What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2025-04-10 compared with 2024-04-02 · 373 added, 325 removed, 204 unchanged (77% of the section changed)

Market for Registrant’s Common Equity,

Related Stockholder Matters and Issuer Purchases of Equity Securitie s

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securitie s

Our common stock

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were registered holders.

Registered holders do not include those stockholders whose stock has been issued in

As of December 31, 2023, our net asset value per share was $3.55.

The following table

reflects the high and low closing sales prices per share of our common stock on the NYSE, and net asset value (“NAV”) per

share for each of the three years ended December 31, 2023, by quarter:

Registered holders do not include those stockholders whose stock has been issued in street name.

As of December

31, 2024, our net asset value per share was $2.17.

The following

table reflects the high and low closing sales prices per share of our common stock on the NYSE, and net asset value (“NAV”)

per share for each of the three years ended December 31, 2024, by quarter:

Stock Performance Graph

The following graph compares the cumulative total return

on our common stock with the cumulative total return of the NYSE Composite Index and the S&P 500 Index for the five years ended December

This comparison assumes $100.00 was invested in our common stock at the closing price of our common stock on December 31, 2018

and in the comparison groups and assumes the reinvestment of all cash dividends on the ex-dividend date prior to any tax effect.

price performance shown on the graph below is not necessarily indicative of future price performance.

As a RIC, we are

required to distribute to our stockholders, in a timely manner, at least 90% of our taxable net investment income each year.

not distribute, in a timely manner, 98.2% of our taxable net capital gains and 90% of our taxable net investment income each year (as

well as any portion of the respective 2% balances not distributed in the previous year), we will be subject to a 4% non-deductible federal

excise tax on certain undistributed income of regulated investment companies.

Under the 1940 Act, we are not permitted to pay dividends

to stockholders unless we meet certain asset coverage requirements.

If taxable net investment income is retained, we will be subject to

federal income and excise taxes.

We reserve the right to retain net long-term capital gains in excess of net short-term capital losses

for reinvestment or to pay contingencies and expenses.

Such retained amounts, if any, will be taxable to the Fund as long-term capital

gains and our stockholders will be able to claim their proportionate share of the federal income taxes paid by the Fund on such gains

as a credit against their own federal income tax liabilities.

Stockholders will also be entitled to increase the adjusted tax basis of

their fund shares by the difference between their undistributed capital gains and their tax credit.

The following graph compares the cumulative

total return on our common stock with the cumulative total return of the NYSE Composite Index and the S&P 500 Index for the five years

ended December 31, 2024.

This comparison assumes $100.00 was invested in our common stock at the closing price of our common stock on

December 31, 2019 and in the comparison groups and assumes the reinvestment of all cash dividends on the ex-dividend date prior to any

The stock price performance shown on the graph below is not necessarily indicative of future price performance.

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If we requalify

as a RIC, we will be required to distribute to our stockholders, in a timely manner, at least 90% of our taxable net investment income

If we do not distribute, in a timely manner, 98.2% of our taxable net capital gains and 90% of our taxable net investment income

each year (as well as any portion of the respective 2% balances not distributed in the previous year), we will be subject to a 4% non-deductible

federal excise tax on certain undistributed income of regulated investment companies.

Under the 1940 Act, we are not permitted to pay

dividends to stockholders unless we meet certain asset coverage requirements.

If taxable net investment income is retained, we will be

subject to federal income and excise taxes.

We reserve the right to retain net long-term capital gains in excess of net short-term capital

losses for reinvestment or to pay contingencies and expenses.

Such retained amounts, if any, will be taxable to the Fund as long-term

capital gains and our stockholders will be able to claim their proportionate share of the federal income taxes paid by the Fund on such

gains as a credit against their own federal income tax liabilities.

Stockholders will also be entitled to increase the adjusted tax basis

of their fund shares by the difference between their undistributed capital gains and their tax credit.

We invest in companies

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debt securities or dividend-paying preferred stock.

