UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


þ			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended September 30, ~~2019~~2020


¨			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER: 1-35906

HARVEST CAPITAL CREDIT CORPORATION

(Exact name of registrant as specified in its charter)


Delaware (State or other Jurisdiction of Incorporation or Organization)			46-1396995 (I.R.S. Employer Identification Number)

767 Third Avenue, 29^th Floor New York, NY 10017 (Address of principal executive offices) (Zip Code)

(212) 906-3589
(Registrant's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value of $0.001 per share	HCAP	NASDAQ Global Market
6.125% Notes due 2022	HCAPZ	NASDAQ Global Market

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 þ 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. ~~(Check one):~~

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 any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. ¨

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

~~The number of~~There were 5,958,479 shares of the registrant’s ~~Common Stock, $0.001 par value,~~common stock outstanding as of November ~~7, 2019 was 5,939,172.~~5, 2020.

HARVEST CAPITAL CREDIT CORPORATION

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER

ENDED SEPTEMBER 30, ~~2019~~2020

TABLE OF CONTENTS


			Page
PART I. FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements ~~- (Unaudited)~~
	Consolidated Statements of Assets and Liabilities as of September 30 ~~2019~~, 20 20 (unaudited) and December 31, ~~2018~~2019	1
	Consolidated Statements of Operations for the three and nine months ended ~~September30, 2019 and~~ September 30, ~~2018~~2020 (unaudited) and September 30, 2019 (unaudited)	2
	Consolidated Statements of Changes in Net Assets for the three and nine months ended September 30, 2020 (unaudited) and September 30, 2019 ~~and~~ ~~September~~ ~~30, 2018~~(unaudited)	43
	Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2019~~ 2020 (unaudited) and September 30, ~~2018~~2019 (unaudited)	5
	Consolidated Schedule of Investments as of September 30, 2020 (unaudited)	7
	Consolidated Schedule of Investments as of December 31, 201 ~~September~~ ~~30, 2019~~9	9
	~~Consolidated Schedule of Investments as of December 31, 2018~~	1412
	Notes to Consolidated Financial ~~Statements~~Statement s (unaudited)	1918
	Consolidated Schedule of Investments in and Advances to Affiliates for the nine m onths ended September 30, ~~2019~~2020 (unaudited)	39
	Consolidated Schedule of Investments in and Advances to Affiliates for the year ended December 31, ~~2018~~201 9	44
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	4849
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	6064
Item 4.	Controls and Procedures	6066
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	6166
Item 1A.	Risk Factors	6166
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6167
Item 3.	Defaults Upon Senior Securities	6267
Item 4.	Mine Safety Disclosures	6267
Item 5.	Other Information	6267
Item 6.	Exhibits	6368
SIGNATURES			6469

PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Harvest Capital Credit Corporation

Consolidated Statements of Assets and Liabilities ~~(Unaudited)~~


		September 30,		December 31,			September 30, 2020		December 31, 2019
		2019		2018			(unaudited)
ASSETS:	ASSETS:					ASSETS:
Non-affiliated/non-control investments, at fair value (cost of $54,372,280 at 9/30/19 and $59,603,853 at 12/31/18)		$	52,806,683	$	61,919,954
Affiliated investments, at fair value (cost of $54,888,708 at 9/30/19 and $25,848,928 at 12/31/18)		54,783,841		24,645,597
Control investments, at fair value (cost of $13,826,508 at 9/30/19 and $13,430,013 at 12/31/18)		7,986,776		8,348,311
Non-affiliated/non-control investments, at fair value (cost of $51,191,614 at 9/30/20 and $61,379,670 at 12/31/19)						Non-affiliated/non-control investments, at fair value (cost of $51,191,614 at 9/30/20 and $61,379,670 at 12/31/19)	$	46,162,570	$	60,973,556
Affiliated investments, at fair value (cost of $42,260,687 at 9/30/20 and $48,111,833 at 12/31/19)						Affiliated investments, at fair value (cost of $42,260,687 at 9/30/20 and $48,111,833 at 12/31/19)	41,006,699		47,431,234
Control investments, at fair value (cost of $14,021,701 at 9/30/20 and $13,958,202 at 12/31/19)						Control investments, at fair value (cost of $14,021,701 at 9/30/20 and $13,958,202 at 12/31/19)	8,811,999		8,404,600
Cash	Cash	16,344,322		26,963,310		Cash	8,406,656		11,199,083
Restricted cash	Restricted cash	1,417,488		1,812,238		Restricted cash	29,338,582		10,648,199
Interest receivable	Interest receivable	754,603		721,195		Interest receivable	652,593		663,191
Accounts receivable – other	Accounts receivable – other	192,056		178,883		Accounts receivable – other	478,499		184,804
Deferred financing costs	Deferred financing costs	477,755		623,442		Deferred financing costs	262,742		425,379
Other assets	Other assets	157,474		106,771		Other assets	204,695		129,690
Total assets	Total assets	$	134,920,998	$	125,319,701	Total assets	$	135,325,035	$	140,059,736

LIABILITIES:	LIABILITIES:					LIABILITIES:
Revolving line of credit	Revolving line of credit	$	36,300,000	$	17,000,000	Revolving line of credit	$	45,000,000	$	43,700,000
2022 Notes (net of deferred offering costs of $674,233 at 9/30/19 and $821,879 at 12/31/18)		28,075,767		27,928,121
2022 Notes (net of deferred offering costs and unamortized discount of $464,967 at 9/30/20 and $623,276 at 12/31/19)						2022 Notes (net of deferred offering costs and unamortized discount of $464,967 at 9/30/20 and $623,276 at 12/31/19)	28,285,033		28,126,724
Accrued interest payable	Accrued interest payable	132,495		115,919		Accrued interest payable	96,276		152,544
Accounts payable - base management fees	Accounts payable - base management fees	578,465		531,628		Accounts payable - base management fees	512,047		593,266
Accounts payable - incentive management fees		—		361,090
Accounts payable - administrative services expenses		350,000		366,667
Accounts payable - administrative services expense						Accounts payable - administrative services expense	350,000		350,000
Accounts payable and accrued expenses	Accounts payable and accrued expenses	655,646		620,312		Accounts payable and accrued expenses	462,605		355,720
Total liabilities	Total liabilities	66,092,373		46,923,737		Total liabilities	74,705,961		73,278,254

Commitments and Contingencies (Note 8)	Commitments and Contingencies (Note 8)					Commitments and Contingencies (Note 8)

NET ASSETS:	NET ASSETS:					NET ASSETS:
Common stock, $0.001 par value, 100,000,000 shares authorized, 6,578,175 issued and 5,975,677 outstanding at 9/30/19 and 6,554,010 issued and 6,372,581 outstanding at 12/31/18		6,578		6,554
Common stock, $0.001 par value, 100,000,000 shares authorized, 6,600,444 issued and 5,958,479 outstanding at 9/30/20 and 6,587,819 issued and 5,945,854 outstanding at 12/31/19						Common stock, $0.001 par value, 100,000,000 shares authorized, 6,600,444 issued and 5,958,479 outstanding at 9/30/20 and 6,587,819 issued and 5,945,854 outstanding at 12/31/19	6,601		6,588
Capital in excess of common stock	Capital in excess of common stock	92,507,506		92,270,273		Capital in excess of common stock	90,962,284		90,876,759
Treasury shares, at cost, 602,498 and 181,429 shares at 9/30/19 and 12/31/18, respectively		(6,329,262)		(1,956,055)
Accumulated over distributed earnings		(17,356,197)		(11,924,808)
Treasury shares, at cost, 641,965 shares at each of 9/30/20 and 12/31/19						Treasury shares, at cost, 641,965 shares at each of 9/30/20 and 12/31/19	(6,723,505)		(6,723,505)
Accumulated overdistributed earnings						Accumulated overdistributed earnings	(23,626,306)		(17,378,360)
Total net assets	Total net assets	68,828,625		78,395,964		Total net assets	60,619,074		66,781,482
Total liabilities and net assets	Total liabilities and net assets	$	134,920,998	$	125,319,701	Total liabilities and net assets	$	135,325,035	$	140,059,736

Common stock outstanding	Common stock outstanding	5,975,677		6,372,581		Common stock outstanding	5,958,479		5,945,854

Net asset value per common share	Net asset value per common share	$	11.52	$	12.30	Net asset value per common share	$	10.17	$	11.23

See accompanying notes to unaudited consolidated financial statements.

Harvest Capital Credit Corporation

Consolidated Statements of Operations (Unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Investment Income:
Interest:
Cash - non-affiliated/non-control investments $ 1,416,656 $ 2,643,751 $ 4,247,511 $ 7,359,565
Cash - affiliated investments 1,432,203 788,995 3,493,857 2,306,626
Cash - control investments — — — 130,934
PIK - non-affiliated/non-control investments 18,471 147,340 49,236 485,168
PIK - affiliated investments 187,334 193,374 569,447 543,677
Amortization of fees, discounts and premiums, net:
  Non-affiliated/non-control investments 121,156 266,246 548,217 897,959
  Affiliated investments 60,970 41,509 118,125 75,595
Total interest income 3,236,790 4,081,215 9,026,393 11,799,524
Other income 45,508 240,680 288,454 318,153
Total investment income 3,282,298 4,321,895 9,314,847 12,117,677
Expenses:
Interest expense - revolving line of credit 224,712 157,266 327,493 446,440
Interest expense - unused line of credit 74,586 83,325 268,470 247,461
Interest expense - deferred financing costs 58,258 58,804 168,898 171,515
Interest expense - 2022 Notes 440,235 440,235 1,320,705 1,320,705
Interest expense - deferred offering costs 50,076 46,702 147,646 137,544
Total interest expense 847,867 786,332 2,233,212 2,323,665
Professional fees 198,360 364,733 1,016,240 1,606,403
General and administrative 235,277 240,664 726,849 814,011
Base management fees 578,466 595,448 1,613,040 1,781,328
Incentive management fees — 362,372 — 549,665
Administrative services expense 350,000 366,666 1,050,000 1,033,332
Total expenses, before reimbursement 2,209,970 2,716,215 6,639,341 8,108,404
     Less: Professional fees reimbursed by HCAP Advisors, LLC (Note 7) — — — (449,835)
Total expenses, after reimbursement 2,209,970 2,716,215 6,639,341 7,658,569
Net Investment Income, before taxes 1,072,328 1,605,680 2,675,506 4,459,108
Excise tax expense — 8,825 — 8,825
Current income tax expense — 10,192 — 43,025
Net Investment Income, after taxes 1,072,328 1,586,663 2,675,506 4,407,258
Net realized gains (losses):
  Non-affiliated / Non-control investments — (35,429) 52,451 (35,429)
  Affiliated investments — 275,006 20,750 (610,636)
  Control investments (92,615) (119,402) (103,505) 36,945
Net realized gains (losses) (92,615) 120,175 (30,304) (609,120)
Net change in unrealized appreciation (depreciation) on investments:
  Non-affiliated / Non-control investments (2,759,004) 19,503 (3,448,583) 142,184
  Affiliated investments 658,765 (2,229,909) 665,351 (745,597)
  Control investments 77,364 628,500 (758,030) 339,436
Net change in unrealized depreciation on investments (2,022,875) (1,581,906) (3,541,262) (263,977)
Total net unrealized and realized losses on investments (2,115,490) (1,461,731) (3,571,566) (873,097)

Provision for taxes on unrealized gains on investments — 507,894 — (15,584)
Net increase (decrease) in net assets resulting from operations $ (1,043,162) $ 632,826 $ (896,060) $ 3,518,577
Net investment income per share $ 0.18 $ 0.25 $ 0.43 $ 0.69
Net increase (decrease) in net assets resulting from operations per share $ (0.17) $ 0.10 $ (0.15) $ 0.55
Weighted average shares outstanding (basic and diluted) 6,053,807 6,398,077 6,171,616 6,408,547


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Investment Income:
Interest:
Cash - non-affiliated/non-control investments	$	967,288	$	1,416,656	$	3,598,978	$	4,247,511
Cash - affiliated investments	1,083,399		1,432,203		3,490,270		3,493,857
PIK - non-affiliated/non-control investments	156,105		18,471		376,321		49,236
PIK - affiliated investments	136,526		187,334		436,381		569,447
Amortization of fees and discounts:
Non-affiliated/non-control investments	54,822		121,156		248,464		548,217
Affiliated investments	476,421		60,970		591,965		118,125
Total interest income	2,874,561		3,236,790		8,742,379		9,026,393
Other income	152,526		45,508		162,317		288,454
Total investment income	3,027,087		3,282,298		8,904,696		9,314,847

Expenses:
Interest expense - revolving line of credit	351,436		224,712		1,012,455		327,493
Interest expense - unused line of credit	25,551		74,586		115,052		268,470
Interest expense - deferred financing costs	58,085		58,258		240,245		168,898
Interest expense - 2022 Notes	440,235		440,235		1,320,705		1,320,705
Interest expense - deferred offering costs and discount	53,693		50,076		158,311		147,646
Total interest expense	929,000		847,867		2,846,768		2,233,212

Professional fees	151,246		198,360		608,570		1,016,240
General and administrative	229,934		235,277		709,622		726,849
Base management fees	512,046		578,466		1,643,020		1,613,040
Administrative services expense	350,000		350,000		1,050,000		1,050,000
Total expenses	2,172,226		2,209,970		6,857,980		6,639,341

Net Investment Income	854,861		1,072,328		2,046,716		2,675,506

Net realized gains (losses):
Non-affiliated / Non-control investments	—		—		(2,176,202)		52,451
Affiliated investments	248,294		—		248,294		20,750
Control investments	(21,950)		(92,615)		(86,501)		(103,505)
Net realized gains (losses)	226,344		(92,615)		(2,014,409)		(30,304)
Net change in unrealized appreciation (depreciation) on investments:
Non-affiliated / Non-control investments	(858,707)		(2,759,004)		(4,622,927)		(3,448,583)
Affiliated investments	(1,191,301)		658,765		(573,390)		665,351
Control investments	586,000		77,364		343,900		(758,030)
Net change in unrealized depreciation on investments	(1,464,008)		(2,022,875)		(4,852,417)		(3,541,262)
Total net unrealized and realized losses on investments	(1,237,664)		(2,115,490)		(6,866,826)		(3,571,566)
Net decrease in net assets resulting from operations	$	(382,803)	$	(1,043,162)	$	(4,820,110)	$	(896,060)

Net investment income per share	$	0.14	$	0.18	$	0.34	$	0.43
Net decrease in net assets resulting from operations per share	$	(0.06)	$	(0.17)	$	(0.81)	$	(0.15)
Weighted average shares outstanding, basic and diluted	5,958,479		6,053,807		5,955,513		6,171,616

See accompanying notes to unaudited consolidated financial statements.

Harvest Capital Credit Corporation

Consolidated Statements of Changes in Net Assets (Unaudited)

Common Stock
Three Months Ended September 30, 2019 Shares Par Capital in Excess of Common Stock Treasury Shares Accumulated Over Distributed Earnings Total Net Assets
Balance as of June 30, 2019 6,126,724 $ 6,570 $ 92,426,143 $ (4,702,931) $ (14,861,022) $ 72,868,760
Net decrease in net assets resulting from operations:
Net investment income — — — — 1,072,328 1,072,328
Net realized losses — — — — (92,615) (92,615)
Net change in unrealized depreciation on investments — — — — (2,022,875) (2,022,875)
Distributions to shareholders (2):
Distributions — — — — (1,452,013) (1,452,013)
Capital share transactions
Reinvestment of dividends 8,514 8 81,363 — — 81,371
Share repurchases (159,561) — — (1,626,331) — (1,626,331)
Total increase (decrease) for the three months ended September 30, 2019 (151,047) 8 81,363 (1,626,331) (2,495,175) (4,040,135)
Balance as of September 30, 2019 5,975,677 $ 6,578 $ 92,507,506 $ (6,329,262) $ (17,356,197) $ 68,828,625


	Common Stock
Three Months Ended September 30, 2020	Shares	Par		Capital in Excess of Common Stock		Treasury Shares		Accumulated Over Distributed Earnings		Total Net Assets
Balance as of June 30, 2020	5,958,479	$	6,601	$	90,962,284	$	(6,723,505)	$	(23,243,503)	$	61,001,877
Net decrease in net assets resulting from operations:
Net investment income	—	—		—		—		854,861		854,861
Net realized gains	—	—		—		—		226,344		226,344
Net change in unrealized depreciation on investments	—	—		—		—		(1,464,008)		(1,464,008)
Total decrease for the three months ended September 30, 2020	—	—		—		—		(382,803)		(382,803)
Balance as of September 30, 2020	5,958,479	$	6,601	$	90,962,284	$	(6,723,505)	$	(23,626,306)	$	60,619,074

Common Stock
Three Months Ended September 30, 2018 Shares Par Capital in Excess of Common Stock Treasury Shares Accumulated Over Distributed Earnings (1) Total Net Assets
Balance as of June 30, 2018 6,395,192 $ 6,537 $ 93,071,543 $ (1,573,457) $ (11,426,575) $ 80,078,048
Net increase in net assets resulting from operations:
Net investment income — — — — 1,586,663 1,586,663
Net realized gains — — — — 120,175 120,175
Net change in unrealized depreciation on investments — — — — (1,581,906) (1,581,906)
Provision for taxes on unrealized gains on investments 507,894 507,894
Distributions to shareholders (2):
Distributions — — — — (1,823,368) (1,823,368)
Capital share transactions
Reinvestment of dividends 7,868 8 83,271 — — 83,279
Share repurchases — — — — — —
Write-off of deferred offering costs — — — — — —
Total increase (decrease) for the three months ended September 30, 2018 7,868 8 83,271 — (1,190,542) (1,107,263)
Balance as of September 30, 2018 6,403,060 $ 6,545 $ 93,154,814 $ (1,573,457) $ (12,617,117) $ 78,970,785


	Common Stock
Three Months Ended September 30, 2019	Shares	Par		Capital in Excess of Common Stock		Treasury Shares		Accumulated Over Distributed Earnings		Total Net Assets
Balance as of June 30, 2019	6,126,724	$	6,570	$	92,426,143	$	(4,702,931)	$	(14,861,022)	$	72,868,760
Net increase in net assets resulting from operations:
Net investment income	—	—		—		—		1,072,328		1,072,328
Net realized losses	—	—		—		—		(92,615)		(92,615)
Net change in unrealized depreciation on investments	—	—		—		—		(2,022,875)		(2,022,875)
Distributions to stockholders (1):
Distributions	—	—		—		—		(1,452,013)		(1,452,013)
Capital share transactions
Reinvestment of dividends	8,514	8		81,363		—		—		81,371
Share repurchases	(159,561)	—		—		(1,626,331)		—		(1,626,331)
Total increase (decrease) for the three months ended September 30, 2019	(151,047)	8		81,363		(1,626,331)		(2,495,175)		(4,040,135)
Balance as of September 30, 2019	5,975,677	$	6,578	$	92,507,506	$	(6,329,262)	$	(17,356,197)	$	68,828,625


	Common Stock
Nine Months Ended September 30, 2020	Shares	Par		Capital in Excess of Common Stock		Treasury Shares		Accumulated Over Distributed Earnings		Total Net Assets
Balance as of December 31, 2019	5,945,854	$	6,588	$	90,876,759	$	(6,723,505)	$	(17,378,360)	$	66,781,482
Net decrease in net assets resulting from operations:
Net investment income	—	—		—		—		2,046,716		2,046,716
Net realized losses	—	—		—		—		(2,014,409)		(2,014,409)
Net change in unrealized depreciation on investments	—	—		—		—		(4,852,417)		(4,852,417)
Distributions to shareholders (1):
Distributions	—	—		—		—		(1,427,836)		(1,427,836)
Capital share transactions
Reinvestment of dividends	12,625	13		85,525		—		—		85,538
Total increase (decrease) for the nine months ended September 30, 2020	12,625	13		85,525		—		(6,247,946)		(6,162,408)
Balance as of September 30, 2020	5,958,479	$	6,601	$	90,962,284	$	(6,723,505)	$	(23,626,306)	$	60,619,074

~~Harvest Capital Credit Corporation~~

~~Consolidated Statements of Changes in Net Assets (Unaudited) (Continued)~~

Common Stock
Nine Months Ended September 30, 2019 Shares Par Capital in Excess of Common Stock Treasury Shares Accumulated Over Distributed Earnings Total Net Assets
Balance as of December 31, 2018 6,372,581 $ 6,554 $ 92,270,273 $ (1,956,055) $ (11,924,808) $ 78,395,964
Net decrease in net assets resulting from operations:
Net investment income — — — — 2,675,506 2,675,506
Net realized losses — — — — (30,304) (30,304)
Net change in unrealized depreciation on investments — — — — (3,541,262) (3,541,262)
Distributions to shareholders (2):
Distributions — — — — (4,535,329) (4,535,329)
Capital share transactions
Reinvestment of dividends 24,165 24 237,233 — — 237,257
Share repurchases (421,069) — — (4,373,207) — (4,373,207)
Total increase (decrease) for the nine months ended September 30, 2019 (396,904) 24 237,233 (4,373,207) (5,431,389) (9,567,339)
Balance as of September 30, 2019 5,975,677 $ 6,578 $ 92,507,506 $ (6,329,262) $ (17,356,197) $ 68,828,625

Common Stock
Nine Months Ended September 30, 2018 Shares Par Capital in Excess of Common Stock Treasury Shares Accumulated Over Distributed Earnings (1) Total Net Assets
Balance as of December 31, 2017 6,457,588 $ 6,520 $ 93,043,208 $ (724,039) $ (10,544,260) $ 81,781,429
Net increase in net assets resulting from operations:
Net investment income — — — — 4,407,258 4,407,258
Net realized losses — — — — (609,120) (609,120)
Net change in unrealized depreciation on investments — — — — (263,977) (263,977)
Provision for taxes on unrealized gains on investments
(15,584) (15,584)
Distributions to shareholders (2):
Distributions — — — — (5,591,434) (5,591,434)
Capital share transactions
Reinvestment of dividends 25,047 25 258,052 — — 258,077
Share repurchases (79,575) — — (849,418) — (849,418)
Write-off of deferred offering costs — — (146,446) — — (146,446)
Total increase (decrease) for the nine months ended September 30, 2018 (54,528) 25 111,606 (849,418) (2,072,857) (2,810,644)
Balance as of September 30, 2018 6,403,060 $ 6,545 $ 93,154,814 $ (1,573,457) $ (12,617,117) $ 78,970,785


	Common Stock
Nine Months Ended September 30, 2019	Shares	Par		Capital in Excess of Common Stock		Treasury Shares		Accumulated Over Distributed Earnings		Total Net Assets
Balance as of December 31, 2018	6,372,581	$	6,554	$	92,270,273	$	(1,956,055)	$	(11,924,808)	$	78,395,964
Net increase in net assets resulting from operations:
Net investment income	—	—		—		—		2,675,506		2,675,506
Net realized losses	—	—		—		—		(30,304)		(30,304)
Net change in unrealized depreciation on investments	—	—		—		—		(3,541,262)		(3,541,262)
Distributions to shareholders (1):
Distributions	—	—		—		—		(4,535,329)		(4,535,329)
Capital share transactions
Reinvestment of dividends	24,165	24		237,233		—		—		237,257
Share repurchases	(421,069)	—		—		(4,373,207)		—		(4,373,207)
Total increase (decrease) for the nine months ended September 30, 2019	(396,904)	24		237,233		(4,373,207)		(5,431,389)		(9,567,339)
Balance as of September 30, 2019	5,975,677	$	6,578	$	92,507,506	$	(6,329,262)	$	(17,356,197)	$	68,828,625


(1)			The ~~following tables provide a reconciliation of~~Company did not make any distributions during the ~~components of accumulated over distributed earnings to conform to the current period presentation:~~

Undistributed Net Investment Income Accumulated Realized Losses on Investments Net Unrealized Depreciation on Investments Accumulated Over Distributed Earnings
Balance as of June 30, 2018 $ 972,244 $ (9,653,256) $ (2,745,563) $ (11,426,575)
Net increase in net assets resulting from operations:
Net investment income 1,586,663 — — 1,586,663
Net realized gains on investments — 120,175 — 120,175
Net change in unrealized depreciation on investments — — (1,581,906) (1,581,906)
Provision for taxes on unrealized gains on investments — — 507,894 507,894
Distributions to shareholders:
Distributions (1,823,367) — — (1,823,367)
Balance as of September 30, 2018 $ 735,540 $ (9,533,081) $ (3,819,575) $ (12,617,116)

Undistributed Net Investment Income Accumulated Realized Losses on Investments Net Unrealized Depreciation on Investments Accumulated Over Distributed Earnings
Balance as of December 31, 2017 $ 1,919,715 $ (8,923,961) $ (3,540,014) $ (10,544,260)
Net increase in net assets resulting from operations:
Net investment income 4,407,258 — — 4,407,258
Net realized losses on investments — (609,120) — (609,120)
Net change in unrealized depreciation on investments — — (263,977) (263,977)
Provision for taxes on unrealized gains on investments — — (15,584) (15,584)
Distributions to shareholders:
Distributions (5,591,434) — — (5,591,434)
Balance as of September 30, 2018 $ 735,539 $ (9,533,081) $ (3,819,575) $ (12,617,117)


~~(2)~~			three months ended September 30, 2020. Distributions exceeded net investment income for the three months ended September 30, 2019 ~~and 2018 in the~~by an amount of ~~$379,685~~$379,685. Net investment income exceeded distributions for the nine months ended September 30, 2020 by $618,880 and ~~$236,705, respectively. Distributions~~distributions exceeded net investment income for the nine months ended September 30, 2019 by $1,859,823. See "Dividends and ~~2018 in the amount of $1,859,823 and $1,184,176, respectively.See Dividends and Distributions Policy~~Distributions" in Note 2.

See accompanying notes to unaudited consolidated financial statements.

Harvest Capital Credit Corporation

Consolidated Statements of Cash Flows (Unaudited)


		Nine Months Ended September 30,							Nine Months Ended September 30,
		2019		2018			2020		2019
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net increase (decrease) in net assets resulting from operations		$	(896,060)	$	3,518,577
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Paid in kind income		(618,683)		(1,028,845)
Paid in kind income collected		124,184		21,269
Net decrease in net assets resulting from operations						Net decrease in net assets resulting from operations	$	(4,820,110)	$	(896,060)
Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by (used in) operating activities:						Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by (used in) operating activities:
Payment-in-kind income						Payment-in-kind income	(812,702)		(618,683)
Payment-in-kind income collected						Payment-in-kind income collected	140,920		124,184
Net realized losses on investments	Net realized losses on investments	30,304		609,120		Net realized losses on investments	2,014,409		30,304
Net change in unrealized depreciation of investments	Net change in unrealized depreciation of investments	3,541,262		263,977		Net change in unrealized depreciation of investments	4,852,417		3,541,262
Provision for deferred taxes on unrealized gains on investments		—		15,584
Amortization of fees, discounts and premiums, net		(666,342)		(973,554)
Amortization of fees and discounts on investments						Amortization of fees and discounts on investments	(840,429)		(666,342)
Amortization of deferred financing costs	Amortization of deferred financing costs	168,898		171,515		Amortization of deferred financing costs	240,245		168,898
Amortization of deferred offering costs		147,646		137,544
Amortization of deferred offering costs and discount						Amortization of deferred offering costs and discount	158,311		147,646
Proceeds from sales of investments	Proceeds from sales of investments	6,078,795		824,540		Proceeds from sales of investments	1,728,081		6,078,795
Purchase of investments (net of loan origination and other fees)	Purchase of investments (net of loan origination and other fees)	(50,952,846)		(19,377,353)		Purchase of investments (net of loan origination and other fees)	(2,463,420)		(50,952,846)
Proceeds from principal payments	Proceeds from principal payments	21,668,998		22,157,428		Proceeds from principal payments	15,995,741		21,668,998
Changes in operating assets and liabilities
Increase in interest receivable		(33,408)		(144,221)
Changes in operating assets and liabilities:						Changes in operating assets and liabilities:
(Increase) decrease in interest receivable						(Increase) decrease in interest receivable	10,598		(33,408)
(Increase) decrease in accounts receivable - other and other assets	(Increase) decrease in accounts receivable - other and other assets	67,373		(306,423)		(Increase) decrease in accounts receivable - other and other assets	(155,589)		67,373
Increase (decrease) in accrued interest payable	Increase (decrease) in accrued interest payable	16,576		(217)		Increase (decrease) in accrued interest payable	(56,268)		16,576
Increase (decrease)in accounts payable and other liabilities		(295,946)		402,194
Increase (decrease) in accounts payable and other liabilities						Increase (decrease) in accounts payable and other liabilities	21,698		(295,946)

Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	(21,619,249)		6,291,135		Net cash provided by (used in) operating activities	16,013,902		(21,619,249)

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Borrowings on revolving credit facility	Borrowings on revolving credit facility	76,300,000		76,000,000		Borrowings on revolving credit facility	92,713,837		76,300,000
Repayment of borrowings on revolving credit facility	Repayment of borrowings on revolving credit facility	(57,000,000)		(66,921,853)		Repayment of borrowings on revolving credit facility	(91,413,837)		(57,000,000)
Financing costs	Financing costs	(23,210)		(37,066)		Financing costs	(73,642)		(23,210)
Repurchased shares (held in Treasury Stock)	Repurchased shares (held in Treasury Stock)	(4,373,207)		(849,418)		Repurchased shares (held in Treasury Stock)	—		(4,373,207)
Distributions to equity holders (net of stock issued under dividend reinvestment plan of $237,257 and $258,077, respectively)		(4,298,072)		(5,333,357)
Distributions to stockholders (net of stock issued under dividend reinvestment plan of $85,538 and $237,257, respectively)						Distributions to stockholders (net of stock issued under dividend reinvestment plan of $85,538 and $237,257, respectively)	(1,342,304)		(4,298,072)

Net cash provided by financing activities		10,605,511		2,858,306
Net cash provided by (used in) provided by financing activities						Net cash provided by (used in) provided by financing activities	(115,946)		10,605,511

Net increase (decrease) in cash during the period	Net increase (decrease) in cash during the period	(11,013,738)		9,149,441		Net increase (decrease) in cash during the period	15,897,956		(11,013,738)

Cash at beginning of period	Cash at beginning of period	28,775,548		11,464,437		Cash at beginning of period	21,847,282		28,775,548

Cash at end of period (1)	Cash at end of period (1)	$	17,761,810	$	20,613,878	Cash at end of period (1)	$	37,745,238	$	17,761,810

Non-cash operating activities:	Non-cash operating activities:					Non-cash operating activities:
Fair value of warrants received from Kleen-Tech Acquisition, LLC	Fair value of warrants received from Kleen-Tech Acquisition, LLC	$	186,970	$	—	Fair value of warrants received from Kleen-Tech Acquisition, LLC	$	—	$	186,970
Fair value of warrants received from Surge Hippodrome Holdings LLC	Fair value of warrants received from Surge Hippodrome Holdings LLC	$	237,579	$	—	Fair value of warrants received from Surge Hippodrome Holdings LLC	$	—	$	237,579
Conversion of Northeast Metal Works, LLC Revolving Credit Facility to Junior Secured Term Loan	Conversion of Northeast Metal Works, LLC Revolving Credit Facility to Junior Secured Term Loan	$	446,494	$	—	Conversion of Northeast Metal Works, LLC Revolving Credit Facility to Junior Secured Term Loan	$	—	$	446,494
Conversion of Coastal Screen & Rail, LLC Revolving Credit Facility to Senior Secured Term Loan	Conversion of Coastal Screen & Rail, LLC Revolving Credit Facility to Senior Secured Term Loan	$	950,000	$	—	Conversion of Coastal Screen & Rail, LLC Revolving Credit Facility to Senior Secured Term Loan	$	—	$	950,000
Conversion of General Nutrition Centers, Inc. Senior Secured Term Loan to Senior Secured Roll-up Term Loan						Conversion of General Nutrition Centers, Inc. Senior Secured Term Loan to Senior Secured Roll-up Term Loan	$	964,812	$	—

Non-cash financing activities:


							Nine Months Ended September 30,
							2020		2019
Non-cash financing activities:						Non-cash financing activities:
Value of shares issued in connection with dividend reinvestment plan	Value of shares issued in connection with dividend reinvestment plan	$	237,257	$	258,077	Value of shares issued in connection with dividend reinvestment plan	$	85,538	$	237,257
Write-off of deferred offering costs		$	—	$	146,446

Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:					Supplemental disclosures of cash flow information:
Cash paid during the period for interest	Cash paid during the period for interest	$	1,900,092	$	2,014,823	Cash paid during the period for interest	$	2,504,479	$	1,900,092
Cash paid during the period for taxes	Cash paid during the period for taxes	$	46,591	$	48,665	Cash paid during the period for taxes	$	45,061	$	46,591


			(1) Consists of cash and restricted cash of $8,406,656 and $29,338,582, respectively, at September 30, 2020, and $16,344,322 and $1,417,488, respectively, at September 30, ~~2019, and $18,653,323 and $1,960,555, respectively at September 30, 2018.~~ 2019.

See accompanying notes to unaudited consolidated financial statements.

Harvest Capital Credit Corporation

Consolidated Schedule of Investments (Unaudited)

As of September 30, ~~2019~~2020

Portfolio Company Date** Industry Investment (1) (2) (12) (13) (14) Principal Cost Fair Value
Non-Control / Non-Affiliate Investments
Back Porch International, Inc. (10.0%)* 09/2019 High Tech Industries Senior Secured Term Loan, due 03/2024 (13.50%; 1M LIBOR + 10.25% + 1.00% PIK) $ 7,000,000 $ 6,868,750 $ 6,868,750
Senior Secured Revolving Line of Credit, due 09/2020 (1M LIBOR + 8.00%) — — —
7,000,000 6,868,750 6,868,750
Brite Media LLC (0.3%)* 04/2014 Media: Advertising, Printing & Publishing Class A Interest (139 Units) 125,000 235,300
125,000 235,300
CP Holding Co., Inc.
(Choice Pet) (3.3%)* 05/2013 Retailer Junior Secured Term Loan, due 06/2020 (12.00%; 7.00% current and 5.00% deferred) (10) 2,899,852 3,098,300 2,262,000
2,899,852 3,098,300 2,262,000
Deluxe Entertainment Services Group Inc.(3.5%)* 01/2019 Media: Diversified & Production Senior Secured Priming Delayed Draw Term Loan, due 07/2020 (9.73%, LIBOR + 7.50%) (15) 459,066 436,093 1,125,875
Senior Secured Term Loan, due 02/2020 (7.76%; LIBOR + 5.50%) (15) 4,716,026 4,343,907 1,213,958
Senior Secured Term Loan, due 02/2020 (8.26%; LIBOR + 6.00%) (15) 210,938 192,549 54,298
5,386,030 4,972,549 2,394,131
Flavors Holdings, Inc. (5.1%)* 10/2014 Beverage, Food & Tobacco Junior Secured Term Loan, due 10/2021 (12.10%; 3M LIBOR +10.00% with a 1.00% LIBOR floor) 4,000,000 3,940,426 3,485,000
4,000,000 3,940,426 3,485,000
Fox Rent A Car, Inc. (0.5%)* 10/2014 Automotive Common Equity Warrants (102 shares) — 328,947
— 328,947
General Nutrition Centers, Inc. (6.1%)* 02/2019 Beverage, Food, & Tobacco Senior Secured Term Loan, due 03/2021 (10.86%; LIBOR + 8.75%; ABR + 7.75%) 4,326,812 4,196,993 4,175,374
4,326,812 4,196,993 4,175,374
GK Holdings, Inc. (3.5%)* 01/2015 High Tech Industries Junior Secured Term Loan, due 01/22 (12.35%; 3M LIBOR + 10.25% with a 1.00% LIBOR floor) (5) 3,000,000 2,965,516 2,422,500
3,000,000 2,965,516 2,422,500
KC Engineering & Construction Services, LLC (4.3%)* 10/2017 Environmental Industries Class A Membership Interest (105,784 Units) (6) 664,392 2,940,608
664,392 2,940,608
Peerless Media, LLC (6.8%)* 02/2019 Media: Advertising, Printing & Publishing Senior Secured Term Loan, due 02/2024 (11.40%; 1M LIBOR + 8.50% with a 2.40% LIBOR floor + 0.50% PIK) 4,694,317 4,656,678 4,694,317
4,694,317 4,656,678 4,694,317
ProAir Holdings Corporation (9.3%)* 09/2017 Capital Equipment Junior Secured Term Loan, due 12/2022 (12.75%) 6,500,000 6,432,035 6,392,500
6,500,000 6,432,035 6,392,500
Regional Engine
Leasing, LLC (3.6%)* 03/2015 Aerospace & Defense Senior Secured Term Loan, due 03/2020 (11.00%; the greater of 11.00% or LIBOR + 4.50%) 2,506,230 2,493,300 2,506,230
Residual Value (3) 102,421 —


Portfolio Company	Date**	Industry	Investment (1) (2) (10) (11) (12)		Principal		Cost		Fair Value
Non-Control / Non-Affiliate Investments
Back Porch International, Inc. (11.4%)*	09/2019	High Tech Industries	Senior Secured Term Loan, due 03/2024 (13.50%; 1M LIBOR + 10.25% with a 2.25% LIBOR floor + 1.00% PIK)	(4)	$	6,895,770	$	6,797,583	$	6,895,770
					6,895,770		6,797,583		6,895,770

Brite Media LLC (0.2%)*	04/2014	Media: Advertising, Printing & Publishing	Class A Interest (0.86% fully diluted common equity)				125,000		142,767
							125,000		142,767

Coastal Screen and Rail, LLC (12.7%)*	01/2018	Construction & Building	Senior Secured Term Loan, due 01/2023 (14.00%; 10.50% Cash + 3.50% PIK)	(4)	7,370,206		7,286,568		7,286,468
			Senior Secured Revolving Line of Credit, due 07/2022 (8.23%; 3M LIBOR + 8.00%)	(3)	100,000		100,000		100,000
			Preferred Equity Class B Interest 10.34% / (3.90% fully diluted common equity)	(5)			150,000		282,000
					7,470,206		7,536,568		7,668,468

Deluxe Entertainment Services Group Inc.(1.7%)*	01/2019	Media: Diversified & Production	Junior Secured Term Loan, due 9/2024 (9.50%, LIBOR + 6.00% with a 1.00% LIBOR floor + 2.50% PIK)		522,923		522,923		522,923
			Common Equity (0.63% fully diluted common equity)				2,056,418		487,679
					522,923		2,579,341		1,010,602

General Nutrition Centers, Inc. (7.6%)*	02/2019	Beverage, Food, & Tobacco	Senior Secured Term Loan, due 08/2020 (11.00%; LIBOR + 8.75% with a 0.75% LIBOR floor; ABR + 7.75%)	(9) (13)	2,998,961		2,910,829		2,685,000
			DIP New Money Term Loan, due upon restructuring (15.25%; Prime + 13.25%)	(9) (13)	964,812		941,502		964,812
			DIP Roll-up Term Loan, due upon restructuring (13.50%; Prime + 10.25%)	(9) (13)	964,812		901,081		964,812
					4,928,585		4,753,412		4,614,624

GK Holdings, Inc. (2.4%)*	01/2015	High Tech Industries	Junior Secured Term Loan, due 01/2022 (13.25%; 3M LIBOR + 10.25% + 2.00% default interest with a 1.00% LIBOR floor)	(4) (9)	3,000,000		2,972,406		1,450,000
					3,000,000		2,972,406		1,450,000

KC Engineering & Construction Services, LLC (4.8%)*	10/2017	Environmental Industries	Class A Membership Interest (2.5% fully diluted common equity)	(5)			906,761		2,905,978
							906,761		2,905,978

Peerless Media, LLC (6.0%)*	02/2019	Media: Advertising, Printing & Publishing	Senior Secured Term Loan, due 02/2024 (11.40%; 1M LIBOR + 8.50% with a 2.40% LIBOR floor + 0.50% PIK)		3,639,914		3,612,977		3,639,914
					3,639,914		3,612,977		3,639,914

ProAir Holdings Corporation (6.6%)*	09/2017	Capital Equipment	Junior Secured Term Loan, due 12/2022 (17.50%; 13.50% + 4.0% PIK default interest)	(4) (9)	7,644,474		7,424,544		4,019,000
					7,644,474		7,424,544		4,019,000

Safety Services Acquisition Corp. (7.3%)*	03/2017	Services: Business	Senior Secured Term Loan, due 08/2021 (13.75%; 3M LIBOR + 8.75% with a 1.00% LIBOR floor + 4.0% PIK)	(4)	4,420,208		4,418,045		4,340,579
	04/2012		Series A Preferred Stock (0.57% fully diluted common equity)				100,000		63,148
					4,420,208		4,518,045		4,403,727

