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Item 1A. Risk Factors

2025-04-10 compared with 2024-04-02 · 379 added, 358 removed, 283 unchanged (72% of the section changed)

An investment in

our securities involves certain risks relating to our structure and investment objectives.

An investment

in our securities involves certain risks relating to our structure and investment objectives.

The risks and uncertainties described below

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types of companies involve a number of significant risks, including the following:

They typically have shorter operating histories, narrower product lines and smaller market shares than public companies, which tend to render them more vulnerable to competitors’

actions and market conditions as well as general economic downturns;

They may have no earnings or experienced losses or may have limited financial resources and may be unable to meet their obligations under their securities, which may be accompanied by a deterioration in the value of their equity securities or any collateral or guarantees provided with respect to their debt;

They are more likely to depend on the management talents and efforts of a small group of persons and, as a result, the death, disability, resignation or termination of one or more of those persons could have a material adverse effect on their business and prospects and, in turn, on our investment;

· They typically have shorter operating histories, narrower product lines

and smaller market shares than public companies, which tend to render them more vulnerable to competitors’

actions and market conditions

as well as general economic downturns;

· They may have no earnings or experienced losses or may have limited financial

resources and may be unable to meet their obligations under their securities, which may be accompanied by a deterioration in the value

of their equity securities or any collateral or guarantees provided with respect to their debt;

· They are more likely to depend on the management talents and efforts

of a small group of persons and, as a result, the death, disability, resignation or termination of one or more of those persons could

have a material adverse effect on their business and prospects and, in turn, on our investment;

· They may have difficulty accessing the capital markets to meet future capital needs;

They generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position;

Generally little public information exists regarding these companies, and investors in these companies generally must rely on the ability of the equity sponsor to obtain adequate information for the purposes of evaluating potential returns and making a fully informed investment decision.

· They generally have less predictable operating results, may from time

to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence

and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position;

· Generally little public information exists regarding these companies,

and investors in these companies generally must rely on the ability of the equity sponsor to obtain adequate information for the purposes

of evaluating potential returns and making a fully informed investment decision.

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There is uncertainty regarding the value of our

privately held securities.

Our net asset value

is based on the value we assign to our portfolio investments.

Our net asset

value is based on the value we assign to our portfolio investments.

For investments that are not listed on a securities exchange or quotation

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from values based on a ready market for these securities.

We depend upon Management for

our future investment success.

We depend upon the

diligence and skill of our Management to select, structure, close and monitor our investments.

Management is responsible for identifying,

structuring, evaluating, monitoring, and disposing of our investments, and the services they collectively provide significantly impact

our results of operations.

Our future success will depend to a significant extent on the continued service and coordination of Management.

Our success will depend on our ability to retain our existing Management and to recruit additional other highly qualified individuals.

If we are unable to integrate new investment and management personnel, we may be unable to achieve our desired investment results.

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.

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.

Also, we expect that our investment strategy will continue to require

Management to investigate and monitor investments that are much more broadly dispersed geographically.

In addition, Management is required

to provide valuations for investments in a broader range of securities, including debt securities, which may require expertise beyond

that previously required.

We cannot assure investors that the overall risk of their investment in the Fund will be reduced as a result

of our investment strategy.

If we cannot achieve our investment objective successfully, the value of your investment in our common stock

could decline substantially.

We may not realize gains from our

equity investments.

We frequently invest

in the equity securities of our portfolio companies.

Also, when we make a loan, we sometimes receive warrants to acquire stock issued

by the borrower.

We depend upon Management for our future investment

upon the diligence and skill of our Management to select, structure, close and monitor our investments.

Management is responsible for

identifying, structuring, evaluating, monitoring, and disposing of our investments, and the services they collectively provide significantly

impact our results of operations.

Our future success will depend to a significant extent on the continued service and coordination of

Our success will depend on our ability to retain our existing Management and to recruit additional other highly qualified

If we are unable to integrate new investment and management personnel, we may be unable to achieve our desired investment

Management may not be able to implement our

investment objective successfully.

is taking a more opportunistic approach to our portfolio investment strategy, shifting our investment emphasis to 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.

Also, we expect that our investment strategy will continue

to require Management to investigate and monitor investments that are much more broadly dispersed geographically.

