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Item 8. Financial Statements and Supplementary Data

2025-12-17 compared with 2014-04-01 · 729 added, 1291 removed, 168 unchanged (92% of the section changed)

Financial Statements and Supplementary Data

of Independent Registered Public Accounting Firm

the Board of Directors and

of Equus Total Return, Inc.:

have audited the accompanying balance sheets of Equus Total Return, Inc.

(a Delaware corporation) (the “Fund”), including

the schedules of investments, as of December 31, 2013 and 2012 and the related statements of operations, changes in net assets

and cash flows for each of the three years in the period ended December 31, 2013 and the selected per share data and ratios for

each of the five years in the period ended December 31, 2013.

These financial statements and selected per share data and ratios

are the responsibility of the management of the Fund.

Our responsibility is to express an opinion on these financial statements

and selected per share data and ratios based on our audits.

conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).

Those standards

require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and selected

per share data and ratios are free of material misstatement.

The Fund is not required to have, nor were we engaged to perform,

an audit of its internal control over financial reporting.

Our audit included consideration of internal control over financial

reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing

an opinion on the effectiveness of the Fund’s internal control over financial reporting.

Accordingly, we express no opinion.

An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements

and selected per share data and ratios.

Our procedures included verification by examination or confirmation of securities held

by the custodian as of December 31, 2013 or by other appropriate auditing procedures.

An audit also includes assessing the accounting

principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

Index to Financial Statements

Report of Independent Registered Public Accounting Firm - (BDO USA, P.C.;

PCAOB ID# 243 ) 38

Balance Sheets As of December 31, 2024 and 2023 40

Statements of Operations For the years ended December 31, 2024, 2023 and 2022 41

Statements of Changes in Net Assets For the years ended December 31, 2024, 2023 and 2022 42

Statements of Cash Flows For the years ended December 31, 2024, 2023 and 2022 43

Statements of Selected Per Share Data and Ratios - For the years ended December 31, 2024, 2023, 2022, 2021 and 2020 44

Schedule of Investments December 31, 2024 45

Schedule of Investments December 31, 2023 47

Notes to Financial Statements 49

Schedules of Investments in and Advances to Affiliates For the year ended December 31, 2024 76

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors Equus Total Return, Inc.

Houston, Texas

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Equus Total Return, Inc.

(the “Fund”), including the schedules of investments, as of December 31, 2024 and 2023, the related statements of operations, changes in net assets, and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and financial statement schedule listed in the Table of Contents in Item 15(a)(1) (collectively referred to as the “financial statements”) and the selected per share data and ratios for each of the five years in the period ended December 31, 2024.

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2024 and 2023, and the results of its operations, changes in net assets and its cash flows for each of the three years in the period ended December 31, 2024, and the selected per share data and ratios for each of the five years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Going Concern Uncertainty

The accompanying financial statements have been prepared assuming that the Fund will continue as a going concern.

As discussed in Note 2 to the financial statements, the Fund has insufficient operating cash flows and cash on hand that raises substantial doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 2.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements and the selected per share data and ratios are the responsibility of the Fund’s management.

Our responsibility is to express an opinion on the Fund’s financial statements and the selected per share data and ratios based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the selected per share data and ratios are free of material misstatement, whether due to error or fraud.

The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and the selected per share data and ratios, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and the selected per share data and ratios.

Our procedures included confirmation of securities owned as of December 31, 2024, and 2023 by correspondence with the custodians.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and the selected per share data and ratios.

We believe that our audits provide a reasonable basis for our opinion.

our opinion, the financial statements and selected per share data and ratios referred to above present fairly, in all material

respects, the financial position of Equus Total Return, Inc.

as of December 31, 2013 and 2012 and the results of its operations

and its cash flows for each of the three years in the period ended December 31, 2013 and the selected per share data and ratios

for each of the five years in the period ended December 31, 2013, in conformity with accounting principles generally accepted in

the United States of America.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Limited Liability Company Investments

As described in Note 3 to the financial statements, the Fund’s control investment portfolio has a total estimated fair value of $27.5 million at December 31, 2024, which includes $17.0 million of limited liability company investments.

Management has determined that these limited liability company investments are Level 3 investments in accordance with Accounting Standards Codification Topic 820 and utilize inputs that are unobservable and significant to the fair value measurement.

Management engaged an independent third-party valuation firm and reserve engineers to assist in the determination of the fair value estimate of the Fund’s limited liability company Investments.

We identified the valuation of the Fund’s limited liability company investments as a critical audit matter.

The principal considerations for our determination are significant judgments involved in the determination of (i) the valuation techniques utilized to value these investments which include the guideline transaction method, guideline public company method, the discounted cash flow method and transaction price method, and (ii) the use of unobservable inputs in these valuation techniques, which include, acreage value multiples, estimated future production, proved reserve multiple, daily production multiple and discount rate.

Auditing these elements was complex because it involved especially subjective auditor judgment, including the use of personnel with specialized skill and knowledge.

The primary procedures we performed to address this critical audit matter included:

Testing the reasonableness of the estimated future production by:

(i) comparing to historical production volumes and historical production decline analyses and (ii) assessing the consistency with evidence obtained in other areas of the audit.

Utilizing personnel with specialized skill and knowledge in valuation to assist in:

(i) evaluating the appropriateness of the valuation techniques applied to each limited liability company investment and (ii) evaluating whether unobservable inputs, including the acreage value multiples, proved reserve multiple, daily production multiple, and discount rate were reasonable by comparing to independent data sources.

/s/ BDO USA, P.C.

We have served as the Fund's auditor since 2014.

Houston, Texas

March 31, 2014

Table of Contents 34

April 10, 2025

EQUUS TOTAL RETURN, INC.

2 unchanged sentences

December 31, 2023

(in thousands, except per share amounts)

(in thousands, except shares and per share amounts)

Investments in portfolio securities at fair value:

Control investments (cost at $ 18,611 and $ 16,364 , respectively)

Affiliate investments (cost at $350 and $350 respectively)

Non-affiliate investments (cost at $1,321 and $10,625 respectively)

Total investments in portfolio securities at fair value

Treasury Bills

Cash and cash equivalents

Restricted cash and temporary cash investments

Accounts receivable from investments

Accrued interest receivable

Accounts receivable and other

Restricted cash

Accounts receivable from affiliates

Accrued interest

Liabilities and net assets

Accounts payable and accrued liabilities

Accounts payable

Accrued compensation

Accounts payable to related parties

1 unchanged sentence

Total liabilities

Commitments and contingencies

Net assets consist of:

Commitments and contingencies (See Note 6)

Common stock, $ 0.001 par value per share;

100,000,000 shares authorized as of December 31, 2024 and December 31, 2023, and 13,586,173 shares outstanding as of December 31, 2024 and 31-Dec-23

Preferred stock, $ 0.001 par value per share;

10,000,000 shares authorized as of December 31, 2024 and December 31, 2023

Common stock, par value

Capital in excess of par value

Undistributed net investment losses

Unrealized depreciation of portfolio securities, net

Accumulated deficit

Total net assets

Shares of common stock issued and outstanding, $.001 par value, 50,000 shares authorized

Shares of preferred stock issued and outstanding, $.001 par value, 5,000 shares authorized

Shares of common stock issued and outstanding, $ 0.001 par value, 100,000 and 50,000 shares authorized, respectively

Net asset value per share

The accompanying notes are an integral

part of these financial statements.

Table of Contents 35

The accompanying notes are an integral part of these financial statements

EQUUS TOTAL RETURN, INC.

3 unchanged sentences

Investment income:

Interest income (loss), net:

Interest income:

Control investments

Affiliate investments

Non-affiliate investments

Total interest income

Interest from temporary cash investments

Interest from U.S.

Treasury Bills

Total investment income

Professional fees

Compensation expense

Offering costs

Professional fees

Professional liability expenses

Director fees and expenses

General and administrative expense

General and administrative expenses

Mailing, printing and other expenses

Interest expense

Settlement expense

Total expenses

Net investment loss

Net realized gain (loss):

Net realized gain:

Treasury Bills

Net realized gain

Net unrealized appreciation (depreciation) of portfolio securities:

Control investments

Affiliate investments

Non-affiliate investments

Temporary cash investments

Net realized loss

Net unrealized depreciation of portfolio securities:

End of period

Beginning of period

Net change in unrealized depreciation of portfolio securities

Net change in net unrealized appreciation (depreciation) of portfolio securities

Federal income taxes

Net increase (decrease) in net assets resulting from operations

Net increase (decrease) in net assets resulting

from operations per share:

Net increase (decrease) in net assets resulting from operations per share:

Basic and diluted

Weighted average shares outstanding:

The accompanying notes are an integral

part of these financial statements.

Table of Contents 36

Basic and diluted

The accompanying notes are an integral part of these financial statements

EQUUS TOTAL RETURN, INC.

STATEMENTS OF CHANGES IN NET ASSETS

Year Ended December 31,

(in thousands)

Net increase (decrease) in net assets resulting from operations

Capital share transactions:

Shares issued for portfolio securities

Net increase in net assets resulting from capital share transactions

Increase (decrease) in net assets

Net assets at beginning of period

Net assets at end of period

The accompanying notes are an integral

part of these financial statements.

Table of Contents 37

Number of Shares

Capital in Excess of Par Value

Accumulated Deficit

Total Net Assets

Balances as of December 31, 2024

Net decrease in net assets resulting from operations

Balances as of December 31, 2023

Issuance of shares

Net increase in net assets resulting from operations

Balances as of December 31, 2022

Net decrease in net assets resulting from operations

Balances as of December 31, 2021

The accompanying notes are an integral part of these financial statements.

EQUUS TOTAL RETURN, INC.

1 unchanged sentence

Year Ended December 31,

(in thousands)

Reconciliation of increase (decrease) in net assets resulting from operations to net cash (used in) provided by operating activities:

Net increase (decrease) in net assets resulting

from operations

Adjustments to reconcile net decrease in net assets resulting from operations to net cash (used in) provided by operating activities:

Net realized loss

Net change in unrealized depreciation of portfolio securities

Changes in operating assets and liabilities:

Cash flow from operating activities:

Net (decrease) increase in net assets resulting from operations

Adjustments to reconcile net (decrease) increase in net assets resulting from operations to net cash provided by (used in) operating activities:

Treasury Bills

Net change in unrealized appreciation (depreciation) of portfolio securities:

Control investments

Purchase of portfolio securities

Net proceeds from dispositions of portfolio securities

Principal payments received from portfolio securities

Decrease in deferred offering costs

Cash settlement of collateral

Sales of temporary cash investments, net

Increase in accounts receivable from affiliates

Decrease in accounts receivable and other

Decrease in accrued interest receivable

(Decrease) increase in accounts payable and accrued liabilities

(Decrease) increase in accounts payable to related parties

Net cash (used in) provided by operating activities

Sales (purchases) of U.S.

Treasury Bills, net

Changes in operating assets and liabilities:

Accounts receivable from affiliates

Accrued interest

Accounts payable and accrued liabilities

Accounts payable to related parties

Net cash provided by (used in) operating activities

Cash flows from financing activities:

1 unchanged sentence

Repayments under margin account

Deferred offering costs

Net cash provided by (used in) financing activities

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Non-cash operating and financing activities:

Shares issued in lieu of cash for portfolio securities

Accrued interest or dividends exchanged for portfolio securities

Issuance of common stock

Net cash (used in) provided by financing activities

Net (decrease) in cash and cash equivalents

Cash and cash equivalents and restricted cash at beginning of period

Cash and cash equivalents and restricted cash at end of period

Supplemental disclosure of cash flow information:

1 unchanged sentence

Income taxes paid

The accompanying notes are an integral

part of these financial statements.

Table of Contents 38

The accompanying notes are an integral part of these financial statements.

EQUUS TOTAL RETURN, INC.

2 unchanged sentences

Investment income

Net investment income (loss)

Net realized loss

Net change in unrealized depreciation

Net increase (decrease) in net assets

Net investment loss

Net realized gain (loss)

Net change in unrealized appreciation of portfolio securities

Net (decrease) increase in net assets resulting from operations

Capital transactions:

Distributions from net investment income

Return of capital distribution

Shares issued for portfolio securities

4 unchanged sentences

Net assets at end of period, basic and diluted

Weighted average number of shares outstanding during period,

Weighted average number of shares outstanding during period, in thousands

Market price per share:

2 unchanged sentences

Selected information and ratios:

Dividends declared

Ratio of expenses to average net assets

Ratio of net investment gain (loss) to average net assets

Ratio of net investment loss to average net assets

Ratio of net increase (decrease) in net assets resulting from operations to average net assets

Total return on market price (1)

Total return = [(ending market price per share + year-to-date dividends paid - beginning market price per share) / beginning market

price per share ].

The accompanying notes are an integral

part of these financial statements.

Table of Contents 39

(1) Total return = [(ending market price per share + year-to-date dividends paid - beginning market price per share) / beginning market price per share].

The accompanying notes are an integral part of these financial statements.

EQUUS TOTAL RETURN, INC.

5 unchanged sentences

Portfolio Company (1)

Control Investments:

Majority-owned (3) :

2 unchanged sentences

Member interest ( 100 %)

Equus Media Development Company, LLC

Morgan E&P, LLC (4)

Member interest ( 100 %)

Spectrum Management, LLC

Carrolton, TX

Business products and services

December 1999

285,000 units of Class A member interest (92.1%/82.5% fully diluted)

16% subordinated promissory note due 11/11 (2)

Control Investments:

Majority-owned (represents 39.0% of total investments at fair value)

Affiliate Investments (4) :

Shipping products and services

350,000 shares of common stock

Affiliate Investments (represents 0.9% of total investments at fair value)

Non-Affiliate Investments

(less than 5% owned):

Property Group

73,666 shares common stock

10% promissory note due 2/18 (2)

Monitor Holding, LLC

Business products and services

November 2013

12 % senior secured

promissory note due 5/26 (5)

Non-Affiliate Investments (represents 7.5% of total investments at fair value)

Investment in Portfolio Securities

Temporary Cash Investments

Treasury Bill

December 2013

Temporary Cash Investments (represents 52.6% of total investments at fair value)

Total Control Investments:

Majority-owned (represents 100% of total investments at fair value)

Total Investments

(1) Under Section 55 (a) of the 1940 Act, qualifying assets must represent at least 70% of total assets at the time of acquisitions of any non-qualifying assets.

As of none of the Fund's total assets were considered non- qualifying assets.

See Note 3 to the financial statements, Valuation of Investments.

Income-producing.

(2) See Note 3 to the financial statements, Valuation of Investments.

(3) Majority-owned investments are generally defined under the Investment Company Act of 1940 as companies in which we own more than 50% of the voting securities of the company.

Affiliate investments are generally defined under the Investment Company Act of 1940 as companies in which we own at least 5% but not more than 25% voting securities of the company.

The accompanying notes are an integral

part of these financial statements.

Table of Contents 40

EQUUS TOTAL RETURN, INC.

SCHEDULE OF INVESTMENTS –

(4) Level 3 Portfolio Investments

(5) Income-producing

SCHEDULE OF INVESTMENTS – (Continued)

DECEMBER 31, 2024

(in thousands, except share data)

Substantially all of our portfolio securities

are restricted from public sale without prior registration under the Securities Act of 1933.

We negotiate certain aspects of the

method and timing of the disposition of our investment in each portfolio company, including registration rights and related costs.