Management’s Discussion

and Analysis of Financial Condition and Results of Operations

We are incorporating

by reference Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2022 Annual Report on

Form 10-K for management’s discussion and analysis of financial condition and results of operations for the fiscal year 2022 compared

to fiscal year 2021.

Equus is a BDC that

provides financing solutions for privately held middle market and small capitalization companies.

We began operations in 1983 and have

been a publicly traded closed-end fund since 1991.

Our investment objective is to seek the highest total return, consisting of capital

appreciation and current income.

Consistent with our announced intention to transform Equus into an operating company or a permanent capital

vehicle, our shareholders have previously authorized our Board to withdraw our BDC election and, although this authorization has since

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

Nevertheless, we will not withdraw this election

unless and until we have entered into a definitive agreement to convert Equus into an operating company or a permanent capital vehicle.

Further, we will also require a subsequent affirmative vote from holders of a majority of our outstanding voting shares to enter into

any such definitive agreement or change the nature of our business.

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

incorporating by reference Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Annual

Report on Form 10-K for management’s discussion and analysis of financial condition and results of operations for the fiscal year

2023 compared to fiscal year 2022.

a BDC that provides financing solutions for privately held middle market and small capitalization companies.

We began operations in 1983

and have been a publicly traded closed-end fund since 1991.

Our investment objective is to seek the highest total return, consisting of

capital appreciation and current income.

Consistent with our announced intention to transform Equus into an operating company or a permanent

capital vehicle, our shareholders have previously authorized our Board to withdraw our BDC election and, although this authorization has

since expired, we expect to receive a further authorization from our stockholders in the future.

Nevertheless, we will not withdraw this

election unless and until we have entered into a definitive agreement to convert Equus into an operating company or a permanent capital

Further, we will also require a subsequent affirmative vote from holders of a majority of our outstanding voting shares to enter

into any such definitive agreement or change the nature of our business.

See Significant Developments –

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BDC Election above.

As a BDC, we are

required to comply with certain regulatory requirements.

For instance, we generally have to invest at least 70% of the Fund’s total

assets in “qualifying assets,”

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are required to comply with certain regulatory requirements.

For instance, we generally have to invest at least 70% of the

Fund’s total assets in “qualifying assets,”

including securities of private U.S.

companies, certain public U.S.

companies with a total

market capitalization not in excess of $250 million, cash, cash equivalents, U.S.

government securities and short-term high-quality debt

Equus is a RIC under Subchapter M of the Code.

To qualify as a RIC, we must meet certain source of income and asset diversification

requirements.

If we comply with the provisions of Subchapter M, the Fund generally does not have to pay corporate-level income taxes on

any income that is distributed to our stockholders.

Investment Income .

We generate investment income from interest payable on the debt securities that the Fund holds, dividends received on equity interests

in our portfolio companies and capital gains, if any, realized upon sales of equity and, to a lesser extent, debt securities in the investment

Our equity investments may include shares of common and preferred stock, membership interests in limited liability companies

and warrants to purchase additional equity interests.

These equity securities may or may not pay dividends, and the exercise prices of

warrants that we acquire in connection with debt investments, if any, vary by investment.

Our debt investments in portfolio companies

may be in the form of senior or subordinated loans and may be unsecured or have a first or second lien on some or all of the assets of

the borrower.

companies with a total market capitalization not in excess of $250 million, cash, cash equivalents, U.S.

government securities and

short-term high-quality debt investments.

Prior to the fourth quarter of 2024, Equus qualified as a RIC under Subchapter M of the

Code and may seek to requalify as a RIC in the future.

To qualify as a RIC, we must meet certain source of income and asset

diversification requirements.

If we comply with the provisions of Subchapter M, the Fund generally would not have to pay

corporate-level income taxes on any income that is distributed to our stockholders.

We generate investment income from interest payable on the debt securities that the Fund holds, dividends received on equity

interests in our portfolio companies and capital gains, if any, realized upon sales of equity and, to a lesser extent, debt securities

in the investment portfolio.

