10(j)

10(k)

10(l)

10(m)

10(n)

10(o)

10(p)

10(q)

 Form of 5.25% Note due 2025, dated as of April 23, 2018 (included as part of Exhibit 4(r)).(34)

 Sixth Supplemental Indenture, dated as of September 24, 2018, between the Registrant and U.S. Bank National Association.(37)

 Form of 6.25% Note due 2033, dated September 24, 2018 (included as part of Exhibit 4(t)).(37)

 Indenture, dated as of November 1, 2018, between Hercules Capital Funding Trust 2018-1, as Issuer, and U.S. Bank National Association, as Trustee.(39)

 Amended and Restated Trust Agreement, dated as of November 1, 2018, between Hercules Capital Funding 2018-1 LLC, as Trust Depositor, and Wilmington Trust,
National Association, as Owner Trustee.(39)

 Indenture, dated as of January 22, 2019, between Hercules Capital Funding Trust 2019-1, as Issuer, and U.S. Bank National Association, as Trustee.(41)

 Amended and Restated Trust Agreement, dated as of January 22, 2019, between Hercules Capital Funding 2019-1 LLC, as Trust Depositor, and Wilmington Trust,
National Association, as Owner Trustee.(41)

 Description of the Registrant’s Securities.

 Hercules Capital, Inc. Amended and Restated 2004 Equity Incentive Plan.(6)

 Hercules Technology Growth Capital, Inc. 2006 Non-Employee Director Plan (2007 Amendment and Restatement).(7)

 Form of Custodian Agreement between the Company and Union Bank of California, N.A.(2)

 Form of Restricted Stock Unit Award Agreement.(6)

 Form of Incentive Stock Option Award under the 2004 Equity Incentive Plan.(2)

 Form of Nonstatutory Stock Option Award under the 2004 Equity Incentive Plan.(2)

 Form of Transfer Agency and Registrar Services Agreement between the Company and American Stock Transfer & Trust Company.(2)

 Warrant Agreement, dated as of June 22, 2004, between the Company and American Stock Transfer & Trust Company, as warrant agent.(5)

 Lease Agreement, dated as of June 13, 2006, between the Company and 400 Hamilton Associates.(3)

 Form of SBA Debenture.(8)

 Form of Amended and Restated Indemnification Agreement.(27)

 Amended and Restated Loan and Security Agreement by and among Hercules Funding II LLC and Wells Fargo Capital Finance, LLC (f/k/a Wells Fargo Foothill, LLC),
dated as of June 29, 2015.(15)

 Amended and Restated Sale and Servicing Agreement by and among Hercules Funding II LLC, Hercules Technology Growth Capital, Inc., and Wells Fargo Capital
Finance, LLC (f/k/a Wells Fargo Foothill, LLC), dated as of June 29, 2015.(15)

 First Amendment to Amended and Restated Loan and Security Agreement by and among Hercules Funding II LLC and Wells Fargo Capital Finance, LLC (f/k/a Wells
Fargo Foothill, LLC), dated as of December 16, 2015.(16)

 Second Amendment to Amended and Restated Loan and Security Agreement by and among Hercules Funding II LLC and Wells Fargo Capital Finance, LLC (f/k/a Wells
Fargo Foothill, LLC), dated as of March 8, 2016. (26)

 Third Amendment to Amended and Restated Loan and Security Agreement by and among Hercules Funding II LLC and Wells Fargo Capital Finance, LLC (f/k/a Wells
Fargo Foothill, LLC), dated as of April 7, 2016.(18)

 Fourth Amendment to the Amended and Restated Loan and Security Agreement, dated as of April 3, 2017, by and among Hercules Funding II LLC as borrower, Wells
Fargo Capital Finance, LLC (f/k/a Wells Fargo Foothill, LLC), as Administrative Agent, and the Lenders party thereto from time to time.(29)

180

 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
  
 
Exhibit
Number
10(r)

10(s)

10(t)

10(u)

10(v)

10(w)

10(x)

10(y)

10(z)

10(aa)

10(bb)

10(cc)

10(dd)

10(ee)

10(ff)

10(gg)

10(hh)

10(ii)

10(jj)

10(kk)

 Description
 Fifth Amendment to the Amended and Restated Loan and Security Agreement, dated as of July 31, 2018, by and among Hercules Funding II LLC as borrower, Wells
Fargo Capital Finance, LLC (f/k/a Wells Fargo Foothill, LLC), as Administrative Agent, and the Lenders party thereto from time to time.(38)

 Sixth Amendment to the Amended and Restated Loan and Security Agreement, dated as of October 26, 2018, by and among Hercules Funding II LLC as borrower, Wells
Fargo Capital Finance, LLC (f/k/a Wells Fargo Foothill, LLC), as Administrative Agent, and the Lenders party thereto from time to time.(38)

 Seventh Amendment to the Amended and Restated Loan and Security Agreement, dated as of January 11, 2019, by and among Hercules Funding II LLC as borrower,
Wells Fargo Capital Finance, LLC (f/k/a Wells Fargo Foothill, LLC), as Administrative Agent, and the Lenders party thereto from time to time.(40)

 Loan and Security Agreement by and among Hercules Funding III, LLC, as borrower, MUFG Union Bank, N.A., as the arranger and administrative agent, and the
lenders party thereto from time to time, dated as of May 5, 2016.(19)

 Sale and Servicing Agreement by and among Hercules Funding III LLC, as borrower, Hercules Capital, Inc., as originator and servicer, and MUFG Union Bank, N.A., as
agent, dated as of May 5, 2016.(19)

 First Amendment to Loan and Security Agreement by and among Hercules Funding III LLC, as borrower, MUFG Union Bank, N.A., as the arranger and administrative
agent, and the lenders party thereto from time to time, dated as of July 14, 2016.(23)

 Second Amendment to the Loan and Security Agreement, dated as of May 25, 2018, by and among Hercules Funding III, LLC, as borrower, MUFG Union Bank, N.A.,
as the arranger and administrative agent, and the lenders party thereto.(36)

 Form of Performance Restricted Stock Unit Award Agreement.(6)

 Retention Agreement, dated as of October 26, 2017, by and between Hercules Capital, Inc. and Manuel A. Henriquez .(32)

 Retention Agreement, dated as of October 26, 2017, by and between Hercules Capital, Inc. and Scott Bluestein.(32)

 Asset Purchase Agreement, dated as of November 1, 2017 by and between Ares Capital Corporation, a Maryland corporation and, together with each Seller Designee
permitted pursuant to the Agreement, and Bearcub Acquisitions LLC, a Delaware limited liability company.(33)

 Form of Retention Performance Stock Unit Award Agreement.(35)

 Form of Cash Retention Bonus Award Agreement.(35)

 Sale and Servicing Agreement, dated as of November 1, 2018, by and among Hercules Capital Funding Trust 2018-1, as Issuer, Hercules Capital, Inc., as Seller and
Servicer, Hercules Capital Funding 2018-1 LLC, as Trust Depositor, and U.S. Bank National Association, as Trustee, Backup Servicer, Custodian and Paying Agent.(39)

 Sale and Contribution Agreement, dated as of November 1, 2018, between Hercules Capital, Inc., as Seller, and Hercules Capital Funding 2018-1 LLC, as Trust
Depositor.(39)

 Note Purchase Agreement, dated as of October 25, 2018, by and among Hercules Capital, Inc., as Originator and Servicer, Hercules Capital Funding 2018-1 LLC, as
Trust Depositor, Hercules Capital Funding Trust 2018-1, as Issuer, and Guggenheim Securities, LLC, as Initial Purchaser.(39)

 Administration Agreement, dated November 1, 2018, by and among Hercules Capital, Inc., as Administrator, Hercules Capital Funding Trust 2018-1, as Issuer,
Wilmington Trust, National Association, as Owner Trustee, and U.S. Bank National Association, as Trustee.(39)

 Sale and Servicing Agreement, dated as of January 22, 2019, by and among Hercules Capital Funding Trust 2019-1, as Issuer, Hercules Capital, Inc., as Seller and
Servicer, Hercules Capital Funding 2019-1 LLC, as Trust Depositor, and U.S. Bank National Association, as Trustee, Backup Servicer, Custodian and Paying Agent.(41)

 Sale and Contribution Agreement, dated as of January 22, 2019, between Hercules Capital, Inc., as Seller, and Hercules Capital Funding 2019-1 LLC, as Trust
Depositor.(41)

 Note Purchase Agreement, dated as of January 14, 2019, by and among Hercules Capital, Inc., as Originator and Servicer, Hercules Capital Funding 2019-1 LLC, as
Trust Depositor, Hercules Capital Funding Trust 2019-1, as Issuer, and Guggenheim Securities, LLC, as Initial Purchaser.(41)

181

 
 
  
 
  
 
 
  
 
 
  
 
  
 
  
 
  
 
  
 
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
Exhibit
Number
10(ll)

10(mm)

10(nn)

10(oo)

10(pp)

10(qq)

10(rr)

10(ss)

10(tt)

10(uu)

10(vv)

10(ww)

10(xx)

10(yy)

10(zz)

10(aaa)

10(bbb)

10(ccc)

10(ddd)

10(eee)

14.1*

14.2*

21.1*

23.1*

 Description
 Administration Agreement, dated January 22, 2019, by and among Hercules Capital, Inc., as Administrator, Hercules Capital Funding Trust 2019-1, as Issuer,
Wilmington Trust, National Association, as Owner Trustee, and U.S. Bank National Association, as Trustee.(41)
 Hercules Capital, Inc. Amended and Restated 2018 Equity Incentive Plan.(42)

 Hercules Capital, Inc. 2018 Non-Employee Director Plan.(42)

 Form of Restricted Stock Unit Award Agreement.(42)

 Form of Restricted Stock Award Agreement (2018 Equity Incentive Plan).(42)

 Form of Restricted Stock Award Agreement (Director Plan).(42)

 Form of Nonstatutory Stock Option Award Agreement.(42)

 Form of Incentive Stock Option Award Agreement.(42)

 Underwriting Agreement, dated June 12, 2019, by and among Hercules Capital, Inc. and Morgan Stanley & Co. LLC, Wells Fargo Securities, LLC and Keefe, Bruyette &
Woods, Inc., as representatives of the several underwriters named on Schedule I.(43)

 First Amendment to the Loan and Security Agreement, dated as of June 28, 2019, by and among Hercules Funding IV LLC, as borrower, MUFG Union Bank, N.A., as
the arranger and administrative agent, and the lenders party thereto from time to time.(44)

 Eighth Amendment to Amended and Restated Loan and Security Agreement, dated as of July 2, 2019, by and among Hercules Funding II LLC, as borrower, Wells Fargo
Capital Finance, LLC (f/k/a Wells Fargo Foothill, LLC), as the arranger and the administrative agent, and the lenders party thereto from time to time.(44)

 Intercreditor Agreement, dated as of July 2, 2019, by and among Wells Fargo Capital Finance, LLC, as arranger and administrative agent, MUFG Union Bank, N.A., as
arranger and administrative agent, Hercules Funding II LLC, Hercules Funding IV LLC, Hercules Capital, Inc., and U.S. Bank National Association, as special
servicer.(44)

 Note Purchase Agreement, dated July 16, 2019, by and among Hercules Capital, Inc. and the Purchasers party thereto.(45)

 Separation Agreement, dated as of July 13, 2019, by and between Hercules Capital, Inc. and Manuel Henriquez.(46)

 Form of Amended and Restated Global Custody Agreement, by and between Hercules Capital, Inc. and MUFG Union Bank, N.A.(47)

 Note Purchase Agreement, dated February 5, 2020, by and among Hercules Capital, Inc. and the Purchasers party thereto.(48)

 Loan and Security Agreement, dated February 20, 2020 by and among Hercules Funding IV LLC, as borrower, MUFG Union Bank, N.A., as the administrative agent,
lender and swingline lender and the lenders part thereto from time to time.(49)

 Sale and Servicing Agreement, dated as of February 20, 2020, by and among Hercules Funding IV LLC, as borrower, Hercules Capital, Inc., as originator and servicer,
and MUFG Union Bank, N.A., as agent.(49)

 Equity Distribution Agreement, dated July 2, 2020, between Hercules Capital, Inc. and JMP Securities, LLC.(51)

 First Supplement to the Note Purchase Agreement, dated as of November 2, 2020, by and among Hercules Capital, Inc. and the Additional Purchasers party thereto.(52)

 Code of Ethics.

 Code of Business Conduct and Ethics.

 List of Subsidiaries.

 Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm.

182

 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
 
  
 
  
 
  
 
Exhibit
Number
31.1*

31.2*

32.1*

32.2*

 Description
 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.

 Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.

 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350), as
amended.

 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350), as
amended.

