Part I [Business](index=3&type=section&id=Item%201.%20Business) Hercules Capital, Inc. is an internally managed BDC and RIC providing senior secured loans to high-growth, venture-backed companies in technology, life sciences, and sustainable technology sectors - The company is a specialty finance firm providing senior secured loans to high-growth, venture capital-backed companies in technology, life sciences, and sustainable/renewable technology industries[22](index=22&type=chunk)[23](index=23&type=chunk) - The primary investment strategy involves structured debt with warrants, designed to generate current income and potential capital appreciation[24](index=24&type=chunk)[25](index=25&type=chunk) - Operates two wholly-owned SBIC subsidiaries, HT III and HC IV, with HT III holding approximately **$201.2 million in assets** (7.7% of total assets) and HC IV providing access to an additional **$175.0 million in SBA debentures**[26](index=26&type=chunk)[27](index=27&type=chunk) - The company is an internally managed BDC and has elected to be treated as a RIC for tax purposes, requiring distribution of at least **90% of its taxable income**[32](index=32&type=chunk)[34](index=34&type=chunk) - The investment portfolio is monitored using a 5-point grading system (1=highest quality, 5=workout), with a weighted average investment grade of **2.16** as of December 31, 2020[91](index=91&type=chunk) - As of December 31, 2020, the company employed **82 professionals**, with over **40% being women** and over **35% from diverse ethnic backgrounds**[101](index=101&type=chunk) [Risk Factors](index=28&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from its BDC structure, substantial indebtedness, concentrated portfolio in volatile sectors, and the ongoing impact of the COVID-19 pandemic - As an internally managed BDC, the company is dependent on key management personnel and may face limitations in compensation flexibility compared to externally managed peers[187](index=187&type=chunk)[188](index=188&type=chunk) - The company operates with substantial indebtedness and an asset coverage ratio of **150%**, which increases leverage and magnifies potential gains and losses[200](index=200&type=chunk)[201](index=201&type=chunk) - The investment portfolio is highly concentrated in specific technology-related industries, with **87.2% of the portfolio's fair value** in the Software, Drug Discovery & Development, and Internet Consumer & Business Services industries as of year-end 2020[273](index=273&type=chunk)[274](index=274&type=chunk) - The COVID-19 pandemic has negatively impacted the global economy and may disrupt operations, impair portfolio companies' ability to repay loans, and increase credit risk[388](index=388&type=chunk)[389](index=389&type=chunk) - The discontinuation of LIBOR presents a risk, as it may affect the value of financial obligations and require renegotiation of credit agreements for both assets and liabilities[256](index=256&type=chunk)[258](index=258&type=chunk) - The company's common stock may trade below its NAV per share, which could limit its ability to raise additional equity capital without stockholder approval and cause dilution[347](index=347&type=chunk)[350](index=350&type=chunk) [Unresolved SEC Staff Comments](index=72&type=section&id=Item%201B.%20Unresolved%20SEC%20Staff%20Comments) The company reports no unresolved comments from the SEC staff - There are no unresolved staff comments as of the report date[430](index=430&type=chunk) [Properties](index=72&type=section&id=Item%202.%20Properties) The company leases all its office spaces, including its principal executive offices, and does not own any real estate - The company leases all its office spaces, including its principal executive offices in Palo Alto, CA, and does not own any real estate[431](index=431&type=chunk) [Legal Proceedings](index=72&type=section&id=Item%203.%20Legal%20Proceedings) The company does not expect any current legal proceedings to materially impact its financial condition or operations - The company is not currently involved in any legal proceedings that are expected to have a material adverse effect on its financial condition[432](index=432&type=chunk) [Mine Safety Disclosures](index=72&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine safety disclosures are not applicable[433](index=433&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=73&type=section&id=Item%205.%20Market%20for%20the%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the NYSE, with a variable distribution policy and no share repurchases in 2020 Quarterly Stock Price and Distribution Data (2020) | Quarter | NAV per Share ($) | High Price ($) | Low Price ($) | High as % of NAV | Low as % of NAV | Distribution per Share ($) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Q1 2020 | 9.92 | 15.99 | 6.81 | 61.2% | -31.4% | 0.320 | | Q2 2020 | 10.19 | 11.83 | 6.64 | 16.1% | -34.8% | 0.320 | | Q3 2020 | 10.26 | 11.97 | 10.02 | 16.7% | -2.3% | 0.340 | | Q4 2020 | 11.26 | 14.42 | 11.13 | 28.1% | -1.2% | 0.370 | - The company's Board of Directors maintains a variable distribution policy with the objective of distributing **90-100% of its taxable quarterly or annual income**[452](index=452&type=chunk) - A stock repurchase plan for up to **$25.0 million** expired on June 18, 2019, with no shares repurchased during 2020 or 2019[447](index=447&type=chunk) - On February 17, 2021, the Board declared a Q1 2021 cash distribution of **$0.32 per share** plus a supplemental cash distribution of **$0.05 per share**[451](index=451&type=chunk) [Selected Consolidated Financial Data](index=76&type=section&id=Item%206.%20Selected%20Consolidated%20Financial%20Data) This section summarizes key financial data from 2016 to 2020, showing growth in total assets and net assets, and detailing 2020 investment income and net asset increase Selected Financial Data (in thousands, except per share) | (in thousands, except per share) | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | **Balance Sheet Data:** | | | | | Total Assets | $2,623,997 | $2,461,968 | $1,945,191 | | Total Net Assets | $1,291,704 | $1,133,049 | $955,444 | | NAV per Share | $11.26 | $10.55 | $9.90 | | **Operations Data:** | | | | | Total Investment Income | $287,258 | $267,874 | $207,753 | | Net Investment Income | $157,140 | $143,272 | $108,729 | | Net Increase in Net Assets | $227,261 | $173,598 | $76,496 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=78&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses 2020 financial performance, highlighting portfolio growth, increased investment income, net unrealized appreciation, strong liquidity, and regulatory asset coverage, while noting COVID-19 impacts Portfolio Activity (Year Ended Dec 31, in millions) | (in millions) | 2020 | 2019 | | :--- | :--- | :--- | | New Debt Commitments | $1,173.1 | $1,457.1 | | Total Funded Investments | $761.3 | $1,025.7 | | Early Principal Repayments | $709.0 | $526.8 | Portfolio Yields | Yield Type | 2020 | 2019 | | :--- | :--- | :--- | | Weighted Average Core Yield | 11.6% | 12.5% | | Weighted Average Effective Yield | 12.9% | 13.4% | - Net realized losses were **$(56.1) million** in 2020, compared to net realized gains of **$16.5 million** in 2019, primarily from write-offs of several debt and equity investments[529](index=529&type=chunk)[530](index=530&type=chunk) - Net unrealized appreciation was **$126.2 million** in 2020, a significant increase from **$13.8 million** in 2019, driven by **$109.7 million** in net unrealized appreciation from the equity and warrant portfolios[531](index=531&type=chunk)[533](index=533&type=chunk) - As of December 31, 2020, the company had **$673.3 million in available liquidity**, including **$198.3 million** in cash and cash equivalents and available credit facilities[571](index=571&type=chunk) - The company's regulatory asset coverage ratio was **207.5%** (excluding SBA debentures), comfortably above the required minimum of **150%**[581](index=581&type=chunk) [Quantitative and Qualitative Disclosure About Market Risk](index=96&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) The company's primary market risk is interest rate volatility, with most loans having floating rates and floors, and a sensitivity analysis showing the impact of rate changes on net income - The company's main market risk is from changes in interest rates, with **96.9% of the loan portfolio** having variable interest rates, primarily based on Prime or LIBOR with floors as of December 31, 2020[614](index=614&type=chunk) Interest Rate Sensitivity Analysis (Annualized) | Basis Point Change | Net Income Impact (in thousands) | EPS Impact | | :--- | :--- | :--- | | +100 | $8,797 | $0.08 | | +50 | $4,462 | $0.04 | | -25 | $19 | $0.00 | | -75 | $74 | $0.00 | - The company did not engage in any interest rate or foreign currency hedging activities during the year ended December 31, 2020[617](index=617&type=chunk) [Financial Statements and Supplementary Data](index=97&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements, including the unqualified auditor's report, and detailed notes on accounting policies, fair value measurement, borrowings, and commitments - The Report of Independent Registered Public Accounting Firm (PricewaterhouseCoopers LLP) provides an unqualified opinion on the financial statements and effectiveness of internal controls, identifying the valuation of Level 3 investments as a critical audit matter due to significant management judgment[626](index=626&type=chunk)[634](index=634&type=chunk) Consolidated Balance Sheet Highlights (as