What changed in this filing

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Item 1. Business

2025-04-10 compared with 2024-04-02 · 285 added, 265 removed, 230 unchanged (71% of the section changed)

Equus Total Return,

(“we,”

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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 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.

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

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negotiated directly with such companies.

Equus is a closed-end

management investment company that has elected to be treated as a business development company (“BDC”) under the Investment

Company Act of 1940 (“1940 Act”).

In order to remain a BDC, we must meet certain specified requirements under the 1940 Act,

including investing at least 70% of our assets in eligible portfolio companies and limiting the amount of leverage we incur.

also a regulated investment company (“RIC”) under Subchapter M of the U.S.

a closed-end management investment company that has elected to be treated as a business development company (“BDC”) under

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

In order to remain a BDC, we must meet certain specified requirements under

the 1940 Act, including investing at least 70% of our assets in eligible portfolio companies and limiting the amount of leverage we incur.

Prior to the fourth quarter of 2024, Equus was also a regulated investment company (“RIC”) under Subchapter M of the U.S.

Internal Revenue Code of 1986.

As such, we are

not required to pay corporate-level income tax on the Fund’s investment income.

So long as we remain a BDC, we intend, insofar as

reasonably possible, to maintain our RIC status, which requires that we qualify annually as a RIC by meeting certain specified requirements.

For a discussion of these requirements necessary to maintain our status as a BDC and as a RIC, please see “

Business Development

Company Requirements ”

A BDC that is also a RIC is not required to pay corporate-level income tax on its investment income.

the fourth quarter of 2024, we elected to not qualify as a RIC.

Consequently, in the event that we incur operating income or net investment

income, we will be taxed at regular corporate rates.

Notwithstanding our present election, we may seek to requalify as a RIC in the future.

For a discussion of requirements necessary to maintain our status as a BDC and as a RIC, please see “

Business Development Company

Requirements ”

Regulated Investment Company Tax Status ,”

respectively.

principal office is located at 700 Louisiana St., 48 th Floor, Houston, Texas, 77002, and

the telephone number is 1-800-856-0901.

Our corporate website is located at www.equuscap.com .

We make available free of charge

on our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those

reports as soon as reasonably practicable after such material is electronically filed or furnished to the Securities and Exchange Commission

(“SEC”).

Our shares are traded on The New York Stock Exchange (“NYSE”) under the ticker symbol “EQS”.

Our principal

office is located at 700 Louisiana St., 41 st Floor, Houston, Texas, 77002, and the telephone number is 1-800-856-0901.

corporate website is located at www.equuscap.com .

We make available free of charge on our website our annual report on Form 10-K,

quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after

such material is electronically filed or furnished to the Securities and Exchange Commission (“SEC”).

Our shares are traded

on The New York Stock Exchange (“NYSE”) under the ticker symbol “EQS”.

Significant Developments

Impact of Geopolitical

Events on the Oil and Gas Sector .

The substantial volatility in world markets has been prominent in the oil and gas sector, with WTI

oil prices reaching a multi-year high of $130.00 per barrel in March 2022, and gas prices also reaching a multi-year high in mid-year,

both due in part to increased demand, the reluctance of U.S.

producers and OPEC nations to generate additional supply, and the conflict

Beginning in the second and third quarters of 2022, oil prices retreated substantially before stabilizing in the second quarter

of 2023, increasing again in the third quarter of 2023, and largely returning to second quarter 2023 prices by year-end.

During the third

quarter of 2023, oil prices increased from $70.64 to $90.79, and thereafter decreased to $71.65 by the end of the fourth quarter of 2023.

Gas prices were volatile in the first half of 2023 before stabilizing in the second half of the year.

During the third quarter of 2023,

gas prices increased from $2.48 to $2.68 before decreasing to $2.58 by the end of the fourth quarter of 2023.

Recent oil price stability

has been a significant factor in increased consolidation activity in the Permian Basin where Equus Energy holds most of its development

rights, as well as in the Williston Basin region in North Dakota where Morgan E&P, LLC holds its development rights.

Financing and Investment Transactions .