(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
(23)
(24)
(25)
(26)
(27)
(28)
(29)
(30)
(31)
(32)
(33)
(34)
(35)
(36)
(37)
(38)
(39)
(40)
(41)
(42)
(43)
(44)
(45)

Previously filed as part of Pre-Effective Amendment No. 2, as filed on June 8, 2005 (File No. 333-122950), to the Registration Statement on Form N-2 of the Company.
Previously filed as part of Pre-Effective Amendment No. 1, as filed on May 17, 2005 (File No. 333-122950) to the Registration Statement on Form N-2 of the Company.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on August 1, 2006.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on March 9, 2007.
Previously filed as part of the Registration Statement on Form N-2 of the Company (File No. 333-122950), as filed on February 22, 2005.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on January 5, 2017.
Previously filed as part of the Securities to be Offered to Employees in Employee Benefit Plans on Form S-8, as filed on October 2, 2007.
Previously filed as part of the Annual Report on Form 10-K of the Company, as filed on March 16, 2009.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on April 11, 2011.
Previously filed as part of Post-Effective Amendment No. 1, as filed on April 17, 2012 (File No. 333-179431), to the Registration Statement on Form N-2 of the Company.
Previously filed as part of Post-Effective Amendment No. 5, as filed on September 24, 2012 (File No. 333-179431), to the Registration Statement on Form N-2 of the Company.
Previously filed as part of Post-Effective Amendment No. 5, as filed on July 14, 2014 (File No. 333-187447), to the Registration Statement on Form N-2 of the Company.
Previously filed as part of Post-Effective Amendment No. 6, as filed on August 11, 2014 (File No. 333-187447), to the Registration Statement on Form N-2 of the Company.
Previously filed as part of the Registration Statement on Form N-2 of the Company (File No. 333-203511), as filed on April 20, 2015.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on June 30, 2015.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on December 18, 2015.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on February 25, 2016.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on April 11, 2016.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on May 10, 2016.
Previously filed as part of Post-Effective Amendment No. 3, as filed on May 2, 2016 (File No. 333-203511), to the Registration Statement on Form N-2 of the Company.
Previously filed as part of Post-Effective Amendment No. 6, as filed on June 27, 2016 (File No. 333-203511), to the Registration Statement on Form N-2 of the Company.
Previously filed as part of Post-Effective Amendment No. 7, as filed on July 5, 2016 (File No. 333-203511), to the Registration Statement on Form N-2 of the Company.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on July 19, 2016.
Previously filed as part of the Post-Effective Amendment No. 10, as filed on October 14, 2016 (File No. 333-203511), to the Registration Statement on Form N-2 of the Company.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on January 25, 2017.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on March 8, 2016.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on July 22, 2016.
Previously filed as part of the Annual Report on Form 10-K of the Company, as filed on February 25, 2016.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on April 7, 2017.
Previously filed as part of the Pre-Effective Amendment No. 2, as filed on September 5, 2017 (File No. 333-214767), to the Registration Statement on Form N-2 of the Company.
Previously filed as part of the Post-Effective Amendment No. 2, as filed on October 25, 2017 (File No. 333-214767), to the Registration Statement on Form N-2 of the Company.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on October 26, 2017.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on November 2, 2017.
Previously filed as part of Post-Effective Amendment No. 4, as filed on April 26, 2018 (File No. 333-214767), to the Registration Statement on Form N-2 of the Company.
Previously filed as part of the Quarterly Report on Form 10-Q of the Company, as filed on May 3, 2018.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on June 1, 2018.
Previously filed as part of Post-Effective Amendment No. 2, as filed on September 24, 2018 (File No. 333-224281), to the Registration Statement on Form N-2 of the Company.
Previously filed as part of the Quarterly Report on Form 10-Q of the Company, as filed on November 1, 2018.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on November 2, 2018.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on January 17, 2019.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on January 22, 2019.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on January 31, 2019.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on June 18, 2019.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on July 3, 2019.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on July 16, 2019.

183

 
 
  
 
  
 
  
 
  
 
 
(46)
(47)
(48)
(49)
(50)
(51)
(52)

Previously filed as part of the Quarterly Report on Form 10-Q of the Company, as filed on August 1, 2019.
Previously filed as part of the Quarterly Report on Form 10-Q of the Company, as filed on October 30, 2019.
Previously filed as part of the Quarterly Report on Form 8-K of the Company, as filed on February 6, 2020.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on February 20, 2020.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on March 20, 2020.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on July 2, 2020.
Previously filed as part of the Current Report on Form 8-K of the Company, as filed on November 4, 2020.

*

Filed herewith 

184

 
 
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the

undersigned, thereunto duly authorized.

  SIGNATURES

Date: February 23, 2021

HERCULES CAPITAL, INC.

By:  

/S/ Scott Bluestein
Scott Bluestein
Chief Executive Officer and Chief Investment Officer

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the following

capacities on February 23, 2021.

Signature

/S/ Scott Bluestein
Scott Bluestein

/S/ Seth H. Meyer 
Seth H. Meyer

/S/ Robert P. Badavas
Robert P. Badavas

/S/ Thomas Fallon
Thomas Fallon

/S/ Joseph F. Hoffman
Joseph F. Hoffman

/S/ Brad Koenig
Brad Koenig

/S/ Doreen Woo Ho
Doreen Woo Ho

/S/ Carol L. Foster
Carol L. Foster

/S/ Gayle Crowell
Gayle Crowell

Title

Director, President, Chief Executive Officer, and
Chief Investment Officer (Principal Executive Officer)

Chief Financial Officer, and
Chief Accounting Officer (Principal Accounting and Financial Officer)

Chairman of the Board

Director

Director

Director

Director

Director

Director

185

Date

February 23, 2021

February 23, 2021

February 23, 2021

February 23, 2021

February 23, 2021

February 23, 2021

February 23, 2021

February 23, 2021

February 23, 2021

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DESCRIPTION OF OUR SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES
EXCHANGE ACT OF 1934

Exhibit 4(z)

As of December 31, 2020, Hercules Capital, Inc. (“we,” “our,” “Hercules,” or the “Company”) had the following three classes of securities registered under Section 12 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”): (i) our common stock, par value $0.001 per share (“common stock”), (ii) our 5.25% Notes due 2025 (the
“April 2025 Notes”) and (iii) our 6.25% Notes due 2033 (the “2033 Notes” and, collectively with the April 2025 Notes, the “Debt Securities”).

The following description is based on relevant portions of the Maryland General Corporation Law, as amended (the “MGCL”), and on our charter and bylaws. This summary
may not contain all of the information that is important to you, and we refer you to the MGCL and our charter and bylaws for a more detailed description of the provisions
summarized below.

DESCRIPTION OF OUR CAPITAL STOCK

Common Stock

Under the terms of our charter, our authorized capital stock consists of 200,000,000 shares of common stock, par value $0.001 per share. Under our charter, our Board of
Directors is authorized to classify and reclassify any unissued shares of stock into other classes or series of stock, and to cause the issuance of such shares, without obtaining
stockholder approval. In addition, as permitted by the MGCL, but subject to the Investment Company Act of 1940, as amended (the “1940 Act”), our charter provides that the
Board of Directors, without any action by our stockholders, may amend the charter from time to time to increase or decrease the aggregate number of shares of stock or the
number of shares of stock of any class or series that we have authority to issue. Under Maryland law, our stockholders generally are not personally liable for our debts or
obligations.

All shares of our common stock have equal rights as to earnings, assets, distributions and voting privileges, except as described below and, when they are issued, will be duly
authorized, validly issued, fully paid and nonassessable.

Distributions may be paid to the holders of our common stock if, as and when authorized by our Board of Directors and declared by us out of assets legally available therefor.
Shares of our common stock have no conversion, exchange, preemptive or redemption rights. In the event of a liquidation, dissolution or winding up of Hercules each share of
our common stock would be entitled to share ratably in all of our assets that are legally available for distribution after we pay all debts and other liabilities and subject to any
preferential rights of holders of our preferred stock, if any preferred stock is outstanding at such time. Each share of our common stock is entitled to one vote on all matters
submitted to a vote of stockholders, including the election of directors. Except as provided with respect to any other class or series of stock, the holders of our common stock
will possess exclusive voting power. There is no cumulative voting in the election of directors, which means that holders of a majority of the outstanding shares of common
stock will elect all of our directors, and holders of less than a majority of such shares will be unable to elect any director.

Preferred Stock

Our charter authorizes our Board of Directors to classify and reclassify any unissued shares of stock into other classes or series of stock, including preferred stock. Prior to
issuance of shares of each class or series, the Board of Directors is required by Maryland law and by our charter to set the terms, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series. Thus, the Board of Directors
could authorize the issuance of shares of preferred stock with terms and conditions which could have the effect of delaying, deferring or preventing a transaction or a change in
control that might involve a premium price for holders of our common stock or otherwise be in their best interest.

Limitation on Liability of Directors and Officers; Indemnification and Advance of Expenses

Maryland law permits a Maryland corporation to include in its charter a provision limiting the liability of its directors and officers to the corporation and its stockholders for
money damages except for liability resulting from (a) actual receipt of an improper benefit or profit in money, property or services or (b) active and deliberate dishonesty
established by a final judgment as being material to the cause of action. Our charter contains such a provision which eliminates directors’ and officers’ liability to the maximum
extent permitted by Maryland law, subject to the requirements of the 1940 Act.

 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
Our charter authorizes us, to the maximum extent permitted by Maryland law and subject to the requirements of the 1940 Act, to indemnify any present or former director or
officer or any individual who, while a director or officer and at our request, serves or has served another corporation, real estate investment trust, partnership, joint venture,
trust, employee benefit plan or other enterprise as a director, officer, partner or trustee, from and against any claim or liability to which such person may become subject or
which such person may incur by reason of his or her service in any such capacity, except with respect to any matter as to which such person shall have been finally adjudicated
in any proceeding not to have acted in good faith in the reasonable belief that their action was in our best interest or to be liable to us or our stockholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office. Our charter also provides that, to the maximum
extent permitted by Maryland law, with the approval of our Board of Directors and provided that certain conditions described in our charter are met, we may pay certain
expenses incurred by any such indemnified person in advance of the final disposition of a proceeding upon receipt of an undertaking by or on behalf of such indemnified person
to repay amounts we have so paid if it is ultimately determined that indemnification of such expenses is not authorized under our charter. Our bylaws obligate us, to the
maximum extent permitted by Maryland law and subject to the requirements of the 1940 Act, to indemnify any present or former director or officer or any individual who,
while a director or officer and at our request, serves or has served another corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or
other enterprise as a director, officer, partner or trustee and who is made, or threatened to be made, a party to the proceeding by reason of his or her service in any such capacity
from and against any claim or liability to which that person may become subject or which that person may incur by reason of his or her service in any such capacity, except with
respect to any matter as to which such person shall have been finally adjudicated in any proceeding not to have acted in good faith in the reasonable belief that their action was
in our best interest or to be liable to us or our stockholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of such person’s office. Our bylaws also provide that, with the approval of our Board of Directors and provided that certain conditions described in our bylaws are met,
we may pay certain expenses incurred by any such indemnified person in advance of the final disposition of a proceeding upon receipt of an undertaking by or on behalf of such
indemnified person to repay amounts we have so paid if it is ultimately determined that indemnification of such expenses is not authorized under our bylaws.  Our charter and
bylaws also permit us to indemnify and advance expenses to any individual who served a predecessor of us in any of the capacities described above and any of our employees or
agents or any employees or agents of our predecessor.

Maryland law requires a corporation (unless its charter provides otherwise, which our charter does not) to indemnify a director or officer who has been successful in the defense
of any proceeding to which he or she is made, or threatened to be made, a party by reason of his or her service in that capacity. Maryland law permits a corporation to indemnify
its present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection
with any proceeding to which they may be made, or threatened to be made, a party by reason of their service in those or other capacities unless it is established that (a) the act or
omission of the director or officer was material to the matter giving rise to the proceeding and (1) was committed in bad faith or (2) was the result of active and deliberate
dishonesty, (b) the director or officer actually received an improper personal benefit in money, property or services or (c) in the case of any criminal proceeding, the director or
officer had reasonable cause to believe that the act or omission was unlawful. However, under Maryland law, a Maryland corporation may not indemnify for an adverse
judgment in a suit by or in the right of the corporation or for a judgment of liability on the basis that a personal benefit was improperly received, unless in either case a court
orders indemnification, and then only for expenses. In addition, Maryland law permits a corporation to advance reasonable expenses to a director or officer upon the
corporation’s receipt of (a) a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for
indemnification by the corporation and (b) a written undertaking by him or her or on his or her behalf to repay the amount paid or reimbursed by the corporation if it is
ultimately determined that the standard of conduct was not met.

We currently have in effect a directors’ and officers’ insurance policy covering our directors and officers and us for any acts and omissions committed, attempted or allegedly
committed by any director or officer during the policy period. The policy is subject to customary exclusions.

 Provisions of the MGCL and Our Charter and Bylaws

The MGCL and our charter and bylaws contain provisions that could make it more difficult for a potential acquiror to acquire us by means of a tender offer, proxy contest or
otherwise. These provisions are expected to discourage certain coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of
us to negotiate first with our Board of Directors. We believe that the benefits of these provisions outweigh the potential disadvantages of discouraging any such acquisition
proposals because, among other things, the negotiation of such proposals may improve their terms.