Surge Busy Bee Holdings, LLC (11.5%)*	11/2017	Services: Business	Senior Secured Term Loan, due 11/2022 (11.15%; 1M LIBOR + 11.00%)	(4)	3,800,000		3,703,801		3,732,000

Portfolio Company Date** Industry Investment (1) (2) (12) (13) (14) Principal Cost Fair Value
2,506,230 2,595,721 2,506,230
Safety Services Acquisition Corp. (6.9%)* 03/2017 Services: Business Senior Secured Term Loan, due 12/2020 (10.13%; 3M LIBOR + 8.00% with a 1.00% LIBOR floor) (5) 4,562,500 4,556,296 4,562,500
04/2012 Series A Preferred Stock (100,000 Shares) 100,000 173,000
4,562,500 4,656,296 4,735,500
Surge Busy Bee Holdings, LLC (10.0%)* 11/2017 Services: Business Senior Secured Term Loan, due 11/2022 (12.05%; 1M LIBOR + 10.00%) 4,175,000 4,035,445 4,138,469
Senior Secured Term Loan, due 11/2022 (14.00%; 12.00% cash/2.00% PIK) 2,424,563 2,351,936 2,424,563
Revolving Line of Credit, due 11/2021 (1M LIBOR + 8.00%) (4) — — —
Class B Equity Warrants (210 Units) 152,950 311,494
6,599,563 6,540,331 6,874,526
Water-Land Manufacturing & Supply, LLC (3.6%)* 08/2018 Consumer Goods - Durable Junior Secured Term Loan, due 05/2023 (12.75%; 3M LIBOR + 10.50% with a 2.25% LIBOR floor) 2,500,000 2,459,293 2,491,000
2,500,000 2,459,293 2,491,000
World Business Lenders, LLC (0.0%)* 12/2013 Banking, Finance, Insurance & Real Estate Class B Equity Interest (49,209 Units) (8) 200,000 —
200,000 —
Subtotal Non-Control / Non-Affiliate Investments $ 53,975,304 $ 54,372,280 $ 52,806,683
Affiliate Investments
Coastal Screen and Rail, LLC (10.9%)* 01/2018 Construction & Building Senior Secured Term Loan, due 01/2023 (12.00%; 10.50% Cash/1.50% PIK) $ 7,193,417 $ 7,076,310 $ 7,143,604
Revolving Line of Credit, due 07/2022 (10.11%; 3M LIBOR + 8.00%) (4) 100,000 100,000 100,000
Preferred Equity Interest (6.21% fully diluted Preferred Equity) (6) 150,000 268,189
7,293,417 7,326,310 7,511,793
Flight Lease XII, LLC (0.9%)* 03/2017 Aerospace & Defense Common Equity Interest (1,000 Units) (6) 389,757 636,000
389,757 636,000
Kleen-Tech Acquisition, LLC (10.6%)* 05/2019 Services: Business Senior Secured Term Loan, due 05/2024 (15.00%; 13.00% Cash/2.00% PIK) 7,182,448 6,876,189 6,876,189
Revolving Line of Credit, due 05/2022 (13.00% Cash/2.00% PIK) (4) — — —
Common Equity Units (13.51% fully diluted) (6) 250,000 250,000
Common Equity Warrants (8.50% Common Equity) (6) 186,970 186,970
7,182,448 7,313,159 7,313,159
National Program Management & Project Controls, LLC (17.1%)* 06/2018 Construction & Building Senior Secured Term Loan, due 06/2023 (12.05%; 1M LIBOR + 10.00%) 6,793,305 6,709,650 6,793,305
Class A Membership Interest (574,392 Units) (6) 2,791,241 4,998,370
6,793,305 9,500,891 11,791,675
Northeast Metal
Works, LLC (14.5%)* 09/2014 Metals & Mining Junior Secured Term Loan, due 06/2020 (15.00%; 11.00% Cash/4.00% PIK) (11) 11,316,785 11,308,499 9,944,625
05/2017 Preferred Equity Interest (2,368 Class A Units; 12.0% cumulative preferred return) (6) (11) 1,515,520 —
11,316,785 12,824,019 9,944,625


Portfolio Company	Date**	Industry	Investment (1) (2) (10) (11) (12)		Principal		Cost		Fair Value
			Senior Secured Term Loan, due 11/2022 (15.00%; 13.00% cash + 2.00% PIK)	(4)	3,591,483		3,516,203		3,261,880
			Senior Secured Revolving Line of Credit, due 11/2021 (1M LIBOR + 8.00%)	(3)	—		—		—
			Class B Equity Warrants (4.75% fully diluted common equity)				76,475		2,106
					7,391,483		7,296,479		6,995,986

Water-Land Manufacturing & Supply, LLC (4.0%)*	08/2018	Consumer Goods - Durable	Junior Secured Term Loan, due 05/2023 (12.75%; 3M LIBOR + 10.50% with a 2.25% LIBOR floor)		2,500,000		2,468,498		2,415,734
					2,500,000		2,468,498		2,415,734

World Business Lenders, LLC (-%)*	12/2013	Banking, Finance, Insurance & Real Estate	Class B Equity Interest (0.28% fully diluted common equity)	(7)			200,000		—
							200,000		—
Subtotal Non-Control / Non-Affiliate Investments					$	48,413,563	$	51,191,614	$	46,162,570

Affiliate Investments
Flight Lease XII, LLC (0.3%)*	03/2017	Aerospace & Defense	Common Equity Interest (19.23% fully diluted common equity)	(5)			197,933		197,933
							197,933		197,933

Kleen-Tech Acquisition, LLC (0.4%)*	05/2019	Services: Business	Common Equity Units (7.35% fully diluted common equity)	(5)			250,000		266,092
							250,000		266,092

National Program Management & Project Controls, LLC (21.2%)*	06/2018	Construction & Building	Senior Secured Term Loan, due 06/2023 (9.75%; 1M LIBOR + 8.25% with a 1.50% LIBOR floor)		5,462,388		5,398,434		5,451,888
	05/2020		Delayed Draw Term Loan, due 06/2023 (9.75%; 1M LIBOR + 8.25% with a 1.50% LIBOR floor)	(3)	63,595		63,312		63,473
			Class A Membership Interest (5.10% fully diluted common equity)	(5)			2,791,241		7,337,701
					5,525,983		8,252,987		12,853,062

Northeast Metal Works, LLC (17.5%)*	09/2014	Metals & Mining	Senior Secured Term Loan, due 06/2020 (10.00%; 7.00% Cash + 3.00% PIK)		13,515,098		13,513,370		10,553,135
	05/2017		Preferred Equity Interest (22.79% fully diluted common equity; 12.0% cumulative preferred return)	(5)			1,515,520		—
					13,515,098		15,028,890		10,553,135

Slappey Communications, LLC (13.4%)*	05/2019	Telecommunications	Senior Secured Term Loan, due 05/2024 (13.00%; 3M LIBOR + 10.00% with a 2.50% LIBOR floor + 0.50% PIK)		7,781,908		7,657,050		7,781,908
			Senior Secured Revolving Line of Credit, due 05/2023 (3M LIBOR + 10.00% with a 2.50% LIBOR floor)	(3)	—		—		—
			Common Equity Units (12.90% preferred equity / 7.59% fully diluted common equity)	(5)			200,000		357,000
					7,781,908		7,857,050		8,138,908

Surge Hippodrome Holdings LLC (8.1%)*	08/2019	Services: Business	Senior Secured Term Loan (Last Out), due 08/2024 (13.50%; 3M LIBOR + 11.50% with a 2.00% LIBOR floor)		5,460,000		5,170,452		4,804,158
			Common Equity Interest (10.08% fully diluted common equity)	(5)			360,000		72,525
			Common Equity Warrants (9.50% fully diluted common equity)	(5)			237,579		52,886
					5,460,000		5,768,031		4,929,569

108

Portfolio Company Date** Industry Investment (1) (2) (12) (13) (14) Principal Cost Fair Value
Slappey Communications, LLC (10.0%) 05/2019 Telecommunications Senior Secured Term Loan, due 05/2024 (13.00%; 3M LIBOR + 10.00% with a 2.50% LIBOR floor + 0.50% PIK) 6,836,616 6,702,692 6,702,692
Revolving Line of Credit, due 05/2023 (3M LIBOR + 10.00% with a 2.50% LIBOR floor) (4) — — —
Common Equity Units (7.74% fully diluted) (6) 200,000 200,000
6,836,616 6,902,692 6,902,692
Surge Hippodrome Holdings LLC (8.3%) 08/2019 Services: Business Senior Secured Term Loan (Last Out), due 08/2024 (13.75%; 3M LIBOR + 11.50%) 5,460,000 5,119,221 5,119,221
Common Equity Interest (10.10% fully diluted) (6) 360,000 360,000
Common Equity Warrants (9.50% fully diluted) (6) 237,579 237,579
5,460,000 5,716,800 5,716,800
V-Tek, Inc. (7.2%) * 03/2017 Capital Equipment Senior Secured Term Loan, due 03/2022 (13.25%; 3M LIBOR + 11.00%) 3,281,250 3,228,983 3,202,000
Revolving Line of Credit, due 03/2021 (8.75%; 3M LIBOR + 6.50%) (4) 1,536,097 1,536,097 1,536,097
Common Stock (90 Shares) (6) 150,000 229,000
4,817,347 4,915,080 4,967,097
Subtotal Affiliate Investments $ 49,699,918 $ 54,888,708 $ 54,783,841
Control Investments
Flight Lease VII, LLC (0.8%) * 03/2016 Aerospace & Defense Common Equity Interest (46.14% fully diluted interest) (9) $ 580,806 $ 580,806
580,806 580,806
Infinite Care, LLC (10.8%) * 02/2016 Healthcare & Pharmaceuticals Senior Secured Term Loan, due 02/2019 (14.02%; 1M LIBOR + 6.00% with a 0.42% LIBOR floor + 6.00% PIK) (7) 4,855,735 3,377,702 3,493,470
Revolving Line of Credit, due 02/2019 (14.02%; 1M LIBOR + 12.00% with a 0.42% LIBOR floor) 3,919,000 3,919,000 3,912,500
Membership Interest (100% membership interests) (6) 5,949,000 —
8,774,735 13,245,702 7,405,970
Subtotal Control Investments $ 8,774,735 $ 13,826,508 $ 7,986,776
Total Investments at 9/30/19 (167.9%) * $ 112,449,957 $ 123,087,496 $ 115,577,300


Portfolio Company	Date**	Industry	Investment (1) (2) (10) (11) (12)		Principal		Cost		Fair Value
V-Tek, Inc. (6.7%) *	03/2017	Capital Equipment	Senior Secured Term Loan, due 03/2022 (6.00%)		3,237,500		3,219,699		2,610,000
			Senior Secured Revolving Line of Credit, due 03/2021 (6.75%; 3M LIBOR + 6.50%)	(3)	1,536,097		1,536,097		1,458,000
			Common Stock (8.98% fully diluted common equity)	(5)			150,000		—
					4,773,597		4,905,796		4,068,000
Subtotal Affiliate Investments					$	37,056,586	$	42,260,687	$	41,006,699

Control Investments
Flight Lease VII, LLC (0.5%) *	03/2016	Aerospace & Defense	Common Equity Interest (46.14% fully diluted common equity)	(8)			$	325,999	$	325,999
							325,999		325,999

Infinite Care, LLC (14.0%) *	02/2016	Healthcare & Pharmaceuticals	Senior Secured Term Loan, due 01/2021 (3.00%)	(6) (9)	4,740,284		3,377,702		4,031,000
			Senior Secured Revolving Line of Credit, due 01/2021 (3.00%)	(6) (9)	4,506,271		4,369,000		4,455,000
			Membership Interest (100% membership interests)	(5) (6)			5,949,000		—
					9,246,555		13,695,702		8,486,000
Subtotal Control Investments					$	9,246,555	$	14,021,701	$	8,811,999

Total Investments at 9/30/20 (158.3%) *					$	94,716,704	$	107,474,002	$	95,981,268

* Fair value as a percentage of net assets

** Date refers to the origination date of the investment


(1)			Debt investments are ~~income producing~~income-producing investments unless an investment is on ~~non accrual.~~non-accrual. Common equity, preferred equity, residual values and warrants are ~~non-income producing.~~non-income-producing.
(2)			For each loan, the Company has provided the interest rate in effect on the date presented, as well as the contractual components of that interest rate. In the case of the Company's variable or floating rate loans, the interest rate in effect takes into account the applicable LIBOR ~~rate~~ in effect on September 30, 2020 or, if higher, the applicable LIBOR floor.
(3)			Line of credit has an unfunded commitment in addition to the amounts shown in the Consolidated Schedule of Investments. See Note 8 in the accompanying Notes to the Consolidated Financial Statements for further discussion on unfunded commitments.
(4)			The cash coupon and/or PIK coupon on the loan is subject to a pricing grid based on certain leverage ratios of the portfolio company.
(5)			This investment is owned by HCAP Equity Holdings, LLC, one of the Company's taxable blocker subsidiaries.
(6)			Infinite Care LLC ("ICC") is in default under the terms of its credit agreement and was on non-accrual status as of September 30, 2020. ICC was current on its interest payments to the Company through December 31, 2017; however, it failed to repay the Company’s protective loan advances at various dates in the fourth quarter of 2017 as well as throughout 2018, 2019, and through September 30, 2020. ICC was previously in breach of its minimum EBITDA, minimum fixed charge and total leverage covenants, but these breaches were waived by the Company through December 31, 2017 in connection with its entry into an agreement, dated as of January 13, 2017, with ICC relating thereto. In October 2017, the Company exercised its rights under a stock pledge of ICC. The Company formed a wholly owned subsidiary, HCAP ICC, LLC, to exercise its proxy right under the pledge agreement and take control of ICC’s board of directors. In January 2018, the Company took control of ICC's equity after accelerating the debt and auctioning ICC’s equity in a public sale. The Company bid a portion of its outstanding debt to gain control of ICC in connection with the public sale process. Upon the completion of the sale process in January 2018, the Company converted $2.0 million of its debt investment in ICC into shares of ICC’s membership interests. Refer to Note 12 in the accompanying Notes to the Consolidated Financial Statements for summarized financial information for ICC for the three and nine months ended September 30, 2020 and September 30, 2019.
(7)			Investment is not a qualifying asset as defined under Section 55(a) of the Investment Company Act of1940, as amended (the "1940 Act"). Qualifying assets must represent at least 70% of total assets at the time of acquisition of any additional non-qualifying assets The Company's non-qualifying assets, on a fair value basis, totaled approximately 1.2% of the Company's total assets as of September 30, 2020.
(8)			This is an equity investment that receives a cash flow stream based on lease payments received by Flight Lease VII, LLC. Flight Lease VII, LLC owns an aircraft that was leased to one lessee. The lessee had been in arrears on its lease payments and in June of 2018, Flight Lease VII, LLC terminated the lease. As a result of the cessation of cash flows, future payments on this equity investment will resume only if Flight Lease VII, LLC is successful in obtaining a new lessee or sells the aircraft.
(9)			This debt investment is on non-accrual status as of September 30, 2020.
(10)			The Company's Credit Facility is secured by all of the Company's assets. Refer to Note 3 in the accompanying Notes to the Consolidated Financial Statements for more information.


(11)			All of the Company's portfolio investments are generally subject to restrictions on sale as "restricted securities", unless otherwise noted.
(12)			Unless otherwise indicated, all portfolio company investments are Level 3 assets whose values were determined using significant unobservable inputs.
(13)			In October 2020, General Nutrition, Inc. ("GNC") was restructured upon its sale. The Company received approximately $1.9 million representing a full payoff at par of each of its New Money DIP Term Loan and its Roll-up DIP Term Loan. The Company also received an additional $1.2 million, representing a discounted payoff of its $3.0 million original tranche B-2 Term Loan and received its pro rata share of a new Second Lien Term Loan with a par value of $1.8 million in the restructured GNC.

As of September 30, 2020, investments consisted of the following:


Type	Amortized Cost		Fair Value		% of Fair Value		% of Net Assets
Senior Secured Debt	$	78,493,705	$	75,079,797	78.3	%	123.8	%
Junior Secured Debt	13,388,371		8,407,657		8.7	%	13.9	%
Equity	15,591,926		12,493,814		13.0	%	20.6	%
Total	$	107,474,002	$	95,981,268	100.0	%	158.3	%

The rate types of debt investments at fair value as of September 30, 2020 were as follows:


Rate Type	Amortized Cost		Fair Value		% of Fair Value		% of Net Assets
Fixed Rate	$	42,707,086	$	36,216,483	43.4	%	59.7	%
Floating Rate	49,174,990		47,270,971		56.6	%	78.0	%
Total	$	91,882,076	$	83,487,454	100.0	%	137.7	%

The industry composition of investments at fair value as of September 30, 2020 was as follows:


Industry	Amortized Cost		Fair Value		% of Fair Value		% of Net Assets
Aerospace & Defense	$	523,932	$	523,932	0.6	%	0.8	%
Banking, Finance, Insurance & Real Estate	200,000		—		—	%	—	%
Beverage, Food & Tobacco	4,753,412		4,614,624		4.8	%	7.6	%
Capital Equipment	12,330,341		8,087,000		8.4	%	13.3	%
Construction & Building	15,789,555		20,521,530		21.4	%	33.9	%
Consumer Goods - Durable	2,468,498		2,415,734		2.5	%	4.0	%
Environmental Industries	906,761		2,905,978		3.0	%	4.8	%
Healthcare & Pharmaceuticals	13,695,702		8,486,000		8.8	%	14.0	%
High Tech Industries	9,769,989		8,345,770		8.7	%	13.8	%
Media: Advertising, Printing & Publishing	3,737,977		3,782,681		3.9	%	6.2	%
Media: Diversified & Production	2,579,341		1,010,602		1.1	%	1.7	%
Metals & Mining	15,028,890		10,553,135		11.0	%	17.4	%
Services: Business	17,832,554		16,595,374		17.3	%	27.4	%
Telecommunications	7,857,050		8,138,908		8.5	%	13.4	%
Total	$	107,474,002	$	95,981,268	100.0	%	158.3	%

The geographic concentrations at fair value as of September 30, 2020 were as follows:


United States Region	Amortized Cost		Fair Value		% of Fair Value		% of Net Assets
West	$	41,124,454	$	38,126,020	39.7	%	62.9	%
Northeast	36,659,788		30,733,228		32.0	%	50.7	%
South	22,265,216		23,103,020		24.1	%	38.1	%
Midwest	7,424,544		4,019,000		4.2	%	6.6	%
	$	107,474,002	$	95,981,268	100.0	%	158.3	%

See accompanying notes to unaudited consolidated financial statements.

Harvest Capital Credit Corporation

Consolidated Schedule of Investments

As of December 31, 2019


Portfolio Company	Date**	Industry	Investment (1) (2) (12) (13) (14)		Principal		Cost		Fair Value
Non-Control / Non-Affiliate Investments
Back Porch International, Inc. (10.3%)*	09/2019	High Tech Industries	Senior Secured Term Loan, due 03/2024 (13.50%; 1M LIBOR + 10.25% + 1.00% PIK)		$	6,974,139	$	6,850,952	$	6,850,952
			Senior Secured Revolving Line of Credit, due 09/2020 (1M LIBOR + 8.00%)	(4)	—		—		—
					6,974,139		6,850,952		6,850,952

Brite Media LLC (0.3%)*	04/2014	Media: Advertising, Printing & Publishing	Class A Interest (0.86% fully diluted common equity)				125,000		183,800
							125,000		183,800

Coastal Screen and Rail, LLC (11.4%)*	01/2018	Construction & Building	Senior Secured Term Loan, due 01/2023 (14.00%; 10.50% Cash plus 3.50% PIK)		7,225,434		7,116,020		7,143,830
			Senior Secured Revolving Line of Credit, due 07/2022 (9.95%; 3M LIBOR + 8.00%)	(4)	100,000		100,000		100,000
			Preferred Equity Interest (3.90% fully diluted common equity)	(6)			150,000		367,000
					7,325,434		7,366,020		7,610,830

CP Holding Co., Inc. (Choice Pet) (3.3%)*	05/2013	Retailer	Junior Secured Term Loan, due 06/2020 (12.00%; 7.00% current and 5.00% deferred)	(10)	2,899,852		3,098,300		2,233,000
					2,899,852		3,098,300		2,233,000

Deluxe Entertainment Services Group Inc. (2.9%)*	01/2019	Media: Diversified & Production	Junior Secured Term Loan, due 09/2024 (10.44%; LIBOR + 6.00% plus 2.50% PIK)	(15)	513,098		513,098		513,098
			Common Equity (0.63% fully diluted common equity)	(15)			2,056,418		1,440,739
					513,098		2,569,516		1,953,837

Flavors Holdings, Inc. (5.7%)*	10/2014	Beverage, Food & Tobacco	Junior Secured Term Loan, due 10/2021 (11.94%; 3M LIBOR +10.00% with a 1.00% LIBOR floor)		4,000,000		3,946,828		3,775,000
					4,000,000		3,946,828		3,775,000

General Nutrition Centers, Inc. (6.2%)*	02/2019	Beverage, Food, & Tobacco	Senior Secured Term Loan, due 03/2021 (10.58%; LIBOR + 8.75%; ABR + 7.75%)		4,326,812		4,216,840		4,137,514
					4,326,812		4,216,840		4,137,514

GK Holdings, Inc. (3.4%)*	01/2015	High Tech Industries	Junior Secured Term Loan, due 01/2022 (12.19%; 3M LIBOR +10.25% with a 1.00% LIBOR floor)	(5)	3,000,000		2,968,933		2,246,250
					3,000,000		2,968,933		2,246,250

KC Engineering & Construction Services, LLC (3.6%)*	10/2017	Environmental Industries	Class A Membership Interest (3.0% fully diluted common equity)	(6)			675,030		2,373,686
							675,030		2,373,686

Peerless Media, LLC (6.8%)*	02/2019	Media: Advertising, Printing & Publishing	Senior Secured Term Loan, due 02/2024 (11.40%; 1M LIBOR + 8.50% with a 2.40% LIBOR floor plus 0.50% PIK)		4,552,922		4,517,569		4,552,922
					4,552,922		4,517,569		4,552,922

ProAir Holdings Corporation (11.2%)*	09/2017	Capital Equipment	Junior Secured Term Loan, due 12/2022 (13.50%)		7,500,000		7,424,544		7,500,000
					7,500,000		7,424,544		7,500,000


Portfolio Company	Date**	Industry	Investment (1) (2) (12) (13) (14)		Principal		Cost		Fair Value
Regional Engine Leasing, LLC (3.5%)*	03/2015	Aerospace & Defense	Senior Secured Term Loan, due 03/2020 (11.00%; the greater of 11.00% or LIBOR + 4.50%)		2,352,247		2,346,042		2,352,247
			Residual Value	(3)			102,421		—
					2,352,247		2,448,463		2,352,247

Safety Services Acquisition Corp. (7.0%)*	03/2017	Services: Business	Senior Secured Term Loan, due 12/2020 (10.00%; 3M LIBOR + 8.00% with a 1.00% floor)	(5)	4,468,750		4,463,773		4,468,750
	04/2012		Series A Preferred Equity (0.57% fully diluted common equity)				100,000		185,768
					4,468,750		4,563,773		4,654,518

Surge Busy Bee Holdings, LLC (12.1%)*	11/2017	Services: Business	Senior Secured Term Loan, due 11/2022 (12.80%; 1M LIBOR + 11.00%)		4,081,250		3,953,009		3,940,500
			Senior Secured Term Loan, due 11/2022 (15.00%; 13.00% cash plus 2.00% PIK)		3,774,563		3,690,463		3,611,000
			Senior Secured Revolving Line of Credit, due 11/2021 (9.80%; 1M LIBOR+8.00%)	(4)	150,000		150,000		150,000
			Class B Equity Warrants (9.50% fully diluted common equity)				152,950		357,500
					8,005,813		7,946,422		8,059,000

Water-Land Manufacturing & Supply, LLC (3.7%)*	08/2018	Consumer Goods - Durable	Junior Secured Term Loan, due 05/2023 (12.75%; 3M LIBOR + 10.50% with a 2.25% LIBOR floor)		2,500,000		2,461,480		2,490,000
					2,500,000		2,461,480		2,490,000

World Business Lenders, LLC (-%)*	12/2013	Banking, Finance, Insurance & Real Estate	Class B Equity Interest (0.28% fully diluted common equity)	(8)			200,000		—
							200,000		—
Subtotal Non-Control / Non-Affiliate Investments					$	58,419,067	$	61,379,670	$	60,973,556

Affiliate Investments
Flight Lease XII, LLC (0.5%)*	03/2017	Aerospace & Defense	Common Equity Interest (19.23% fully diluted common equity)	(6)			389,757		345,980
					—		389,757		345,980

Kleen-Tech Acquisition, LLC (11.0%)*	05/2019	Services: Business	Senior Secured Term Loan, due 05/2024 (15.00%; 13.00% Cash plus 2.00% PIK)		7,131,721		6,850,998		6,819,708
			Senior Secured Revolving line of Credit, due 05/2022 (15.00%; 13.00% Cash plus 2.00% PIK)	(4)	—		—		—
			Common Equity Units (7.96% fully diluted common equity)	(6)			250,000		274,136
			Common Equity Warrants (8.50% fully diluted common equity)	(6)			186,970		275,104
					7,131,721		7,287,968		7,368,948

National Program Management & Project Controls, LLC (15.5%)*	06/2018	Construction & Building	Senior Secured Term Loan, due 06/2023 (10.05%; 1M LIBOR + 8.25%)	(4)	5,566,764		5,487,512		5,566,763
			Class A Membership Interest (5.10% fully diluted common equity)	(6)			2,791,241		4,799,331
					5,566,764		8,278,753		10,366,094

Northeast Metal Works, LLC (17.3%)*	09/2014	Metals & Mining	Senior Secured Term Loan, due 06/2020 (15.00%; 11.00% Cash plus 4.00% PIK)	(11)	13,121,048		13,115,448		11,596,969
	05/2017		Preferred Equity Interest (22.79% fully diluted common equity; 12.0% cumulative preferred return)	(6) (11)			1,515,520		—
					13,121,048		14,630,968		11,596,969

Slappey Communications, LLC (10.6%)*	05/2019	Telecommunications	Senior Secured Term Loan, due 05/2024 (13.00%; 3M LIBOR + 10.00% with a 2.50% LIBOR floor plus 0.50% PIK)		6,845,352		6,718,056		6,828,238


Portfolio Company	Date**	Industry	Investment (1) (2) (12) (13) (14)		Principal		Cost		Fair Value
			Senior Secured Revolving Line of Credit, due 05/2023 (3M LIBOR + 10.00% with a 2.50% LIBOR floor plus 0.50% PIK)	(4)	—		—		—
			Common Equity Units (12.90% preferred equity / 7.59% fully diluted common equity)	(6)			200,000		227,035
					6,845,352		6,918,056		7,055,273

Surge Hippodrome Holdings, LLC (8.6%)*	08/2019	Services: Business	Senior Secured Term Loan (Last Out), due 08/2024 (13.50%; 3M LIBOR + 11.50%)		5,460,000		5,131,294		5,131,294
			Common Equity Interest (10.10% fully diluted common equity)	(6)			360,000		360,000
			Common Equity Interest (9.50% fully diluted common equity)	(6)			237,579		237,579
					5,460,000		5,728,873		5,728,873

V-Tek, Inc. (7.4%)*	03/2017	Capital Equipment	Senior Secured Term Loan, due 03/2022 (13.00%; 3M LIBOR + 11.00%)		3,237,500		3,191,361		3,175,500
			Senior Secured Revolving Line of Credit, due 03/2021 (8.50%; 3M LIBOR + 6.50%)	(4)	1,536,097		1,536,097		1,536,097
			Common Stock (8.98% fully diluted common equity)	(6)			150,000		257,500
					4,773,597		4,877,458		4,969,097
Subtotal Affiliate Investments					$	42,898,482	$	48,111,833	$	47,431,234

Control Investments
Flight Lease VII, LLC (0.6%)*	03/2016	Aerospace & Defense	Common Equity Interest (46.14% fully diluted interest)	(9)			$	412,500	$	412,500
					—		412,500		412,500

Infinite Care, LLC (12.0%)*	02/2016	Healthcare & Pharmaceuticals	Senior Secured Term Loan, due 01/2021 (3.0%)	(7)	4,740,284		3,377,702		3,783,600
			Senior Secured Revolving Line of Credit, due 01/2021 (3.0%)	(7)	4,356,271		4,219,000		4,208,500
			Membership Interest (100% membership interests)	(6) (7)			5,949,000		—
					9,096,555		13,545,702		7,992,100
Subtotal Control Investments					$	9,096,555	$	13,958,202	$	8,404,600

Total Investments at 12/31/19 (174.9%) *					$	110,414,104	$	123,449,705	$	116,809,390

* Fair value as a percentage of net assets

** Date refers to the origination date of the investment


(1)			Debt investments are income-producing investments unless an investment is on non-accrual. Common equity, preferred equity, residual values and warrants are non-income-producing.
(2)			For each loan, the Company has provided the interest rate in effect on the date presented, as well as the contractual components of that interest rate. In the case of the Company's variable or floating rate loans, the interest rate in effect takes into account the applicable LIBOR in effect on December 31, 2019 or, if higher, the applicable LIBOR floor.
(3)			"Residual value" represents the value of the Company's share in the collateral securing the loan.
(4)			~~Credit facility~~Line of credit has an unfunded commitment in addition to the amounts shown in the Consolidated Schedule of Investments. See Note 8 in the Notes to the audited Consolidated Financial Statements included in the Company's annual report on Form 10-K for the fiscal year ended December 31, 2019 for further discussion on unfunded commitments.
(5)			The coupon on the loan is subject to a pricing grid based on certain leverage ratios of the portfolio company.
(6)			~~The~~This investment is owned by HCAP Equity Holdings, LLC, one of the Company's taxable blocker ~~subsidiary.~~subsidiaries.

1114


(7)			~~Infinite Care LLC ("ICC")~~ICC is in default under the terms of its credit agreement and was on non-accrual status as of ~~September 30,~~December 31, 2019. ICC was current on its interest payments to the Company through December 31, 2017; however, it failed to repay the Company’s protective loan advances at various dates in the fourth quarter of 2017 as well as throughout 2018 and 2019. ICC was previously in breach of its minimum EBITDA, minimum fixed charge and total leverage covenants, but these breaches were waived by the Company through December 31, 2017 in connection with its entry into an agreement, dated as of January 13, 2017, with ICC relating thereto. In October 2017, the Company exercised its rights under a stock pledge of ICC. The Company formed a wholly owned subsidiary, HCAP ICC, LLC, to exercise its proxy right under the pledge agreement and take control of ICC’s board of directors. In January 2018, the Company took control of ICC's equity after accelerating the debt and auctioning ICC’s equity in a public sale. The Company bid a portion of its outstanding debt to gain control of ICC in connection with the public sale process. Upon the completion of the sale process in January 2018, the Company converted $2.0 million of its debt investment in ICC into shares of ICC’s membership interests. ~~ICC failed to pay its scheduled amortization payment to the Company as of September 30, 2019.~~ Refer to Note 1213 in the ~~accompanying notes~~Notes to the ~~unaudited consolidated financial~~audited Consolidated Financial Statements included in the Company's annual report on Form 10-K for the fiscal year ended December 31, 2019 for summarized balance sheets for ICC as of December 31, 2019 and December 31, 2018 and summarized income statements for ~~summarized financial information for ICC for both~~ the ~~three~~years ending December 31, 2019, December 31, 2018, and ~~nine months ended September 30, 2019 and September 30, 2018.~~ December 31, 2017.
(8)			Investment is not a qualifying asset as defined under Section 55(a) of the 1940 Act. Qualifying assets must represent at least 70% of total assets at the time of acquisition of any additional non-qualifying assets The Company's non-qualifying assets, on a fair value basis, ~~total~~totaled approximately ~~1.2%~~1.0% of the Company's total assets as of ~~September 30,~~December 31, 2019.
(9)			This is an equity investment that receives a cash flow stream based on lease payments received by Flight Lease VII, LLC. Flight Lease VII, LLC owns an aircraft that was leased to one lessee. The lessee had been in arrears on its lease payments and in June of 2018, Flight Lease VII, LLC terminated the lease. As a result of the cessation of cash flows, future payments on this equity investment will resume only if Flight Lease VII, LLC is successful in obtaining a new lessee or sells the aircraft. For the ~~nine months~~year ended ~~September 30,~~December 31, 2019, the Company recognized an impairment charge of ~~$0.1~~$0.3 million, which is presented in the net realized gains (losses) - control investments balance on the Consolidated Statement of Operations.
(10)			This portfolio company failed to make its contractual deferred interest payment on July 23, 2018, ~~and~~ partially paid its December 31, 2018 contractual current interest payment and failed to make any contractual interest payments throughout 2019. As such, this loan is on non-accrual status as of ~~September 30,~~December 31, 2019. In addition, the Company's management determined that the contractual interest payments, including the deferred interest, ~~was~~were no longer collectible and, as a result, reversed the interest payment that had previously been viewed as collectible under the circumstances and had been accrued during the ~~nine months ending September 30,~~year ended December 31, 2019.
(11)			On May 22, 2019, Northeast Metal Works, LLC ("Northeast Metal Works") entered into a new financing agreement with a senior lender. In conjunction with this, Northeast Metal Works and the Company entered into a subordination and inter-creditor agreement where the Company thereby agreed to subordinate its indebtedness to the senior lender ~~throughout~~through the earlier of the due date of the new financing agreement, which expires on May 31, 2020, or the date inon which Northeast Metal Works has fully satisfied the indebtedness to the new senior lender. In addition, the new senior lender obtained a first priority interest in certain assets of ~~the entity.~~Northeast Metal Works. As a result, the Company ~~has~~ reclassified its term loan investment in Northeast Metal Works from senior secured to junior secured. In connection with the new financing agreement, Northeast Metal Works paid down the existing $1.5 million revolving line of credit by approximately $1.1 million. The remaining $0.4 million commitment under the revolving line of credit was transferred to the junior secured term loan as an increase in the outstanding principal amount. Finally, as part of the refinancing transaction, the Company sold 125 units of its preferred equity interest in Northeast Metal Works to a third party and recognized a realized gain of $20,750. On September 27, 2019, the senior lender issued a Notice of Default to Northeast Metal Works. The Notice of Default prohibited Northeast Metal Works from making any further interest payments to the Company, despite having the cash on hand to do so. On October 31, 2019, the Company extended $1.7 million in additional credit to Northeast Metal Works by increasing the commitment on its junior secured term loan. Northeast Metal Works used the proceeds to ~~payoff~~pay off the existing senior secured debt and the senior secured debt was subsequently terminated. As a result of this transaction, the Company's junior secured term loan converted into a senior secured term loan.
(12)			The Company's Credit Facility is secured by all of the Company's assets. Refer to Note 3 in the ~~accompanying notes~~Notes to the ~~unaudited consolidated financial statements~~audited Consolidated Financial Statements included in the Company's annual report on Form 10-K for the fiscal year ended December 31, 2019 for more information.
(13)			All of the Company's portfolio investments are generally subject to restrictions on sale as "restricted securities", unless otherwise noted.
(14)			Unless otherwise indicated, all portfolio company investments are Level 3 assets whose values were determined using significant unobservable inputs.
~~(15)~~			Lenders of Deluxe Entertainment Services Group Inc.'s ("Deluxe") agreed on July 31, 2019 to fund a $73 million priming facility, in which the Company participated on a pro-rata basis. Deluxe has filed a Prepackaged Chapter 11 Reorganization Plan whereby the senior secured term loan will be written off and holders will receive approximately 65.0% of Deluxe's equity and the senior secured priming delayed draw term loan will convert into a second lien term loan and those holders will receive approximately 35.0% of Deluxe's equity. The cutoff date for acceptance or rejection was October 16, 2019. Due to the inherent uncertainty of the outcome of the restructuring and the declining performance of Deluxe, the Company has placed its debt investments in Deluxe on non-accrual status as of September 30, 2019.