In the first quarter of 2025, we undertook the following transactions:

· 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.

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· 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,

or an aggregate of $2.75 million, conditional upon Equus facilitating NAEOC’s acquisition of operating rights with respect to Equus

Energy’s holdings in the Conger Field, as well as the acquisition of the working interests associated with the Conger Field not

already held by Equus Energy.

of Geopolitical Events on the Oil and Gas Sector .

The substantial volatility in world markets has been prominent in the oil and gas

sector, with WTI and gas prices reaching multi-year highs in 2022, largely due to increased post-Covid demand and the buildup and subsequent

invasion of Ukraine by Russian forces.

Prices began to moderately rise and fall in successive quarters between the third quarter of 2023

and the fourth quarter of 2024, and stood at $72.44 as of December 31, 2024.

Natural gas prices experienced high volatility in 2022 before

collapsing in 2023 and have thereafter remained relatively stable, finishing the year ended December 31, 2024 at $3.40 per MMBTU.

oil price stability has been a significant factor in increased consolidation activity in the Williston Basin region in North Dakota where

Morgan E&P, LLC holds its development rights.

Authorization

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transaction would be acceptable to us.

Board and management of the Fund (“Management”) continue to believe that current market conditions and recent portfolio performance

dictate the need to pursue a more active role in the management of our remaining investments and to seek liquidity events at the appropriate

time to protect and enhance shareholder value.

These activities include continuous monitoring and intensive reviews of portfolio company

performance and expectations, providing follow-on capital when necessary, and the exploration of liquidity events for certain portfolio

companies to position the Fund to maximize investment returns and, to the extent we intend to remain a BDC, actively pursuing suitable

new investments for the Fund.

Our Board and management of the Fund (“Management”) continue to believe that current market conditions and recent portfolio

performance dictate the need to pursue a more active role in the management of our remaining investments and to seek liquidity events

at the appropriate time to protect and enhance shareholder value.

These activities include continuous monitoring and intensive reviews

of portfolio company performance and expectations, providing follow-on capital when necessary, and the exploration of liquidity events

for certain portfolio companies to position the Fund to maximize investment returns and, to the extent we intend to remain a BDC, actively

pursuing suitable new investments for the Fund.

Investment Objective

To the extent we

remain a BDC and do not complete the transformation of Equus into an operating company as described above, our investment objective is

to maximize the total return to our stockholders in the form of current investment income and long-term capital gains by investing in

the debt and equity securities of small and middle market capitalization companies that are generally not publicly traded at the time

To the extent

we remain a BDC and do not complete the transformation of Equus into an operating company as described above, our investment objective

is to maximize the total return to our stockholders in the form of current investment income and long-term capital gains by investing

in the debt and equity securities of small and middle market capitalization companies that are generally not publicly traded at the time

of our investment.

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Investment Strategy

Our investment strategy

attempts to strike a balance between the potential for gain and the risk of loss.

With respect to capital appreciation, Equus is a “growth-at-reasonable-price”

investor that seeks to identify and acquire securities that meet our criteria for selling at reasonable prices.

We give priority to cash

producing investments wherein we invest principally in debt or preferred equity financing with the objective of generating regular interest

and dividend income back to the Fund.

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 a financing.

Given market conditions over the past several years and the

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

the current strategies.

Our investment

strategy attempts to strike a balance between the potential for gain and the risk of loss.

With respect to capital appreciation, Equus

is a “growth-at-reasonable-price”

investor that seeks to identify and acquire securities that meet our criteria for selling

at reasonable prices.

We give priority to cash producing investments wherein we invest principally in debt or preferred equity financing

with the objective of generating regular interest and dividend income back to the Fund.

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 a financing.

market conditions over the past several years and the performance of our portfolio, our Management and Board believe it prudent to continue

to review alternatives to refine and further clarify the current strategies.

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Investment Criteria

Consistent with our

investment objective and strategy, our Management evaluates prospective investments based upon the criteria set forth below.

We may modify

some or all of these criteria from time to time.

Management Competency

and Ownership .