 
 
 
 
 
 
 
 
Classified Board of Directors

Our Board of Directors is divided into three classes of directors serving staggered three-year terms. Directors of each class are elected to serve until the third annual meeting
following their election and until their respective successors are duly elected and qualify. Each year one class of directors will be elected by the stockholders. A classified board
may render a change in control or removal of our incumbent management more difficult. We believe, however, that the longer time required to elect a majority of a classified
Board of Directors will help to ensure the continuity and stability of our management and policies.

Election of Directors

Our charter provides that, except as otherwise provided in the bylaws, the affirmative vote of the holders of a majority of the outstanding shares of stock entitled to vote in the
election of directors will be required to elect each director. Our bylaws currently provide that in uncontested elections, a director will be elected by the affirmative vote of a
majority of the total votes cast for and votes cast against as to each director nominee. In contested elections, directors will be elected by a plurality of the votes cast. An election
will be considered to be contested if our secretary has received notice that a stockholder has nominated an individual for election as a director, which notice complies with the
requirements for advance notice of stockholder nominations set forth in our bylaws, and the nomination has not been withdrawn at least 10 days prior to the date that our proxy
statement is filed with the SEC, and, as a result of which, the number of nominees exceeds the number of directors to be elected at the meeting. Pursuant to our charter and
bylaws, our Board of Directors may amend the bylaws to alter the vote required to elect directors.

Number of Directors; Vacancies; Removal

Our charter provides that the number of directors will be set only by the Board of Directors in accordance with our bylaws. Our bylaws provide that a majority of our entire
Board of Directors may at any time increase or decrease the number of directors. However, the number of directors may never be less than one nor, unless the bylaws are
amended, more than 12. We have elected to be subject to the provision of Subtitle 8 of Title 3 of the MGCL regarding the filling of vacancies on the Board of Directors.
Accordingly, except as may be provided by the Board of Directors in setting the terms of any class or series of preferred stock, any and all vacancies on the Board of Directors
may be filled only by the affirmative vote of a majority of the remaining directors in office, even if the remaining directors do not constitute a quorum, and any director elected
to fill a vacancy shall serve for the remainder of the full term of the directorship in which the vacancy occurred and until a successor is elected and qualifies, subject to any
applicable requirements of the 1940 Act.

Our charter provides that a director may be removed only for cause, as defined in the charter, and then only by the affirmative vote of at least two-thirds of the votes entitled to
be cast in the election of directors.

Action by Stockholders

Under the MGCL, stockholder action may be taken only at an annual or special meeting of stockholders or by unanimous consent in lieu of a meeting (unless the charter
provides for stockholder action by less than unanimous written consent, which our charter does not). These provisions, combined with the requirements of our bylaws regarding
the calling of a stockholder-requested special meeting of stockholders discussed below, may have the effect of delaying consideration of a stockholder proposal until the next
annual meeting.

Advance Notice Provisions for Stockholder Nominations and Stockholder Proposals

Our bylaws provide that with respect to an annual meeting of stockholders, nominations of persons for election to the Board of Directors and the proposal of business to be
considered by stockholders may be made only (1) pursuant to our notice of the meeting, (2) by the Board of Directors or (3) by a stockholder who was a stockholder of record
both at the time of giving of notice by the stockholder and at the time of the annual meeting, who is entitled to vote at the meeting and who has complied with the advance
notice procedures of the bylaws. With respect to special meetings of stockholders, only the business specified in our notice of the meeting may be brought before the meeting.
Nominations of persons for election to the Board of Directors at a special meeting may be made only (1) pursuant to our notice of the meeting, (2) by the Board of Directors or
(3) provided that the Board of Directors has determined that directors will be elected at the meeting, by a stockholder who was a stockholder of record both at the time of giving
of notice by the stockholder and at the time of the special meeting, who is entitled to vote at the meeting and who has complied with the advance notice provisions of the
bylaws.

The purpose of requiring stockholders to give us advance notice of nominations and other business is to afford our Board of Directors a meaningful opportunity to consider the
qualifications of the proposed nominees and the advisability of any other proposed business and, to the extent deemed necessary or desirable by our Board of Directors, to
inform stockholders and make recommendations about

 
 
 
 
 
 
 
 
 
 
 
 
 
 
such qualifications or business, as well as to provide a more orderly procedure for conducting meetings of stockholders. Although our bylaws do not give our Board of
Directors any power to disapprove stockholder nominations for the election of directors or proposals recommending certain action, they may have the effect of precluding a
contest for the election of directors or the consideration of stockholder proposals if proper procedures are not followed and of discouraging or deterring a third party from
conducting a solicitation of proxies to elect its own slate of directors or to approve its own proposal without regard to whether consideration of such nominees or proposals
might be harmful or beneficial to us and our stockholders.

Calling of Special Meeting of Stockholders

Our bylaws provide that special meetings of stockholders may be called by the chairman of our Board of Directors, our Board of Directors and certain of our officers.
Additionally, our bylaws provide that, subject to the satisfaction of certain procedural and informational requirements by the stockholders requesting the meeting, a special
meeting of stockholders shall be called by our secretary upon the written request of stockholders entitled to cast not less than a majority of all of the votes entitled to be cast at
such meeting.

Approval of Extraordinary Corporate Action; Amendment of Charter and Bylaws

Under Maryland law, a Maryland corporation generally cannot dissolve, amend its charter, merge, convert, sell all or substantially all of its assets, engage in a share exchange or
engage in similar transactions outside the ordinary course of business, unless approved by the affirmative vote of stockholders entitled to cast at least two-thirds of the votes
entitled to be cast on the matter. However, a Maryland corporation may provide in its charter for approval of these matters by a lesser percentage, but not less than a majority of
all of the votes entitled to be cast on the matter. Our charter generally provides for approval of charter amendments and extraordinary transactions by the stockholders entitled to
cast at least a majority of the votes entitled to be cast on the matter. Our charter also provides that certain charter amendments and any proposal for our conversion from a
closed-end company to an open-end company or any proposal for our liquidation or dissolution requires the approval of the stockholders entitled to cast at least 75% of the
votes entitled to be cast on such matter. However, if such amendment or proposal is approved by at least 75% of our continuing directors (in addition to approval by our Board
of Directors), such amendment or proposal may be approved by the stockholders entitled to cast a majority of the votes entitled to be cast on such a matter. The “continuing
directors” are defined in our charter as our current directors, as well as those directors whose nomination for election by the stockholders or whose election by the directors to fill
vacancies is approved by a majority of the continuing directors then on the Board of Directors.

Our charter and bylaws provide that the Board of Directors will have the exclusive power to make, alter, amend or repeal any provision of our bylaws.

No Appraisal Rights

Our charter provides that stockholders will not be entitled to exercise appraisal rights unless our Board of Directors, upon the affirmative vote of a majority of the entire Board
of Directors, determines that such rights apply.

Control Share Acquisitions

The Maryland Control Share Acquisition Act (the “Control Share Act”) provides that holders of control shares of a Maryland corporation acquired in a control share acquisition
have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquiror, by officers or by
directors who are employees of the corporation are excluded from shares entitled to vote on the matter. Control shares are voting shares of stock which, if aggregated with all
other shares of stock owned by the acquiror or in respect of which the acquiror is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable
proxy), would entitle the acquiror to exercise voting power in electing directors within one of the following ranges of voting power:

•

•

•

one-tenth or more but less than one-third;

one-third or more but less than a majority; or

a majority or more of all voting power.

The requisite stockholder approval must be obtained each time an acquiror crosses one of the thresholds of voting power set forth above. Control shares do not include shares
the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. A control share acquisition means the acquisition of issued and
outstanding control shares, subject to certain exceptions.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A person who has made or proposes to make a control share acquisition may compel the Board of Directors of the corporation to call a special meeting of stockholders to be
held within 50 days of demand to consider the voting rights of the shares. The right to compel the calling of a special meeting is subject to the satisfaction of certain conditions,
including an undertaking to pay the expenses of the meeting. If no request for a meeting is made, the corporation may itself present the question at any stockholders meeting.

If voting rights are not approved at the meeting or if the acquiring person does not deliver an acquiring person statement as required by the statute, then the corporation may
repurchase for fair value any or all of the control shares, except those for which voting rights have previously been approved. The right of the corporation to repurchase control
shares is subject to certain conditions and limitations. Fair value is determined, without regard to the absence of voting rights for the control shares, as of the date of the last
control share acquisition by the acquiror or of any meeting of stockholders at which the voting rights of the shares are considered and not approved. If voting rights for control
shares are approved at a stockholders meeting and the acquiror becomes entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise appraisal
rights. The fair value of the shares as determined for purposes of appraisal rights may not be less than the highest price per share paid by the acquiror in the control share
acquisition.

The Control Share Act does not apply (a) to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or (b) to acquisitions
approved or exempted by the charter or bylaws of the corporation.

Our bylaws contain a provision exempting from the Control Share Act any and all acquisitions by any person of our shares of stock.

Business Combinations

Under the Maryland Business Combination Act (the “Business Combination Act”), “business combinations” between a Maryland corporation and an interested stockholder or
an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These
business combinations include a merger, consolidation, share exchange or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity
securities. An interested stockholder is defined as:

•

•

any person who beneficially owns 10% or more of the voting power of the corporation’s shares; or

an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or
more of the voting power of the then outstanding voting stock of the corporation.

A person is not an interested stockholder under this statute if the Board of Directors approved in advance the transaction by which such stockholder otherwise would have
become an interested stockholder. However, in approving a transaction, the Board of Directors may provide that its approval is subject to compliance, at or after the time of
approval, with any terms and conditions determined by the board.

After the 5-year prohibition, any business combination between the Maryland corporation and an interested stockholder generally must be recommended by the Board of
Directors of the corporation and approved by the affirmative vote of at least:

•

•

80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation; and

two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder with whom
or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested stockholder.

These super-majority vote requirements do not apply if the corporation’s common stockholders receive a minimum price, as defined under Maryland law, for their shares in the
form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares.

The statute permits various exemptions from its provisions, including business combinations that are exempted by the Board of Directors before the time that the interested
stockholder becomes an interested stockholder. Our Board of Directors has adopted a resolution exempting any business combination between us and any other person from the
provisions of the Business Combination Act, provided that the business combination is first approved by the Board of Directors, including a majority of the directors who are
not interested persons as defined in the 1940 Act.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Conflict with 1940 Act

Our bylaws provide that, if and to the extent that any provision of the MGCL, or any provision of our charter or bylaws conflicts with any provision of the 1940 Act, the
applicable provision of the 1940 Act will control.

Regulatory Restrictions

Our wholly-owned subsidiaries, HT III and HC IV, have obtained SBIC licenses. The SBA prohibits, without prior SBA approval, a “change of control” or transfers which
would result in any person (or group of persons acting in concert) owning 10% or more of any class of capital stock of a SBIC. A “change of control” is any event which would
result in a transfer of the power, direct or indirect, to direct the management and policies of a SBIC, whether through ownership, contractual arrangements or otherwise.

5.25% Notes due 2025

 DESCRIPTION OF OUR DEBT SECURITIES

On April 26, 2018, we issued $75.0 million in aggregate principal amount of the April 2025 Notes. The April 2025 Notes will mature on April 30, 2025, unless previously
repurchased in accordance with their terms. The April 2025 Notes bear interest at a rate of 5.25% per year payable quarterly in arrears on January 30, April 30, July 30, and
October 30 of each year, commencing on July 30, 2018 and trade on the NYSE under the symbol “HCXZ”. The April 2025 Notes are our direct unsecured obligations and rank
pari passu, or equally in right of payment, with all outstanding and future unsecured unsubordinated indebtedness issued by us.

We may redeem some or all of the April 2025 Notes at any time, or from time to time, at the redemption price set forth under the terms of the indenture after April 30, 2021. No
sinking fund is provided for the April 2025 Notes. The April 2025 Notes were issued in denominations of $25 and integral multiples of $25 thereof.

The April 2025 Notes were issued pursuant to certain indenture, dated March 6, 2012 (the “Base Indenture”), by and between the Company and U.S. Bank, National
Association (the “Trustee”), as supplemented by the Fifth Supplemental Indenture, dated April 26, 2018 (the “April 2025 Notes Indenture”). As of December 31, 2019, the
Company was in compliance with the terms of the April 2025 Notes Indenture.

6.25% Notes due 2033

On September 24, 2018, we issued $40.0 million in aggregate principal amount of the 2033 Notes. The 2033 Notes will mature on October 30, 2033, unless previously
repurchased in accordance with their terms. The 2033 Notes bear interest at a rate of 6.25% per year payable quarterly in arrears on January 30, April 30, July 30, and October
30 of each year, commencing on October 30, 2018 and trade on the NYSE under the symbol “HCXY.”
The 2033 Notes are our direct unsecured obligations and rank pari passu, or equally in right of payment, with all outstanding and future unsecured unsubordinated indebtedness
issued by us.

We may redeem some or all of the 2033 Notes at any time, or from time to time, at the redemption price set forth under the terms of the indenture after October 30, 2023. No
sinking fund is provided for the 2033 Notes. The 2033 Notes were issued in denominations of $25 and integral multiples of $25 thereof.