As defined in the Investment Company

Act of 1940, all of our investments are in eligible portfolio companies.

We provide significant managerial assistance to portfolio

companies that comprise 82% of the total value of the investments in portfolio securities as of December 31, 2013.

Our investments in portfolio securities

consist of the following types of securities as of December 31, 2013 (in thousands):

Our portfolio securities are restricted from public sale without prior registration under the Securities Act of 1933 (hereafter, the “Securities Act”).

We typically negotiate certain aspects of the method and timing of the disposition of our investment in each portfolio company, including registration rights and related costs.

As a business development company (“BDC”), we may invest up to 30% of our assets in non-qualifying portfolio investments, as permitted by the Investment Company Act of 1940 (the “1940 Act”).

Specifically, we may invest up to 30% of our assets in entities that are not considered “eligible portfolio companies” (as defined in the 1940 Act), including companies located outside of the United States, entities that are operating pursuant to certain exceptions under the 1940 Act, and publicly-traded entities with a market capitalization exceeding $250 million.

As of December 31, 2024, we had invested 91.9% of our assets in securities of portfolio companies that constituted qualifying investments under the 1940 Act.

As of December 31, 2024, none of our investments are considered non-qualifying assets as all of our investments are in enterprises that are considered eligible portfolio companies the 1940 Act.

We provide significant managerial assistance to our portfolio companies that comprise 100% of the total value of the investments in portfolio securities as of December 31, 2024.

We are classified as a “non-diversified” investment company under the 1940 Act, which means we are not limited in the proportion of our assets that may be invested in the securities of a single issuer.

The value of one segment called “Energy” includes our two remaining portfolio companies and was 93.2% of our net asset value, 91.9% of our total assets and 100% of our investments in portfolio company securities (at fair value) as of December 31, 2024.

Changes in business or industry trends or in the financial condition, results of operations, or the market’s assessment of any single portfolio company will affect the net asset value and the market price of our common stock to a greater extent than would be the case if we were a “diversified” company holding numerous investments.

Our investments in portfolio securities consist of the following types of securities as of December 31, 2024 (in thousands):

Type of Securities

Fair Value as

Percentage of

Fair Value as Percentage of Net Assets

Limited liability company investments

Secured and subordinated debt

Interest payments are being received

and/or accrued on notes with a fair value of $2.0 million, while accrued interest has been impaired on notes receivable included

in secured and subordinated debt with a fair value of $2.9 million.

The following is a summary by industry

of our investments in portfolio securities as of December 31, 2013 (in thousands):

Fair Value as

Percentage of

Business products and services

Shipping products and services

The accompanying notes are an integral

part of these financial statements.

Table of Contents 41

The following is a summary by industry of the Fund’s investments in portfolio securities as of December 31, 2024 (in thousands):

Fair Value as Percentage of Net Assets

EQUUS TOTAL RETURN, INC.

2 unchanged sentences

(in thousands, except share data)

and Location of

Name and Location of

Date of Initial

Portfolio Company (1)

Control Investments:

Majority-owned (3) :

Equus Energy, LLC (4)

interest (100%)

Equus Media Development

interest (100%)

Spectrum Management,

Carrolton, TX

products and services

units of Class A member interest (92.1%/82.5% fully diluted)

subordinated promissory notes due 11/11 (5)

Control investments:

Majority-owned (represents 80.4% of total investments at fair value)

Investments (4) :

PalletOne, Inc.

products and services

shares of common stock (18.70%)

Affiliate Investments (represents 1.6% of total investments at fair value)

Non-Affiliate

Investments (less than 5% owned):

The Bradshaw Group

Richardson, TX

products and services

576,828 Class B shares

preferred stock

Class C shares preferred stock

Class D shares 15% preferred stock

Class E shares 8% preferred stock

to buy 2,229,450 shares of common stock through 5/16

Infinia Corporation

shares common stock (0.06%)

to purchase 16,000 shares of common stock at $6.50 per share through 12/12

Orco Property Group

Paris, France

shares common stock

December 2011

Member interest ( 100 %)

Morgan E&P, LLC (4)

Member interest ( 100 %)

12 % senior secured

promissory note due 5/26 (5)

Trulite, Inc.

to buy 8,934,211 shares of common stock at $0.01 - $0.38 per share through 11/15

Non-Affiliate Investments (represents 18.0% of total investments at fair value)

Investment in Portfolio Securities

Total Control Investments:

Majority-owned(represents 47.6%of total investments at fair value)

Treasury Bills

December 2023

Treasury bills (represents 52.4% of total investments at fair value)

Total Investments

(1) Under Section 55 (a) of the 1940 Act, qualifying assets must represent at least 70% of total assets at the time of acquisitions of any non-qualifying assets.

As of none of the Fund's total assets were considered non- qualifying assets.

See Note 3 to the financial statements, Valuation of Investments.

Income-producing.

(2) See Note 3 to the financial statements, Valuation of Investments.

(3) Majority-owned investments are generally defined under the Investment Company Act of 1940 as companies in which we own more than 50% of the voting securities of the company.

Affiliate investments are generally defined under the Investment Company Act of 1940 as companies in which we own at least 5% but not more than 25% voting securities of the company.

Non-income producing.

The accompanying notes are an integral

part of these financial statements.

Table of Contents 42

EQUUS TOTAL RETURN, INC.

SCHEDULE OF INVESTMENTS –

(4) Level 3 Portfolio Investments

(5) Income-producing

SCHEDULE OF INVESTMENTS – (Continued)

DECEMBER 31, 2023

(in thousands, except share data)

Substantially all of our portfolio securities

are restricted from public sale without prior registration under the Securities Act of 1933.

We negotiate certain aspects of the

method and timing of the disposition of our investment in each portfolio company, including registration rights and related costs.

As defined in the Investment Company

Act of 1940, all of our investments are in eligible portfolio companies.

We provide significant managerial assistance to portfolio

companies that comprise 100% of the total value of the investments in portfolio securities as of December 31, 2012.

Our investments in portfolio securities

consist of the following types of securities as of December 31, 2012 (in thousands):

Our portfolio securities are restricted from public sale without prior registration under the Securities Act of 1933 (hereafter, the “Securities Act”).

We typically negotiate certain aspects of the method and timing of the disposition of our investment in each portfolio company, including registration rights and related costs.

As a business development company (“BDC”), we may invest up to 30% of our assets in non-qualifying portfolio investments, as permitted by the Investment Company Act of 1940 (the “1940 Act”).

As of December 31, 2023, we had invested 43.7% of our assets in securities of portfolio companies that constituted qualifying investments under the 1940 Act.

As of December 31, 2023, none of our investments are considered non-qualifying assets as all of our investments are in enterprises that are considered eligible portfolio companies the 1940 Act.

We provide significant managerial assistance to our portfolio companies that comprise 100% of the total value of the investments in portfolio securities as of December 31, 2023.

The value of one segment called “Energy” includes our two remaining portfolio companies and was 84.6% of our net asset value, 43.7% of our total assets and 100% of our investments in portfolio company securities (at fair value) as of December 31, 2023.

Our investments in portfolio securities consist of the following types of securities as of December 31, 2023 (in thousands):

Type of Securities

Fair Value as

Percentage of

Fair Value as Percentage of Net Assets

Limited liability company investments

Secured and subordinated debt

Preferred stock

Interest payments are being received

and/or accrued on notes with a fair value of $1.4 million, while accrued interest has been impaired on notes receivable included

in secured and subordinated debt with a fair value of $0.4 million.

The following is a summary by industry

of our investments in portfolio securities as of December 31, 2012 (in thousands):

The following is a summary by industry of the Fund’s investments in portfolio securities as of December 31, 2023 (in thousands):

Fair Value as Percentage of Net Assets

Business products and services

Shipping products and services

Alternative energy

The accompanying notes are an integral

part of these financial statements.

Table of Contents 43

EQUUS TOTAL RETURN, INC.

2 unchanged sentences

(1) ORGANIZATION AND BUSINESS PURPOSE

Equus Total Return, Inc.

( “we,”

“us,”

“our,”

“Equus”

the “Company”

and the “Fund ”), a Delaware

corporation, was formed by Equus Investments II, L.P.

(the “Partnership”) on August 16, 1991.

On July 1, 1992, the

Partnership was reorganized and all of the assets and liabilities of the Partnership were transferred to the Fund in exchange for

shares of common stock of the Fund.

Our shares trade on the New York Stock Exchange under the symbol EQS.

On August 11, 2006, our

shareholders approved the change of the Fund’s investment strategy to a total return investment objective.

This new strategy

seeks to provide the highest total return, consisting of capital appreciation and current income.

In connection with this strategic

investment change, the shareholders also approved the change of name from Equus II Incorporated to Equus Total Return, Inc.

We attempt to maximize the return to

stockholders in the form of current investment income and long-term capital gains by investing in the debt and equity securities

of companies with a total enterprise value of between $5.0 million and $75.0 million, although we may engage in transactions with

smaller or larger investee companies from time to time.

We seek to invest primarily in companies pursuing growth either through

acquisition or organically, leveraged buyouts, management buyouts and recapitalizations of existing businesses or special situations.

Our income-producing investments consist principally of debt securities including subordinate debt, debt convertible into common

or preferred stock, or debt combined with warrants and common and preferred stock.

Debt and preferred equity financing may also

be used to create long-term capital appreciation through the exercise and sale of warrants received in connection with the financing.

We seek to achieve capital appreciation by making investments in equity and equity-oriented securities issued by privately-owned

companies in transactions negotiated directly with such companies.

Given market conditions over the past several years and the

performance of our portfolio, our Management and Board of Directors believe it prudent to continue to review alternatives to refine

and further clarify the current strategies.

We elected to be treated as a BDC under

the Investment Company Act of 1940 (“1940 Act”).

We currently qualify as a regulated investment company (“RIC”)

for federal income tax purposes and, therefore, are not required to pay corporate income taxes on any income or gains that we distribute

to our stockholders.

We have certain wholly owned taxable subsidiaries (“Taxable Subsidiaries”) each of which holds

one or more portfolio investments listed on our Schedules of Investments.

The purpose of these Taxable Subsidiaries is to permit

us to hold certain income-producing investments or portfolio companies organized as limited liability companies, or LLCs, (or other

forms of pass-through entities) and still satisfy the RIC tax requirement that at least 90% of our gross revenue for income tax

purposes must consist of investment income.

Absent the Taxable Subsidiaries, a portion of the gross income of these income-producing

investments or of any LLC (or other pass-through entity) portfolio investment, as the case may be, would flow through directly

to us for the 90% test.

To the extent that such income did not consist of investment income, it could jeopardize our ability to

qualify as a RIC and, therefore, cause us to incur significant federal income taxes.

The income of the LLCs (or other pass-through

entities) owned by Taxable Subsidiaries is taxed to the Taxable Subsidiaries and does not flow through to us, thereby helping us

preserve our RIC status and resultant tax advantages.

We do not consolidate the Taxable Subsidiaries for income tax purposes and

they may generate income tax expense because of the Taxable Subsidiaries’

ownership of the portfolio companies.

any such income tax expense on our Statements of Operations.

About the Company— Equus Total Return, Inc.

(“we,” “us,” “our,” “Equus” the “Company” and the “Fund”), a Delaware corporation, was formed by Equus Investments II, L.P.

(the “Partnership”) on August 16, 1991.

On July 1, 1992, the Partnership was reorganized and all of the assets and liabilities of the Partnership were transferred to the Fund in exchange for shares of common stock of the Fund.

Our shares trade on the New York Stock Exchange (“NYSE”) under the symbol ‘EQS’.

On August 11, 2006, our shareholders approved the change of the Fund’s investment strategy to a total return investment objective.

This strategy seeks to provide the highest total return, consisting of capital appreciation and current income.

In connection with this strategic investment change, the shareholders also approved the change of name from Equus II Incorporated to Equus Total Return, Inc.

On January 20, 2021, holders of a majority of the outstanding common stock of the Fund approved the restatement of our Certificate of Incorporation to increase the number of our authorized shares of common stock from 50,000,000 to 100,000,000 , and the number of our authorized shares of preferred stock from 5,000,000 to 10,000,000 .

As of December 31, 2024, we had 13,586,173 shares of common stock outstanding and no shares of preferred stock outstanding.

We attempt to maximize the return to stockholders in the form of current investment income and long-term capital gains by investing in the debt and equity securities of companies with a total enterprise value between $ 5.0 million and $ 75.0 million, although we may engage in transactions with smaller or larger investee companies from time to time.

We seek to invest primarily in companies pursuing growth either through acquisition or organically, leveraged buyouts, management buyouts and recapitalizations of existing businesses or special situations.

Our income- producing investments consist principally of debt securities including subordinated debt, debt convertible into common or preferred stock, or debt combined with warrants and common and preferred stock.

Debt and preferred equity financing may also be used to create long-term capital appreciation through the exercise and sale of warrants received in connection with the financing.

We seek to achieve capital appreciation by making investments in equity and equity- oriented securities issued by privately-owned companies in transactions negotiated directly with such companies.

Given market conditions over the past several years and the performance of our portfolio, our Management and Board of Directors believe it prudent to continue to review alternatives to refine and further clarify the current strategies.

We elected to be treated as a BDC under the Investment Company Act of 1940 Act (“1940 Act”), although our shareholders have previously authorized us to withdraw this election and, although such authorization has expired, will likely do so again in the future.

Prior to the fourth quarter of 2024, we qualified as a regulated investment company (“RIC”) for federal income tax purposes and, therefore, were not required to pay corporate income taxes on any income or gains that we would have distributed distribute to our stockholders.

During the fourth quarter of 2024, we elected to not qualify as a RIC and, consequently, we will be subject to normal corporate rates of taxation of our income and gains and will not be permitted to deduct distributions paid to our stockholders.

We have certain wholly owned taxable subsidiaries (“Taxable Subsidiaries”) that were created to help us maintain our RIC status, each of which holds one or more portfolio investments listed on our Schedules of Investments.

The purpose of these Taxable Subsidiaries was to permit us to hold certain income- producing investments or portfolio companies organized as limited liability companies, or LLCs, (or other forms of pass-through entities) and still satisfy the RIC tax requirement that at least 90% of our gross revenue for income tax purposes must consist of investment income.

Absent the Taxable Subsidiaries, a portion of the gross income of these income-producing investments or of any LLC (or other pass-through entity) portfolio investment, as the case may be, would flow through directly to us for the 90% test.

Since we have elected to not qualify as a RIC, the income of these Taxable Subsidiaries may be taxable to Equus, which is now classified as a Subchapter C or corporation.

To the extent that such income did not consist of investment income, it could jeopardize our ability to requalify as a RIC and, therefore, cause us to incur federal income taxes as described above.

The income of the LLCs (or other pass-through entities) owned by Taxable Subsidiaries is taxed to the Taxable Subsidiaries and does not flow through to us, thereby helping us obtain (or preserve, as the case may be) RIC status and the resultant tax advantages.

We do not consolidate the Taxable Subsidiaries for income tax purposes, with the exception of Texas Margins Tax, which is an entity level tax.

The Taxable Subsidiaries may generate income tax expense because of the Taxable Subsidiaries’ ownership of the portfolio companies.

We reflect any such income tax expense on our Statements of Operations.

(2) LIQUIDITY AND FINANCING ARRANGEMENTS

Liquidity —There are several

factors that may materially affect our liquidity during the reasonably foreseeable future.