We seek to invest in companies with experienced management teams who have demonstrated a track record of successful

with our investment objective and strategy, our Management evaluates prospective investments based upon the criteria set forth below.

We may modify some or all of these criteria from time to time.

Competency and Ownership .

We seek to invest in companies with experienced management teams who have demonstrated a track record of

successful performance.

Further, we desire to invest in companies with significant management ownership.

We believe that significant management ownership

in small capitalization and middle market companies provides appropriate incentives and an alignment of interests for management to maximize

shareholder value.

In addition, we will seek to design compensation and incentive arrangements that align the interests of the portfolio

company’s management with those of the Fund to enhance potential returns.

Substantial Target

We believe that significant management

ownership in small capitalization and middle market companies provides appropriate incentives and an alignment of interests for management

to maximize shareholder value.

In addition, we will seek to design compensation and incentive arrangements that align the interests of

the portfolio company’s management with those of the Fund to enhance potential returns.

Target Market .

We desire to focus on companies whose products or services have favorable growth potential and strong competitive positions

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be sizeable or have significant growth potential.

History of Profitability

and Favorable Growth Potential .

We target companies that have demonstrated a history of profitability or a reasonable expectation

of a return to profitability in the near future.

of Profitability and Favorable Growth Potential .

We target companies that have demonstrated a history of profitability or a reasonable

expectation of a return to profitability in the near future.

Ability to Provide

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interest and/or preferred dividend payments.

Management Assistance

and Substantial Equity .

Given the requirements of a BDC under the 1940 Act, we seek to invest in companies that will permit substantial

managerial assistance, including representation on the board of directors of the company or its equivalent.

With regard to equity investments,

we desire to obtain a substantial investment position in portfolio companies.

This position may be as a minority shareholder with certain

contractual rights and powers, or as a majority shareholder, and should otherwise allow us to have substantive input on the direction

and strategies of the portfolio company.

Plausible Exit

and Potential for Appreciation .

Prior to investing in a portfolio company, we will seek to analyze potential exit strategies and pursue

those investments with such strategies as may be achievable.

Assistance and Substantial Equity .

Given the requirements of a BDC under the 1940 Act, we seek to invest in companies that will permit

substantial managerial assistance, including representation on the board of directors of the company or its equivalent.

With regard to

equity investments, we desire to obtain a substantial investment position in portfolio companies.

This position may be as a minority shareholder

with certain contractual rights and powers, or as a majority shareholder, and should otherwise allow us to have substantive input on the

direction and strategies of the portfolio company.

Exit and Potential for Appreciation .

Prior to investing in a portfolio company, we will seek to analyze potential exit strategies

and pursue those investments with such strategies as may be achievable.

Investment Operations

Our investment operations

consist principally of the following basic activities:

Investment Selection.

Historically, many of our investment opportunities have come from Management, members of our Board, other private equity investors,

direct approaches from prospective portfolio companies and referrals from investment banks, business brokers, commercial, regional and

local banks, attorneys, accountants and other members of the financial community.

Our investment operations consist principally of the following

basic activities:

Historically, many of our investment opportunities have come from Management, members of our Board, other private equity

investors, direct approaches from prospective portfolio companies and referrals from investment banks, business brokers, commercial, regional

and local banks, attorneys, accountants and other members of the financial community.

Subject to the approval of our Board, we may compensate

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Background checks on members of management;

Research relating to the company, its management, industry, markets, products and services and competitors.

Research relating to the company, its management, industry, markets, products

and services and competitors.

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Structuring Investments.

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and individual investors.

Providing Management Assistance and

Monitoring of Investments .

Providing Management Assistance

and Monitoring of Investments .

Successful private equity investments typically require active monitoring of, and significant participation

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Follow-On Investments

Following our initial

investment, a portfolio company may request that we make follow-on investments by providing additional equity or loans needed to fully

implement its business plans to develop a new line of business or to recover from unexpected business problems or other purposes.

follow-on investments may be made to exercise warrants or other preferential rights granted to the Fund or otherwise to increase our position

in a portfolio company.