~~As of September 30, 2019, investments consisted of the following:~~

Type Amortized Cost Fair Value % of Fair Value % of Net Assets
Senior Secured Debt $ 78,777,791 $ 76,643,412 66.3 % 111.4 %
Junior Secured Debt 30,204,069 26,997,625 23.4 % 39.2 %
Equity 14,105,636 11,936,263 10.3 % 17.3 %
Total $ 123,087,496 $ 115,577,300 100.0 % 167.9 %

~~The rate type of debt investments at fair value as of September 30, 2019 was as follows:~~

Rate Type Amortized Cost Fair Value % of Fair Value % of Net Assets
Fixed Rate $ 39,636,569 $ 37,549,711 36.2 % 54.6 %
Floating Rate 69,345,291 66,091,326 63.8 % 96.0 %
Total $ 108,981,860 $ 103,641,037 100.0 % 150.6 %

~~The industry composition of investments at fair value as of September 30, 2019 was as follows:~~

Industry Amortized Cost Fair Value % of Fair Value % of Net Assets
Aerospace & Defense $ 3,566,284 $ 3,723,036 3.2 % 5.4 %
Automotive — 328,947 0.3 % 0.5 %
Banking, Finance, Insurance & Real Estate 200,000 — — % — %
Beverage, Food & Tobacco 8,137,419 7,660,374 6.6 % 11.1 %
Capital Equipment 11,347,115 11,359,597 9.8 % 16.5 %
Construction & Building 16,827,200 19,303,468 16.7 % 28.0 %
Consumer Goods - Durable 2,459,293 2,491,000 2.2 % 3.6 %
Environmental Industries 664,392 2,940,608 2.5 % 4.3 %
Healthcare & Pharmaceuticals 13,245,702 7,405,970 6.4 % 10.8 %
High Tech Industries 9,834,266 9,291,250 8.0 % 13.5 %
Media: Advertising, Printing & Publishing 4,781,678 4,929,617 4.3 % 7.2 %
Media: Diversified & Production 4,972,549 2,394,131 2.1 % 3.5 %
Metals & Mining 12,824,019 9,944,625 8.6 % 14.4 %
Retailer 3,098,300 2,262,000 2.0 % 3.3 %
Services: Business 24,226,587 24,639,985 21.3 % 35.8 %
Telecommunications 6,902,692 6,902,692 6.0 % 10.0 %
Total $ 123,087,496 $ 115,577,300 100.0 % 167.9 %

~~The geographic concentrations at fair value as of September 30, 2019 was as follows:~~

United States Region Amortized Cost Fair Value % of Fair Value % of Net Assets
West $ 51,597,429 $ 46,040,530 39.8 % 66.9 %
Northeast 41,173,546 37,152,642 32.2 % 54.0 %
South 23,884,486 25,991,628 22.5 % 37.7 %
Midwest 6,432,035 6,392,500 5.5 % 9.3 %
$ 123,087,496 $ 115,577,300 100.0 % 167.9 %

~~See accompanying notes to unaudited consolidated financial statements.~~

~~Harvest Capital Credit Corporation~~

~~Consolidated Schedule of Investments~~

~~As of December 31, 2018~~

Portfolio Company Date** Industry Investment (1) (2) (13) (14) (15) Principal Cost Fair Value
Non-Control / Non-Affiliate Investments
Bradford Soap
International, Inc. (5.0%)* 08/2015 Consumer Goods - Non-Durable Junior Secured Term Loan, due 10/2019 (18.38%; 1M LIBOR + 13.00% + 3.00% default rate) (5) (11) $ 4,250,001 $ 4,224,975 $ 3,952,501
4,250,001 4,224,975 3,952,501
Brite Media LLC (0.2%)* 04/2014 Media: Advertising, Printing & Publishing Class A Interest (139 Units) 125,000 131,679
125,000 131,679
CP Holding Co., Inc.
(Choice Pet) (3.6%)* 05/2013 Retailer Junior Secured Term Loan, due 06/2020 (12.00%; 7.00% current and 5.00% deferred) (12) 2,899,852 3,098,300 2,842,000
2,899,852 3,098,300 2,842,000
Douglas Machines Corp. (4.3%)* 05/2014 Capital Equipment Junior Secured Term Loan, due 1/2021 (12.50%) 3,377,633 3,351,798 3,377,633
3,377,633 3,351,798 3,377,633
Flavors Holdings, Inc. (4.9%)* 10/2014 Beverage, Food & Tobacco Junior Secured Term Loan, due 10/2021 (12.80%; 3M LIBOR +10.00% with a 1.00% LIBOR floor) 4,000,000 3,922,308 3,842,000
4,000,000 3,922,308 3,842,000
Flight Lease XIII, LLC (0.4%)* 03/2017 Aerospace & Defense Common Equity Interest (600 Units) (6) 253,796 295,800
253,796 295,800
Fox Rent A Car, Inc. (1.7%)* 10/2014 Automotive Common Equity Warrants (102 shares) — 1,352,000
— 1,352,000
GK Holdings, Inc. (3.5%)* 01/2015 High Tech Industries Junior Secured Term Loan, due 01/2022 (13.05%; 3M LIBOR +10.25% with a 1.00% LIBOR floor) (5) 3,000,000 2,955,675 2,771,500
3,000,000 2,955,675 2,771,500
KC Engineering & Construction Services, LLC (2.5%)* 10/2017 Environmental Industries Class A Membership Interest (103,414 Units) (6) 641,711 1,939,500
641,711 1,939,500
National Program Management & Project Controls, LLC (10.1%)* 06/2018 Construction & Building Senior Secured Term Loan, due 06/2023 (12.53%; 1M LIBOR + 10.00%) 6,937,681 6,840,054 6,911,000
Class A Membership Interest (136,034 Units) (6) 611,333 973,500
6,937,681 7,451,387 7,884,500
ProAir Holdings Corporation (8.1%)* 09/2017 Capital Equipment Junior Secured Term Loan, due 12/2022 (12.75%) 6,500,000 6,420,046 6,382,000
6,500,000 6,420,046 6,382,000
Regional Engine
Leasing, LLC (3.8%)* 03/2015 Aerospace & Defense Senior Secured Term Loan, due 03/2020 (11.00%; the greater of 11.00% or LIBOR + 4.50%) 2,942,435 2,907,053 2,941,500
Residual Value (3) 102,421 —
2,942,435 3,009,474 2,941,500
Safety Services Acquisition Corp. (8.9%)* 03/2017 Services: Business Senior Secured Term Loan, due 03/2019 (13.88%; 3M LIBOR + 11.00% with a 1.00% floor) (5) 6,843,750 6,833,634 6,842,500
04/2012 Series A Preferred Stock (100,000 Shares) 100,000 173,000

Portfolio Company Date** Industry Investment (1) (2) (13) (14) (15) Principal Cost Fair Value
6,843,750 6,933,634 7,015,500
Shannon Specialty Floors, LLC (4.6%)* 04/2017 Chemicals, Plastics & Rubber Junior Secured Term Loan, due 04/2021 (12.93%; 3M LIBOR + 10.50% with a 1.00% LIBOR floor) (5) 3,642,477 3,599,001 3,568,000
3,642,477 3,599,001 3,568,000
Surge Busy Bee Holdings, LLC (9.0%)* 11/2017 Services: Business Senior Secured Term Loan, due 11/2022 (12.53%; 1M LIBOR + 10.00%) 4,656,250 4,480,856 4,524,500
Senior Secured Term Loan, due 11/2022 (14.00%; 12.00% cash/2.00% PIK) 2,412,501 2,327,683 2,299,500
Revolving Line of Credit, due 11/2021 (1M LIBOR+8.00%) (4) — — —
Class B Equity Warrants (210 Units) 152,950 243,500
7,068,751 6,961,489 7,067,500
Water-Land Manufacturing & Supply, LLC (3.1%)* 08/2018 Consumer Goods - Durable Junior Secured Term Loan, due 05/2023 (13.38%; 3M LIBOR + 10.50% with a 2.25% LIBOR floor) 2,500,000 2,453,154 2,453,154
2,500,000 2,453,154 2,453,154
Wetmore Tool and Engineering Company (5.2%)* 03/2017 Capital Equipment Junior Secured Term Loan, due 09/2021 (12.50%; 12.00% Cash/0.50% PIK) (5) 4,042,636 4,002,105 4,042,636
4,042,636 4,002,105 4,042,636
World Business Lenders, LLC (0.1%)* 12/2013 Banking, Finance, Insurance & Real Estate Class B Equity Interest (49,209 Units) (9) 200,000 60,551
200,000 60,551
Subtotal Non-Control / Non-Affiliate Investments $ 58,005,216 $ 59,603,853 $ 61,919,954
Affiliate Investments
Coastal Screen and Rail, LLC (9.6%)* 01/2018 Construction & Building Senior Secured Term Loan, due 01/2023 (12.00%; 10.50% Cash/1.50% PIK) $ 6,392,068 $ 6,267,795 $ 6,328,000
01/2018 Revolving Line of Credit, due 07/2022 (10.74%; 3M LIBOR + 8.00%) (4) 700,000 700,000 700,000
01/2018 Preferred Equity Interest (6.21% fully diluted Preferred Equity) (6) 150,000 395,000
7,092,068 7,117,795 7,423,000
Flight Lease XII, LLC (0.8%)* 03/2017 Aerospace & Defense Common Equity Interest (1,000 Units) (6) 389,757 636,000
— 389,757 636,000
Northeast Metal
Works, LLC (15.0%)* 09/2014 Metals & Mining Senior Secured Term Loan, due 12/2019 (17.00%; 10.50% Cash + 6.50% PIK) (8) 10,436,690 10,417,612 10,223,500
Revolving Line of Credit, due 12/2019 (15.00%) (8) 1,500,000 1,500,000 1,497,500
05/2017 Preferred Equity Interest (2,493 Class A Units; 12.0% cumulative preferred return) (6) 1,595,520 —
11,936,690 13,513,132 11,721,000
V-Tek, Inc. (6.2%)* 03/2017 Capital Equipment Senior Secured Term Loan, due 03/2022 (13.75%; 3M LIBOR + 11.00%) 3,412,500 3,342,147 3,341,000
Senior Secured Revolver, due 03/2021 (9.25%; 3M LIBOR + 6.50%) (4) 1,336,097 1,336,097 1,336,097
Common Stock (90 Shares) (6) 150,000 188,500
4,748,597 4,828,244 4,865,597
Subtotal Affiliate Investments $ 23,777,355 $ 25,848,928 $ 24,645,597
Control Investments
Flight Lease VII, LLC (0.8%)* 03/2016 Aerospace & Defense Common Equity Interest (46.14% fully diluted interest) (10) $ 684,311 $ 684,311
— 684,311 684,311

Portfolio Company Date** Industry Investment (1) (2) (13) (14) (15) Principal Cost Fair Value
Infinite Care, LLC (9.7%)* 02/2016 Healthcare & Pharmaceuticals Senior Secured Term Loan, due 02/2019 (14.51%; 1M LIBOR+6.00% with a 0.42% LIBOR floor + 6.00% PIK) (7) 4,641,335 3,377,702 3,948,000
Revolving Line of Credit, due 02/2019 (14.51%, 1M LIBOR+12.00% with a 0.42% LIBOR floor) 3,719,000 3,719,000 3,716,000
Membership Interest (100% membership interests) (6) 5,649,000 —
8,360,335 12,745,702 7,664,000
Subtotal Control Investments $ 8,360,335 $ 13,430,013 $ 8,348,311
Total Investments at 12/31/18 (121.1%) * $ 90,142,906 $ 98,882,794 $ 94,913,862

* Fair value as a percentage of net assets

** Date refers to the origination date of the investment


~~(1)~~(15)			~~Debt investments are income producing investments unless an~~On November 6, 2019, the Company's investment ~~is on non accrual. Common equity, residual values~~in Deluxe Entertainment Services Group Inc. ("Deluxe") was restructured whereby the Company's $5.4 million of debt at par value was deemed extinguished and ~~warrants are non-income producing.~~
~~(2)~~			~~For each loan,~~in return the Company ~~has provided the interest rate in effect on the date presented, as well as the contractual components~~received its pro-rata share of that interest rate. In the case of the Company's variable or floating rate loans, the interest rate in effect takes into account the applicable LIBOR rate in effect on December 31, 2018 or, if higher, the applicable LIBOR floor.
~~(3)~~			~~"Residual value" represents the~~a new second lien term loan with a par value of ~~the Company's share~~$0.5 million and 0.63% ownership in the ~~collateral securing the loan.~~
~~(4)~~			~~Credit facility has an unfunded commitment in addition to the amounts shown in the Consolidated Schedule~~common equity of ~~Investments. See Note 8 in the Notes to Consolidated Financial Statements for further discussion on unfunded commitments.~~
~~(5)~~			~~The coupon on the loan is subject to~~ a ~~pricing grid based on certain leverage ratios of the portfolio company.~~
~~(6)~~			~~The investment is owned by HCAP Equity Holdings, LLC, the Company's taxable blocker subsidiary.~~
~~(7)~~			~~Infinite Care LLC~~newly formed holding company, DESG Intermediate II Inc. ("~~ICC"~~DESG") is in default under the terms of its credit agreement and was on non-accrual status as of December 31, 2018. ICC was current on its interest payments to the Company through December 31, 2017; however, it failed to repay the Company’s protective loan advances at various dates in the fourth quarter of 2017 as well as throughout 2018. ICC was previously in breach of its minimum EBITDA, minimum fixed charge and total leverage covenants, but these breaches were waived by the Company through December 31, 2017 in connection with its entry into an agreement, dated as of January 13, 2017, with ICC relating thereto. In October 2017, the Company exercised its rights under a stock pledge of ICC. The Company formed a wholly owned subsidiary, HCAP ICC, LLC, to exercise its proxy right under the pledge agreement and take control of ICC’s board of directors. In January 2018, the Company took control of ICC's equity after accelerating the debt and auctioning ICC’s equity in a public sale. The Company bid a portion of its outstanding debt to gain control of ICC in connection with the public sale process. Upon the completion of the sale process in January 2018, the Company converted $2.0 million of its debt investment in ICC into shares of ICC’s membership interests. ICC failed to pay its scheduled amortization payment to the Company as of December 31, 2018. In addition, for the year ended December 31, 2018, the Company funded $1.7 million in revolver advances to ICC and made a $0.6 million equity contribution to ICC to fund their liquidity needs.
~~(8)~~			The interest rate on the revolver is 11% prior to the interim advance term; 13.5% from the first amendment effective date to February 28, 2018; 14.25% from March 1, 2018 through May 31, 2018 and 15% from June 1, 2018 until expiration of the interim advance. The interest rate on the term loan is 11% prior to and following the interim advance term; 10.5% cash pay plus 6% PIK from the first amendment date trough February 28, 2018; 10.5% cash pay plus 6.25% PIK from March 1, 2018 to May 31, 2018; 10.5% cash pay plus 6.5% PIK from June 1, 2018 until expiration of the interim advance.
~~(9)~~			Investment is not a qualifying asset as defined under Section 55(a) of the 1940 Act. Qualifying assets must represent at least 70% of total assets at the time of acquisition of any additional non-qualifying assets The Company's non-qualifying assets, on a fair value basis, total approximately 2.0% of the Company's total assets as of December 31, 2018.
~~(10)~~			This is an equity investment that receives a cash flow stream based on lease payments received by Flight Lease VII, LLC. Flight Lease VII, LLC owns an aircraft that was leased to one lessee. The lessee had been in arrears on its lease payments and in June of 2018, Flight Lease VII, LLC terminated the lease.. As a result of ~~the cessation of cash flows, future payments on~~ this ~~equity investment will resume only if Flight Lease VII, LLC is successful in obtaining a new lessee or sells the aircraft. For the year ended December 31, 2018,~~transaction, the Company ~~recognized an impairment charge~~recorded a realized loss of ~~$0.2~~$2.4 million, which is presented in the net realized gains (losses) - ~~control~~non-affiliated/non-control investments balance on the ~~consolidated~~Consolidated Statement of ~~Operations.~~
~~(11)~~			~~This portfolio company is~~Operations included in ~~covenant default as of December 31, 2018 and~~ the ~~Company enforced its rights to charge~~Company's annual report on Form 10-K for the ~~portfolio company the default interest rate. The portfolio company made all contractual interest and principal payments during the~~fiscal year ended December 31, ~~2018.~~
~~(12)~~			~~This portfolio company failed to make its contractual deferred interest payment on July 23, 2018 and partially paid its December 31, 2018 contractual current interest payment.~~
~~(13)~~			~~The Company's Credit Facility is secured by all of the Company's assets. Refer to Note 3 in the accompanying notes to the unaudited consolidated financial statements for more information.~~
~~(14)~~			~~All of the Company's portfolio investments are generally subject to restrictions on sale as "restricted securities", unless otherwise noted.~~
~~(15)~~			~~Unless otherwise indicated, all portfolio company investments are Level 3 assets whose values were determined using significant unobservable inputs.~~ 2019.

As of December 31, ~~2018,~~2019, investments consisted of the following:


Type	Type	Amortized Cost		Fair Value		% of Fair Value		% of Net Assets		Type	Amortized Cost		Fair Value		% of Fair Value		% of Net Assets
Senior Secured Debt	Senior Secured Debt	$	54,049,633	$	54,609,097	57.5	%	69.7	%	Senior Secured Debt	$	87,032,136	$	85,954,384	73.6	%	128.7	%
Junior Secured Debt	Junior Secured Debt	34,027,362		33,231,424		35.0	%	42.4	%	Junior Secured Debt	20,413,183		18,757,348		16.0	%	28.1	%
Equity	Equity	10,805,799		7,073,341		7.5	%	9.0	%	Equity	16,004,386		12,097,658		10.4	%	18.1	%
Total	Total	$	98,882,794	$	94,913,862	100.0	%	121.1	%	Total	$	123,449,705	$	116,809,390	100.0	%	174.9	%

The rate ~~type~~types of debt investments at fair value as of December 31, ~~2018 was~~2019 were as follows:


Rate Type	Rate Type	Amortized Cost		Fair Value		% of Fair Value		% of Net Assets		Rate Type	Amortized Cost		Fair Value		% of Fair Value		% of Net Assets
Fixed Rate	Fixed Rate	$	40,292,392	$	39,934,269	45.5	%	50.9	%	Fixed Rate	$	51,238,518	$	49,248,854	47.0	%	73.7	%
Floating Rate	Floating Rate	47,784,603		47,906,252		54.5	%	61.1	%	Floating Rate	56,206,802		55,462,878		53.0	%	83.1	%
Total	Total	$	88,076,995	$	87,840,521	100.0	%	112.0	%	Total	$	107,445,320	$	104,711,732	100.0	%	156.8	%

The industry composition of investments at fair value as of December 31, ~~2018~~2019 was as follows:


Industry	Industry	Amortized Cost		Fair Value		% of Fair Value		% of Net Assets		Industry	Amortized Cost		Fair Value		% of Fair Value		% of Net Assets
Aerospace & Defense	Aerospace & Defense	$	4,337,337	$	4,557,611	4.8	%	5.8	%	Aerospace & Defense	$	3,250,719	$	3,110,727	2.7	%	4.7	%
Automotive		—		1,352,000		1.4	%	1.7	%
Banking, Finance, Insurance & Real Estate	Banking, Finance, Insurance & Real Estate	200,000		60,551		0.1	%	0.1	%	Banking, Finance, Insurance & Real Estate	200,000		—		—	%	—	%
Beverage, Food & Tobacco	Beverage, Food & Tobacco	3,922,308		3,842,000		4.1	%	4.9	%	Beverage, Food & Tobacco	8,163,668		7,912,514		6.8	%	11.9	%
Capital Equipment	Capital Equipment	18,602,194		18,667,866		19.7	%	23.8	%	Capital Equipment	12,302,002		12,469,097		10.7	%	18.7	%
Chemicals, Plastics and Rubber		3,599,001		3,568,000		3.8	%	4.6	%
Construction & Building	Construction & Building	14,569,182		15,307,500		16.1	%	19.5	%	Construction & Building	15,644,773		17,976,924		15.4	%	26.9	%
Consumer Goods - Non-Durable		4,224,975		3,952,501		4.2	%	5.0	%
Consumer Goods - Durable	Consumer Goods - Durable	2,453,154		2,453,154		2.6	%	3.1	%	Consumer Goods - Durable	2,461,480		2,490,000		2.1	%	3.7	%
Environmental Industries	Environmental Industries	641,711		1,939,500		2.0	%	2.5	%	Environmental Industries	675,030		2,373,686		2.0	%	3.6	%
Healthcare & Pharmaceuticals	Healthcare & Pharmaceuticals	12,745,702		7,664,000		8.1	%	9.8	%	Healthcare & Pharmaceuticals	13,545,702		7,992,100		6.8	%	12.0	%
High Tech Industries	High Tech Industries	2,955,675		2,771,500		2.9	%	3.5	%	High Tech Industries	9,819,886		9,097,202		7.8	%	13.6	%
Media: Advertising, Printing & Publishing	Media: Advertising, Printing & Publishing	125,000		131,679		0.1	%	0.2	%	Media: Advertising, Printing & Publishing	4,642,569		4,736,722		4.1	%	7.1	%
Media: Diversified & Production										Media: Diversified & Production	2,569,516		1,953,837		1.7	%	2.9	%
Metals & Mining	Metals & Mining	13,513,132		11,721,000		12.3	%	15.0	%	Metals & Mining	14,630,968		11,596,969		9.9	%	17.4	%
Retailer	Retailer	3,098,300		2,842,000		3.0	%	3.6	%	Retailer	3,098,300		2,233,000		1.9	%	3.3	%
Services: Business	Services: Business	13,895,123		14,083,000		14.8	%	18.0	%	Services: Business	25,527,036		25,811,339		22.1	%	38.6	%
Telecommunications										Telecommunications	6,918,056		7,055,273		6.0	%	10.5	%
Total	Total	$	98,882,794	$	94,913,862	100.0	%	121.1	%	Total	$	123,449,705	$	116,809,390	100.0	%	174.9	%

The geographic concentrations at fair value as of December 31, ~~2018 was~~2019 were as follows:

United States Region Amortized Cost Fair Value % of Fair Value % of Net Assets
West $ 36,086,071 $ 32,955,912 34.7 % 42.1 %
Northeast 35,519,206 33,053,552 34.8 % 42.2 %
South 20,857,471 22,522,398 23.7 % 28.7 %
Midwest 6,420,046 6,382,000 6.8 % 8.1 %
$ 98,882,794 $ 94,913,862 100.0 % 121.1 %

1716


United States Region	Amortized Cost		Fair Value		% of Fair Value		% of Net Assets
West	$	48,099,122	$	44,339,347	38.0	%	66.4	%
Northeast	44,285,800		40,083,277		34.3	%	60.0	%
South	23,640,239		24,886,766		21.3	%	37.3	%
Midwest	7,424,544		7,500,000		6.4	%	11.2	%
	$	123,449,705	$	116,809,390	100.0	%	174.9	%

See accompanying notes to unaudited consolidated financial statements.

Harvest Capital Credit Corporation

Notes to Unaudited Consolidated Financial Statements

Note 1. Organization

Harvest Capital Credit Corporation ("HCAP" or the "Company") was incorporated as a Delaware corporation on November 14, 2012, for the purpose of, among other things, acquiring Harvest Capital Credit LLC (“HCC LLC”). HCAP acquired HCC LLC onin May 2, 2013, in connection with HCAP's initial public offering. HCAP is an externally managed, closed-end, non-diversified management investment company that has filed an election to be ~~treated~~regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, for tax purposes, HCAP has elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As an investment company, the Company follows accounting and reporting guidance as set forth in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 946, Financial Services- Investment Companies.

On July 1, 2016, the Company formed HCAP Equity Holdings, LLC, a Delaware limited liability company, as a wholly-owned subsidiary of the Company to hold certain equity investments made by the Company in limited liability companies or other forms of pass-through entities. By investing through HCAP Equity Holdings, LLC, the Company is able to benefit from the tax treatment of this entity and create a tax structure that is advantageous with respect to the Company's status as a RIC. This taxable subsidiary is consolidated for U.S. GAAP financial reporting purposes, and the portfolio investments held by the taxable subsidiary are included in the Company's consolidated financial statements and recorded at fair value in conjunction with the Company's valuation policy. The Company also formed a wholly-owned subsidiary, HCAP ICC, LLC, a Delaware limited liability company, to exercise certain rights in connection with its investment in Infinite Care, LLC.

HCAP Equity Holdings, LLC and HCAP ICC, LLC are consolidated for financial reporting purposes, and the portfolio investments held by HCAP Equity Holdings, LLC are included in the Company's consolidated financial statements and recorded at fair value in conjunction with the Company's valuation policy. However, HCAP Equity Holdings, LLC and HCAP ICC, LLC are not consolidated for income tax purposes and may generate tax expense as a result of any ownership of portfolio companies.

Note 2. Summary of Significant Accounting Policies

Basis of Financial Statement Presentation

The accompanying unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in accordance with the ~~rules~~requirements for reporting on Form 10-Q and ~~regulations~~Articles 6, 10 and 12 of ~~the SEC and~~ Regulation S-X. In the opinion of management, all adjustments of a normal recurring nature considered necessary for the fair statement of the Company's consolidated interim financial statements have been made. ~~Certain prior period amounts have been reclassified to reflect current period classification.~~

In preparing the consolidated interim financial statements in accordance with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, as of the date of the Consolidated Statements of Assets and Liabilities and the Consolidated Statements of Operations for the relevant period. Actual results could differ from those estimates.

Principles of Consolidation

The consolidated financial statements of the Company include the accounts of Harvest Capital Credit Corporation and its wholly-owned subsidiaries, HCAP Equity Holdings, LLC and HCAP ICC, LLC. The effects of all intercompany transactions between the Company and its subsidiaries have been eliminated in consolidation. Under ~~the investment company rules and regulations pursuant to Article 6 of Regulation S-X and~~ ASC 946, Financial Services - Investment Companies, the Company is precluded from consolidating any entity other than another investment company, except that ASC 946 provides for the consolidation of a controlled operating company that provides substantially all of its services to the investment company or its consolidated subsidiaries.

Recent Accounting Pronouncements

In June 2016, FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments require a financial asset (or a group of financial assets) measured at

amortized cost basis to be presented at the net amount expected to be collected. The amendments in ASU 2016-13 broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The new standard is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. The Company has adopted these amendments as currently required and the adoption did not have a material impact on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements in Topic 820, Fair Value Measurement, by removing certain disclosure requirements related to the fair value hierarchy, modifying existing disclosure requirements related to measurement uncertainty and adding new disclosure requirements. ASU 2018-13 is effective for public companies for annual reporting periods and interim periods within those annual periods beginning after

December 15, 2019. ~~The Company has reviewed the requirements and concluded that the adoption of this ASU will not have a material impact on its consolidated financial statements.~~

In August 2018, the SEC issued Final Rule Release No. 33-10532 - Disclosure Update and Simplification. This rule amends various SEC disclosure requirements that have been determined to be redundant, duplicative, overlapping, outdated, or superseded. The changes are generally expected to reduce or eliminate certain disclosures; however, the amendments did expand interim period disclosure requirements related to changes in stockholders' equity. This final rule became effective on November 5, 2018. The Company has adopted these amendments as currently required and these are reflected in its consolidated financial statements and related disclosures. ~~Certain prior year information has been adjusted to conform with these amendments.~~

In March 2019, the SEC issued Final Rule Release No. 33-10618, FAST Act Modernization and Simplification of Regulation S-K, which amends certain SEC disclosure requirements. The amendments are intended to simplify certain disclosure requirements, improve readability and navigability of disclosure documents, and discourage repetition and disclosure of immaterial information. The amendments are effective for all filings submitted on or after May 2, 2019. The Company adopted the requisite amendments effective May 2, 2019. As it pertains to the Company for this Form 10-Q, there were no significant changes to the Company's consolidated financial position or disclosures. The Company is still evaluating the impact this amendment will have on its other future periodic filings and registration statements.

Cash

Cash as presented in the Consolidated Statements of Assets and Liabilities and the Consolidated Statements of Cash Flows includes bank clearing accounts with financial institutions and cash held in these accounts may exceed the Federal Deposit Insurance Corporation ~~("FDIC")~~ insured limit.

Restricted Cash

Restricted cash of ~~$1.4~~$29.3 million and ~~$1.8~~$10.6 million as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019, respectively, was held at ~~U.S. Bank, National Association~~financial institutions in conjunction with the Company's senior secured revolving credit facility ~~(the~~(as amended, the "Credit Facility") (see Note 3. Borrowings). The Company is restricted from accessing this cash until the monthly settlement date when, after delivering a covenant compliance certificate, the net restricted cash is released to the Company after paying interest, fees, expenses, and ~~expenses~~borrowings outstanding owed under ~~its~~the Credit Facility.

Investments and Related Investment Revenue and Expense

All investment related revenue and expenses are reflected on the Consolidated Statement of Operations, generally commencing on the trade date unless otherwise specified by the transaction documents.

The Company accrues interest income if it expects that ultimately it will be able to collect it. Generally, when an interest payment default occurs on a loan in the portfolio, when interest has not been paid for greater than 90 days, or when management otherwise believes that the issuer of the loan will not be able to service the loan and other obligations, the Company will place the loan on non-accrual status and will cease accruing interest income on that loan until all principal and interest is current through payment or until a restructuring occurs, such that the interest income is deemed collectible. However, the Company remains contractually entitled to this interest, and any collections actually received on these non-accrual loans may be recognized as interest income on a cash basis or applied to the principal depending upon management's judgment regarding collectability. The Company may make exceptions to this policy if the loan has sufficient collateral value and is in the process of collection and the amount of collectible interest can be reasonably estimated. As of September 30, ~~2019,~~2020, the Company had ~~three~~debt investments in four portfolio companies, with a combined fair value of ~~$12.1~~$18.6 million, on non-accrual status. As of December 31, ~~2018,~~2019, the Company had ~~one~~debt investments in two portfolio ~~company~~companies, with a combined fair value of ~~$7.7~~$10.2 million, on non-accrual status.

For loans with contractual PIK (payment-in-kind) interest income, which represents contractual interest accrued and added to the loan balance that generally becomes due at maturity, the Company will not accrue PIK interest if the Company believes that the PIK interest is no longer collectible, including if the portfolio company valuation indicates that such PIK interest is not collectible. Loan origination fees - net of direct loan origination costs, original issue discounts that initially represent the value of detachable equity warrants obtained in conjunction with the acquisition of debt securities and market discounts or premiums - are accreted or amortized using the effective interest method as interest income over the contractual life of the loan. Upon the prepayment of a loan or debt security, any unamortized net loan origination fee will be recorded as

interest income. Loan exit fees that are contractually required to be paid at the termination or maturity of the loan will be accreted to interest income over the contractual term of the loan. The Company suspends the accretion of interest income for any loans or debt securities placed on non-accrual status. The Company may also collect other prepayment premiums on loans. These prepayment premiums are recorded as other income as earned.

Certain expenses related to legal and tax consultation, due diligence, valuation expenses and independent collateral appraisals may arise when the Company makes certain investments. To the extent that such costs are not classified as direct loan origination costs, these expenses are recognized in the Consolidated Statements of Operations as they are incurred.

For equity investments with contractual dividends, the Company accrues ~~the~~ dividend income based on the contractual obligation. The Company will not accrue ~~the~~ dividend income if the Company believes that the dividend income is no longer collectible, including if the portfolio company valuation indicates that such dividend income is not collectible. For equity investments without contractual dividends, dividend income will be recognized on the ex-dividend date.

Income from certain of the Company's equity investments is recorded based upon an estimation of an effective yield to expected maturity utilizing projected cash flows in accordance with ASC 325-40, Beneficial Interests in Securitized Financial Assets. The Company monitors the expected cash flows from these equity investments and the effective yield is determined and updated at each reporting date.

Investment Date

The Company records investment purchases and sales based on the trade date. For instances when the trade date and funding date differ, the Company captures the open trades in the receivable for securities sold or payable for securities purchased on the Consolidated Statements of Assets and Liabilities. ~~The Company's portfolio turnover rate for the nine months ended September 30, 2019 was 28.0%.~~

Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation

Realized gains and losses on investments are calculated using the specific identification method. The Company measures realized gains or losses on equity investments as the difference between the net proceeds from the sale and the cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized. The Company measures realized gains or losses on debt investments as the difference between the net proceeds from the repayment or sale and the contractual amount owed to the Company on the investment, without regard to unrealized appreciation or depreciation previously recognized or unamortized deferred fees. The acceleration of unamortized deferred fees is recognized as interest income and the collection of prepayment and other fees is recognized as other income. The Company recognized $0.2 million in net realized gains on its investments and $0.1 million in net realized losses on its investments during the three months ended September 30, ~~2019~~2020 and ~~$0.1 million of net realized gains on its investments during the three months ended~~ September 30, ~~2018.~~2019, respectively. The Company recognized $2.0 million and $30,304 in net realized losses on its investments during the nine months ended September 30, ~~2019~~2020 and ~~$0.6 million of net realized losses on its investments during the nine months ended~~ September 30, ~~2018.~~2019, respectively.

Net changes in unrealized appreciation or depreciation measure changes in the fair value of the Company's investments relative to changes in their amortized cost. The Company recognized $1.5 million and $2.0 million in net change in unrealized depreciation during the three months ended September 30, ~~2019~~2020 and ~~$1.6 million in net change in unrealized depreciation during the three months ended~~ September 30, ~~2018.~~2019, respectively. The Company recognized $4.9 million and $3.5 million in net change in unrealized depreciation during the nine months ended September 30, ~~2019~~2020 and ~~$0.3 million in net change in unrealized depreciation during the nine months ended~~ September 30, ~~2018.~~2019, respectively.

Classification of Portfolio Companies

The Company classifies its ~~portfolio companies~~investments by level of control. As defined in the 1940 Act, control investments are those where there is the ability or power to exercise a controlling influence over the management or policies of a company. Control is generally deemed to exist when a company or individual owns beneficially more than 25% of the voting securities of ~~an investee company.~~another entity. Affiliated investments and affiliated companies are defined by a lesser degree of influence and are deemed to exist through beneficial ownership of at least 5% but not more than 25%, of the outstanding voting securities of another ~~person.~~entity. See the table below for a breakdown of the Company's portfolio companies by classification at September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

2120


		Number of portfolio company investments by classification				Number of portfolio company investments by classification
		September 30, 2019	December 31, 2018		September 30, 2020	December 31, 2019
Non-Control/Non-Affiliated	Non-Control/Non-Affiliated	16	18	Non-Control/Non-Affiliated	13	16
Affiliated	Affiliated	8	4	Affiliated	7	7
Control	Control	2	2	Control	2	2
Total	Total	26	24	Total	22	25

Valuation of Investments

Valuation analyses of the Company’s investments are generally performed on a quarterly basis pursuant to ASC 820, Fair Value Measurement. ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with applicable accounting guidance and expands disclosure of fair value measurements.

Pursuant to ASC 820, the valuation standard used to measure the value of each investment is fair value 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.” Investments are recorded at their fair value at each quarter end (the measurement date).

Fair Value Investment Hierarchy

Accounting standards establish a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:


Level 1			Quoted prices (unadjusted) for identical assets or liabilities in active public markets that the entity has the ability to access as of the measurement date.
Level 2			Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3			Significant unobservable inputs that reflect a reporting entity’s own assumptions about what market participants would use in pricing an asset or liability.

Valuation Process

Investments are measured at fair value as determined in good faith by the Company's management team and investment professionals of HCAP Advisors, LLC, the Company's external investment adviser ("HCAP Advisors"), reviewed by the audit committee (which consists entirely of directors who are not "interested persons," as such term is defined in Section 2(a)(19) of the 1940 Act, of the Company) of the board of directors, and ultimately approved by the Company's board of directors, based on, among other factors, consistently applied valuation procedures ~~and the following~~on each measurement date.

The board of directors undertakes a multi-step valuation process onat each measurement ~~date:~~date.

•The valuation process generally begins with each investment initially being valued by the Company's management orand the investment professionals of ~~its investment adviser,~~HCAP Advisors and/or, if applicable, by an independent third-party valuation firm.

•Preliminary valuation conclusions are documented and discussed with the Company's senior management.

•The audit committee of the Company's board of directors reviews and discusses the preliminary ~~valuations.~~valuations and recommends valuations to the board of directors for approval.

•The board of directors discusses valuations and determines the fair value of each investment in the Company's portfolio in good faith, based upon ~~the recommendation of senior management, the~~ input of the Company's senior management, HCAP Advisors' investment professionals, and an independent third-party valuation firm ~~report (if~~(to the extent any such firm reviewed ~~in such~~the investment during the applicable quarter), and the recommendation of the board of director's audit committee.

The nature of the materials and input that the Company’s board of directors receives in the valuation process varies depending on the nature of the investment and the other facts and circumstances. For example, in the case of investments that are Level 1 or 2 assets, a formal report by the Company’s management or ~~the~~HCAP Advisors' investment professionals, ~~of its investment adviser,~~ called a portfolio monitoring report, or “PMR,” is not generally prepared, and no independent ~~external~~third-party valuation firm is engaged due to the availability of quotes in markets for such investments or similar assets.

In the case of investments that are Level 3 assets, however, the Company’s board of directors generally receives a report on material Level 3 investments on a quarterly basis (i) from the Company’s management or ~~the~~HCAP Advisors' investment professionals ~~of its investment adviser~~ in the form of a PMR, (ii) from aan independent third-party valuation firm, or (iii) in some cases, both. In the case of investments that are Level 3 assets and have an investment rating of 1 (performing above expectations), the Company generally engages an independent ~~external~~third-party valuation firm to review all such material investments at least annually. In quarters where an external valuation is not prepared for such investments, the Company’s management or ~~the~~HCAP Advisors' investment professionals ~~of its investment adviser~~ generally prepare a PMR. In the case of investments that are Level 3 assets and have an investment rating of 2 through 5 (with performance ranging from within expectations to substantially below expectations), the Company generally engages an independent ~~external~~third-party valuation firm to review such material investments quarterly (and may receive a PMR in addition to the review of the independent external valuation firm where the Level 3 assets have an investment rating of 3 through 5). However, in certain cases for Level 3 assets, the Company may determine that it is more appropriate for ~~the Company~~HCAP Advisors' investment professionals to prepare a PMR instead of engaging an independent ~~external~~third-party valuation firm on a quarterly basis, because a third-party valuation is not cost effective or the nature of the investment does not warrant a quarterly third-party valuation. In addition, under certain unique circumstances, the Company may determine that a formal valuation report is not likely to be informative, and neither a third-party valuation report nor a report from the Company’s management or ~~the~~HCAP Advisors' investment professionals ~~of its investment adviser~~ is prepared. Such circumstances might include, for example, an instance in which the investment has paid off after the period end date but before the board of directors meets to discuss the valuations.

Further, Level 3 debt investments that have closed within six months of the measurement date are valued at ~~amortized~~ cost unless ~~a material adverse change in portfolio company operations has occurred since the closing of the investment.~~unique circumstances dictate otherwise.

Valuation Methodology

The following section describes the valuation methods and techniques used to measure the fair value of the investments.

Fair value for each investment may be derived using a combination of valuation methodologies that, in the judgment of the Company's management, are most relevant to such investment, including, without limitation, being based on one or more of the following: (i) market prices obtained from market makers for which management has deemed there to be enough breadth (number of quotes) and depth to be indicative of fair value, (ii) the price paid or realized in a completed transaction or binding offer received in an arms-length transaction, (iii) the market approach (enterprise value), (iv) the income approach (discounted cash flow analysis), or (v) the bond yield approach.

The valuation methods selected for a particular investment are based on the circumstances and on the level of sufficient data available to measure fair value. If more than one valuation method is used to measure fair value, the results are evaluated and weighted, as appropriate, considering the reasonableness of the range indicated by those results. A fair value measurement is the point within that range that is most representative of fair value given the circumstances.

The determination of fair value using the selected methodologies takes into consideration a range of factors including, but not limited to, the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public and private exchanges for comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the investment, compliance with agreed upon terms and covenants, and assessment of credit ratings of an underlying borrower.

In most cases the Company uses the bond yield approach for valuing its Level 3 debt investments, as long as the Company deems this method appropriate. This approach entails analyzing the interest rate spreads for recently completed financing transactions which are similar in nature to the Company's, in order to assess what the range of effective market interest rates would be for the investment if it were being made on or near the valuation date. Then all of the remaining expected cash flows of the investment are discounted using this range of interest rates to determine a range of fair values for the debt investment. If, in the Company's judgment, the bond yield approach is not appropriate, the Company may use the market approach, or, in certain cases, an alternative methodology potentially including an asset liquidation or expected recovery model.

The fair value of equity securities, including warrants, in portfolio companies oftentimes considers the market approach, which applies market valuation multiples of publicly-traded firms or recently acquired private firms engaged in businesses similar to those of the portfolio companies. This approach to determining the fair value of a portfolio company’s equity security will typically involve: (1) applying to the portfolio company’s ~~trailing twelve month~~trailing-twelve-month EBITDA (earnings before interest, taxes, depreciation and amortization) a range of enterprise value to EBITDA multiples that are derived from an analysis of comparable companies, in order to arrive at a range of enterprise values for the portfolio company; then (2) subtracting from the

range of enterprise values balances of any debt or equity securities that rank senior to the Company's equity securities; and (3) multiplying the range of equity values by the Company’s ownership share of such equity to determine a range of fair values for the Company’s equity investment.

The Company also uses the income approach, which discounts a portfolio company’s expected future cash flows to determine its net present enterprise value. The discount rate used is based upon the company’s weighted average cost of capital, which is determined by blending the cost of the portfolio company’s various debt instruments and its estimated cost of equity capital. The cost of equity capital is estimated based upon the Company's market knowledge and discussions with private equity sponsors.

These valuation methodologies involve a significant degree of ~~judgment.~~judgment, including in discerning whether the impact of the COVID-19 pandemic on the Company's portfolio companies and their earnings is temporary or permanent in nature and the resulting significance thereof on the valuation of the Company's portfolio investments. As it relates to investments that do not have an active public market, there is no single standard for determining the estimated fair value. Valuations of privately held investments are inherently uncertain, and they may fluctuate over short periods of time and ~~may be~~are based on ~~estimates.~~estimates and other information provided to the Company by its portfolio companies, including with respect to the evolving nature of the impact of the COVID-19 pandemic on their businesses and earnings. The determination of fair value may differ materially from the values that would have been used if a ready market for these investments existed. In some cases, fair value of such investments is best expressed as a range of values derived utilizing different methodologies from which a single ~~estimate~~fair value may then be determined.

Consequently, fair value for each investment may be derived using a combination of valuation methodologies that, in the judgment of the Company's management, are most relevant to such investment. The selected valuation methodologies for a particular investment are consistently applied on each measurement date. However, a change ~~in a valuation methodology or its application~~ from one measurement date to another in a valuation methodology, its application or the related inputs, such as earnings and adjustments relating thereto to account for the estimated impact of the COVID-19 pandemic on a portfolio company, is possible if the change results in a measurement that is deemed to be equally or more representative of fair value in the circumstances.

Capital Gains Incentive Fee

Under GAAP, the Company calculates the capital gains incentive fee as if the Company had realized all investments at their fair values as of the reporting date. Accordingly, the Company accrues a provisional capital gains incentive fee taking into account any unrealized gains or losses. As the provisional incentive fee is subject to the performance of investments until there is a realization event, the amount of provisional capital gains incentive fee accrued at a reporting date may vary from the capital gains incentive fee that is ultimately paid and the differences could be material.

Deferred Financing Costs

Deferred financing costs consist of debt issuance costs associated with the Company's Credit Facility. The deferred financing costs consist of fees and other direct costs incurred by the Company in obtaining debt financing from its lenders and are recognized as assets and are amortized as interest expense over the term of the applicable credit facility. The balance of deferred financing costs as of September 30, 2020 and December 31, 2019 was $0.3 million and $0.4 million, respectively. Amortization expense relating to deferred debt financing costs during the three months ended September 30, 2020 and September 30, 2019 was $0.1 million and $0.1 million, respectively. Amortization expense relating to deferred debt financing costs during the nine months ended September 30, 2020 and September 30, 2019 was $0.2 million and $0.2 million, respectively.

Deferred Offering Costs

Deferred offering costs consist of expenses related to the Company's $28.8 million in aggregate principal amount of its ~~6.125%~~2022 Notes ~~due 2022 ("2022 Notes")~~(defined below in Note 3), including underwriting fees, legal fees, and other direct costs incurred. The deferred offering costs are recognized as a reduction to the 2022 Notes on the Company's consolidated statement of assets and liabilities and are amortized as interest expense through the maturity of the 2022 Notes. The balance of deferred offering costs as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 was ~~$0.7~~$0.5 million and ~~$0.8~~$0.6 million, respectively. Amortization expense of the deferred offering costs was ~~$50,076~~$53,693 and ~~$46,702~~$50,076 for the three months ended September 30, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively. Amortization expense of the deferred offering costs ~~was $0.1 million and $0.1 million for the nine months ended September 30, 2019 and September 30, 2018, respectively~~

~~Deferred Financing Costs~~

Deferred financing costs consist of debt issuance costs associated with the Company's revolving line of credit. The deferred financing costs consist of fees and other direct costs incurred by the Company in obtaining debt financing from its lenders and are recognized as assets and are amortized as interest expense over the term of the applicable credit facility. The balance of deferred financing costs as of September 30, 2019 and December 31, 2018 was $0.5 million and $0.6 million, respectively. Amortization expense relating to deferred debt financing costs during the three months ended September 30, 2019 and September 30, 2018 was $58,258 and $58,804, respectively. Amortization expense relating to the deferred debt financing costs during the nine months ended September 30, ~~2019~~2020 and September 30, ~~2018~~2019 was $0.2 million and ~~$0.2~~$0.1 million, respectively.