In addition, Management

is required to provide valuations for investments in a broader range of securities, including debt securities, which may require expertise

beyond that previously required.

We cannot assure investors that the overall risk of their investment in the Fund will be reduced as a

result of our investment strategy.

If we cannot achieve our investment objective successfully, the value of your investment in our common

stock could decline substantially.

We may not realize gains from our equity

We frequently

invest in the equity securities of our portfolio companies.

Also, when we make a loan, we sometimes receive warrants to acquire stock

issued by the borrower.

Ultimately, our goal is to sell these equity interests and realize gains.

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.

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.

in Morgan E&P and 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.

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.

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.

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holdings in Morgan E&P 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”)

and Equus Energy, LLC (“Equus Energy”), our two remaining portfolio investments, 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.

In addition, the pricing of these commodities is highly dependent

upon technological improvements in energy production and development, energy efficiency, and seasonal weather patterns.

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.

Neither Morgan nor Equus Energy employs 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 and Equus

Energy, as well as the economic attractiveness of future capital expenditures for new drilling and recompletions, may be materially adversely

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.

In addition, the pricing

of these commodities is highly dependent upon technological improvements in energy production and development, energy efficiency, and

seasonal weather patterns.

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.

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

After our initial

investment in a portfolio company, we may be called upon from time to time to provide additional funds to such company, or may have the

opportunity to increase our investment in that company through the exercise of a warrant to purchase common stock or through follow-on

investments in the debt or equity of that company.

We cannot assure you that we will make, or have sufficient funds to make, any such

follow-on investments.

Any decision by us not to make a follow-on investment or any inability on our part to make such an investment may

have a negative impact on a portfolio company in need of investment and may result in a missed opportunity for us to increase our participation

in a successful operation.

A decision not to make a follow-on investment may also require us to subordinate our debt interest to a new

lender or dilute our equity interest in, or reduce the expected yield on, our investment.

We have invested in a limited number

of portfolio companies.

The Fund is 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.

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.

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

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

initial investment in a portfolio company, we may be called upon from time to time to provide additional funds to such company, or may

have the opportunity to increase our investment in that company through the exercise of a warrant to purchase common stock or through

follow-on investments in the debt or equity of that company.

We cannot assure you that we will make, or have sufficient funds to make,

any such follow-on investments.

Any decision by us not to make a follow-on investment or any inability on our part to make such an investment

may have a negative impact on a portfolio company in need of investment and may result in a missed opportunity for us to increase our

participation in a successful operation.

A decision not to make a follow-on investment may also require us to subordinate our debt interest

to a new lender or dilute our equity interest in, or reduce the expected yield on, our investment.

We have invested in a limited number of portfolio

is 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.

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.

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.

A consequence of

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company holding a greater number of investments.

liquidity of our privately held securities may adversely affect our business.

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The lack of liquidity of our privately held securities

may adversely affect our business.

Our portfolio investments

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if the need arises.

In situations

where we hold junior priority liens, our ability to control decisions with respect to our portfolio companies may be limited by lenders

holding superior liens.

In a default scenario, the value of collateral may be insufficient to repay us after the senior priority lenders

are paid in full.

We may make certain

loans to portfolio companies that are secured by a junior priority security interest in the same collateral pledged to secure debt owed

to lenders with liens senior to ours.

Often, the senior lender has procured covenants from the portfolio company prohibiting the incurrence

of additional secured debt without the senior lender's consent.

As a condition of permitting the portfolio company to incur junior secured

indebtedness, the senior lender will require that we, as junior lender, enter into an intercreditor agreement that, among other things,

will establish the senior lender's right to control the disposition of any collateral in the event of an insolvency proceeding or other

default situation.

In addition, intercreditor agreements generally will expressly subordinate junior liens to senior liens as well as

the repayment of junior debt to senior debt.

Because of the control

we may cede to senior lenders under intercreditor agreements, we may be unable to control the manner or timing of collateral disposition.

In addition, the value of collateral securing our debt investment will ultimately depend on market and economic conditions at the time

of disposal, the availability of buyers and other factors.

Therefore, we cannot assure you that the proceeds, if any, from the sale or

sales of all of the collateral would be sufficient to satisfy the loan obligations secured by our liens.

There is also a risk that such

collateral securing our investments will be difficult to sell in a timely manner or to appraise.