We may make follow-on investments in portfolio companies from cash on hand or borrow all or a portion of the funds

If we are unable to make follow-on investments due to lack of available capital, the portfolio company in need of the investment

may be negatively impacted, we may be required to subordinate our debt interest in the portfolio company to a new lender, and/or our equity

interest in the portfolio company may be diluted if outside equity capital is required.

Following our

initial investment, a portfolio company may request that we make follow-on investments by providing additional equity or loans needed

to fully implement its business plans to develop a new line of business or to recover from unexpected business problems or other purposes.

In addition, follow-on investments may be made to exercise warrants or other preferential rights granted to the Fund or otherwise to increase

our position in a portfolio company.

We may make follow-on investments in portfolio companies from cash on hand or borrow all or a portion

of the funds required.

If we are unable to make follow-on investments due to lack of available capital, the portfolio company in need

of the investment may be negatively impacted, we may be required to subordinate our debt interest in the portfolio company to a new lender,

and/or our equity interest in the portfolio company may be diluted if outside equity capital is required.

Disposition of Investments

The method and timing

of the disposition of our investments in portfolio companies are critical to our ability to realize capital gains and minimize capital

We may dispose of our portfolio securities through a variety of transactions, including recapitalizations, refinancings, management

buyouts, repayments from cash flow, acquisitions of portfolio companies by a third party and outright sales of the Fund’s securities

in a portfolio company.

In addition, under certain circumstances we may distribute our portfolio securities in-kind to our stockholders.

In structuring our investments, we endeavor to reach an understanding with the management of the prospective portfolio company as to the

appropriate method and timing of the disposition of the investment.

In some cases, we seek registration rights for our portfolio securities

at the time of investment which typically provide that the portfolio company will bear the cost of registration.

To the extent not paid

by the portfolio company, the Fund typically bears the costs of disposing of our portfolio investments.

The method and

timing of the disposition of our investments in portfolio companies are critical to our ability to realize capital gains and minimize

capital losses.

We may dispose of our portfolio securities through a variety of transactions, including recapitalizations, refinancings,

management buyouts, repayments from cash flow, acquisitions of portfolio companies by a third party and outright sales of the Fund’s

securities in a portfolio company.

In addition, under certain circumstances we may distribute our portfolio securities in-kind to our

stockholders.

In structuring our investments, we endeavor to reach an understanding with the management of the prospective portfolio company

as to the appropriate method and timing of the disposition of the investment.

In some cases, we seek registration rights for our portfolio

securities at the time of investment which typically provide that the portfolio company will bear the cost of registration.

To the extent

not paid by the portfolio company, the Fund typically bears the costs of disposing of our portfolio investments.

Current Portfolio Companies

For a description

of our current portfolio company investments, see “

Management’s Discussion and Analysis of Financial Condition and Results

of Operations–Portfolio Securities .”

On a quarterly basis,

Management values our portfolio investments.

of our portfolio company investments as of December 31, 2024, see “

Management’s Discussion and Analysis of Financial Condition

and Results of Operations–Portfolio Securities .”

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On a quarterly

basis, Management values our portfolio investments.

These valuations are subject to the approval and adoption of the Board.

Valuations of our

portfolio securities at “fair value”

are performed in accordance with accounting principles generally accepted in the United

States (“GAAP”).

The fair value of

investments for which no market exists (which includes most of our investments) is determined through procedures established in good faith

by the Board.

of our portfolio securities at “fair value”

are performed in accordance with accounting principles generally accepted in the

United States (“GAAP”).

The fair value

of investments for which no market exists (which includes most of our investments) is determined through procedures established in good

faith by the Board.

As a general principle, the current “fair value”

of an investment is the amount the Fund might reasonably expect

to receive upon its sale in an orderly manner.

of an investment is the amount the Fund might reasonably

expect to receive upon its sale in an orderly manner.

There are a range of values that are reasonable for such investments at any particular

We base our adjustments

to fair value 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.

In the case 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 inherently subjective, and our estimate of fair value may differ materially from amounts

actually received upon the disposition of our 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

Our general intent

is to hold our loans to maturity when appraising our privately held debt investments.

As such, we believe the fair value will not exceed

the cost of the investment;

adjustments to fair value 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.