Dividends and Distributions

Dividends and distributions to common stockholders are recorded on the ex-dividend date. Distributions to ~~shareholders~~stockholders which exceed tax distributable income (tax net investment income and realized gains, if any) are reported as distributions of

paid-in capital (i.e., return of capital). The determination of the tax attributes of the Company's distributions is made at the end of the year based upon the Company's taxable income for the full year and the distributions paid during the full year. Net realized capital gains, if any, are distributed at least annually, although the Company may decide to retain such capital gains for investment. The Company adopted a dividend reinvestment plan that provides for reinvestment of its dividends and other distributions on behalf of the Company's stockholders, unless a stockholder elects to receive cash. As a result, if the board of directors authorizes, and the Company declares, a cash dividend or other distribution, then stockholders who have not “opted out” of the dividend reinvestment plan will have their cash distribution automatically reinvested in additional shares of the Company's common stock, rather than receiving the cash distribution.

During the three months ended September 30, 2020, the Company did not pay any distributions. During the three months ended September 30, 2019, the Company paid distributions totaling $0.24 per share. During the nine months ended September 30, 2020 and September 30, ~~2018,~~2019, the Company paid distributions totaling $0.24 and ~~$0.29~~$0.74 per share, respectively. ~~During the nine months ended September 30, 2019 and September 30, 2018,~~

On March 12, 2020, the Company paid distributions totaling $0.74 and $0.87, respectively. Of the aggregate distributions declared and paid during the nine months ended September 30, 2019, and paid or to be paid subsequent to September 30, 2019, and through December 31, 2019, the Company estimates that, on a tax basis and subject to revision, those distributions will be derived from the following sources: (1) 80% ordinary income ($0.78 per share) and (2) 20% return of capital ($0.20 per share) based onannounced monthly distributions of ~~$0.98 paid through December 31, 2019. The amount~~$0.08 per share payable on each of April 30, 2020 (the "March 2020 Dividend") and ~~source~~May 28, 2020 (the "April 2020 Dividend") to record holders as of ~~these distributions, however, are estimates only~~April 23, 2020 and ~~are provided solely pursuant~~May 21, 2020, respectively. However, the board of directors has decided to ~~Section 19(a)~~defer the record date and payment of each of the ~~1940 Act. These estimates are not being provided for tax reporting purposes~~March 2020 Dividend and ~~should not be relied upon for tax reporting or~~the April 2020 Dividend and has determined to suspend the declaration of any ~~other purposes. The final determination~~future dividends until such later time as the board of ~~the amount and source of 2019 distributions will be made after the end~~directors determines is prudent in light of the Company's ~~fiscal year, will be reported to stockholders on Form 1099-DIV,~~capital needs and ~~could differ significantly from these estimates.~~contractual obligations, and in the Company's stockholders' best interests.

Income Taxes

The Company has elected to be treated, and intends to qualify annually, as a RIC under Subchapter M of the Code. To qualify for tax treatment as a RIC, the Company is required to meet certain income and asset diversification tests in addition to distributing at least 90% of ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available for distribution. As a RIC, the Company will be subject to a 4% nondeductible federal excise tax on certain undistributed income unless the Company distributes in a timely manner an amount at least equal to the sum of (1) 98% of its ordinary income for each calendar year, (2) 98.2% of its capital gain net income for the 1-year period ending October 31 in that calendar year and (3) any ordinary income and net capital gains for preceding years that were not distributed during such years and on which the Company paid no U.S. federal income tax. To the extent the Company receives taxable income information from portfolio companies subsequent to the filing of the Form 10-K which alters taxable income estimates and book/tax differences as reported in the filing, the Company’s tax return will be trued-up.

~~The~~One of the Company's wholly-owned taxable ~~subsidiary,~~subsidiaries, HCAP Equity Holdings LLC, holds certain portfolio investments that are listed on the Consolidated Schedule of Investments. HCAP Equity Holdings LLC is consolidated for financial reporting purposes, such that the company’s consolidated financial statements reflect the Company’s investments in the portfolio companies owned by it. The purpose of ~~the~~ HCAP Equity Holdings LLC is to permit the Company to hold certain portfolio companies that are organized as limited liability companies (“LLCs”) (or other forms of pass-through entities) and still satisfy the RIC tax requirement that at least 90% of the RIC’s gross revenue for income tax purposes must consist of qualifying investment income. Absent such a taxable subsidiary, a proportionate amount of any gross income of an LLC (or other pass-through entity) portfolio investment would flow through directly to the RIC. To the extent that such income did not consist of qualifying investment income, it could jeopardize the Company’s ability to qualify as a RIC and therefore cause the Company

to incur significant amounts of federal income taxes. When LLCs (or other pass-through entities) are owned by a taxable subsidiary, their income is taxed to the taxable subsidiary and does not flow through to the RIC, thereby helping the Company preserve its RIC status and resultant tax advantages. HCAP Equity Holdings LLC is not consolidated for income tax purposes and may generate income tax expense as a result of its ownership of ~~the~~interests in portfolio companies. This income tax expense is reflected in the Company’s Consolidated Statements of Operations.

HCAP Equity Holdings, LLC is subject to U.S. federal and state income ~~taxes. HCAP Equity Holdings, LLC is not consolidated for income tax purposes~~taxes and may generate income tax liabilities or assets from permanent and temporary differences in the recognition of items for financial reporting and income tax purposes at HCAP Equity Holdings, LLC. During ~~both~~ the three and nine months ended September 30, 2020 and September 30, 2019, the Company did not incur any deferred tax expense for such temporary differences. During the three months ended September 30, 2018, the Company recognized a $0.5 million deferred tax benefit on unrealized losses on its investments. During the nine months ended September 30, 2018, the Company recognized a $15,584 deferred tax expense on unrealized gains on investments. The Company did not recognize a current income tax expense during ~~both~~ the three ~~and~~or nine months ended September 30, 2020 and 2019. ~~During the three months ended~~

~~September 30, 2018, the Company recognized a $10,192 current income tax expense. During the nine months ended September 30, 2018, the Company recognized a $43,025 current income tax expense.~~

The Company’s tax returns are subject to examination by federal, state and local taxing authorities. Because many types of transactions are susceptible to varying interpretations under federal and state income tax laws and regulations, the amounts reported in the accompanying financial statements may be subject to change at a later date by the respective taxing authorities. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. Penalties or interest that may be assessed related to any income taxes would be classified as other operating expenses in the financial statements. Based on an analysis of the Company's tax position, there are no uncertain tax positions that met the recognition or measurement criteria and the Company has no amounts accrued for interest or penalties as of September 30, ~~2019. Neither HCC LLC nor the~~2020. The Company is not currently undergoing any tax examinations. The Company does not anticipate any significant increase or decrease in unrecognized tax benefits for the next twelve months. The federal tax years ~~2015-2018~~2016-2019 for ~~HCC LLC and~~ the Company remain subject to examination by the IRS. The state tax years ~~2013-2018~~2014 - 2019 for ~~HCC LLC and~~ the Company remain subject to examination by the state taxing authorities.

Excise Tax

The Company estimates excise tax based on timely information available. The Company does not estimate that it will incur an excise tax for the fiscal year ended December 31, ~~2019.~~2020. The Company ~~incurred~~did not incur an excise tax expense for the year ended December 31, ~~2018 of $8,825, relating to an under accrual and payment of its its 2017 excise tax paid in 2018.~~2019.

Note 3. Borrowings

The Company's principal balance of its debt obligations consist of the following:


		As of							As of
		September 30, 2019		December 31, 2018			September 30, 2020		December 31, 2019
Revolving line of credit	Revolving line of credit	$	36,300,000	$	17,000,000	Revolving line of credit	$	45,000,000	$	43,700,000
2022 Notes	2022 Notes	28,750,000		28,750,000		2022 Notes	28,750,000		28,750,000
Total debt obligations	Total debt obligations	$	65,050,000	$	45,750,000	Total debt obligations	$	73,750,000	$	72,450,000

The weighted average stated interest rate and weighted average maturity on all of the Company's debt obligations outstanding as of September 30, ~~2019~~2020 were 5.7% and ~~2.5~~1.4 years, respectively. The weighted average stated interest rate and weighted average maturity on all of the Company's debt obligations outstanding as of December 31, ~~2018 was 5.9%~~2019 were 5.4% and ~~3.4~~2.2 years, respectively.

Revolving Line of Credit

On October 29, 2013, the Company entered into a Loan and Security Agreement (as amended, restated and modified from time to time, the "Loan and Security Agreement") with CapitalSource Bank (now Pacific Western ~~Bank)~~Bank following a merger), as agent and a lender, and each of the lenders from time to time party thereto, including City National Bank, to provide the Company with ~~a $55.0~~its $45.0 million Credit Facility. The Credit Facility is secured by all of the Company’s assets, including the Company's equity interest in HCAP Equity Holdings, LLC and HCAP ICC, LLC, and has an accordion feature that allows the size of the facility to increase up to $85.0 million. The Credit Facility has a revolving period that expires on April 30, 2020. The maturity date under the Credit Facility is the earlier of (x) October 30, 2021, or (y) the date that is six (6) months prior to the maturity of any of the Company's outstanding unsecured long-term indebtedness, which, based on the Company's outstanding 2022 Notes that mature on September 15, 2022, the maturity date under the Credit Facility would be October 30, 2021. HCAP Equity Holdings, LLC became a co-borrower under the Credit Facility in August 2016, and HCAP ICC, LLC, became a borrower under the Credit Facility in November 2017.LLC.

~~In addition,~~

During the revolving period, availability under the Credit Facility is determined by advance rates against eligible loans in the borrowing base up to a maximum aggregate availability of $44.3 million. Advance rates against individual investments range from 40% to 65% depending on the seniority of the investment in the borrowing base.

~~if such obligations outstanding are equal to or greater than fifty percent of the maximum loan amount. In each case, the fee is~~ calculated based on the difference between ~~(i)~~(a) the maximum loan amount under the ~~Credit Facility~~Loan and ~~(ii)~~Security Agreement and (b) the average daily principal balance of the obligations outstanding during the prior calendar ~~month.~~month; (iv) prohibits the Company from repurchasing shares of its common stock and declaring and paying any distribution or dividend until the termination of the Loan and Security Agreement, except, in the case of distributions and dividends, to the extent necessary for the Company to maintain its eligibility to qualify as a RIC under Subchapter M of the Code; (x) includes a minimum liquidity covenant threshold for the Company of least $2.2 million through termination of the Loan and Security Agreement; and (xi) permits the use of an Alternative Rate (as defined in the Loan and Security Agreement) in place of LIBOR if certain conditions are satisfied.

Beginning as of August 1, 2020, during the amortization period, the Company is required to pay down the principal amount outstanding under the Credit Facility on a monthly basis in equal installments during the relevant calendar quarter so that such outstanding amounts will be reduced by an amount equal to or greater than (i) $2.2 million for each of the first two full calendar quarters following July 31, 2020, (ii) $3.3 million for each of the succeeding two full calendar quarters and (iii) $4.3 million for each succeeding calendar quarter until termination of the Credit Facility, which is scheduled to mature on October 30, 2021. During the amortization period, 90% of all principal collections the Company receives from its portfolio companies must generally be paid to the lenders to pay down the Company's obligations and other amounts outstanding under the Credit Facility. In addition, any proceeds the Company receives from the sale or issuance of its equity or debt securities during the amortization period must generally be applied to the prepayment of the Company's obligations under the Credit Facility.

The Credit Facility ~~also~~ contains additional customary terms and conditions, including, without limitation, affirmative and negative covenants, including, without limitation, information reporting requirements, a minimum ~~tangible net worth, a minimum debt service~~debt-service coverage ratio ~~a minimum liquidity of 4% of the maximum loan amount, a maximum senior leverage ratio of 1.00 to 1.00, a maximum total leverage ratio of 1.40 to 1.00,~~ and maintenance of RIC and BDC status. In addition, the Credit Facility contains a covenant that limits the amount of the Company's unsecured longer-term indebtedness (as defined in the Credit Facility), which includes the 2022 Notes, to 50% of the maximum borrowing amount under the Credit Facility. The Credit Facility also contains customary events of default, including, without limitation, nonpayment, misrepresentation of representations and warranties in a material respect, breach of covenant, cross-default to other indebtedness, bankruptcy, change of control, and the occurrence of a material adverse effect. In addition, the Credit Facility provides that, upon the occurrence and during the continuation of ~~such an~~any event of default, the Company’s administration agreement could be terminated and a backup administrator could be substituted by the agent.

~~Availability~~The maturity date under the Credit Facility is ~~determined by advance rates against eligible loans in~~ the ~~borrowing base up~~earlier of (x) October 30, 2021, or (y) the date that is six months prior to ~~a maximum aggregate availability~~the maturity of ~~$55.0 million. Advance rates against individual investments range from 40% to 65% depending~~any of the Company's outstanding unsecured long-term indebtedness. Based on the ~~seniority of~~Company's outstanding 2022 Notes (defined below) that mature on September 15, 2022, the ~~investment~~maturity date under the Credit Facility is October 30, 2021. HCAP Equity Holdings, LLC became a co-borrower under the Credit Facility in August 2016, and HCAP ICC, LLC, became a borrower under the ~~borrowing base.~~

Credit Facility in November 2017.

As of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 the outstanding balance on the Credit Facility was ~~$36.3~~$45.0 million and ~~$17.0~~$43.7 million, respectively. As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company was in compliance with ~~its debt covenants.~~the covenants under the Credit Facility.

See "Note 13. Subsequent Events" for more information regarding the Credit Facility.

2022 Notes

On August 24, 2017, the Company closed the public offering of $25.0 million in aggregate principal amount of its 6.125% Notes due 2022 ~~Notes.~~(the "2022 Notes"). On September 1, 2017, the Company closed on an additional $3.75 million in aggregate principal amount of 2022 Notes to cover the over-allotment option exercised by the underwriters. In total, the Company issued 1,150,000 of the 2022 Notes at a price of $25.00 per Note. The total net proceeds to the Company from the 2022 Notes, after deducting underwriting discounts of $0.9 million and offering costs of $0.2 million, were $27.7 million. As of September 30, 2020, the outstanding principal balance of the 2022 Notes was $28.8 million and the debt issuance costs balance was $0.5 million. As of December 31, 2019, the outstanding principal balance of the 2022 Notes was $28.8 million and the debt issuance costs balance was ~~$0.7 million. As of December 31, 2018, the outstanding principal balance of the 2022 Notes was $28.8 million and the debt issuance costs balance was $0.8~~$0.6 million. The Company used the proceeds of the 2022 Notes to redeem its 7.00% Notes due 2020 in full on September 23, 2017.

The 2022 Notes mature on September 15, 2022 and bear interest at a rate of 6.125%. They are redeemable in whole or in part at ~~anytime~~any time at the Company's option ~~after September 15, 2019~~ at a price equal to 100% of the outstanding principal amount of the 2022 Notes plus accrued and unpaid interest. The 2022 Notes are unsecured obligations of the Company and rank pari passu with any existing and future unsecured unsubordinated indebtedness; senior to any of the Company’s future indebtedness that expressly provides it is subordinated to the 2022 Notes; effectively subordinated to all of the existing and future secured indebtedness of the Company, to the extent of the value of the assets securing such indebtedness, including borrowings under the Credit Facility; and structurally subordinated to all existing and future indebtedness and other obligations of any subsidiaries, financing vehicles, or similar facilities the Company may form in the future, with respect to claims on the assets of any such subsidiaries, financing vehicles, or similar facilities. Interest on the 2022 Notes is payable quarterly on March 15, June 15, September 15, and December 15 of each year. The 2022 Notes are listed on the ~~NASDAQ~~Nasdaq Global Market under the trading symbol “HCAPZ.” The Company may from time to time repurchase 2022 Notes in accordance with the 1940 Act and the rules promulgated thereunder.

The indenture governing the 2022 Notes (the ~~"2022~~“2022 Notes Indenture”) contains certain covenants, including covenants (i) ~~requiring~~prohibiting the Company’s issuance of any senior securities unless, immediately after such issuance, the Company is in compliance with the 1940 Act asset coverage requirements ~~set forth in Section 18(a)(1)(A) as modified~~(after giving effect to any exemptive relief granted to the Company by ~~Section 61(a)(1) of~~the Securities and Exchange Commission (the “SEC”)); (ii) if the Company’s asset coverage has been below the 1940 Act ~~whether or not~~minimum asset coverage requirements (after giving effect to any exemptive relief granted to the Company ~~continues to be subject to such provisions of~~by the 1940 Act; (ii) requiring the Company’s compliance, under certain circumstances, with a modified version of the requirements set forth in Section 18(a)(1)(B) as modified by Section 61(a)(1) of the 1940 Act, whether or not the Company continues to be subject to such provisions of the 1940 Act,SEC) for more than six consecutive months, prohibiting the declaration of any cash dividend or distribution ~~upon any class of~~on the Company’s ~~capital~~common stock (except to the extent necessary for the Company to maintain its ~~status~~treatment as a RIC under Subchapter M of the Code), or purchasing any ~~such capital~~of its common stock, ~~if the Company’s asset coverage, as defined in the 1940 Act, were below 150%~~unless, 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;~~purchase, the Company is in compliance with the 1940 Act asset coverage requirements (after giving effect to any exemptive relief granted to the Company by the SEC); and (iii) requiring the Company to provide financial information to the holders of the 2022 Notes and the ~~custodian~~Trustee if the Company ceases to be subject to the reporting requirements of the Securities Exchange Act of ~~1934.~~1934, as amended (the "Exchange Act"). These covenants are subject to limitations and exceptions that are described in the 2022 Notes Indenture. As of September 30, ~~2019~~2020 and December 31, ~~2018 ,~~2019, the Company was in compliance with ~~its debt covenants.~~the covenants under the 2022 Notes Indenture.

Regulatory Requirements

As a BDC, the Company is generally required, upon issuing any senior securities, to meet a coverage ratio of total assets, less liabilities and indebtedness not represented by senior securities, to total senior securities, which include all of the Company's borrowings, of at least 200%. However, the Small Business Credit Availability Act (the "SBCAA"), which was signed into law onin March ~~23,~~ 2018, ~~has~~ modified this requirement to permit a BDC to reduce the required minimum asset coverage ratio ~~applicable~~ to ~~a BDC~~150% from 200% ~~to 150%~~, if certain requirements are met. On May 4, 2018, the Company's board of directors unanimously approved the application of the modified asset coverage requirements set forth in Section 61(a)~~(2)~~ of the ~~Investment Company Act of~~ 1940 ~~as amended by the Small Business Credit Availability~~ Act. As a result, the asset coverage ratio applicable to the Company ~~was~~under the 1940 Act changed to 150% from 200% ~~to 150%~~, effective May 4, 2019.

As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company's aggregate indebtedness, including outstanding borrowings under the Credit Facility and the aggregate principal amount outstanding on the 2022 Notes, was ~~$65.1~~$73.8 million and ~~$45.8~~$72.5 million, respectively, and as of September 30, ~~2019,~~2020, and December 31, ~~2018,~~2019, the Company's asset coverage, as defined in the 1940 Act, was ~~206%~~182% and ~~271%~~192%, respectively.

Note 4. Concentrations of Credit Risk

The Company’s investment portfolio consists primarily of loans to privately-held small to mid-size companies. Many of these companies may experience variation in operating results. Many of these companies do business in regulated industries and could be affected by changes in government regulations.

The largest debt investments may vary from year to year as new debt investments are recorded and repaid. The Company’s five largest debt investments represented approximately ~~37.0%~~48.2% and ~~41.2%~~40.8% of total principal balance outstanding as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. Investment income, consisting of interest and fees, can fluctuate significantly upon repayment of large loans. ~~Interest and fee~~Investment income from the five largest debt investments accounted for approximately ~~29.6%~~29.3% and ~~32.8%~~29.6% of total investment income for the three months ended September 30, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively. ~~Interest and fee~~Investment income from the five largest debt investments accounted for approximately ~~26.6%~~33.3% and ~~30.9%~~26.6% of total investment income for the nine months ended September 30, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively.

Note 5. ~~Shareholders’~~Stockholders' Equity

The following table summarizes the Company's common stock activity for each of the three and nine months ended September 30, ~~2019~~2020 and September 30, ~~2018.~~2019.


		Three Months Ended September 30,											Nine Months Ended September 30,													Three Months Ended September 30,					Nine Months Ended September 30,
		2019				2018					2019						2018				2020			2019				2020		2019
		Shares	Amount		Shares	Amount		Shares	Amount			Shares	Amount			Shares		Amount		Shares	Amount		Shares	Amount			Shares	Amount
Shares repurchased	Shares repurchased	(159,561)	$	(1,626,331)	—	$	—	(421,069)	$	(4,373,207)		(79,575)	$	(849,418)	Shares repurchased	—		$	—	(159,561)	$	(1,626,331)	—	$	—		(421,069)	$	(4,373,207)
Dividends reinvested	Dividends reinvested	8,514	81,371		7,868	83,279		24,165	237,257			25,047	258,077		Dividends reinvested	—		—		8,514	81,371		12,625	85,538			24,165	237,257
Total	Total	(151,047)	$	(1,544,960)	7,868	$	83,279	(396,904)	$	(4,135,950)		(54,528)	$	(591,341)	Total	—		$	—	(151,047)	$	(1,544,960)	12,625	$	85,538		(396,904)	$	(4,135,950)

As of September 30, ~~2019~~2020 and ~~2018,~~2019, the Company had no dilutive securities outstanding.

On ~~June 13, 2017,~~November 1, 2018, the ~~Company's~~ board of directors authorized ~~a $3.0 million~~an open market stock repurchase program. Pursuant to the program, the Company was authorized to repurchase up to ~~$3.0 million~~250,000 shares in the aggregate of ~~its~~the Company's outstanding common stock in the open market. The repurchase program expired on ~~June 30, 2018. In total,~~April 4, 2019, on which date the Company ~~repurchased 116,189~~met the 250,000 shares ~~of its common stock for a total cost of $1.3 million under this stock repurchase program.~~limit.

On ~~November 1, 2018,~~May 2, 2019, the board of directors authorized another open market stock repurchase program. Pursuant to the program, the Company was authorized to repurchase up to 250,000 shares in the aggregate of the Company's outstanding common stock in the open market. The repurchase program expired on ~~April 4, 2019. The~~October 24, 2019, on which date the Company ~~repurchased all~~met the 250,000 shares ~~authorized by its board of directors under this stock repurchase program for a total cost of $2.6 million.~~limit.

~~On May 2, 2019,~~During the ~~board of directors authorized another open market stock repurchase program. Pursuant to the program,~~three months ended September 30, 2020 the Company ~~is authorized to~~did not repurchase up to 250,000 shares in the aggregate of the Company's outstanding common stock in the open market. Unless amended by the Company's board of directors, the repurchase program was set to expire on the earlier of December 31, 2019 or the repurchase of 250,000 shares of the Company's outstanding common stock. Through September 30, 2019, the Company has purchased 210,533any shares of its common stock under this stock repurchase program and had a total of 39,467 shares remaining to purchase. Subsequent to September 30, 2019, the Company repurchased 39,467 shares of its common stock at an average price of $9.99 per share. With those shares repurchased in the fourth quarter of 2019, the Company reached the 250,000 share limit under the stock repurchase program authorized by the Company's board of directors in May 2019.

stock. During the three months ended September 30, 2019, the Company repurchased 159,561 shares of its common stock at an average price of $10.19 ~~and a total cost~~per share, for an aggregate purchase price of $1.6 million. During the ~~three~~nine months ended September 30, ~~2018,~~2020, the Company did not repurchase any shares of its common stock. During the nine months ended September 30, 2019, the ~~Company~~ repurchased 421,069 shares of its common stock at an average price of $10.39 per share ~~and a total cost~~for an aggregate purchase price of $4.4 ~~million. During the nine months ended September 30, 2018, the Company repurchased 79,575 shares of its common stock at an average price of $10.67 per share and a total cost of $0.8~~ million.

The Company has adopted an “opt out” dividend reinvestment plan, or “DRIP,” for its common stockholders. As a result, if the Company makes cash distributions, then stockholders’ cash distributions will be automatically reinvested in additional shares of the Company's common stock, unless they specifically “opt out” of the dividend reinvestment plan so as to receive cash distributions.

Note 6. Fair Value Measurements

As described in Note 2, the Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. A description of the valuation methodologies used for assets and liabilities recorded at fair value, and for estimating fair value for financial and non-financial instruments not recorded at fair value, is set

forth below. The information presented should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only required for a portion of the Company’s assets and liabilities.

2022 ~~notes:~~Notes: The 2022 Notes are a Level 2 financial instrument with readily observable market inputs from other comparable unsecured notes in the marketplace. The ~~unsecured notes~~2022 Notes trade under the ticker "HCAPZ". As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the fair value of the 2022 Notes was ~~$29.2~~$27.9 million and ~~$28.8~~$29.8 million, respectively, which was based on the closing price of the 2022 Notes on ~~that day.~~the respective dates.

Revolving line of credit: Borrowings under the Credit Facility are carried at cost. The fair value of the Credit Facility as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 was ~~$36.3~~$45.0 million and ~~$17.0~~$43.7 million, respectively, which approximates ~~cost.~~cost due to its short-term maturity and floating rate coupon.

Off-balance sheet financial instruments: The fair value of unfunded commitments is estimated based on the fair value of the funded portion of the corresponding debt investment.

As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, unfunded commitments totaled ~~$3.2~~$2.3 million and ~~$1.4~~$3.1 million, respectively, and if funded, their estimated fair values on such dates were ~~$3.1~~$2.3 million and ~~$1.3~~$3.1 million, respectively.

There were no assets or liabilities measured at fair value on a nonrecurring basis as of September 30, ~~2019~~2020 or December 31, ~~2018.~~2019.

The following table details the financial instruments that are carried at fair value and measured at fair value on a recurring basis as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively:


		Fair Values as of September 30, 2019															Fair Values as of September 30, 2020
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total

Financial assets:	Financial assets:									Financial assets:
Senior Secured (1)	Senior Secured (1)	$	—	$	—	$	76,643,412	$	76,643,412	Senior Secured (1)	$	—	$	—	$	75,079,797	$	75,079,797
Junior Secured	Junior Secured	—		—		26,997,625		26,997,625		Junior Secured	—		—		8,407,657		8,407,657
Equity and Equity Related Securities	Equity and Equity Related Securities	—		—		11,936,263		11,936,263		Equity and Equity Related Securities	—		—		12,493,814		12,493,814
		$	—	$	—	$	115,577,300	$	115,577,300		$	—	$	—	$	95,981,268	$	95,981,268


		Fair Values as of December 31, 2018															Fair Values as of December 31, 2019
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total

Financial assets:	Financial assets:									Financial assets:
Senior Secured (1)	Senior Secured (1)	$	—	$	—	$	54,609,097	$	54,609,097	Senior Secured (1)	$	—	$	—	$	85,954,384	$	85,954,384
Junior Secured	Junior Secured	—		—		33,231,424		33,231,424		Junior Secured	—		—		18,757,348		18,757,348
Equity and Equity Related Securities	Equity and Equity Related Securities	—		—		7,073,341		7,073,341		Equity and Equity Related Securities	—		—		12,097,658		12,097,658
		$	—	$	—	$	94,913,862	$	94,913,862		$	—	$	—	$	116,809,390	$	116,809,390


(1)			Senior secured category includes both first out and last out term loans. The Company's last out senior secured loans are identified on the Consolidated Schedule of Investments.

The following table provides quantitative information related to the significant unobservable inputs used to fair value the Company's Level 3 investments as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, and indicates the valuation techniques utilized by the Company to determine the fair value:

Type of Investment Fair Value at September 30, 2019 Valuation Technique (1) Significant Unobservable Input Range Weighted Average
Senior Secured (2) $ 76,643,412 Bond Yield Risk adjusted discount factor 11.7% - 19.8% 15.4%
Market EBITDA multiple 3.2x - 8.0x 5.2x
Income Weighted average cost of capital 3.3% - 19.8% 12%
Junior Secured $ 26,997,625 Bond Yield Risk adjusted discount factor 20.0% - 32.5% 27.4%
Market EBITDA multiple 4.6x - 8.5x 6.9x
Market Revenue multiple 0.6x - 0.6x 0.6x
Income Weighted average cost of capital 13.0% - 32.5% 18.4%
Equity and Equity Related Securities $ 11,936,263 Market EBITDA multiple 4.6x - 8.0x 7.4x
Income Weighted average cost of capital 11.9% - 11.9% 11.9%

Type of Investment

Fair Value at September 30, 2020

Valuation Technique (1)

Significant Unobservable Input

Range

Weighted Average (2)

Senior Secured (3)

75,079,797

Bond Yield

Risk adjusted discount factor

5.8% - 15.0%

10.9%

Income

Weighted average cost of capital

8.0% - 24.3%

13.7%

Junior Secured

8,407,657

Market

Risk adjusted discount factor

45.0% - 45.0%

45%

Market

EBITDA multiple

5.5x - 5.5x

5.5x

Income

Weighted average cost of capital

17.5% - 17.5%

17.5%

Equity and Equity Related Securities

12,493,814

Market

EBITDA multiple

5.0x - 9.5x

9.0x

Market

Book value multiple

1.0x - 1.0x

1.0x

Type of Investment

Fair Value at December 31, 2019

Valuation Technique (1)

Significant Unobservable Input

Range

Weighted Average (2)

Senior Secured (3)

85,954,384

Bond Yield

Risk adjusted discount factor

8.0% - 31.8%

17.6%

Market

EBITDA multiple

3.8x - 12.0x

10.1x

Market

Revenue multiple

3.3x - 3.3x

3.3x

Income

Weighted average cost of capital

3.5% - 30.0%

13.2%

Junior Secured

18,757,348

Bond Yield

Risk adjusted discount factor

27.5% - 27.5%

27.5%

Market

EBITDA multiple

5.0x - 7.8x

6.9x

Market

Revenue multiple

0.7x - 0.7x

0.7x

Income

Weighted average cost of capital

13.0% - 32.5%

16.7%

Equity and Equity Related Securities

12,097,658

Market

EBITDA multiple

5.0x - 12.0x

7.4x

Market

Book value multiple

1.0x - 1.0x

1.0x

Income

Weighted average cost of capital

12.0% - 12.0%

12.0%

Type of Investment Fair Value at December 31, 2018 Valuation Technique (1) Significant Unobservable Input Range Weighted Average
Senior Secured (2) $ 54,609,097 Bond Yield Risk adjusted discount factor 9.2% - 32.5% 15.2%
Market EBITDA multiple 3.0x - 5.8x 4.9x
Income Weighted average cost of capital 9.4% - 31.3% 15.6%
Junior Secured $ 33,231,424 Bond Yield Risk adjusted discount factor 13.4% - 20.0% 15.8%
Market EBITDA multiple 5.2x - 8.9x 6.9x
Market Revenue multiple 0.7x - 0.7x 0.7x
Income Weighted average cost of capital 13.4% - 21.0% 15.6%
Equity and Equity Related Securities $ 7,073,341 Market EBITDA multiple 4.6x - 6.9x 5.9x
Market Book value multiple 1.0x - 1.0x 1.0x
Income Weighted average cost of capital 12.3% - 12.3% 12.3%


(1)			When estimating the fair value of its debt investments, the Company typically utilizes the bond yield technique. The significant unobservable inputs used in the fair value measurement under this technique are risk adjusted discount factors. However, the Company also takes into consideration the market technique and income technique in order to determine whether the fair value of the debt investment is within the estimated enterprise value of the portfolio company. The significant unobservable inputs used under these techniques are EBITDA multiples and weighted average cost of capital. Under the bond yield technique, significant increases (decreases) in the risk adjusted discount factors would result in a significantly lower (higher) fair value measurement. When estimating the fair value of its equity investments, the Company utilizes the (i) market technique and (ii) income technique. The significant unobservable inputs used in the fair value measurement of the Company’s equity investments are EBITDA multiples and weighted average cost of capital (“WACC”). Significant increases (decreases) in EBITDA multiple inputs in isolation would result in a significantly higher (lower) fair value measurement. Significant increases (decreases) in WACC inputs in isolation would result in a significantly lower (higher) fair value measurement.
(2)			The weighted average is calculated in two parts. First, the Company calculates each portfolio company's unobservable input weight by multiplying an individual portfolio company's unobservable input by its fair value and dividing by the total fair value of each portfolio company that utilizes that unobservable input. Then, the Company totals each portfolio company's weight that utilizes that specific unobservable input to calculate the weighted average.
(3)			Senior secured category includes both first out and last out term loans. The Company's last out senior secured loans are identified on the Consolidated Schedule of Investments.

The following table shows a reconciliation of the beginning and ending balances for Level 3 assets for the nine months ended September 30, ~~2019~~2020 and September 30, ~~2018.~~2019. Transfers between investment type and level, if any, are recognized at fair value at the beginning of the period in which the transfers ~~occur :~~occur:


	Nine Months Ended September 30, 2020
	Senior Secured (1)		Junior Secured		Equity and Equity Related Securities		Total Investments as of September 30, 2020

Fair value of portfolio, beginning of period	$	85,954,384	$	18,757,348	$	12,097,658	$	116,809,390
New/Add-on investments/principal increases	3,499,023		—		231,731		3,730,754
Principal payments received/principal reductions	(13,314,587)		(4,000,000)		—		(17,314,587)
Sales of investments	—		(1,060,000)		(652,087)		(1,712,087)
Loan origination and other fees received	(298,514)		(4,000)		—		(302,514)
Payment-in-kind interest earned	802,877		9,825		—		812,702
Accretion of deferred loan origination fees/discounts	772,768		67,662		—		840,430
Transfers to (from) level 3	—		—		—		—
Transfer (to) from investment type	—		—		—		—
Net realized losses on investments	—		(2,038,300)		7,897		(2,030,403)
Change in unrealized appreciation (depreciation) on investments	(2,336,154)		(3,324,878)		808,615		(4,852,417)
Fair value of portfolio, end of period	$	75,079,797	$	8,407,657	$	12,493,814	$	95,981,268
Net change in unrealized appreciation (depreciation) relating to Level 3 assets still held at September 30, 2020	$	(2,361,239)	$	(4,362,006)	$	794,329	$	(5,928,916)

Nine Months Ended September 30, 2019
Senior Secured (1) Junior Secured Equity and Equity Related Securities Total Investments as of September 30, 2019
Fair value of portfolio, beginning of period $ 54,609,097 $ 33,231,424 $ 7,073,341 $ 94,913,862
New/Add-on investments/principal increases 44,041,031 446,494 3,737,138 48,224,663
Principal payments received/principal reductions (7,700,773) (15,312,804) (230,115) (23,243,692)
Sales of investments — — (100,750) (100,750)
Loan origination fees received (1,852,715) — — (1,852,715)
Payment-in-kind interest earned 355,541 263,142 — 618,683
Accretion of deferred loan origination fees/discounts 477,777 187,169 — 664,946
Transfers to (from) level 3 — — — —
Transfer (to) from investment type (10,314,500) 10,314,500 — —
Net realized losses on investments — — (106,435) (106,435)
Change in unrealized appreciation (depreciation) on investments (2,972,046) (2,132,300) 1,563,084 (3,541,262)
Fair value of portfolio, end of period $ 76,643,412 $ 26,997,625 $ 11,936,263 $ 115,577,300
Net change in unrealized appreciation (depreciation) relating to Level 3 assets still held at September 30, 2019 $ (2,890,453) $ (2,453,502) $ 1,605,089 $ (3,738,866)


		Nine Months Ended September 30, 2018																			Nine Months Ended September 30, 2019
		Senior Secured(1)		Junior Secured		Equity and Equity Related Securities		Revenue - Linked Security		Total Investments as of September 30, 2018			Senior Secured (1)		Junior Secured		Equity and Equity Related Securities		Total Investments as of September 30, 2019

Fair value of portfolio, beginning of period	Fair value of portfolio, beginning of period	$	59,010,761	$	44,379,140	$	7,958,168	$	533,000	$	111,881,069	Fair value of portfolio, beginning of period	$	54,609,097	$	33,231,424	$	7,073,341	$	94,913,862
New/Add-on investments/principal increases	New/Add-on investments/principal increases	16,362,500		2,500,000		881,898		—		19,744,398		New/Add-on investments/principal increases	44,041,031		446,494		3,737,138		48,224,663
Principal payments received/principal reductions	Principal payments received/principal reductions	(16,896,043)		(986,144)		(203,650)		(342,842)		(18,428,679)		Principal payments received/principal reductions	(7,700,773)		(15,312,804)		(230,115)		(23,243,692)
Sales of investments	Sales of investments	(510,651)		—		(1,538,884)		—		(2,049,535)		Sales of investments	—		—		(100,750)		(100,750)
Loan origination fees received		(281,383)		(85,662)		—		—		(367,045)
Loan origination and other fees received												Loan origination and other fees received	(1,852,715)		—		—		(1,852,715)
Payment-in-kind interest earned	Payment-in-kind interest earned	556,178		472,665		—		—		1,028,843		Payment-in-kind interest earned	355,541		263,142		—		618,683
Accretion of deferred loan origination fees/discounts	Accretion of deferred loan origination fees/discounts	593,534		335,825		—		—		929,359		Accretion of deferred loan origination fees/discounts	477,777		187,169		—		664,946
Transfers to (from) level 3	Transfers to (from) level 3	—		—		—		—		—		Transfers to (from) level 3	—		—		—		—
Transfer (to) from investment type	Transfer (to) from investment type	(2,000,000)		—		2,000,000		—		—		Transfer (to) from investment type	(10,314,500)		10,314,500		—		—
Net realized losses on investments	Net realized losses on investments	(620,805)		—		62,359		(50,674)		(609,120)		Net realized losses on investments	—		—		(106,435)		(106,435)
Change in unrealized appreciation (depreciation) on investments	Change in unrealized appreciation (depreciation) on investments	2,546,911		(27,540)		(2,630,061)		(139,484)		(250,174)		Change in unrealized appreciation (depreciation) on investments	(2,972,046)		(2,132,300)		1,563,084		(3,541,262)
Fair value of portfolio, end of period	Fair value of portfolio, end of period	$	58,761,002	$	46,588,284	$	6,529,830	$	—	$	111,879,116	Fair value of portfolio, end of period	$	76,643,412	$	26,997,625	$	11,936,263	$	115,577,300
Net change in unrealized appreciation (depreciation) relating to Level 3 assets still held at September 30, 2018		$	2,279,530	$	(27,540)	$	(2,402,640)	$	—	$	(150,650)
Net change in unrealized appreciation (depreciation) relating to Level 3 assets still held at September 30, 2019												Net change in unrealized appreciation (depreciation) relating to Level 3 assets still held at September 30, 2019	$	(2,890,453)	$	(2,453,502)	$	1,605,089	$	(3,738,866)


(1)			Senior secured category includes both first out and last out term loans. The Company's last out senior secured loans are identified on the Consolidated Schedule of Investments.

There were no transfers between levels of the fair value hierarchy during the nine months ended September 30, ~~2019~~2020 and September 30, ~~2018.~~2019.

Note 7. Related Party Transactions

The ~~Company~~Company's predecessor, Harvest Capital Credit LLC, was founded in ~~September~~ 2011 by certain members of ~~its investment adviser~~HCAP Advisors and JMP Group Inc. (now JMP Group LLC) ("JMP Group"), a full-service investment banking and asset management firm. JMP Group currently holds an equity interest in ~~the Company~~us and ~~the Company's investment adviser.~~a majority equity interest in HCAP Advisors. JMP Group conducts its primary business activities through two wholly-owned subsidiaries: (i) Harvest Capital Strategies, LLC ("HCS"), an ~~SEC registered~~SEC-registered investment adviser that focuses on long-short equity hedge funds, middle-market lending and private equity, and (ii) JMP Securities LLC, a full-service investment bank that provides equity research, institutional brokerage and investment banking services to growth companies and their investors.

Management Fees and Incentive Fees

In conjunction with the Company's initial public offering in May 2013, HCAP entered into an investment advisory and management agreement with HCAP ~~Advisors LLC ("HCAP Advisors"), which is a majority owned subsidiary of JMP Group.~~Advisors. Under the investment advisory and management agreement, the base management fee is calculated based on the Company's gross assets (which includes assets acquired with the use of leverage and excludes cash and cash equivalents) at an annual rate of (i) 2.0% onof gross assets up to and including $350 million, (ii) 1.75% onof gross assets above $350 million and up to and including $1 billion, and (iii) 1.5% onof gross assets above $1 billion.