If the proceeds of the collateral are

insufficient to repay our loans, then we will have an unsecured claim to the extent of the deficiency against any of the company's remaining

assets, which claim will likely be shared with many other unsecured creditors.

or minority equity investor in a portfolio company, we may have little direct influence over the entity.

situations where we hold junior priority liens, our ability to control decisions with respect to our portfolio companies may be limited

by lenders holding superior liens.

In a default scenario, the value of collateral may be insufficient to repay us after the senior priority

lenders are paid in full.

certain loans to portfolio companies that are secured by a junior priority security interest in the same collateral pledged to secure

debt owed to lenders with liens senior to ours.

Often, the senior lender has procured covenants from the portfolio company prohibiting

the incurrence of additional secured debt without the senior lender's consent.

As a condition of permitting the portfolio company to incur

junior secured indebtedness, the senior lender will require that we, as junior lender, enter into an intercreditor agreement that, among

other things, will establish the senior lender's right to control the disposition of any collateral in the event of an insolvency proceeding

or other default situation.

In addition, intercreditor agreements generally will expressly subordinate junior liens to senior liens as

well as the repayment of junior debt to senior debt.

the control we may cede to senior lenders under intercreditor agreements, we may be unable to control the manner or timing of collateral

In addition, the value of collateral securing our debt investment will ultimately depend on market and economic conditions

at the time of disposal, the availability of buyers and other factors.

Therefore, we cannot assure you that the proceeds, if any, from

the sale or sales of all of the collateral would be sufficient to satisfy the loan obligations secured by our liens.

There is also a risk

that such collateral securing our investments will be difficult to sell in a timely manner or to appraise.

If the proceeds of the collateral

are insufficient to repay our loans, then we will have an unsecured claim to the extent of the deficiency against any of the company's

remaining assets, which claim will likely be shared with many other unsecured creditors.

a debt or minority equity investor in a portfolio company, we may have little direct influence over the entity.

The stockholders and management

of the portfolio company may make decisions that could decrease the value of our portfolio holdings.

We may make both

debt and minority equity investments.

Should a portfolio company make business decisions with which we disagree, of the stockholders and

management of that company take risks or otherwise act in ways that do not serve our interests, the value of our portfolio holdings could

decrease and have an adverse effect on our financial position and results of operations.

We may choose

to waive or defer enforcement of covenants in the debt securities held in our portfolio, which may cause us to lose all or part of our

investment in these companies.

both debt and minority equity investments.

Should a portfolio company make business decisions with which we disagree, of the stockholders

and management of that company take risks or otherwise act in ways that do not serve our interests, the value of our portfolio holdings

could decrease and have an adverse effect on our financial position and results of operations.

may choose to waive or defer enforcement of covenants in the debt securities held in our portfolio, which may cause us to lose all or

part of our investment in these companies.

We may structure

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and financial condition and cause the loss of all or part of your investment.

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We expect to have limited public information regarding

the companies in which we may invest.

Our portfolio consists

entirely of securities issued by privately-held companies.

There is generally little or no publicly available information about such companies,

and we must rely on the diligence of Management to obtain the information necessary for our decision to invest in them and in order to

monitor them effectively.

We cannot assure you that such diligence efforts will uncover all material information about such privately

held businesses necessary to make fully informed investment decisions.

Our prospective portfolio companies may be highly leveraged.

Investments in leveraged

buyouts and in highly leveraged companies involve a high degree of business and financial risk and can result in substantial losses.

leveraged company’s income and net assets will tend to increase or decrease at a greater rate than if borrowed money were not used.

The use of leverage by portfolio companies also magnifies the increase or decrease in the value of our investment as compared to the overall

change in the enterprise value of a portfolio company.

Some of our portfolio

companies have incurred substantial debt in relation to their equity capital.

Such indebtedness generally has a term that will require

that the balance of the loan be refinanced when it matures.

If a portfolio company cannot generate adequate cash flow to meet the principal

and interest payments on its debt or is not successful in refinancing the debt upon its maturity, our investment could be reduced or eliminated

through foreclosure on the portfolio company’s assets or by the portfolio company’s reorganization or bankruptcy.

Our portfolio

consists entirely of securities issued by privately-held companies.

There is generally little or no publicly available information about

such companies, and we must rely on the diligence of Management to obtain the information necessary for our decision to invest in them

and in order to monitor them effectively.