of Dec 31, 2020, in thousands) | (in thousands) | Amount | | :--- | :--- | | Total Investments, at fair value | $2,354,078 | | Total Assets | $2,623,997 | | Total Liabilities | $1,332,293 | | Total Net Assets | $1,291,704 | Consolidated Operations Highlights (Year Ended Dec 31, 2020, in thousands) | (in thousands) | Amount | | :--- | :--- | | Total Investment Income | $287,258 | | Net Investment Income | $157,140 | | Net Realized (Loss) on Investments | $(56,105) | | Net Change in Unrealized Appreciation | $126,226 | | Net Increase in Net Assets | $227,261 | - Note 3 (Fair Value) shows that of the **$2.35 billion in investments**, **$2.20 billion** are classified as Level 3, indicating reliance on significant unobservable inputs for valuation[788](index=788&type=chunk)[791](index=791&type=chunk) - Note 5 (Borrowings) details approximately **$1.3 billion** in outstanding principal from various sources, including SBA Debentures, multiple series of notes, and convertible notes[826](index=826&type=chunk) - Note 11 (Commitments and Contingencies) discloses approximately **$179.8 million** in unfunded commitments to portfolio companies and investment funds as of December 31, 2020[946](index=946&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=170&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) This item is not applicable as there were no changes in or disagreements with accountants on accounting and financial disclosure - Not Applicable[964](index=964&type=chunk) [Controls and Procedures](index=170&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2020, with no material changes reported - Management concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[965](index=965&type=chunk) - Management's assessment concluded that the company's internal control over financial reporting was effective as of December 31, 2020, based on the COSO framework[969](index=969&type=chunk) - There were no changes in internal control over financial reporting during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, such controls[971](index=971&type=chunk) [Other Information](index=171&type=section&id=Item%209B.%20Other%20Information) This section provides updated tables for fees, expenses, and senior securities, detailing annual expenses and regulatory asset coverage ratios Annual Expenses (as a percentage of net assets) | Expense Category | Percentage | | :--- | :--- | | Operating expenses | 5.49% | | Interest and fees paid on borrowed funds | 5.81% | | **Total annual expenses** | **11.30%** | - The Senior Securities table shows total outstanding senior securities of **$1.3 billion** as of December 31, 2020[984](index=984&type=chunk) - As of December 31, 2020, the company's regulatory asset coverage ratio was **207.5%** (excluding SBA debentures) and **199.3%** (including SBA debentures)[987](index=987&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=175&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2021 Proxy Statement - This information is incorporated by reference from the definitive Proxy Statement for the 2021 Annual Meeting of Shareholders[989](index=989&type=chunk) [Executive Compensation](index=175&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the 2021 Proxy Statement - This information is incorporated by reference from the definitive Proxy Statement for the 2021 Annual Meeting of Shareholders[990](index=990&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=175&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership is incorporated by reference from the 2021 Proxy Statement - This information is incorporated by reference from the definitive Proxy Statement for the 2021 Annual Meeting of Shareholders[991](index=991&type=chunk) [Certain Relationships and Related Transactions and Director Independence](index=175&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%20and%20Director%20Independence) Information regarding related transactions and director independence is incorporated by reference from the 2021 Proxy Statement - This information is incorporated by reference from the definitive Proxy Statement for the 2021 Annual Meeting of Shareholders[992](index=992&type=chunk) [Principal Accountant Fees and Services](index=175&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the 2021 Proxy Statement - This information is incorporated by reference from the definitive Proxy Statement for the 2021 Annual Meeting of Shareholders[993](index=993&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=176&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed as part of the Form 10-K report - This section provides an index of all financial statements, schedules, and exhibits filed with the annual report[996](index=996&type=chunk)[1014](index=1014&type=chunk) [Form 10-K Summary](index=176&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable to the company - Not applicable[997](index=997&type=chunk)

October 29, 2020 THIRD QUARTER 2020 INVESTOR PRESENTATION Financing the Growth of Tomorrow's Companies TodayTM IMPORTANT NOTICE: FORWARD LOOKING STATEMENTS This presentation may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. You should understand that under Section 27A(b)(2)(B) of the Securities Act of 1933, as amended, and Section 21E(b)(2)(B) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the "safe harbor" provisio ...

Financial Data and Key Metrics Changes - In Q3 2020, Hercules Capital generated total investment income of $70.3 million, an increase of 3.5% compared to the prior quarter, and net investment income of $38.7 million or $0.34 per share, reflecting a $3 million or $0.02 per share increase from the previous quarter [21][49] - Year-to-date, total investment income reached $211.9 million, up 7.4% year-over-year, while net investment income increased by 11.4% year-over-year to $115 million [21][22] - The weighted average internal credit rating improved to 2.22 in Q3 from 2.30 in Q2, with rate 1 and 2 credits increasing to 64.4% from 59.7% [24][25] Business Line Data and Key Metrics Changes - Hercules Capital originated over $514 million in new debt and equity commitments in Q3, with gross fundings of nearly $266 million [15][21] - The investment activity was skewed slightly more towards life sciences companies, with strong performance from both technology and life sciences teams [17][18] - The debt investment portfolio grew by $4.8 million at cost and $48.2 million at fair value during the quarter [20] Market Data and Key Metrics Changes - The venture capital ecosystem raised a total of $56.6 billion and invested over $112 billion in the U.S. through the first three quarters of 2020, indicating strong market activity despite the pandemic [41][118] - Approximately 90% of current life sciences debt investments at cost are in publicly traded companies, with a weighted average public market capitalization of about $1.5 billion [39] Company Strategy and Development Direction - Hercules Capital continues to focus on maximizing liquidity, ensuring balance sheet strength, and maintaining operational flexibility amid the pandemic [12][29] - The company emphasizes diversification and controlled growth, particularly in technology and life sciences sectors, which provide a competitive advantage [16][18] - The recent approval of a new SBA license allows Hercules to access an additional $175 million of flexible capital, enhancing its liquidity position [31][48] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the credit quality and investment opportunities, noting a strong pipeline exceeding $1 billion [70][118] - The company anticipates early payoffs in Q4 to be between $100 million and $150 million, although this could change [31][60] - The core yield guidance remains at 11% to 12% for the remainder of 2020, with expectations for SG&A expenses to be slightly lower than prior guidance [59][60] Other Important Information - Hercules Capital wrote off two impaired loans during the quarter, which had been on non-accrual, but overall credit performance remained solid [14][25] - The company has a cumulative investment of over $11 billion in venture and growth stage companies since inception [23] Q&A Session Summary Question: Can you provide details on the improvements in credit quality? - Management noted that the migration of grade three loans to grade two was primarily driven by successful fundraising activities, with no specific credit trends indicating broader issues [64][65] Question: Are there more opportunities with new companies compared to earlier in the year? - Management indicated a strong pipeline of approximately $1 billion, with continued selectivity in evaluating new deals [70][72] Question: What attributes contribute to the strong credit quality and competitive positioning? - The quality and experience of the investment team were highlighted as key factors, along with strong fundamentals in the venture capital ecosystem [78][80] Question: Can you provide an update on Gibraltar? - Gibraltar continues to perform well, benefiting from the current environment for credit-oriented ABL lenders [81] Question: How do you view the cadence of investing in the near term? - Management acknowledged that Q3 was typically a slow quarter but noted strong performance this year, with ongoing activity into Q4 [82][85] Question: Can you update on the Strategic Initiatives regarding the RIA? - Management confirmed the exploration of opportunities following the SEC's no-action relief for creating a registered investment advisor [88][90] Question: What was the nature of the recent exits? - The two exited loans were previously impaired, with one linked to COVID impacts and the other being a long-term non-accrual situation [92][95] Question: How did you achieve strong funding despite a virtual environment? - The investment team adapted well to remote work, leveraging technology and existing relationships to conduct due diligence effectively [100][102] Question: Can you provide details on the equity positions sold during the quarter? - Management clarified that no larger equity positions were liquidated, focusing instead on smaller names [124] Question: How will the new SPI subsidiary be funded? - The plan involves putting in additional equity into the SPV as needed to draw down debentures [125] Question: Has the remote working environment led to operational efficiencies? - Management stated it is too early to determine long-term efficiencies related to real estate and operations [127]