Management fee expense for the three months ended September 30, ~~2019~~2020 and September 30, ~~2018~~2019 totaled ~~$0.6~~$0.5 million and $0.6 million, respectively. Management fee expense for the nine months ended September 30, ~~2019~~2020 and September 30, ~~2018~~2019 totaled $1.6 million and ~~$1.8~~$1.6 million, respectively.

The incentive fee consists of two parts. The first part is calculated and payable quarterly in arrears based on the pre-incentive fee net investment income for the immediately preceding calendar quarter and is 20% of the amount, if any, by which the pre-incentive fee net investment income for the immediately preceding calendar quarter exceeds a 2.0% (which is 8.0% annualized) hurdle rate and a “catch-up” provision, ~~measured as of the end of each calendar quarter. Under this provision, in any calendar quarter, the investment adviser~~pursuant to which HCAP Advisors receives ~~no incentive fee until the net investment income equals the hurdle rate of 2.0%, but then receives, as a “catch-up”,~~ 100% of the pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.5% (10.0% annualized). The effect of this "catch-up" provision is that, if pre-incentive fee net investment income exceeds 2.5% in any calendar quarter, ~~the investment adviser,~~ HCAP Advisors ~~(as defined above),~~ will receive 20% of the pre-incentive fee net investment income as if a hurdle rate did not apply. Since the hurdle rate is fixed, as interest rates rise, it is easier for the investment adviser to surpass the hurdle rate and receive an incentive fee based on net investment income.The second part is calculated and payable in arrears as of the end of each calendar year (or upon termination of the investment advisory and management agreement, as of the termination date) and equals 20% of the realized capital gains on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees.

The income-based incentive fee is subject to a total return requirement, which provides that no incentive fee in respect of the pre-incentive fee net investment income is payable except to the extent 20% of the cumulative net increase in net assets resulting from operations over the then current and 11 preceding calendar quarters exceeds the cumulative income and capital gains incentive fees accrued and/or paid for the 11 preceding quarters. As a result, even in the event that the pre-incentive fee net investment income exceeds the hurdle rate, no incentive fee will be payable to the extent that the Company has generated cumulative net decreases in assets resulting from operations over the trailing 12 quarters due to unrealized or realized net losses on its investments.

The Company did not incur ~~a pre-incentive fee net investment income~~an income-based incentive fee ~~expense~~ for ~~both~~any of the three ~~and~~or nine months ended September 30, ~~2019. During the three months ended~~2020 or September 30, ~~2018,~~2019.

The second part of the ~~Company incurred a pre-incentive fee net investment income~~ incentive fee ~~expense~~is calculated and payable in arrears as of ~~$0.4 million. During~~ the ~~nine months ended September 30, 2018,~~end of each calendar year (or upon termination of the ~~Company incurred~~investment advisory and management agreement, as of the termination date) and equals 20% of the aggregate realized capital gains on a ~~pre-incentive fee~~cumulative basis from inception through the end of each calendar year, computed net ~~investment income~~of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gains incentive ~~fee expense of $0.5 million.~~fees.

The capital gains incentive fee is determined and paid annually with respect to cumulative realized capital gains (but not unrealized capital gains) to the extent such cumulative realized capital gains exceed cumulative realized and unrealized capital losses through the end of such fiscal year (less the aggregate amount of any previously paid capital ~~gain~~gains incentive fee). The Company also records an expense accrual relating to the capital gains incentive fee payable by the Company to ~~its investment adviser~~HCAP Advisors when (i) the cumulative realized and unrealized gains on its investments exceed all cumulative realized and unrealized capital losses on its investments and (ii) the capital gains incentive fee that would be payable exceeds the aggregate amount of any previously paid capital ~~gain~~gains incentive fee given the fact that a capital gains incentive fee would be owed to ~~the investment adviser~~HCAP Advisors if the Company were to liquidate its investment portfolio at such time. Any decrease in unrealized appreciation in subsequent periods will result in the reversal of some or all of such previously recorded expense accrual. The ~~actual incentive fee payable to~~Company recorded a net change in unrealized depreciation of $1.5 million and $2.0 million for the ~~Company's investment adviser related to capital gains is determined~~three months ended September 30, 2020 and ~~payable in arrears at the end of each fiscal year and is only based on cumulative realized capital gains, including realized capital gains for such period, but not unrealized capital gains.~~September 30, 2019, respectively. The Company recorded a net change in unrealized depreciation of ~~$2.0~~$4.9 million ~~for the three months ended September 30, 2019~~ and ~~a net change in unrealized depreciation of $1.6 million for the three months ended September 30, 2018. The Company recorded a net change in unrealized depreciation of~~ $3.5 million for the nine months ended September 30, 2020 and September 30, 2019, ~~and a~~respectively. The Company recorded net ~~change in unrealized depreciation~~realized gains of ~~$0.3~~$0.2 million for the ~~nine~~three months ended September 30, ~~2018. The Company recorded~~2020 and net realized losses of $0.1 million for the three months ended September 30, ~~2019 and net realized gains of $0.1 million for the three months ended September 30, 2018.~~2019. The Company recorded a net realized ~~loss~~losses of $2.0 million and $30,304 ~~during~~for the nine months ended September 30, ~~2019~~2020 and ~~a net realized loss of $0.6 million during the nine months ended~~ September 30, ~~2018.~~2019, respectively. The Company did not incur a capital gains incentive fee ~~expense~~ for ~~either~~any of the three or nine months ended September 30, ~~2019~~2020 or September 30, ~~2018.~~2019.

Total base management fees and incentive ~~management~~ fees expense was ~~$0.6~~$0.5 million and ~~$1.0~~$0.6 million for the three months ended September 30, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively. Total base management fees and incentive fees expense was $1.6 million and ~~$2.3~~$1.6 million for the nine months ended September 30, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively. ~~Accrued~~Total accrued base management fees and incentive management fees payable were ~~$0.6~~$0.5 million and ~~$0.9~~$0.6 million as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

Administrative Services Expense

~~In conjunction with~~HCAP Advisors also serves as the Company's ~~initial public offering in May 2013, the Company entered into~~administrator pursuant to an administration agreement with JMP Credit Advisors LLC (now Medalist Partners Corporate Finance LLC) ("JMP Credit Advisors"), an affiliate of JMP Group, pursuant to which JMP Credit Advisors provided administrative services to the Company and furnished the Company with office facilities, equipment, and clerical, bookkeeping, and record keeping services. Payments under the administration agreement were equal to an amount based upon the Company's allocable portion of the administrator's overhead in performing its obligations under the administration agreement, including rent and the Company's allocable portion of the cost of its chief financial officer and chief compliance officer and their respective staffs and administrative services provided to the Company by its chief executive officer and other officers.

On April 17, 2018, in connection with the Company moving its administrative function from its Alpharetta, Georgia office to its New York, New York office, the board of directors approved entry into an administration agreement with HCAP Advisors, which was entered into and took effect as of April 29, 2018.agreement. Under the ~~new~~administration agreement, HCAP Advisors provides administrative services to ~~HCAP~~the Company and furnishes the Company with office facilities, equipment, and clerical, bookkeeping, and ~~record keeping~~recordkeeping services. In full consideration of the provision of the services of HCAP Advisors, the Company reimburses HCAP Advisors for the costs and expenses incurred by HCAP Advisors in performing its obligations and providing personnel and facilities under the administration agreement. Payments under the administration agreement are equal to an amount based upon the Company's allocable portion of the administrator's overhead in performing its obligations under the administration agreement, including rent and the Company's allocable portion of the cost of its executive officers and their respective staffs and administrative services provided to the Company by its executive officers. ~~The Company negotiated a cap with~~

HCAP Advisors agreed to cap the amounts payable by the Company under the administration agreement to $1.4 million during each of the ~~2018~~2020 and 2019 fiscal ~~years~~years. In addition, if requested to provide significant managerial assistance to the Company’s portfolio companies, HCAP Advisors is paid an additional amount based on the services provided, which shall not exceed the amount the Company receives from such companies for providing this assistance and will not count against the $1.4 million ~~respectively.~~cap on amounts payable by the Company under the administration agreement.

Total administrative services expense was $0.4 million and $0.4 million for the three months ended September 30, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively. Total administrative services expense was $1.1 million and ~~$1.0~~$1.1 million for the nine months ended September 30, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively. Accrued administrative services fees payable were $0.4 million and $0.4 million as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

~~Expenses Reimbursed by HCAP Advisors~~

From time to time, HCAP Advisors may voluntarily waive and/or reimburse expenses incurred by the Company. During the year ended December 31, 2018 the Company incurred approximately $0.7 million in non-recurring professional fees for

additional work provided by its legal counsel and external auditors in connection with the material weakness identified by management as disclosed in Item 9A of the Company's annual report on Form 10-K for the year ended December 31, 2017. HCAP Advisors has agreed to reimburse the Company approximately $0.4 million of those expenses. The Company is under no legal obligation to repay HCAP Advisors for any amount of the expenses HCAP Advisors is reimbursing the Company. HCAP Advisors did not voluntarily waive and/or reimburse any expenses incurred by the Company during the three or nine months months ended September 30, 2019.

Co-investment Transactions ~~With~~with Affiliates

On ~~September 14, 2018,~~December 10, 2015, the Company received co-investment exemptive relief under the 1940 Act from the SEC (the "Exemptive Relief") permitting the Company greater flexibility to negotiate the terms of co-investments with certain accounts managed or held by JMP Group and certain of its subsidiaries, in ~~accordance~~each case in a manner consistent with the ~~exemptive order issued by~~Company's investment objectives and strategies as well as regulatory requirements and other pertinent factors (including the ~~Securities~~terms and ~~Exchange Commission~~conditions of the Exemptive Relief). Under the terms of the relief, a “required majority” (as defined in Section 57(o) of the 1940 Act) of the Company's independent directors must make certain conclusions in connection with a co-investment transaction, including (1) the terms of the proposed transaction, including the consideration to be paid, are reasonable and fair to the Company and its stockholders and do not involve overreaching in respect of the Company ~~executed a co-investment~~or its stockholders on the part of any person concerned and (2) the proposed transaction ~~whereby~~is consistent with the ~~Company invested alongside affiliate funds of JMP Group in an add-on investment in National Program Management & Project Controls, LLC. The Company's share~~interests of the ~~co-investment transaction consisted of $3.5 million of senior secured term loan~~Company's stockholders and ~~$0.3 million of Class A membership interests. As of September 30, 2019,~~is consistent with the Company's ~~total~~ investment ~~at fair value, in National Program Management & Project Controls, LLC, after subsequent add-on investments, consisted of a $6.8 million senior secured term loan~~objectives and ~~$5.0 million of class A membership interests.~~strategies.

OnIn February ~~15,~~ 2019, in accordance with the ~~exemptive order issued by the Securities and Exchange Commission to the Company,~~Exemptive Relief, the Company executed a co-investment transaction whereby the Company invested alongside affiliate funds of JMP Group in a $4.8 million senior secured term loan and $0.5 million revolving line of credit of Peerless Media, LLC. The revolving line of credit was subsequently cancelled. As of September 30, 2020, the Company's total investment, at fair value, in Peerless Media, LLC consisted of a $3.6 million senior secured term loan. As of December 31, 2019, the Company's total investment, at fair value, in Peerless Media, LLC consisted of a ~~$4.7~~$4.6 million senior secured term ~~loan and an undrawn revolving credit facility.~~loan.

Note 8. Commitments and Contingencies

At September 30, ~~2019,~~2020, the Company had a total of ~~$3.2~~$2.3 million in unfunded commitments comprised entirely of unfunded revolving ~~line~~lines of credit ~~commitments on six~~and delayed draw term loans for five of the Company’s debt investments. As of December 31, ~~2018,~~2019, the Company had a total of ~~$1.4~~$3.1 million in unfunded commitments comprised entirely of unfunded revolving ~~line~~lines of credit ~~commitments~~and delayed draw term loans on ~~three~~seven of the Company’s debt investments. The following table summarizes the Company's unfunded commitments and extended fair value if the unfunded commitments were fully funded as of September 30, ~~2019~~2020 and December 31, ~~2018:~~

As of September 30, 2019 As of December 31, 2018
Unfunded commitment Extended fair value of unfunded commitment if fully funded Unfunded commitment Extended fair value of unfunded commitment if fully funded
Back Porch International, Inc. $ 500,000 $ 490,625 $ — $ —
Coastal Screen and Rail, LLC 850,000 850,000 250,000 250,000
Kleen-Tech Acquisition, LLC 400,000 382,944 — —
Slappey Communications, LLC 500,000 490,205 — —
Surge Busy Bee Holdings, LLC 450,000 447,509 450,000 434,419
V-Tek, Inc. 463,903 463,903 663,903 663,903
$ 3,163,903 $ 3,125,186 $ 1,363,903 $ 1,348,322
2019:


	As of September 30, 2020				As of December 31, 2019
	Unfunded commitment		Extended fair value of unfunded commitment if fully funded		Unfunded commitment		Extended fair value of unfunded commitment if fully funded
Back Porch International, Inc.	$	—	$	—	$	500,000	$	491,168
Coastal Screen and Rail, LLC	850,000		850,000		850,000		850,000
Kleen-Tech Acquisition, LLC	—		—		400,000		382,500
National Program Management & Project Controls, LLC	35,600		35,532		100,000		100,000
Slappey Communications, LLC	500,000		500,000		500,000		498,750
Surge Busy Bee Holdings, LLC	450,000		425,794		300,000		300,000
V-Tek, Inc.	463,903		440,317		463,903		463,903
Total	$	2,299,503	$	2,251,643	$	3,113,903	$	3,086,321

Legal Proceedings

Neither the Company nor its subsidiaries are currently subject to any material pending legal proceedings, other than ordinary routine litigation incidental to their respective businesses, and no such material proceedings are known to be contemplated. The Company ~~is party~~and its subsidiaries may from time to ~~certain legal proceedings incidental to~~time, however, be involved in litigation arising out of their operations in the normal course of business or otherwise, including ~~where third~~the enforcement of rights under the contracts with the Company's portfolio companies. Third parties may ~~try to~~also seek to impose liability on the Company in connection with the activities of its portfolio companies. ~~While the outcome of these legal proceedings cannot at this time be predicted with certainty,~~

Distributions

On March 12, 2020, the Company ~~does not expect that these proceedings will have a material effect~~announced the $0.08 per share March 2020 Dividend and the $0.08 per share April 2020 Dividend payable on April 30, 2020 and May 28, 2020, respectively, to record holders as of April 23, 2020 and May 21, 2020, respectively. However, the board of directors has decided to defer the record date and payment of each of the March 2020 Dividend and the April 2020 Dividend and has determined to suspend the declaration of any future dividends until such later time as the board of directors determines is prudent in light of the Company's ~~financial condition or results of operations.~~capital needs and contractual obligations, and in the Company's stockholders' best interests.

Note 9. Net Increase (Decrease) in Net Assets Resulting from Operations per Common Share

In accordance with the provision of ASC 260, “Earnings per Share,” basic earnings per share is computed by dividing earnings available to common ~~shareholders~~stockholders by the weighted average number of shares outstanding during the period. Other potentially dilutive common shares, and the related impact to earnings, are considered when calculating earnings per share on a

diluted basis. There were no potentially dilutive common shares ~~issued~~outstanding as of September 30, ~~2019~~2020 or September 30, ~~2018 because there were no dilutive securities outstanding.~~2019.

The following information sets forth the computation of the weighted average basic and diluted net increase in net assets per share from operations for each period:

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Net increase (decrease) in net assets resulting from operations $ (1,043,162) $ 632,826 $ (896,060) $ 3,518,577
Weighted average shares outstanding (basic and diluted) 6,053,807 6,398,077 6,171,616 6,408,547
Net increase (decrease) in net assets resulting from operations per share $ (0.17) $ 0.10 $ (0.15) $ 0.55


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net increase decrease in net assets resulting from operations	$	(382,803)	$	(1,043,162)	$	(4,820,110)	$	(896,060)
Weighted average shares outstanding (basic and diluted)	5,958,479		6,053,807		5,955,513		6,171,616
Net decrease in net assets resulting from operations per share	$	(0.06)	$	(0.17)	$	(0.81)	$	(0.15)

Note 10. Income Tax

To receive RIC tax treatment, the Company must, among other things, distribute annually at least 90% of its net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. Depending on the level of taxable income earned in a tax year, the Company may choose to carry forward taxable income in excess of current year distributions into the next tax year and pay a 4% excise tax on such income. Any such carryover taxable income must be distributed through a dividend declared prior to filing the final tax return related to the year which generated such taxable income. The Company may, in the future, make actual distributions to its stockholders of its net capital gains. The Company can offer no assurance that it will achieve results that will permit the payment of any cash distributions and, if the Company issues senior securities, the Company may be prohibited from making distributions if doing so causes the Company to fail to maintain the asset coverage ratios stipulated by the 1940 Act or if distributions are limited by the terms of any of the Company's borrowings. The Company did not incur an excise tax for calendar year ~~2018.~~2019.

The Company's wholly-owned subsidiaries, HCAP Equity Holdings, LLC and HCAP ICC, LLC, have each elected to be taxed as a C-Corporation. As such, income taxes are accrued for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the basis of certain assets and liabilities for financial and tax reporting. The deferred taxes represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred tax assets are limited to amounts considered to be realizable in future periods. The Company accounts for any interest and penalties related to unrecognized tax benefits as part of the income tax provision.

HCAP Equity Holdings, LLC has a net operating loss carryforward for federal and state income taxes of approximately $0.3 million and $0.5 million as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. As HCAP Equity Holdings, LLC has historically generated taxable losses, the Company cannot assume as of September 30, ~~2019~~2020 that it will be able to utilize this net operating loss to offset future taxable income. As a result, any deferred income tax assets, ~~which are estimated to be approximate $0.1 million as of September 30, 2019,~~ resulting from a net operating loss carry forward and deferred taxes on net unrealized losses, include certain future tax benefits that management believes will not be utilized, and as such, the Company has recorded a full valuation allowance. The loss carryforward does not expire.

Note 11. Financial Highlights

The following is a schedule of financial highlights for the nine months ended September 30, ~~2019,~~2020 and September 30, ~~2018,~~2019, respectively:


		Nine Months Ended September 30,												Nine Months Ended September 30,
		2019				2018					2020			2019
Per share data:	Per share data:									Per share data:
Net asset value at beginning of period	Net asset value at beginning of period	$	12.30			$	12.66			Net asset value at beginning of period	$	11.23		$	12.30
Net investment income (1)	Net investment income (1)	0.43				0.69				Net investment income (1)	0.34			0.43
Realized gains (losses) on investments (1)		—			(5)	(0.10)
Net change in unrealized appreciation (depreciation) on investments (1)		(0.58)				(0.04)
Provision for taxes on unrealized gains on investments (1)		—				—			(5)
Net increase in net assets from operations (1)		(0.15)				0.55
Realized losses on investments (1)										Realized losses on investments (1)	(0.34)			—			(5)
Net change in unrealized depreciation on investments (1)										Net change in unrealized depreciation on investments (1)	(0.81)			(0.58)
Net decrease in net assets from operations (1)										Net decrease in net assets from operations (1)	(0.81)			(0.15)
Distributions (2)	Distributions (2)	(0.74)				(0.87)				Distributions (2)	(0.24)			(0.74)
Total distributions	Total distributions	(0.74)				(0.87)				Total distributions	(0.24)			(0.74)
Effect of shares repurchased / issued	Effect of shares repurchased / issued	0.11				(0.01)				Effect of shares repurchased / issued	(0.01)			0.11
Net asset value at end of period	Net asset value at end of period	$	11.52			$	12.33			Net asset value at end of period	$	10.17		$	11.52
Net assets at end of period	Net assets at end of period	68,828,625				78,970,785				Net assets at end of period	60,619,074			68,828,625
Shares outstanding at end of period	Shares outstanding at end of period	5,975,677				6,403,060				Shares outstanding at end of period	5,958,479			5,975,677
Weighted average shares outstanding (basic and diluted)	Weighted average shares outstanding (basic and diluted)	6,171,616				6,408,547				Weighted average shares outstanding (basic and diluted)	5,955,513			6,171,616
Per share closing price at end of period	Per share closing price at end of period	$	9.95			$	10.89			Per share closing price at end of period	$	3.45		$	9.95
Ratios and Supplemental data:	Ratios and Supplemental data:									Ratios and Supplemental data:
Total return based on change in NAV (not annualized), gross of incentive fees (3)		0.90		%		6.69		%
Total return based on change in NAV (not annualized), net of incentive fees (3)		0.90		%		5.95		%
Total return based on change in NAV (not annualized) (3)										Total return based on change in NAV (not annualized) (3)	(6.20)		%	0.90		%
Total investment return (not annualized) (4)	Total investment return (not annualized) (4)	6.66		%		8.09		%		Total investment return (not annualized) (4)	(59.25)		%	6.66		%
Average Net Assets	Average Net Assets	$	73,754,722			$	80,531,550			Average Net Assets	$	62,541,081		$	73,754,722
Ratio of expenses to average net assets, excluding expenses reimbursed by HCAP Advisors, before incentive fees (annualized)		12.00		%		12.60		%
Ratio of expenses to average net assets, excluding expenses reimbursed by HCAP Advisors, after incentive fees (annualized)		12.00		%		13.51		%
Ratio of expenses to average net assets, including expenses reimbursed by HCAP Advisors, before incentive fees (annualized)		12.00		%		11.86		%
Ratio of expenses to average net assets, including expenses reimbursed by HCAP Advisors, after incentive fees (annualized)		12.00		%		12.77		%
Ratio of expenses to average net assets (annualized)										Ratio of expenses to average net assets (annualized)	14.62		%	12.00		%
Ratio of net investment income to average net assets (annualized)	Ratio of net investment income to average net assets (annualized)	4.84		%		7.30		%		Ratio of net investment income to average net assets (annualized)	4.36		%	4.84		%
Portfolio Turnover Ratio										Portfolio Turnover Ratio	3.13		%	28.00		%
Asset Coverage Ratio										Asset Coverage Ratio	182		%	206		%


(1)			Based on weighted average number of common shares outstanding for the period.
(2)			~~Distributions~~Net investment income for the nine months ended September 30, 2020 exceeded distributions by $618,880 and distributions exceeded net investment income for the nine months ended September 30, 2019 ~~exceeded net investment income in the amount of $1,859,823~~by $1,859,823. See "Dividends and ~~distributions for the nine months ended September 30, 2018 exceeded net investment income in the amount of $1,184,174. See Dividends and Distributions Policy~~Distributions" in Note 2.
(3)			This measure of total investment return measures the changes in net asset value over the period indicated, taking into account dividends as reinvested. The return is calculated by taking the difference between the net asset value per share at the end of the period (plus assumed reinvestment of dividends and distributions at prices obtained under the Company's dividend reinvestment plan) and the net asset value per share at the beginning of the period, and dividing that difference by the net asset value per share at the beginning of the period. This return primarily differs from the total investment return in that it does not take into account changes in the market price of the Company's stock.
(4)			This measure of total investment return measures the changes in market value over the period indicated, taking into account dividends as reinvested. The return is calculated based on an assumed purchase of stock at the market price on the first day of the period (plus assumed reinvestment of dividends and distributions at prices obtained under the Company’s dividend reinvestment plan) and an assumed sale at the market price on the last day of the period. The difference between the sale and purchases is then divided by the purchase prices. The total investment return does not reflect any sales load that may be paid by investors.


(5)			Rounds to less than $0.01 per share.

Note 12. Significant ~~Subsidiaries~~Subsidiary

The Company has determined that Infinite Care, LLC, an unconsolidated portfolio company of the Company, has met the conditions of a significant subsidiary under Regulation S-X Rule 10-01(b)(1) for the three and nine months ended September 30, ~~2019.~~2020. The financial information presented below includes a summarized income statement for Infinite Care, LLC, ~~LLC~~ for each of the three and nine months ended September 30, ~~2019~~2020 and September 30, ~~2018.~~2019.


Income Statement - Infinite Care, LLC	Income Statement - Infinite Care, LLC	For the Three Months Ended September 30, 2019		For the Three Months Ended September 30, 2018		For the Nine Months Ended September 30, 2019		For the Nine Months Ended September 30, 2018		Income Statement - Infinite Care, LLC	For the Three Months Ended September 30, 2020		For the Three Months Ended September 30, 2019		For the Nine Months Ended September 30, 2020		For the Nine Months Ended September 30, 2019
Net sales	Net sales	$	4,298,601	$	3,960,429	$	12,793,602	$	11,480,152	Net sales	$	4,660,937	$	4,298,601	$	12,145,860	$	12,793,602
Cost of goods sold		3,221,744		2,808,375		9,437,176		8,165,296
Cost of services										Cost of services	3,128,551		3,221,744		9,213,606		9,437,176
Gross profit	Gross profit	1,076,857		1,152,054		3,356,426		3,314,856		Gross profit	1,532,386		1,076,857		2,932,254		3,356,426
Operating expenses	Operating expenses	1,150,079		1,102,775		3,413,685		3,266,746		Operating expenses	1,107,153		1,150,079		3,263,780		3,413,685
Income from operations	Income from operations	(73,222)		49,279		(57,259)		48,110		Income from operations	425,233		(73,222)		(331,526)		(57,259)
Other expenses, net		(291,587)		(318,441)		(599,099)		(924,038)
Net loss		$	(364,809)	$	(269,162)	$	(656,358)	$	(875,928)
Other expenses										Other expenses	312,222		291,587		728,325		599,099
Net income (loss)										Net income (loss)	$	113,011	$	(364,809)	$	(1,059,851)	$	(656,358)

Note 13. Subsequent Events

The Company's management has evaluated subsequent events through the date of issuance of the consolidated interim financial statements included herein. There have been no subsequent events that occurred during such period that would require disclosure in this Form 10-Q or would be required to be recognized in the consolidated financial statements as of and for the nine months ended September 30, ~~2019,~~2020, except as discussed below.

~~Subsequent to September 30, 2019,~~On October 7, 2020, the Company ~~repurchased 39,467 shares~~received approximately $1.9 million representing a full payoff at par of each of its ~~common stock at~~New Money DIP Term Loan and its Roll-up DIP Term Loan, in connection with GNC's restructuring. On October 30, 2020, the Company also received an ~~average price~~additional $1.2 million, representing a discounted payoff of ~~$9.99 per share. With those shares repurchased~~its $3.0 million original tranche B-2 Term Loan and received its pro rata share of a new Second Lien Term Loan with a par value of $1.8 million in the ~~fourth quarter of 2019, the Company reached the 250,000 share limit under the stock repurchase program authorized by the Company's board of directors in May 2019.~~restructured GNC.

On October ~~31, 2019,~~30, 2020, the Company ~~increased the commitment on~~received $7.8 million from Slappey Communications, LLC ("Slappey"), representing a full payoff at par of its ~~junior~~senior secured term loan ~~in Northeast Metal Works, LLC by $1.7 million. Northeast Metal Works, LLC used the proceeds to payoff~~and terminated its senior secured revolving line of ~~credit~~credit. In connection with the payoff, the Company also received a ~~third party lender~~prepayment fee in the amount of $0.1 million. The Company retained its equity investment in Slappey and ~~as a result~~funded its pro rata share of ~~this transaction,~~an equity contribution in the ~~Company's junior secured term loan converted into a senior secured term loan.~~amount of $0.1 million.

On October ~~31, 2019,~~30, 2020, the Company ~~sold its warrants in Fox Rent A Car, Inc. As part~~entered into the Eleventh Amendment to the Loan and Security Agreement (the "Amendment"), by and among the Company, HCAP Equity Holdings, LLC, HCAP ICC, LLC, Pacific Western Bank, as agent and a lender, and each of the ~~transaction,~~other lenders from time to time party thereto, including City National Bank. The Amendment amends the Credit Facility to, among other things, (i) extend the revolving period to January 31, 2021, until which date the Company ~~received $0.2 million in cash, 11,959 shares~~may receive additional advances at the discretion of ~~Europcar Mobility Group,~~the lenders; and ~~contingent consideration in~~(ii) amend the ~~form~~definition of "debt service" to exclude from the calculation of the debt service coverage ratio, for any period from August 1, 2020 through December 31, 2020, an ~~earn out. The~~amount equal to the lesser of (x) the amount of the required monthly amortization payments for the relevant period and (y) the aggregate amount of all prepayments of principal (both voluntary and mandatory) collected by the Company ~~is in~~during the ~~process of liquidating all of its shares in Europcar Mobility Group.~~relevant period.

~~On October 31, 2019,~~As of November 5, 2020, the Company's outstanding indebtedness under its Credit Facility equaled $6.7 million.

Subsequent to September 30, 2020, the COVID-19 pandemic and the related effects on the U.S. and global economies, has continued to have adverse consequences for the business operations of certain of the Company's portfolio companies and has adversely affected, and threatens to continue to adversely affect, the respective operations of the Company ~~declared monthly distributions~~and HCAP

Advisors. Given the dynamic nature of ~~$0.08 per share payable~~this situation, the Company cannot reasonably estimate the full impact of COVID-19 on ~~each~~its financial condition, results of ~~November 27, 2019, December 27, 2019, January 31, 2020,~~operations, or cash flows in the future. However, the Company does expect that it could have a material adverse impact on future net investment income, the fair value of portfolio investments, and ~~February 28, 2020.~~the results of operations and financial condition of the Company and its portfolio companies.

Schedule 12-14

Harvest Capital Credit Corporation

Consolidated Schedule of Investments in and Advances to Affiliates (Unaudited)

Nine Months Ended September 30, ~~2019~~2020


Portfolio Company	Portfolio Company	Type of Investment (4) (5) (11) (19) (20)		Net Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)		Amount of Dividends or Interest Credited to Income (1)		December 31, 2018 Value		Gross Additions (2)		Gross Reductions (3)		September 30, 2019 Value		Portfolio Company	Type of Investment (4) (5) (10) (18) (19)		Net Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)		Amount of Dividends or Interest Credited to Income (1)		December 31, 2019 Value		Gross Additions (2)		Gross Reductions (3)		September 30, 2020 Value
More than 25% Owned	More than 25% Owned																	More than 25% Owned
Flight Lease VII, LLC	Flight Lease VII, LLC	Common Equity Interest (46.14% fully diluted interest)	(9) (12)	$	(103,505)	$	—	$	—	$	684,311	$	—	$	(103,505)	$	580,806	Flight Lease VII, LLC	Common Equity Interest (46.14% fully diluted common equity)	(9) (11)	$	(86,501)	$	—	$	—	$	412,500	$	—	$	(86,501)	$	325,999

Infinite Care, LLC	Infinite Care, LLC	Senior Secured Term Loan, due 02/2019 (14.02%; 1M LIBOR + 6.00% with a 0.42% LIBOR floor + 6.00% PIK)	(8) (14)	—		(454,530)		—		3,948,000		—		(454,530)		3,493,470		Infinite Care, LLC	Senior Secured Term Loan, due 01/2021 (3.00%)	(8) (13) (20)	—		247,400		—		3,783,600		247,400		—		4,031,000

		Revolving Line of Credit, due 02/2019 (14.02%; 1M LIBOR + 12.00% with a 0.42% LIBOR floor)	(8)	—		(3,500)		—		3,716,000		200,000		(3,500)		3,912,500			Senior Secured Revolving Line of Credit, due 01/2021 (3.00%)	(8) (20)	—		96,500		—		4,208,500		246,500		—		4,455,000

		Membership Interest (100% membership interests)	(7) (8)	—		(300,000)		—		—		300,000		(300,000)		—			Membership Interest (100% membership interests)	(7) (8)	—		—		—		—		—		—		—

Total More Than 25% Owned Portfolio Companies	Total More Than 25% Owned Portfolio Companies			$	(103,505)	$	(758,030)	$	—	$	8,348,311	$	500,000	$	(861,535)	$	7,986,776	Total More Than 25% Owned Portfolio Companies			$	(86,501)	$	343,900	$	—	$	8,404,600	$	493,900	$	(86,501)	$	8,811,999

5% and Greater Owned, But Not Greater Than 25%	5% and Greater Owned, But Not Greater Than 25%																	5% and Greater Owned, But Not Greater Than 25%
Coastal Screen and Rail, LLC		Senior Secured Term Loan, due 01/2023 (12.00%; 10.50% Cash/1.50% PIK)	(16)	$	—	$	7,089	$	637,568	$	6,328,000	$	1,040,820	$	(225,216)	$	7,143,604
Flight Lease XII, LLC																		Flight Lease XII, LLC	Common Equity Interest (19.23% fully diluted common equity)	(7) (11)	$	(191,824)	$	43,776	$	—	$	345,980	$	43,777	$	(191,824)	$	197,933

Kleen-Tech Acquisition, LLC																		Kleen-Tech Acquisition, LLC	Senior Secured Term Loan, due 05/2024	(16) (21)	—		31,291		1,147,960		6,819,708		524,499		(7,344,207)		—

		Revolving Line of Credit, due 07/2022 (10.11%; 3M LIBOR + 8.00%)	(6)	—		—		45,815		700,000		350,000		(950,000)		100,000			Senior Secured Revolving Line of Credit, due 05/2022	(21)	—		—		—		—		—		—		—

		Preferred Equity Interest (6.21% fully diluted Preferred Equity)	(7)	—		(126,811)		—		395,000		—		(126,811)		268,189			Common Equity Units (7.35% fully diluted common equity)	(7)	—		(8,044)		—		274,136		—		(8,044)		266,092

Flight Lease XII, LLC		Common Equity Interest (1,000 Units)	(7) (12)	—		—		140,028		636,000		—		—		636,000
																			Common Equity Warrants	(21)	440,118		(88,135)		—		275,104		440,118		(715,222)		—

National Program Management & Project Controls, LLC																		National Program Management & Project Controls, LLC	Senior Secured Term Loan, due 06/2023 (9.75%; 1M LIBOR + 8.25% with a 1.50% LIBOR floor)	(15)	—		(25,798)		428,440		5,566,763		15,299		(130,174)		5,451,888


Portfolio Company	Portfolio Company	Type of Investment (4) (5) (11) (19) (20)		Net Realized Gain (Loss)	Net Change in Unrealized Appreciation (Depreciation)	Amount of Dividends or Interest Credited to Income (1)	December 31, 2018 Value	Gross Additions (2)	Gross Reductions (3)	September 30, 2019 Value	Portfolio Company	Type of Investment (4) (5) (10) (18) (19)		Net Realized Gain (Loss)	Net Change in Unrealized Appreciation (Depreciation)	Amount of Dividends or Interest Credited to Income (1)	December 31, 2019 Value	Gross Additions (2)	Gross Reductions (3)	September 30, 2020 Value
Kleen-Tech Acquisition, LLC		Senior Secured Term Loan, due 05/2024 (15.00%; 13.00% Cash/2.00% PIK)	(17)	—	—	401,393	—	6,992,856	(116,667)	6,876,189
												Delayed Draw Term Loan, due 06/2023 (9.75%; 1M LIBOR + 8.25% with a 1.50% LIBOR floor)	(6)	—	161	2,680	—	64,291	(818)	63,473
		Revolving Line of Credit, due 05/2022 (13.00% Cash/2.00% PIK)	(6)	—	—	678	—	—	—	—
												Class A Membership Interest (5.10% fully diluted common equity)	(7)	—	2,538,371	—	4,799,331	2,538,370	—	7,337,701
		Common Equity Units (13.51% fully diluted)		—	—	—	—	250,000	—	250,000

		Common Equity Warrants (8.50% Common Equity)		—	—	—	—	186,970	—	186,970

National Program Management & Project Controls, LLC		Senior Secured Term Loan, due 06/2023 (12.05%; 1M LIBOR + 10.00%)	(16)	—	12,709	663,282	6,911,000	26,681	(144,376)	6,793,305

		Class A Membership Interest (574,392 Units)	(7) (10)	—	1,844,962	—	973,500	4,024,870	—	4,998,370

Northeast Metal Works LLC	Northeast Metal Works LLC	Junior Secured Term Loan, due 06/2020 (15.00%; 11.00% Cash/4.00% PIK)	(15) (22)	—	(1,169,762)	1,307,966	10,223,500	890,887	(1,169,762)	9,944,625	Northeast Metal Works LLC	Senior Secured Term Loan, due 06/2020 (10.00%; 7.00% Cash + 3.00% PIK)	(14)	—	(1,441,756)	1,184,383	11,596,969	397,922	(1,441,756)	10,553,135

		Revolving Line of Credit, due 12/2019 (15.00%)	(21) (22)	—	2,500	88,750	1,497,500	2,500	(1,500,000)	—

		Preferred Equity Interest (2,368 Class A Units; 12.0% cumulative preferred return)	(7) (22)	20,750	80,000	—	—	100,750	(100,750)	—		Preferred Equity Interest (22.79% fully diluted common equity; 12.0% cumulative preferred return)	(7)	—	—	—	—	—	—	—

Slappey Communications, LLC	Slappey Communications, LLC	Senior Secured Term Loan, due 05/2024 (13.00%; 3M LIBOR + 10.00% with a 2.50% LIBOR floor + 0.50% PIK)	(18)	—	—	270,392	—	6,702,692	—	6,702,692	Slappey Communications, LLC	Senior Secured Term Loan, due 05/2024 (13.00%; 3M LIBOR + 10.00% with a 2.50% LIBOR floor + 0.50% PIK)	(17)	—	14,676	800,485	6,828,238	1,151,958	(198,288)	7,781,908

		Revolving Line of Credit, due 05/2023 (3M LIBOR + 10.00% with a 2.50% LIBOR floor)	(6)	—	—	854	—	—	—	—		Senior Secured Revolving Line of Credit, due 05/2023 (3M LIBOR + 10.00% with a 2.50% LIBOR floor)	(6)	—	—	313	—	100,000	(100,000)	—

		Common Equity Units (7.74% fully diluted)		—	—	—	—	200,000	—	200,000		Common Equity Units (12.90% preferred equity / 7.59% fully diluted common equity)	(7)	—	129,965	—	227,035	129,965	—	357,000

Surge Hippodrome Holdings LLC											Surge Hippodrome Holdings LLC	Senior Secured Term Loan (Last Out), due 08/2024 (13.50%; 3M LIBOR + 11.50% with a 2.00% LIBOR floor)	(16)	—	(366,294)	600,173	5,131,294	39,158	(366,294)	4,804,158

												Common Equity Interest (10.08% fully diluted common equity)	(7)	—	(287,475)	—	360,000	—	(287,475)	72,525

												Common Equity Warrants (9.50% fully diluted common equity)	(7)	—	(184,693)	—	237,579	—	(184,693)	52,886

V-Tek, Inc.											V-Tek, Inc.	Senior Secured Term Loan, due 03/2022 (6.00%)	(12)	—	(593,838)	266,294	3,175,500	28,338	(593,838)	2,610,000

Portfolio Company Type of Investment (4) (5) (11) (19) (20) Net Realized Gain (Loss) Net Change in Unrealized Appreciation (Depreciation) Amount of Dividends or Interest Credited to Income (1) December 31, 2018 Value Gross Additions (2) Gross Reductions (3) September 30, 2019 Value
Surge Hippodrome Holdings LLC Senior Secured Term Loan (Last Out), due 08/2024 (13.75%; 3M LIBOR + 11.50%) (17) — — 132,946 — 5,119,221 — 5,119,221
Common Equity Interest (10.10% fully diluted) (7) — — — — 360,000 — 360,000
Common Equity Warrants (9.50% fully diluted) (7) — — — — 237,579 — 237,579
V-Tek, Inc. Senior Secured Term Loan, due 03/2022 (13.25%; 3M LIBOR + 11.00%) (13) — (25,836) 365,131 3,341,000 18,086 (157,086) 3,202,000
Revolving Line of Credit, due 03/2021 (8.75%; 3M LIBOR + 6.50%) (6) — — 104,519 1,336,097 200,000 — 1,536,097
Common Stock (90 Shares) (7) — 40,500 — 188,500 40,500 — 229,000
Total 5% And Greater Owned, But Not Greater Than 25% Owned Portfolio Companies $ 20,750 $ 665,351 $ 4,159,322 $ 32,530,097 $ 26,744,412 $ (4,490,668) $ 54,783,841


Portfolio Company	Type of Investment (4) (5) (10) (18) (19)		Net Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)		Amount of Dividends or Interest Credited to Income (1)		December 31, 2019 Value		Gross Additions (2)		Gross Reductions (3)		September 30, 2020 Value
	Senior Secured Revolving Line of Credit, due 03/2021 (6.75%; 3M LIBOR + 6.50%)	(6)	—		(78,097)		87,888		1,536,097		—		(78,097)		1,458,000

	Common Stock (8.98% fully diluted common equity)	(7)	—		(257,500)		—		257,500		—		(257,500)		—

Total 5% And Greater Owned, But Not Greater Than 25% Owned Portfolio Companies			$	248,294	$	(573,390)	$	4,518,616	$	47,431,234	$	5,473,695	$	(11,898,230)	$	41,006,699


(1)			Represents the total amount of interest and fees credited to income for the portion of the year an investment was included in Affiliate categories.
(2)			Gross additions include ~~increase~~increases in the total cost basis of investments resulting from a new portfolio investment and accrued PIK interest.
(3)			Gross reductions include decreases in the total cost basis of investments resulting from principal or PIK repayments or sales.
(4)			Debt investments are ~~income producing~~income-producing investments unless an investment is on non-accrual. Common equity, preferred equity, residual values and warrants are ~~non-income producing.~~non-income-producing.
(5)			For each loan, the Company has provided the interest rate in effect on the date presented, as well as the contractual components of that interest rate. In the case of the Company's variable or floating rate loans, the interest rate in effect takes into account the applicable LIBOR ~~rate~~ in effect on the date presented or, if higher, the applicable LIBOR floor.
(6)			Credit facility has an unfunded ~~commitments~~commitment in addition to the amounts shown in the Consolidated Schedule of Investments. See Note 8 in the Notes to Consolidated Financial Statements for further discussion on portion of commitment unfunded atas of September 30, ~~2019.~~2020.
(7)			~~The~~This investment is ~~held~~owned by HCAP Equity Holdings, LLC, one of the Company's taxable blocker ~~subsidiary.~~subsidiaries.
(8)			Infinite Care LLC ("ICC") is in default under the terms of its credit agreement. In October 2017, the Company exercised its rights under a stock pledge of the borrower. The Company formed a wholly owned subsidiary, HCAP ICC, LLC, to exercise its proxy right under the pledge agreement and take control of the board of ICC. The loan was placed on non-accrual status in Q4 2017. In January 2018, HCAP took control of the borrower's equity after accelerating the debt and auctioning the borrower’s equity in a public sale. The Company bid a portion of its outstanding debt to gain control of the company. Upon completion of this process the Company converted $2.0 million of its debt investment in the borrower to membership interests.
(9)			This is an equity investment that receives a cash flow stream based on lease payments received by Flight Lease VII, LLC. Flight Lease VII, LLC owns an aircraft that was leased to one lessee. The lessee had been in arrears on its lease payments and in June of 2018, Flight Lease VII, LLC terminated the lease. As a result of the cessation of cash flows, future payments on this equity investment will resume only if Flight Lease VII, LLC is successful in obtaining a new lessee or sells the aircraft.
(10)			During the nine months ended September 30, 2019, the Company's voting rights ownership interest increased to over the 5.0% affiliate investment classification threshold. Previously, this portfolio company was classified as a non-control/non-affiliated portfolio company.
~~(11)~~			The Company's non-qualifying assets, on a fair value basis, ~~comprise~~total approximately ~~1.2%~~1.0% of the Company's total assets as of September 30, 2020.
~~(12)~~(11)			Industry: Aerospace & Defense
~~(13)~~(12)			Industry: Capital Equipment
~~(14)~~(13)			Industry: Healthcare & Pharmaceuticals
~~(15)~~(14)			Industry: Metals & Mining
~~(16)~~(15)			Industry: Construction & Building
~~(17)~~(16)			Industry: Services: Business
~~(18)~~(17)			Industry: Telecommunications
~~(19)~~(18)			All of the Company's portfolio investments are generally subject to restrictions on resale as "restricted securities," unless otherwise noted.
~~(20)~~(19)			The Company's Credit Facility is secured by all of the Company's assets. Refer to Note 3 in the accompanying ~~notes~~Notes to the ~~unaudited consolidated financial statements~~Consolidated Financial Statements for more information.
(20)			This debt investment is on non-accrual status as of September 30, 2020.
(21)			The Company exited this investment in ~~2019.~~
~~(22)~~			On May 22, 2019, Northeast Metal Works, LLC entered into a new financing agreement with a senior lender. In conjunction with this, Northeast Metal Works, LLC and the Company entered into a subordination and inter-creditor agreement where the Company thereby agreed to subordinate its indebtedness to the senior lender throughout the earlier of the due date of the new financing agreement, which expires on May 31, 2020, or the date in which Northeast Metal Works, LLC has fully satisfied the indebtedness to the new senior lender. In addition, the new senior lender obtained a first priority interest in certain assets of the entity. As a result, the Company has reclassified its term loan investment in Northeast Metal Works, LLC from senior secured to junior secured. In connection with the new financing agreement, Northeast Metal Works, LLC paid down the existing $1.5 million revolving line of credit by approximately $1.1 million. The remaining $0.4 million commitment under the revolving line of credit was transferred to the junior secured term loan as an increase in the outstanding principal amount. Finally, as part of the refinancing transaction, the Company sold 125 units of its preferred equity interest in Northeast Metal Works, LLC to a third party and recognized a realized gain of $20,750. On September 27, 2019, the senior lender issued a Notice of Default to Northeast Metal Works. The Notice of Default prohibited Northeast Metal Works from making any further interest payments to the Company, despite having the cash on hand to do so. On October 31, 2019, the Company extended $1.7 million in additional credit to Northeast Metal Works by increasing the commitment on its junior secured term loan. Northeast Metal Works used the proceeds to payoff the existing senior secured debt and the senior secured debt was subsequently terminated. As a result of this transaction, the Company's junior secured term loan converted into a senior secured term loan. 2020.