In the case 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 inherently subjective, and our estimate of fair value

may differ materially from amounts actually received upon the disposition of our 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.

intent is to hold our loans to maturity when appraising our privately held debt investments.

As such, we believe the fair value will not

exceed the cost of the investment;

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

Our Management may

engage independent, third-party valuation firms to conduct independent appraisals and review Management’s preliminary valuations

Our Management

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.

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the fair values for all of the Fund’s portfolio investments to the Board of Directors for final approval.

To the extent that

market quotations are readily available for our investments and such investments are freely transferable, we value them at the closing

market price on the date of valuation.

For securities which are of the same class as a class of public securities but are restricted from

free trading (such as Rule 144 stock), we establish our valuation by discounting the closing market price to reflect the estimated impact

of illiquidity caused by such restrictions.

extent that market quotations are readily available for our investments and such investments are freely transferable, we value them at

the closing market price on the date of valuation.

For securities which are of the same class as a class of public securities but are

restricted from free trading (such as Rule 144 stock), we establish our valuation by discounting the closing market price to reflect the

estimated impact of illiquidity caused by such restrictions.

We generally hold investments in debt securities to maturity.

Accordingly, we determine the

fair value of debt securities on the basis of the terms of the debt securities and the financial condition of the issuer.

We value certificates

of deposit at their face value, plus interest accrued to the date of valuation.

we determine the fair value of debt securities on the basis of the terms of the debt securities and the financial condition of the issuer.

We value certificates of deposit at their face value, plus interest accrued to the date of valuation.

Our Board reviews

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utilizes independent valuation firms to review Management’s valuation methodology or to conduct an independent valuation.

We compete with a

large number of public and private equity and mezzanine funds and other financing sources, including traditional financial services companies

such as finance companies and commercial banks.

Many of our competitors are substantially larger and have considerably greater financial,

technical and marketing resources.

Our competitors may have a lower cost of funds and many have access to funding sources not available

In addition, certain of our competitors may have higher risk tolerances or different risk assessments, which could allow them to

consider a wider variety of investments and establish more relationships and build their respective market shares.

In addition, many of

our competitors are not subject to the regulatory restrictions imposed by the 1940 Act imposes on BDCs.

We cannot assure

you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of

We compete with

a large number of public and private equity and mezzanine funds and other financing sources, including traditional financial services

companies such as finance companies and commercial banks.

Many of our competitors are substantially larger and have considerably greater

financial, technical and marketing resources.

Our competitors may have a lower cost of funds and many have access to funding sources not

available to us.

In addition, certain of our competitors may have higher risk tolerances or different risk assessments, which could allow

them to consider a wider variety of investments and establish more relationships and build their respective market shares.

many of our competitors are not subject to the regulatory restrictions imposed by the 1940 Act imposes on BDCs.

assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results

of operations.

In addition, because of this competition, we may not be able to take advantage of attractive investment opportunities and

may not be able to identify and make investments that satisfy our investment objectives or meet our investment goals.

principal executive offices are located at 700 Louisiana St., 48 th Floor, Houston, Texas

Should we remain a BDC and not transform into an operating company or a permanent capital vehicle, we believe our office facilities

are suitable and adequate for our operations as currently conducted and contemplated.

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Our principal

executive offices are located at 700 Louisiana St., 48 th Floor, Houston, Texas 77002.

Should we remain a BDC and not transform

into an operating company or a permanent capital vehicle, we believe our office facilities are suitable and adequate for our operations

as currently conducted and contemplated.

Business Development Company Requirements

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assets relevant to our business are the following:

Securities purchased in transactions not involving any public offering from an issuer that is an eligible portfolio company.

An eligible portfolio company is any issuer that (a) is organized and has its principal place of business in the United States, (b) is not an investment company other than a small business investment company wholly-owned by the BDC, and (c) either (i) (A) does not have any class of securities with respect to which a broker or dealer may extend margin credit, (B) is controlled by the BDC either singly or as part of a group and an affiliated person of the BDC is a member of the issuer’s board of directors, or (C) has total assets of not more than $4 million and capital and surplus of at least $2 million, or (ii) does not have any class of securities listed on a national securities exchange, unless the total market capitalization of such issuer does not exceed $250 million.