PART I. FINANCIAL INFORMATION [ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) Presents Hercules Capital, Inc.'s unaudited consolidated financial statements, covering financial position, performance, cash flows, and detailed notes [Consolidated Statements of Assets and Liabilities](index=3&type=section&id=Consolidated%20Statements%20of%20Assets%20and%20Liabilities) Shows Hercules Capital, Inc.'s increased total assets and net assets, with higher investments and a slight rise in liabilities Consolidated Statements of Assets and Liabilities (in thousands) | Metric | September 30, 2020 (in thousands) | December 31, 2019 (in thousands) | | :------------------------------------------------- | :-------------------------------- | :-------------------------------- | | **Assets** | | | | Total investments in securities, at value | $2,420,827 | $2,314,526 | | Cash and cash equivalents | $27,554 | $64,393 | | Restricted cash | $20,507 | $50,603 | | Total assets | $2,504,001 | $2,461,968 | | **Liabilities** | | | | Total liabilities | $1,330,921 | $1,328,919 | | **Net Assets** | | | | Total net assets | $1,173,080 | $1,133,049 | | Shares of common stock outstanding | 114,317 | 107,364 | | Net asset value per share | $10.26 | $10.55 | - The company's consolidated securitization trusts for the 2027 and 2028 Asset-Backed Notes, which are variable interest entities (VIEs), had total assets of **$685.9 million** and total liabilities of **$445.1 million** as of **September 30, 2020**[13](index=13&type=chunk)[14](index=14&type=chunk) [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) Shows increased investment income and net investment income, offset by substantial net realized losses on investments Metric (in thousands) | Metric (in thousands) | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total investment income | $70,339 | $69,238 | $211,926 | $197,297 | | Total operating expenses | $31,625 | $30,365 | $96,948 | $94,124 | | Net investment income | $38,714 | $38,873 | $114,978 | $103,173 | | Net realized gain (loss) on investments | $(48,501) | $4,807 | $(41,393) | $13,633 | | Net change in unrealized appreciation (depreciation) on investments | $52,834 | $(24,409) | $2,504 | $12,181 | | Net increase (decrease) in net assets resulting from operations | $43,047 | $19,271 | $76,089 | $128,987 | | Basic EPS | $0.38 | $0.18 | $0.68 | $1.29 | [Consolidated Statements of Changes in Net Assets](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets) Illustrates equity movements, driven by operations, public offerings, stock issuances, and shareholder distributions Metric (in thousands) | Metric (in thousands) | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2019 | | :------------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Balance at beginning of period | $1,164,030 | $1,133,049 | $1,104,684 | $955,444 | | Net increase (decrease) in net assets from operations | $43,047 | $76,089 | $19,271 | $128,987 | | Public offering, net of offering expenses | $(96) | $73,566 | $(331) | $95,092 | | Distributions | $(36,557) | $(116,782) | $(35,555) | $(97,606) | | Stock-based compensation | $2,124 | $6,332 | $1,239 | $7,094 | | Balance at end of period | $1,173,080 | $1,173,080 | $1,085,681 | $1,085,681 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Indicates a shift from cash provided by financing activities in 2019 to cash used in 2020, with reduced operating cash Metric (in thousands) | Metric (in thousands) | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :------------------------------------------------- | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(24,015) | $(226,752) | | Net cash used in investing activities | $(115) | $(484) | | Net cash (used in) provided by financing activities | $(42,805) | $217,310 | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $(66,935) | $(9,926) | | Cash, cash equivalents, and restricted cash at end of period | $48,061 | $35,931 | - Supplemental disclosures show interest paid of **$46.2 million** in **2020** (vs. **$41.0 million** in **2019**) and income tax paid of **$2.5 million** in **2020** (vs. **$1.4 million** in **2019**) for the nine months ended September 30[23](index=23&type=chunk) [Consolidated Schedule of Investments](index=9&type=section&id=Consolidated%20Schedule%20of%20Investments) Details Hercules Capital, Inc.'s portfolio by type, maturity, interest rate, and sub-industry, primarily debt in Drug Discovery & Development and Software Total Investments in Securities (in thousands) | Investment Type | September 30, 2020 (Value) | December 31, 2019 (Value) | | :---------------------- | :--------------------------- | :-------------------------- | | Debt Investments | $2,264,447 | $2,148,592 | | Equity Investments | $133,849 | $145,053 | | Warrant Investments | $22,531 | $20,881 | | **Total** | **$2,420,827** | **$2,314,526** | Investment Portfolio by Industry Sector (in thousands) | Industry Sector | September 30, 2020 (Fair Value) | Percentage of Total Portfolio | | :------------------------------ | :------------------------------ | :---------------------------- | | Drug Discovery & Development | $859,371 | 35.6% | | Software | $755,010 | 31.2% | | Internet Consumer & Business Services | $492,696 | 20.4% | | Sustainable and Renewable Technology | $61,297 | 2.5% | | Information Services | $53,363 | 2.2% | | Diversified Financial Services | $46,797 | 1.9% | | Drug Delivery | $45,481 | 1.9% | | Medical Devices & Equipment | $38,543 | 1.6% | | Healthcare Services, Other | $27,271 | 1.1% | | Media/Content/Info | $21,308 | 0.9% | | Communications & Networking | $12,534 | 0.5% | | Surgical Devices | $3,190 | 0.1% | | Electronics & Computer Hardware | $2,809 | 0.1% | | Consumer & Business Products | $708 | 0.0% | | Semiconductors | $432 | 0.0% | | Specialty Pharmaceuticals | $17 | 0.0% | | Biotechnology Tools | $0 | 0.0% | | **Total** | **$2,420,827** | **100.0%** | - As of **September 30, 2020**, approximately **92.4%** of the investment portfolio by fair value was located in the United States, with smaller percentages in the United Kingdom (**2.5%**), Australia (**2.2%**), and Netherlands (**1.5%**)[149](index=149&type=chunk) [Notes to Consolidated Financial Statements](index=30&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Provides detailed explanations for financial statements, covering business, accounting policies, fair value, borrowings, income tax, equity, and subsequent events [1. Description of Business and Basis of Presentation](index=30&type=section&id=1.%20Description%20of%20Business%20and%20Basis%20of%20Presentation) Hercules Capital, Inc. is a specialty finance company providing senior secured loans to high-growth, venture capital-backed companies, operating as an internally managed BDC and RIC - Hercules Capital, Inc. is a specialty finance company focused on providing senior secured loans to high-growth, innovative venture capital-backed companies in technology, life sciences, and sustainable and renewable technology industries[87](index=87&type=chunk) - The company operates as an internally managed, non-diversified closed-end investment company and has elected to be regulated as a Business Development Company (BDC) under the **1940 Act**, and as a Regulated Investment Company (RIC) for tax purposes effective **January 1, 2006**[88](index=88&type=chunk) - The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries (including SBIC subsidiaries like HT III), and affiliated securitization trusts (VIEs) where the Company is the primary beneficiary[96](index=96&type=chunk)[100](index=100&type=chunk) [2. Summary of Significant Accounting Policies](index=31&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) Details significant accounting policies, including consolidation, investment valuation (primarily Level 3), income recognition, and treatment of cash and other assets [Valuation of Investments](index=31&type=section&id=Valuation%20of%20Investments) The company values approximately **96.7%** of its total assets at fair value, primarily Level 3 assets, determined by the Board due to lack of market quotations - Approximately **96.7%** of the Company's total assets at **September 30, 2020**, were investments in portfolio companies whose fair value is determined in good faith by the Board of Directors, primarily classified as **Level 3** assets under **ASC Topic 820**[103](index=103&type=chunk) Fair Value Hierarchy of Investments (in thousands) | Description | September 30, 2020 (Level 1) | September 30, 2020 (Level 2) | September 30, 2020 (Level 3) | | :------------------ | :--------------------------- | :--------------------------- | :--------------------------- | | Senior Secured Debt | — | — | $2,249,500 | | Unsecured Debt | — | — | $14,947 | | Preferred Stock | — | — | $50,283 | | Common Stock | $41,646 | — | $41,920 | | Warrants | — | $6,963 | $15,568 | | Escrow Receivable | — | — | $417 | | **Total** | **$41,646** | **$6,963** | **$2,372,635** | - The valuation process for debt investments involves determining a hypothetical market yield and applying premiums/discounts based on credit quality, security liens, and other investment characteristics[119](index=119&type=chunk) - For equity and warrant investments, valuation uses market comparable multiples (EBITDA, Revenue, Tangible Book Value), market equity adjustment factors, and discounts for lack of marketability, often employing a **Black Scholes Option Pricing Model (OPM)**[124](index=124&type=chunk) [Portfolio Composition](index=39&type=section&id=Portfolio%20Composition) Investments are classified by control level, primarily senior secured debt concentrated in Drug Discovery & Development and Software, with **85.5%** in a first lien position Investment Portfolio by Asset Class (in thousands) | Asset Class | September 30, 2020 (Fair Value) | Percentage of Total Portfolio | | :------------------------- | :------------------------------ | :---------------------------- | | Senior Secured Debt | $1,317,224 | 54.4% | | Senior Secured Debt with Warrants | $954,807 | 39.4% | | Unsecured Debt | $14,947 | 0.6% | | Preferred Stock | $50,283 | 2.1% | | Common Stock | $83,566 | 3.5% | | **Total** | **$2,420,827** | **100.0%** | - As of **September 30, 2020**, approximately **85.5%** of the Company's debt investments were in a senior secured first lien position, with **43.3%** secured by a first priority security in all assets (including intellectual property) and **34.2%** secured by a first priority security in all assets except intellectual property (which was prohibited from pledging)[151](index=151&type=chunk) - The largest industry concentrations as of **September 30, 2020**, were Drug Discovery & Development (**35.6%**), Software (**31.2%**), and Internet Consumer & Business Services (**20.4%**)[150](index=150&type=chunk) [Income Recognition](index=42&type=section&id=Income%20Recognition) Accrues interest income on loans (OID, PIK), places 90+ day past due loans on non-accrual, and amortizes or recognizes fee income as earned - Interest income is recognized on an accrual basis, including OID and PIK interest, as long as collection is expected[154](index=154&type=chunk) - Loans **90 days** or more past due are typically placed on non-accrual status[154](index=154&type=chunk) - Fee income includes loan commitment, facility, and origination fees amortized over the loan life, and one-time fees for specific events like prepayment penalties or covenant defaults[155](index=155&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk) - Exit fees are also accreted into interest income over the loan's contractual life[157](index=157&type=chunk) - PIK interest income was approximately **$2.3 million** and **$6.5 million** for the three and nine months ended **September 30, 2020**, respectively[158](index=158&type=chunk) - To maintain RIC tax status, PIK and exit fee income must be accrued and distributed as dividends, even if cash has not yet been collected[159](index=159&type=chunk) [3. Fair Value of Financial Instruments](index=43&type=section&id=3.%20Fair%20Value%20of%20Financial%20Instruments) Fair value of financial instruments approximates carrying amounts for short-maturity items, with borrowings based on market prices or estimated rates - The carrying amounts of cash, cash equivalents, receivables, accounts payable, and accrued liabilities approximate their fair values due to their short maturity[161](index=161&type=chunk) Fair Value of Outstanding Borrowings (in thousands) | Description | September 30, 2020 (Fair Value) | December 31, 2019 (Fair Value) | | :---------------------- | :------------------------------ | :------------------------------ | | SBA Debentures | $102,815 | $152,963 | | 2022 Notes | $151,844 | $151,215 | | July 2024 Notes | $106,294 | $107,028 | | February 2025 Notes | $49,730 | — | | June 2025 Notes | $69,681 | — | | 2025 Notes | $76,380 | $77,430 | | 2033 Notes | $42,560 | $42,160 | | 2027 Asset-Backed Notes | $200,219 | $200,750 | | 2028 Asset-Backed Notes | $251,475 | $251,094 | | 2022 Convertible Notes | $230,874 | $234,922 | | Union Bank Facility | $37,492 | $103,919 | | **Total** | **$1,319,364** | **$1,321,481** | - The fair value of outstanding borrowings is categorized into **Level 2** (observable market trading prices/quotations for **2022**, **2025**, **2033**, **2027**, **2028 Notes**, and **2022 Convertible Notes**) and **Level 3** (unobservable market rates for **SBA Debentures**, **July 2024**, **February 2025**, **June 2025 Notes**, and **Union Bank Facility**)[162](index=162&type=chunk)[163](index=163&type=chunk) [4. Borrowings](index=44&type=section&id=4.%20Borrowings) Details various outstanding borrowings, including SBA Debentures, Notes, Asset-Backed Notes, Convertible Notes, and Credit Facilities, with principal amounts, rates, and maturities Outstanding Borrowings (in thousands) | Borrowing Type | Total Available (Sep 30, 2020) | Principal (Sep 30, 2020) | Carrying Value (Sep 30, 2020) | Total Available (Dec 31, 2019) | Principal (Dec 31, 2019) | Carrying Value (Dec 31, 2019) | | :---------------------- | :----------------------------- | :----------------------- | :---------------------------- | :----------------------------- | :----------------------- | :---------------------------- | | SBA Debentures | $99,000 | $99,000 | $98,668 | $149,000 | $149,000 | $148,165 | | 2022 Notes | $150,000 | $150,000 | $148,907 | $150,000 | $150,000 | $148,514 | | 2025 Notes | $75,000 | $75,000 | $73,256 | $75,000 | $75,000 | $72,970 | | 2033 Notes | $40,000 | $40,000 | $38,582 | $40,000 | $40,000 | $38,501 | | July 2024 Notes | $105,000 | $105,000 | $103,869 | $105,000 | $105,000 | $103,685 | | February 2025 Notes | $50,000 | $50,000 | $49,493 | — | — | — | | June 2025 Notes | $70,000 | $70,000 | $69,233 | — | — | — | | 2027 Asset-Backed Notes | $200,000 | $200,000 | $197,521 | $200,000 | $200,000 | $197,312 | | 2028 Asset-Backed Notes | $250,000 | $250,000 | $247,579 | $250,000 | $250,000 | $247,395 | | 2022 Convertible Notes | $230,000 | $230,000 | $227,786 | $230,000 | $230,000 | $226,614 | | Wells Facility | $75,000 | — | — | $75,000 | — | — | | Union Bank Facility | $400,000 | $37,492 | $37,492 | $200,000 | $103,919 | $103,919 | | **Total** | **$1,744,000** | **$1,306,492** | **$1,292,386** | **$1,474,000** | **$1,302,919** | **$1,287,075** | - The company repaid **$50.0 million** of SBA debentures during the nine months ended **September 30, 2020**[168](index=168&type=chunk) - New debt issuances in **2020** included **$50.0 million** of **February 2025 Notes** and **$70.0 million** of **June 2025 Notes**[184](index=184&type=chunk)[187](index=187&type=chunk) - The Wells Facility and Union Bank Facility are credit lines with accordion features, allowing for increased capacity[215](index=215&type=chunk)[221](index=221&type=chunk) - As of **September 30, 2020**, there were no outstanding borrowings under the Wells Facility, but **$37.5 million** was outstanding under the Union Bank Facility[224](index=224&type=chunk) [5. Income Taxes](index=54&type=section&id=5.%20Income%20Taxes) Operates as a RIC, aiming to distribute taxable income to avoid corporate taxes, but subject to a **4%** federal excise tax on undistributed income - The Company operates as a Regulated Investment Company (RIC) under **Subchapter M of the Code**, aiming to avoid U.S. federal income tax on distributed taxable income by meeting income, asset diversification, and distribution tests (generally **90%** of investment company taxable income)[226](index=226&type=chunk)[227](index=227&type=chunk) - A **4%** nondeductible U.S. federal excise tax applies to certain undistributed income unless timely distributions are made, generally **98%** of ordinary income and **98.2%** of capital gain net income[229](index=229&type=chunk)[230](index=230&type=chunk) Taxable Income and Taxes Paid (in thousands) | Metric | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :----------------------------------- | :-------------------------- | :-------------------------- | | Taxable income | $112,800 | $110,000 | | Taxable net realized gains | $14,200 | $15,600 | | Income tax, including excise tax, paid | $2,478 | $1,371 | [6. Stockholders' Equity](index=55&type=section&id=6.%20Stockholders'%20Equity) Manages equity through ATM agreements and public offerings, selling **6.0 million** shares for **$73.9 million** net proceeds in **2020**, with a new ATM for **16.5 million** shares - The company terminated the **2019 Equity Distribution Agreement** and entered into a new **2020 Equity Distribution Agreement** on **July 2, 2020**, allowing for the sale of up to **16.5 million** shares of common stock through JMP as its sales agent[238](index=238&type=chunk) - During the nine months ended **September 30, 2020**, the company sold approximately **6.0 million** shares of common stock under the **2019 Equity Distribution Agreement**, generating total accumulated net proceeds of approximately **$73.9 million**[239](index=239&type=chunk) - As of **September 30, 2020**, there were **456,484** stock options outstanding and **16.5 million** shares available for issuance under the **2020 Equity Distribution Agreement**[241](index=241&type=chunk)[243](index=243&type=chunk) [7. Equity Incentive Plans](index=56&type=section&id=7.