What changed in this filing

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Item 1A. Risk Factors

2025-12-18 compared with 2025-12-17 · 44 added, 36 removed, 268 unchanged (23% of the section changed)

30 unchanged sentences

Management may not be able to implement our investment objective successfully.

Our Board is taking a more opportunistic approach to our portfolio investment strategy, shifting our investment emphasis to sectors such as energy.

Our Board is taking a more opportunistic approach to our portfolio investment strategy, shifting our investment emphasis from manufacturing and services to other sectors, such as energy.

In order to implement our investment strategy, Management must analyze, conduct due diligence, invest in, monitor and sell investment interests in industries in which many of them have not previously been involved.

8 unchanged sentences

These equity interests may not appreciate and, in fact, may depreciate in value.

For our present portfolio and other investments we may make in the future, the market value of our equity investments may fall below our estimate of the fair value of such investments before we sell them.

For Equus Energy and other investments we may make in the future, the market value of our equity investments may fall below our estimate of the fair value of such investments before we sell them.

Given these factors, there is a risk that we will not realize gains upon the sale of those or other investment interests that we hold.

Our holdings in Morgan E&P are subject to commodity price declines endemic to oil and gas companies.

Our holdings in Equus Energy are subject to commodity price declines endemic to oil and gas companies.

The oil and gas business is fundamentally a commodity-based enterprise.

This means that the operations and earnings of Morgan E&P, LLC (“Morgan”) may be significantly affected by changes in prices of oil, gas and natural gas liquids.

This means that the operations and earnings of Equus Energy may be significantly affected by changes in prices of oil, gas and natural gas liquids.

The prices of these products are also dependent upon local, regional and global events or conditions that affect supply and demand for the relevant commodity.

1 unchanged sentence

Moreover, as a worldwide commodity, the price of oil and natural gas is also influenced by global demand, changes in currency exchange rates, interest rates, and inflation.

Morgan does not employ any hedging strategies in respect of its oil and gas holdings and is therefore subject to price fluctuations resulting from these and other factors.

The operational results and financial condition of Morgan, as well as the economic attractiveness of future capital expenditures for new drilling, may be materially adversely affected as a result of lower oil and gas prices.

Equus Energy does not employ any hedging strategies in respect of its oil and gas holdings and is therefore subject to price fluctuations resulting from these and other factors.

The operational results and financial condition of Equus Energy, as well as the economic attractiveness of future capital expenditures for new drilling and recompletions, may be materially adversely affected as a result of lower oil and gas prices.

We may not be able to make additional investments in our portfolio companies from time to time, which may dilute our interests in such companies.

6 unchanged sentences

As a matter of policy, we generally have not initially invested more than 25% of the value of our net assets in a single portfolio company.

However, we would expect that any new investments may exceed this percentage for the immediate future.

In view of the net asset value of the Fund as of December 31, 2022 and the fact that our sole portfolio investment consists of our equity holding in Equus Energy, however, we would expect that any new investments may exceed this percentage for the immediate future.

Moreover, follow-on investments, disproportionate increases or decreases in the fair value of certain portfolio companies or sales of investments may result in more than 25% of our net assets being invested in a single portfolio company at a particular time.

46 unchanged sentences

Our business requires a substantial amount of cash to operate.

We may borrow funds to pay contingencies or expenses or to make investments, or to reinstate our pass-through tax status as a RIC under Subchapter M of the Code.

We may borrow funds to pay contingencies or expenses or to make investments, to maintain our pass-through tax status as a RIC under Subchapter M of the Code.

We are permitted under the 1940 Act to borrow if, immediately after the borrowing, we have an asset coverage ratio of at least 150%.

7 unchanged sentences

The make-up of our portfolio has made it more difficult for us to borrow at the level and on the terms that we desire.

Our borrowings have historically consisted of a revolving line of credit which has since expired, and a margin account used quarterly to enable us to achieve adequate diversification to maintain our previous pass-through tax status as a RIC.

We are attempting to secure liquidity through various means, including the sale of our portfolio assets, as well as debt and equity financing.

Although we believe we will be able to obtain sufficient liquidity for our operating expenses for the next twelve months, we could be wrong.

If we are wrong, we would have to obtain capital from other sources to pay Fund expenses.

We may also be required to sell our portfolio holdings at an inopportune time and at a price that may be less than would be received if such holdings were sold in a more competitive and orderly manner.

Although we believe the Fund’s liquidity is sufficient for our operating expenses for the next twelve months, we could be wrong.

If we are wrong, we would have to obtain capital from other sources to pay Fund expenses, which could involve selling our portfolio holdings at an inopportune time and at a price that may be less than would be received if such holding were sold in a more competitive and orderly manner.

The costs of borrowing money may exceed the income from the portfolio securities we purchase with the borrowed money.

1 unchanged sentence

A decline in net asset value could affect our ability to make distributions on our common stock.

If we seek to requalify as a RIC and obtain pass-through tax status as a result, our failure to distribute a sufficient portion of our net investment income and net realized capital gains could result in a loss of such pass-through tax status or subject us to a 4% excise tax.