We cannot assure you that such diligence efforts will uncover all material information about

such privately held businesses necessary to make fully informed investment decisions.

Our prospective portfolio companies may be

highly leveraged.

in leveraged buyouts and in highly leveraged companies involve a high degree of business and financial risk and can result in substantial

A leveraged company’s income and net assets will tend to increase or decrease at a greater rate than if borrowed money were

The use of leverage by portfolio companies also magnifies the increase or decrease in the value of our investment as compared

to the overall change in the enterprise value of a portfolio company.

portfolio companies have incurred substantial debt in relation to their equity capital.

Such indebtedness generally has a term that will

require that the balance of the loan be refinanced when it matures.

If a portfolio company cannot generate adequate cash flow to meet

the principal and interest payments on its debt or is not successful in refinancing the debt upon its maturity, our investment could be

reduced or eliminated through foreclosure on the portfolio company’s assets or by the portfolio company’s reorganization or

A substantial portion

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to service their floating rate debt and on their profits.

Leverage may impair

the ability of our portfolio companies to finance their future operations and capital needs.

As a result, the ability of our portfolio

companies to respond to changing business and economic conditions and to business opportunities may be limited.

may impair the ability of our portfolio companies to finance their future operations and capital needs.

As a result, the ability of our

portfolio companies to respond to changing business and economic conditions and to business opportunities may be limited.

Our business depends on external financing.

Our business requires

a substantial amount of cash to operate.

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%.

That is, we may borrow an amount equal to double the fair value of our total

net assets (including investments made with borrowed funds).

The amount and nature of any such borrowings depend upon a number of factors

over which we have no control, including general economic conditions, conditions in the financial markets and the impact of the financing

on the tax treatment of our stockholders.

The use of leverage, even on a short-term basis, could have the effect of magnifying increases

or decreases in our net asset value.

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 are permitted under the 1940 Act to borrow if, immediately after

the borrowing, we have an asset coverage ratio of at least 150%.

That is, we may borrow an amount equal to double the fair value of our

total net assets (including investments made with borrowed funds).

The amount and nature of any such borrowings depend upon a number of

factors over which we have no control, including general economic conditions, conditions in the financial markets and the impact of the

financing on the tax treatment of our stockholders.

The use of leverage, even on a short-term basis, could have the effect of magnifying

increases or decreases in our net asset value.

While the “spread”

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value for our investments or recoup all of our capital if we needed to liquidate our portfolio investments.

Many financial institutions

are unwilling to lend against a portfolio of illiquid, private securities.

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 pass- through

tax status as a RIC.

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.

Many financial

institutions are unwilling to lend against a portfolio of illiquid, private securities.

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.

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The costs of borrowing

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

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

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

net investment losses in the past five years.

We have had net investment

losses in the past five years, with a net investment loss of $4.0 million for the year ended December 31, 2023.

We cannot assure you that

we will be able to increase our net assets or generate net investment income.

If we fail to increase the Fund’s net assets or generate

net investment income, such failure will likely have a material adverse effect upon the Fund, our results of operation, and our financial

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

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.

See Management’s Discussion and

Analysis of Financial Condition and Results of Operations .

We have had net investment losses in the past five

net investment losses in the past five years, with a net investment loss of $15.6 million for the year ended December 31, 2024.

assure you that we will be able to increase our net assets or generate net investment income.

If we fail to increase the Fund’s

net assets or generate net investment income, such failure will likely have a material adverse effect upon the Fund, our results of operation,

and our financial condition.

You could lose all or a substantial amount of your investment in the Fund as a result.

We do not currently

intend to recommence our managed distribution policy and you might not receive dividends on your shares.

On March 24, 2009,

do not currently intend to recommence our managed distribution policy and you might not receive dividends on your shares.

24, 2009, we announced a suspension of our managed distribution policy and payment of quarterly dividends for an indefinite period.

As originally

implemented, the policy provided for quarterly dividends at an annualized rate equal to 10% of the Fund’s market value per share

as at the end of the preceding calendar year.

originally implemented, the policy provided for quarterly dividends at an annualized rate equal to 10% of the Fund’s market value

per share as at the end of the preceding calendar year.

We subsequently undertook certain changes in our Board and Management.