We view this period as the twelve month

period from the date of the financial statements in this Form 10-K, i.e ., the period through December 31, 2014.

We are evaluating the impact of current

market conditions on our portfolio company valuations and their ability to provide current income.

We have followed valuation techniques

in a consistent manner;

however, we are cognizant of current market conditions that might affect future valuations of portfolio

We believe that our operating cash flow and cash on hand will be sufficient to meet operating requirements and to finance

routine expenditures through the next twelve months.

As of December 31, 2013, we had cash

and cash equivalents of $19.1 million.

We had $13.5 million of our net assets of $33.2 million invested in portfolio securities.

We also had $15.2 million of restricted cash and temporary cash investments, including primarily the proceeds of a quarter-end

margin loan that we incurred to maintain the diversification requirements applicable to a RIC to maintain our pass-through tax

Of this amount, $15.0 million was invested in U.S.

Treasury bills and $0.2 million represented a required 1% brokerage

margin deposit.

These securities were held by a securities brokerage firm and pledged along with other assets to secure repayment

of the margin loan.

Treasury bills were sold on January 2, 2014 and we subsequently repaid this margin loan.

interest was paid on January 22, 2014.

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As of December 31, 2012, we had cash

and cash equivalents of $23.7 million.

We had $9.2 million of our net assets of $32.9 million invested in portfolio securities.

As of December 31, 2013, we had no outstanding

commitments to our portfolio company investments.

Under certain circumstances, we may be called on to make follow-on investments

in certain portfolio companies.

If we do not have sufficient funds to make follow-on investments, the portfolio company in need

of the investment may be negatively impacted.

Also, our equity interest in the estimated fair value of the portfolio company could

RIC Borrowings and Temporary Cash

Investments —During 2013 and 2012, we borrowed sufficient funds to maintain the Fund’s RIC status by utilizing a

margin account with a securities brokerage firm.

There is no assurance that such arrangement will be available in the future.

we are unable to borrow funds to make qualifying investments, we may no longer qualify as a RIC.

We would then be subject to corporate

income tax on the Fund’s net investment income and realized capital gains, and distributions to stockholders would be subject

to income tax as ordinary dividends.

Failure to continue to qualify as a RIC could be material to us and our stockholders.

As of December 31, 2013, we borrowed

$15.0 million to make qualifying investments to maintain our RIC status by utilizing a margin account with a securities brokerage

We collateralized such borrowings with restricted cash and temporary cash investments in U.S.

Treasury bills of $15.2 million.

Treasury bills were sold on January 2, 2014 and the total amount borrowed was repaid at that time.

The margin interest

was paid on January 22, 2014.

We had no RIC borrowings or restricted

cash as of December 31, 2012.

Economic Conditions —

conditions since the second quarter of 2008 and market dislocations have resulted in the availability of debt and equity capital

declining significantly for smaller enterprises.

Generally, the limited amount of available debt financing has shorter maturities,

higher interest rates and fees, and more restrictive terms than debt facilities available in the past.

In addition, during 2013

the price of our common stock continued to trade well below our net asset value, thereby making it undesirable to issue additional

shares of our common stock.

Because of these challenges, our near-term strategies shifted from originating debt and equity investments

to preserving liquidity necessary to meet our operational needs.

Key initiatives that we undertook over the past several years

to provide necessary liquidity included monetizations and the utilization of non-cash resources of the Fund to make portfolio investments.

Although there can be no assurances that such initiatives will be sufficient, we believe we have sufficient liquidity to meet our

2014 operating requirements.

As of December 31, 2024, we had cash and cash equivalents of $ 0.3 million.

Our operating cash flow and cash on hand is not sufficient to meet operating requirements or to finance routine capital expenditures through the next twelve months.

We are therefore seeking liquidity from the sale of our portfolio interests, as well as seeking external debt and equity financing from third parties.

In addition, we are actively seeking to fulfill the conditions of redemption relating to certain shares of preferred stock received in connection with our recent sale of Equus Energy as described in Note II Subsequent Events .

Should any or all of the foregoing events not occur as contemplated, the Fund will not have the necessary funds to maintain normal operations and, therefore, substantial doubt would exist about the Fund’s ability to continue as a going concern.

During the first three quarters of 2024 and all of 2023, we borrowed sufficient funds to maintain the Fund’s RIC status by utilizing a margin account with a securities brokerage firm.

If we seek to requalify as a RIC, there is no assurance that such arrangement will be available in the future.

If we are unable to borrow funds to make qualifying investments, we may not requalify as a RIC.

We would then continue to be subject to corporate income tax on the Fund’s net investment income and realized capital gains, and distributions to stockholders would continue to be subject to income tax as ordinary dividends.

If we continue to be a BDC and generate significant income and gains, but do not requalify as a RIC, we will be subject to corporate level tax and the non-deductibility of dividends, any of which could be material to us and our stockholders.

(3) SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant

accounting policies followed by the Fund in the preparation of its financial statements:

Use of Estimates —The preparation

of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts

and disclosures in the financial statements.

Although we believe the estimates and assumptions used in preparing these financial

statements and related notes are reasonable in light of known facts and circumstances, actual results could differ from those estimates.

Valuation of Investments —Portfolio

investments are carried at fair value with the net change in unrealized appreciation or depreciation included in the determination

of net assets.

Valuations of portfolio securities are performed in accordance with accounting principles generally accepted in

the United States of America and the financial reporting policies of the Securities and Exchange Commission (“SEC”).

The applicable methods prescribed by such principles and policies are described below:

Publicly-traded portfolio securities —Investments

in companies whose securities are publicly traded are generally valued at their quoted market price at the close of business on

the valuation date.

Privately-held portfolio securities —The

fair value of investments for which no market exists is determined on the basis of procedures established in good faith by our

Board of Directors.

As a general principle, the current “fair value”

of an investment would be the amount we might

reasonably expect to receive for it upon its current sale, in an orderly manner.

Appraisal valuations are necessarily subjective

and the estimated values arrived at by the Fund may differ materially from amounts actually received upon the disposition of portfolio

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Thinly Traded and Over-the-Counter

Securities —Generally, we value securities that are traded in the over-the-counter market or on a stock exchange at the

average of the prevailing bid and ask prices on the date of the relevant period end.

However, we may apply a discount to the market

value of restricted or thinly traded public securities to reflect the impact that these restrictions have on the value of these

We review factors, including the trading volume, total securities outstanding and our percentage ownership of securities

to determine whether the trading levels are active (Level 1) or inactive (Level 2) or unobservable (Level 3).

As of December 31,

2013, these securities represented 11.0% of our investments in portfolio securities.

We utilized independent pricing services with

certain of our fair value estimates.

To corroborate “bid/ask”

quotes from independent pricing services, we perform

a market-yield approach to validate prices obtained or obtain other evidence.

During the first twelve months after

an investment is made, the original investment value is utilized to determine the fair value unless significant developments have

occurred during this twelve month period which would indicate a material effect on the portfolio company (such as results of operations

or changes in general market conditions).

After the twelve month period, or if material events have occurred within the twelve

month period, we consider a two step process when appraising investments of privately held companies.

The first step involves determining

the enterprise value of the portfolio company.

During this step, we consider three different valuation approaches:

a market approach,

an income approach, and an asset approach.

The particular facts and circumstances of each portfolio company determine which approach,

or combination of approaches, will be utilized.

The second step when appraising equity investments of privately held companies

involves allocating value to the various debt and equity securities of the company.

We allocate value to these securities based

on their relative priorities.

For equity securities such as warrants, we may also incorporate alternative methodologies including

the Black-Scholes Option Pricing Model.

Market approach –

approach typically employed by Management calculates the enterprise value of a company as a multiple of earnings before interest,

taxes, depreciation and amortization (“EBITDA”) generated by the company for the trailing twelve month period.

to the company’s EBITDA, including those for non-recurring items, may be considered.

Multiples are estimated based on current

market conditions and past experience in the private company marketplace and are subjective in nature.

We will apply liquidity

and other discounts as deemed appropriate to equity valuations where applicable.

We may also use, when available, third-party transactions

in a portfolio company’s securities as the basis of valuation (the “private market method”).

The private market

method will be used only with respect to completed transactions or firm offers made by sophisticated, independent investors.

Income approach –

approach typically utilized by our Management calculates the enterprise value of a company utilizing a discounted cash flow model

incorporating projected future cash flows of the company.

Projected future cash flows consider the historical performance of the

company as well as current and projected market participant performance.

Discount rates are estimated based on current market conditions

and past experience in the private company marketplace and are subjective in nature.

We will apply liquidity and other discounts

as deemed appropriate to equity valuations where applicable.

Asset approach –

the asset approach to determine the fair value of significantly deteriorated investments demonstrating circumstances indicative

of a liquidation analysis.

This situation may arise when a portfolio company:

1) cannot generate adequate cash flow to meet the

principal and interest payments on its indebtedness;

2) is not successful in refinancing its debt upon maturity;

3) we believe

the credit quality of a loan has deteriorated due to changes in the business and underlying asset or market conditions may result

in the company’s inability to meet future obligations;

or 4) the portfolio company’s reorganization or bankruptcy.

Consideration is also given as to whether a liquidation event would be orderly or forced.

We base adjustments upon such factors

as the portfolio company’s earnings, cash flow and net worth, the market prices for similar securities of comparable companies,

an assessment of the company’s current and future financial prospects and various other factors and assumptions.

of unsuccessful or substantially declining operations, we may base a portfolio company’s fair value upon the company’s

estimated liquidation value.

Fair valuations are necessarily subjective, and our estimate of fair value may differ materially from

amounts actually received upon the disposition of its portfolio securities.

Also, any failure by a portfolio company to achieve

its business plan or obtain and maintain its financing arrangements could result in increased volatility and result in a significant

and rapid change in its value.

Our general intent is to hold our loans

to maturity when appraising our privately held debt investments.

As such, we believe that the fair value will not exceed the cost

of the investment.

However, in addition to the previously described analysis involving allocation of value to the debt instrument,

we perform a yield analysis to determine if a debt security has been impaired.

Certificates of deposit purchased by the Fund generally

will be valued at their face value, plus interest accrued to the date of valuation.

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The Audit Committee of the Board of

Directors may engage independent, third-party valuation firms to conduct independent appraisals and review management’s preliminary

valuations of each privately-held investment in order to make their own independent assessment.

Any third-party valuation data

would be considered as one of many factors in a fair value determination.

The Audit Committee then would recommend the fair values

for all privately-held securities based on all relevant factors to the Board of Directors for final approval.

Because of the

inherent uncertainty of the valuation of portfolio securities which do not have readily ascertainable market values,

amounting to $13.3 million and $9.0 million as of December 31, 2013 and 2012, respectively, our fair value determinations may

materially differ from the values that would have been used had a ready market existed for the securities.

As of December 31,

2013, one of our portfolio investments, consisting of 73,666 ordinary shares of OPG, was publicly listed on the NYSE Euronext

Paris Exchange, along with €1,200,790 in newly-issued 6-year OPG Notes, however, as of December 31, 2013, there had been

no recent trading activity in the OPG Notes.

On a daily basis, we adjust our net

asset value for the changes in the value of our publicly held securities, if applicable, and material changes in the value of private

securities, generally determined on a quarterly basis or as announced in a press release, and reports those amounts to Lipper Analytical

Services, Inc.

Weekly and daily net asset values appear in various publications, including Barron’s and The Wall

Street Journal .

Deferred Offering Costs—

of costs related to the offering whereby we will sell additional shares or rights to acquire shares at a market price that may

have been below net asset value.

The main components of the costs are legal fees and consultant’s fees specifically related

to the offering.

Offering costs of $0.4 million were

expensed at September 30, 2011, due to the delay in completing an offering to issue new shares.

Foreign Exchange—

temporary changes in foreign exchange rates of portfolio securities denominated in foreign currencies as changes in fair value.

These changes are therefore reflected as unrealized gains or losses until realized.

Investment Transactions —Investment

transactions are recorded on the accrual method.

Realized gains and losses on investments sold are computed on a specific identification

We classify our investments in accordance

with the requirements of the 1940 Act.

Under the 1940 Act, “Control Investments”

are defined as investments in companies

in which EQS owns more than 25% of the voting securities or maintains greater than 50% of the board representation.

Under the 1940

Act, “Affiliate Investments”

are defined as those non-control investments in companies in which we own between 5% and

25% of the voting securities.

Under the 1940 Act, “Non-affiliate Investments”

are defined as investments that are neither

Control Investments nor Affiliate Investments.

Interest Income Recognition —We

record interest income, adjusted for amortization of premium and accretion of discount, on an accrual basis to the extent that

we expect to collect such amounts.

We accrete or amortize discounts and premiums on securities purchased over the life of the respective

security using the effective yield method.

The amortized cost of investments represents the original cost adjusted for the accretion

of discount and/or amortization of premium on debt securities.

We stop accruing interest on investments when we determine that

interest is no longer collectible.

We may also impair the accrued interest when we determine that all or a portion of the current

accrual is uncollectible.

If we receive any cash after determining that interest is no longer collectible, we treat such cash as

payment on the principal balance until the entire principal balance has been repaid, before it recognizes any additional interest

Payment in Kind Interest (PIK) —We

have loans in our portfolio that may pay PIK interest.

We add PIK interest, if any, computed at the contractual rate specified

in each loan agreement, to the principal balance of the loan and recorded as interest income.

To maintain our status as a RIC,

we must pay out to stockholders this non-cash source of income in the form of dividends even if we have not yet collected any cash

in respect of such investments.

Cash Flows —For purposes

of the Statements of Cash Flows, we consider all highly liquid temporary cash investments purchased with an original maturity of

three months or less to be cash equivalents.

We include our investing activities within cash flows from operations.

“Restricted Cash & Temporary Cash Investments”

used for purposes of complying with RIC requirements from cash equivalents.

Income Taxes —We intend

to comply with the requirements of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such,

will not be subject to federal income taxes on otherwise taxable income (including net realized capital gains) which is distributed

to stockholders.

Therefore, no provision for federal income taxes is recorded in the financial statements.

We borrow money from

time to time to maintain our tax status under the Internal Revenue Code as a RIC.

See Note 2 for further discussion of the Fund’s

RIC borrowings.

Table of Contents 47

All corporations incorporated in the

State of Delaware are required to file an Annual Report and to pay a franchise tax.

As a result, we paid Delaware Franchise tax

in the amount of $0.01 million, $0.01 million and $0.01 million for the years ended December 31, 2013, December 31, 2012 and December

31, 2011, respectively.

Texas margin tax applies to legal entities

conducting business in Texas.

The margin tax is based on our Texas sourced taxable margin.

The tax is calculated by applying a

tax rate to a base that considers both revenue and expenses and therefore has the characteristics of an income tax.

we did not owe state income tax for the years ended December 31, 2013, December 31, 2012, and December 31, 2011 respectively.

Fair Value Measurement —Fair

value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction

between market participants at the measurement date.

We have categorized all investments recorded at fair value based upon the

level of judgment associated with the inputs used to measure their fair value.

Hierarchical levels, directly related to the amount

of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:

Level 1—Inputs are unadjusted,

quoted prices in active markets for identical assets at the measurement date.

The types of assets carried at Level 1 fair value

generally are equities listed in active markets.

Level 2—Inputs (other than quoted

prices included in Level 1) are either directly or indirectly observable for the asset in connection with market data at the measurement

date and for the extent of the instrument’s anticipated life.