Qualifying assets may also include follow-on investments in a company that was a particular type of eligible portfolio company at the time of the BDC’s initial investment, but subsequently did not meet the definition;

Securities received in exchange for or distributed with respect to securities described above, or pursuant to the exercise of options, warrants or rights relating to such securities;

Cash, cash items, government securities, or high quality debt securities maturing in one year or less from the time of investment.

· Securities purchased in transactions not involving any public offering

from an issuer that is an eligible portfolio company.

An eligible portfolio company is any issuer that (a) is organized and has its principal

place of business in the United States, (b) is not an investment company other than a small business investment company wholly-owned by

the BDC, and (c) either (i) (A) does not have any class of securities with respect to which a broker or dealer may extend margin credit,

(B) is controlled by the BDC either singly or as part of a group and an affiliated person of the BDC is a member of the issuer’s

board of directors, or (C) has total assets of not more than $4 million and capital and surplus of at least $2 million, or (ii) does not

have any class of securities listed on a national securities exchange, unless the total market capitalization of such issuer does not

exceed $250 million.

Qualifying assets may also include follow-on

investments in a company that was a particular type of eligible portfolio company at the time of the BDC’s initial investment, but

subsequently did not meet the definition;

· Securities received in exchange for or distributed with respect to securities

described above, or pursuant to the exercise of options, warrants or rights relating to such securities;

· Cash, cash items, government securities, or high quality debt securities

maturing in one year or less from the time of investment.

To include certain

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We offer to provide significant managerial assistance to each of our portfolio companies.

We may not change

the nature of our business so as to cease to be, or withdraw our election as, a BDC unless authorized by vote of the holders of the majority

of our outstanding voting securities, as defined in the 1940 Act.

As noted above, we have previously received this authorization from

our shareholders to withdraw our BDC election and, although this authorization has expired, we expect to receive an additional authorization

change the nature of our business so as to cease to be, or withdraw our election as, a BDC unless authorized by vote of the holders of

the majority of our outstanding voting securities, as defined in the 1940 Act.

As noted above, we have previously received this authorization

from our shareholders to withdraw our BDC election and, although this authorization has expired, we expect to receive an additional authorization

by our stockholders in the future.

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for purposes of the BDC provisions of the 1940 Act.

are permitted by the 1940 Act, under specified conditions, to issue multiple classes of senior debt and a single class of preferred stock

senior to the common stock if our asset coverage, as defined in the 1940 Act, is at least 150% after the issuance of the debt or the senior

stockholders’

In addition, provisions must be made to prohibit any distribution to common stockholders or the repurchase

of any shares unless the asset coverage ratio is at least 150% at the time of the distribution or repurchase.

Fund Share Sales

Below Net Asset Value .

We are permitted by the 1940 Act, under specified conditions, to issue multiple classes of senior debt and a single class of preferred

stock senior to the common stock if our asset coverage, as defined in the 1940 Act, is at least 150% after the issuance of the debt or

the senior stockholders’

In addition, provisions must be made to prohibit any distribution to common stockholders or

the repurchase of any shares unless the asset coverage ratio is at least 150% at the time of the distribution or repurchase.

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Sales Below Net Asset Value .

To the extent we remain a BDC, we generally may sell our common stock at a price that is below the prevailing

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discount or to increase the net asset value of our shares.

Affiliated Transactions .

Many of the transactions involving the Fund and its affiliates (as well as affiliates of such affiliates) require the prior approval of

a majority of the independent directors and a majority of the independent directors having no financial interest in the transactions.

Transactions .

Many of the transactions involving the Fund and its affiliates (as well as affiliates of such affiliates) require the

prior approval of a majority of the independent directors and a majority of the independent directors having no financial interest in

the transactions.

However, certain transactions involving closely affiliated persons of the Fund require the prior approval of the SEC.

Regulated Investment Company Tax Status

As a BDC, we have

historically operated to qualify as a RIC under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"),

we have historically operated to qualify as a RIC under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"),

although RIC qualification is not a prerequisite to qualifying as a BDC.