These changes have

been pursued, in part, with the objective of increasing the number of attractive investment opportunities to us and revising our investment

strategy to include more recurrent cash income producing investments, all of which could ultimately result in the resumption of our managed

distribution policy at some time in the future.

The implementation of these revisions to our investment strategy and the recurrent generation

of cash income from our investments, however, cannot be guaranteed and will not occur if we complete the transformation of Equus into

an operating company.

If we were unable to resume our managed distribution policy and were further unable to profitably sell or otherwise

dispose of our portfolio company investments, you might not receive dividends on your shares.

These changes

have been pursued, in part, with the objective of increasing the number of attractive investment opportunities to us and revising our

investment strategy to include more recurrent cash income producing investments, all of which could ultimately result in the resumption

of our managed distribution policy at some time in the future.

The implementation of these revisions to our investment strategy and the

recurrent generation of cash income from our investments, however, cannot be guaranteed and will not occur if we complete the transformation

of Equus into an operating company.

If we were unable to resume our managed distribution policy and were further unable to profitably

sell or otherwise dispose of our portfolio company investments, you might not receive dividends on your shares.

We operate in a highly competitive market for investment

opportunities.

We compete with a

large number of private equity funds and mezzanine funds, investment banks and other equity and non-equity-based investment funds, investment

entities, foreign investors and individuals and other sources of financing, including traditional financial services companies such as

commercial banks.

with a large number of private equity funds and mezzanine funds, investment banks and other equity and non-equity-based investment funds,

investment entities, foreign investors and individuals and other sources of financing, including traditional financial services companies

such as commercial banks.

In recent years, the number of investment vehicles seeking small capitalization investments has increased dramatically.

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financial condition and results of operations.

An economic downturn could affect our operating results.

An economic downturn

may have a particularly adverse effect upon small and medium-sized companies, which are our primary market for investments.

During periods

of volatile economic conditions, these companies often experience decreased revenues, financial losses, difficulty in obtaining access

to financing and increased funding costs.

During such periods, these companies also may have difficulty expanding their businesses and

operations and may be unable to meet their debt service obligations or other expenses as they become due.

An economic downturn could affect our operating

downturn may have a particularly adverse effect upon small and medium-sized companies, which are our primary market for investments.

periods of volatile economic conditions, these companies often experience decreased revenues, financial losses, difficulty in obtaining

access to financing and increased funding costs.

During such periods, these companies also may have difficulty expanding their businesses

and operations and may be unable to meet their debt service obligations or other expenses as they become due.

Any of the foregoing developments

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Any of these events could have a material adverse effect on our business, financial condition and results of operations.

We may experience

fluctuations in our quarterly results.

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We may experience fluctuations in our quarterly

We may experience

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As a result of these factors, you should not rely on our results for any period as being indicative of performance in future periods.

The due diligence process that

we undertake in connection with our investments may not reveal all facts that may be relevant in connection with an investment.

The due diligence process

that we undertake in connection with our investments may not reveal all facts that may be relevant in connection with an investment.

Before making our

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The use of leverage may adversely affect our performance.

We may utilize leverage

for the Fund or its subsidiaries by borrowing or issuing preferred stock or short-term debt securities.

Borrowings and other capital generated

from leverage will result in lenders and other creditors with fixed dollar claims on our assets that are superior to the claims of our

common shareholders.

If the value of our assets increases, then leveraging would cause the net asset value attributable to our common

stock to increase more sharply than it would have had we not leveraged.

Conversely, if the value of our assets decreases, leveraging would

cause net asset value to decline more sharply than it otherwise would have had we not leveraged.

Similarly, any increase in our income

in excess of interest payable on the borrowed funds would cause our net income to increase more than it would without the leverage, while

any decrease in our income would cause net income to decline more sharply than it would have had we not borrowed.

Leverage is generally

considered a speculative investment technique.

The use of leverage may cause us to sell our portfolio

interests prematurely.

If we remain a BDC

and borrow monies for our additional portfolio investments, we may secure loans or otherwise borrow funds from conventional banks, other

lending institutions, or private parties, which parties may include the sellers of the investment interests being acquired.

Equus defaults under any of these borrowing arrangements, our business could be adversely affected as we may be forced to sell a portion

of our investments quickly and prematurely at what may be disadvantageous prices to us in order to meet our outstanding payment obligations,

the result of which would have a material adverse effect on our business, financial condition, results of operations and cash flows.

leverage will increase our exposure to changes in market rates of interest.