Fair valued assets that are generally included in this category

are warrants held in a public company.

Level 3—Inputs reflect our best

estimate of what market participants would use in pricing the asset at the measurement date.

It includes prices or valuations that

require inputs that are both significant to the fair value measurement and unobservable.

Generally, assets carried at fair value

and included in this category are debt, warrants and/or other equity investments held in a private company.

As previously described,

we consider a two step process when appraising investments of privately held companies.

The first step involves determining the

enterprise value of the portfolio company.

During this step, we consider three different valuation approaches:

a market approach,

an income approach, and a cost approach.

The particular facts and circumstances of each portfolio company determine which approach,

or combination of approaches, will be utilized.

The second step when appraising equity investments of privately held companies

involves allocating value to the various debt and equity securities of the company.

We allocate value to these securities based

on their relative priorities.

For equity securities such as warrants, we may also incorporate alternative methodologies including

the Black-Scholes Option Pricing Model.

Yield analysis is also employed to determine if a debt security has been impaired.

We will record unrealized depreciation

on investments when we determine that the fair value of a security is less than its cost basis, and will record unrealized appreciation

when we determine that the fair value is greater than its cost basis.

As of December 31, 2013, investments

measured at fair value on a recurring basis are categorized in the tables below based on the lowest level of significant input

to the valuations:

Value Measurements as of December 31, 2013

The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements:

Earnings Per Share —Basic earnings per share is computed by dividing net increase (decrease) in net assets resulting from operations by the weighted-average number of shares of common stock outstanding for the period.

Other potentially dilutive common stock, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis.

Use of Estimates —The preparation of financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements.

Although we believe the estimates and assumptions used in preparing these financial statements and related notes are reasonable in light of known facts and circumstances, actual results could differ from those estimates.

We have identified valuation of investments and revenue recognition as our most critical accounting estimates.

Consolidation —In accordance with Article 6 of Regulation S-X under the Securities Act of 1933, we do not consolidate portfolio company investments.

Under Accounting Standards Committee (“ASC”) 946, we are 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.

Valuation of Investments— For most of our investments, market quotations are not available.

With respect to investments for which market quotations are not readily available or when such market quotations are deemed not to represent fair value, our Board has approved a multi-step valuation process each quarter, as described below:

Each portfolio company or investment is reviewed by our investment professionals;

With respect to investments with a fair value exceeding $ 2.5 million that have been held for more than one year, we engage independent valuation firms to assist our investment professionals.

These independent valuation firms conduct independent valuations and make their own independent assessments;

Our Management produces a report that summarizes each of our portfolio investments and recommends a fair value of each such investment as of the date of the report;

The Audit Committee of our Board reviews and discusses the preliminary valuation of our portfolio investments as recommended by Management in their report and any reports or recommendations of the independent valuation firms, and then approves and recommends the fair values of our investments so determined to our Board for final approval;

The Board discusses valuations and determines the fair value of each portfolio investment in good faith based on the input of our Management, the respective independent valuation firm, as applicable, and the Audit Committee.

During the first twelve months after an investment is made, we rely on the original investment amount to determine the fair value unless significant developments have occurred during this twelve-month period which would indicate a material effect on the portfolio company (such as results of operations or changes in general market conditions).

Investments are valued utilizing a yield analysis, enterprise value (“EV”) analysis, net asset value analysis, liquidation analysis, discounted cash flow analysis, or a combination of methods, as appropriate.

The yield analysis uses loan spreads and other relevant information implied by market data involving identical or comparable assets or liabilities.

Under the EV analysis, the EV of a portfolio company is first determined and allocated over the portfolio company’s securities in order of their preference relative to one another (i.e., “waterfall” allocation).

To determine the EV, we typically use a market multiples approach that considers relevant and applicable market trading data of guideline public companies, transaction metrics from precedent M&A transactions and/or a discounted cash flow analysis.

The net asset value analysis is used to derive a value of an underlying investment (such as real estate property) by dividing a relevant earnings stream by an appropriate capitalization rate.

For this purpose, we consider capitalization rates for similar properties as may be obtained from guideline public companies and/or relevant transactions.

The liquidation analysis is intended to approximate the net recovery value of an investment based on, among other things, assumptions regarding liquidation proceeds based on a hypothetical liquidation of a portfolio company’s assets.

The discounted cash flow analysis uses valuation techniques to convert future cash flows or earnings to a range of fair values from which a single estimate may be derived utilizing an appropriate discount rate.

The measurement is based on the net present value indicated by current market expectations about those future amounts.

In applying these methodologies, additional factors that we consider in fair value pricing our investments may include, as we deem relevant:

security covenants, call protection provisions, and information rights;

the nature and realizable value of any collateral;

the portfolio company’s ability to make payments;

the principal markets in which the portfolio company does business;

publicly available financial ratios of peer companies;

the principal market;

and enterprise values, among other factors.

Also, any failure by a portfolio company to achieve its business plan or obtain and maintain its financing arrangements could result in increased volatility and result in a significant and rapid change in its value.

In addition to the previously described analysis involving allocation of value to the debt instrument, we perform a yield analysis assuming a hypothetical current sale of the security to determine if a debt security has been impaired.

The yield analysis considers changes in interest rates and changes in leverage levels of the portfolio company as compared to the market interest rates and leverage levels.

We record unrealized depreciation on investments when we determine that the fair value of a security is less than its cost basis, and will record unrealized appreciation when we determine that the fair value is greater than its cost basis.

Fair Value Measurement—Fair value is 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 and sets out a fair value hierarchy.

The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

Inputs are broadly defined as assumptions market participants would use in pricing an asset or liability.

The three levels of the fair value hierarchy are described below:

Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2—Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly;

and fair value is determined through the use of models or other valuation methodologies.

Level 3—Inputs are unobservable for the asset or liability and include situations where there is little, if any, market activity for the asset or liability.

The inputs into the determination of fair value are based upon the best information under the circumstances and may require significant management judgment or estimation.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.

In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.

Investments for which prices are not observable are generally private investments in the debt and equity securities of operating companies.

One of the primary valuation methods used to estimate the fair value of these Level 3 investments is the discounted cash flow method (although a liquidation analysis, option theoretical, or other methodology may be used when more appropriate).

The discounted cash flow approach to determine fair value (or a range of fair values) involves applying an appropriate discount rate(s) to the estimated future cash flows using various relevant factors depending on investment type, including comparing the latest arm’s length or market transactions involving the subject security to the selected benchmark credit spread, assumed growth rate (in cash flows), and capitalization rates/multiples (for determining terminal values of underlying portfolio companies).

The valuation based on the inputs determined to be the most reasonable and probable is used as the fair value of the investment.

The determination of fair value using these methodologies may take 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 exchanges for comparable securities, current and projected operating performance, financing transactions subsequent to the acquisition of the investment and anticipated financing transactions after the valuation date.

To assess the reasonableness of the discounted cash flow approach, the fair value of equity securities, including warrants, in portfolio companies may also consider the market approach—that is, through analyzing and applying to the underlying portfolio companies, market valuation multiples of publicly-traded firms engaged in businesses similar to those of the portfolio companies.

The market approach to determining the fair value of a portfolio company’s equity security (or securities) will typically involve:

(1) applying to the portfolio company’s trailing twelve months (or current year projected) EBITDA, a low to high range of enterprise value to EBITDA multiples that are derived from an analysis of publicly-traded comparable companies, in order to arrive at a range of enterprise values for the portfolio company;

(2) subtracting from the range of calculated enterprise values the outstanding balances of any debt or equity securities that would be senior in right of payment to the equity securities we hold;

and (3) multiplying the range of equity values derived therefrom by our ownership share of such equity tranche in order to arrive at a range of fair values for our equity security (or securities).

Application of these valuation methodologies involves a significant degree of judgment by Management.

Due to the inherent uncertainty of determining the fair value of Level 3 investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that may ultimately be received or settled.

Further, such investments are generally subject to legal and other restrictions or otherwise are less liquid than publicly traded instruments.

If we were required to liquidate a portfolio investment in a forced or liquidation sale, we might realize significantly less than the value at which such investment had previously been recorded.

With respect to Level 3 investments, where sufficient market quotations are not readily available or for which no or an insufficient number of indicative prices from pricing services or brokers or dealers have been received, we undertake, on a quarterly basis, our valuation process as described above.

We assess the levels of the investments at each measurement date, and transfers between levels are recognized on the subsequent measurement date closest in time to the actual date of the event or change in circumstances that caused the transfer.

There were no transfers to or from Level 3 for the years ended December 31, 2024 and 2023.

As of December 31, 2024, investments measured at fair value on a recurring basis are categorized in the tables below based on the lowest level of significant input to the valuations:

Fair Value Measurements as of December 31, 2024

(in thousands)

Prices in Active Markets for Identical Assets

Other Observable Inputs

Unobservable Inputs

Quoted Prices in Active Markets for Identical Assets

Significant Other Observable Inputs

Significant Unobservable Inputs

Control investments

Affiliate investments

Non-affiliate investments

Total investments

cash investments

Total investments and temporary cash investments

Table of Contents 48

As of December 31, 2012, investments measured

at fair value on a recurring basis are categorized in the tables below based on the lowest level of significant input to the valuations:

Value Measurements As of December 31, 2012

Prices in Active Markets for Identical Assets (Level 1)

Other Observable Inputs

Unobservable Inputs

Non-affiliate

The following table provides a reconciliation

of fair value changes during 2013 for all investments for which we determine fair value using significant unobservable (Level 3)

Fair value measurements

using significant unobservable inputs (Level 3)

As of December 31, 2023, investments measured at fair value on a recurring basis are categorized in the tables below based on the lowest level of significant input to the valuations:

Fair Value Measurements as of December 31, 2023

(in thousands)

Quoted Prices in Active Markets for Identical Assets

Significant Other Observable Inputs

Significant Unobservable Inputs

Control investments

Total investments

Treasury Bills

Total investments and U.S.

Treasury Bills

The following table provides a reconciliation of fair value changes during 2024 for all investments for which we determine fair value using significant unobservable (Level 3) inputs:

Fair value measurements using significant unobservable inputs (Level 3)

(in thousands)

Control Investments

Affiliate Investments

Non-affiliate

Fair value as of December 31, 2012

Realized losses

Change in unrealized depreciation

Fair value as of January 1, 2024

Change in unrealized appreciation

Purchases of portfolio securities

Proceeds from sales/dispositions

Fair value as of December 31, 2024

The following table provides a reconciliation

of fair value changes during 2012 for all investments for which we determine fair value using significant unobservable (Level 3)

value measurements using significant unobservable inputs (Level 3)

The following table provides a reconciliation of fair value changes during 2023 for all investments for which we determine fair value using significant unobservable (Level 3) inputs:

Fair value measurements using significant unobservable inputs (Level 3)

(in thousands)

Control Investments

Affiliate Investments

Non-affiliate

Fair value as of January 1, 2023

Change in unrealized appreciation

Purchases of portfolio securities

Fair value as of December 31, 2023

Realized losses

Change in unrealized depreciation

The following table provides a reconciliation of fair value changes during 2022 for all investments for which we determine fair value using significant unobservable (Level 3) inputs:

Fair value measurements using significant unobservable inputs (Level 3)

(in thousands)

Control Investments

Affiliate Investments

Non-affiliate Investments

Fair value as of January 1, 2022

Change in unrealized appreciation

Purchases of portfolio securities

Proceeds from sales/dispositions

Transfers in (out) of Level 3

Fair value as of December 31, 2022

Significant Unobservable Inputs

Our investment portfolio is not composed of homogeneous debt and equity securities that can be valued with a small number

Instead, the majority of our investment portfolio is composed of complex debt and equity securities with distinct contract

terms and conditions.

As such, our valuation of each investment in our portfolio is unique and complex, often factoring in numerous

different inputs, including historical and forecasted financial and operational performance of the portfolio company, project cash

flows, market multiples comparable market transactions, the priority of our securities compared with those of other investors,

credit risk, interest rates, independent valuations and reviews and other inputs.

Table of Contents 49

The following table summarizes the significant non-observable

inputs in the fair value measurements of our level 3 investments by category of investment and valuation technique as of December

Fair value measurements can be sensitive to changes in one or more of the valuation inputs.

Changes in discount rates, EBITDA or EBITDA multiples (or revenue or revenue multiples), each in isolation, may change the fair value of certain of our investments.

Generally, an increase/(decrease) in market yields, discount rates, or an increase/(decrease) in EBITDA or EBITDA multiples (or revenue or revenue multiples) may result in a corresponding increase/(decrease), respectively, in the fair value of certain of our investments.

In the case of our holdings in Morgan and Equus Energy, we may also consider acreage value, proved reserve multiples, daily production multiples, and discount rates.

Finally, industry trends, market forecasts, and comparable transactions in sectors in which we hold a Level 3 investment are also taken into account when assessing the value of these investments.

The following table summarizes the significant non-observable inputs in the fair value measurements of our Level 3 investments by category of investment and valuation technique as of December 31, 2024:

(in thousands )

1 unchanged sentence

Unobservable Inputs

Secured and subordinated debt

Yield Analysis

Market interest rate

Limited liability company investments

Acreage Value (per acre)

Guideline Transaction Method

Proved Reserve Multiple

Equus Energy, LLC

Daily Production Multiple

Discounted Cash Flow

Discount Rate

Transaction Price

Proved Reserve Multiple

Guideline Public Company Method

Daily Production Multiple

Morgan E&P, LLC

Guideline Transaction Method

Proved Reserve Multiple

Daily Production Multiple

Discounted Cash Flow

Discount Rate

Morgan E&P, LLC

Yield analysis

Discount for lack of marketability

Pending Transaction

Discount for lack of marketability

Pending Transaction

Control Premium

New Transation

Pending Transaction

Asset Approach

Recovery Rate

(in thousands )

Valuation Techniques

Unobservable Inputs

Limited liability company investments

Income/Market Approach

Reserve Adjustment Factors

Acreage Value (per acre)

Guideline Transaction Method

Proved Reserve Multiple

Equus Energy, LLC

Daily Production Multiple

Discounted Cash Flow

Discount Rate

Proved Reserve Multiple

Guideline Public Company Method

Daily Production Multiple

Morgan E&P, LLC

Guideline Transaction Method

Proved Reserve Multiple

Daily Production Multiple

Discounted Cash Flow

Discount Rate

Morgan E&P, LLC

Yield analysis

Discount for lack of marketability

The various weighted averages in the table above were determined based on acreage, reserves, production and, in the case of discount rates, an arithmetic average of minimum and maximum rates.

Because of the inherent uncertainty of the valuation of portfolio securities which do not have readily ascertainable market values, our fair value determinations may materially differ from the values that would have been used had a ready market existed for the securities.

We adjust our net asset value for the changes in the value of our publicly held securities, if applicable, and material changes in the value of private securities, generally determined on a quarterly basis or as announced in a press release, and report those amounts to Lipper Analytical Services, Inc.

Our net asset value appears in various publications, including Barron’s and The Wall Street Journal .

Investment Transactions — Investment transactions are recorded at fair value on the trade date.

Current-period changes in fair value of investments are reflected as a component of the net unrealized appreciation of portfolio securities on the Statements of Operations.

The net change in unrealized appreciation primarily reflects the change in investment fair values as of the last business day of the reporting period, including the reversal of previously recorded unrealized gains or losses for investments sold during the period.