Our failure to distribute a sufficient portion of our net investment income and net realized capital gains could result in a loss of pass-through tax status or subject us to a 4% excise tax.

If the asset coverage for debt securities issued by the Fund declines to less than 150% (as a result of market fluctuations or otherwise), we may be required to sell a portion of our investments when it is disadvantageous to do so.

61 unchanged sentences

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

As noted elsewhere herein, we have previously received an authorization from our stockholders to withdraw our election to be classified as a BDC.

Although this authorization has since expired, we expect to receive an additional authorization from our stockholders in the future.

As noted elsewhere herein, on November 1, 2022 we received authorization from our stockholders to withdraw our election to be classified as a BDC.

Although this authorization expired on February 28, 2023, we expect to receive an additional authorization from our stockholders in the future.

Accordingly, our management is currently evaluating potential transactions that would result in the transformation of Equus into an operating company instead of a BDC and the withdrawal of our BDC election within this time frame, but we may nevertheless not consummate any such transformation and remain a BDC.

6 unchanged sentences

Such developments could correspondingly decrease our operating flexibility.

We are not currently qualified as a RIC under the Code and will be subject to corporate level income tax.

As described under Regulated Investment Company Tax Status above, during the fourth quarter of 2024, we elected to not qualify as a RIC.

As a result, we will be subject to regular corporate level income tax on our income and gains and will not be permitted to deduct distributions paid to our stockholders.

To requalify as a RIC and be entitled to the tax benefits accorded to RICs under the Code, we must meet certain income source, asset diversification and annual distribution requirements applicable to RICs.

Further, we must also derive, each taxable year, at least 90% of our gross income from dividends, interest, payments with respect to certain securities loans, gains from the sale of stock or other securities or foreign currencies, or other income derived with respect to our business of investing in such stock or securities or currencies and net income from interests in certain “qualified” publicly traded partnerships.

We may not continue to qualify as a RIC under the Code.

To remain entitled to the tax benefits accorded to RICs under the Code while we maintain our status as a BDC, we must meet certain income source, asset diversification and annual distribution requirements.

To qualify as a RIC, we must derive each taxable year at least 90% of our gross income from dividends, interest, payments with respect to certain securities loans, gains from the sale of stock or other securities or foreign currencies, or other income derived with respect to our business of investing in such stock or securities or currencies and net income from interests in certain “qualified” publicly traded partnerships.

The annual distribution requirement for a RIC is satisfied if we distribute at least 90% of our ordinary net taxable income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, to our stockholders on an annual basis.

As discussed above in “Our business depends on external financing,” we historically have borrowed funds necessary to make qualifying investments to satisfy the Subchapter M diversification requirements.

We undertook no such borrowings during the fourth quarter of 2024.

In addition to corporate levels of tax on our income and gains as a non-RIC, our distributions will be taxable as dividends to the extent paid from earnings and profits.

We may also be subject to income tax and/or a 4% excise tax, if we fail to distribute a sufficient portion of our net investment income and net realized capital gains.

To the extent that we generate such income and gains and do not requalify as a RIC, our tax treatment as a regular Subchapter C corporation would have a material adverse effect on the total return, if any, obtainable from an investment in our common stock.

Because we intend to distribute substantially all of our income and net realized capital gains to our stockholders, if we continue to operate as a BDC, we will need additional capital to finance our growth.

As noted above, inasmuch as we expect to receive a future authorization from our stockholders to withdraw our election to be classified as a BDC, such withdrawal also means that we will not requalify as a RIC.

Our management is currently evaluating potential transactions that would result in the transformation of Equus into an operating company and the withdrawal of our BDC election and RIC status within this time frame, but we may nevertheless not consummate any such transformative transaction and remain a BDC and continue to seek to requalify as a RIC.

In order to requalify as a RIC, to avoid payment of excise taxes and to minimize or avoid payment of income taxes, for so long as we maintain our status as a BDC, we intend to distribute to our stockholders substantially all of our net ordinary income and realized net capital gains except for certain net long- term capital gains (which we may retain, pay applicable income taxes with respect thereto, and elect to treat as deemed distributions to our stockholders).

If we fail to satisfy such diversification requirements and cease to qualify for conduit tax treatment, we will be subject to income tax on our income and gains and will not be permitted to deduct distributions paid to stockholders.

In addition, our distributions will be taxable as dividends to the extent paid from earnings and profits.

We may also cease to qualify as a RIC or be subject to income tax and/or a 4% excise tax, if we fail to distribute a sufficient portion of our net investment income and net realized capital gains.

The loss of our RIC qualification would have a material adverse effect on the total return, if any, obtainable from an investment in our common stock.

Because we intend to distribute substantially all of our income and net realized capital gains to our stockholders, if we continue to operate as a BDC and as a RIC, we will need additional capital to finance our growth.

In order to qualify as a RIC, to avoid payment of excise taxes and to minimize or avoid payment of income taxes, for so long as we maintain our status as a BDC, we intend to distribute to our stockholders substantially all of our net ordinary income and realized net capital gains except for certain net long- term capital gains (which we may retain, pay applicable income taxes with respect thereto, and elect to treat as deemed distributions to our stockholders).