We may utilize

leverage for the Fund or its subsidiaries by borrowing or issuing preferred stock or short-term debt securities.

Borrowings and other

capital generated from leverage will result in lenders and other creditors with fixed dollar claims on our assets that are superior to

the claims of our common shareholders.

If the value of our assets increases, then leveraging would cause the net asset value attributable

to our common stock to increase more sharply than it would have had we not leveraged.

Conversely, if the value of our assets decreases,

leveraging would cause net asset value to decline more sharply than it otherwise would have had we not leveraged.

Similarly, any increase

in our income in excess of interest payable on the borrowed funds would cause our net income to increase more than it would without the

leverage, while any decrease in our income would cause net income to decline more sharply than it would have had we not borrowed.

is generally considered a speculative investment technique.

The use of leverage may cause us to sell our

portfolio interests prematurely.

If we remain a

BDC and borrow monies for our additional portfolio investments, we may secure loans or otherwise borrow funds from conventional banks,

other lending institutions, or private parties, which parties may include the sellers of the investment interests being acquired.

event Equus defaults under any of these borrowing arrangements, our business could be adversely affected as we may be forced to sell a

portion of our investments quickly and prematurely at what may be disadvantageous prices to us in order to meet our outstanding payment

obligations, the result of which would have a material adverse effect on our business, financial condition, results of operations and

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The use of leverage will increase our exposure to

changes in market rates of interest.

To date, we have

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Risks Related to Our Business and Structure

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.

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

Our ability to invest in private companies

may be limited in certain circumstances.

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.

our management is currently evaluating potential transactions that would result in the transformation of Equus into an operating company

12 unchanged sentences

status as a BDC could reduce our operating flexibility.

If we do not maintain

the Fund’s status as a BDC and we do not complete the transformation of Equus into an operating company, we might be regulated as

a closed-end investment company under the 1940 Act, which would subject us to substantially more regulatory restrictions under the 1940

not maintain the Fund’s status as a BDC and we do not complete the transformation of Equus into an operating company, we might be

regulated as a closed-end investment company under the 1940 Act, which would subject us to substantially more regulatory restrictions

under the 1940 Act.

This could impose tighter limitations on Equus in terms of the use of leverage and transactions with affiliated entities.

Such developments

could correspondingly decrease our operating flexibility.

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”

Such developments could correspondingly decrease our operating flexibility.

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

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

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.

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.

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

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.

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.

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.

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.

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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.

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 operate 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 qualify as a RIC.

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%.

This requirement limits the amount that we

Because we will continue to need capital to grow our investment portfolio, this limitation may prevent us from incurring debt

and require us to issue additional equity at a time when it may be disadvantageous to do so.

We cannot assure you that debt and equity

financing will be available to us on favorable terms, or at all, and debt financings may be restricted by the terms of any of our outstanding

In addition, as a BDC, we are generally not permitted to issue equity securities priced below net asset value without stockholder

If additional funds are not available to us, we could be forced to curtail or cease new lending and investment activities, and

our net asset value could decline.

Directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval.

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).

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%.

requirement limits the amount that we may borrow.

Because we will continue to need capital to grow our investment portfolio, this limitation

may prevent us from incurring debt and require us to issue additional equity at a time when it may be disadvantageous to do so.

assure you that debt and equity financing will be available to us on favorable terms, or at all, and debt financings may be restricted

by the terms of any of our outstanding borrowings.

In addition, as a BDC, we are generally not permitted to issue equity securities priced

below net asset value without stockholder approval.

If additional funds are not available to us, we could be forced to curtail or cease

new lending and investment activities, and our net asset value could decline.

Board of Directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval.

Our Board of Directors

13 unchanged sentences

our ability to make distributions.

Risks Related to Our Operation

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.

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.

If we maintain our status as a BDC and do not complete a transformation into an operating company or a permanent capital

vehicle, we will continue to be subject to the 1940 Act.

Risks Related to Our Operation as a BDC

Our ability to enter into transactions with

our affiliates is restricted.

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.

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.

If we maintain our status as a BDC and do not complete a transformation into an operating company or a permanent

capital vehicle, we will continue to be subject to the 1940 Act.