Realized gains or losses are recognized as the difference between the net proceeds received (excluding prepayment fees, if any) and the amortized cost basis of the investment using the specific identification method without regard to unrealized gains or losses previously recognized, and include investments written off during the period, net of recoveries.

As of December 31, 2024, we have no assets going through foreclosure.

Realized gains and losses on investments sold are computed on a specific identification basis.

We classify our investments in accordance with the requirements of the 1940 Act.

Under the 1940 Act, “Control Investments” are defined as investments in companies in which the Fund owns more than 25% of the voting securities or maintains greater than 50% of the board representation.

Under the 1940 Act, “Affiliate Investments” are defined as those non-control investments in companies in which we own between 5% and 25% of the voting securities.

Under the 1940 Act, “Non- affiliate Investments” are defined as investments that are neither Control Investments nor Affiliate Investments.

Interest and Dividend Income Recognition —We record interest income, adjusted for amortization of premium and accretion of discount, on an accrual basis to the extent that we expect to collect such amounts.

We accrete or amortize discounts and premiums on securities purchased over the life of the respective security using the effective yield method.

The amortized cost of investments represents the original cost adjusted for the accretion of discount and/or amortization of premium on debt securities.

We stop accruing interest on investments when we determine that interest is no longer collectible.

We may also impair the accrued interest when we determine that all or a portion of the current accrual is uncollectible.

If we receive any cash after determining that interest is no longer collectible, we treat such cash as payment on the principal balance until the entire principal balance has been repaid, before we recognize any additional interest income.

We will write off uncollectible interest upon the occurrence of a definitive event such as a sale, bankruptcy, or reorganization of the relevant portfolio interest.

Dividend income is recorded as dividends are declared by the portfolio company or at the point an obligation exists for the portfolio company to make a distribution.

Payment in Kind Interest (PIK) —We may make loans in our portfolio that may pay PIK interest.

We add PIK interest, if any, computed at the contractual rate specified in each loan agreement, to the principal balance of the loan and recorded as interest income.

If we seek to requalify as a RIC, we must pay out to stockholders this non-cash source of income in the form of dividends even if we have not yet collected any cash in respect of such investments.

We will continue to pay out net investment income and/or realized capital gains, if any, on an annual basis as required under the 1940 Act.

Cash and Cash Equivalents and Restricted Cash — Cash includes unrestricted demand deposits at highly rated financial institutions and highly liquid investments with original maturities of three months or less.

The Company’s cash balances may exceed Federal Deposit Insurance Corporation (“FDIC”) insured limits from time to time.

Although the Company bears risk to amounts in excess of those insured by the FDIC, it does not anticipate any losses as a result due to the financial position and creditworthiness of the depository institutions in which those deposits are held.

We include our investing activities within cash flows from operations.

The following table provides a reconciliation of cash and cash equivalents and restricted cash as reported within the consolidated balance sheet that sums to the total of the same amounts shown in the consolidated statement of cash flows as of December 31, 2024, 2023 and 2022:

Cash and cash equivalents at end of period

Restricted cash at end of period

Cash and cash equivalents and restricted cash at end of period

Taxes — Historically, the Company has filed an income tax return as Regulated Investment Company.

However, as a result of the Company’s election to not qualify as a RIC in the fourth quarter of 2024, the Company is now classified as a C corporation for income tax purposes and subject to guidance under ASC 740, accounting for income taxes.

This change in tax status is reflected in the footnotes below.

All corporations incorporated in the State of Delaware are required to file an Annual Report and to pay a franchise tax.

As a result, the Company paid Delaware Franchise tax in the amount of $ 0.03 million for the year ended December 31, 2024, $ 0.03 million for the year ended December 31, 2023, $ 0.02 million for the year ended December 31, 2022, respectively.

Texas margin tax applies to legal entities conducting business in Texas.

The margin tax is based on our Texas sourced taxable margin.

The tax is calculated by applying a tax rate to a base that considers both revenue and expenses and therefore has the characteristics of an income tax.

For the year ended December 31, 2024, no state income tax is expected.

No state income tax was due for the years ended December 31, 2023 and 2022.

Distributable Earnings —The components that make up distributable earnings (accumulated undistributed deficit) on the Balance Sheet as of December 31, 2024 and 2023 are as follows:

December 31, 2024

December 31, 2023

Accumulated undistributed net investment losses

Unrealized appreciation of portfolio securities, net

Accumulated undistributed net capital gains

Accumulated deficit

Share-Based Incentive Compensation —On June 13, 2016, our shareholders approved the adoption of our 2016 Equity Incentive Plan (“Incentive Plan”).

The Incentive Plan is intended to promote the interests of the Fund by encouraging officers, employees, and directors of the Fund and its affiliates to acquire or increase their equity interest in the Fund and to provide a means whereby they may develop a proprietary interest in the development and financial success of the Fund, to encourage them to remain with and devote their best efforts to the business of the Fund, thereby advancing the interests of the Fund and its stockholders.

The Incentive Plan is also intended to enhance the ability of the Fund and its affiliates to attract and retain the services of individuals who are essential for the growth and profitability of the Fund.

The Incentive Plan permits the award of restricted stock as well as common stock purchase options.

The maximum number of shares of common stock that are subject to awards granted under the Incentive Plan is 2,434,728 shares.

The term of the Incentive Plan will expire on June 13, 2026.

On March 17, 2017, we granted awards of restricted stock under the Plan to certain of our directors and executive officers in the aggregate amount of 844,500 shares.

The awards are each subject to a vesting requirement over a 3-year period unless the recipient thereof is terminated or removed from their position as a director or executive officer without “cause”, or as a result of constructive termination, as such terms are defined in the respective award agreements entered into by each of the recipients and the Fund.

As of December 31, 2020, all shares were vested.

Accordingly, for restricted stock awards, we measure the grant date fair value based upon the market price of our common stock on the date of the grant and amortize the fair value of the awards as share-based compensation expense over the requisite service period, which is generally the vesting term.

Inasmuch as all existing awards under the Incentive Plan became fully-vested prior to 2021, we recorded no compensation expense relating to awards made under the Incentive Plan for the years ended December 31, 2024, 2023 and 2022.

Segments —Equus operates as a single segment with a principal investment objective to maximize total return from generating current income from debt investments and current income and capital appreciation from equity and equity-related investments.

The Company’s Investment Committee and Chief Executive Officer collectively perform the function that allocates resources and assesses performance, and thus together, serve as the Company’s chief operating decision maker (the “CODM”).

Among other metrics, the CODM uses net investment income as a primary GAAP profit or loss metric used in making operating decisions, which can be found on the Statement of Operations along with significant expenses.

The measure of segment assets is reported on the Balance Sheets as total assets.

(4) RELATED PARTY TRANSACTIONS AND AGREEMENTS

Except as noted below, as compensation

for services to the Fund, each Independent Director receives an annual fee of $20,000 paid quarterly in arrears, a fee of $2,000

for each meeting of the Board of Directors attended in person, a fee of $1,000 for participation in each telephonic meeting of

the Board and a fee of $1,000 for each committee meeting attended, and reimbursement of all out-of-pocket expenses relating to

attendance at such meetings.

A quarterly fee of $15,000 is paid to the Chairman of the Audit Committee and a quarterly fee of $3,750

is paid to the Chairman of the Independent Directors.

We may also pay other one-time or recurring fees to members of our Board

of Directors in special circumstances.

Except as noted below, as compensation for services to the Fund, each Independent Director receives an annual fee of $ 40,000 paid quarterly in arrears, a fee of $ 2,000 for each meeting of the Board of Directors or committee thereof attended in person, a fee of $ 1,000 for participation in each telephonic meeting of the Board or committee thereof, and reimbursement of all out-of-pocket expenses relating to attendance at such meetings.

The chair of each of our standing committees (audit, compensation, and nominating and governance) also receives an annual fee of $ 50,000 , payable quarterly in arrears.

We may also pay other one-time or recurring fees to members of our Board of Directors in special circumstances.

None of our interested directors receive annual fees for their service on the Board of Directors.

In June, 2010, the Fund ratified and approved the use of

A+ Filings, LLC (“A+ Filings”) to file its reports with the Securities and Exchange Commission.

The Fund incurred $7,000

and $14,000 in services rendered by A+ Filings for the years ended December 31, 2012 and 2011, respectively.

Secretary of the Fund, held a majority of the voting shares of A+ Filings;

Denos sold his interest in A+ Filings in

On December 20, 2010, our board of directors approved a consulting

agreement ("Consulting Agreement") with John A.

Hardy, the Fund's Chief Executive Officer.

The Consulting Agreement

provides for base compensation to Mr.

Hardy of $200,000 per annum and an annual bonus based upon achievement of certain criteria.

The bonus is subject to an annual payout cap of $150,000, and any bonus earned that exceeds the payout cap will be carried over

into subsequent fiscal years.

If the Consulting Agreement is terminated without cause, as defined therein, Mr.

be entitled to receive one year's base consulting fee, together with all bonuses earned and unpaid and unpaid up to the date of

Hardy is not entitled to participate in any employee-related benefits, including health, life and disability

plans, of the Fund.

For the years ended December 31, 2012 and 2013, Mr.

Hardy’s compensation totaled $350,000 in each

of these years, which included a $150,000 bonus in accordance with this agreement.

Hardy has permanently waived his right

to $873,211 of earned but unpaid bonus under the Consulting Agreement for fiscal 2012 and has further permanently waived his right

to $5,618 of earned but unpaid bonus in connection with activities of the Fund for fiscal 2013.

In November, 2011, Equus Energy, LLC,

a wholly-owned subsidiary of the Fund, entered into a consulting agreement with Global Energy Associates, LLC (“Global Energy”)

to provide consulting services for energy related investments.

Hankinson, Director, is a managing partner and co-founder

of Global Energy.

For each of the years ended December 31, 2013 and 2012, payments to Global Energy totaled $75,000.

In respect of services provided

to the Fund by members of the Board not in connection with their roles and duties as directors, the Fund pays a rate of $250 per

hour for services rendered.

In connection with services rendered by Kenneth I.

Denos, Secretary and Chief Compliance Officer

of the Fund, the Fund incurred $344,562 as of December 31, 2013, which is included as compensation expense.

In connection

with services rendered by Mr.

Denos in 2012, the Fund incurred $249,813 which is included in compensation expense as of December

31, 2012 statement of operations.

(5) FEDERAL INCOME

As a Regulated Investment Company,

our tax liability is dependent upon whether an election is made to distribute taxable investment income and capital gains above

any statutory requirement.

As we incurred losses in 2011, 2012 and 2013 no distributions were required or made.

Table of Contents 50

The Internal Revenue Service approved

our request, effective October 31, 1998, to change our year-end for determining capital gains for purposes of Section 4982

of the Internal Revenue Code from December 31 to October 31.

For the year ended December 31, 2013,

we have a net investment loss for book purposes of $3.1 million and $3.1 million for tax purposes.

During 2013, we had a net capital

loss for book purposes of $9.8 million and a net capital loss for tax purposes of $9.8 million for tax purposes.

The aggregate book cost of

investments as of December 31, 2013 was $17.5 million.

These investments had unrealized appreciation of approximately

$1.8 million and unrealized depreciation of $5.8 million for book purposes, resulting in unrealized depreciation of

approximately $4.0 million.

The Fund had unrealized appreciation of approximately $1.9 million and unrealized depreciation of

approximately $2.9 million for tax purposes, resulting in net unrealized depreciation of approximately $1 million as of

December 31, 2013.

As of December 31, 2013, we had approximately $ 32.5 million in Capital losses of which $15.6 million

will begin expiring after 2017, and the remaining $16.9 million can be carried over indefinitely.

The Return of Capital Statement of Position,

for the three years ended December 31, 2013, includes a reclassification for permanent book to tax differences of less than $1,000

in each year.

These differences were primarily due to the tax exempt interest income received.

The adjustments resulted in a net

decrease in accumulated earnings.

The reclassification has no effect on net assets.

For the year ended December 31, 2012,

we have a net investment loss for book purposes of $2.7 million and $3.2 million for tax purposes.

During 2012, we had a net capital

loss for book purposes of $2.8 million and a net capital loss for tax purposes of $6.3 million for tax purposes.

The aggregate

book cost of investments as of December 31, 2012 was $23.3 million.

Such investments had unrealized appreciation of approximately

$0 .8 million and unrealized depreciation of $18.0 million for book purposes, resulting in net unrealized depreciation of approximately

$17.2 million.

The Fund had unrealized appreciation of approximately $1.0 million and unrealized depreciation of approximately

$15.2 million for tax purposes, resulting in net unrealized depreciation of approximately $14.2 million as of December 31,

As of December 31, 2012, we had approximately $22.7 million in Capital losses of which $15.6 million will begin expiring

after 2017, and the remaining $7.1 million can be carried over indefinitely.

For the year ended December 31, 2011,

we have a net investment loss for book purposes of $3.5 million and $4.9 million for tax purposes.

During 2011, we had a net capital

loss for book purposes of $10.9 million and a net capital loss for tax purposes of $0.8 million for tax purposes.

The aggregate

book cost of investments as of December 31, 2011 was $33.6 million.

Such investments had unrealized appreciation of approximately

$ 2.7 million and unrealized depreciation of $20.1 million for book purposes, resulting in net unrealized depreciation of approximately

$17.4 million.

The Fund had unrealized appreciation of approximately $2.8 million and unrealized depreciation of approximately

$17.1 million for tax purposes, resulting in net unrealized depreciation of approximately $14.3 million as of December 31,

As of December 31, 2011, we had approximately $16.4 million in Capital losses of which $15.6 million will expire after 2017,

and the remaining $0.8 million can be carried over indefinitely.

We believe that any aggregate exposure

for uncertain tax positions should not have a material impact on our financial statements as of December 31, 2013 or December 31,

An uncertain tax position is measured as the largest amount of tax return benefits that does not have a greater than 50%

likelihood of being realized upon ultimate settlement.

We have not recorded an adjustment to our financial statements related to

any uncertain tax positions.

We will continue to evaluate our tax positions and recognize any future impact of uncertain tax positions

as a charge to income in the applicable period in accordance with promulgated standards.

The Fund’s accounting policy related

to income tax penalties and interest assessments is to accrue for these costs and record a charge to expenses during the period

that the Fund records a benefit for an uncertain tax position until resolution is achieved with the taxing authorities or the expiration

of the applicable statute of limitations.

The Fund’s accounting policy

related to income tax penalties and interest assessments is to accrue for these costs and record a charge to expenses during the period that the Fund takes an uncertain tax position through resolution with the taxing authorities or

expiration of the applicable statute of limitations.

All of the Fund’s

federal and state income tax returns for 2009 through 2012 remain open to examination.

We believe that there are no tax

positions taken or expected to be taken that would significantly increase or decrease unrecognized tax benefits within 12

months of the reporting date.

Table of Contents 51

(6) CONTRACTUAL OBLIGATIONS

We have operating leases for office

space and office equipment.

The lease for office space expires in 2014.

The lease also contains a provision for certain annual

rental escalations.

Rent expense inclusive of common area maintenance costs was $85,000,

$84,000, and $81,000 for each of the years ended December 31, 2013, 2012 and 2011, respectively.

Future minimum lease payments

under the operating lease as of December 31, 2013 for the year ended December 31, 2014 is $42,000.

As of December 31, 2013, we had no outstanding

commitments to our portfolio company investments.