Our equity investments may include shares of common and preferred stock, membership interests in limited

liability companies and warrants to purchase additional equity interests.

These equity securities may or may not pay dividends, and the

exercise prices of warrants that we acquire in connection with debt investments, if any, vary by investment.

Our debt investments in portfolio

companies may be in the form of senior or subordinated loans and may be unsecured or have a first or second lien on some or all of the

assets of the borrower.

Our loans typically have a term of three to seven years and bear interest at fixed or floating rates.

Interest on these

debt securities is generally payable either quarterly or semiannually.

Some promissory notes held by the Fund provide that a portfolio

company may elect to pay interest in cash or provide that discount interest may accrete in the form of original issue discount or payment-in-kind

(PIK) over the life of the notes by adding unpaid interest amounts to the principal balance.

Amortization of principal on our debt investments

is generally deferred for several years from the date of initial investment.

The principal amount of these debt securities and any accrued

but unpaid interest generally will become due at maturity.

We also earn interest income at market rates on investments in short-term marketable

From time to time, we generate income in the form of commitment, origination, structuring, and extension fees in connection

with our investments.

on these debt securities is generally payable either quarterly or semiannually.

Some promissory notes held by the Fund provide that a

portfolio company may elect to pay interest in cash or provide that discount interest may accrete in the form of original issue discount

or payment-in-kind (PIK) over the life of the notes by adding unpaid interest amounts to the principal balance.

Amortization of principal

on our debt investments is generally deferred for several years from the date of initial investment.

The principal amount of these debt

securities and any accrued but unpaid interest generally will become due at maturity.

We also earn interest income at market rates on

investments in short-term marketable securities.

From time to time, we generate income in the form of commitment, origination, structuring,

and extension fees in connection with our investments.

We recognize all such fees when earned.

our primary operating expenses include director fees and expenses, professional fees, compensation expense, and general and administrative

Currently, our primary operating expenses include director fees and expenses, professional fees, compensation expense, and general

and administrative fees.

During 2024, 2023 and 2022, we did not incur any non- recurring expenses.

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inasmuch as it does not have active operations.

Operating Activities.

We use cash to make new investments and follow-on investments in our existing portfolio companies.

We record these investments at

cost on the applicable trade date.

We record these investments

at cost on the applicable trade date.

Realized gains or losses are computed using the specific identification method.

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in limited liability companies.

certain circumstances, we make follow-on investments in some of our portfolio companies.

As of December 31, 2023, we had $1.7 million

in outstanding commitments in our portfolio companies.

Under certain circumstances, we

make follow-on investments in some of our portfolio companies.

As of December 31, 2024,

we had no outstanding commitments in our portfolio companies.

Financing Activities.

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subject to certain restrictions, including an overall limitation on the amount of outstanding debt, or leverage, relative to equity of

Because of the nature and size of our portfolio investments, we periodically borrow funds to make qualifying investments in order

to maintain our qualification as a RIC.

During 2023 and 2022, we borrowed such funds by accessing a margin account with a securities brokerage

We invest the proceeds of these margin loans in high-quality securities such as U.S.

Treasury securities until they are repaid.

We refer to these high-quality investments as “restricted assets”

because they are not generally available for investment

in portfolio companies under the terms of borrowing.

If, in the future, we cannot borrow funds to make such qualifying investments at

the end of any future quarter, we may not qualify as a RIC and would become subject to corporate-level income tax on our net investment

income and realized capital gains, if any.

In addition, our distributions to stockholders would be taxable as ordinary dividends to the

extent paid from earnings and profits.

Because of the nature and size of our portfolio investments, we have periodically borrowed funds to make qualifying investments

in order to maintain our qualification as a RIC.

During the first three quarters of 2024

and all of 2023, we borrowed such funds by accessing a margin account with a securities brokerage firm.

We invested the proceeds of these

margin loans in high-quality securities such as U.S.

Treasury securities until they were repaid.