As an investment company, we are prohibited under the 1940 Act from participating

12 unchanged sentences

or their affiliates.

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governing our operation as a BDC affect our ability to, and the way in which we, raise additional capital.

17 unchanged sentences

at a time when such sales may be disadvantageous.

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 .

To the extent we

remain a BDC, changes in the laws or regulations or the interpretations of the laws and regulations that govern BDCs, RICs or non-depository

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 .

To the extent

we remain a BDC, changes in the laws or regulations or the interpretations of the laws and regulations that govern BDCs, RICs or non-depository

commercial lenders, could significantly affect our operations and our cost of doing business.

9 unchanged sentences

could have a material adverse effect upon our business, results of operations or financial condition.

Risks Related

to Our Plan to Transform Equus Into an Operating Company

In our efforts to pursue the

transformation of Equus into an operating company, we are exploring and evaluating strategic alternatives for the Fund and we cannot assure

you that we will be successful in identifying a strategic alternative, that such strategic alternative will yield additional value for

our stockholders or that the process will not have an adverse impact on our business.

In prior years, we

announced our plan to effect the restructuring of the Fund as an operating company no longer subject to the 1940 Act, which transaction

Risks Related to Our Plan to Transform Equus Into

an Operating Company

In our efforts to

pursue the transformation of Equus into an operating company, we are exploring and evaluating strategic alternatives for the Fund and

we cannot assure you that we will be successful in identifying a strategic alternative, that such strategic alternative will yield additional

value for our stockholders or that the process will not have an adverse impact on our business.

In prior years,

we announced our plan to effect the restructuring of the Fund as an operating company no longer subject to the 1940 Act, which transaction

could take the form of a sale of Equus, a restructuring, a recapitalization, merger, or other business combination, or the conversion

20 unchanged sentences

of strategic alternatives.

If we are unable

to effectively manage the strategic review process, our business, financial condition, liquidity and results of operations could be adversely

If we reorganize

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

If we are unable to effectively manage

the strategic review process, our business, financial condition, liquidity and results of operations could be adversely affected.

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If we reorganize as an operating company, we will

likely not seek to req ualify 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.

We have elected to

be classified as a BDC under the 1940 Act.

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.

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

We have elected

to be classified as a BDC under the 1940 Act.

However, if we effect a reorganization of the Fund into an operating company or a permanent

9 unchanged sentences

which we presently operate, the result of which could have a material adverse effect on our results and financial condition.

If we reorganize

as an operating company or a permanent capital vehicle, we may not be able to utilize our capital losses.

As noted above, we

may reorganize Equus as an operating company or a permanent capital vehicle.

If we reorganize as an operating company or a permanent capital

vehicle, we may lose our ability to offset future income against our cumulative capital losses.

If we reorganized as an operating company

or a permanent capital vehicle and were unable to offset future income against these capital losses, the result could have a material

we reorganize as an operating company or a permanent capital vehicle, we may not be able to utilize our capital losses.

As noted above,

we may reorganize Equus as an operating company or a permanent capital vehicle.

If we reorganize as an operating company or a permanent

capital vehicle, we may lose our ability to offset future income against our cumulative capital losses.

If we reorganized as an operating

company or a permanent capital vehicle and were unable to offset future income against these capital losses, the result could have a material

adverse effect on our future operating results and our financial condition.

If we reorganize as an operating

company or a permanent capital vehicle, our stockholders will no longer have certain protections under the 1940 Act.

If we withdraw the

Fund’s election to be treated as a BDC, Equus will no longer be subject to regulation under the 1940 Act, which is designed to protect

the interests of investors in investment companies.

Specifically, our stockholders would no longer have the following protections of the

If we reorganize

as an operating company or a permanent capital vehicle, our stockholders will no longer have certain protections under the 1940 Act.

If we withdraw

the Fund’s election to be treated as a BDC, Equus will no longer be subject to regulation under the 1940 Act, which is designed

to protect the interests of investors in investment companies.

Specifically, our stockholders would no longer have the following protections

of the 1940 Act:

· Leverage Limits .

We would no longer be subject to the requirement in Section 61 of the 1940 Act that we maintain a ratio of assets to senior securities (such as senior debt or preferred stock) of at least 150% and we would not be limited by statute or regulation to the amount of leverage we could incur.