(7) DIVIDENDS

On March 24, 2009, we announced that

we suspended our managed distribution policy and payment of quarterly distributions for an indefinite period.

We will continue

to pay out net investment income and/or realized capital gains, if any, on an annual basis as required under the Investment Company

We may also pay other one-time or recurring fees to members of our Board of Directors in special circumstances.

None of our interested directors receive annual fees for their service on the Board of Directors.

In respect of services provided to the Fund by members of the Board not in connection with their roles and duties as directors, the Fund pays a rate of $ 300 per hour for services rendered.

As of December 31, 2024, we accrued $ 62,000 in director fees.

(5) FEDERAL INCOME TAX MATTERS

Deferred income tax assets and liabilities are recorded based on enacted tax rates applicable to the future period when those temporary differences are expected to be recovered or settled.

For the tax years ended December 31, 2024, the Company’s U.S Federal statutory tax rate was 21 %.

The Company is also subject to the Texas Gross Margin tax of .

75 % of modified taxable income as determined for Texas purposes.

This combination results in a marginal blended tax rate of approximately 21.6 %.

At each of December 31, 2024, and 2023, the tax effected amount of U.S.

Federal net operating loss carryforwards (“NOLs”) totaled $ 6.8 and $ 6.1 million respectively.

As of December 31, 2024, $1.4 million in NOLs will begin to expire in varying amounts between 2036 and 2037, and the remaining $5.4 million can be carried forward indefinitely .

The Company has determined, after weighing both positive and negative evidence, that the net deferred tax asset (DTA) for the Company is not more-likely- than-not to be realizable.

Therefore, a valuation allowance of $ 4.9 million was established at December 31, 2024 to completely offset the DTA as of that date.

During the current period, the Company has estimated a taxable loss.

This NOL will be carried forwarded indefinitely with no expiration and is fully offset with a valuation allowance.

As such, the Company has not recorded any current income tax expense or benefit for the period.

All of the Company’s federal and state tax returns for 2020 through 2023 remain open to examination.

The provision for income taxes for the years ended December 31, 2024 consisted of the following:

Years Ended December 31,

Current (expense) benefit:

Total current (expense) benefit

Deferred (expense) benefit:

Total deferred (expense) benefit

Total benefit (expense):

Total benefit (expense)

As of December 31, 2024, the Company has not recorded a reserve for uncertain tax positions.

The components of the net deferred tax assets (liabilities) in the Fund’s balance sheets were as follows:

As of December 31,

Deferred tax assets:

Charitable Contributions

Net operating loss carryforwards

Total Deferred Tax Assets

Valuation allowance

( 4,892,336 )

Deferred Tax Assets after Valuation Allowance Deferred tax liabilities:

Mark to Market Unrealized Gain/Loss

( 1,866,690 )

Total net deferred tax assets (liabilities)

The provision for income taxes varies from the maximum federal statutory rate of 21% for the year ended December 31, 2024, as follows:

Years Ended December 31,

Income tax expense (benefit) at federal statutory rate

$ ( 3,939,998 )

Change in tax status

Effect of state income taxes

Non-deductible Permanent Items

2023 Return to Provision Adjustment

Change in valuation allowance

The Fund’s accounting policy related to income tax penalties and interest assessments is to accrue for these costs and record a charge to income tax expenses during the period that the Fund takes an uncertain tax position through resolution with the taxing authorities or expiration of the applicable statute of limitations.

All of the Fund’s federal and state tax returns for 2021 through 2024 remain open to examination.

We believe that there are no tax positions taken or expected to be taken that would significantly increase or decrease unrecognized tax benefits within twelve months of the reporting date.

(6) COMMITMENTS AND CONTINGENCIES

Lease Commitments .

We had an operating lease for office space that expired in September 2014.

Our current office space lease is month-to-month.

Rent expense under the operating lease agreement, inclusive of common area maintenance costs, was $ 93,000 for the years ended December 31, 2024, 2023, and 2022, respectively.

We have no other leases.

Portfolio Companies.

As of December 31, 2024 and, 2023, we had $ 0 and $ 1.7 million in outstanding commitments to our portfolio company investments.

Under certain circumstances, we may be called on to make follow-on investments in certain portfolio companies.

If we do not have sufficient funds to make follow- on investments, the portfolio company in need of the investment may be negatively impacted.

Also, our equity interest in the estimated fair value of the portfolio company could be reduced.

Follow-on investments may include capital infusions which are expenditures made directly to the portfolio company to ensure that operations are completed, thereby allowing the portfolio company to generate cash flows to service the debt.

Legal Proceedings.

From time to time, the Fund is also a party to certain proceedings incidental to the normal course of our business including the enforcement of our rights under contracts with our portfolio companies.

While the outcome of these legal proceedings cannot at this time be predicted with certainty, we do not expect that these proceedings will have a material effect upon the Fund’s financial condition or results of operations.

(7) PORTFOLIO SECURITIES

2024 Portfolio Activity

During the year ended December 31, 2013,

we had investment activity of $0.8 million in two portfolio companies.

We capitalized consulting expenses of $0.3 million relating

to Spectrum Management.

We made a short-term working capital loan of $0.5 million to Security Monitor Holdings, LLC (“SMH”).

SMH is a company which specializes in managing and improving operations of distressed companies.

The following table includes significant investment activity

during the year ended December 31, 2013 (in thousands):

The following table summarizes significant investment activity during the year ended December 31, 2024 (in thousands):

Investment Activity

2 unchanged sentences

Portfolio Company

Security Monitor Holdings, Inc.

Spectrum Management, LLC

During 2013, we realized net capital

losses of $9.8 million, including the following significant transactions:

Portfolio Company

Transaction Type

Realized Gain (Loss)

The Bradshaw Group

Business products and services

Non-affiliate

Infinia Corporation

Alternative Energy

Non-affiliate

During 2013, we recorded a net

change in unrealized depreciation of $13.3 million, to a net unrealized depreciation of $3.9 million at December 31, 2013.

Such change in depreciation resulted primarily from the following changes:

Transfer of unrealized depreciation to realized loss of our holdings in Bradshaw of $1.8 million in connection with Bradshaw’s sale of all of its assets;

Transfer of unrealized depreciation to realized loss of our holdings in Infinia of $8.0 million as a result of the liquidation of Infinia due to bankruptcy proceedings initiated by the company;

Increase in the fair value of Equus Energy of $1.1 million due improved operational results and an increase in proved developed producing reserves;

Increase in the fair value of our holdings in Spectrum of $2.5 million due to continued stability in operations resulting in the utilization of a market approach in determining fair value, in lieu of an asset approach applying a liquidation analysis used in prior quarters;

Increase in the fair value of our holdings in PalletOne of $0.1 million due to improved operations.

Table of Contents 52

Follow-On Cash

Morgan E&P, LLC

During 2024, we recorded a decrease of $ 15.6 million in net unrealized appreciation, from an unrealized appreciation of $ 24.5 million at December 31, 2023 to a net unrealized appreciation of $ 8.9 million at December 31, 2024.

Such change in unrealized appreciation resulted primarily from the decrease in the fair value of our holdings in Morgan E&P, LLC of $ 9.6 million, principally due to a lower forward price curve for oil, as well as the reclassification of certain of its proved reserves from producing to non-producing.

The change in unrealized appreciation also resulted from the decrease in fair value of our holding in Equus Energy, LLC of $ 6.0 million, principally due to various factors, including (i) decreases in the forward curve for oil and natural gas and its effect on the economic prospects of Equus Energy regarding future development of its oil and gas properties, and (ii) indications of interest from third parties regarding the possible sale of these properties during the fourth quarter of 2024.

See Subsequent Events below where we sold our interest in Equus Energy in March 2025 for a combination of cash and preferred stock valued at $ 4.0 million.

2023 Portfolio Activity

During the year ended December 31, 2012,

we received $6.4 million from the disposal of the Fund’s 55% fully-diluted equity interest in Sovereign, together with the

Fund’s promissory note and all interest as accrued interest.

We also received $5.3 million from the disposal of the Fund’s

34.2% equity interest in ConGlobal, together with the Fund’s promissory note and all interest as accrued interest.

On May 7, 2012, holders of 72.5% of

all OG bondholders approved a joint restructuring of certain bond debt of OG and its parent company, OPG.

Pursuant to such restructuring,

approximately 84.5% of the Orco Germany bonds held by each bondholder were converted into Obligations Convertibles en Actions

(“OCA”) on May 9, 2012.

The OCA were converted into an aggregate of 26,209,613 OPG shares which were delivered

in two tranches.

The first tranche, consisting of 18,361,540 OPG shares, was delivered in May 2012, of which the Fund received

1,102,455 OPG shares.

The second tranche, consisting of 7,848,073 OPG shares, was received in October 2012.

Also in October, the

remaining 15.5% of the Orco Germany bonds held by each bondholder was converted into new 6-year OPG Notes with a face value of

€20.0 million bearing cash and PIK interest each at 5% per annum, which interest percentages may be reduced over time upon

timely repayments of principal tranches during a four-year period commencing in 2015.

Of the total amount of OPG Notes issued,

Equus received OPG Notes in the face amount of €1,200,790.

On October 15, 2012, we announced the sale of 1,500,000 of our

1,573,666 OPG shares, where we received net cash proceeds of €3.8 million [$4.9 million].

As of December 31, 2012, we held

73,666 OPG shares, and €1,200,790 OPG Notes.

During the year ended December 31, 2012,

we had investment activity of $7.2 million in two portfolio companies.

We made a follow-on investment of $6.8 million in Equus

The restructuring of the Orco Germany bonds noted above resulted in the capitalization of $0.3 million accrued interest

received in the form of additional portfolio securities (PIK).

We capitalized legal and consulting expenses of $0.1 million relating

The following table includes significant investment activity

during the year ended December 31, 2012 (in thousands):

The following table summarizes significant investment activity during the year ended December 31, 2023 (in thousands):

Investment Activity

2 unchanged sentences

Portfolio Company

Equus Energy, LLC

Orco Property Group S.A.

Spectrum Management, LLC

During 2012, we realized net capital

losses of $2.8 million, including the following significant transactions:

Portfolio Company

Transaction Type

Realized Gain (Loss)

ConGlobal Industries Holding, Inc.

Shipping products and services

Sovereign Business Forms, Inc.

Business products and services

Orco Property Group

Non-affiliate

Various others

During 2012, we recorded a net

change in unrealized depreciation of $0.2 million, to a net unrealized depreciation of $17.2 million at December 31, 2012.

Such change in depreciation resulted primarily from the following changes:

Transfer of unrealized depreciation to realized loss of our holdings in ConGlobal of $1.6 million upon the divestiture of the investment;

Transfer of unrealized depreciation to realized loss of our holdings in Sovereign of $0.6 million upon the divestiture of the investment;

The restructuring of the 8,890 Orco Germany bonds resulted in the Fund holding 1,573,666 ordinary shares of OPG and €1,200,790 newly-issued 6-year OPG notes.

The capitalization of $0.3 million accrued interest and the subsequent sale of 1.5 million shares of OPG shares in October 2012 resulted in a decrease in fair value our holdings in of OPG of $1.8 million;

Table of Contents 53

Decrease in the fair value of Equus Energy, LLC of $0.2 million due to working capital expenditures.

Follow-On Cash

Morgan E&P, LLC

During 2023, we recorded an increase of $ 17.0 million in net unrealized appreciation, from an unrealized appreciation of $ 7.5 million as of December 31, 2022 to a net unrealized appreciation of $24.5 million as of December 31, 2023.

Such change in unrealized appreciation resulted primarily from the increase in the fair value of our holdings in Morgan E&P, LLC of $ 22.6 million, principally due to substantial increases in Morgan’s reserves and the reclassification of certain of its proved reserves from undeveloped to producing.

The increase in the fair value of Morgan was offset by the decrease in fair value of our holding in Equus Energy, LLC of $ 5.7 million, principally due to decreases in the forward curve for natural gas and its effect on the economic prospects of Equus Energy regarding future development of its gas properties.

2022 Portfolio Activity

During the year ended December 31, 2011,

we received $0.4 million from Sovereign in the form of principal payments and a distribution from Equus Media Development Company,

LLC in the amount of $1.0 million.

We sold our promissory notes in 1848 Capital Partners, LLC , Big Apple Entertainment Partners,

LLC, and London Bridge and certain assets of Riptide in which we hold a 64.67% membership interest.

All of these assets were sold

to Capital Markets Acquisition Partners, LLC for a combined price of $10 million, with $9.8 million allocated to the promissory

notes held by the Fund and $0.2 million to Riptide.

We allocated the proceeds to the promissory notes resulting in a realized loss

of approximately $0.9 million at London Bridge.

In addition, the monies provided to Riptide were sufficient to satisfy its outstanding

liabilities, resulting in a value of $0.

We also received $0.8 million in connection with the sale and redemption of our membership

interest in RP&C International Investments LLC.

During the year ended December 31, 2011,

we had investment activity of $3.7 million in three portfolio companies.

We made a follow-on investment of $0.3 million in Spectrum.

On April 27, 2011, we announced that we had entered into two separate transactions involving the purchase of an aggregate of 11,408

4% bonds due May 2012 (“Bonds”) issued by Orco Germany S.A., a commercial and multi-family residential real estate

holding company and developer based in Berlin.

The consideration provided to the selling bondholders consisted of an aggregate

of 1,700,000 newly issued shares of common stock of the Fund.

These shares are unregistered under the Securities Act of 1933.

We received 8,890 of the Bonds on April 27, 2011.

On May 9, 2011, one of these agreements was amended and restated to provide

for an additional 45 days to deliver 2,518 of the Bonds in exchange for providing to the Fund approximately $1.6 million in cash

as security for such delivery.

As the remaining bonds were not delivered by the specified date, the cash collateral became free

and clear property of the Fund on June 23, 2011.

On September 30, 2011, we formed Equus Energy as a wholly-owned subsidiary of

the Fund, to make investments in companies in the energy sector, with particular emphasis on income-producing oil & gas properties.

In December 2011, we contributed $250,000 to the capital of Equus Energy.

The following table includes significant

investment activity during the year ended December 31, 2011 (in thousands):

Investment Activity

2 unchanged sentences

Portfolio Company

Orco Germany S.A

Spectrum Management, LLC

Equus Energy, LLC

During 2011, we realized net capital

losses of $10.9 million, including the following significant transactions (in thousands):

Portfolio Company

Transaction Type

Realized Gain (Loss)

Riptide Entertainment, LLC

Entertainment and leisure

London Bridge Entertainment Partners Ltd

Entertainment and leisure

Non-affiliate

RP&C International Investments LLC

Various others

During 2011, we recorded a net

change in unrealized depreciation of $9.9 million, to a net unrealized depreciation of $17.4 million at December 31, 2011.