%20Equity%20Incentive%20Plans) Utilizes **2018 Equity Incentive Plan** and **Director Plan** for stock options, restricted stock, and units, recognizing compensation expense over vesting periods - The company uses the **2018 Equity Incentive Plan** and the **Director Plan** to grant stock options, restricted stock awards, and restricted stock units to employees and non-employee directors[245](index=245&type=chunk)[246](index=246&type=chunk) Unrecognized Compensation Costs (in thousands) | Award Type | Unrecognized Compensation Costs (Sep 30, 2020) | | :---------------------- | :--------------------------------------------- | | Stock Options | $32 | | Restricted Stock Awards | $8,300 | | Restricted Stock Units | $2,800 | | Retention PSUs | $2,700 | | Cash Awards | $2,500 | - Retention Performance Stock Unit (PSU) awards and Cash Awards were granted to senior personnel in **May 2018**, designed to incentivize based on total shareholder return (TSR) and vesting on the fourth anniversary of the grant date[254](index=254&type=chunk) [8. Earnings Per Share](index=59&type=section&id=8.%20Earnings%20Per%20Share) Basic and diluted EPS calculated based on net assets from operations and weighted average shares. **2022 Convertible Notes** were anti-dilutive and excluded Earnings Per Share (EPS) Data | Metric | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :----------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net increase (decrease) in net assets from operations (in thousands) | $43,047 | $19,271 | $76,089 | $128,987 | | Basic weighted average common shares outstanding (in thousands) | 113,489 | 104,314 | 111,342 | 99,615 | | Diluted weighted average common shares outstanding (in thousands) | 113,744 | 104,655 | 111,590 | 100,043 | | Basic EPS | $0.38 | $0.18 | $0.68 | $1.29 | | Diluted EPS | $0.38 | $0.18 | $0.67 | $1.29 | - The **2022 Convertible Notes** were anti-dilutive for both the three and nine months ended **September 30, 2020** and **2019**, and thus excluded from the calculation of diluted earnings per share, as the share price was less than the conversion price[258](index=258&type=chunk)[259](index=259&type=chunk) [9. Financial Highlights](index=60&type=section&id=9.%20Financial%20Highlights) Highlights for nine months ended **September 30, 2020**, show **NAV per share of $10.26**, total return of **(10.19%)**, and net investment income of **$1.03 per share** Financial Highlights (9 Months Ended September 30) | Metric | 2020 | 2019 | | :------------------------------------------------ | :---------- | :---------- | | Net asset value at beginning of period | $10.55 | $9.90 | | Net investment income (per share) | $1.03 | $1.03 | | Net realized gain (loss) on investments (per share) | $(0.37) | $0.14 | | Net unrealized appreciation (depreciation) on investments (per share) | $0.02 | $0.12 | | Total from investment operations (per share) | $0.68 | $1.29 | | Net asset value at end of period | $10.26 | $10.38 | | Per share market value at end of period | $11.57 | $13.37 | | Total return | (10.19%) | 29.94% | | Shares outstanding at end of period (in thousands) | 114,317 | 104,636 | | Ratio of total expense to average net assets | 11.29% | 12.25% | | Ratio of net investment income before investment gains and losses to average net assets | 13.39% | 13.43% | | Portfolio turnover rate | 23.86% | 22.82% | | Weighted average debt outstanding (in thousands) | $1,302,048 | $1,145,027 | [10. Commitments and Contingencies](index=60&type=section&id=10.%20Commitments%20and%20Contingencies) Unfunded contractual commitments totaled **$242.5 million**, with **$97.9 million** in non-binding term sheets. Lease obligations totaled **$11.1 million** - As of **September 30, 2020**, the company had approximately **$242.5 million** in unfunded contractual commitments, including undrawn revolving facilities, available at the request of portfolio companies and unencumbered by milestones[267](index=267&type=chunk)[270](index=270&type=chunk) - The company also had approximately **$97.9 million** of non-binding term sheets outstanding, which are subject to due diligence and final approval and do not necessarily represent future cash requirements[268](index=268&type=chunk) Contractual Obligations (in thousands) | Contractual Obligations | Total | Less than 1 year | 1 - 3 years | 3 - 5 years | After 5 years | | :---------------------- | :------------ | :--------------- | :---------- | :---------- | :------------ | | Borrowings | $1,306,492 | $25,000 | $454,000 | $337,492 | $490,000 | | Lease and License Obligations | $11,135 | $3,000 | $5,776 | $1,581 | $778 | | **Total** | **$1,317,627** | **$28,000** | **$459,776** | **$339,073** | **$490,778** | [11. Recent Accounting Pronouncements](index=62&type=section&id=11.%20Recent%20Accounting%20Pronouncements) Adopted **ASU 2018-13** and **2020-04** with no material impact, assessing **ASU 2020-6**, and early implemented SEC's revised 'significant subsidiary' definition - The company fully adopted **ASU 2018-13**, 'Fair Value Measurement,' effective **January 1, 2020**, and **ASU 2020-04**, 'Reference Rate Reform,' effective **March 12, 2020**, neither of which had a material impact on its consolidated financial statements[279](index=279&type=chunk)[280](index=280&type=chunk) - The company is assessing the impact of **ASU 2020-6**, 'Debt with Conversion and Other Options,' effective after **December 15, 2021**, and does not intend to early adopt it[281](index=281&type=chunk) - The company elected to implement the SEC's revised 'significant subsidiary' rule (**May 2020**) effective **June 30, 2020**, expecting it to reduce future requirements for separate audited financial statements and summarized financial information for controlled portfolio companies[282](index=282&type=chunk) [12. Subsequent Events](index=63&type=section&id=12.%20Subsequent%20Events) Sold **306,401** shares under **2020 Equity Distribution Agreement**, declared **$0.32** cash and **$0.02** supplemental distributions, and HT IV received an SBIC license for **$175.0 million** capital - As of **October 26, 2020**, the company sold **306,401** shares of common stock under the **2020 Equity Distribution Agreement**, with **16.2 million** shares remaining available[284](index=284&type=chunk) - On **October 21, 2020**, the Board of Directors declared a cash distribution of **$0.32 per share** and a supplemental cash distribution of **$0.02 per share**, both payable on **November 16, 2020**[285](index=285&type=chunk) - On **October 27, 2020**, Hercules Technology IV, L.P. (HT IV) received an SBIC license, granting access to **$175.0 million** of capital through the SBA debenture program, in addition to a regulatory capital contribution of **$87.5 million**[286](index=286&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=64&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses financial performance, condition, operations, COVID-19 impact, portfolio activities, liquidity, capital, and critical accounting policies [COVID-19 Developments](index=65&type=section&id=COVID-19%20Developments) COVID-19 negatively impacted net assets from operations but increased investment income, with long-term impacts remaining uncertain due to fluidity - **COVID-19** negatively impacted net assets from operations for the nine months ended **September 30, 2020**, but total investment income and net investment income increased[291](index=291&type=chunk) - The long-term impact of **COVID-19** on the business, future results, financial position, or cash flows cannot be estimated due to the fluidity of the situation, potential resurgence, and government actions[291](index=291&type=chunk) - The company is maintaining close communications with portfolio companies and increasing oversight of credits in vulnerable industries to manage potential risks[324](index=324&type=chunk) [Overview](index=65&type=section&id=Overview) Hercules Capital, Inc. provides structured debt with warrants, senior debt, and equity to venture capital-backed tech companies, aiming for total return - The company's primary business is providing structured debt with warrants, senior debt, and equity investments to high-growth, venture capital-backed companies in technology-related industries[293](index=293&type=chunk) - The investment objective is to maximize total portfolio return by generating current income from debt and capital appreciation from warrant and equity-related investments[295](index=295&type=chunk) - The company operates as an internally managed BDC and has elected RIC tax treatment, requiring it to invest at least **70%** of total assets in 'qualifying assets' and distribute **90%** or more of its taxable income[297](index=297&type=chunk)[298](index=298&type=chunk) [Portfolio and Investment Activity](index=66&type=section&id=Portfolio%20and%20Investment%20Activity) Investment portfolio increased to **$2.4 billion**, with **$1,035.3 million** in debt commitments and **$480.7 million** in principal repayments for the nine months - The total fair value of the investment portfolio was approximately **$2.4 billion** at **September 30, 2020**, an increase from **$2.3 billion** at **December 31, 2019**[301](index=301&type=chunk) Portfolio Activity (in millions) | Metric | 9 Months Ended Sep 30, 2020 | Year Ended Dec 31, 2019 | | :----------------------------------- | :-------------------------- | :---------------------- | | Debt Commitments (Total) | $1,035.3 | $1,457.1 | | Funded and Restructured Debt Investments (Total) | $629.4 | $1,007.9 | | Funded Equity Investments (Total) | $2.0 | $17.8 | | Unfunded Contractual Commitments | $242.5 | $133.7 | | Non-Binding Term Sheets (Total) | $97.9 | $194.0 | - During the nine months ended **September 30, 2020**, the company received approximately **$480.7 million** in aggregate principal repayments, of which **$426.7 million** were early principal repayments from **27** portfolio companies[307](index=307&type=chunk) [Changes in Portfolio](index=68&type=section&id=Changes%20in%20Portfolio) Revenue from interest, fees, and capital gains. Debt terms are 2-5 years with **6.9% to 11.5%** interest, concentrated in Drug Discovery & Development, Software, and Internet Consumer & Business Services - Debt investments generally have a term of **two to five years** and typically bear interest at a rate ranging from approximately **6.9% to 11.5%**[309](index=309&type=chunk) Yields on Debt Investments | Metric | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | | :------------ | :-------------------------- | :-------------------------- | | Core Yield | 11.3% | 12.4% | | Effective Yield | 12.6% | 13.4% | | Total Yield | 11.5% | 12.1% | - As of **September 30, 2020**, approximately **91.9%** of the portfolio's fair value was concentrated in five industries: Drug Discovery & Development (**35.6%**), Software (**31.2%**), Internet Consumer & Business Services (**20.4%**), Sustainable and Renewable Technology (**2.5%**), and Information Services (**2.2%**)[316](index=316&type=chunk) - Approximately **97.9%** of the debt investment portfolio was priced at floating interest rates or floating interest rates with a Prime- or LIBOR-based interest rate floor as of **September 30, 2020**[319](index=319&type=chunk) [Portfolio Grading](index=70&type=section&id=Portfolio%20Grading) Uses a 1-to-5 grading system for debt investment risk, with a weighted average of **2.22**. Increased oversight for vulnerable industries due to **COVID-19** Debt Investment Portfolio Grading (Fair Value, in thousands) | Investment Grading | Number of Companies (Sep 30, 2020) | Debt Investments at Fair Value (Sep 30, 2020) | Percentage of Total Portfolio (Sep 30, 2020) | | :----------------- | :--------------------------------- | :-------------------------------------------- | :------------------------------------------- | | 1 | 17 | $406,502 | 17.9% | | 2 | 50 | $1,053,112 | 46.5% | | 3 | 33 | $772,269 | 34.1% | | 4 | 4 | $26,663 | 1.2% | | 5 | 2 | $5,901 | 0.3% | | **Total** | **106** | **$2,264,447** | **100.0%** | - The weighted average investment grading for debt investments was **2.22** on a cost basis as of **September 30, 2020**, compared to **2.15** at **December 31, 2019**[323](index=323&type=chunk) - The company proactively assesses and manages potential risks across its debt investment portfolio due to **COVID-19**, increasing oversight and analysis of credits in vulnerable industries[324](index=324&type=chunk) [Results of Operations](index=70&type=section&id=Results%20of%20Operations) Shows increased total investment income and net investment income, but significant net realized losses. Operating expenses rose due to higher interest and fees on borrowings [Investment Income](index=70&type=section&id=Investment%20Income) Total investment income increased to **$70.3 million** (three months) and **$211.9 million** (nine months), driven by higher recurring interest and accelerated income from early repayments Investment Income (in thousands) | Metric (in thousands) | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total investment income | $70,339 | $69,238 | $211,926 | $197,297 | | Total interest income | $65,375 | $64,244 | $195,134 | $181,427 | | Total fee income | $4,964 | $4,994 | $16,792 | $15,870 | - The increase in interest income for both periods in **2020** was primarily due to an increase in the weighted average principal outstanding of loans and accelerated income from early loan repayments[327](index=327&type=chunk) - PIK interest income slightly decreased for the nine months ended **September 30, 2020**, to **$6.5 million** from **$6.6 million** in **2019**, due to a decrease in the weighted average principal outstanding for loans bearing PIK interest[326](index=326&type=chunk)[330](index=330&type=chunk) [Operating Expenses](index=72&type=section&id=Operating%20Expenses) Total operating expenses increased to **$31.6 million** (three months) and **$96.9 million** (nine months), primarily due to higher interest and fees on borrowings Operating Expenses (in thousands) | Metric (in thousands) | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total operating expenses | $31,625 | $30,365 | $96,948 | $94,124 | | Interest and fees on borrowings | $16,631 | $14,995 | $49,683 | $45,720 | | General and administrative | $5,291 | $6,368 | $17,213 | $16,316 | | Employee compensation | $7,181 | $7,559 | $22,575 | $23,372 | | Stock-based compensation | $2,522 | $1,443 | $7,477 | $8,716 | - The weighted average cost of debt was approximately **5.1%** for both three-month periods, and **5.1%** for the nine months ended **September 30, 2020**, down from **5.4%** in **2019**, primarily due to a reduction in weighted average principal outstanding on higher-yielding debt instruments[337](index=337&type=chunk) [Net Investment Realized Gains and Losses and Net Unrealized Appreciation and Depreciation](index=72&type=section&id=Net%20Investment%20Realized%20Gains%20and%20Losses%20and%20Net%20Unrealized%20Appreciation%20and%20Depreciation) Recognized significant net realized losses of **$48.5 million** (three months) and **$41.4 million** (nine months), offset by **$52.8 million** net unrealized appreciation in Q3 **2020** Net Realized Gains (Losses) (in thousands) | Metric (in thousands) | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Realized gains | $1,463 | $9,015 | $16,182 | $23,957 | | Realized losses | $(49,964) | $(4,208) | $(57,575) | $(10,324) | | **Net realized gains (losses)** | **$(48,501)** | **$4,807** | **$(41,393)** | **$13,633** | Net Unrealized Appreciation (Depreciation) on Investments (in thousands) | Metric (in thousands) | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total net unrealized appreciation (depreciation) on investments | $52,834 | $(24,409) | $2,504 | $12,181 | - For the three months ended **September 30, 2020**, net unrealized appreciation of **$52.8 million** was recorded, primarily from **$43.3 million** on debt investments (including **$35.9 million** reversal of depreciation upon write-off/pay-off) and **$9.5 million** on equity and warrant investments[346](index=346&type=chunk)[347](index=347&type=chunk) [Income and Excise Taxes](index=74&type=section&id=Income%20and%20Excise%20Taxes) Accounts for income taxes under **ASC Topic 740**, aiming to distribute taxable income as a RIC to avoid corporate taxes, but subject to a **4%** federal excise tax - The company provides for income taxes based on current and deferred amounts, with valuation allowances used to reduce deferred tax assets to the amount likely to be realized[354](index=354&type=chunk) - As a RIC, the company intends to distribute substantially all annual taxable income to stockholders to avoid corporate-level U.S. federal income taxes, but is subject to a **4%** nondeductible federal excise tax on certain undistributed income if excise tax avoidance requirements are not met[354](index=354&type=chunk)[355](index=355&type=chunk) - Taxable income for the nine months ended **September 30, 2020**, was approximately **$112.8 million**, with taxable net realized gains of **$14.2 million**[233](index=233&type=chunk) [Net Change in Net Assets Resulting from Operations and Earnings Per Share](index=74&type=section&id=Net%20Change%20in%20Net%20Assets%20Resulting%20from%20Operations%20and%20Earnings%20Per%20Share) Net increase in net assets from operations was **$43.0 million** (three months) and **$76.1 million** (nine months), with **2022 Convertible Notes** being anti-dilutive Net Change in Net Assets and EPS | Metric | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :----------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net increase (decrease) in net assets from operations (in thousands) | $43,047 | $19,271 | $76,089 | $128,987 | | Basic EPS | $0.38 | $0.18 | $0.68 | $1.29 | | Diluted EPS | $0.38 | $0.18 | $0.67 | $1.29 | - The **2022 Convertible Notes** were anti-dilutive and excluded from diluted EPS calculations for both the three and nine months ended **September 30, 2020** and **2019**, as the share price was less than the conversion price[358](index=358&type=chunk) [Financial Condition, Liquidity, and Capital Resources](index=75&type=section&id=Financial%20Condition,%20Liquidity,%20and%20Capital%20Resources) Available liquidity of **$465.1 million**, net assets of **$1.2 billion**, and a **NAV per share of $10.26**, with an asset coverage ratio of **197.0%** (excluding SBA debentures) - As of **September 30, 2020**, the company had **$465.1 million** in available liquidity, including **$27.6 million** in cash and cash equivalents, and available borrowing capacity of **$75.0 million** under the Wells Facility and **$362.5 million** under the Union Bank Facility[384](index=384&type=chunk) - Net assets totaled **$1.2 billion**, with a **NAV per share of $10.26**, as of **September 30, 2020**[391](index=391&type=chunk) - The company's asset coverage ratio under BDC regulatory requirements was **197.0%** (excluding SBA debentures) and **189.7%** (including SBA debentures) as of **September 30, 2020**, operating under the **150%** minimum asset coverage ratio approved by stockholders[393](index=393&type=chunk) [Critical Accounting Policies](index=81&type=section&id=Critical%20Accounting%20Policies) Significant