If we qualify as a RIC and annually distribute to our stockholders

in a timely manner at least 90% of our investment company taxable income, we will not be subject to federal income tax on the portion

of our taxable income and capital gains we distribute to our stockholders.

Taxable income generally differs from net income as defined

by accounting principles generally accepted in the United States due to temporary and permanent timing differences in the recognition

of income and expenses, returns of capital and net unrealized appreciation or depreciation.

During the fourth quarter of 2024, we elected to not qualify

as a RIC, although we may seek to requalify at a later date.

Because we do not presently qualify as a RIC, in the event that we generate

operating income or net investment income, we will be subject to regular corporate rates of taxation.

If we requalify

as a RIC and annually distribute to our stockholders in a timely manner at least 90% of our investment company taxable income, we will

not be subject to federal income tax on the portion of our taxable income and capital gains we distribute to our stockholders.

income generally differs from net income as defined by accounting principles generally accepted in the United States due to temporary

and permanent timing differences in the recognition of income and expenses, returns of capital and net unrealized appreciation or depreciation.

While we are not

required to qualify as a RIC to maintain our BDC status, we must continue to qualify as an investment company to maintain our RIC status,

among other requirements.

To maintain our RIC status, we must (i) continue to qualify as an investment company;

(ii) distribute to our

stockholders in a timely manner at least 90% of our investment company taxable income, as defined by the Code;

(iii) derive in each taxable

year at least 90% of our gross investment company income from dividends, interest, payments with respect to securities loans, gains from

the sale of stock or other securities or other income derived with respect to our business of investing in such stock or securities as

defined by the Code;

required to qualify as a RIC to maintain our BDC status, we must continue to qualify as an investment company to obtain RIC status under

the Code, among other requirements.

To obtain (or maintain, as the case may be) RIC status, we must (i) continue to qualify as an investment

(ii) distribute to our stockholders in a timely manner at least 90% of our investment company taxable income, as defined by the

(iii) derive in each taxable year at least 90% of our gross investment company income from dividends, interest, payments with respect

to securities loans, gains from the sale of stock or other securities or other income derived with respect to our business of investing

in such stock or securities as defined by the Code;

and (iv) meet investment diversification requirements.

The diversification requirements generally require us, at

the end of each quarter of the taxable year, to have (a) at least 50% of the value of our assets consist of cash, cash items, government

securities, securities of other RICs and other securities if such other securities of any one issuer do not represent more than 5% of

our assets and 10% of the outstanding voting securities of the issuer and (b) no more than 25% of the value of our assets invested in

the securities of one issuer (other than U.S.

government securities and securities of other RICs), or of two or more issuers that are

controlled by us and are engaged in the same or similar or related trades or businesses.

In addition, should

we choose not to distribute at least 98.2% of our net income consisting of capital gains for each one-year period ending on October 31,

The diversification requirements

generally require us, at the end of each quarter of the taxable year, to have (a) at least 50% of the value of our assets consist of cash,

cash items, government securities, securities of other RICs and other securities if such other securities of any one issuer do not represent

more than 5% of our assets and 10% of the outstanding voting securities of the issuer and (b) no more than 25% of the value of our assets

invested in the securities of one issuer (other than U.S.

government securities and securities of other RICs), or of two or more issuers

that are controlled by us and are engaged in the same or similar or related trades or businesses.

should we choose not to distribute at least 98.2% of our net income consisting of capital gains for each one-year period ending on October

31, we will be subject to a 4.0% nondeductible Federal exercise tax.

For the year ended December 31, 2021, we incurred a capital gain related

to the settlement of the escrow receivable in connection with the sale of our interest in PalletOne, Inc.

that was not fully offset by

our capital loss carryforward.

We chose not to distribute this small amount for the current year and pay the associated tax.

ended December 31, 2021, we accrued a $38,000 in corporate level income and excise tax in lieu of effecting a distribution of the net

capital gain.

This tax was paid in March 2022.