Such change in unrealized depreciation resulted primarily from the following changes:

Decline in fair market value of our holdings in ConGlobal $2.6 million due to the decline in operating performance;

Transfer of unrealized depreciation to realized depreciation of our holdings in London Bridge Entertainment Partners, Ltd.

of $0.8 million due to the sale of the promissory note;

Increase in the fair market value of our holding in Orco Germany S.A.

bonds of $2.7 million due to the difference in the market price of Equus shares used as consideration for the bonds on the date of acquisition offset by the change in Euro-USD exchange rate;

Table of Contents 54

Increase in the fair market value of our holding in PalletOne of $0.1 million due to steady improvement in operating performance and indications of value from independent third parties;

Transfer of unrealized depreciation to realized depreciation for our holding in Riptide of $10.1 million due to the sale of the promissory notes and the winding up of the entity;

Transfer of unrealized appreciation to realized appreciation for our holding in RP&C of $0.1 million due to the maturity of the investment;

Increase in fair market value of our holding in Sovereign of $0.6 million as Sovereign has seen an upward trend in operating results and has continued to reduce its debt which has resulted in a corresponding increase its equity value;

Decrease in fair market value of our holdings in Spectrum of $1.4 million due to the decline in operating performance and the maturity of its funded debts which remain in default;

Decrease in the fair market value of our holdings in Trulite, Inc.

of $0.1 due to the lack of progress and inability to achieve sufficient funding with regards to its product development program.

Follow-On Cash

Morgan E&P, LLC

During 2022, we recorded an increase of $ 2.5 million in net unrealized appreciation, from an unrealized appreciation of $ 5.0 million as of December 31, 2021 to a net unrealized appreciation of $7.5 million as of December 31, 2022.

Such change in unrealized appreciation resulted primarily from the increase in the fair value of our holdings in Equus Energy, LLC of $ 2.65 million, principally due to increases in the cost basis of this investment, as well as increases in oil and gas prices, as well as increases in the short- and long-term forward pricing curves for these commodities during 2022.

(8) EQUUS ENERGY, LLC

Equus Energy was formed in November

2011 as a wholly-owned subsidiary of the Fund to make investments in companies in the energy sector, with particular emphasis on

income-producing oil & gas properties.

Equus Energy, LLC (“Equus Energy”) was formed in November 2011 as a wholly-owned subsidiary of the Fund to make investments in companies in the energy sector, with particular emphasis on income-producing oil & gas properties.

In December 2011, we contributed $ 250,000 to the capital of Equus Energy.

27, 2012, we invested an additional $6.8 million in Equus Energy for the purpose of additional working capital and to fund the

purchase of $6.6 million in working interests in 129 producing and non-producing oil and gas wells.

The working interests include

associated development rights of approximately 23,000 acres situated on 13 separate properties in Texas and Oklahoma.

interests range from a de minimus amount to 50% of the leasehold that includes these wells.

The wells are operated by a number

of experienced operators, including Chevron USA, Inc., which has operating responsibility for all of Equus Energy’s 40 producing

well interests located in the Conger Field, a productive oil and gas field on the edge of the Permian Basin that has experienced

successful gas and hydrocarbon extraction in multiple formations.

Equus Energy, which holds a 50% working interest in each of these

Conger Field wells, is working with Chevron in a recompletion program of existing Conger Field wells to the Wolfcamp formation,

a zone containing oil as well as gas and natural gas liquids.

Two recompletions in the Conger Field have been effected since the

closing date of the acquisition of the working interests and a third recompletion is planned during the second quarter of 2014,

with additional recompletions anticipated for the remainder of 2014 and beyond.

Part of Equus Energy’s acreage rights described

above also includes a 50% working interest in possible new drilling to the base of the Canyon formation (appx.

8,500 feet) on 2,400

acres in the Conger Field.

Also included in the interests acquired by Equus Energy are working interests of 7.5% and 2.5% in the

Burnell and North Pettus Units, respectively, which collectively comprise approximately 13,000 acres located in the area known

as the “Eagle Ford Shale”

Revenue and Income.

the year ended December 31, 2013.

Equus energy’s revenue, operating income, and net loss were $2,555,475, $1,314,864, and

$230,306, respectively.

Capital Expenditures .

Since the effective date of the acquisition of the working interests described above (Sept.

1, 2012), Equus Energy has

invested approximately $832,811 in respect of the following four projects on two properties, collectively resulting in an

estimated 29,000 additional BOE to Equus Energy’s proved developed producing reserves based on a reserve report

provided to Equus Energy by Lee Keeling & Associates, Inc., an independent petroleum engineering firm.

Conger Field (Chevron USA)

Recompletion of the Mahaffey #1 Well ($363,589) .

The recompletion of the Mahaffey #1 gas well to the Wolfcamp shale oil formation was committed by WAOC prior to the date of acquisition

and came on-line in January 2013.

For the year ended December 31, 2013, the Mahaffey well generated, net to Equus Energy, approximately

$132,373 and $92,186 in gross revenue and operating income, respectively.

Recompletion of the EB Cope #6 Well ($327,253) .

In August 2013, Chevron commenced recompletion of the EB Cope #6 gas well to the Wolfcamp shale oil formation.

During the period

since recompletion to December 31, 2013, this well generated, net to Equus Energy, an estimated $242,962 and $208,162 in gross

revenue and operating income, respectively.

Table of Contents 55

Needville Field (Sue Ann Operating)

Drilling of the Hurta #4 Oil Well ($140,420) .

The Hurta #4 well was drilled in February 2013 and came on-line in March 2013.

During the year ended December 31, 2013, this well

generated, net to Equus Energy, $294,296 and $262,177 in gross revenue and operating income, respectively.

In the future, the well

may be recompleted to an additional zone.

Recompletion of the Hurta #3 Oil Well ($8,360) .

Hurta #3 well was recompleted in late July 2013.

For the period since recompletion to December 31, 2013, this well generated, net

to Equus Energy, $149,371 and $114,912 in gross revenue and operating income, respectively.

In the future, the well may be recompleted

to an additional zone.

not consolidate Equus Energy or its wholly-owned subsidiaries and accordingly only the value of our investment in Equus

Energy is included on our statement of assets and liabilities.

Our investment in Equus Energy is valued in accordance with

our normal valuation procedures and is based in part on the net values of the underlying assets held by Equus Energy, a

discounted cash flow analysis based on a reserve report prepared for Equus Energy by Lee Keeling & Associates, Inc.,

an independent petroleum engineering firm, the transactions and values of comparable companies in this sector, and the

estimated value of leasehold mineral interests associated with the acreage held by Equus Energy.

A valuation of Equus

Energy was performed by a third-party valuation firm, who recommended a value range of Equus Energy consistent with the fair

value we ascribed in our Schedule of Investments on page 39.

Table of Contents 56

is summarized consolidated financial information for Equus Energy as of December 31, 2013 and December 31, 2012 and for the year

ended December 31, 2013 (in thousands):

EQUUS ENERGY, LLC.

Consolidated Balance Sheets

On December 27, 2012, we invested an additional $ 6.8 million in Equus Energy for the purpose of additional working capital and to fund the purchase of $ 6.6 million in working interests that, as of December 31, 2024, consisted of 136 producing and non- producing oil and gas wells.

On September 30, 2020, the Fund provided an additional $ 0.6 million in capital to Equus Energy for the purpose of additional working capital.

On June 30, 2021, the Fund provided an additional $ 0.35 million in capital to Equus Energy for the purpose of additional working capital.

On December 31, 2022, the Fund provided an additional $ 0.15 million in capital to Equus Energy for the purpose of additional working capital.

The working interests include associated development rights of approximately 21,320 acres situated on 9 separate properties in Texas and Oklahoma.

The working interests range from a de minimus amount to 50 % of the leasehold that includes these wells.

The wells are operated by a number of operators, including Burk Royalty, which has operating responsibility for all of Equus Energy’s 22 producing well interests located in the Conger Field, a productive oil and gas field on the edge of the Permian Basin that has experienced successful gas and hydrocarbon extraction in multiple formations.

Equus Energy, which holds a 50 % working interest in each of these Conger Field wells, is seeking to effect a recompletion program of existing Conger Field wells to the Wolfcamp formation, a zone containing oil as well as gas and natural gas liquids.

Part of Equus Energy’s acreage rights described above also includes a 50% working interest in possible new drilling to the base of the Canyon formation (appx.

8,500 feet) on 2,400 acres in the Conger Field.

Also included in the interests acquired by Equus Energy are working interests of 7.5 % and 2.5 % in the Burnell and North Pettus Units, respectively, which collectively comprise approximately 13,000 acres located in the area known as the “Eagle Ford Shale” play.

See Subsequent Events below where we sold our interest in Equus Energy for a combination of cash and preferred stock valued at $ 4.0 million.

Below is selected financial information from the audited financial statements of Equus Energy as of December 31, 2024 and 2023, and for the years ended December 31, 2024, 2023 and 2022 (in thousands):

EQUUS ENERGY, LLC and SUBSIDIARY

Condensed Consolidated Balance Sheets

Current assets:

Cash and cash equivalents

Accounts receivable

3 unchanged sentences

Net oil and gas properties

Liabilities and members' capital

Liabilities and member's deficit

Current liabilities:

3 unchanged sentences

Asset retirement obligations

Total non-current liabilities

Total liabilities

Members' capital

Total members' capital

Total liabilities and members capital

Revenue and direct operating expenses

for the various oil and gas assets included in the accompanying statements represent the net collective working and revenue interests

acquired by Equus Energy.

The revenue and direct operating expenses presented herein relate only to the interests in the producing

oil and natural gas properties and do not represent all of the oil and natural gas operations of all of these properties.

operating expenses include lease operating expenses and production and other related taxes.

General and administrative expenses,

depletion, depreciation and amortization (“DD&A”) of oil and gas properties and federal and state taxes have been

excluded from direct operating expenses in the accompanying statements of revenues and direct operating expenses because the allocation

of certain expenses would be arbitrary and would not be indicative of what such costs would have been had Equus Energy been operated

as a stand-alone entity.

The statements of revenue and direct operating expenses presented are not indicative of the financial

condition or results of operations of Equus Energy on a go forward basis due to changes in the business and the omission of various

operating expenses.

Table of Contents 57

EQUUS ENERGY, LLC.

Consolidated Statement of Operations

December 31, 2013

Total member's deficit

Total liabilities and member's deficit

EQUUS ENERGY, LLC and SUBSIDIARY

Condensed Consolidated Statements of Operations

Year Ended December 31,

Operating revenue

2 unchanged sentences

Depletion, depreciation, amortization and accretion

Professional fees

General and administrative

Total operating expenses

Operating loss before income tax expense

Critical Accounting Policies for

Equus Energy –

Equus Energy and its wholly-owned subsidiary EQS Energy Holdings, Inc.

(collectively, “the Company”)

follow the Full Cost Method of Accounting for oil and gas properties.

Under the full cost method, all costs associated with

property acquisition, exploration, and development activities are capitalized.

Capitalized costs include lease acquisitions, geological

and geophysical work, delay rentals, costs of drilling, completing and equipping successful and unsuccessful oil and gas wells

and related costs.

Gains or losses are normally not recognized on the sale or other disposition of oil and gas properties.

Gains or losses are normally reflected as an adjustment to the full cost pool.

The capitalized costs of oil and gas

properties, plus estimated future development costs relating to proved reserves and estimated cost of dismantlement and abandonment,

net of salvage value, are amortized on a unit-of-production method over the estimated productive life of the proved oil and gas

Unevaluated oil and gas properties are excluded from this calculation.

Net operating loss

Non-operating income

Total other income

Net (loss) income

EQUUS ENERGY, LLC and SUBSIDIARY

Condensed Consolidated Statements of Cash Flows

Year ended December 31,

Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depletion, depreciation and amortization

expense for the Company’s oil and gas properties totaled $0.8 million for the year ended December 31, 2013.

Capitalized oil and gas property costs

are limited to an amount (the ceiling limitation) equal to the sum of the following:

(a) As of December 31, 2013, the present value of estimated future net revenue from the projected

production of proved oil and gas reserves, calculated at the simple arithmetic average, first-day-of-the-month prices during the

twelve-month period before the balance sheet date (with consideration of price changes only to the extent provided by contractual

arrangements) and a discount factor of 10%;

(b) The cost of investments in unproved and unevaluated properties excluded from the costs being

When it is determined that oil and gas

property costs exceed the ceiling limitation, an impairment charge is recorded to reduce its carrying value to the ceiling limitation.

The Company did not recognize an impairment loss on its oil and gas properties for the year ended December 31, 2013 and 2012, respectively.

The costs of certain unevaluated leasehold

acreage and certain wells being drilled are not amortized.

The Company excludes all costs until proved reserves are found or until

it is determined that the costs are impaired.

Costs not amortized are periodically assessed for possible impairment or reduction

If a reduction in value has occurred, costs being amortized are increased accordingly.

Table of Contents 58

Revenue Recognition - Revenue

recognized for oil and natural gas sales under the sales method of accounting.

Under this method, revenue recognized on

production as it is taken and delivered to its purchasers.

The volumes sold may be more or less than the volumes entitled to, based

on the owner’s net leasehold interest.

These differences result from production imbalances, which are not significant, and

are reflected as adjustments to proven reserves and future cash flows in the unaudited supplementary oil and gas information included

Accounting Policy on Depletion

- The Company employs the “Units of Production”

method in calculating depletion of its proved oil and gas properties,

wherein capitalized costs, as adjusted for future development costs and asset retirement obligations, are amortized over the total

estimated proved reserves.

Accretion expense

Changes in operating assets and liabilities:

Accounts receivable

Prepaid expenses and other current assets

Accounts payable and accrued liabilities

Due to Parent

Net cash used in operating activities

Cash flows from investing activities:

Investment in oil & gas properties

Net cash used in investing activities

Cash flows from financing activities:

Capital contribution

Net cash provided by investing activities

Net decrease in cash

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

(9) MORGAN E&P, LLC

Morgan E&P, LLC (“Morgan”) was organized by the Fund on April 3, 2023 as a Delaware limited liability company and a wholly-owned subsidiary of the Fund.

During 2023, Morgan acquired 5,897 net acres, in the Bakken/Three Forks formation in the Williston Basin of North Dakota, and acquired approximately 810 additional net acres during the second quarter of 2024.

The acreage and associated mineral rights were acquired from Pro Energy I LLC (“Pro Energy”) who received a carried working interest of 20 % in the acquired acreage.

In May 2023, we entered into an agreement with Morgan to provide it up to $ 10.0 million in senior debt financing, subject to a schedule of disbursements and draws that we determine.

This amount was subsequently amended in 2024 to $ 10.5 million.

As of December 31, 2024, Morgan had drawn the full $ 10.5 million under this facility.

During the fourth quarter of 2024, Morgan entered into an agreement to acquire the carried working interest held by Pro Energy in exchange for a payment of

$ 2.4 million in cash.

Below is summarized audited condensed consolidated financial information for Morgan E&P, LLC as of December 31, 2024 and 2023 and for the year ended December 31, 2024 and the period from inception (April 3, 2023) through December 31, 2023, respectively, (in thousands):

Mo rg an E&P, LLC

Condensed Balance Sheets

December 31, 2024

December 31, 2023

Revenue receivables

Joint interest billing receivables

Other receivables

Prepaids and other current assets

Current assets

Property, plant and equipment

Oil and gas properties, net - full cost method

Other property, plant and equipment, net

Total property, plant and equipment - net

Other noncurrent assets

Operating lease right-of-use assets, net

Total noncurrent assets

Liabilities and Member's Deficit:

Current liabilities

Accounts payable

Revenue payable

Prepayments from working interest owners

Current portion of operating lease liabilities

Due to parent

Accrued liabilities

Total current liabilities

Long-term liabilities

Asset retirement obligations

- The fair value of asset retirement obligations are recorded in the period in which they are incurred if a reasonable estimate

of fair value can be made, and the corresponding cost is capitalized as part of the carrying amount of the related long-lived asset.

The fair value of the asset retirement obligation is measured using expected future cash outflows discounted at the Company’s

credit-adjusted risk-free interest rate.