As of September 30, ~~2019,~~2020, affiliate investments consisted of the following:


Type	Type	Amortized Cost		Fair Value		% of Fair Value		% of Net Assets		Type	Amortized Cost		Fair Value		% of Fair Value		% of Net Assets
Senior Secured Debt	Senior Secured Debt	$	44,645,844	$	44,879,078	38.8	%	65.3	%	Senior Secured Debt	$	44,305,116	$	41,208,562	42.9	%	68.0	%
Junior Secured Debt		11,308,499		9,944,625		8.6	%	14.4	%
Equity	Equity	12,760,873		7,946,914		6.9	%	11.5	%	Equity	11,977,272		8,610,136		9.0	%	14.2	%
Total	Total	$	68,715,216	$	62,770,617	54.3	%	91.2	%	Total	$	56,282,388	$	49,818,698	51.9	%	82.2	%

The rate ~~type~~types of affiliate debt investments at fair value as of September 30, ~~2019~~2020 consisted of the following:


Type	Type	Amortized Cost		Fair Value		% of Fair Value		% of Net Assets		Type	Amortized Cost		Fair Value		% of Fair Value		% of Net Assets
Fixed Rate	Fixed Rate	$	25,260,998	$	23,964,418	20.7	%	34.8	%	Fixed Rate	$	21,260,072	$	19,039,135	19.8	%	31.4	%
Floating Rate	Floating Rate	30,693,345		30,859,285		26.7	%	44.9	%	Floating Rate	23,045,044		22,169,427		23.1	%	36.6	%
Total	Total	$	55,954,343	$	54,823,703	47.4	%	79.7	%	Total	$	44,305,116	$	41,208,562	42.9	%	68.0	%

The industry composition of affiliate investments at fair value as of September 30, ~~2019~~2020 consisted of the following:


Industry	Industry	Amortized Cost		Fair Value		% of Fair Value		% of Net Assets		Industry	Amortized Cost		Fair Value		% of Fair Value		% of Net Assets
Aerospace & Defense	Aerospace & Defense	$	970,563	$	1,216,806	1.1	%	1.8	%	Aerospace & Defense	$	523,932	$	523,932	0.6	%	0.9	%
Capital Equipment	Capital Equipment	4,915,080		4,967,097		4.3	%	7.2	%	Capital Equipment	4,905,796		4,068,000		4.2	%	6.7	%
Construction & Building	Construction & Building	16,827,201		19,303,468		16.6	%	28.1	%	Construction & Building	8,252,987		12,853,062		13.4	%	21.2	%
Healthcare & Pharmaceuticals	Healthcare & Pharmaceuticals	13,245,702		7,405,970		6.4	%	10.8	%	Healthcare & Pharmaceuticals	13,695,702		8,486,000		8.8	%	14.0	%
Metals & Mining	Metals & Mining	12,824,019		9,944,625		8.6	%	14.4	%	Metals & Mining	15,028,890		10,553,135		11.0	%	17.4	%
Services: Business	Services: Business	13,029,959		13,029,959		11.3	%	18.9	%	Services: Business	6,018,031		5,195,661		5.4	%	8.6	%
Telecommunications	Telecommunications	6,902,692		6,902,692		6.0	%	10.0	%	Telecommunications	7,857,050		8,138,908		8.5	%	13.4	%
Total	Total	$	68,715,216	$	62,770,617	54.3	%	91.2	%	Total	$	56,282,388	$	49,818,698	51.9	%	82.2	%

The geographic concentrations of affiliate investments at fair value as of September 30, ~~2019~~2020 consisted of the following:


United States Region	United States Region	Amortized Cost		Fair Value		% of Fair Value		% of Net Assets		United States Region	Amortized Cost		Fair Value		% of Fair Value		% of Net Assets
West	West	$	34,974,832	$	31,477,901	27.2	%	45.7	%	West	$	27,104,485	$	25,673,154	26.7	%	42.4	%
Northeast										Northeast	20,796,921		15,482,704		16.2	%	25.5	%
South	South	15,199,565		15,631,291		13.5	%	22.7	%	South	8,380,982		8,662,840		9.0	%	14.3	%
Northeast		18,540,819		15,661,425		13.6	%	22.8	%
Total	Total	$	68,715,216	$	62,770,617	54.3	%	91.2	%	Total	$	56,282,388	$	49,818,698	51.9	%	82.2	%

See accompanying notes to unaudited consolidated financial statements.

Harvest Capital Credit Corporation

Consolidated Schedule of Investments in and Advances to Affiliates

Year Ended December 31, ~~2018~~2019


Portfolio Company	Portfolio Company	Type of Investment (4) (5) (10) (17) (20)		Net Realized Loss		Net Change in Unrealized Appreciation (Depreciation)		Amount of Dividends or Interest Credited to Income (1)		December 31, 2017 Value		Gross Additions (2)		Gross Reductions (3)		December 31, 2018 Value		Portfolio Company	Type of Investment (4) (5) (11) (19) (20)		Net Realized Loss		Net Change in Unrealized Appreciation (Depreciation)		Amount of Dividends or Interest Credited to Income (1)		December 31, 2018 Value		Gross Additions (2)		Gross Reductions (3)		December 31, 2019 Value
More than 25% Owned	More than 25% Owned																	More than 25% Owned
Flight Lease XI, LLC		Common Equity Interest (400 Units)	(11) (18)	$	156,347	$	(127,421)	$	92,791	$	327,421	$	—	$	(327,421)	$	—

Flight Lease VII, LLC	Flight Lease VII, LLC	Common Equity Interest (46.14% fully diluted interest)	(11) (19)	(241,963)		27,424		38,144		829,849		96,424		(241,962)		684,311		Flight Lease VII, LLC	Common Equity Interest (46.14% fully diluted common equity)	(9) (12)	$	(271,811)	$	—	$	—	$	684,311	$	—	$	(271,811)	$	412,500

Infinite Care, LLC	Infinite Care, LLC	Senior Secured Term Loan, due 2/2019 (14.51%; 1M LIBOR + 6.00% with a 0.42% LIBOR floor plus 6.00% PIK)	(8) (13)	—		2,940,646		—		3,492,000		3,221,067		(2,765,067)		3,948,000		Infinite Care, LLC	Senior Secured Term Loan, due 01/2021 (3.0%)	(8) (14)	—		(164,400)		—		3,948,000		98,949		(263,349)		3,783,600

		Revolving Line of Credit, due 2/2019 (14.51%; 1M LIBOR + 12.00% with a 0.42% LIBOR floor	(8)	—		(3,000)		—		2,065,000		1,654,000		(3,000)		3,716,000			Senior Secured Revolving Line of Credit, due 01/2021 (3.0%)	(8)	—		(7,500)		—		3,716,000		637,271		(144,771)		4,208,500

		Membership Interest (100% membership interests)	(7) (8)	—		(2,649,000)		—		—		2,649,000		(2,649,000)		—			Membership Interest (100% membership interests)	(7) (12)	—		(300,000)		—		—		300,000		(300,000)		—

Total More Than 25% Owned Portfolio Companies	Total More Than 25% Owned Portfolio Companies			$	(85,616)	$	188,649	$	130,935	$	6,714,270	$	7,620,491	$	(5,986,450)	$	8,348,311	Total More Than 25% Owned Portfolio Companies			$	(271,811)	$	(471,900)	$	—	$	8,348,311	$	1,036,220	$	(979,931)	$	8,404,600

5% and Greater Owned, But Not Greater Than 25%	5% and Greater Owned, But Not Greater Than 25%																	5% and Greater Owned, But Not Greater Than 25%
Coastal Screen and Rail, LLC		Senior Secured Term Loan, due 01/2023 (12.00%; 10.50% Cash/1.50% PIK)	(16)	$	—	$	60,205	$	758,954	$	—	$	6,503,278	$	(175,278)	$	6,328,000
Flight Lease XII, LLC																		Flight Lease XII, LLC	Common Equity Interest (19.23% fully diluted common equity)	(7) (12)	$	—	$	(290,020)	$	140,028	$	636,000	$	—	$	(290,020)	$	345,980

Kleen-Tech Acquisition, LLC																		Kleen-Tech Acquisition, LLC	Senior Secured Term Loan, due 05/2024 (15.00%; 13.00% Cash plus 2.00% PIK)	(17)	—		(31,290)		702,214		—		7,055,165		(235,457)		6,819,708

		Revolving Line of Credit, due 07/2022 (10.74%; 3M LIBOR + 8.00%)	(6)	—		—		56,288		—		835,000		(135,000)		700,000			Senior Secured Revolving Line of Credit, due 05/2022 (15.00%; 13.00% Cash plus 2.00% PIK)	(6)	—		—		1,189		—		—		—		—

		Preferred Equity Interest (6.21% fully diluted Common Equity)		—		245,000		—		—		395,000		—		395,000			Common Equity Units (7.96% fully diluted common equity)	(7)	—		24,136		—		—		274,136		—		274,136

Flight Lease XII, LLC		Common Equity Interest (1,000 Units)	(7) (11)	—		129,741		222,925		616,502		129,741		(110,243)		636,000

24/7 Software, Inc. (formerly Instant Sales Solutions, Inc.)		Senior Secured Term Loan	(14) (18)	—		—		279,923		2,859,272		—		(2,859,272)		—
																			Common Equity Warrants (8.50% fully diluted common equity)	(7)	—		88,135		—		—		275,104		—		275,104
		Revolving Line of Credit	(18)	—		—		—		—		—		—		—
National Program Management & Project Controls, LLC																		National Program Management & Project Controls, LLC	Senior Secured Term Loan, due 06/2023 (10.05%; 1M LIBOR + 8.25%)	(16)	—		8,305		876,031		6,911,000		26,679		(1,370,916)		5,566,763

Portfolio Company Type of Investment (4) (5) (10) (17) (20) Net Realized Loss Net Change in Unrealized Appreciation (Depreciation) Amount of Dividends or Interest Credited to Income (1) December 31, 2017 Value Gross Additions (2) Gross Reductions (3) December 31, 2018 Value
Common Stock (950 Shares) (18) 259,506 (350,000) — 1,300,000 — (1,300,000) —
Northeast Metal Works, LLC Senior Secured Term Loan, due 12/2019 (17.00%; 10.50% Cash plus 6.50% PIK) (15) — (93,583) 1,734,426 9,652,000 647,967 (76,467) 10,223,500
Revolving Line of Credit, due 12/2019 (15.00%) (9) — 15,500 231,500 1,482,000 165,500 (150,000) 1,497,500
Preferred Equity Interest (2,493 Class A Units; 12.0% cumulative preferred return) (7) 398 (1,476,520) — 1,481,000 — (1,481,000) —
V-Tek, Inc. Senior Secured Term Loan, due 03/2022 (13.75%; 3M LIBOR + 11.00%) (12) — (94,673) 489,831 3,500,000 — (159,000) 3,341,000
Senior Secured Revolver, due 03/2021 (9.25%; 3M LIBOR + 6.50%) (6) — — 111,697 886,097 450,000 — 1,336,097
Common Stock (90 Shares) (7) — (162,500) — 351,000 — (162,500) 188,500
WorkWell, LLC Senior Secured Term Loan (13) (18) (636,050) 654,993 — 3,856,000 654,993 (4,510,993) —
Preferred Stock (250,000 Shares) (18) (249,990) 250,000 — — 250,000 (250,000) —
Common Stock (250,000 Shares) (18) — — — — — — —
Total 5% and Greater Owned, But Not Greater Than 25% Owned Portfolio Companies $ (626,136) $ (821,837) $ 3,885,544 $ 25,983,871 $ 10,031,479 $ (11,369,753) $ 24,645,597


Portfolio Company	Type of Investment (4) (5) (11) (19) (20)		Net Realized Loss	Net Change in Unrealized Appreciation (Depreciation)	Amount of Dividends or Interest Credited to Income (1)	December 31, 2018 Value	Gross Additions (2)	Gross Reductions (3)	December 31, 2019 Value

	Class A Membership Interest (5.10% fully diluted common equity)	(7) (10)	—	1,645,922	—	973,500	3,825,831	—	4,799,331

Northeast Metal Works, LLC	Senior Secured Term Loan, due 06/2020 (15.00%; 11.00% Cash plus 4.00% PIK)	(15) (22)	—	(1,324,367)	1,788,632	10,223,500	2,697,836	(1,324,367)	11,596,969

	Revolving Line of Credit, due 12/2019	(21) (22)	—	2,500	88,750	1,497,500	2,500	(1,500,000)	—

	Preferred Equity Interest (22.79% fully diluted common equity; 12.0% cumulative preferred return)	(7) (22)	20,750	80,000	—	—	100,750	(100,750)	—

Slappey Communications, LLC	Senior Secured Term Loan, due 05/2024 (13.00%; 3M LIBOR + 10.00% with a 2.50% LIBOR floor plus 0.50% PIK)	(18)	—	110,182	503,510	—	6,828,238	—	6,828,238

	Senior Secured Revolving Line of Credit, due 05/2023 (3M LIBOR + 10.00% with a 2.50% LIBOR floor plus 0.50% PIK)	(6)	—	—	1,493	—	—	—	—

	Common Equity Units (12.90% preferred equity / 7.59% fully diluted common equity	(7)	—	27,035	—	—	227,035	—	227,035

Surge Hippodrome Holdings LLC	Senior Secured Term Loan (Last Out), due 08/2024 (13.50%; 3M LIBOR + 11.50%)	(17)	—	—	334,580	—	5,131,294	—	5,131,294

	Common Equity Interest (10.10% fully diluted common equity)	(7)	—	—	—	—	360,000	—	360,000

	Common Equity Warrants (9.50% fully diluted common equity)	(7)	—	—	—	—	237,579	—	237,579

V-Tek, Inc.	Senior Secured Term Loan, due 03/2022 (13.00%; 3M LIBOR + 11.00%)	(13)	—	(14,714)	480,646	3,341,000	24,214	(189,714)	3,175,500


Portfolio Company	Type of Investment (4) (5) (11) (19) (20)		Net Realized Loss		Net Change in Unrealized Appreciation (Depreciation)		Amount of Dividends or Interest Credited to Income (1)		December 31, 2018 Value		Gross Additions (2)		Gross Reductions (3)		December 31, 2019 Value
	Senior Secured Revolving Line of Credit, due 03/2021 (8.50%; 3M LIBOR + 6.50%)	(6)	—		—		138,062		1,336,097		200,000		—		1,536,097

	Common Stock (8.98% fully diluted common equity)	(7)	—		69,000		—		188,500		69,000		—		257,500

Total 5% and Greater Owned, But Not Greater Than 25% Owned Portfolio Companies			$	20,750	$	394,824	$	5,055,135	$	25,107,097	$	27,335,361	$	(5,011,224)	$	47,431,234


(1)			Represents the total amount of interest and fees credited to income for the portion of the year an investment was included in Affiliate categories.
(2)			Gross additions include ~~increase~~increases in the total cost basis of investments resulting from new portfolio investment and accrued PIK interest.
(3)			Gross reductions include decreases in the total cost basis of investments resulting from principal or PIK repayments or sales.
(4)			Debt investments are ~~income producing~~income-producing investments unless an investment is on non-accrual. Common equity, preferred equity, residual values and warrants are ~~non-income producing.~~non-income-producing.
(5)			For each loan, the Company has provided the interest rate in effect on the date presented, as well as the contractual components of that interest rate. In the case of the Company's variable or floating rate loans, the interest rate in effect takes into account the applicable LIBOR rate in effect on ~~the date presented~~December 31, 2019 or, if higher, the applicable LIBOR floor.
(6)			Credit facility has an unfunded ~~commitments~~commitment in addition to the amounts shown in the Consolidated Schedule of Investments. See Note 8 in the Notes to Consolidated Financial Statements for further discussion on portion of commitment unfunded at December 31, ~~2018.~~2019.
(7)			~~The~~This investment is ~~held~~owned by HCAP Equity Holdings, LLC, one of the Company's taxable blocker ~~subsidiary.~~subsidiaries.
(8)			Infinite Care LLC ("ICC") is in default under the terms of its credit ~~agreement.~~agreement and was on non-accrual status as of December 31, 2019. In October 2017, the Company exercised its rights under a stock pledge of ~~the borrower.~~ICC. The Company formed a wholly owned subsidiary, HCAP ICC, LLC, to exercise its proxy right under the pledge agreement and take control of the board of ICC. The loan was placed on non-accrual status in Q4 2017. In January 2018, HCAP took control of the borrower's equity after accelerating the debt and auctioning the borrower’s equity in a public sale. The Company bid a portion of its outstanding debt to gain control of the company. Upon completion of this process the Company converted $2.0 million of its debt investment in ~~the borrower to~~ICC into shares of ICC's membership interests.
(9)			The interest rate on the revolver is 11% prior to following the interim advance term; 13.5% from the first amendment effective date to February 28, 2018; 14.25% from March 1, 2018 through May 31, 2018 and 15% from June 1, 2018 until expiration of the interim advance. The interest rate on the term loan is 11% prior to and following the interim advance term; 10.5% cash pay plus 6% PIK from the first amendment date trough February 28, 2018; 10.5% cash pay plus 6.25% PIK from March 1, 2018 to May 31, 2018; 10.5% cash pay plus 6.5% PIK from 6/1/18 until expiration of the interim advance.
~~(10)~~			~~The Company's non-qualifying assets, on a fair value basis, total approximately 2.0% of the Company's total assets.~~
~~(11)~~			~~Industry: Aerospace & Defense~~
~~(12)~~			~~Industry: Capital Equipment~~
~~(13)~~			~~Industry: Healthcare & Pharmaceuticals~~
~~(14)~~			~~Industry: High Tech Industries~~
~~(15)~~			~~Industry: Metals & Mining~~
~~(16)~~			~~Industry: Construction & Building~~
~~(17)~~			~~All of the Company's portfolio investments are generally subject to restrictions on resale as "restricted securities," unless otherwise noted.~~
~~(18)~~			~~The Company exited this investment in 2018.~~
~~(19)~~			This is an equity investment that receives a cash flow stream based on lease payments received by Flight Lease VII, LLC. Flight Lease VII, LLC owns an aircraft that was leased to one lessee. The lessee had been in arrears on its lease payments and in June of 2018, Flight Lease VII, LLC terminated the lease. As a result of the cessation of cash flows, future payments on this equity investment will resume only if Flight Lease VII, LLC is successful in obtaining a new lessee or sells the aircraft. ~~For~~
(10)			During the year ended December 31, ~~2018,~~2019, the ~~Company recognized an impairment charge~~Company's voting rights ownership interest increased to over the 5.0% affiliate investment classification threshold. Previously, this portfolio company was classified as a non-control/non-affiliated portfolio company.
(11)			The Company's non-qualifying assets, on a fair value basis, total approximately 1.0% of ~~$0.2 million, which is presented in~~ the ~~net realized gains (losses) - control~~Company's total assets as of December 31, 2019.
(12)			Industry: Aerospace & Defense
(13)			Industry: Capital Equipment
(14)			Industry: Healthcare & Pharmaceuticals
(15)			Industry: Metals & Mining
(16)			Industry: Construction & Building
(17)			Industry: Services: Business
(18)			Industry: Telecommunications
(19)			All of the Company's portfolio investments ~~balance~~are generally subject to restrictions on ~~the consolidated Statement of Operations.~~ resale as "restricted securities," unless otherwise noted.
(20)			The Company's Credit Facility is secured by all of the Company's assets. Refer to Note 3 in the ~~accompanying notes~~Notes to the ~~unaudited consolidated financial statements~~audited Consolidated Financial Statements included in the Company's annual report on Form 10-K for the fiscal year ended December 31, 2019 for more information.
(21)			The Company exited this investment in 2019.
(22)			On May 22, 2019, Northeast Metal Works, LLC ("Northeast Metal Works") entered into a new financing agreement with a senior lender. In conjunction with this, Northeast Metal Works and the Company entered into a subordination and inter-creditor agreement where the Company thereby agreed to subordinate its indebtedness to the senior lender through the earlier of the due date of the new financing agreement, which expires on May 31, 2020, or the date on which Northeast Metal Works has fully satisfied the indebtedness to the new senior lender. In addition, the new senior lender obtained a first priority interest in certain assets of Northeast Metal Works. As a result, the Company reclassified its term loan investment in Northeast Metal Works from senior secured to junior secured. In connection with the new financing agreement, Northeast Metal Works paid down the existing $1.5 million revolving line of credit by approximately $1.1 million. The remaining $0.4 million commitment under the revolving line of credit was transferred to the junior secured term loan as an increase in the outstanding principal amount. Finally, as part of the refinancing transaction, the Company sold 125 units of its preferred equity interest in Northeast Metal Works to a third party and recognized a realized gain of $20,750. On September 27, 2019, the senior lender issued a Notice of Default to Northeast Metal Works. The Notice of Default prohibited Northeast Metal Works from making any further interest payments to the Company, despite having the cash on hand to do so. On October 31, 2019, the Company extended $1.7 million in additional credit to Northeast Metal Works by increasing the commitment on its junior secured term loan. Northeast Metal Works used the proceeds to pay off the existing senior secured debt and the senior secured debt was subsequently terminated. As a result of this transaction, the Company's junior secured term loan converted into a senior secured term loan.

As of December 31, ~~2018,~~2019, affiliate investments consisted of the following:


Type	Type	Amortized Cost		Fair Value		% of Fair Value		% of Net Assets		Type	Amortized Cost		Fair Value		% of Fair Value		% of Net Assets
Senior Secured Debt	Senior Secured Debt	$	30,660,353	$	31,090,097	32.8	%	39.7	%	Senior Secured Debt	$	49,627,468	$	48,646,669	41.6	%	72.8	%
Equity	Equity	8,618,588		1,903,811		2.0	%	2.4	%	Equity	12,442,567		7,189,165		6.2	%	10.8	%
Total	Total	$	39,728,941	$	32,993,908	34.8	%	42.1	%	Total	$	62,070,035	$	55,835,834	47.8	%	83.6	%

The rate type of affiliate debt investments at fair value as of December 31, ~~2018~~2019 was as follows:


Type	Type	Amortized Cost		Fair Value		% of Fair Value		% of Net Assets		Type	Amortized Cost		Fair Value		% of Fair Value		% of Net Assets
Fixed Rate	Fixed Rate	$	18,185,407	$	18,049,000	19.1	%	23.1	%	Fixed Rate	$	27,563,148	$	26,408,777	22.6	%	39.5	%
Floating Rate	Floating Rate	12,474,946		13,041,097		13.7	%	16.6	%	Floating Rate	22,064,320		22,237,892		19.0	%	33.3	%
Total	Total	$	30,660,353	$	31,090,097	32.8	%	39.7	%	Total	$	49,627,468	$	48,646,669	41.6	%	72.8	%

The industry composition of affiliate investments at fair value as of December 31, ~~2018~~2019 consisted of the following:


Industry	Industry	Amortized Cost		Fair Value		% of Fair Value		% of Net Assets		Industry	Amortized Cost		Fair Value		% of Fair Value		% of Net Assets
Aerospace & Defense	Aerospace & Defense	$	1,074,068	$	1,320,311	1.4	%	1.7	%	Aerospace & Defense	$	802,257	$	758,480	0.7	%	1.1	%
Capital Equipment	Capital Equipment	4,828,244		4,865,597		5.1	%	6.2	%	Capital Equipment	4,877,458		4,969,097		4.3	%	7.4	%
Construction & Building	Construction & Building	7,117,795		7,423,000		7.8	%	9.4	%	Construction & Building	8,278,753		10,366,094		8.9	%	15.5	%
Healthcare & Pharmaceuticals	Healthcare & Pharmaceuticals	12,745,702		7,664,000		8.1	%	9.8	%	Healthcare & Pharmaceuticals	13,545,702		7,992,100		6.8	%	12.0	%
Metals & Mining	Metals & Mining	13,513,132		11,721,000		12.4	%	15.0	%	Metals & Mining	14,630,968		11,596,969		9.9	%	17.4	%
Services: Business										Services: Business	13,016,841		13,097,821		11.2	%	19.6	%
Telecommunications										Telecommunications	6,918,056		7,055,273		6.0	%	10.6	%
Total	Total	$	39,278,941	$	32,993,908	34.8	%	42.1	%	Total	$	62,070,035	$	55,835,834	47.8	%	83.6	%

The geographic concentrations of affiliate investments at fair value as of December 31, ~~2018~~2019 consisted of the following:


United States Region	United States Region	Amortized Cost		Fair Value		% of Fair Value		% of Net Assets		United States Region	Amortized Cost		Fair Value		% of Fair Value		% of Net Assets
West	West	$	17,573,946	$	12,529,597	13.2	%	16.0	%	West	$	33,989,881	$	30,696,239	26.3	%	46.0	%
Northeast	Northeast	13,513,132		11,721,000		12.4	%	15.0	%	Northeast	20,359,841		17,325,842		14.8	%	25.9	%
South	South	8,191,863		8,743,311		9.2	%	11.1	%	South	7,720,313		7,813,753		6.7	%	11.7	%
Total	Total	$	39,278,941	$	32,993,908	34.8	%	42.1	%	Total	$	62,070,035	$	55,835,834	47.8	%	83.6	%

See accompanying notes to unaudited consolidated financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Some of the statements in this ~~quarterly report~~Quarterly Report on Form 10-Q constitute forward-looking statements, which relate to future events or our future performance or financial condition. ~~The forward-looking~~Forward-looking statements ~~contained in this quarterly report on Form 10-Q involve risks and uncertainties, including~~may include, among other things, statements as ~~to:~~

•to our future operating results, ~~including the performance of our existing investments;~~

•~~the introduction, withdrawal, success and timing of business initiatives and strategies;~~

•~~changes in political, economic or industry conditions, the interest rate environment or financial and capital markets, which could result in changes in the value of our assets;~~

•~~the relative and absolute investment performance and operations of our investment adviser;~~

•~~the impact of increased competition;~~

•~~the impact of investments we intend to make and future acquisitions and divestitures;~~

•~~our ability to turn potential investment opportunities into transactions and thereafter into completed and successful investments;~~

•~~the unfavorable resolution of any future legal proceedings;~~

•our business prospects and the prospects of our portfolio ~~companies;~~

•companies, the impact of the investments that we expect to make, the ability of our ~~regulatory structure~~portfolio companies to achieve their objectives, our expected financings and ~~tax status;~~

•investments, the adequacy of our cash resources and working ~~capital;~~

•capital, and the timing of cash flows, if any, from the operations of our portfolio ~~companies;~~

•~~the impact of interest rate volatility on our results, particularly because we use leverage as part of our investment strategy;~~

•~~the ability of our portfolio companies to achieve their objective;~~

•~~the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to us or our investment adviser;~~

•~~our contractual arrangements and relationships with third parties;~~

•~~our ability to access capital and any future financings by us;~~

•~~the ability of our investment adviser to attract and retain highly talented professionals; and~~

•~~the impact of changes to tax legislation and, generally, our tax position.~~

companies. Such forward-looking statements may include statements preceded by, followed by or that otherwise include the words “may,” “might,” “will,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “estimate,” “anticipate,” “predict,” “potential,” ~~“plan”~~“plan,” variations of such words, and similar expressions.

Readers are cautioned that the forward-looking statements contained in this Quarterly Report on Form 10-Q are only predictions, are not guarantees of future performance, and are subject to risks, events, uncertainties and assumptions that are difficult to predict. Our actual results could differ materially from those implied or ~~similar words.~~expressed in the forward-looking statements, and future results could differ materially from historical performance, for any reason, including the risk factors discussed in this Quarterly Report on Form 10-Q, in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and in Item 1A entitled “Risk Factors” in Part I of our Annual Report on Form 10-K for the year ended December 31, 2019. Other factors that could cause our actual results and financial condition to differ materially include, but are not limited to:

•the performance of our existing investments;

•the introduction, withdrawal, success and timing of business initiatives and strategies;

•changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets, including with respect to changes from the impact of the Coronavirus ("COVID-19") pandemic;

•the length and duration of the COVID-19 outbreak in the United States as well as worldwide and the magnitude of the economic impact of that outbreak;

•the effect of the disruptions caused by the COVID-19 pandemic on our ability to continue to effectively manage our business and on the availability of equity and debt capital and our use of borrowed money to finance a portion of our investments;

•the relative and absolute investment performance and operations of our investment adviser;

•the impact of increased competition;

•the impact of investments we intend to make and future acquisitions and divestitures;

•our ability to turn potential investment opportunities into transactions and thereafter into completed and successful investments;

•the unfavorable resolution of any existing or future legal proceedings;

•the effect of the COVID-19 pandemic on our business prospects and the prospects of our portfolio companies, including our and their ability to achieve our respective objectives;

•our regulatory structure and tax status;

•the adequacy of our cash resources and working capital;

•the timing of cash flows, if any, from the operations of our portfolio companies;

•the impact of interest rate volatility on our results, particularly because we use leverage as part of our investment strategy;

•the impact of legislative and regulatory actions and reforms, including in response to the COVID-19 pandemic; and regulatory, supervisory or enforcement actions of government agencies relating to us or our investment adviser;

•our contractual arrangements and relationships with third parties, including but not limited to lenders and investors, including other investors in our portfolio companies;

•our ability to access capital and any future financings by us;

•the ability of our investment adviser to attract and retain highly talented professionals; and

•the impact of changes to tax legislation and, generally, our tax position.

We have based the forward-looking statements included in this ~~quarterly report~~Quarterly Report on Form 10-Q on information available to us on the date of this ~~quarterly~~ report, ~~on Form 10-Q,~~ and we assume no obligation to update any such forward-looking statements. ~~Actual results could differ materially from those anticipated in our forward-looking statements, and future results could differ materially from historical performance.~~ We undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law or SEC rule or regulation. You are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

The following analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes thereto contained elsewhere in this ~~quarterly report~~Quarterly Report on Form 10-Q.

Overview

We were formed as a Delaware corporation on November 14, ~~2012. We~~2012 and completed our initial public offering on May 7, ~~2013, raising $51.0 million in gross proceeds. On May 17, 2013, we raised another $6.5 million in gross proceeds from the closing of the initial public offering underwriters’ overallotment option.~~2013. Immediately prior to the initial public offering, we acquired Harvest Capital Credit LLC in a merger whereby the outstanding limited liability company membership interests of Harvest Capital Credit LLC were converted into shares of our common stock and we assumed and succeeded to all of Harvest Capital Credit LLC’s assets and liabilities, including its entire portfolio of investments. We issued 2,246,699 shares of our common stock for all of Harvest Capital Credit LLC’s 2,266,974 outstanding membership interests in connection with the merger. Harvest Capital Credit LLC is considered to be our predecessor for accounting purposes and, as such, its financial statements are our historical financial statements.

Our investment objective is to generate both current income and capital appreciation primarily by making direct investments in the form of ~~subordinated~~senior debt, ~~senior~~subordinated debt and, to a lesser extent, minority equity investments. We ~~plan~~seek to accomplish our investment objective by targeting investments in small ~~and~~to mid-sized U.S. private companies with annual revenues of less than $100 million and annual EBITDA (earnings before interest, taxes, depreciation and amortization) of less than $15 million. We believe that transactions involving companies of this size offer higher yielding investment opportunities, lower leverage levels and other terms more favorable than transactions involving larger companies.

We are an externally managed, closed-end, non-diversified management investment company that has elected to be regulated as a ~~business development company ("BDC")~~BDC under the ~~Investment Company Act of~~ 1940 (the "1940 Act"). As a BDC, we are required to comply with certain regulatory requirements. For instance, as a BDC, we must not acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Qualifying assets include investments in “eligible portfolio companies.” Under the relevant SEC rules, the term “eligible portfolio company” includes all private operating companies, companies whose securities are not listed on a national securities exchange, and certain public companies that have listed their securities on a national securities exchange and have a market capitalization of less than $250 million, in each case organized in the United States.Act.

We have also elected to be treated for U.S. federal income tax purposes as a ~~regulated investment company ("RIC")~~RIC under Subchapter M of the ~~Internal Revenue~~ Code, ~~(the "Code"),~~ and we intend to ~~receive RIC~~continue to qualify annually for tax treatment ~~annually.~~as a RIC.

Our investment adviser, HCAP Advisors, which is registered as an investment adviser under the Advisers Act, manages our day-to-day operations and provides investment advisory and management services to us, subject to the overall supervision of our board of directors and pursuant to an investment advisory and management agreement. HCAP Advisors also serves as our administrator pursuant to an administration agreement, through which it furnishes us with office facilities, equipment and clerical, bookkeeping and recordkeeping services and performs, or oversees the performance of, our required administrative services.

COVID-19 Update

The COVID-19 pandemic, and the related effects on the U.S. and global economies, has had adverse consequences for the business operations of certain of our portfolio companies and has adversely affected, and threatens to continue to adversely affect, our operations and the operations of HCAP Advisors.

We are continuing to monitor the COVID-19 pandemic and its impact on our business and the business of our portfolio companies, and we have continued to fund existing unfunded revolving lines of credit when requests have been made from our portfolio companies and intend to continue to do so. We may also participate in follow-on investments with respect to existing portfolio companies. Due to the adverse effects of the COVID-19 pandemic on our operations and our liquidity, we have decided to temporarily cease to make and originate new investments. We will decide to resume to make and originate new investments when we believe it is prudent in light of our capital needs and contractual obligations, and in the best interests of us and our stockholders.

Neither our management nor our board of directors can predict the full impact of the COVID-19 pandemic, including its duration and the magnitude of its economic impact, and we cannot predict the extent and duration of various travel restrictions, business closures and other quarantine measures imposed, or may in the future be imposed, by various local, state, and federal governmental authorities, as well as non-U.S. governmental authorities. As such, we are unable to accurately predict the extent to which COVID-19 will negatively affect our portfolio companies’ operating results or the impact that such disruptions may have on our results of operations and financial condition.

Depending on the duration and extent of the disruption to the operations of our portfolio companies, we expect that certain of our portfolio companies will, and will continue to, experience financial distress and possibly default on their financial obligations to us and their other capital providers. This risk is amplified with respect to portfolio companies operating in certain industries, such as aerospace and defense, beverage, food and tobacco, construction and building, consumer goods, retail, business services, energy services and others. For example, in June 2020, one of our portfolio companies, General Nutrition Centers, Inc. ("GNC"), filed for bankruptcy. Subsequent to September 30, 2020, GNC was restructured upon the finalization of its plan of reorganization, in connection with which we received approximately $1.9 million, representing a full payoff at par of each of our New Money DIP Term Loan and Roll-up DIP Term Loan. We also received an additional $1.2 million in cash, in connection with the finalization of its plan of reorganization, representing a discounted payoff of our $3.0 million original tranche B-2 Term Loan and received our pro rata share of a new Second Lien Term Loan with a par value of $1.8 million in the restructured GNC.

Some of our portfolio companies have taken steps to reduce operating expenses, such as significantly curtailing business operations, reducing headcounts and/or deferring capital expenditures, and we expect that additional portfolio companies may take similar steps if subjected to prolonged and severe financial distress, which may impair their business on a permanent basis. These developments would likely result in a decrease in the value of our investment in any such portfolio company, which decrease could be material. To mitigate these risks, a majority of our portfolio companies have applied for and received approval for loans under the U.S. Small Business Administration's ("SBA") Paycheck Protection Program ("PPP Loan") created as part of the recently enacted Coronavirus Aid, Relief, and Economic Security Act. Assuming that the PPP Loan proceeds are used to cover certain costs and expenses (e.g. documented payroll, mortgage interest, rent, and utility costs) and certain conditions are met, these PPP Loans could be completely forgiven by the U.S. federal government. Through the date of this filing, fifteen of our portfolio companies have applied for and received approval of PPP Loans totaling $30.3 million. As of September 30, 2020, we had four portfolio companies, with a combined fair value of $18.6 million, on non-accrual status. The effects of the COVID-19 pandemic discussed above increase the risk that we will place additional portfolio investments on non-accrual status in the future.