The 2033 Notes were issued pursuant to the Base Indenture, as supplemented by the Sixth Supplemental Indenture to the Base Indenture, dated September 24, 2018 (the “2033
Notes Indenture,” and together with the 2022 Notes Indenture, the “indenture”). As of December 31, 2019, the Company was in compliance with the terms of the 2033 Notes
Indenture.

General

For purposes of this description, any reference to the payment of principal of or premium or interest, if any, on Debt Securities will include additional amounts if required by the
terms of the Debt Securities.

The indenture does not limit the amount of Debt Securities that may be issued thereunder from time to time. Debt Securities issued under the indenture, when a single trustee is
acting for all Debt Securities issued under the indenture, are called the “indenture securities.” The indenture also provides that there may be more than one trustee thereunder,
each with respect to one or more different series of indenture securities. See “Resignation of Trustee” section below. At a time when two or more trustees are acting under the
indenture, each with respect to only certain series, the term “indenture securities” means the one or more series of Debt Securities with

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
respect to which each respective trustee is acting. In the event that there is more than one trustee under the indenture, the powers and trust obligations of each trustee described
in this prospectus will extend only to the one or more series of indenture securities for which it is trustee. If two or more trustees are acting under the indenture, then the
indenture securities for which each trustee is acting would be treated as if issued under separate indentures.
 .

We have the ability to issue indenture securities with terms different from those of indenture securities previously issued and, without the consent of the holders thereof, to
reopen a previous issue of a series of indenture securities and issue additional indenture securities of that series unless the reopening was restricted when that series was created.

Certain Covenants

In addition to standard covenants relating to payment of principal and interest, maintaining an office or agency, payment of taxes and related matters, the following covenants
apply to each of the Debt Securities.

Statement as to Compliance

We have agreed to deliver to the Trustee, within 120 calendar days after the end of each fiscal year ending after the date hereof so long as any Debt Security is outstanding, an
Officers’ Certificate stating to the knowledge of the signers thereof whether the Company is in default in the performance of any of the terms, provisions or conditions of the
indenture. For purposes of this covenant, such default shall be determined without regard to any period of grace or requirement of notice under the indenture.

1940 Act Compliance

We have agreed that, for the period of time during which the Debt Securities are outstanding, we will not violate (whether or not it is subject to)  Section 18(a)(1)(A) as modified
by Section 61(a)(1) of the 1940 Act or as may be applicable to us from time to time or any successor provisions thereto, giving effect to any exemptive relief granted to the
Company by the Securities and Exchange Commission (“Commission”) (even if we are no longer subject to such provisions of the 1940 Act).

We have also agreed that for the period of time during which the Debt Securities are Outstanding, pursuant to Section 18(a)(1)(B) as modified by Section 61(a)(1) of the 1940
Act as may be applicable to the Company from time to time or any successor provisions thereto of the 1940 Act, we will not declare any dividend (except a dividend payable in
our stock), or declare any other distribution, upon a class of our capital stock, or purchase any such capital stock, unless, in every such case, at the time of the declaration of any
such dividend or distribution, or at the time of any such purchase, we have an asset coverage (as defined in the 1940 Act) of at least the threshold specified in Section 18(a)(1)
(B) as modified by Section 61(a)(1) of the 1940 Act as may be applicable to us from time to time after deducting the amount of such dividend, distribution or purchase price, as
the case may be, and in each case giving effect to (i) any exemptive relief granted to the Company by the Commission and (ii) any no-action relief granted by the Commission
to another business development company (or to the Company if it determines to seek such similar no-action or other relief) permitting the business development company to
declare any cash dividend or distribution notwithstanding the prohibition contained in Section 18(a)(1)(B) as modified by Section 61(a)(1) of the 1940 Act as may be applicable
to us from time to time in order to maintain such business development company’s status as a regulated investment company under Subchapter M of the Internal Revenue Code
of 1986, as amended.

Global Securities

The Debt Securities were issued as registered securities in book-entry form only. A global security represents one or any other number of individual Debt Securities. Generally,
all Debt Securities represented by the same global securities will have the same terms.

Each Debt Security issued in book-entry form will be represented by a global security that we deposit with and register in the name of a financial institution or its nominee that
we select. The financial institution that we select for this purpose is called the depositary. The Depository Trust Company, New York, New York, known as DTC, is the
depositary for the Debt Securities.

A global security may not be transferred to or registered in the name of anyone other than the depositary or its nominee, unless special termination situations arise. We describe
those situations below under “Special Situations when a Global Security Will Be Terminated.” As a result of these arrangements, the depositary, or its nominee, will be the sole
registered owner and holder of all Debt Securities represented by a global security, and investors will be permitted to own only beneficial interests in a global security.
Beneficial interests must be held by means of an account with a broker, bank or other financial institution that in turn has an account

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
with the depositary or with another institution that has an account with the depositary. Thus, an investor whose security is represented by a global security will not be a holder of
the Debt Security, but only an indirect holder of a beneficial interest in the global security.

Special Considerations for Global Securities

As an indirect holder, an investor’s rights relating to a global security will be governed by the account rules of the investor’s financial institution and of the depositary, as well
as general laws relating to securities transfers. The depositary that holds the global security will be considered the holder of the Debt Securities represented by the global
security.

Accordingly, an investor should be aware of the following:

•

•

•

•

•

•

•

•

•

An investor cannot cause the Debt Securities to be registered in his or her name, and cannot obtain certificates for his or her interest in the Debt
Securities, except in the special situations we describe below.

An investor will be an indirect holder and must look to his or her own bank or broker for payments on the Debt Securities and protection of his or her
legal rights relating to the Debt Securities, as we describe under “Issuance of Securities in Registered Form” above.

An investor may not be able to sell interests in the Debt Securities to some insurance companies and other institutions that are required by law to own
their securities in non-book-entry form.

An investor may not be able to pledge his or her interest in a global security in circumstances where certificates representing the Debt Securities must
be delivered to the lender or other beneficiary of the pledge in order for the pledge to be effective.

The depositary’s policies, which may change from time to time, will govern payments, transfers, exchanges and other matters relating to an investor’s
interest in a global security. We and the trustee have no responsibility for any aspect of the depositary’s actions or for its records of ownership interests
in a global security. We and the trustee also do not supervise the depositary in any way.

If we redeem less than all the Debt Securities of a particular series being redeemed, DTC’s practice is to determine by lot the amount to be redeemed
from each of its participants holding that series.

An investor is required to give notice of exercise of any option to elect repayment of its Debt Securities, through its participant, to the Trustee and to
deliver the related Debt Securities by causing its participant to transfer its interest in those Debt Securities, on DTC’s records, to the Trustee.

DTC requires that those who purchase and sell interests in a global security deposited in its book-entry system use immediately available funds. Your
broker or bank may also require you to use immediately available funds when purchasing or selling interests in a global security.

Financial institutions that participate in the depositary’s book-entry system, and through which an investor holds its interest in a global security, may
also have their own policies affecting payments, notices and other matters relating to the Debt Securities. There may be more than one financial
intermediary in the chain of ownership for an investor. We do not monitor and are not responsible for the actions of any of those intermediaries. 

Special Situations when a Global Security will be Terminated

In a few special situations described below, a global security will be terminated and interests in it will be exchanged for certificates in non-book-entry form (certificated
securities). After that exchange, the choice of whether to hold the certificated Debt Securities directly or in street name will be up to the investor. Investors must consult their
own banks or brokers to find out how to have their interests in a global security transferred on termination to their own names, so that they will be holders. We have described
the rights of legal holders and street name investors under “Issuance of Securities in Registered Form” above.

If a global security is terminated, only the depositary, and not we or the Trustee, is responsible for deciding the names of the institutions in whose names the Debt Securities
represented by the global security will be registered and, therefore, who will be the holders of those Debt Securities.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Payment and Paying Agents

We will pay interest to the person listed in the Trustee’s records as the owner of the Debt Security at the close of business on a particular day in advance of each due date for
interest, even if that person no longer owns the Debt Security on the interest due date. That day, often approximately two weeks in advance of the interest due date, is called the
“record date.” Because we will pay all the interest for an interest period to the holders on the record date, holders buying and selling Debt Securities must work out between
themselves the appropriate purchase price. The most common manner is to adjust the sales price of the Debt Securities to prorate interest fairly between buyer and seller based
on their respective ownership periods within the particular interest period. This prorated interest amount is called “accrued interest.”

Payments on Global Securities

We will make payments on a global security in accordance with the applicable policies of the depositary as in effect from time to time. Under those policies, we will make
payments directly to the depositary, or its nominee, and not to any indirect holders who own beneficial interests in the global security. An indirect holder’s right to those
payments will be governed by the rules and practices of the depositary and its participants.

Payments on Certificated Securities

We will make payments on a certificated Debt Security as follows. We will pay interest that is due on an interest payment date by check mailed on the interest payment date to
the holder at his or her address shown on the trustee’s records as of the close of business on the regular record date. We will make all payments of principal and premium, if any,
by check at the office of the Trustee in New York, New York and/or at other offices that may be designated by the Trustee or in a notice to holders against surrender of the Debt
Security.

Alternatively, if the holder asks us to do so, we will pay any amount that becomes due on the Debt Security by wire transfer of immediately available funds to an account at a
bank in New York City, on the due date. To request payment by wire, the holder must give the Trustee or other paying agent appropriate transfer instructions at least 15
business days before the requested wire payment is due. In the case of any interest payment due on an interest payment date, the instructions must be given by the person who is
the holder on the relevant regular record date. Any wire instructions, once properly given, will remain in effect unless and until new instructions are given in the manner
described above.

Payment when Offices are Closed

If any payment is due on a Debt Security on a day that is not a business day, we will make the payment on the next day that is a business day. Payments made on the next
business day in this situation will be treated under the indenture as if they were made on the original due date. Such payment will not result in a default under any Debt Security
or the indenture, and no interest will accrue on the payment amount from the original due date to the next day that is a business day.

Book-entry and other indirect holders should consult their banks or brokers for information on how they will receive payments on their Debt Securities.

Events of Default

You will have rights if an Event of Default occurs in respect of the Debt Securities of your series and is not cured, as described later in this subsection.

The term “Event of Default” in respect of the Debt Securities of your series means any of the following:

•

•

•

•

we do not pay the principal of, or any premium on, a Debt Security of the series on its due date;

we do not pay interest on a Debt Security of the series when due, and such default is not cured within 30 days;

we do not deposit any sinking fund payment in respect of Debt Securities of the series on its due date, and do not cure this default within five days;

we remain in breach of a covenant in respect of Debt Securities of the series for 60 days after we receive a written notice of default stating we are in
breach. The notice must be sent by either the trustee or holders of at least 25% of the principal amount of Debt Securities of the series;

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
•

•

we file for bankruptcy or certain other events of bankruptcy, insolvency or reorganization occur and remain undischarged or unstayed for a period of 60
days; and

on the last business day of each of 24 consecutive calendar months, we have an asset coverage of less than 100%, giving effect to any exemptive relief
granted to us by the SEC.

An Event of Default for a particular series of Debt Securities does not necessarily constitute an Event of Default for any other series of Debt Securities issued under the same or
any other indenture. The trustee may withhold notice to the holders of Debt Securities of any default, except in the payment of principal, premium or interest, if it considers the
withholding of notice to be in the best interests of the holders.

Remedies if an Event of Default Occurs

If an Event of Default has occurred and has not been cured, the trustee or the holders of at least 25% in principal amount of the Debt Securities of the affected series may
declare the entire principal amount of all the Debt Securities of that series to be due and immediately payable. This is called a declaration of acceleration of maturity. In certain
circumstances, a declaration of acceleration of maturity may be canceled by the holders of a majority in principal amount of the Debt Securities of the affected series.

The trustee is not required to take any action under the indenture at the request of any holders unless the holders offer the trustee reasonable protection from expenses and
liability (called an “indemnity”). If reasonable indemnity is provided, the holders of a majority in principal amount of the outstanding Debt Securities of the relevant series may
direct the time, method and place of conducting any lawsuit or other formal legal action seeking any remedy available to the trustee. The trustee may refuse to follow those
directions in certain circumstances. No delay or omission in exercising any right or remedy will be treated as a waiver of that right, remedy or Event of Default.

Before you are allowed to bypass your trustee and bring your own lawsuit or other formal legal action or take other steps to enforce your rights or protect your interests relating
to the Debt Securities, the following must occur:

•

•

•

•

•

•

•

•

the holder must give your trustee written notice that an Event of Default has occurred and remains uncured;

the holders of at least 25% in principal amount of all outstanding Debt Securities of the relevant series must make a written request that the trustee take
action because of the default and must offer reasonable indemnity to the trustee against the cost and other liabilities of taking that action;

the trustee must not have taken action for 60 days after receipt of the above notice and offer of indemnity; and

the holders of a majority in principal amount of the Debt Securities must not have given the trustee a direction inconsistent with the above notice during
that 60 day period.