If we fail to satisfy

the 90% distribution requirement or otherwise fail to qualify as a RIC in any taxable year, we will be subject to tax in such year on

the 90% distribution requirement or otherwise fail to requalify as a RIC in any taxable year, we will be subject to tax in such year on

all of our taxable income, regardless of whether we make any distribution to our stockholders.

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have been necessary in recent years.

We act as the custodian

of our securities to the extent permitted under the 1940 Act and are subject to the restrictions imposed on self- custodians by the 1940

Act and the rules and regulations thereunder.

We have also entered into an agreement with Amegy Bank with respect to the safekeeping of

our securities.

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We act as the

custodian of our securities to the extent permitted under the 1940 Act and are subject to the restrictions imposed on self- custodians

by the 1940 Act and the rules and regulations thereunder.

We have also entered into an agreement with Amegy Bank with respect to the safekeeping

of our securities.

The principal business office of Amegy Bank is 1717 West Loop South, Houston, Texas 77027.

Transfer and Disbursing Agent

We employ Equiniti

Group as our transfer agent to record transfers of our shares, maintain proxy records and to process distributions.

The principal business

office of our transfer agent is 6201 15th Avenue, 2nd Floor, Brooklyn, NY 11219.

Equiniti Group as our transfer agent to record transfers of our shares, maintain proxy records and to process distributions.

The principal

business office of our transfer agent is 6201 15th Avenue, 2nd Floor, Brooklyn, NY 11219.

Certifications

In June 2023, pursuant

to Section 303A.12(a) of the NYSE Listed Company Manual, we submitted to the NYSE an unqualified certification of our Chief Executive

In addition, certifications by our Chief Executive Officer and Chief Financial Officer have been filed as exhibits to this annual

report on Form 10-K as required by the Securities Exchange Act of 1934, as amended, and the Sarbanes-Oxley Act of 2002.

Forward-Looking

2024, pursuant to Section 303A.12(a) of the NYSE Listed Company Manual, we submitted to the NYSE an unqualified certification of our Chief

Executive Officer.

In addition, certifications by our Chief Executive Officer and Chief Financial Officer have been filed as exhibits

to this annual report on Form 10-K as required by the Securities Exchange Act of 1934, as amended, and the Sarbanes-Oxley Act of 2002.

Forward-Looking Statements

All statements

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results, or the ability to generate sales, income, or cash flow are forward-looking statements.

Among the factors

that could cause actual results to differ materially are the following:

(i) changes in the economic conditions in which we operate, including

changes related to the evolving impact of the coronavirus, which might negatively impacting our financial resources;

(ii) the substantially

greater resources of certain of our competitors than the Fund, potentially reducing the number of suitable investment opportunities offered

or reducing the yield necessary to consummate the investment;

(iii) the uncertainty regarding the value of our privately held securities

that require a good faith estimate of fair value for which a change in estimate could affect the Fund’s net asset value;

illiquidity of our investments in securities of privately held companies which could affect our ability to realize a gain;

(v) the default

of one or more of our portfolio companies on their loans or the failure of such companies to provide any returns on our investments which

could affect the Fund’s operating results;

factors that could cause actual results to differ materially are the following:

(i) changes in the economic conditions in which we operate,

including changes related to the evolving impact of the coronavirus, which might negatively impacting our financial resources;

substantially greater resources of certain of our competitors than the Fund, potentially reducing the number of suitable investment opportunities

offered or reducing the yield necessary to consummate the investment;

(iii) the uncertainty regarding the value of our privately held

securities that require a good faith estimate of fair value for which a change in estimate could affect the Fund’s net asset value;

(iv) the illiquidity of our investments in securities of privately held companies which could affect our ability to realize a gain;

the default of one or more of our portfolio companies on their loans or the failure of such companies to provide any returns on our investments

which could affect the Fund’s operating results;

(vi) our dependence on external financing to grow our business;

(vii) our ability to

retain key management personnel;

(vii) our ability

to retain key management personnel;

(viii) an economic downturn or recession that could impair our portfolio companies and therefore harm

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Reform Act of 1995 and, as such, speak only as of the date made.

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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

Item 1. Business