We refer to these high-quality investments

as “restricted assets”

because they are not generally available for investment in portfolio companies under the terms of borrowing.

If, in the future, we seek to requalify as a RIC and cannot borrow funds to make such qualifying investments at the end of any future

quarter, we would not so requalify and would, as a non-RIC, be subject to corporate-level income tax on our net investment income and

realized capital gains, if any.

In addition, our distributions to stockholders would be taxable as ordinary dividends to the extent paid

from earnings and profits.

Federal Income Tax Considerations .”

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Distributions .

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2016 Equity Incentive Plan

On June 13, 2016,

2016, our shareholders approved the adoption of our 2016 Equity Incentive Plan (“Incentive Plan”).

On January 10, 2017, the SEC

issued an order approving the Incentive Plan and certain awards intended to be made thereunder.

The Incentive Plan is intended to promote

the interests of the Fund by encouraging officers, employees, and directors of the Fund and its affiliates to acquire or increase their

equity interest in the Fund and to provide a means whereby they may develop a proprietary interest in the development and financial success

of the Fund, to encourage them to remain with and devote their best efforts to the business of the Fund, thereby advancing the interests

of the Fund and its stockholders.

The Incentive Plan is also intended to enhance the ability of the Fund and its affiliates to attract

and retain the services of individuals who are essential for the growth and profitability of the Fund.

The Incentive Plan

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

The maximum number of shares of common stock that are

subject to awards granted under the Incentive Plan is 2,434,728 shares.

On January 10, 2017, the

SEC issued an order approving the Incentive Plan and certain awards intended to be made thereunder.

The Incentive Plan is intended to

promote the interests of the Fund by encouraging officers, employees, and directors of the Fund and its affiliates to acquire or increase

their equity interest in the Fund and to provide a means whereby they may develop a proprietary interest in the development and financial

success of the Fund, to encourage them to remain with and devote their best efforts to the business of the Fund, thereby advancing the

interests of the Fund and its stockholders.

The Incentive Plan is also intended to enhance the ability of the Fund and its affiliates

to attract and retain the services of individuals who are essential for the growth and profitability of the Fund.

The Incentive

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

The maximum number of shares of common stock that

are subject to awards granted under the Incentive Plan is 2,434,728 shares.

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

March 17, 2017, we granted awards of restricted stock under the Plan to certain of our directors and executive officers in the aggregate

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

amount of 844,500 shares.

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Critical Accounting Estimates

We follow the accounting

and reporting guidance in FASB Accounting Standards Codification Topic 946 “Financial Services –

Investment Companies .”

Our financial statements are based on the selection and application of significant accounting policies, which require management to make

significant estimates and assumptions.

We believe that the following are some of the more critical judgment areas in the application of

our accounting policies that currently affect our financial condition and results of operations.

the accounting and reporting guidance in FASB Accounting Standards Codification Topic 946 “Financial Services –

Companies .”

Our financial statements are based on the selection and application of significant accounting policies, which require

management to make significant estimates and assumptions.

We believe that the following are some of the more critical judgment areas in

the application of our accounting policies that currently affect our financial condition and results of operations.

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Valuation of Investments

For most of our investments,

market quotations are not available.

With respect to investments for which market quotations are not readily available or when such market

quotations are deemed not to represent fair value, our Board has approved a multi-step valuation process each quarter, as described below:

For most of our

investments, market quotations are not available.

With respect to investments for which market quotations are not readily available or

when such market quotations are deemed not to represent fair value, our Board has approved a multi-step valuation process each quarter,

as described below:

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

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

With respect to investments with a fair value exceeding

$2.5 million that have been held for more than one year, we engage independent valuation firms to assist our investment professionals.