The COVID-19 pandemic and its effects on our portfolio companies have already had adverse material effects on our investment income, particularly our interest income, received from our investments, and we expect that such adverse effects will continue for the duration of the pandemic and potentially for some time thereafter. During the nine months ended September 30, 2020 we added three portfolio companies, ProAir Holdings Corporation, GK Holdings, Inc., and GNC, to our non-accrual assets. We may need to restructure our investments in some of our portfolio companies as a result of the adverse effects of the COVID-19 pandemic, which could result in reduced interest payments, an increase in the amount of “paid-in-kind” or “PIK” interest we receive, and the placement of any such investment on non-accrual status. Certain restructurings of our portfolio investments included in the borrowing base for our Credit Facility or any future credit facility could result in a reduction in any such borrowing base, which may have a material adverse effect on our results of operations, financial

condition and available liquidity going forward. In addition, any decreases in our net investment income would increase the portion of our cash flows dedicated to servicing borrowings, including existing borrowings and required amortization payments under the Credit Facility and existing borrowings under the 2022 Notes, and any distribution payments to stockholders. As discussed below, under “Financial Condition, Liquidity and Capital Resources,” our board of directors has already taken action to defer the record dates and payments of our March 2020 and April 2020 monthly dividends and has determined to suspend the declaration of any future dividends until further notice. Depending on the duration of the COVID-19 pandemic and the extent of its effects on our portfolio companies’ operations and our net investment income, any future distributions to our stockholders may be for amounts less than our historical distributions, may be made less frequently than historical practices, and may be made in part cash and part stock (as per each stockholder's election), subject to a limitation that the aggregate amount of cash to be distributed to all stockholders must be at least 10% of the aggregate declared distribution for distributions declared on or before December 31, 2020, and at least 20% of the aggregate declared distribution for distributions declared on or after January 1, 2021.

Primarily as a result of the COVID-19 pandemic, we have had a significant reduction in our net asset value as of September 30, 2020, as compared to our net asset value as of December 31, 2019. The decrease in net asset value as of September 30, 2020 primarily resulted from the aggregate unrealized depreciation of our investment portfolio due to decreases in the fair value of some of our portfolio company investments, which is primarily the result of the adverse economic effects of the COVID-19 pandemic and the continuing uncertainty surrounding its long-term impact.

As of September 30, 2020, we are permitted under the 1940 Act, as a BDC, to borrow amounts such that our asset coverage, as defined in the 1940 Act, equals at least 150% after such borrowing. In addition, the Credit Facility contains events of default and cross-default provisions relating to other indebtedness, as well as affirmative and negative covenants, including, among other things: (i) a limit on our senior debt-to-tangible equity ratio of 1.00 to 1.00 at any time; (ii) a limit on our total debt-to-tangible equity ratio of 1.40 to 1.00 at any time; (iii) a limit on our debt service coverage ratio of 1.25 to 1.00 as of the end of any quarter in the period beginning as of August 1, 2020 (which ratio was 1.40 to 1.00 as of the end of any quarter prior to August 1, 2020); (iv) a requirement that our tangible net worth not be less than $58.0 million; (v) minimum liquidity; and (vi) maintenance of RIC and BDC status. The 2022 Notes Indenture also contains certain covenants, including covenants (i) prohibiting our issuance of any senior securities unless, immediately after such issuance, we are in compliance with the 1940 Act asset coverage requirements (after giving effect to any exemptive relief granted to us by the SEC), and, (ii) if our asset coverage has been below the 1940 Act minimum asset coverage requirements (after giving effect to any exemptive relief granted to us by the SEC) for more than six consecutive months, prohibiting the declaration of any cash dividend or distribution on our common stock (except to the extent necessary for us to maintain our ~~qualification~~treatment as a RIC under Subchapter M of the Code), or purchasing any of our common stock, unless, 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, we ~~must, among other things, meet certain source-of-income~~are in compliance with the 1940 Act asset coverage requirements (after giving effect to any exemptive relief granted to us by the SEC).

As of September 30, 2020, we were in compliance with our asset coverage requirements under the 1940 Act and with the covenants under the terms of the Credit Facility and under the 2022 Notes Indenture. However, any continued increase in net unrealized depreciation on our investment portfolio or further significant reductions in our net asset ~~diversification requirements. As~~value as a ~~RIC, we generally will not have~~result of the effects of the COVID-19 pandemic or otherwise increases the risk of (i) triggering the 1940 Act asset coverage covenants under the 2022 Notes Indenture, which would limit our ability to raise debt capital, pay ~~corporate-level U.S. federal income taxes on any income we distribute~~distributions to our stockholders, ~~provided we distribute at least 90%~~and repurchase shares of our ~~ordinary~~common stock, (ii) reducing our borrowing base under the Credit Facility or any future credit facility going forward, and (iii) breaching certain covenants under the Credit Facility, including but not limited to those relating to tangible net worth and debt service coverage ratio. In the event that unrealized depreciation in the fair value of portfolio investments included in the borrowing base of the Credit Facility or any future credit facility or other factors cause our aggregate outstanding borrowings under the Credit Facility or such other credit facility to exceed the applicable borrowing base, we would be required to immediately prepay the lenders an amount equal to such excess amount. If we are unable to remit such payment or we otherwise breach a covenant under the Credit Facility, or are unable to cure any event of default or obtain a waiver from the lenders, the lenders may choose to foreclose upon and sell, or otherwise transfer, the collateral subject to their security interests, which comprises all of our assets as of September 30, 2020, and accelerate our repayment obligations under the Credit Facility. Any such event would have a material adverse effect on our business, liquidity, financial condition, results of operations and ability to pay distributions to our stockholders. In addition, if the lenders exercise their right to sell the assets pledged under the Credit Facility, such sales may be completed at distressed sale prices, thereby diminishing or potentially eliminating the amount of cash available to us after repayment of the amounts outstanding under the Credit Facility. See “Item 1A — “Risk Factors — Risks Relating to our Business and Structure” included in our most recent Annual Report on Form 10-K and the other risk factors contained therein and in our subsequent filings with the SEC, including our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and this Quarterly Report on Form 10-Q.

We are also subject to financial risks, including changes in market interest rates. As of September 30, 2020, 56.6% of our debt investments bore interest based on floating rates (some of which were subject to interest rate floors), which generally are LIBOR-based. In addition, the Credit Facility has floating rate interest provisions. In connection with the COVID-19 pandemic, the U.S. Federal Reserve and other central banks have reduced certain interest rates and LIBOR has decreased. A prolonged reduction in interest rates will reduce our gross investment income and ~~short term capital gains.~~could result in a decrease in our net investment income if such decreases in LIBOR are not offset by a corresponding increase in the spread over LIBOR that we earn on any portfolio investments, a decrease in our operating expenses, or a decrease in the interest rate of our floating interest rate liabilities tied to LIBOR. See “Item 3. Quantitative and Qualitative Disclosures About Market Risk” for an analysis of the impact of hypothetical base rate changes in interest rates.

We will continue to monitor the rapidly evolving situation relating to the COVID-19 pandemic and related guidance from U.S. and international authorities, including federal, state and local public health authorities. Given the dynamic nature of this situation and the fact that there may be developments outside of our control that require us or our portfolio companies to adjust plans of operation, we cannot reasonably estimate the full impact of COVID-19 on our financial condition, results of operations or cash flows in the future. However, we do expect that it could have a material adverse impact on our future net investment income, the fair value of our portfolio investments, and the results of operations and financial condition of us and our portfolio companies.

Portfolio

Portfolio Composition

As of September 30, ~~2019,~~2020, we had ~~$115.6~~$96.0 million (at fair value) invested in 2622 portfolio companies. As of September 30, ~~2019,~~2020, our portfolio was comprised of approximately ~~66.3%~~78.3% senior secured debt, ~~23.4%~~8.7% junior secured debt and ~~10.3%~~13.0% equity and equity-like investments.

As of December 31, ~~2018,~~2019, we had ~~$94.9~~$116.8 million (at fair value) invested in 2425 portfolio companies. As of December 31, ~~2018,~~2019, our portfolio was comprised of approximately ~~57.5%~~73.6% senior secured debt, ~~35.0%~~16.0% junior secured debt and ~~7.5%~~10.4% equity and equity-like investments.

We originate and invest primarily in privately held small and mid-sized companies (typically those with less than $15.0 million of EBITDA) through first lien and second lien debt, sometimes with a corresponding equity investment component. The composition of our investments as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 was as follows:


		September 30, 2019						December 31, 2018							September 30, 2020				December 31, 2019
		Cost		Fair Value		Cost		Fair Value			Cost		Fair Value		Cost		Fair Value
Senior Secured Debt	Senior Secured Debt	$	78,777,791	$	76,643,412	$	54,049,633	$	54,609,097	Senior Secured Debt	$	78,493,705	$	75,079,797	$	87,032,136	$	85,954,384
Junior Secured Debt	Junior Secured Debt	30,204,069		26,997,625		34,027,362		33,231,424		Junior Secured Debt	13,388,371		8,407,657		20,413,183		18,757,348
Equity	Equity	14,105,636		11,936,263		10,805,799		7,073,341		Equity	15,591,926		12,493,814		16,004,386		12,097,658
Total Investments	Total Investments	$	123,087,496	$	115,577,300	$	98,882,794	$	94,913,862	Total Investments	$	107,474,002	$	95,981,268	$	123,449,705	$	116,809,390

At September 30, ~~2019,~~2020, our average portfolio company debt investment at amortized cost and fair value was approximately ~~$4.2~~$4.1 million and ~~$4.0~~$3.8 million, respectively, and our largest portfolio company debt investment by amortized cost and fair value was approximately ~~$11.3~~$13.5 million and ~~$9.9~~$10.6 million, respectively. At December 31, ~~2018,~~2019, our average portfolio company debt investment at amortized cost and fair value was approximately ~~$4.0~~$4.5 million and ~~$4.0~~$4.2 million, respectively, and our largest portfolio company debt investment by amortized cost and fair value was approximately ~~$11.9~~$13.1 million and ~~$11.7~~$11.6 million, respectively.

At September 30, ~~2019, 63.8%~~2020, 56.6% of our debt investments bore interest based on floating rates (some of which were subject to interest rate floors), such as LIBOR, and ~~36.2%~~43.4% of our debt investments bore interest at fixed rates. At December 31, ~~2018, 54.5%~~2019, 53.0% of our debt investments bore interest based on floating rates (some of which were subject to interest rate floors), such as LIBOR, and ~~45.5%~~47.0% bore interest at fixed rates.

The weighted average effective yield of our debt and other income-producing investments, as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, was ~~13.6%~~12.6% and ~~14.8%~~14.0%, respectively. The weighted average effective yield on the entire portfolio, as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, was ~~10.7%~~8.6% and ~~12.7%~~11.3%, respectively.

The weighted average annualized effective yield on debt and other income-producing investments is computed using the effective interest rates for our debt and other income producing investments, including cash and PIK interest as well as the accretion of deferred fees. The individual investment yields are then weighted by the respective fair values of the investments (as of the date presented) in calculating the weighted average effective yield as a percentage of our debt and other income-producing investments. Infinite Care, LLC, ~~CP Holding Co., Inc. (Choice Pet),~~ProAir Holdings Corporation, GK Holdings, Inc, and ~~Deluxe Entertainment Services Group Inc.~~GNC were excluded from the calculation as of September 30, ~~2019~~2020 because they were on non-accrual status as of that date. Infinite Care, LLC ~~was~~and CP Holding Co., Inc. (Choice Pet) were excluded from the calculation as of December 31, ~~2018~~2019 because ~~it was~~they were on non-accrual status onas of that date. Equity components of the investment portfolio were also excluded from these calculations either because they do not have stated interest rates or are non-income producing. The weighted average annualized yield on total investments takes the same yields but weights them to determine the weighted average effective yield as a percentage of the Company's total investments. The dollar-weighted average annualized yield on the Company’s investments for a given period will generally be higher than what investors in our common stock would realize in a return over the same period because the dollar-weighted average annualized yield does not reflect the Company’s expenses or any sales load that may be paid by investors.

For investments that have a PIK interest component, PIK interest is accrued each period but generally not collected until the debt investment is sold or paid off. A roll forward of PIK interest for the three and nine months ended September 30, ~~2019~~2020 and September 30, ~~2018~~2019 is summarized in the table below.


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,				Nine Months Ended September 30,
		2019		2018		2019		2018			2020		2019		2020		2019
PIK, beginning of period	PIK, beginning of period	$	3,449,314	$	4,402,923	$	3,123,501	$	3,852,636	PIK, beginning of period	$	3,505,245	$	3,449,314	$	3,855,222	$	3,123,501
Accrual	Accrual	205,805		340,714		618,683		1,028,845		Accrual	292,631		205,805		812,702		618,683
Payments	Payments	(37,120)		—		(124,184)		(21,269)		Payments	(103,382)		(37,120)		(145,928)		(124,184)
Write-off	Write-off	—		—		—		(116,576)		Write-off	—		—		(827,502)		—
PIK, end of period	PIK, end of period	$	3,617,999	$	4,743,637	$	3,618,000	$	4,743,636	PIK, end of period	$	3,694,494	$	3,617,999	$	3,694,494	$	3,618,000

Investment Activity

During the three months ended September 30, 2020, we closed $1.0 million of debt investment commitments in one existing portfolio company and closed $31,732 of equity investments in one existing portfolio company. During the three months ended September 30, 2019, we closed $14.6 million of debt investment commitments and $0.6 million of equity investments in two new and three existing portfolio companies. During the ~~three~~nine months ended September 30,

~~2018,~~ 2020, we closed ~~$6.0~~$2.2 million of debt investment commitments and ~~$0.4~~$0.2 million of equity investments in ~~one new and two~~four existing portfolio companies. During the nine months ended September 30, 2019, we closed $50.9 million of debt investment commitments and $3.7 million of equity investments in nine new portfolio companies and seven existing portfolio companies.

During the ~~nine~~three months ended September 30, ~~2018,~~2020, we ~~closed $18.6~~exited $8.0 million of debt investment commitments and ~~$0.9~~$0.2 million of equity investments in ~~three new and three existing~~two portfolio companies.

During the three months ended September 30, 2019, we exited $7.0 million of debt investment commitments in three portfolio companies. During the ~~three~~nine months ended September 30, ~~2018,~~2020, we exited ~~$12.0~~$17.1 million of debt investment commitments ~~$0.2~~and $0.3 million ~~of our revenue-linked security investment, and $1.0 million of~~in equity investments in six portfolio companies. During the nine months ended September 30, 2019, we exited $21.4 million of debt investment commitments and $0.2 million of equity investments in nine portfolio companies. During the nine months ended September 30, 2018, we exited $18.9 million of debt investment commitments, $0.2 million of our revenue-linked security investment, and $1.1 million of equity investments in eleven portfolio companies.

Our level of investment activity can vary substantially from period to period depending on many factors, including the level of merger and acquisition activity in our target market, the general economic environment and the competitive environment for the types of investments we make.

Asset Quality

In addition to various risk management and monitoring tools, we use an investment rating system to characterize and monitor the credit profile and expected level of returns on each investment in our portfolio. This investment rating system uses a five-level numeric scale. In determining an investment rating, Company management takes into account various aspects of a company's performance during the measurement period and assigns an investment rating to each aspect, which are then averaged. Such averages may inform, but do not necessarily determine, the investment rating assigned to a company. The following is a description of the conditions associated with each investment rating:

•Investment Rating 1 is used for investments that are performing above expectations, and whose risks remain favorable compared to the expected risk at the time of the original investment.

•Investment Rating 2 is used for investments that are performing within expectations and whose risks remain neutral compared to the expected risk at the time of the original investment. All new loans are initially rated 2.

•Investment Rating 3 is used for investments that are performing below expectations and that require closer monitoring, but where no loss of return or principal is expected. Portfolio companies with a rating of 3 may be out of compliance with financial covenants.

•Investment Rating 4 is used for investments that are performing substantially below expectations and whose risks have increased substantially since the original investment. These investments are often in workout. Investments with a rating of 4 are those for which ~~some~~there is an increased possibility of loss of return, but no loss of principal is expected.

•Investment Rating 5 is used for investments that are performing substantially below expectations and whose risks have increased substantially since the original investment. These investments are almost always in workout. Investments with a rating of 5 are those for which ~~some~~ loss of return and principal is expected.

The following table shows the investment rankings of our debt investments at fair value (in millions):


		As of September 30, 2019									As of December 31, 2018									As of September 30, 2020			As of December 31, 2019
Investment Rating	Investment Rating	Fair Value (in millions)		% of Debt Portfolio		Number of Portfolio Companies	Fair Value (in millions)		% of Debt Portfolio		Number of Portfolio Companies	Investment Rating	Fair Value (in millions)		% of Debt Portfolio		Number of Portfolio Companies	Fair Value (in millions)		% of Debt Portfolio		Number of Portfolio Companies
1	1	$	16.1	15.5	%	3	$	28.2	32.1	%	5	1	$	23.8	28.6	%	4	$	14.6	13.9	%	3
2	2	63.1		60.9	%	12	30.7		35.0	%	7	2	11.4		13.6	%	3	66.1		63.1	%	13
3	3	2.4		2.3	%	1	18.4		21.0	%	3	3	16.4		19.6	%	4	2.2		2.2	%	1
4	4	12.2		11.8	%	2	2.8		3.2	%	1	4	31.9		38.2	%	5	13.8		13.2	%	2
5	5	9.8		9.5	%	2	7.7		8.7	%	1	5	—		—	%	—	8.0		7.6	%	1
		$	103.6	100.0	%	20	$	87.8	100.0	%	17		$	83.5	100.0	%	16	$	104.7	100.0	%	20

Loans and Debt Securities on Non-Accrual Status

We do not accrue interest income on loans and debt securities if we doubt our ability to collect such interest. Generally, when an interest payment default occurs on a loan in the portfolio, when interest has not been paid for greater than 90 days, or when management otherwise believes that the issuer of the loan will not be able to service the loan and other obligations, we will place the loan on non-accrual status and will cease accruing interest income on that loan until all principal and interest is current through payment or until a restructuring occurs, such that the interest income is deemed collectible. However, collections actually received on non-accrual loans may be recognized as interest income on a cash basis or applied to principal depending on management's judgment regarding collectability. As of September 30, ~~2019,~~2020, we had ~~three~~investments in four portfolio companies on non-accrual status (our senior secured debt ~~investment~~investments in Infinite Care, LLC, our junior secured debt investment in ProAir Holdings Corporation, our junior secured debt investment in GK Holdings, Inc., and our senior secured debt investment in GNC), which totaled $18.6 million at fair value and $22.9 million at cost and comprised an aggregate of 24.9% of our debt investments at cost. As of December 31, 2019, we had investments in two portfolio companies on non-accrual status (our senior secured debt investments in Infinite Care, LLC and our junior secured debt investment in CP Holding Co., Inc. (Choice Pet)), which totaled $10.6 million at fair value and ~~our senior secured term loans in Deluxe Entertainment Services Group Inc.) which~~$10.7 million at cost and comprised ~~14.1%~~an aggregate of 10.0% of our ~~debt investments at cost. As of December 31, 2018, we had one loan on non-accrual status (our senior secured debt investment in Infinite Care, LLC), which comprised 8.1% of our~~

debt investments at cost. The failure by a borrower or borrowers to pay interest and repay principal could have a material adverse effect on our financial condition and results of operation.

Results of Operations

An important measure of our financial performance is the net increase or decrease in net assets resulting from operations, which includes net investment income, net realized gain or loss and net change in unrealized appreciation or depreciation. Net investment income is the difference between our income from interest, distributions, fees and other investment income and our operating expenses, including interest on borrowed funds. Net realized gain or loss on investments is generally the difference between the proceeds received from dispositions of portfolio investments and their amortized cost. Net change in unrealized appreciation or depreciation on investments is the net unrealized change in the fair value of our investment portfolio.

Comparison of the Three and Nine Months Ended September 30, ~~2019~~2020 and September 30, ~~2018~~2019

Revenues

We generate revenue primarily in the form of interest income on debt investments and, to a lesser extent, capital gains on equity investments we make in portfolio companies. Our debt investments typically have terms of five to seven years and bear interest at a fixed or floating rate. Interest on our debt investments is payable at least quarterly. Payments of principal on our debt investments may be amortized over the stated term of the investment, deferred for several years or due entirely at maturity. In some cases, our debt investments may pay interest in kind, or PIK. Any outstanding principal amount of our debt investments and any accrued but unpaid interest will generally become due at the maturity date. The level of interest income we receive is directly related to the balance of interest-bearing investments multiplied by the weighted average yield of our investments. We expect that the dollar amount of interest and any dividend income that we earn to increase as the size of our investment portfolio increases. In addition, we may generate revenue in the form of prepayment, commitment, loan origination, structuring or due diligence fees and consulting fees, which may be non-recurring in nature.

Investment income for the three months ended September 30, ~~2019~~2020 totaled ~~$3.3~~$3.0 million, compared to investment income of ~~$4.3~~$3.3 million for the three months ended September 30, ~~2018.~~2019. Investment income for the three months ended September 30, ~~2019~~2020 was comprised primarily of $2.8 million in cash interest, $0.2 million in PIK interest, $0.2 million in fees earned on the investment portfolio, and $45,508 in other income. Investment income for the three months ended September 30, 2018 was comprised of

~~$3.4~~$2.1 million in cash interest, $0.3 million in PIK interest, ~~$0.3~~$0.5 million in fees earned on the investment portfolio, and $0.2 million of other ~~income. The decrease in investment~~ income in(which was primarily a prepayment fee earned upon the full payoff of Kleen-Tech Acquisition, LLC). Investment income for the three months ended September 30, 2019 iswas comprised primarily ~~attributable to a smaller income-earnings~~of $2.8 million in cash interest, $0.2 million in PIK interest, and $0.2 million in fees earned on the investment ~~portfolio, on average during the period, coupled with a lower weighted average effective yield, as compared to the three months ended September 30, 2018.~~portfolio.

Investment income for the nine months ended September 30, ~~2019~~2020 totaled ~~$9.3~~$8.9 million, compared to investment income of ~~$12.1~~$9.3 million for the nine months ended September 30, ~~2018.~~2019. Investment income for the nine months ended September 30, 2020 was comprised primarily of $7.1 million in cash interest, $0.8 million in PIK interest, $0.8 million in fees earned on the investment portfolio, and $0.2 million of other income (which was primarily a prepayment fee earned on the full payoff of Kleen-Tech Acquisition, LLC). Investment income for the nine months ended September 30, 2019 was comprised primarily of $7.7 million in cash interest (which is net of $0.3 million of previously accrued interest income written-off during the period), $0.6 million in PIK interest, $0.7 million in fees earned on the investment portfolio and $0.3 million in other income. Investment income for the three months ended September 30, 2018 was comprised of $9.8 million in cash interest, $1.0 million in PIK interest, $1.0 million in fees earned on the investment portfolio, and $0.3 million of other income.

The decrease in investment income in the three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019 is primarily attributable to a smaller income-earning ~~investment~~ portfolio, ~~on average during~~ the ~~period, coupled with~~addition of ProAir Holdings Corporation, GK Holdings, Inc., and GNC to our non-accrual assets and a lower weighted average effective yield ~~as compared to~~on our income-earning portfolio. Conversely, the ~~nine months ended September 30, 2018.~~payoff of Kleen-Tech Acquisition, LLC had a $0.6 million, or $0.09 per share, one-time positive impact on investment income per share.

Expenses

Our primary operating expenses include the payment of fees to HCAP Advisors ~~LLC~~ under the investment advisory and management agreement, our allocable portion of overhead expenses and other administrative expenses under the administration agreement with ~~JMP Credit Advisors (which expired on April 29, 2018) and the administration agreement with~~ HCAP Advisors, ~~(which commenced on April 29, 2018)~~including the allocated costs incurred by HCAP Advisors in providing managerial assistance to those portfolio companies that request it, and other operating costs described below. We bear all other out-of-pocket costs and expenses of our operations and transactions, which include:

•~~Interest~~interest expense and unused line fees;

•the cost of calculating our net asset value, including the cost of any third-party valuation services;

•the cost of effecting sales and repurchases of shares of our common stock and other securities;

•fees payable to third parties relating to making investments, including out-of-pocket fees and expenses associated with performing due diligence and reviews of prospective investments;

•transfer agent and custodial fees;

•out-of-pocket fees and expenses associated with marketing efforts;

•federal and state registration fees and any stock exchange listing fees;

•U.S. federal, state and local taxes;

•independent directors’ fees and expenses;

•brokerage commissions;

•fidelity bond, directors’ and officers’ liability insurance and other insurance premiums;

•direct costs, such as printing, mailing, long distance telephone and staff;

•fees and expenses associated with independent audits and outside legal costs, and

•costs associated with our reporting and compliance obligations under the 1940 Act and other applicable U.S. federal and state securities laws.

Operating expenses totaled $2.2 million for the three months ended September 30, ~~2019,~~2020, compared to ~~$2.7~~$2.2 million for the three months ended September 30, ~~2018. Operating expenses in both periods consisted of~~2019. Interest expense increased by $0.1 million to $0.9 million due to a higher average outstanding debt balance and a higher weighted-average interest expense, base management fees, administrator expenses, interest and related fees, professional fees, valuation fees, insurance expenses, directors’ fees, taxes, and other general and administrative expenses. The decrease in operating expenses was primarily due to

~~lower professional fees in~~rate on borrowings under our Credit Facility during the three months ended September 30, ~~2019~~2020, compared to the three months ended September 30, ~~2018 as well as the absence of an incentive management fee in~~2019. Professional fees slightly decreased for the three months ended September 30, 2019 compared to a $0.4 million incentive management fee incurred during the three months ended September 30, 2018. This was offset by higher interest expense during the three months ended September 30, 2019 due to higher borrowings, on average, during the three months ended September 30, 20192020 compared to the three months ended September 30, ~~2018.~~2019 and general and administrative expenses remained relatively flat at $0.2 million for both the three months ended September 30, 2020 and September 30, 2019.

Operating expenses totaled $6.9 million for the nine months ended September 30, 2020, compared to $6.6 million for the nine months ended September 30, ~~2019,~~2019. Interest expense increased by $0.6 million to $2.8 million due to a higher average outstanding debt balance and a higher weighted-average interest rate on borrowings under our Credit Facility during the nine months ended September 30, 2020, compared to ~~$7.7~~the nine months ended September 30, 2019. In addition, during the nine months ended September 30, 2020, we accelerated expensing approximately $0.1 million of deferred financing costs in accordance with ASC 470 Debt, due to the reduction in our borrowing capacity under our Credit Facility. Professional fees decreased to $0.6 million for the nine months ended September 30, 2018. Operating expenses in both periods consisted of interest expense, base management fees, administrator expenses, interest and related fees, professional fees, valuation fees, insurance expenses, directors’ fees, taxes, and other general and administrative expenses. The decrease in operating expenses was primarily due to higher professional fees and general and administrative costs incurred during the nine months ended September 30, 2018 relating to the material weakness identified by management at December 31, 2017, coupled with a decrease in interest expense (due to lower borrowings, on average, throughout the nine months ended September 30, 2019 and a decrease in management fees expense (due to a lower portfolio balance, at fair value) and the absence of an incentive management fee.

From time to time HCAP Advisors may voluntarily waive and/or reimburse expenses incurred by us. During the nine months ended September 30, 2018, we incurred approximately $0.7 million in non-recurring professional fees for additional work provided by our legal counsel and external auditors in connection with the material weakness identified by management as disclosed in Item 9A of our annual report on Form 10-K for the year ended December 31, 2017. HCAP Advisors agreed to reimburse us approximately $0.4 million of those expenses. We are under no legal obligation to repay HCAP Advisors for any amount of the expenses HCAP Advisors is reimbursing us. Net of expenses reimbursed by HCAP Advisors, we incurred in 2018 approximately $0.3 million in one-time expenses related to additional professional fees incurred relating to the material weakness that we do not expect to recur in the future. HCAP Advisors did not voluntarily waive and/or reimburse expenses incurred by us during the three or nine months ended September 30, 2019.

Interest expense increased due to a higher average outstanding debt balance during the three months ended September 30, 2019, compared to the three months ended September 30, 2018. Interest expense decreased due to a lower average outstanding debt balance and lower LIBOR rates during the nine months ended September 30, 2019, compared to the nine months ended September 30, 2018.

Administrative services expense was $0.4 million for the three months ended September 30, 2019, compared to $0.4 million for the three months ended September 30, 2018. Administrative services expense was $1.12020 from $1.0 million for the nine months ended September 30, 2019 ~~compared to $1.0~~and general and administrative expenses remained relatively flat at $0.7 million for both the nine months ended September 30, ~~2018.~~2020 and September 30, 2019. Professional fees and general and administrative expenses decreased as we reviewed all of our service providers in 2019 and changed certain service providers to more cost-effective solutions. We began to realize these cost savings earlier in fiscal year 2020.

Base management fees for the three months ended September 30, ~~2019 was $0.6~~2020 were $0.5 million, compared to $0.6 million for the three months ended September 30, ~~2018. Base management fees for the nine months ended September 30, 2019 was $1.6 million, compared to $1.8 million for the nine months ended September 30, 2018.~~2019. The ~~slight~~ decrease in base management fees is attributable to a ~~smaller~~lower average amount of gross investments, at fair value, outstanding during the 2020 period, as compared to the 2019 period. Base management fees were relatively flat at $1.6 million for the nine months ended September 30, ~~2019, as~~2020 compared to the nine months ended September 30, ~~2018.~~2019.

We did not incur any incentive ~~management~~ fees for either of the three or nine months ended September 30, ~~2019. We incurred an incentive management fee of approximately $0.4 million and $0.5 million for the three and nine months ended September 30, 2018, respectively. This is primarily a result of the~~2020 or 2019 because our pre-incentive fee net investment income did not ~~exceeding~~exceed the hurdle rate for ~~both periods in fiscal year 2019.~~the relevant periods. We only incur an incentive ~~management~~ fee

if our pre-incentive fee net investment income return exceeds a 2.0% quarterly (8.0% annualized) hurdle rate. ~~The Company's~~Our pre-incentive fee net investment income return failed to meet this hurdle rate ~~for both~~with respect to each of the relevant periods in the three and nine months ended September 30, 2020 and 2019. In addition, the incentive fees paid or owed to HCAP Advisors are subject to a ~~three year~~three-year total return requirement, such that no incentive fee, in respect of pre-incentive fee net investment income, will be payable except to the extent 20.0% of the cumulative net increase in net assets resulting from operations over the calendar quarter for which such fees are being calculated and the 11 preceding quarters exceeds the cumulative incentive fees paid or accrued over the 11 preceding quarters.

Administrative services expense was $0.4 million for each of the three months ended September 30, 2020 and September 30, 2019. Administrative services expense was $1.1 million for each of the nine months ended September 30, 2020 and September 30, 2019.

Net Investment Income

For the three months ended September 30, ~~2019,~~2020, net investment income was ~~$1.1~~$0.9 million, compared to ~~$1.6~~$1.1 million for the three months ended September 30, ~~2018.~~2019. For the nine months ended September 30, ~~2019,~~2020, net investment income was ~~$2.7~~$2.0 million, compared to ~~$4.4~~$2.7 million for the nine months ended September 30, ~~2018.~~2019.

For the three months ended September 30, ~~2019,~~2020, net investment income per share was ~~$0.18~~$0.14 compared to ~~$0.25~~$0.18 for the three months ended September 30, ~~2018.~~2019. For the nine months ended September 30, ~~2019,~~2020, net investment income per share was ~~$0.43~~$0.34 compared to ~~$0.69~~$0.43 for the nine months ended September 30, ~~2018.~~2019.

Net Realized Gains and Losses

Realized gains and losses on investments are calculated using the specific identification method. We measure realized gains or losses on equity investments as the difference between the net proceeds from the sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized. We measure realized gains or losses on debt investments as the difference between the net proceeds from the repayment or sale and the contractual amount owed to us on the investment, without regard to unrealized appreciation or depreciation previously recognized or unamortized deferred fees. Upon prepayment of debt investments, we recognize the acceleration of unamortized deferred fees as interest income and we recognize the collection of prepayment and other fees as other income.

We recognized ~~$0.1~~$0.2 million in net realized ~~losses~~gains on our investments for the three months ended September 30, ~~2019,~~2020, compared to ~~$0.1 million~~$92,615 of net realized ~~gains~~losses on our investments in the three months ended September 30, ~~2018.~~2019. We recognized ~~$30,304~~$2.0 million in net realized losses on our investments for the nine months ended September 30, ~~2019,~~2020, compared to ~~$0.6 million~~$30,304 of net realized losses on our investments ~~for~~in the nine months ended September 30, ~~2018.~~2019.

A summary of net realized gains and losses for the three months ended September 30, ~~2019~~2020 and ~~2018~~2019 is as follows:

Three Months Ended September 30,
2019 2018
AMS Flight Leasing, LLC (Senior Secured Term Loan) $ — $ 3,776
Flight Lease VII, LLC (Common Equity Interest) (92,615) (119,402)
IAG Engine Center, LLC (Senior Secured Term Loan) — 11,469
IAG Engine Center, LLC (Revenue-Linked Security) — (50,674)
24/7 Software, Inc. (Common Stock) — 275,006
Net realized gains (losses) $ (92,615) $ 120,175


	Three Months Ended September 30,
	2020		2019
Flight Lease VII, LLC (Common Equity Interest)	$	(21,950)	$	(92,615)
Flight Lease XII, LLC (Common Equity Interest)	(191,824)		—
Kleen-Tech Acquisition, LLC (Common Equity Warrants)	440,118		—
Net realized gains (losses)	$	226,344	$	(92,615)

A summary of net realized gains and losses for the nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 is as follows:

Nine Months Ended September 30,
2019 2018
AMS Flight Leasing, LLC (Senior Secured Term Loan) $ — $ 3,776
Dell International L.L.C. (Senior Secured Term Loan) 6,151 —
Flight Lease VII, LLC (Common Equity Interest) (103,505) (119,402)
Flight Lease XI, LLC (Common Equity Interest) — 156,347
Flight Lease XIII, LLC (Common Equity Interest) (23,680) —
IAG Engine Center, LLC (Senior Secured Term Loan) — 11,469
IAG Engine Center, LLC (Revenue-Linked Security) — (50,674)
Mercury Network, LLC (Common Equity Units) 69,980 —
Northeast Metal Works LLC (Preferred Equity Interest) 20,750 398
24/7 Software, Inc. (Common Stock) — 275,006
WorkWell, LLC (Senior Secured Term Loan) — (636,050)
WorkWell, LLC (Preferred Equity Interest) — (249,990)
Net realized losses $ (30,304) $ (609,120)


	Nine Months Ended September 30,
	2020		2019
CP Holding Co. Inc. (Choice Pet) (Junior Secured Term Loan)	$	(2,038,300)	$	—
Dell International L.L.C. (Senior Secured Term Loan)	—		6,151
Flight Lease VII, LLC (Common Equity Interest)	(86,501)		(103,505)
Flight Lease XII, LLC (Common Equity Interest)	(191,824)		—
Flight Lease XIII, LLC (Common Equity Interest)	—		(23,680)
Fox Rent A Car, Inc. (Common Equity Warrants)	15,994		—
Kleen-Tech Acquisition, LLC (Common Equity Warrants)	440,118
Mercury Network, LLC (Common Equity Units)	—		69,980
Northeast Metal Works LLC (Preferred Equity Interest)	—		20,750
Regional Engine Leasing, LLC (Residual Value)	(102,421)		—
Surge Busy Bee Holdings, LLC (Class B Equity Warrants)	(51,475)		—
Net realized losses	$	(2,014,409)	$	(30,304)

Net Change in Unrealized Appreciation (Depreciation) of Investments

Net change in unrealized appreciation (depreciation) primarily reflects the change in portfolio investment values during the reporting period, including the reversal of previously recorded appreciation or depreciation when gains or losses are realized.

Net change in unrealized ~~appreciation (depreciation)~~depreciation on investments totaled ~~$(2.0)~~$1.5 million and $2.0 million for the three months ended September 30, ~~2019~~2020 and ~~$(1.6) million for the three months ended~~ September 30, ~~2018.~~2019, respectively. The decrease in net unrealized depreciation between periods is primarily due to an improvement in general economic conditions since June 30, 2020 as well as improvement in the operations and liquidity of certain portfolio companies.

Net change in unrealized ~~appreciation (depreciation)~~depreciation on investments totaled ~~$(3.5)~~$4.9 million and $3.5 million for the nine months ended September 30, ~~2019~~2020 and ~~$(0.3) million for the nine months ended~~ September 30, ~~2018.~~

~~In addition, we recognized a deferred tax benefit relating to investments owned by our taxable blocker~~2019, respectively. The increase in net unrealized depreciation between periods is primarily the result of ~~$0.5 million for~~ the ~~three months ended September 30, 2018. We recognized a deferred tax expense relating to investments owned by our taxable blocker~~adverse economic effects of ~~15,584 for~~ the ~~nine months ended September 30, 2018. We did not recognize any provision for deferred tax liabilities relating to investments owned by our taxable blocker for both~~COVID-19 pandemic and the ~~three and nine months ended September 30, 2019.~~continuing uncertainty surrounding its long-term impact.

Net Increase in Net Assets Resulting from Operations

~~The~~We had a net ~~increase (decrease)~~decrease in net assets resulting from operations ~~was $(1.0)~~of $0.4 million for the three months ended September 30, ~~2019,~~2020, compared to ~~$0.6 million for the three months ended September 30, 2018. The $1.6~~a $1.0 million net decrease in net assets resulting from operations for the three months ended September 30, ~~2019, compared~~2019. The change between periods are attributable to the three months ended September 30, 2018, was primarily attributable to a decrease in investment income (attributed to a lower income-earning portfolio and a lower effective yield) and an increase in unrealized depreciation, offset by lower operating expenses.factors discussed above.

~~The~~We had a net ~~increase~~decrease in net assets resulting from operations ~~was $(0.9)~~of $4.8 million for the nine months ended September 30, ~~2019,~~2020, compared to ~~$3.5 million for the nine months ended ended September 30, 2018. The $4.4~~a $0.9 million net decrease in net assets resulting from operations for the nine months ended ~~ended~~ September 30, ~~2019, compared~~2019. The change between periods are attributable to the nine months ended September 30, 2018, was primarily attributable to a decrease in investment income (attributed to a lower income-earning portfolio and a lower effective yield) and an increase in unrealized depreciation, offset by lower operating expenses.factors discussed above.

Financial Condition, Liquidity and Capital Resources

~~Cash Flows from Operating and Financing Activities~~

Our operating activities used cash of $21.6 million for the nine months ended September 30, 2019 and provided cash of $6.3 million for the nine months ended September 30, 2018, primarily in connection with investment exits and fundings of new investments.

Our financing activities provided cash of $10.6 million for the nine months ended September 30, 2019 and provided cash of $2.9 million for the nine months ended September 30, 2018. Our financing activity proceeds and uses for both periods were primarily in connection with distributions paid to shareholders and net borrowings on our Credit Facility.

Our liquidity and capital resources are derived from our Credit Facility and cash flows from operations, including investment sales and repayments. Our primary use of funds from operations generally includes investments in portfolio companies and other operating expenses we incur, as well as the payment of distributions to the holders of our common stock. We used, and expect to continue to use, these capital resources as well as proceeds from public and private offerings of securities to finance any investment activities and for general corporate purposes.

We believe that our ~~investment activities.~~current cash on hand and our anticipated cash flows from operations will be adequate to meet our cash needs for our daily operations. This "Financial Condition, Liquidity and Capital Resources" section should be read in conjunction with "COVID-19 Update" above.

Cash Flows from Operating and Financing Activities

Our operating activities provided cash of $16.0 million for the nine months ended September 30, 2020 and used cash of $21.6 million for the nine months ended September 30, 2019, primarily in connection with investment exits, fundings of new investments, interest income received, and proceeds from principal payments.

Our financing activities used cash of $0.1 million for the nine months ended September 30, 2020 and provided cash of $10.6 million for the nine months ended September 30, 2019. Our financing activity proceeds and uses for both periods were primarily in connection with distributions paid to stockholders, net activity under our Credit Facility and, for the 2019 period, repurchases of our common stock.