Fair value, to the extent possible, should include a market risk premium for unforeseeable

circumstances.

No market risk premium was included in the Company’s asset retirement obligation fair value estimate

since a reasonable estimate could not be made.

The liability is accreted to its then present value each period, and the capitalized

cost is depleted or amortized over the estimated recoverable reserves using the units-of-production method.

(10) RECENT ACCOUNTING PRONOUNCEMENTS

In June 2013, the Financial Accounting

Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-08, Financial Services—Investment

ASU 2013-08 provides clarifying guidance to determine if an entity qualifies as an investment company.

ASU 2013-08 also

requires an investment company to measure non-controlling interests in other investment companies at fair value.

The following

disclosures will also be required upon adoption of ASU 2013-08:

(i) whether an entity is an investment company and is applying

the accounting and reporting guidance for investment companies;

(ii) information about changes, if any, in an entity’s status

as an investment company;

and (iii) information about financial support provided or contractually required to be provided by an

investment company to any of its investees.

The requirements of ASU 2013-08 are effective for the Company beginning in the first

quarter of 2014.

The Company is currently evaluating the impact, if any, that these updates will have on its financial condition

or results of operations.

(11) SUBSEQUENT EVENT

Our Management performed an evaluation

of the Fund’s activity through the date the financial statements were issued, noting the following subsequent event:

On January 2, 2014, the Fund sold

Treasury Bills for $15.0 million and repaid its year-end margin loan.

(12) SELECTED QUARTERLY DATA

(in thousands, except per share amounts)

Long-term operating lease liabilities

Note payable - Due to parent

Long-term accrued liabilities - Due to parent

Total long-term liabilities

Commitments and contingencies (Note 10)

Member's deficit

Total liabilities and member's deficit

Mo rg an E&P, LLC

Condensed Statements of Operations

Year Ended December 31,

Quarter Ended

September 30,

Total investment income (loss)

Net investment loss

Increase (decrease) in net assets resulting

from operations

Basic and diluted earnings per share (1)

Table of Contents 59

thousands, except per share amounts)

Period from inception (April 3, 2023)

Oil, natural gas and natural gas liquid revenues

Lease operating

Production and other taxes

Marketing, transportation and gathering expense

Depreciation, depletion and amortization

Impairment of oil and gas properties

General and administrative

Total expenses

Other income (expense)

Interest income

Interest expense

Total other expense, net

Mo rg an E&P, LLC

Condensed Statements of Cash Flows

Year Ended December 31, 2024

investment income (loss)

investment loss

(decrease) in net assets resulting

and diluted earnings per share (1)

( 1) The sum of quarterly per

share amount may not equal per share amounts reported for year-to-date periods due to changes in the number of weighted average

shares outstanding and the effects of rounding.

(13) LEGAL PROCEEDINGS

Champion Window Arbitration Claim —In

January 2006, we sold our 31.5% ownership interest in Champion Window, Inc.

(“Champion”), a portfolio company of the

Fund, to Atrium Companies Inc.

(“Atrium”) pursuant to a Stock Purchase Agreement (“SPA”) dated December

The SPA contained certain limited rights of indemnification for Atrium in connection with its purchase of such ownership

More than five years after the closing

of the sale of our Champion interest, Atrium filed suit in the District Court of Harris County, Texas against two former officers

of Atrium’s subsidiary, Champion, alleging, amongst other matters, that the former officers breached their fiduciary duties

to Champion by hiring undocumented workers.

This action was commenced primarily as a result of an investigation by the U.S.

and Customs Enforcement agency (“ICE”) into Atrium’s hiring practices.

On March 12, 2012, to protect its interests,

we filed a Petition in Intervention in the State Court Action seeking a declaration from the Court that Equus did not owe any obligation

to indemnify Atrium or Champion for any penalties, costs or fees associated with the investigation by ICE.

On March 16, 2012, Atrium and Champion

filed a claim with the American Arbitration Association in Dallas, Texas, against Equus and a number of the other sellers under

In September 2013, all of Atrium and Champion’s claims including claims against its former officers described above,

were also consolidated in the Arbitration Action.

In the Arbitration Action, Atrium and

Champion seek damages arising from Equus’

and the other sellers’

indemnity obligations set forth in the SPA.

claims it is entitled to indemnification under the SPA for costs it has incurred in responding to an ongoing investigation by ICE.

Atrium entered into a Non-Prosecution Agreement with ICE.

It appears that one condition of the Non-Prosecution Agreement required

Atrium to pay ICE $2,000,000.

Atrium and Champion asserted two counts of breach of contract against Equus, both arising out of

the alleged obligation to indemnify Atrium and Champion pursuant to certain provisions of the SPA.

Atrium and Champion also asserted

claims for fraudulent inducement against two former officers and directors of Champion.

Through the arbitration, Atrium and Champion

seek to recover an unspecified amount in the form of alleged “losses, damages, assessments, penalties, interest, reasonable

attorneys’

and accountants’

fees, settlement costs, and other costs and expenses arising directly or indirectly out

of or incident to,”

the alleged breach of the indemnity provisions in the SPA.

As a consequence of their fraudulent inducement

claim against the two former officers and directors, Atrium and Champion alternatively seek equitable rescission of the SPA and

exemplary damages from the two former officers and directors.

Atrium and Champion have yet to specify

the amount of damages they seek from Equus or the other sellers pursuant to the alleged indemnity obligations under the SPA.

and Champion have disclosed the payment of $2 million to ICE to resolve the investigation and avoid prosecution for their hiring

We filed an answer to Atrium and Champion’s

claims on December 6, 2013.

In our answer, we denied that we owed any indemnity obligations to Atrium or Champion and further denied

that the Fund is in any way liable to Atrium or Champion.

To the extent Atrium and Champion are able to establish a right to an

indemnity, we will further contest the amount of the claimed indemnity, inasmuch as we believe (among other defenses) that the

indemnity obligation can only exist, if at all, with respect to damages arising as a direct and proximate result of employees who

were hired prior to the closing date of the 2006 sale of Champion and remained in continuous employment after the 2006 sale, and

not to any employee who may have been hired in the six years after the sale.

While we believe the Atrium claim is

without merit and we intend to continue to vigorously dispute the claim, there is a reasonable possibility of an adverse ruling

which may require the Fund to indemnify Atrium.

If Equus is required to indemnify Atrium and Champion, we estimate that such indemnity

obligation could vary from $2.0 million to $3.0 million.

Pursuant to the

Table of Contents 60

SPA, the indemnification obligation of Equus and the other

sellers is several and not joint, and any such indemnity, however uncertain, would likely be reduced proportionately to our percentage

ownership in Champion at the time of sale, which was 31.5% of Champion’s shares outstanding.

Indemnification Settlement —Effective

June 13, 2013, the Fund entered into a settlement agreement with Sam Douglass, a former director and executive officer of the Fund,

in respect of a claim for indemnification pursuant to the General Corporation Law of Delaware and an indemnification agreement

entered into by the Fund with Mr.

Douglass on May 3, 2001.

The settlement agreement provides for the reimbursement to Mr.

of actual expenses incurred, excluding any fines or penalties, in connection with an enforcement action initiated by the Securities

and Exchange Commission against Mr.

Douglass in 2009.

The settlement payment of $125,000 was made on June 24, 2013.

Lawsuit Settlement —On August

12, 2012, Paula Douglass filed a lawsuit against the Fund and members of the Board of Directors in the District Court of Harris

County, Texas.

Douglass’

complaint alleged various causes of action, including minority shareholder oppression, dilution,

and breach of fiduciary duty, and sought unspecified damages and attorney’s fees.

Effective June 13, 2013, the Fund entered

into a settlement agreement with Ms.

Douglass, Sam Douglass, as well as certain trusts controlled by them.

Pursuant to the settlement

agreement and in view of the estimated costs of protracted litigation and the associated disruption to the operations of the Fund,

the Board of Directors approved a payment of $402,254, in complete settlement of the lawsuit, as being in the best interests of

the Fund and its shareholders.

The settlement payment was made on July 30, 2013.

Douglass filed a motion to dismiss the lawsuit

with prejudice on August 8, 2013.

Settlement—

On June 9, 2011, RNR Production, Land and Cattle Company, Inc.

(“RNR”) filed a lawsuit

against the Fund and members of the Board of directors in the district Court of Harris County, Texas, seeking

various monetary and equitable remedies, including a motion for a temporary restraining order against the Fund from holding

its annual meeting of shareholders.

The Fund prevailed against the motion but agreed to a nuisance settlement with RNR in

exchange for a one-time payment of $200,000 which was paid on September 2, 2011,

Settlement—

On March 10, 2010, American General Life Insurance Company (“American General”) filed a

complaint against the Fund in the District Court of Harris County, Texas in connection with an office lease entered into

by our former administrator with American General.

The complaint by American General sought to hold the Fund liable for

unpaid rent, improvements, and attorneys’

fees totaling approximately $450,000.

We agreed to a settlement with American

General in exchange for a one-time payment of $120,000, which was paid on June 7, 2011.

From time to time, the Fund is also

a party to certain proceedings incidental to the normal course of our business including the enforcement of our rights under contracts

with our portfolio companies.

While the outcome of these legal proceedings cannot at this time be predicted with certainty, we

do not expect that these proceedings will have a material effect upon the Fund’s financial condition or results of operations.

Changes in and Disagreements with Accountants

on Accounting and Financial Disclosure

Period from inception (April 3, 2023)

through December 31, 2023

Cash flows from operating activities

Adjustments to reconcile net loss to net cash flows (used in) provided by operating activities

Depreciation, depletion, and amortization

Amortization of right-of-use asset

Impairment of oil and gas properties

Changes in operating assets and liabilities

Accounts receivable – oil and natural gas sales

Accounts receivable – joint interest billings

Other receivables

Prepaids and other current assets

Accounts payable

Revenue payable

Prepayments from owners

Due to parent

Current portion of operating lease liabilities

Accrued liabilities

Long-term accrued liabilities - due to parent

Net cash provided (used in) by operating activities

Cash flows from investing activities

Capital expenditures

Acquisition of oil and gas properties

Additions to other property, plant and equipment

Net cash used in investing activities

Cash flows from financing activities

Proceeds from note payable - affiliate

Net cash provided by financing activities

Net change in cash

Beginning of period

End of period

Supplemental disclosure for noncash financing and investing activities

Operating lease right-of-use assets additions

Acquisition of oil and natural gas working interests funded by accrued liabilities

Change in capital accounts payable and capital accruals

Prepayments applied to joint interest receivables

Change in asset retirement costs

(10) RECENT ACCOUNTING PRONOUNCEMENTS

Recent Accounting Standards —We consider the applicability and impact of all accounting standard updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”).

ASUs not listed below were assessed and either determined to be not applicable or expected to have minimal impact on our financial statements.

Accounting Standards Not Yet Adopted —In December 2023, FASB issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures”.

The amendments in this ASU require improved annual income tax disclosures surrounding rate reconciliation, income taxes paid, and other disclosures.

This update will be effective for financial statements issued for fiscal years beginning after December 15, 2024.

The Fund is currently evaluating the impact of this standard on the financial statements.

In November 2024, FASB issued ASU 2024-03, “Income Statement – Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220- 40), Disaggregation of Income Statement Expenses”.

The amendments in this Update require disclosure, in the notes to financial statements, of specified information about certain costs and expenses.

This update will be effective for financial statements issued for fiscal years beginning after December 15, 2026.

Early adoption is permitted.

The Fund is currently evaluating the impact of this standard on the financial statements.

In January 2025, FASB issued ASU 2025-01, “Income Statement – Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40), Clarifying the Effective Date”.

The amendment in this Update amends the effective date of Update 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026.

Early adoption of Update 2024-03 is permitted.

The Fund is currently evaluating the impact of this standard on the consolidated financial statements.

In November 2024, FASB issued ASU 2024-04, “Debt with Conversion and Other Options (Subtopic 470-20), Induced Conversions of Convertible Debt Instruments”.

The amendments in this Update clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion.

Under the amendments, to account for a settlement of a convertible debt instrument as an induced conversion, an inducement offer is required to provide the debt holder with, at a minimum, the consideration (in form and amount) issuable under the conversion privileges provided in the terms of the instrument.

An entity should assess whether this criterion is satisfied as of the date the inducement offer is accepted by the holder.

If, when applying this criterion, the convertible debt instrument had been exchanged or modified (without being deemed substantially different) within the one-year period leading up to the offer acceptance date, an entity should compare the terms provided in the inducement offer with the terms that existed one year before the offer acceptance date.

The amendments do not change the other criteria that are required to be satisfied to account for a settlement transaction as an induced conversion.

The amendments in this Update also make additional clarifications to assist stakeholders in applying the guidance.

Under the amendments, the incorporation, elimination, or modification of a VWAP formula does not automatically cause a settlement to be accounted for as an extinguishment;

an entity should instead assess whether the form and amount of conversion consideration are preserved (that is, provided for in the inducement offer) using the fair value of an entity’s shares as of the offer acceptance date.

The amendments in this Update also clarify that the induced conversion guidance applies to a convertible debt instrument that is not currently convertible as long as it had a substantive conversion feature as of both its issuance date and the date the inducement offer is accepted.

This update will be effective for financial statements issued for fiscal years beginning after December 15, 2025.

Early adoption is permitted for all entities that have adopted the amendments in update 2020-06.

The Fund is currently evaluating the impact of this standard on the consolidated financial statements.

Accounting Standards Recently Adopted —On January 1, 2024, we adopted ASU 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures”.

The amendments in this ASU require improved reportable segment information on an annual and interim basis, primarily through enhanced disclosures about significant segment expenses.

See Note 3 – Segments for the incremental disclosures.

(11) SUBSEQUENT EVENTS

Our Management performed an evaluation of the Fund’s activity through the date the financial statements were issued, noting the following subsequent events:

Issuance of Convertible Note and Warrants .

On February 10, 2025, we issued a 1-year senior convertible promissory note bearing interest at the rate of 10.0 % per annum in exchange for $ 2.0 million in cash (“Equus Note”).

The Equus Note is convertible into shares of the Fund’s common stock at a conversion price of $ 1.50 per share.

Contemporaneously with the issuance of the Note, the Fund also issued two common stock purchase warrants to acquire an aggregate of 2,000,000 shares of the Fund’s common stock at an exercise price of $ 1.50 per share.

New Portfolio Investment .

On February 10, 2025, we purchased from General Enterprise Ventures, Inc., a developer of fire suppression products (“GEVI”), a 1- year senior convertible promissory note bearing interest at the rate of 10 % per annum, in exchange for $ 1.5 million in cash (“GEVI Note”).

The GEVI Note is convertible into shares of GEVI’s common stock at a conversion price of $ 0.40 per share.

Contemporaneously with the purchase of the GEVI Note, the Fund also received a common stock purchase warrant to acquire an aggregate of 1,875,000 shares of GEVI common stock at an exercise price of $ 0.50 per share.

Sale of Equus Energy .

On March 3, 2025, we sold Equus Energy to North American Energy Opportunities Corp., a developer of upstream oil and gas assets (“NAEOC”).

The consideration provided by NAEOC consisted of $ 1.25 million in cash and 27,500 shares of preferred stock, redeemable within 6 months of the date of issuance at $ 100.00 per share based upon fulfillment of certain conditions.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K/A

Item 8. Financial Statements and Supplementary Data