We would no longer be subject to the requirement

in Section 61 of the 1940 Act that we maintain a ratio of assets to senior securities (such as senior debt or preferred stock) of at least

150% and we would not be limited by statute or regulation to the amount of leverage we could incur.

· Range of Investments .

We would no longer be prohibited from investing in certain types of companies, such as brokerage firms, insurance, companies, and investment companies.

We would no longer be prohibited from investing

in certain types of companies, such as brokerage firms, insurance, companies, and investment companies.

· Changes in Financial Reporting .

While the conversion of Equus into an operating company will enable us to consolidate the financial results of entities we control, a change in our method of accounting could also reduce the reported value of our investments in controlled privately-held companies by eliminating our ability to report an increase in the fair value of these holdings.

While the conversion of Equus

into an operating company will enable us to consolidate the financial results of entities we control, a change in our method of accounting

could also reduce the reported value of our investments in controlled privately-held companies by eliminating our ability to report an

increase in the fair value of these holdings.

· Protection of Directors and Officers .

We would no longer be prohibited from protecting any director or officer against any liability to the Fund or our stockholders arising from willful malfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of that person’s office, although there are similar limitations under Delaware law, our Certificate of Incorporation, and our Bylaws that would still apply.

We would no longer be prohibited

from protecting any director or officer against any liability to the Fund or our stockholders arising from willful malfeasance, bad faith,

gross negligence, or reckless disregard of the duties involved in the conduct of that person’s office, although there are similar

limitations under Delaware law, our Certificate of Incorporation, and our Bylaws that would still apply.

· Fidelity Bond .

We would no longer be required to provide and maintain an investment company blanket bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement.

We would no longer be required to provide and maintain

an investment company blanket bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement.

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· Director Independence .

We would no longer be required to ensure that a majority of our directors are persons who are not “interested persons,”

as that term is defined in the 1940 Act, and certain persons, such as investment bankers, that would be prevented from serving on our Board if we were a BDC.

However, assuming we can comply with the NYSE’s listing standards for operating companies, we will remain subject to NYSE listing standards that require the majority of directors of a listed company and all members of its compensation, audit and nominating committees to be “independent”

We would no longer be required to ensure

that a majority of our directors are persons who are not “interested persons,”

as that term is defined in the 1940 Act, and

certain persons, such as investment bankers, that would be prevented from serving on our Board if we were a BDC.

However, assuming we

can comply with the NYSE’s listing standards for operating companies, we will remain subject to NYSE listing standards that require

the majority of directors of a listed company and all members of its compensation, audit and nominating committees to be “independent”

as defined under NYSE rules.

· Affiliate Transactions .

We would no longer be subject to provisions of the 1940 Act regulating transactions between BDCs and certain affiliates, although we would still be subject to conflict of interest rules and governance procedures that exist under Delaware law and NYSE rules.

We would no longer be subject to provisions

of the 1940 Act regulating transactions between BDCs and certain affiliates, although we would still be subject to conflict of interest

rules and governance procedures that exist under Delaware law and NYSE rules.

· Share Issuances .

We would no longer be subject to provisions of the 1940 Act restricting our ability to issue shares below NAV or in exchange for services, nor would we be restricted in issuing more than one class of equity securities or instruments that could be converted into other classes of equity securities.

We would no longer be subject to provisions of

the 1940 Act restricting our ability to issue shares below NAV or in exchange for services, nor would we be restricted in issuing more

than one class of equity securities or instruments that could be converted into other classes of equity securities.

· Share Repurchases .

We would no longer be restricted under the 1940 Act in our ability to repurchase shares from our stockholders, and would instead be subject only to NYSE rules and Delaware corporate law requirements for such repurchases.

We would no longer be restricted under the

1940 Act in our ability to repurchase shares from our stockholders, and would instead be subject only to NYSE rules and Delaware corporate

law requirements for such repurchases.

· Change of Business .

We would be able to change the nature of our business and fundamental investment policies without having to obtain the approval of our stockholders.

We would be able to change the nature of our

business and fundamental investment policies without having to obtain the approval of our stockholders.

· Director and Officer Incentives .

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

We would no longer require exemptive

relief from the SEC before implementing incentive compensation plans for our key executives and non-executive directors.

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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 1A. Risk Factors