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

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

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

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

Our Management produces a report that summarizes each of our portfolio

investments and recommends a fair value of each such investment as of the date of the report;

The Audit Committee of our Board reviews and discusses the preliminary

valuation of our portfolio investments as recommended by Management in their report and any reports or recommendations of the independent

valuation firms, and then approves and recommends the fair values of our investments so determined to our Board for final approval;

The Board discusses valuations and determines the fair value of each portfolio

investment in good faith based on the input of our Management, the respective independent valuation firm, as applicable, and the Audit

During the first

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or changes in general market conditions).

Investments are valued

utilizing a yield analysis, enterprise value (“EV”) analysis, net asset value analysis, liquidation analysis, discounted cash

flow analysis, or a combination of methods, as appropriate.

are valued utilizing a yield analysis, enterprise value (“EV”) analysis, net asset value analysis, liquidation analysis, discounted

cash flow analysis, or a combination of methods, as appropriate.

The yield analysis uses loan spreads and other relevant information implied

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those future amounts.

In applying these

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

security covenants,

call protection provisions, and information rights;

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

covenants, call protection provisions, and information rights;

the nature and realizable value of any collateral;

the portfolio company’s ability

to make payments;

the portfolio company’s

ability to make payments;

the principal markets in which the portfolio company does business;

publicly available financial ratios of peer companies;

publicly available financial ratios of peer

the principal market;

and enterprise values, among other factors.

Also, any failure by a portfolio company to achieve its business plan

or obtain and maintain its financing arrangements could result in increased volatility and result in a significant and rapid change in

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.

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Our general intent

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the value determined by the yield analysis as the fair value for that security if less than the cost of the investment.

We will record unrealized

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

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

Because of the inherent

uncertainty of the valuation of portfolio securities which do not have readily ascertainable market values, amounting to $40.9 million

and $15.7 million as of December 31, 2023 and 2022, respectively, our fair value determinations may materially differ from the values

that would have been used had a ready market existed for the securities.

We adjust our net

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

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

We will record

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

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

Because of the

inherent uncertainty of the valuation of portfolio securities which do not have readily ascertainable market values, amounting to $27.5

million and $40.9 million as of December 31, 2024 and 2023, respectively, our fair value determinations may materially differ from the

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

See Note 3 to the financial statements included

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

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

Services, Inc.

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Current Market Conditions

GDP increased

at an annualized rate of 3.3% in the fourth quarter of 2023, substantially higher than consensus estimates for the quarter.

in the fourth quarter of 2023 also compared favorably to an annualized increase of 2.7% for the fourth quarter of 2022, although down

from 4.9% for the third quarter of 2023.

Overall, GDP growth was 2.5% for all of 2022, as compared to 2.1% for all of 2022.

GDP growth in the fourth quarter of 2023 was largely due to decreases in private inventory investment, federal government spending, residential

fixed investment, and consumer spending.

The Conference Board is projecting GDP growth of 1.2% for 2024 and 1.4% for 2025.

The Congressional

Budget Office is predicting 1.5% GDP growth for 2024.

increased at an annualized rate of 2.3% in the fourth quarter of 2024, which was relatively consistent with consensus estimates for the

quarter, but lower than GDP growth for the third quarter of 2024 (3.1%), as well as the fourth quarter of 2023 (3.2%).

Overall GDP growth

for the full year 2024 was 2.8% compared to 2.9% in 2023.

The increase in GDP during the fourth quarter of 2024 was driven principally

by consumer spending, offset by a decrease in business investment during the quarter.

The Congressional Budget Office is projecting GDP

growth of 1.9% for 2025 and 1.8% for 2026.

The CBO report was released prior to the inauguration of the new U.S.

President and the administration’s

imposition of tariffs which has resulted in a downward adjustment to GDP forecasts.

Citing tariff concerns, Morgan Stanley revised its

GDP growth forecast for 2025 and 2026 from 1.9% and 1.3%, respectively, to 1.5% and 1.2%.

Bureau of Economic Analysis;

The Conference Board;

Congressional Budget

Congressional Budget Office ).

As of February

2025, the U.S.

unemployment rate stood at 4.1%, and has remained largely stable for a considerable period, fluctuating between 3.4% and

4.1% for the previous 36 months.