However, you are entitled at any time to bring a lawsuit for the payment of money due on your Debt Securities on or after the due date.

Holders of a majority in principal amount of the Debt Securities of the affected series may waive any past defaults other than:

the payment of principal, any premium or interest; or

in respect of a covenant that cannot be modified or amended without the consent of each holder.

Book-entry and other indirect holders should consult their banks or brokers for information on how to give notice or direction to or make a request of the trustee and
how to declare or cancel an acceleration of maturity.

Each year, we will furnish to each trustee a written statement of certain of our officers certifying that to their knowledge we are in compliance with the indenture and the Debt
Securities, or else specifying any default.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Merger or Consolidation

Under the terms of the indenture, we are generally permitted to consolidate or merge with another entity. We may also be permitted to sell all or substantially all of our assets to
another entity. However, we may not take any of these actions unless all the following conditions are met:

•

•

•

•

•

where we merge out of existence or sell our assets, the resulting entity must agree to be legally responsible for our obligations under the Debt
Securities;

immediately after giving effect to such transaction, no Default or Event of Default shall have happened and be continuing;

under the indenture, no merger or sale of assets may be made if as a result any of our property or assets or any property or assets of one of our
subsidiaries, if any, would become subject to any mortgage, lien or other encumbrance unless either (a) the mortgage, lien or other encumbrance could
be created;

pursuant to the limitation on liens covenant in the indenture without equally and ratably securing the indenture securities or (b) the indenture securities
are secured equally and ratably with or prior to the debt secured by the mortgage, lien or other encumbrance; and

we must deliver certain certificates and documents to the trustee.

Modification or Waiver

There are three types of changes we can make to the indenture and the Debt Securities issued thereunder.

Changes Requiring Approval

First, there are changes that we cannot make to Debt Securities without specific approval of all of the holders. The following is a list of those types of changes:

•

•

•

•

•

•

•

•

•

•

•

•

change the stated maturity of the principal of or interest on a Debt Security;

reduce any amounts due on a Debt Security;

reduce the amount of principal payable upon acceleration of the maturity of a security following a default;

adversely affect any right of repayment at the holder’s option;

change the place (except as otherwise designed by the Trustee) or currency of payment on a Debt Security;

impair your right to sue for payment;

adversely affect any right to convert or exchange a Debt Security in accordance with its terms;

modify the subordination provisions in the indenture in a manner that is adverse to holders of the Debt Securities;

reduce the percentage of holders of Debt Securities whose consent is needed to modify or amend the indenture;

reduce the percentage of holders of Debt Securities whose consent is needed to waive compliance with certain provisions of the indenture or to waive
certain defaults;

modify any other aspect of the provisions of the indenture dealing with supplemental indentures, modification and waiver of past defaults, changes to
the quorum or voting requirements or the waiver of certain covenants; and

change any obligation we have to pay additional amounts.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Changes Not Requiring Approval

The second type of change does not require any vote by the holders of the Debt Securities. This type is limited to clarifications and certain other changes that would not
adversely affect holders of the outstanding Debt Securities in any material respect. We also do not need any approval to make any change that affects only Debt Securities to be
issued under the indenture after the change takes effect.

Changes Requiring Majority Approval

Any other change to the indenture and the Debt Securities would require the following approval:

•

•

if the change affects only one series of Debt Securities, it must be approved by the holders of a majority in principal amount of that series; and

if the change affects more than one series of Debt Securities issued under the same indenture, it must be approved by the holders of a majority in
principal amount of all of the series affected by the change, with all affected series voting together as one class for this purpose. 

The holders of a majority in principal amount of all of the series of Debt Securities issued under an indenture, voting together as one class for this purpose, may waive our
compliance with some of our covenants in that indenture. However, we cannot obtain a waiver of a payment default or of any of the matters covered by the bullet points
included above under “—Changes Requiring Approval.”

Further Details Concerning Voting

Debt Securities will not be considered outstanding, and therefore not eligible to vote, if we have deposited or set aside in trust money for their payment or redemption. Debt
Securities will also not be eligible to vote if they have been fully defeased as described later under “Defeasance—Full Defeasance.”

We will generally be entitled to set any day as a record date for the purpose of determining the holders of outstanding indenture securities that are entitled to vote or take other
action under the indenture. If we set a record date for a vote or other action to be taken by holders of one or more series, that vote or action may be taken only by persons who
are holders of outstanding indenture securities of those series on the record date and must be taken within eleven months following the record date.

Book-entry and other indirect holders should consult their banks or brokers for information on how approval may be granted or denied if we seek to change the
indenture or the Debt Securities or request a waiver.

Defeasance

Covenant Defeasance

Under current U.S. federal tax law, we can make the deposit described below and be released from some of the restrictive covenants in the indenture under which the particular
series was issued. This is called “covenant defeasance.” In that event, you would lose the protection of those restrictive covenants but would gain the protection of having
money and government securities set aside in trust to repay your Debt Securities. If applicable, you also would be released from the subordination provisions as described under
the “Indenture Provisions—Subordination” section below. In order to achieve covenant defeasance, we must do the following:

•

•

•

if the Debt Securities of the particular series are denominated in U.S. dollars, we must deposit in trust for the benefit of all holders of such Debt
Securities a combination of money and U.S. government or U.S. government agency notes or bonds that will generate enough cash to make interest,
principal and any other payments on the Debt Securities on their various due dates;

we must deliver to the trustee a legal opinion of our counsel confirming that, under current U.S. federal income tax law, we may make the above
deposit without causing you to be taxed on the Debt Securities any differently than if we did not make the deposit and just repaid the Debt Securities
ourselves at maturity; and

we must deliver to the trustee a legal opinion of our counsel stating that the above deposit does not require registration by us under the 1940 Act, as
amended, and a legal opinion and officers’ certificate stating that all conditions precedent to covenant defeasance have been complied with.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
If we accomplish covenant defeasance, you can still look to us for repayment of the Debt Securities if there were a shortfall in the trust deposit or the trustee is prevented from
making payment. For example, if one of the remaining Events of Default occurred (such as our bankruptcy) and the Debt Securities became immediately due and payable, there
might be a shortfall. Depending on the event causing the default, you may not be able to obtain payment of the shortfall.

Full Defeasance

If there is a change in U.S. federal tax law, as described below, we can legally release ourselves from all payment and other obligations on the Debt Securities of a particular
series (called “full defeasance”) if we put in place the following other arrangements for you to be repaid:

•

•

•

•

•

if the Debt Securities of the particular series are denominated in U.S. dollars, we must deposit in trust for the benefit of all holders of such Debt
Securities a combination of money and United States government or United States government agency notes or bonds that will generate enough cash to
make interest, principal and any other payments on the Debt Securities on their various due dates.

we must deliver to the trustee a legal opinion confirming that there has been a change in current U.S. federal tax law or an IRS ruling that allows us to
make the above deposit without causing you to be taxed on the Debt Securities any differently than if we did not make the deposit and just repaid the
Debt Securities ourselves at maturity. Under current U.S. federal tax law, the deposit and our legal release from the Debt Securities would be treated as
though we paid you your share of the cash and notes or bonds at the time the cash and notes or bonds were deposited in trust in exchange for your Debt
Securities and you would recognize gain or loss on the Debt Securities at the time of the deposit;

we must deliver to the trustee a legal opinion of our counsel stating that the above deposit does not require registration by us under the 1940 Act, as
amended, and a legal opinion and officers’ certificate stating that all conditions precedent to defeasance have been complied with;

Defeasance must not result in a breach of the indenture or any other material agreements; and

Satisfy the conditions for covenant defeasance contained in any supplemental indentures.

If we ever did accomplish full defeasance, as described above, you would have to rely solely on the trust deposit for repayment of the Debt Securities. You could not look to us
for repayment in the unlikely event of any shortfall. Conversely, the trust deposit would most likely be protected from claims of our lenders and other creditors if we ever
became bankrupt or insolvent. If applicable, you would also be released from the subordination provisions described later under “Indenture Provisions—Subordination.”

Form, Exchange and Transfer of Certificated Registered Securities

Holders may exchange their certificated securities, if any, for Debt Securities of smaller denominations or combined into fewer Debt Securities of larger denominations, as long
as the total principal amount is not changed.

Holders may exchange or transfer their certificated securities, if any, at the office of their trustee. We have appointed the trustee to act as our agent for registering Debt
Securities in the names of holders transferring Debt Securities. We may appoint another entity to perform these functions or perform them ourselves.

Holders will not be required to pay a service charge to transfer or exchange their certificated securities, if any, but they may be required to pay any tax or other governmental
charge associated with the transfer or exchange. The transfer or exchange will be made only if our transfer agent is satisfied with the holder’s proof of legal ownership.

We may appoint additional transfer agents or cancel the appointment of any particular transfer agent. We may also approve a change in the office through which any transfer
agent acts.

If any certificated securities of a particular series are redeemable and we redeem less than all the Debt Securities of that series, we may block the transfer or exchange of those
Debt Securities during the period beginning 15 days before the day we mail the notice of redemption and ending on the day of that mailing, in order to freeze the list of holders
to prepare the mailing. We may also refuse to register transfers or exchanges of any certificated securities selected for redemption, except that we will continue to permit
transfers and exchanges of the unredeemed portion of any Debt Security that will be partially redeemed.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Resignation of Trustee

Each trustee may resign or be removed with respect to one or more series of indenture securities provided that a successor trustee is appointed to act with respect to these series.
In the event that two or more persons are acting as trustee with respect to different series of indenture securities under the indenture, each of the trustees will be a trustee of a
trust separate and apart from the trust administered by any other trustee.

Indenture Provisions—Subordination

Upon any distribution of our assets upon our dissolution, winding up, liquidation or reorganization, the payment of the principal of (and premium, if any) and interest, if any, on
any indenture securities denominated as subordinated Debt Securities is to be subordinated to the extent provided in the indenture in right of payment to the prior payment in full
of all senior indebtedness (as defined below), but our obligation to you to make payment of the principal of (and premium, if any) and interest, if any, on such subordinated Debt
Securities will not otherwise be affected. In addition, no payment on account of principal (or premium, if any), sinking fund or interest, if any, may be made on such
subordinated Debt Securities at any time unless full payment of all amounts due in respect of the principal (and premium, if any), sinking fund and interest on senior
indebtedness has been made or duly provided for in money or money’s worth.

In the event that, notwithstanding the foregoing, any payment by us is received by the trustee in respect of subordinated Debt Securities or by the holders of any of such
subordinated Debt Securities before all senior indebtedness is paid in full, the payment or distribution must be paid over to the holders of the senior indebtedness or on their
behalf for application to the payment of all the senior indebtedness remaining unpaid until all the senior indebtedness has been paid in full, after giving effect to any concurrent
payment or distribution to the holders of the senior indebtedness. Subject to the payment in full of all senior indebtedness upon this distribution by us, the holders of such
subordinated Debt Securities will be subrogated to the rights of the holders of the senior indebtedness to the extent of payments made to the holders of the senior indebtedness
out of the distributive share of such subordinated Debt Securities.

By reason of this subordination, in the event of a distribution of our assets upon our insolvency, certain of our senior creditors may recover more, ratably, than holders of any
subordinated Debt Securities. The indenture provides that these subordination provisions will not apply to money and securities held in trust under the defeasance provisions of
the indenture.

Senior indebtedness is defined in the indenture as the principal of (and premium, if any) and unpaid interest on:

•

•

our indebtedness (including indebtedness of others guaranteed by us), whenever created, incurred, assumed or guaranteed, for money borrowed (other than
indenture securities issued under the indenture and denominated as subordinated Debt Securities), unless in the instrument creating or evidencing the same or under
which the same is outstanding it is provided that this indebtedness is not senior or prior in right of payment to the subordinated Debt Securities; and

renewals, extensions, modifications and refinancings of any of this indebtedness. 

The Trustee under the Indenture

U.S. Bank National Association is the trustee under the indenture.

 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
Exhibit 14.1

This  Code  of  Ethics  (the  “Code”)  has  been  adopted  by  the  Board  of  Directors  (the  “Board”)  of  Hercules  Capital,  Inc.  (the
“Company”) in accordance with Rule 17j-l(c) under the Investment Company Act of 1940, as amended (the “1940 Act”). Rule 17j-1 generally
describes fraudulent or manipulative practices with respect to purchases or sales of securities held or to be acquired by business development
companies if affected by Access Persons (as defined below) of such companies.

CODE OF ETHICS

The purpose of this Code is to reflect the following:

(1) the duty at all times to place the interests of shareholders first;

(2) the requirement that all personal securities transactions be conducted consistent with the Code and in such a manner as to avoid
any actual or potential conflict of interest or any abuse of an individual’s position of trust and responsibility; and

(3) the fundamental standard that business development company personnel should not take inappropriate advantage of their
positions.