estimates in investment valuation (predominantly Level 3 assets), income recognition, and stock-based compensation, requiring Board and independent firm judgment - The most significant estimate in financial statements is the valuation of investments, with approximately **96.7%** of total assets at **September 30, 2020**, being **Level 3** investments whose fair value is determined in good faith by the Board of Directors[416](index=416&type=chunk) - The company engages independent valuation firms to assist in valuing selected portfolio investments quarterly, based on factors like potential for material fluctuations, size, credit quality, and time since last valuation[417](index=417&type=chunk) - Stock-based compensation expense for options and restricted stock is measured at grant date fair value and recognized over the vesting period, requiring judgment in estimating volatility, forfeiture rates, and expected option life[420](index=420&type=chunk) [Subsequent Events](index=82&type=section&id=Subsequent%20Events) Sold **306,401** shares under **2020 Equity Distribution Agreement**, declared **$0.32** cash and **$0.02** supplemental distributions, and HT IV received an SBIC license for **$175.0 million** capital - As of **October 26, 2020**, the company sold **306,401** shares of common stock under the **2020 Equity Distribution Agreement**, with **16.2 million** shares remaining available[421](index=421&type=chunk) - On **October 21, 2020**, the Board of Directors declared a cash distribution of **$0.32 per share** and a supplemental cash distribution of **$0.02 per share**, both payable on **November 16, 2020**[422](index=422&type=chunk) - On **October 27, 2020**, HT IV was licensed as an SBIC, gaining access to **$175.0 million** of capital through the SBA debenture program, in addition to an **$87.5 million** regulatory capital contribution[423](index=423&type=chunk) [COVID-19](index=82&type=section&id=COVID-19) The company continues to closely monitor the **COVID-19** pandemic and its broader impact on the U.S. and global economy, with no reportable subsequent events as of **October 29, 2020** - The company continues to closely monitor the **COVID-19** pandemic and its broader impact on the U.S. and global economy[424](index=424&type=chunk) - As of **October 29, 2020**, there is no indication of a reportable subsequent event impacting the financial statements for the three and nine months ended **September 30, 2020**[424](index=424&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=83&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Exposed to interest rate risk, affecting funding costs and investment income, with **97.9%** of loans at variable rates and most borrowings at fixed rates - The company is subject to financial market risks, primarily interest rate risk, which affects both its cost of funding and interest income from portfolio investments[425](index=425&type=chunk) - As of **September 30, 2020**, approximately **97.9%** of the loans in the portfolio had variable rates based on floating LIBOR or Prime rates with a floor, while most borrowings (**SBA debentures**, **2022**, **July 2024**, **February 2025**, **June 2025**, **2025**, **2033**, **2027**, **2028 Asset-Backed Notes**, and **2022 Convertible Notes**) bear interest at a fixed rate[425](index=425&type=chunk) Annualized Impact of Hypothetical Interest Rate Changes (in thousands) | Basis Point Change | Interest Income | Interest Expense | Net Income | EPS | | :----------------- | :-------------- | :--------------- | :--------- | :---- | | (75) | $(53) | $(45) | $(8) | $(0.00) | | (50) | $(53) | $(30) | $(23) | $(0.00) | | (25) | $(53) | $(15) | $(38) | $(0.00) | | 25 | $2,197 | $15 | $2,182 | $0.02 | | 50 | $4,581 | $30 | $4,551 | $0.04 | | 75 | $6,964 | $45 | $6,919 | $0.06 | | 100 | $9,471 | $60 | $9,411 | $0.08 | | 200 | $21,622 | $121 | $21,501 | $0.19 | [ITEM 4. CONTROLS AND PROCEDURES](index=84&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Disclosure controls and procedures were effective as of **September 30, 2020**, with no material changes in internal control over financial reporting during the quarter - As of **September 30, 2020**, the company's disclosure controls and procedures were deemed effective by its chief executive and chief financial officers[430](index=430&type=chunk) - No material changes in internal control over financial reporting occurred during the most recently completed fiscal quarter[431](index=431&type=chunk) PART II. OTHER INFORMATION [ITEM 1. LEGAL PROCEEDINGS](index=85&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) May be involved in litigation, but current proceedings are not expected to materially affect financial condition or results of operations - The company may be involved in litigation arising from its operations, but does not expect current matters to materially affect its financial condition or results of operations[434](index=434&type=chunk) [ITEM 1A. RISK FACTORS](index=85&type=section&id=ITEM%201A.%20RISK%20FACTORS) **COVID-19** poses significant risks, stock price volatility may limit equity raising, and underperforming portfolio investments could adversely affect financial results - The **COVID-19** pandemic poses significant risks, including disruption to operations, impaired ability of portfolio companies to fulfill obligations, increased delinquencies, declining collateral values, and reduced demand for loans, which could materially adversely affect the business[436](index=436&type=chunk)[437](index=437&type=chunk) - The common stock price may be volatile or trade below its **NAV per share**, which could limit the company's ability to raise additional equity capital and cause dilution to stockholders if shares are issued at a discount[438](index=438&type=chunk)[439](index=439&type=chunk)[441](index=441&type=chunk) - Failure of significant portfolio investments to perform as expected could negatively affect financial results, given that several companies represent greater than **5%** of net assets, including **BridgeBio Pharma LLC** (**7.2%**), **EverFi, Inc.** (**7.1%**), and **Tricida, Inc.** (**6.7%**)[442](index=442&type=chunk)[443](index=443&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=87&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) Issued **198,393** shares of common stock, valued at approximately **$2.4 million**, to stockholders through its dividend reinvestment plan, not subject to SEC registration - During the nine months ended **September 30, 2020**, the company issued **198,393** shares of common stock to stockholders via its dividend reinvestment plan[444](index=444&type=chunk) - The aggregate value of these shares was approximately **$2.4 million**, and they were not subject to the registration requirements of the **Securities Act**[444](index=444&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=87&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This item is not applicable to the current report [ITEM 4. MINE SAFETY DISCLOSURES](index=87&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the current report [ITEM 5. OTHER INFORMATION](index=87&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This item is not applicable to the current report [ITEM 6. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES](index=88&type=section&id=ITEM%206.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) Lists exhibits filed with **Form 10-Q**, including CEO/CFO certifications and Schedule of Investments in and Advances to Affiliates, detailing control and affiliate investments - The exhibits include CEO and CFO certifications (**31.1**, **31.2**, **32.1**, **32.2**) as required by the **Sarbanes-Oxley Act of 2002**[448](index=448&type=chunk) Total Control and Affiliate Investments (in thousands) | Metric | As of Dec 31, 2019 (Fair Value) | As of Sep 30, 2020 (Fair Value) | | :----------------------------------- | :------------------------------ | :------------------------------ | | Total Control Investments | $59,746 | $55,092 | | Total Affiliate Investments | $21,808 | $9,800 | | **Total Control and Affiliate Investments** | **$81,554** | **$64,892** | - All control and affiliate investments are classified as **Level 3** investments, valued using significant unobservable inputs[457](index=457&type=chunk) [SIGNATURES](index=91&type=section&id=SIGNATURES) Report duly signed by **Scott Bluestein** (President, CEO, CIO) and **Seth H. Meyer** (CFO, CAO) on behalf of Hercules Capital, Inc. on **October 29, 2020** - The report was signed by **Scott Bluestein**, President, Chief Executive Officer, and Chief Investment Officer, and **Seth H. Meyer**, Chief Financial Officer, and Chief Accounting Officer, on **October 29, 2020**[461](index=461&type=chunk)

Hercules Capital, Inc. (NYSE:HTGC) Q2 2020 Earnings Conference Call July 30, 2020 5:00 PM ET Company Participants Michael Hara – Investor Relations and Corporate Communications Scott Bluestein – Chief Executive Officer and Chief Investment Officer Seth Meyer – Chief Financial Officer Conference Call Participants Crispin Love – Piper Sandler Finian O'Shea – Wells Fargo Chris York – JMP Securities Mike Smyth – B. Riley John Hecht – Jefferies Christopher Nolan – Ladenburg Thalmann Henry Coffey – Wedbush Casey ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Quarterly Period Ended June 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 814-00702 HERCULES CAPITAL, INC. (Exact Name of Registrant as Specified in its Charter) Maryland 74-3113410 (State or Jurisdiction of Incorporation or Organization) 400 ...