Most economists, however, do not project this level to continue, as recessionary headwinds and lower growth

forecasts suggest an increase during the remainder of 2024.

Moreover, the labor participation rate remains at approximately 62.5%, below

the pre-pandemic high of 63.3% of February 2020.

Most of the recent employment gains in 2022 and 2023 were due to gains in the leisure

and hospitality industry, healthcare, construction, and social assistance.

With the advent of tariffs, government layoffs, and a more aggressive deportation policy for undocumented

immigrants, most economists are projecting the unemployment rate to increase during the remainder of 2025.

Moreover, the labor participation

rate remains at approximately 62.5%, below the pre-pandemic high of 63.3% of February 2020.

Most of the recent employment gains in 2023

and 2024 were due to gains in the leisure and hospitality industry, construction, trade, transportation, and utilities.

Bureau of Labor Statistics;

Trading Economics ).

Beginning in 2021

and continuing through 2022, consumer prices increased the most in four decades, reaching a high of 8.3%, before steadily declining throughout

2023, finishing the year at 3.4%.

in 2021 and continuing through 2022, consumer prices increased the most in four decades, reaching a high of 8.3%, before steadily declining,

more or less, throughout 2023 and 2024, finishing the year at 2.9%.

This trend has continued into January 2025, where the U.S.

Bureau of Labor Statistics reported an annualized

rate of 3.1%.

In view of lower growth projections and other economic headwinds, most analysts predict consumer price increases to taper

further to approximately 2.4% for all of 2024.

of Labor Statistics reported an annualized rate of 3.0%.

Notwithstanding a projected slowing of the U.S.

economy for 2025, most economists

are projecting similar rates of inflation for 2025 as compared to 2024, principally due to the effect of expected tariffs on imported

Bureau of Labor Statistics;

Global merger and

acquisition activity in 2023 was $3.1 trillion, a 14% drop from $3.6 trillion in 2022 which itself was 28% lower than 2021’s all-time

high of $5.0 trillion.

Biotechnology, energy, and healthcare were the sectors that experienced the most significant dealmaking activity

during the year.

Higher costs of capital were the principal cause of the continued decline in dealmaking.

Most analysts expect consolidation

activity in 2024 to increase slightly as a result of pent up demand and stable interest rates.

Private equity firms

experienced a similar slowdown in activity during 2023 which continued a downward trend from 2022 and the highs experienced during the

Covid-19 pandemic.

Nevertheless, there remains ample undeployed cash, and strong, acquisitive companies, as well as emerging companies

in the AI space, appear to be best positioned as some of the candidates for private equity activity in 2024.

Morgan Stanley ).

Global merger

and acquisition activity in 2024 was approximately $2.2 trillion, a slight increase from $2.1 trillion in 2023, but well off the high

of $4.1 trillion in 2021.

Financial services, materials, industrials, and information technology were the sectors that experienced the

most significant dealmaking activity during the year.

Most analysts expect consolidation activity in 2025 to increase over 2024, principally

due to expected lower costs of capital.

Ernst & Young ).

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Private equity

activity increased from $1.9 trillion in 2023 to $2.1 trillion in 2024, reversing a downward trend from 2021 and 2022 and the highs experienced

during the Covid-19 pandemic.

Nevertheless, private equity fundraising was lower for the third straight year due to a weak exit environment

that has constrained liquidity, with fund flows down 30% in 2024 as compared to 2023.

During 2024, our

net asset value increased from $2.61 per share as of December 31, 2022 to $3.55 per share as of December 31, 2023.

net asset value decreased from $3.55 per share as of December 31, 2023 to $2.17 per share as of December 31, 2024.

As of December 31,

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Liquidity and Capital Resources

The Company defines

cash equivalents as securities that are readily convertible into known amounts of cash and near their maturity that they present insignificant

risk of changes in value because of changes in interest rates.