SECTION I: STATEMENT OF PURPOSE AND APPLICABILITY

(A)

Statement of Purpose

It is the policy of the Company that no affiliated person of the Company will, in connection with the purchase or sale,
directly or indirectly, by such person of any security held or to be acquired by the Company,

(1)

(2)

(3)

(4)

Employ any device, scheme or artifice to defraud the Company;

Make to the Company any untrue statement of a material fact or omit to state to the Company a
material fact necessary in order to make the statement made, in light of the circumstances under which
it is made, not misleading;

Engage  in  any  act,  practice,  or  course  of  business  which  operates  or  would  operate  as  a  fraud  or  deceit
upon the Company; or

Engage in any manipulative practice with respect to the Company.

1

 
 
 
 
 
 
(B)

Scope of the Code

In order to prevent Access Persons, as defined in Section II, paragraph (A) below, of the Company from engaging in any
of these prohibited acts, practices or courses of business, the Board has adopted this Code.

SECTION II: DEFINITIONS

(A)

(B)

(C)

(D)

Access Person. “Access Person” means any director, officer, or “Advisory Person” of the Company.

Advisory Person. “Advisory Person” of the Company means: (i) any director, officer or employee of the Company or
of any company in a control relationship to the Company, who, in connection with his or her regular functions or
duties, makes, participates in, or obtains information regarding the purchase or sale of a Covered Security by the
Company, or whose functions relate to the making of any recommendations with respect to such purchases or sales;
and (ii) any natural person in a control relationship to the Company who obtains information concerning
recommendations made to the Company with regard to the purchase or sale of a “Covered Security.”

Beneficial Interest. “Beneficial Interest” includes any entity, person, trust, or account with respect to which an Access
Person exercises investment discretion or provides investment advice. A beneficial interest will be presumed to
include all accounts in the name of or for the benefit of the Access Person, his or her spouse, dependent children, or
any person living with him or her or to whom he or she contributes economic support.

Beneficial Ownership. “Beneficial Ownership” will be determined in accordance with Rule 16a-1(a)(2) under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), except that the determination of direct or
indirect Beneficial Ownership will apply to all securities, and not just equity securities, that an Access Person holds or
acquires. Rule 16a-1(a)(2) provides that the term “beneficial owner” means any person who, directly or indirectly,
through any contract, arrangement, understanding, relationship, or otherwise, has or shares a direct or indirect
pecuniary interest in any equity security. Therefore, an Access Person may be deemed to have Beneficial Ownership
of securities held by members of his or her immediate family sharing the same household, or by certain partnerships,
trusts, corporations, or other arrangements.

(E)

Control. “Control” will have the meaning set forth in Section 2(a)(9) of the 1940 Act.

2

 
 
 
 
 
 
 
 
 
 
(F)

Covered Security. “Covered Security” means a security as defined in Section 2(a)(36) of the 1940 Act, except that
it does not include (i): direct obligations of the Government of the United States; (ii) banker’s acceptances, bank
certificates of deposit, commercial paper and high quality short-term debt instruments including repurchase
agreements; and (iii) shares issued by registered open-end investment companies (i.e., mutual funds); however,
exchange traded funds structured as unit investment trusts or open-end funds are considered “Covered Securities.”

Company. The “Company” means Hercules Capital, Inc., a Maryland corporation.

Designated Officer. “Designated Officer” means the officer of the Company designated by the Board from time to time to be
responsible for management of compliance with this Code and/or any person or persons designated by such officer to
perform such functions on his or her behalf.

Disinterested Director. “Disinterested Director” means a director of the Company who is not an “interested person” of the
Company within the meaning of Section 2(a)(19) of the 1940 Act.

Initial Public Offering. “Initial Public Offering” means an offering of securities registered under the Securities Act of 1933,
as amended (the “Securities Act”), the issuer of which, immediately before the registration, was not subject to the reporting
requirements of Sections 13 or 15(d) of the Exchange Act.

Investment Personnel. “Investment Personnel” means: (i) any employee of the Company (or of any company in a control
relationship to the Company) who, in connection with his or her regular functions or duties, makes or participates in making
recommendations regarding the purchase or sale of securities by the Company; and (ii) any natural person who controls the
Company and who obtains information concerning recommendations regarding the purchase or sale of securities by the
Company.

Limited Offering. “Limited Offering” means an offering that is exempt from registration under the Securities Act
pursuant to Section 4(2) or Section 4(6) or pursuant to Rule 504, Rule 505 or Rule 506 under the Securities Act.

Purchase or Sale of a Covered Security. “Purchase or Sale of a Covered Security” is broad and includes, among other things, the
writing of an option to purchase or sell a Covered Security, or the use of a derivative product to take a position in a Covered
Security.

(G)

(H)

(I)

(J)

(K)

(L)

(M)

3

 
 
 
 
 
 
 
SECTION III: STANDARDS OF CONDUCT

(A)

General Standards

(1)

(2)

(3)

(4)

No Access Person will engage, directly or indirectly, in any business transaction or arrangement for
personal profit that is inconsistent with the best interests of the Company or its shareholders.

No Access Person will make use of any confidential information gained by reason of his or her
employment by or affiliation with the Company or affiliates thereof in order to derive a personal profit for
himself or herself or for any Beneficial Interest, in violation of the fiduciary duty owed to the Company or
its shareholders.

No Access Person will recommend or authorize the purchase or sale of a Covered Security by the
Company or its affiliates without having disclosed, at the time of such recommendation or authorization,
any Beneficial Interest in, or Beneficial Ownership of, such Covered Security or the issuer thereof.

No Access Person will disclose any confidential information concerning securities holdings or
securities transactions of the Company to persons outside the Company, without obtaining prior written
approval from the Designated Officer, or such person or persons designated to act on his or her behalf.
Notwithstanding the preceding sentence, such Access Person may dispense such information without
obtaining prior written approval:

(a)

(b)

(c)

(d)

when there is a public report containing the same information;

when such information is dispensed in accordance with compliance procedures established to
prevent conflicts of interest between the Company and its affiliates;

when such information is reported to directors of the Company; or

in the ordinary course of his or her duties on behalf of the Company.

(5)

All personal securities transactions should be conducted consistent with this Code and in such a manner
as to avoid actual or potential conflicts of interest, the appearance of a conflict of interest, or any abuse
of an individual’s position of trust and responsibility within the Company.

(B)

Requirement to Obtain Preclearance

(1)

(2)

Preclearance is Required before Trading.  Preclearance of trades helps to prevent personal trading from conflicting
with Company transactions.  No Access Person will be able to purchase or sell, directly or indirectly, any Covered
Security in which he or she has, or by reason of such transaction acquires, any direct or indirect Beneficial Ownership
unless that Access Person has obtained preclearance prior to engaging in such transaction.

How to Obtain Preclearance. Prior to conducting a trade, all Access Persons must enter transaction information into
the ComplySci Preclearance System (“ComplySci”) and follow the

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
instructions to receive approval. If preclearance is granted, it will be valid for 5 business days from the day that
approval was granted and the trade must take place within those days. If Preclearance approval is not granted, Access
Persons will not be permitted to engage in the proposed transaction and may direct further inquiries to the CCO.

(3)

Certain Transactions May be Denied Preclearance. The following transactions will generally be denied preclearance.

(a)

(b)

(c)

(d)

Company Considering Purchase or Sale. Requests for preclearance regarding any securities that the
Company is currently considering for purchase or sale will generally be denied.

Company Same Day Purchase or Sale. Requests for preclearance regarding any securities that the
Company has purchased or sold on the same business day as the preclearance request will generally be
denied.

Restricted Security List. Requests for preclearance regarding any security listed on the Company’s
Restricted Security List will generally be denied.

Blackouts for Investment Personnel. Requests from Investment Personnel for preclearance that fall
within a “blackout” period will generally be denied.

(4)

(5)

Approval of CCO’s Transaction.  The CCO will conduct transactions in the manner described herein for all Access
Persons.  The Chief Executive Officer or Chief Financial Officer will approve such transactions.

Exclusions from Preclearance Requirement. The following transactions will generally be exempt from the
preclearance requirement.

(a)

Exchange Traded Fund transactions where no constituent security held by the Exchange Traded Fund
amounts to greater than 5% of the Exchange Traded Fund’s holdings;

(6)

Other Restrictions

a.

b.

Company Acquisition of Shares in Companies that Investment Personnel Hold Through Limited
Offerings. Investment Personnel who have been authorized to acquire securities in a Limited Offering
must disclose that investment to the Designated Officer when they are involved in the Company’s
subsequent consideration of an investment in the issuer, and the Company’s decision to purchase such
securities must be independently reviewed by Investment Personnel with no personal interest in that
issuer.

Gifts. No Access Person may accept, directly or indirectly, any gift, favor, or service or other
consideration of more than a de minimis value (e.g., $250) from any person or entity that does business or
proposes to do business with the Company, and/or with whom he or she transacts business on behalf of
the Company, under circumstances when to do so would conflict with the Company’s best interests or
would impair the ability of such person to be completely disinterested when required, in the course of
business, to make judgments and/or recommendations on behalf of the Company.  An Access Person
must pre-clear gifts over $250 in ComplySci.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
c.

d.

Service as Director. No Access Person will serve on the board of directors of a portfolio company of the
Company unless (i) such board service is consistent with the interests of the Company and its
shareholders and (ii) such Access Person has obtained prior written approval from the Designated Officer
for such service.

Initial Public Offerings and Limited Offerings. Access Persons must obtain preclearance before, directly
or indirectly, acquiring Beneficial Ownership in any securities in an Initial Public Offering or in a Limited
Offering.

SECTION IV: PROCEDURES TO IMPLEMENT CODE OF ETHICS

The following reporting procedures have been established to assist Access Persons in avoiding a violation of this Code, and to

assist the Company in preventing, detecting, and imposing sanctions for violations of this Code. Every Access Person must follow these
procedures. Questions regarding these procedures should be directed to the Designated Officer.

(A)

Applicability

All Access Persons are subject to the reporting requirements set forth in Section IV(B) except:

(1)

(2)

(3)

with respect to transactions effected for, and Covered Securities held in, any account over which the
Access Person has no direct or indirect influence or control;

a Disinterested Director, who would be required to make a report solely by reason of being a Director,
need not make: (1) an initial holdings or an annual holdings report; and (2) a quarterly transaction report,
unless the Disinterested Director knew or, in the ordinary course of fulfilling his or her official duties as a
Director, should have known that during the 15-day period immediately before or after such Disinterested
Director’s transaction in a Covered Security, the Company purchased or sold the Covered Security, or the
Company considered purchasing or selling the Covered Security.

an Access Person need not make a quarterly transaction report if the report would duplicate information
contained in broker trade confirmations or account statements received by the Company with respect to
the Access Person in the time required by subsection (B)(2) of this Section IV, if all of the information
required by subsection (B)(2) of this Section IV is contained in the broker trade confirmations or account
statements, or in the records of the Company, as specified in subsection (B)(4) of this Section IV.

(B)

Report Types

(1)

(2)

(3)

(4)

Initial Holdings Report. An Access Person must file an initial report in ComplySci not later than 10 calendar days
after that person became an Access Person.

Quarterly Transaction Report. An Access Person must file a quarterly transaction report in ComplySci not later than
30 calendar days after the end of a calendar quarter.

Annual Holdings Report. An Access Person must file an annual holdings report in ComplySci not later than 30
calendar days after the end of a fiscal year.

Account Statements. In lieu of providing a quarterly transaction report, an Access Person may direct his or her broker
to provide to the Designated Officer copies of periodic statements for all investment accounts in which they have
Beneficial Ownership that provide the information required in quarterly transaction reports, as set forth above.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(C)

(E)

(F)

(G)

(H)

(5)

Company Reports. No less frequently than annually, the Company must furnish to the Board, and the Board must
consider, a written report that:

(a)

(b)

describes any issues arising under the Code or procedures since the last report to the Board, including but
not limited to, information about material violations of the Code or procedures and sanctions imposed in
response to the material violations; and

certifies that the Company has adopted procedures reasonably necessary to prevent Access
Persons from violating the Code.

Disclaimer of Beneficial Ownership. Any report required under this Section IV may contain a statement that the report
will not be construed as an admission by the person making such report that he or she has any direct or indirect beneficial
ownership in the Covered Security to which the report relates.

Review of Reports. The reports required to be submitted under this Section IV will be delivered to the Designated
Officer. The Designated Officer will review such reports to determine whether any transactions recorded therein
constitute a violation of the Code. The Designated Officer will maintain copies of the reports as required by Rule 17j-
1(f).

Designated Officer Investigation. The Designated Officer may conduct such investigation as he or she considers
necessary to determine if proposed trades comply with this Code, including post-transaction monitoring. The Designated
Officer may impose additional measures to avoid perceived or actual conflicts of interest or to address any transactions
that require additional review.

Acknowledgment and Certification. Upon becoming an Access Person and annually thereafter, all Access Persons will sign an
acknowledgment and certification of their receipt of and intent to comply with this Code in ComplySci. Each Access Person must
also certify annually that he or she has read and understands the Code and recognizes that he or she is subject to the Code. In
addition, each access person must certify annually that he or she has complied with the requirements of the Code and that he or
she has disclosed or reported all personal securities transactions required to be disclosed or reported pursuant to the requirements
of the Code.