Although we expect to fund the growth of our investment portfolio through the net proceeds from future equity offerings and issuances of senior securities or future borrowings to the extent permitted by the 1940 Act, our plans to raise capital may not be successful. In this regard, iffor so long as our common stock trades at a price below our ~~then-current~~ net asset value per share, we may be limited in our ability to raise equity capital given that we cannot sell our common stock at a price below net asset value per share unless our stockholders approve such a sale and our board of directors makes certain determinations in connection therewith. For all of ~~2019~~2020 to date and all of ~~2018,~~2019, our common stock traded at a discount to our then-current net asset value. If our common stock continues to trade at a discount to net asset value, we ~~may~~will be limited in our ability to raise equity capital unless we obtain the approval described above, which we have ~~neither sought nor obtained.~~not requested from stockholders.

In addition, we intend to distribute between 90% and 100% of our taxable income to our stockholders in order to satisfy the requirements applicable to RICs under Subchapter M of the Code. Consequently, we may not have the funds or the ability to fund new investments, to make additional investments in our portfolio companies, to fund our unfunded commitments to portfolio companies or to repay borrowings. In addition, the illiquidity of our portfolio investments may make it difficult for us to sell these investments when desired and, if we are required to sell these investments, we may realize significantly less than their recorded value.

~~Also, as a BDC, we~~BDCs are generally required, upon issuing any senior securities, to meet a coverage ratio of total assets, less liabilities and indebtedness not represented by senior securities, to total senior securities, which include all of ~~our~~the BDC's borrowings and any outstanding preferred stock, of at least 200%. However, the ~~Small Business Credit Availability Act,~~SBCAA, which was signed into law, onin March ~~23,~~ 2018, ~~has modified this requirement~~among other things, amended Section 61(a) of the 1940 Act to ~~permit~~add a ~~BDC to reduce~~new Section 61(a)(2) that reduces the ~~required minimum~~ asset coverage ~~ratio~~requirement applicable to ~~a BDC~~BDCs from 200% to 150%~~, if~~ so long as the BDC meets certain disclosure requirements ~~are met.~~and obtains certain approvals. On May 4, 2018, our board of directors unanimously approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the ~~Investment Company Act of~~ 1940 ~~as amended by the Small Business Credit Availability~~ Act. As a result, ~~the~~effective May 4, 2019, our applicable asset coverage ratio ~~applicable to~~under the ~~Company was changed from 200%~~1940 Act decreased to 150% ~~effective May 4, 2019. This requirement limits the amount that we may borrow.~~ from 200%.

As of September 30, ~~2019,~~2020, our aggregate indebtedness, including outstanding borrowings under our Credit Facility and the aggregate principal amount outstanding on our 2022 Notes, was ~~$65.1~~$73.8 million, and our asset coverage, as defined in the 1940 Act, was 206%. As of December 31, 2018, our aggregate indebtedness, including outstanding borrowings under our Credit Facility and the aggregate principal amount outstanding on our 2022 Notes, was $45.8 million, and our asset coverage, as defined in the 1940 Act, was 271%182%. The amount of leverage that we employ as a BDC will depend on our assessment of market conditions and other factors at the time of any proposed borrowing, such as the maturity, covenant package and rate structure of the proposed borrowings, our ability to raise funds through the issuance of shares of our common stock and the risks of such borrowings within the context of our investment outlook. Ultimately, we only intend to use leverage if the expected returns from borrowing to make investments will exceed the cost of such borrowing.

On April 8, 2020, in connection with the outbreak of the COVID-19 pandemic, the SEC issued the Order Under Sections 6(c), 17(d), 38(a) and 57(i) of the Investment Company Act of 1940 and Rule 17d-1 Thereunder Granting Exemptions from Specified Provisions of the Investment Company Act and Certain Rules Thereunder, Investment Company Act Release No. 33837 (Apr. 8, 2020) (the “April 2020 Order”), which provides exemptions from certain requirements of the 1940 Act. Section II of the April 2020 Order (i) affords BDCs greater flexibility in calculating asset coverage ratios for purposes of the 1940 Act asset coverage requirements, (ii) requires a BDC’s board of directors, including a required majority of such board, as defined in Section 57(o) of the 1940 Act, to determine that the issuance or sale of covered senior securities is permitted by this Order and is in the best interests of the BDC and its stockholders, (iii) requires prior disclosure on Form 8-K of the election to rely on Section II of the April 2020 Order, and (iv) includes certain limitations on new investments, among other requirements detailed in the April 2020 Order.

In particular, election to be subject to Section II of the April 2020 Order would permit us to use a modified formula to calculate our asset coverage ratios for purposes of the 1940 Act asset coverage requirements and, in doing so, would permit us to rely in part on the fair value of our assets as of December 31, 2019. The overall effect of any election to be subject to Section II of the April 2020 Order would be to make it easier for us to meet our applicable asset coverage ratios for purposes of the 1940 Act asset coverage requirements, as well as for purposes of covenants referencing the 1940 Act asset coverage requirements, including under the 2022 Notes Indenture, which could result in the Company incurring additional leverage and being subject to the risks associated with additional leverage. As of the date of this filing, our board of directors has not elected to subject us to Section II of the April 2020 Order but will continue to assess its potential benefits to the Company with respect to providing additional flexibility to manage our portfolio and support our portfolio companies during the economic disruption caused by the COVID-19 pandemic.

As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we had cash and restricted cash of ~~$17.8~~$37.7 million and ~~$28.8~~$21.8 million, respectively.

Credit Facility

On October 29, 2013, we entered into athe Loan and Security Agreement ~~with CapitalSource Bank (now Pacific Western Bank), as agent and a lender, and each of the lenders from time to time party thereto, including City National Bank,~~ to provide ~~the~~ us with ~~a $55.0~~our $45.0 million ~~senior secured revolving credit facility (the “Credit Facility”).~~Credit Facility. The Credit Facility is secured by all of ~~the~~ our assets, including ~~the Company's~~our equity interest in HCAP Equity Holdings, LLC and HCAP ICC, LLC, and has an accordion feature that allows the size of the facility to increase up to $85.0 million. The Credit Facility has a revolving period that, following a recent amendment, expires on April 30, 2020. The maturity date under the Credit Facility is, following a recent amendment, the earlier of (x) October 30, 2021, or (y) the date that is six (6) months prior to the maturity of any of the Company's outstanding unsecured longer-term indebtedness, which, based on our outstanding unsecured notes that mature on September 15, 2022, the maturity date under the facility would be October 30, 2021. HCAP Equity Holdings, LLC became a co-borrower under the Credit Facility in August 2016, and HCAP ICC, LLC, became a borrower under the Credit Facility in November 2017.LLC.

~~Advances~~As of September 30, 2020, advances under the Credit Facility bear interest at a rate per annum equal to the lesser of (i) the applicable LIBOR ~~rate~~ plus ~~3.25%~~4.50% (with a ~~0.50%~~1.00% LIBOR floor) and (ii) the maximum rate permitted under applicable law. During the revolving period, availability under the Credit Facility is determined by advance rates against eligible loans in the borrowing base up to a maximum aggregate availability of $44.3 million. Advance rates against individual investments range from 40% to 65% depending on the seniority of the investment in the borrowing base.

In addition, as of September 30, 2020, the Credit Facility included the following terms, among other things: (i) a revolving period scheduled to expire on October 31, 2020 (please see "Recent Developments" below for information regarding the extension of the revolving period to January 31, 2021); (ii) provides for a senior leverage ratio (the ratio of total borrowed money other than subordinated debt and unsecured longer-term indebtedness to equity) of 1-to-1; (iii) provides for a total leverage ratio (the ratio of total debt to equity) of 1.4-to-1 and a limit on our debt service coverage ratio of 1.25-to-1.00 as of the end of any quarter in the period beginning as of August 1, 2020 (which ratio was 1.40-to-1.00 as of the end of any quarter prior to August 1, 2020); (iv) additional advances requested under the Credit Facility will be made only at the discretion of the lenders; (v) aggregate commitments under the Loan and Security Agreement are $45.0 million; (vi) a tangible net worth covenant that reflects a minimum amount equal to $58.0 million; (vii) an effective limitation on the aggregate value of eligible loans in the borrowing base to maximum of approximately $44.3 million; (viii) requires ~~payment~~us to pay a monthly fee of ~~a fee~~0.50% per annum for unused amounts during the revolving period, which fee varies depending on the obligations outstanding as follows: (i) 0.75% per annum, if the average daily principal balance of the obligations outstanding for the prior month are less than fifty percent of the maximum loan amount; and (ii) 0.50% per annum, if such obligations outstanding are equal to or greater than fifty percent of the maximum loan amount. In each case, the fee is calculated based on the difference between ~~(i)~~(a) the maximum loan amount under the ~~Credit Facility~~Loan and ~~(ii)~~Security Agreement and (b) the average daily principal balance of the obligations outstanding during the prior calendar ~~month.~~month; (iv) prohibits us from repurchasing shares of our common stock and declaring and paying any distribution or dividend until the termination of the Loan and Security Agreement, except, in the case of distributions and dividends, to the extent necessary for us to maintain our eligibility to qualify as a RIC under Subchapter M of the Code; (x) includes a minimum liquidity covenant threshold of least $2.2 million through termination of the Loan and Security Agreement; and (xi) permits the use of an Alternative Rate (as defined in the Loan and Security Agreement) in place of LIBOR if certain conditions are satisfied.

Beginning as of August 1, 2020, during the amortization period, we are required to pay down the principal amount outstanding under the Credit Facility on a monthly basis in equal installments during the relevant calendar quarter so that such outstanding amounts will be reduced by an amount equal to or greater than (i) $2.2 million for each of the first two full calendar quarters following July 31, 2020, (ii) $3.3 million for each of the succeeding two full calendar quarters and (iii) $4.3 million for each succeeding calendar quarter until termination of the Credit Facility, which is scheduled to mature on October 30, 2021. During the amortization period, 90% of all principal collections we receive from our portfolio companies must generally be paid to the lenders to pay down our obligations and other amounts outstanding under the Credit Facility. In addition, any proceeds we receive from the sale or issuance of our equity or debt securities during the amortization period must generally be applied to the prepayment of our obligations under the Credit Facility.

and maintenance of RIC and BDC status. ~~In addition, the Credit Facility contains a covenant that limits the amount of our unsecured longer-term indebtedness (as defined in the Credit Facility), which~~

~~includes our 2022 Notes, to 50% of the maximum borrowing amount under the Credit Facility.~~ The Credit Facility also contains customary events of default, including, without limitation, nonpayment, misrepresentation of representations and warranties in a material respect, breach of covenant, cross-default to other indebtedness, bankruptcy, change of control, and the occurrence of a material adverse effect. In addition, the Credit Facility provides that, upon the occurrence and during the continuation of ~~such an~~any event of default, ~~the Company’s~~our administration agreement could be terminated and a backup administrator could be substituted by the agent.

The maturity date under the Credit Facility is the earlier of (x) October 30, 2021, or (y) the date that is six months prior to the maturity of any of our outstanding unsecured long-term indebtedness. Based on our outstanding 2022 Notes that mature on September 15, 2022, the maturity date under the Credit Facility is October 30, 2021. HCAP Equity Holdings, LLC became a co-borrower under the Credit Facility in August 2016, and HCAP ICC, LLC, became a borrower under the Credit Facility in November 2017.

As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the outstanding balance on the ~~$55.0 million~~ Credit Facility was ~~$36.3~~$45.0 million and ~~$17.0~~$43.7 million, respectively.

See "Recent Developments" below for more information relating to the Credit Facility.

2022 Notes ~~Offering~~

On August 24, 2017, ~~the Company~~we closed the public offering of $25.0 million in aggregate principal amount of ~~its 6.125% Notes due~~ 2022 ~~(the "2022 Notes").~~Notes. On September 1, 2017, ~~the Company~~we closed on an additional $3.75 million in aggregate principal amount of 2022 Notes to cover the over-allotment option exercised by the underwriters. In total, ~~the Company~~we issued 1,150,000 of the 2022 Notes at a price of $25.00 per Note. The total net proceeds tofrom the ~~Company from~~issuance of the 2022 Notes, after deducting underwriting discounts of $0.9 million and offering expenses of $0.2 million, were $27.7 million. As of September 30, 2020, the outstanding principal balance of the 2022 Notes was $28.8 million and the debt issuance costs balance was $0.5 million. As of December 31, 2019, the outstanding principal balance of the 2022 Notes was $28.8 million and the debt issuance costs balance was ~~$0.7~~$0.6 million. ~~As of December 31, 2018, the outstanding principal balance of the 2022 Notes was $28.8 million and the debt issuance costs balance was $0.8 million. The Company~~We used the proceeds of the 2022 Notes to redeem ~~the~~our 7.00% Notes due 2020 ~~Notes~~ in full on September 23, 2017.

The 2022 Notes mature on September 15, 2022 and bear interest at a rate of 6.125%. They are redeemable in whole or in part at ~~anytime~~any time at our option ~~after September 15, 2019~~ at a price equal to 100% of the outstanding principal amount of the 2022 Notes plus accrued and unpaid interest. The 2022 Notes are unsecured obligations and rank pari passu with any existing and future unsecured indebtedness; senior to any of our future indebtedness that expressly provides it is subordinated to the 2022 Notes; effectively subordinated to all of the existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, including borrowings under the Credit Facility; and structurally subordinated to all existing and future indebtedness and other obligations of any subsidiaries, financing vehicles, or similar facilities we may form in the future, with respect to claims on the assets of any such subsidiaries, financing vehicles, or similar facilities. Interest on the 2022 Notes is payable quarterly on March 15, June 15, September 15, and December 15 of each year. The 2022 Notes are listed on the ~~NASDAQ~~Nasdaq Global Market under the trading symbol “HCAPZ.” The Company may from time to time repurchase 2022 Notes in accordance with the 1940 Act and the rules promulgated thereunder.

The ~~indenture governing the~~ 2022 Notes ~~(the "2022 Notes Indenture”)~~Indenture contains certain covenants, including covenants (i) ~~requiring the Company’s~~prohibiting our issuance of any senior securities unless, immediately after such issuance, we are in compliance with the 1940 Act asset coverage requirements ~~set forth in Section 18(a)(1)(A) as modified~~(after giving effect to any exemptive relief granted to us by ~~Section 61(a)(1) of~~the SEC); (ii) if our asset coverage has been below the 1940 Act ~~whether or not~~minimum asset coverage requirements (after giving effect to any exemptive relief granted to us by the Company continues to be subject to such provisions of the 1940 Act; (ii) requiring the Company’s compliance, under certain circumstances, with a modified version of the requirements set forth in Section 18(a)(1)(B) as modified by Section 61(a)(1) of the 1940 Act, whether or not the Company continues to be subject to such provisions of the 1940 Act,SEC) for more than six consecutive months, prohibiting the declaration of any cash dividend or distribution ~~upon any class of the Company’s capital~~on our common stock (except to the extent necessary for ~~the Company~~us to maintain ~~its~~our treatment as a RIC under Subchapter M of the Code), or purchasing any ~~such capital~~of our common stock, ~~if the Company’s asset coverage, as defined in the 1940 Act, were below 150%~~unless, 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;~~purchase, we are in compliance with the 1940 Act asset coverage requirements (after giving effect to any exemptive relief granted to us by the SEC); and (iii) requiring ~~the Company~~us to provide financial information to the holders of the 2022 Notes and the Trustee if ~~the Company ceases~~we cease to be subject to the reporting requirements of the ~~Securities~~ Exchange ~~Act of 1934.~~Act. These covenants are subject to limitations and exceptions that are described in the 2022 Notes Indenture.

Off-Balance Sheet Arrangements

We may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our portfolio companies. As of September 30, 2020, our only off-balance sheet arrangements consisted of $2.3 million of unfunded revolving lines of credit and delayed draw term loans to five of our portfolio companies. As of

December 31, 2019, our only off-balance sheet arrangements consisted of ~~$3.2~~$3.1 million of unfunded revolving ~~line~~lines of credit ~~commitments~~and delayed draw term loans to ~~six of our portfolio companies. As of December 31, 2018, our only off-balance sheet arrangements consisted of $1.4 million of unfunded revolving line of credit commitments to three~~seven of our portfolio companies.

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with U.S. GAAP, which requires the use of estimates that involve the exercise of judgment and the use of assumptions as to future uncertainties. Our most critical accounting policies involve decisions and assessments that could affect our reported assets and liabilities, as well as our reported revenues and expenses. We believe that all of the decisions and assessments upon which our consolidated financial statements are based are reasonable at the time made and based upon information available to use at that time. We rely upon a thorough valuation process, which includes, for certain portfolio investments, the input of an anexternal independent ~~external~~third-party valuation firm to arrive at what we believe to be reasonable estimates of fair ~~market~~ value, whenever available. As of September 30, 2020, our investment portfolio had a fair value of $96.0 million and we recognized $1.5 million of net unrealized depreciation and $4.9 million of net unrealized depreciation for the three and nine months ended September 30, 2020, respectively. For more information on our fair value measurements, see Note 6 of the Notes to Consolidated Financial Statements. For a review of our significant accounting policies and the recent accounting pronouncements that may impact our results of operations, see Note 2 of the Notes to Consolidated Financial Statements.

Regulated Investment Company Status and Distributions

We have elected to be treated as a RIC under Subchapter M of the Code. If we receive RIC tax treatment, we will not be taxed on our investment company taxable income or realized net capital gains, to the extent that such taxable income or gains are distributed, or deemed to be distributed, to stockholders on a timely basis.

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 until realized. Distributions declared and paid by us in a year may differ from taxable income for that year as such dividends may include the distribution of current year taxable income or the distribution of prior year taxable income carried forward into and distributed in the current year. Distributions also may include returns of capital.

To receive RIC tax treatment, the Company is required to meet certain income and asset diversification tests in addition to distributing at least 90% of ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available for distribution. As a RIC, the Company will be subject to a 4% nondeductible U.S. federal excise tax on certain undistributed income unless the Company distributes in a timely manner an amount at least equal to the sum of (1) 98% of its ordinary income for each calendar year, (2) 98.2% of its capital gain net income for the 1-year period ending October 31 in that calendar year and (3) any ordinary income and net capital gains for preceding years that were not distributed during such years and on which the Company paid no U.S. federal income tax.

We intend to distribute to our stockholders between 90% and 100% of our annual taxable income (which includes our taxable interest and fee income). However, the covenants contained in the Credit Facility and in the 2022 Notes Indenture may prohibit us from making distributions to our stockholders, and, as a result, could hinder our ability to satisfy the distribution requirement. In addition, we may retain for investment some or all of our net taxable capital gains (i.e., realized net long-term capital gains in excess of realized net short-term capital losses) and treat such amounts as deemed distributions to our stockholders. If we do this, our stockholders will be treated as if they received actual distributions of the capital gains we retained and then reinvested the net after-tax proceeds in our common stock. Our stockholders also may be eligible to claim tax credits (or, in certain circumstances, tax refunds) equal to their allocable share of the tax we paid on the capital gains deemed distributed to them. To the extent our taxable earnings for a fiscal taxable year fall below the total amount of our distributions for that fiscal year, a portion of those distributions may be deemed a return of capital 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, we may be limited in our ability to make distributions due to the asset coverage test for borrowings applicable to us as a BDC under the 1940 Act and due to provisions in the Credit ~~Facility.~~Facility and the 2022 Notes Indenture. For example, we are prohibited under the Loan and Security Agreement from declaring and paying any distribution or dividend, except to the extent necessary for us to maintain our eligibility to qualify as a RIC under Subchapter M of the Code. We cannot assure stockholders that they will receive any dividends or distributions at a particular level.

In this regard, on March 12, 2020, we announced monthly distributions of $0.08 per share payable on each of April 30, 2020 (the "March 2020 Dividend") and May 28, 2020 (the "April 2020 Dividend") to record holders as of April 23, 2020 and May 21, 2020, respectively. However, our board of directors has decided to defer the record date and payment of each of the March 2020 Dividend and the April 2020 Dividend and has determined to suspend the declaration of any future dividends until such later time as our board of directors determines is prudent in light of our capital needs and contractual obligations, and in our stockholders' best interests.

In accordance with certain applicable Treasury regulations and private letter rulings issued by the Internal Revenue Service, a RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder may elect to receive his or her entire distribution in either cash or stock of the RIC, subject to a limitation that the aggregate amount of cash to be distributed to all stockholders must be at least 10% of the aggregate declared distribution for distributions declared on or before December 31, 2020, and at least 20% of the aggregate declared ~~distribution.~~distribution for distributions declared on or after January 1, 2021. If too many stockholders elect to receive cash, the cash available for distribution must be allocated among each stockholder electing to receive cash (with the balance of the distribution paid in stock). In no event will any stockholder, electing to receive cash, receive less than the lesser of (a) the portion of the distribution such ~~shareholder~~stockholder has elected to receive in cash, or (b) an amount equal to his or her entire distribution times the percentage limitation on cash available for distribution. If these and certain other

requirements are met, for ~~U.S~~U.S. federal income tax purposes, the amount of the dividend paid in stock will be equal to the amount of cash that could have been received instead of stock. ~~We have no current intention of paying distributions in shares of our stock in accordance with these Treasury regulations or private letter rulings.~~

Recent Developments

~~Subsequent to September 30, 2019,~~On October 7, 2020, we ~~repurchased 39,467 shares~~received approximately $1.9 million representing a full payoff at par of each of our ~~common stock at~~New Money DIP Term Loan and our Roll-up DIP Term Loan, in connection with GNC's restructuring. On October 30, 2020,we also received an ~~average price~~additional $1.2 million, representing a discounted payoff of ~~$9.99 per share. With those shares repurchased~~our $3.0 million original tranche B-2 Term Loan and received our pro rata share of a new Second Lien Term Loan with a par value of $1.8 million in the ~~fourth quarter of 2019, we have reached the 250,000 share limit under the stock repurchase program authorized by the Company's board of directors in May 2019.~~restructured GNC.

On October ~~31, 2019, the~~30, 2020, we ~~increased the commitment~~received $7.8 million from Slappey Communications, LLC ("Slappey"), representing a full payoff at par of our ~~junior~~senior secured term loan ~~in Northeast Metal Works, LLC by $1.7 million. Northeast Metal Works, LLC used the proceeds to payoff its~~and terminated our senior secured revolving line of ~~credit~~credit. In connection with the payoff, we also received a ~~third party lender~~prepayment fee in the amount of $0.1 million. We retained our equity investment in Slappey and ~~as a result~~funded our pro rata share of ~~this transaction, our junior secured term loan converted into a senior secured term loan.~~an equity contribution in the amount of $0.1 million.

On October 30, 2020, we entered into the Amendment to the Loan and Security Agreement, which amended the Credit Facility to, among other things, (i) extend the revolving period to January 31, ~~2019,~~2021, until which date we ~~sold our warrants in Fox Rent A Car, Inc. As part~~may receive additional advances at the discretion of the ~~transaction, we received $0.2 million in cash, 11,959 shares~~lenders; and (ii) amend the definition of ~~Europcar Mobility Group,~~"debt service" to exclude from the calculation of the debt service coverage ratio, for any period from August 1, 2020 through December 31, 2020, an amount equal to the lesser of (x) the amount of the required monthly amortization payments for the relevant period and ~~contingent consideration in~~(y) the ~~form~~aggregate amount of ~~an an earn out. We are in~~all prepayments of principal (both voluntary and mandatory) collected by us during the ~~process of liquidating all of our shares in Europcar Mobility Group.~~relevant period.

~~On October 31, 2019, the we declared monthly distributions of $0.08 per share payable on each~~As of November ~~27, 2019, December 27, 2019, January 31,~~5, 2020, our outstanding indebtedness under our Credit Facility equaled $6.7 million.

Subsequent to September 30, 2020, the COVID-19 pandemic, and ~~February 28, 2020.~~the related effects on the U.S. and global economies, has continued to have adverse consequences for the business operations of certain of our portfolio companies and has adversely affected, and threatens to continue to adversely affect, our operations and the operations of HCAP Advisors. Given the dynamic nature of this situation, we cannot reasonably estimate the full impact of COVID-19 on our financial condition, results of operations or cash flows in the future. However, we do expect that it could have a material adverse impact on our future net investment income, the fair value of our portfolio investments, and the results of operations and financial condition of us and our portfolio companies. See “COVID-19 Update” above for more information.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are subject to ~~financial~~ market risk. Market risk includes risks ~~including~~that arise from changes in interest ~~rates.~~rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. The prices of securities held by us may decline in response to certain events, including those directly involving the companies we invest in; conditions affecting the general economy; overall market changes; legislative reform; local, regional, national or global political, social or economic instability; and interest rate fluctuations. In addition, U.S. and global capital markets and credit markets have experienced a higher level of stress due to the global COVID-19 pandemic, which has resulted in an increase in the level of volatility across such markets and in values of publicly-traded securities. Any continuation of the stresses on capital markets and credit markets, or a further

increase in volatility could result in a contraction of available credit for us and/or an inability by us to access the equity or debt capital markets or could otherwise cause an inability or unwillingness of our lenders to fund their commitments to us or of any lenders generally extend credit to us, any of which may have a material adverse effect on our results of operations and financial condition.

We are also subject to interest rate risks. Changes in the general level of interest rates can affect our net interest income, which is the difference between the interest income earned on our interest-earning assets and our interest expense in connection with our interest-bearing debt and liabilities. In connection with the COVID-19 pandemic, the U.S. Federal Reserve and other central banks have reduced certain interest rates and LIBOR has decreased. A prolonged reduction in interest rates will reduce our gross investment income and could result in a decrease in our net investment income if such decreases in LIBOR are not offset by a corresponding increase in the spread over LIBOR that we earn on any portfolio investments, a decrease in our operating expenses, or a decrease in the interest rate of our floating interest rate liabilities tied to LIBOR. As of September 30, ~~2019, eighteen~~2020, fourteen of our ~~individual debt investments,~~loans, or ~~63.8%,~~56.6% of the fair value of our debt investment portfolio, ~~bore~~carried interest at floating rates. In addition, as of September 30, 2020, advances under the Credit Facility bear interest at a rate per annum equal to the lesser of (i) the applicable LIBOR plus 4.50% (with a 1.00% LIBOR floor) and (ii) the maximum rate permitted under applicable law.

Assuming that the ~~Consolidated~~ Statement of Assets and Liabilities as of September 30, ~~2019~~2020 were to remain constant and no actions were taken to alter the existing interest rate sensitivity, a hypothetical 100 basis points increase in LIBOR would increase our net investment income by ~~approximately $0.5~~a maximum of $0.3 million. ~~Alternatively,~~Similarly, a hypothetical 100 basis points decrease in LIBOR would decrease our net ~~investment~~ income by ~~approximately $0.2~~$0.1 million. Although we believe that this measure is indicative of our sensitivity to interest rate changes, it does not adjust for potential changes in credit quality, size and composition of the assets on the balance sheet and other business developments that could affect net increase in net assets resulting from operations, or net income. Accordingly, no assurances can be given that actual results would not differ materially from the potential outcome simulated by this estimate.

Because we have previously borrowed, and plan to borrow in the future, money to make investments, our net investment income will be 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 our investment portfolio.

We may hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contacts subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of lower interest rates with respect to our portfolio of investments. We have not engaged in any hedging activities to date.

In July 2017, the U.K. Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with a new index calculated by short term repurchase agreements, backed by Treasury securities, called the Secured Overnight Financing Rate (“SOFR”). 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. Whether or not SOFR attains market traction as a LIBOR replacement remains a question and the future of LIBOR at this time is uncertain.

The expected discontinuation of LIBOR could have a significant impact on our business. We typically use LIBOR as a reference rate in loans we extend to portfolio companies such that the interest due to us pursuant to a loan extended to a portfolio company is calculated using LIBOR. As of September 30, 2020, we had a total of $38.7 million principal balance, or 40.9% of the principal balance of our debt investment portfolio, in such LIBOR-linked debt investments whose maturity dates extend past December 31, 2021. If LIBOR ceases to exist, we may need to renegotiate these debt investments extending beyond 2021 to replace LIBOR with the new standard that is established in its place or another pricing method, which could have an adverse effect on our ability to receive attractive returns. In addition, if LIBOR ceases to exist beyond 2021, any credit facility to which we are a party that extends beyond 2021 will need to implement the new standard that is established in the place of LIBOR or another pricing method.

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 modifications of the terms of a debt instrument being treated as a taxable exchange, among other requirements, 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. Beyond these challenges, we anticipate there may be additional risks to our current processes and information systems that will need to be identified and evaluated by us.

Given the current uncertainties over LIBOR’s discontinuation and the replacement alternatives, it is not possible at this time to predict the effect of any such changes, any establishment of alternative reference rates, or any other reforms to LIBOR that may be enacted in the United Kingdom or elsewhere, including any impact on our LIBOR-linked debt investments that mature after December 31, 2021. In addition, 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.

Item 4. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

As of September 30, ~~2019~~2020 (the end of the period covered by this report), we, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the ~~1934~~Exchange Act). Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

(b) Changes in Internal Control Over Financial Reporting

~~Management did not identify any change~~There were no changes in ~~the Company's~~our internal control over financial reporting that occurred during the three months ended September 30, ~~2019~~2020 that ~~has~~have materially affected, or isare reasonably likely to materially affect, ~~the Company's~~our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

WeNeither we, HCAP Advisors, nor our subsidiaries are ~~a party~~currently subject to ~~certain~~any material pending legal proceedings, other than ordinary routine litigation incidental to our respective businesses, and no such material proceedings are known to be contemplated. We, HCAP Advisors, and our subsidiaries may from time to time, however, be involved in litigation arising out of our operations in the normal course of business or otherwise, including the enforcement of our ~~business, including where third~~rights under the contracts with our portfolio companies. Third parties may ~~try to~~also seek to impose liability on us in connection with the activities of our portfolio companies. While we cannot predict the outcome of these legal proceedings ~~cannot at this time be predicted~~ with certainty, we do not expect ~~these~~that these proceedings will have a material adverse effect on our consolidated financial ~~condition or results of operations.~~statements.

1.Item 1A. Risk Factors

In addition to the ~~information provided under the heading "Risk Factors"~~risk factors previously disclosed in our ~~annual report~~Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018,~~2019 and in our Quarterly Report on Form 10-Q for the ~~Company~~quarter ended March 31, 2020, we have identified the following ~~risk~~risks and ~~uncertainty~~uncertainties that could materially affect our business, financial condition and/or ~~operating results.~~results of operations. You should carefully consider all such risks before making a decision to purchase our securities, which could materially affect our

business, financial condition and/or results of operations. Any such risks and uncertainties are not the only ones facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may ~~materially affect~~have a material adverse effect on our business, financial condition and/or operating ~~results.~~

~~Changes relating to~~results, as well as the ~~LIBOR calculation process may adversely affect the value~~market price of ~~the LIBOR-indexed, floating rate debt securities in~~ our ~~portfolio and adversely affect our debt financing, which could have an adverse effect on our business, financial condition and results of operations.~~

On July 27, 2017, the U.K. Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. It is unclear if at that time whether LIBOR will cease to exist or if new methods of calculating LIBOR will be established such that it continues to exist after 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with a new index calculated by short term repurchase agreements, backed by Treasury securities called the Secured Overnight Financing Rate (“SOFR”). The first publication of SOFR was released in April 2018. Whether or not SOFR attains market traction as a LIBOR replacement remains a question and the future of LIBOR at this time is uncertain.securities.

We ~~typically use LIBOR as a reference rate in loans we extend~~may be subject to portfolio companies such that the interest due to us pursuant to a loan extended to a portfolio company is calculated using LIBOR. As of September 30, 2019, we had a total of $43.8 million principal balance, or 39.0% of the principal balance of our debt investment portfolio, in such LIBOR-linked debt investments whose maturity dates extend past December 31, 2021. If LIBOR ceases to exist, we may need to renegotiate these debt investments extending beyond 2021 to replace LIBORrisks associated with the new standard that is established in its place or another pricing method, which could have an adverse effect on our ability to receive attractive returns. In addition, borrowings under our Credit Facility, which is currently set to mature on October 30, 2021, bear interest at LIBOR plus a margin rate. As a result, if we are able to extend our Credit Facility beyond 2021 and if LIBOR ceases to exist at that time, we may need to renegotiate the interest-rate provisions in the Credit Facility to replace LIBOR with the new standard that is established in its place or another pricing method."covenant-lite" loans.

~~Given~~Our investments in debt instruments may include “covenant-lite” loans. Covenants are contractual restrictions that lenders place on companies to limit the ~~current uncertainties over LIBOR’s discontinuation~~corporate actions a company may pursue. Generally, the loans in which we expect to invest will have financial maintenance covenants, which are used to proactively address materially adverse changes in a portfolio company’s financial performance. However, to a lesser extent, we may hold investments in “covenant-lite” loans. We use the term “covenant-lite” to refer generally to loans that do not have a complete set of financial maintenance covenants. Generally, “covenant-lite” loans provide borrower companies more freedom to negatively impact lenders because their covenants are incurrence-based, which means they are only tested and can only be breached following an affirmative action of the ~~replacement alternatives, it is not possible at this time to predict the effect of any such changes, any establishment of alternative reference rates, or any other reforms to LIBOR that may be enacted~~borrower, rather than by a deterioration in the ~~United Kingdom~~borrower’s financial condition. Accordingly, to the extent that we invest in “covenant-lite” loans, we may have fewer rights against a borrower and may have a greater risk of loss on such investments as compared to investments in or ~~elsewhere, including any impact on our LIBOR-linked debt investments that mature after December 31, 2021.~~exposure to loans with financial maintenance covenants.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended September 30, 2019, the Company issued a total of 8,514 shares of our common stock under our dividend reinvestment plan (“DRIP”). This issuance was not subject to the registration requirements of the Securities Act of 1933. The aggregate value of the shares of our common stock issued under the DRIP was approximately $0.1 million for the three months ended September 30, 2019 and $0.2 million for the nine months ended September 30, 2019.Not applicable.

On May 2, 2019, the Company's board of directors authorized an open market stock repurchase program. Pursuant to the program, the Company is authorized to repurchase up to 250,000 shares in the aggregate of its outstanding common stock in the open market. Unless amended by the board of directors, the repurchase program was set to expire on the earlier of December 31, 2019 or the repurchase of 250,000 shares of the Company's outstanding common stock. Through September 30, 2019, the Company has purchased 210,533 shares of its common stock under this stock repurchase program and had a total of 39,467 shares remaining to purchase. Subsequent to September 30, 2019, the Company repurchased 39,467 shares of its common stock at an average price of $9.99 per share. With those shares repurchased in the fourth quarter of 2019, the Company reached the 250,000 share limit under the stock repurchase program authorized by the Company's board of directors in May 2019.

~~During the three months ended September 30, 2019, the Company made the following repurchases pursuant to the repurchase plan:~~

Month Total Number of Shares Purchased Average Purchase Price Total Number of Shares Purchased as part of Publicly Announced Plan Maximum Remaining Shares That May Yet Be Purchased Under Plans
July 1 - July 31 50,737 $ 10.41 50,737 148,291
August 1 - August 31 50,474 10.10 50,474 97,817
September 1 - September 30 58,350 10.09 58,350 39,467
159,561 $ 10.19 159,561

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~None.~~On October 30, 2020, we entered into the Amendment to the Loan and Security Agreement, which amended the Credit Facility to, among other things, (i) extend the revolving period to January 31, 2021, until which date we may receive additional advances at the discretion of the lenders; and (ii) amend the definition of "debt service" to exclude from the calculation of the debt service coverage ratio, for any period from August 1, 2020 through December 31, 2020, an amount equal to the lesser of (x) the amount of the required monthly amortization payments for the relevant period and (y) the aggregate amount of all prepayments of principal (both voluntary and mandatory) collected by us during the relevant period.

The description above is only a summary of the material provisions of the Amendment and is qualified in its entirety by reference to the Company of the Amendment which is filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.

Item 6. Exhibits

6267

EXHIBIT INDEX


Exhibit Number						Description
3.1						Restated Certificate of Incorporation of ~~Harvest Capital Credit Corporation (the “Company”) (incorporated~~the Company (incorporated by reference to Exhibit (a)(1) to Pre-Effective Amendment No. 2 to the ~~registrant’s~~R egistrant’s Registration Statement on Form N-2, File No. 333-185672, filed on April 24, 2013).

3.2						Bylaws of the Company (incorporated by reference to Exhibit (b)(1) to Pre-Effective Amendment No. 1 to the ~~registrant’s~~R egistrant’s Registration Statement on Form N-2, File No. 333-185672, filed on March 26, 2013).

10 .1						Tenth Amendment to Loan and Security Agreement, dated as of August 6, 2020, by and among the Company, HCAP Equity Holdings, LLC and HCAP ICC, LLC, as borrowers, Pacific Western Bank, as agent and a lender, and each of the other lenders from time to time party thereto (incorporated by reference to Exhibit 10 .2 to the Registrant's Quarterly Report on Form 10-Q,, File No. 814-00985 , filed on August 6, 2020).

10.2						Eleventh Amendment to Loan and Security Agreement, dated as of October 30 , 2020, by and among the Company, HCAP Equity Holdings, LLC and HCAP ICC, LLC, as borrowers, Pacific Western Bank, as agent and a lender, and each of the other lenders from time to time party thereto *

31.1						Chief Executive Officer Certification Pursuant to Exchange Act Rule 13a-14 (a)~~, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~.*

31.2						Chief Financial Officer Certification Pursuant to Exchange Act Rule 13a-14 (a)~~, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~.*

32.1						Chief Executive Officer Certification pursuant to 18 U.S.C. Section ~~1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~1350.*

32.2						Chief Financial Officer Certification pursuant to 18 U.S.C. Section ~~1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~1350.*

* Filed herewith.

SIGNATURES

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.


			HARVEST CAPITAL CREDIT CORPORATION

Date: November ~~7, 2019~~5, 2020			/s/ Joseph A. Jolson
			Joseph A. Jolson Chairman and Chief Executive Officer (Principal Executive Officer)

Date: November ~~7, 2019~~5, 2020			/s/ William E. Alvarez, Jr.
			William E. Alvarez, Jr. Chief Financial Officer, Chief Compliance Officer and Secretary (Principal Financial and Accounting Officer)

6469


Provision for taxes on unrealized gains on investments	—		507,894		—		(15,584)
Net increase (decrease) in net assets resulting from operations	$	(1,043,162)	$	632,826	$	(896,060)	$	3,518,577

Net investment income per share	$	0.18	$	0.25	$	0.43	$	0.69
Net increase (decrease) in net assets resulting from operations per share	$	(0.17)	$	0.10	$	(0.15)	$	0.55
Weighted average shares outstanding (basic and diluted)	6,053,807		6,398,077		6,171,616		6,408,547


	Common Stock
Three Months Ended September 30, 2018	Shares	Par		Capital in Excess of Common Stock		Treasury Shares		Accumulated Over Distributed Earnings (1)		Total Net Assets
Balance as of June 30, 2018	6,395,192	$	6,537	$	93,071,543	$	(1,573,457)	$	(11,426,575)	$	80,078,048
Net increase in net assets resulting from operations:
Net investment income	—	—		—		—		1,586,663		1,586,663
Net realized gains	—	—		—		—		120,175		120,175
Net change in unrealized depreciation on investments	—	—		—		—		(1,581,906)		(1,581,906)
Provision for taxes on unrealized gains on investments								507,894		507,894
Distributions to shareholders (2):
Distributions	—	—		—		—		(1,823,368)		(1,823,368)
Capital share transactions
Reinvestment of dividends	7,868	8		83,271		—		—		83,279
Share repurchases	—	—		—		—		—		—
Write-off of deferred offering costs	—	—		—		—		—		—
Total increase (decrease) for the three months ended September 30, 2018	7,868	8		83,271		—		(1,190,542)		(1,107,263)
Balance as of September 30, 2018	6,403,060	$	6,545	$	93,154,814	$	(1,573,457)	$	(12,617,117)	$	78,970,785


	Undistributed Net Investment Income		Accumulated Realized Losses on Investments		Net Unrealized Depreciation on Investments		Accumulated Over Distributed Earnings
Balance as of June 30, 2018	$	972,244	$	(9,653,256)	$	(2,745,563)	$	(11,426,575)
Net increase in net assets resulting from operations:
Net investment income	1,586,663		—		—		1,586,663
Net realized gains on investments	—		120,175		—		120,175
Net change in unrealized depreciation on investments	—		—		(1,581,906)		(1,581,906)
Provision for taxes on unrealized gains on investments	—		—		507,894		507,894
Distributions to shareholders:
Distributions	(1,823,367)		—		—		(1,823,367)
Balance as of September 30, 2018	$	735,540	$	(9,533,081)	$	(3,819,575)	$	(12,617,116)


Month	Total Number of Shares Purchased	Average Purchase Price		Total Number of Shares Purchased as part of Publicly Announced Plan	Maximum Remaining Shares That May Yet Be Purchased Under Plans
July 1 - July 31	50,737	$	10.41	50,737	148,291
August 1 - August 31	50,474	10.10		50,474	97,817
September 1 - September 30	58,350	10.09		58,350	39,467
	159,561	$	10.19	159,561