As a BDC, we are generally required to meet a coverage ratio of total assets to total senior securities, which includes all of our borrowings and any preferred stock we may issue in the future, of at least 150%.

7 unchanged sentences

However, absent stockholder approval, we may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC.

As described above under “ Significant Developments – Authorization to Withdraw BDC Election ”, our shareholders have previously provided this authorization and may do so again in the future, although we will not withdraw our election as a BDC unless and until we have entered into a definitive agreement to effect the transformation of Equus into an operating company.

As described above under “ Significant Developments – Authorization to Withdraw BDC Election ”, our shareholders have recently provided this authorization and may do so again in the future, although we will not withdraw our election as a BDC unless and until we have entered into a definitive agreement to effect the transformation of Equus into an operating company.

We cannot predict the effect any changes to our current operating policies and strategies would have on our business, operating results and value of our stock.

2 unchanged sentences

Our ability to enter into transactions with our affiliates is restricted.

As noted above, our stockholders have previously authorized our Board and Chief Executive Officer to withdraw our election to be classified as a BDC and, although this authorization has expired, we expect to receive a further authorization from our stockholders in the future.

As noted above, on November 1, 2022, our stockholders authorized our Board and Chief Executive Officer to withdraw our election to be classified as a BDC and, although this authorization expired on February 28, 2023, we expect to receive a further authorization from our stockholders in the future.

Accordingly, our management is currently evaluating potential transactions that would result in the transformation of Equus into an operating company and the withdrawal of our BDC election within this time frame, but we may nevertheless not consummate any such transformative transaction and remain a BDC.

14 unchanged sentences

If that happens, we may be required to liquidate a portion of our investments and repay a portion of our indebtedness at a time when such sales may be disadvantageous.

Senior Securities .

As a result of issuing senior securities, we would also be exposed to typical risks associated with leverage, including an increased risk of loss.

If we issue preferred securities, they would rank “senior” to common stock in our capital structure.

Preferred stockholders would have separate voting rights and may have rights, preferences or privileges more favorable than that of our common stockholders.

Furthermore, the issuance of preferred securities could have the effect of delaying, deferring or preventing a transaction or a change of control that might involve a premium price for our common stockholders or otherwise be in your best interest.

Additional Common Stock.

Our Board of Directors may decide to issue common stock to finance our operations rather than issuing debt or other senior securities.

As a BDC, we are generally not able to issue our common stock at a price below net asset value without first obtaining required approvals from our stockholders and our independent directors.

In any such case, the price at which our securities are to be issued and sold may not be less than a price, that in the determination of our Board of Directors, closely approximates the market value of such securities (less any commission or discount).

We may also make rights offerings to our stockholders at prices per share less than the net asset value per share, subject to the 1940 Act.

If we raise additional funds by issuing more common stock or senior securities convertible into, or exchangeable for, our common stock, the percentage ownership of our stockholders at that time would decrease, and you may experience dilution.

Changes in the laws or regulations governing our business, or changes in the interpretations thereof, and any failure by us to comply with these laws or regulations, could negatively affect the profitability of our operations .

16 unchanged sentences

If we are unable to effectively manage the strategic review process, our business, financial condition, liquidity and results of operations could be adversely affected.

If we reorganize as an operating company, we will likely not seek to requalify as a RIC under the Code.

If we were to reorganize as an operating company, we would not seek to reinstate our status as a RIC.

As noted above under Regulated Investment Company Tax Status , if we do not requalify as a RIC, we will be subject to corporate income tax, which would substantially reduce the amount of income we might otherwise distribute to our shareholders.

If we reorganize as an operating company, we will likely not continue to qualify as a RIC under the Code.

If we were to reorganize as an operating company, we would lose our status as a RIC.

If we fail to qualify as a RIC, we will be subject to corporate income tax, which would substantially reduce the amount of income we might otherwise distribute to our shareholders.

If we reorganize as an operating company or a permanent capital vehicle, we will not continue to operate as a BDC.

1 unchanged sentence

However, if we effect a reorganization of the Fund into an operating company or a permanent capital vehicle, we will seek to terminate our BDC classification.

Holders of a majority of the outstanding common stock of the Fund have previously approved our cessation as a BDC under the 1940 Act and authorized our Board to cause the Fund’s withdrawal of its election to be classified as a BDC.

Although this authorization has expired, we expect to receive a further such authorization from our stockholders in the future.

On November 1, 2022, holders of a majority of the outstanding common stock of the Fund approved our cessation as a BDC under the 1940 Act and authorized our Board to cause the Fund’s withdrawal of its election to be classified as a BDC.

Although this authorization expired on February 28, 2023, we expect to receive a further such authorization from our stockholders in the future.

Nevertheless, if we were to terminate our election to be classified as a BDC and were still determined by the SEC to constitute an “investment company,” we would be subject to significantly greater regulatory requirements and constraints than under those which we presently operate, the result of which could have a material adverse effect on our results and financial condition.

29 unchanged sentences

We would no longer require exemptive relief from the SEC before implementing incentive compensation plans for our key executives and non-executive directors.

Unresolved Staff Comments

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 1A. Risk Factors