Records. The Company will maintain records with respect to this Code in the manner and to the extent set forth below, which
records may be maintained on microfilm or electronic storage media under the conditions described in Rule 31a-2(f) under the
1940 Act and will be available for examination by representatives of the Securities and Exchange Commission (the “SEC”):

(1)

(2)

(3)

(4)

A copy of this Code and any other code of ethics of the Company that is, or at any time within the past five years
has been, in effect will be maintained in an easily accessible place;

A record of any violation of this Code and of any action taken as a result of such violation will be maintained in an
easily accessible place for a period of not less than five years following the end of the fiscal year in which the
violation occurs;

A copy of each report made by an Access Person or duplicate account statement received pursuant to this Code,
including any information provided in lieu of the reports under subsection (A)(3) of this Section IV will be
maintained for a period of not less than five years from the end of the fiscal year in which it is made or the
information is provided, the first two years in an easily accessible place;

A record of all persons who are, or within the past five years have been, required to make reports pursuant to this
Code, or who are or were responsible for reviewing these reports, will be maintained in an easily accessible place;

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(5)

(6)

(7)

(8)

(9)

(10)

A copy of each report required under subsection (B)(5) of this Section IV will be maintained for at least five years
after the end of the fiscal year in which it is made, the first two years in an easily accessible place;
A record of any decision, and the reasons supporting the decision, to approve the direct or indirect acquisition by an
Access Person of beneficial ownership in any securities in an Initial Public Offering and

Limited Offering will be maintained for at least five years after the end of the fiscal year in which the approval is
granted.

Obligation to Report a Violation. Every Access Person who becomes aware of a possible violation of this Code by
any person must report it to the Designated Officer, who will report it to appropriate management personnel. The
management personnel will take such action that they consider appropriate under the circumstances. In the case of
officers or other employees of the Company, such action may include removal from office. The Board will be
notified, in a timely manner, of remedial action taken with respect to violations of the Code.

Confidentiality. All reports of Covered Securities transactions, duplicate confirmations, account statements and other
information filed with the Company or furnished to any person pursuant to this Code will be treated as confidential,
but are subject to review as provided herein and by representatives of the Securities and Exchange Commission or
otherwise to comply with applicable law or the order of a court of competent jurisdiction.

Waivers. The Designated Officer has the authority to exempt any employee or investment transaction from any or all
of the provisions of this Code if the Designated Officer determines that such exemption would not be against the
interests of any shareholders and is consistent with applicable laws and regulations, including Rule 17j-1 under the
Investment Company Act. The Designated Officer will prepare and file a written memorandum of any exemption
granted, describing the circumstances and reasons for the exemption.

SECTION V: SANCTIONS

Upon determination that a violation of this Code has occurred, management personnel of the Company may impose such sanctions

as they deem appropriate, including, among other things, disgorgement of profits, a letter of censure or suspension or termination of the
employment of the violator. All violations of this Code and any sanctions imposed with respect thereto will be reported in a timely manner to
the Board.

SECTION VI: AMENDMENTS

This Code may be amended from time to time by resolution of the Board, or without a resolution of the Board to the extent the

approval of such amendment is not required under the 1940 Act.

Amended and restated on July 7, 2015; Further amended and restated on October 12, 2016, November 30, 2016, November 13, 2017,
September 19, 2019 and November 19, 2019; Ratified on December 3, 2020

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exhibit 14.2

CODE OF BUSINESS CONDUCT AND ETHICS
Amended and Restated:

December 3, 2020

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CODE OF BUSINESS CONDUCT AND ETHICS

TABLE OF CONTENTS

Introduction

1

Purpose of the Code

Conflicts of Interest

1

1

Corporate Opportunities

2

Confidentiality2

Fair Dealing

2

Protection and Proper Use of Company Assets

3

Compliance with Applicable Laws, Rules and Regulations

3

Equal Opportunity, Harassment

Retaining Business Records

4

Accuracy of Company Records

Outside Employment

Service as a Director

4

4

3

4

Dealings with Government and Industry Regulators

5

Media Relations

5

Intellectual Property Information

5

Internet and E-Mail Policy

6

Reporting Violations and Complaint Handling

6

Sanctions for Code Violations

Application/Waivers

7

Revisions and Amendments

7

Other Policies and Procedures

Internal Use

8

7

7

 
 
 
 
 
 Introduction

This Code  of  Business  Conduct  and  Ethics  (the  “Code”)  has  been  adopted  by  Hercules  Capital,  Inc.  (the  “Company”)  in  order  to
establish applicable policies, guidelines, and procedures that promote ethical practices and conduct by the Company and all its employees, officers,
and directors. You should carefully read and retain a copy of the Code for future reference. The Code is primarily designed to assist you in the
recognition and resolution of potential conflicts of interest, maintain the confidentiality of our business activities, assist in the compliance with all
applicable securities laws and reporting of any unethical or illegal conduct, and reaffirm and promote the Company’s commitment to a corporate
culture that values honesty, integrity, and accountability.

All officers, directors and employees (“ Covered Persons”) of the Company are responsible for maintaining this level of integrity and for
complying with the policies contained in this Code. If you have a question or concern about what is proper conduct for you or anyone else, please
raise these concerns with the Chief Compliance Officer or any member of the Company’s senior management, or follow the procedures outlined in
applicable sections of this Code.

The Company’s Code of Ethics under Rule 17j-1 under the Investment Company Act of 1940, as amended (the “1940 Act”) and  the

Company’s Insider Trading Policy, contain separate requirements for persons covered by this Code and other persons and is not part of this  Code.

This Code is intended to:

 Purpose of the Code

1.

2.

3.

4.
5.

6.

help you recognize ethical issues and take the appropriate steps to resolve these  issues;

deter ethical violations and avoid any abuse of position of trust and  responsibility;

maintain confidentiality of our business activities;

assist you in complying with applicable securities  laws;
assist you in reporting any unethical or illegal conduct;  and

reaffirm and promote our commitment to a corporate culture that values  honesty, integrity and accountability.

As a condition of employment or continued employment, you must acknowledge annually, in writing, that you have received a copy of
this Code, read it, and understand that the Code contains our expectations regarding your conduct. You also will receive any updates and updated
versions of this Code and will be required to read and acknowledge such updates.

 Conflicts of Interest

You must avoid any conflict, or the appearance of a conflict, between your personal interests and the Company’s interests. A “conflict
of  interest”  occurs  when  your  private  interests  interfere  in  any  way,  or  even  appears  to  interfere,  with  the  interests  of,  or  your  service  to,  the
Company. For example, a conflict of interest probably exists if:

1.

2.

you, or a member of your family, receives improper personal benefits as a result of the Covered Person’s position with the
Company;
you use any non-public information about us, our customers, or our other business partners for your personal gain, or the gain
of a member of your family;

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3.
4.

5.

6.

you use or communicate confidential information obtained in the course of your work for your or another’s personal benefit;
you take actions or have interests that may make it difficult to perform your work on behalf of the Company objectively and
effectively;

you use your personal influence or personal relationship improperly to influence investment decisions, financial reporting or
company charitable contributions to benefit yourself to the detriment of the Company; or
you accept, directly or indirectly, any gift, favor, or service or other consideration  valued in excess of $250 from any person or
entity  that  does  or  proposes  to  do  business  with  the  Company  without  obtaining  pre-clearance  from  the  Chief  Compliance
Officer as
required by the Company’s Code of Ethics.

Each of us has a duty to advance the legitimate interests of the Company when the opportunity to do so presents itself. Therefore, you

 Corporate Opportunities

may not:

1.

2.

3.

take for yourself personally opportunities, including investment opportunities, discovered through the use of your position with
us, or through the use of Company property or information;

use our property, information, or position for your personal gain or the gain of a family member; or

compete, or prepare to compete, with  us.

 Confidentiality

You  must  not  disclose  confidential  information  regarding  us,  our  affiliates,  our  lenders,  or  our  other  business  partners,  unless
disclosure is authorized or required by law. Confidential information includes all non-public information that might be harmful to, or useful to the
competitors of, the Company, our affiliates, our lenders or our other business partners. Even after you leave the Company, this obligation continues
until the information becomes publicly available.

All reports and records prepared or maintained pursuant to this Code will be considered confidential and will be maintained and

protected accordingly. Except as otherwise required by law or this Code, such matters will not be disclosed by the Company to anyone other than
the Board of Directors and its counsel.

You must endeavor to deal fairly with our suppliers and business partners, or any other companies or individuals with whom we do
business or come into contact with, including fellow employees and our competitors. You must not take unfair advantage of these or other parties
by means of:
1.

manipulation;

 Fair Dealing

2.
3.

4.

5.

concealment;
abuse of privileged information;

misrepresentation of material facts; or

any other unfair-dealing practice.

2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Protection and Proper Use of Company Assets

Our assets are to be used only for legitimate business purposes. Theft, carelessness and waste have a direct impact on the Company’s

profitability. You should protect our assets and ensure that they are used efficiently.

Incidental personal use of telephones, fax machines, copy machines, personal computers and similar equipment is generally allowed if
there is no significant added cost to us, it does not interfere with your work duties, it is in compliance with the Company’s policy with respect to
internet usage and social media and is not related to an illegal activity or to any outside business.

 Compliance with Applicable Laws, Rules and Regulations

Each of us has a duty to comply with all laws, rules and regulations that apply to our business.

Highlighted below are some of the key compliance guidelines that must be followed.

1.

2.

3.

4.

Insider  trading. It is against the law to buy or sell securities using material information that  is not available  to  the  public.
Individuals who give this “inside” information to others may be liable to the same extent as the individuals who trade while in
possession of such information. You must not trade in our securities, or the securities of our affiliates, our lenders,  or our other
business partners while in the possession of “inside” information. All employees are required to be familiar and comply with
our Insider Trading Policy in the Company’s Compliance Manual.

“Whistleblower”  protections. It  is  against  the  law  to  discharge,  demote,  suspend,  threaten,  harass,  or  discriminate  in  any
manner  against  an  employee  who  provides  information  or  otherwise  assists  in  investigations  or  proceedings  relating  to
violations of federal securities laws or other federal laws prohibiting fraud against shareholders. You must not discriminate in
any  way  against  an  employee  who  engages  in  these  “whistleblower”  activities.  You  are  encouraged  to  refer  to  our
Whistleblower Policy in the Company’s Compliance Manual.

1940 Act requirements. A separate code of ethics has been established to comply with Rule  17j-1 under the 1940 Act and is
applicable to those persons designated in such code.

Document retention. You must adhere to appropriate procedures governing the retention and destruction of records consistent
with applicable laws, regulations and our policies. You may not destroy, alter or falsify any document that may be relevant to a
threatened or pending lawsuit or governmental investigation. All employees are required to be familiar and comply with our
Recordkeeping Policy in the Company’s Compliance Manual.

Please talk to the Chief Compliance Officer or any member of senior management if  you  have  any  questions  about  how  to  comply

with the above regulations and other laws, rules and regulations.

 In addition, we expect you to comply with all our policies and procedures that apply to you. We may modify or update our policies and
procedures in the future, and  may adopt new Company policies and procedures from time to time. You are also expected to observe the terms of
any confidentiality agreement, employment agreement or other similar agreement that applies to you.

Equal Opportunity, Harassment

We are committed to providing equal opportunity in all of our employment practices including selection, hiring, promotion, transfer, and

compensation of all qualified applicants and employees

3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
without regard to race, color, sex or gender, gender identity, sexual orientation, religion, age,  national origin, handicap, disability, citizenship status,
or any other status protected by law. With this in mind, there are certain behaviors that will not be tolerated. These include harassment, violence,
intimidation, and discrimination of any kind involving race, color, sex or gender, gender identity, sexual orientation, religion, age, national origin,
handicap, disability, citizenship status, marital status, or any other status protected by law.

 Retaining Business Records

The law requires us to maintain certain types of corporate records, usually for specified periods of time. Failure to retain those records
for  those  minimum  periods  could  subject  us  to  penalties  and  fines,  cause  the  loss  of  rights,  obstruct  justice,  place  us  in  contempt  of  court,  or
seriously disadvantage us in litigation If we inform you, or you believe that our records are relevant to any litigation or governmental action, or any
potential  litigation  or  action,  then  you  must  preserve  those  records  until  we  determine  the  records  are  no  longer  required  to  be  preserved.  This
requirement supersedes any previously or subsequently established destruction policies for those records. If you believe that this requirement may
apply, or have any questions regarding the possible applicability of this requirement, please contact our Chief Compliance Officer.

Accuracy of Company Records

We require honest and accurate recording and reporting of information in order to make responsible business decisions. This includes

such data as quality, safety, and personnel records, as well as financial records.

All financial books, records and accounts must  accurately  reflect  transactions  and  events,  and  conform  both  to  required  accounting

principles and to our system of internal controls. No false or  artificial entries may be made.

 Outside Employment

Without the written consent of the Chief Executive Officer, no officer or employee is permitted to:

engage in any other financial services business;

be employed or compensated by any other business for work performed;  or

have  a  significant  (more  than  5%  equity)  interest  in  any  other  financial  services  business,  including,  but  not  limited  to,  banks,
brokerages, investment advisers, insurance companies or any other similar business.