July 30, 2020 SECOND QUARTER 2020 INVESTOR PRESENTATION Financing the Growth of Tomorrow's Companies TodayTM IMPORTANT NOTICE: FORWARD LOOKING STATEMENTS This presentation may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. You should understand that under Section 27A(b)(2)(B) of the Securities Act of 1933, as amended, and Section 21E(b)(2)(B) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the "safe harbor" provisions ...

Hercules Capital, Inc. (NYSE:HTGC) Q1 2020 Results Earnings Conference Call May 4, 2020 5:00 PM ET Company Participants Michael Hara - Managing Director of Investor Relations Scott Bluestein - Chief Executive Officer, Chief Investment Officer Seth Meyer - Chief Financial Officer Conference Call Participants Tim Hayes - B. Riley FBR Chris York - JMP Securities John Hecht - Jefferies Finian O'Shea - Wells Fargo Ryan Lynch - KBW Christopher Nolan - Ladenburg Thalmann Casey Alexander - Compass Point Operator La ...

Investment Portfolio Valuation - The total fair value of the investment portfolio was approximately $2.3 billion as of March 31, 2020, unchanged from December 31, 2019[306]. - The fair value of the debt investment portfolio increased to approximately $2.2 billion at March 31, 2020, compared to approximately $2.1 billion at December 31, 2019[306]. - The fair value of the equity portfolio decreased to approximately $94.5 million at March 31, 2020, down from approximately $145.0 million at December 31, 2019[306]. - The ending portfolio value as of March 31, 2020, was $2,302.5 million, a decrease from $2,314.5 million at December 31, 2019[312]. - Approximately 8.1% of the company's total assets, or $193.3 million, were held in tangible assets through its wholly owned SBIC as of March 31, 2020[301]. - The portfolio companies are primarily in high-margin, high-growth sectors, with 88.9% of the fair value composed of investments in five industries, including 30.1% in "Drug Discovery & Development" and 28.0% in "Software"[321]. - As of March 31, 2020, approximately 96.1% of total assets were invested in portfolio companies with fair values determined in good faith by the board[413]. Investment Income and Returns - Total investment income for the three months ended March 31, 2020 was approximately $73.6 million, compared to approximately $58.8 million for the same period in 2019, representing a year-over-year increase of 25.0%[329]. - Interest income for the three months ended March 31, 2020 totaled approximately $66.2 million, an increase from approximately $55.5 million in the same period of 2019, primarily due to an increase in the weighted average principal outstanding of loans[330]. - Fee income from commitment, facility, and loan-related fees for the three months ended March 31, 2020 was approximately $7.4 million, up from approximately $3.3 million in the same period of 2019, reflecting a 124.2% increase[334]. - The total return for investors was approximately (44.5%) for the three months ended March 31, 2020, compared to 17.2% for the same period in 2019[320]. Debt and Financing - The company aims to maximize total return by generating current income from debt investments and capital appreciation from warrant and equity-related investments[300]. - The company is focused on providing senior secured loans to high-growth, innovative venture capital-backed companies in technology-related industries[297]. - The weighted average cost of debt decreased to approximately 5.2% for the three months ended March 31, 2020, down from 5.8% in the same period in 2019, primarily due to a reduction in higher yielding debt instruments[339]. - The company had approximately $134.7 million of unfunded commitments available at the request of portfolio companies as of March 31, 2020[392]. - The company had $1.3 billion in total contractual obligations as of March 31, 2020[395]. Operational Performance - The company received approximately $167.5 million in aggregate principal repayments during the three months ended March 31, 2020, with approximately $150.5 million being early principal repayments[311]. - New fundings and restructures amounted to $233.6 million for the three months ended March 31, 2020, compared to $1,025.7 million for the year ended December 31, 2019[312]. - The company recorded $76.3 million of net unrealized depreciation on investments for the three months ended March 31, 2020, compared to a net unrealized appreciation of $28.0 million in 2019[347]. - The net change in net assets resulting from operations was a decrease of approximately $28.7 million for the three months ended March 31, 2020, compared to an increase of $61.6 million in 2019[353]. - Both basic and fully diluted net change in net assets per common share were $(0.27) for the three months ended March 31, 2020, compared to $0.64 per share in 2019[354]. Expenses and Costs - General and administrative expenses increased to $6.1 million for the three months ended March 31, 2020, up from $4.2 million in 2019, mainly due to higher income taxes, rent, and legal expenses[340]. - Employee compensation and benefits rose to $8.2 million for the three months ended March 31, 2020, compared to $6.6 million in 2019, driven by increased variable compensation[341]. - Interest and fees on borrowings totaled approximately $16.3 million for the three months ended March 31, 2020, compared to $15.6 million for the same period in 2019, reflecting an increase due to new note issuances[338]. Capital Management - The company may seek to raise additional equity or debt capital through various means, including registered offerings and securitization of investments[357]. - The company has authorized a stock repurchase plan permitting up to $25.0 million of common stock repurchases, although no repurchases occurred during 2019[367]. - The company closed the June 2019 Equity Offering, generating net proceeds of $70.5 million before expenses[372]. - As of March 31, 2020, the company had $438.2 million in available liquidity, including $34.3 million in cash and cash equivalents[379]. - The company issued $105.0 million in July 2024 Notes, generating net proceeds of approximately $103.5 million[374]. - The company issued $50.0 million in February 2025 Notes, generating net proceeds of approximately $49.4 million[375]. Distribution Policy - The company intends to maintain a variable distribution policy, distributing approximately 90% - 100% of taxable quarterly income[401]. - The company plans to distribute taxable income to avoid corporate-level federal income tax while maintaining its qualification as a RIC[406]. - It is expected that a cash distribution of $0.32 per share will be paid to shareholders on May 21, 2020[419]. - The distributions announced in 2019 were 100% from current and accumulated earnings and profits[402]. Risk Management - The company did not engage in any hedging activities during the first quarter of 2020 but may use standard hedging instruments in the future to mitigate interest rate fluctuations[425]. - The company has not conducted interest rate or foreign currency hedging activities[425]. - Based on hypothetical changes in benchmark interest rates, the impact of changes in interest income and expenses under different basis point changes indicates that a 200 basis point change could result in a net income change of approximately $15.2 million[424]. - The weighted average investment grading of debt investments was 2.34 as of March 31, 2020, compared to 2.15 at December 31, 2019, indicating a slight increase in perceived risk[327].

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, 2019 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 74-3113410 (State or other jurisdiction o ...