1.

2.

3.

Requests for outside employment waivers must be made in writing to the Chief Executive Officer with a copy to the Chief

Compliance Officer of the Company.

No  officer  or  employee  may  serve  as  a  director  or  officer  of  any  organization,  other  than  the  Company,  without  prior  written
authorization from our Chief Compliance Officer. Any request to serve on the board or as an officer of such an organization must include the name
of the entity and its business, the names of the other board members or  officers,  as  applicable,  and  a  general  reason  for  the  request.  The  Chief
Compliance Officer will consult with the Chief Executive Officer in connection

 Service as a Director

4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
with any such request.

Directors who serve on the Company’s Board of Directors are required to adhere to the procedures set forth in the Company’s Corporate

Governance Guidelines prior to serving on a board of another organization.

 Dealings with Government and Industry Regulators

The  Company’s  policy  forbids  payments  of  any  kind  by  us,  our  employees  or  any  agent  or  other   intermediary  to  any  government
official,  self-regulatory  official  or  other  similar  person  or  entity,  within  the  United  States  or  abroad,  for  the  purpose  of  obtaining  or  retaining
business, or for the purpose of influencing favorable consideration of any application for a business activity or other matter. This policy covers all
types of payments, even to minor government officials and industry regulators, regardless of whether the payment would be considered legal under
the  circumstances,  provided  that,  subject  to  certain  limitations,  political  contributions  or  donations  of  an  amount  less  than  the  then  federally-
mandated  maximum  amount,  made  without  the  intent  to  obtain  or  retain  business  or  favorably  influence  consideration  of  any  application  for  a
business activity or other matter, are permitted, as further explained below. Employees are required to avoid even the appearance of impropriety  in
their dealings with industry and government regulators and officials, even with respect to permissible contributions or donations.

It is expected and required that all employees fulfill their personal obligations to governmental and regulatory bodies. Those obligations
include the filing of appropriate federal, state and local tax returns, as well as the filing of any applicable forms or reports required by regulatory
bodies.

All employees are required to cooperate fully with management in connection with any internal or independent investigation and any
claims, actions, arbitrations, litigations, investigations or inquiries brought by or against us. Employees are expected, if requested, to provide us
with reasonable assistance, including, but not limited to, meeting or consulting with the Company and our representatives, reviewing documents,
analyzing facts and appearing or testifying as witnesses or interviewees or otherwise.

Employees are required to immediately notify the Chief Compliance Officer in the event they are contacted by any national, state, local
or self-regulatory authority or body regarding a potential or actual litigation, investigation, examination, or inquiry directly or indirectly involving
the Company, unless, upon the written advice of legal counsel, such employee is prohibited by law from doing so in such case.

We  must  speak  with  a  unified  voice  in  all  dealings  with  the  press  and  other  media.  As  a  result,  the  Company’s  Chief  Executive
Officer,  or  his  designee,  is  the  sole  contact  for  media  seeking  information  about  the  Company.  Any  requests  from  the  media  regarding  the
Company must be referred to its Chief Executive Officer, or his designee.

 Media Relations

 Intellectual Property Information

Information generated in our business is a valuable asset. Protecting this information plays an important role in our growth and ability
to  compete.  Such  information  includes  business  and  research  plans;  objectives  and  strategies;  trade  secrets;  unpublished  financial  information;
salary  and  benefits  data;  and  lender  and  other  business  partner  lists.  Employees  who  have  access  to  our  intellectual  property  information  are
obligated to safeguard it from unauthorized access and:

1.
2.

not disclose this information to persons outside of the  Company;
not use this information for personal benefit or the benefit of persons outside of  the Company; and

5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
3.

not share this information with other employees except on a legitimate “need  to know” basis.

 Internet and E-Mail Policy

We  provide  an  e-mail  system  and  Internet  access  to  certain  of  our  employees  to  help  them  do  their  work. You  may  use  the  e-mail
system and the Internet only for legitimate business purposes in the course of your duties. Incidental and occasional personal use is permitted, but
never for personal gain or any improper or illegal use. Further, you are prohibited from discussing or posting information regarding the Company
in any external electronic forum, including Internet chat rooms, electronic bulletin boards or social media sites. You are encouraged to refer to our
Social Media Policy in the Company’s Compliance Manual for more information.

 Reporting Violations and Complaint Handling

You are responsible for compliance with the rules, standards and principles described in this Code.  In addition, you should be alert to
possible violations of the Code by the Company’s employees, officers and directors, and you are required to report a violation promptly. Normally,
reports should be made to one’s immediate supervisor. Under some circumstances, it may be impractical or you may feel uncomfortable raising a
matter with your supervisor. In those instances, you are encouraged to contact the Chief Compliance Officer who will investigate the matter and
potentially report it to the Company’s Chief Executive Officer and/or Board of Directors, as the circumstance dictates. You will also be expected to
cooperate in an investigation of a violation.

The Company has also adopted a Whistleblower Policy pursuant to which you may report a concern about our conduct, the conduct of a
director, officer or employee of the Company or our accounting, internal accounting controls or auditing matters directly to the Audit Committee of
the  Board  of  Directors  of  the  Company. All  reported  concerns  will  be  reviewed  and  by  the Audit  Committee  and/or  by  the  Chief  Compliance
Officer on behalf of the Audit Committee. The status of all outstanding concerns forwarded to the Audit Committee will be reported on a quarterly
basis by the Company’s Chief Compliance Officer. The Audit Committee may direct that certain matters be presented to the full Board and may
retain  outside  advisors  or  counsel,  for  any  concern  reported  to  it. You  are  encouraged  to  refer  to  our  Whistleblower  Policy  in  the  Company’s
Compliance Manual and to report any concerns that you might have.

All reports will be investigated and, whenever possible, requests for confidentiality will be honored. And, while anonymous reports will
be accepted, please understand that anonymity may hinder or impede the investigation of a report. All cases of questionable activity or improper
actions  will  be  reviewed  for  appropriate  action,  discipline  or  corrective  actions.  Whenever  possible,  we  will  keep  confidential  the  identity  of
employees, officers or directors who are accused of violations, unless or until it has been determined that a violation has occurred.

There  will  be  no  reprisal,  retaliation  or  adverse  action  taken  against  any  employee  who,  in  good  faith,  reports  or  assists  in  the

investigation of, a violation or suspected violation, or who makes an inquiry about the appropriateness of an anticipated or actual course of action.

6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
For  reporting  concerns  about  the  Company’s  conduct,  the  conduct  of  a  director,  officer  or  employee  of  the  Company,  or  about  the

Company’s accounting, internal accounting controls or auditing matters, you may use the following means of communication:

1.

By Mail:Chief
Compliance Officer
Hercules Capital, Inc.
400 Hamilton Avenue, Suite 310
Palo Alto, CA 94301

2.

Confidentially By Mail:Chairperson of the Audit Committee

To be Opened by Audit Committee Only C/O Chief
Compliance Officer
Hercules Capital, Inc. 400 Hamilton
Avenue, Suite 310 Palo Alto, CA
94301

3.

4.

Anonymously By Phone to Ethics Hotline: 650-600-5400

By Email to Chief  Compliance Officer:complianceofficer@htgc.com

 Sanctions for Code Violations

All  violations  of  the  Code  are  subject  to  appropriate  corrective  action,  up  to  and  including  dismissal.  If  the  violation  involves

potentially criminal activity, the individual or individuals in question will be reported, as warranted, to the appropriate authorities.

All the directors, officers and employees of the Company are subject to this Code.

 Application/Waivers

Any material amendment or waiver of the Code for an executive officer of the Company or a member of the Board of Directors of the
Company  must  be  made  by  the  Board  of  Directors  and  disclosed  on  a  Form  8-K  filed  with  the  SEC  within  four  business  days  following  such
amendment or waiver.

 Revisions and Amendments

This Code may be revised, changed or amended at any time by our Board of Directors. Following any material revisions or updated, an
updated version of this Code will be distributed to you, and will supersede the prior version of this Code effective upon distribution. We may ask
you to sign an acknowledgement confirming that you have read and understood the revised version of the Code, and that you agree to comply with
the provisions.

This Code will be the sole code of business conduct and ethics adopted by the Company for purposes of Section 406 of the Sarbanes-
Oxley  Act  and  the  rules  and  forms  applicable  to  registered  investment  companies  thereunder.  Insofar  as  other  policies  or  procedures  of  the
Company may govern the

 Other Policies and Procedures

7

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
behavior  or  activities  of  the  Covered  Person  who  are  subject  to  this  Code,  they  are  superseded  by  this  Code  to  the  extent  that  they  overlap  or
conflict with the provisions of this Code.

 Internal Use

The Code is intended solely for the internal use by the Company and does not constitute an admission, by or on behalf of any

Company, as to any fact, circumstance, or legal conclusion.

8

 
 
 
 
 
List of Subsidiaries

Exhibit 21.1

Bearcub Acquisitions LLC

Gibraltar Acquisition LLC (1)

Gibraltar Business Capital LLC (1)

HercGBC LLC (1)

Hercules Adviser LLC (2)

Hercules Capital Funding 2018-1 LLC

Hercules Capital Funding 2019-1 LLC

Hercules Capital Funding Trust 2018-1

Hercules Capital Funding Trust 2019-1

Hercules Capital IV, L.P.

Hercules Capital Management LLC

Hercules Capital, Inc.

Hercules Funding II, LLC

Hercules Funding IV, LLC

Hercules Private Global Venture Growth Fund GP I LLC (2)

Hercules Private Global Venture Growth Fund I L.P. (2)

 Hercules Technology III, LP

Hercules Technology Management Co II, Inc.

Hercules Technology Management Co III LLC

Hercules Technology Management Co IV LLC

Hercules Technology Management Co V LLC

Hercules Technology SBIC Management, LLC

(1)

(2)

Subsidiary is not consolidated for financial reporting purposes. The Company’s investments are carried on the consolidated statement of assets and liabilities at fair value and are classified as
control investments.
Subsidiary is not operational as of 12/31/2020.

 
 
 
 
 
 
 
 
 
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-229435) and N-2 (No. 333-231089) of Hercules Capital, Inc. of our
report dated February 23, 2021 relating to the financial statements, financial statement schedule, senior securities table and the effectiveness of internal control over financial
reporting, which appears in this Form 10-K. We also consent to the reference to us under the heading “Senior Securities” in this Form 10-K.

Exhibit 23.1

/s/ PricewaterhouseCoopers LLP
San Francisco, California
February 23, 2021

 
 
CERTIFICATION PURSUANT TO

RULE 13a-14(a) and 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED

Exhibit 31.1

I, Scott Bluestein, Director, President, Chief Executive Officer, and Chief Investment Officer of the Company, certify that:

1. I have reviewed this annual report on Form 10-K of Hercules Capital, Inc. (the “registrant”) for the year ended December 31, 2020;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in

light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition,

results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules

13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide

reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the

disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter

(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s

auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to

adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial

reporting.

Date: February 23, 2021

  By:

/S/ SCOTT BLUESTEIN
Scott Bluestein
Director, President, Chief Executive Officer, and
Chief Investment Officer (Principal Executive Officer)

 
 
 
 
 
 
 
 
 
 
CERTIFICATION PURSUANT TO

RULE 13a-14(a) and 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED

Exhibit 31.2

I, Seth H. Meyer, Chief Financial Officer, and Chief Accounting Officer certify that:

1. I have reviewed this annual report on Form 10-K of Hercules Capital, Inc. (the “registrant”) for the year ended December 31, 2020;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in

light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition,

results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules

13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide

reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the

disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter

(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s

auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to

adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial

reporting.

Date: February 23, 2021

  By:

/S/ SETH H. MEYER
Seth H. Meyer
Chief Financial Officer, and
Chief Accounting Officer (Principal Accounting and Financial Officer)

 
 
 
 
 
 
 
 
 
 
CERTIFICATION PURSUANT TO
SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Exhibit 32.1

In connection with the accompanying Annual Report of Hercules Capital, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2020 (the “Report”) as

filed with the Securities and Exchange Commission on the date hereof, I, Scott Bluestein, Director, President, Chief Executive Officer and Chief Investment Officer of the
Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 23, 2021

  By:

/S/ SCOTT BLUESTEIN
Scott Bluestein
Director, President, Chief Executive Officer, and
Chief Investment Officer (Principal Executive Officer)

 
 
 
 
 
 
 
 
 
 
CERTIFICATION PURSUANT TO
SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Exhibit 32.2

In connection with the accompanying Annual Report of Hercules Capital, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2020 (the “Report”) as
filed with the Securities and Exchange Commission on the date hereof, I, Seth H. Meyer, the Chief Financial Officer, and Chief Accounting Officer of the Company, certify, to
the best of my knowledge, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 23, 2021

  By:

/S/ SETH H. MEYER
Seth H. Meyer
Chief Financial Officer, and
Chief Accounting Officer (Principal Accounting and Financial Officer)