Generally, only securities with a maturity of three months or less from

the date of purchase would qualify, with limited exceptions.

defines cash equivalents as securities that are readily convertible into known amounts of cash and near their maturity that they present

insignificant risk of changes in value because of changes in interest rates.

Generally, only securities with a maturity of three months

or less from the date of purchase would qualify, with limited exceptions.

The Company deems that certain money market funds, U.S.

Treasury bills, repurchase

agreements and other high-quality, short-term debt securities would qualify as cash equivalents (See Note 2 to the financial statements.)

bills, repurchase agreements and other high-quality, short-term debt securities would qualify as cash equivalents (See Note 2 to the financial

We generate cash

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and to pay the dividends to our stockholders.

Because of the nature

and size of the portfolio investments, we may periodically borrow funds to make qualifying investments to maintain our tax status as a

We often borrow such funds by utilizing a margin account with a securities brokerage firm.

There is no assurance that such arrangement

the nature and size of the portfolio investments, we have, until the fourth quarter of 2024, periodically borrowed funds to make qualifying

investments to maintain our prior tax status as a RIC.

As a RIC, we often borrowed such funds by utilizing a margin account with a securities

brokerage firm.

If we seek to requalify as a RIC, t here is no assurance that such arrangement

will be available in the future.

If the Fund is unable to borrow funds to make qualifying investments, it may no longer qualify as a RIC.

The Fund would then be subject to corporate income tax on its net investment income and realized capital gains, and distributions to stockholders

would be subject to income tax as ordinary dividends.

The Fund has the

ability to borrow funds and issue forms of senior securities representing indebtedness or stock, such as preferred stock, subject to certain

restrictions.

Net taxable investment income and net taxable realized gains from the sales of portfolio investments are intended to be

distributed at least annually, to the extent such amounts are not reserved for payment of expenses and contingencies or to make follow-on

or new investments.

If the Fund is unable to borrow funds to make qualifying investments, it may no longer requalify as a

The Fund would then continue to be subject to corporate income tax on its net investment income and realized capital gains, and distributions

to stockholders would be subject to income tax as ordinary dividends.

has the ability to borrow funds and issue forms of senior securities representing indebtedness or stock, such as preferred stock, subject

to certain restrictions.

Net taxable investment income and net taxable realized gains from the sales of portfolio investments are intended

to be distributed at least annually, to the extent such amounts are not reserved for payment of expenses and contingencies or to make

follow-on or new investments.

The Fund reserves

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of portfolio securities.

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

to finance routine capital expenditures through the next twelve months.

If we effect a Consolidation of the Fund as described under “

Developments –

Our operating cash flow and cash on hand is not sufficient to meet operating requirements or to finance routine

capital expenditures through the next twelve months.

We are therefore seeking liquidity from the sale of our portfolio interests, as well

as seeking external debt and equity financing from third parties.

Should either or both of the foregoing events not occur as contemplated,

the Fund will not have the necessary funds to maintain normal operations and, therefore, substantial doubt would exist about the Fund’s

ability to continue as a going concern.

Further, if we effect a transformation of the Fund into an operating company as described under

Significant Developments –

Authorization to Withdraw BDC Election ”

above, we may utilize some or a substantial portion of our current

liquidity in connection with a contemplated transaction as payment of the purchase price and to pay associated legal, due diligence, accounting,

and other fees.

Further, we may borrow funds from financial institutions or other providers of debt capital to provide and pay for a part

of the consideration and expenses necessary to effect a conversion of Equus into an operating company.

above, we may utilize some or a substantial

portion of our current liquidity in connection with a contemplated transaction as payment of the purchase price and to pay associated

legal, due diligence, accounting, and other fees.

Further, we may borrow funds from financial institutions or other providers of debt

capital to provide and pay for a part of the consideration and expenses necessary to effect a conversion of Equus into an operating company.

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Year Ended December 31, 2024

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in cash and cash equivalents.

We generated $38.2 million in cash for operating activities in 2024 principally due to $45.1 million sales in net investments

Treasury bills, offset by $2.2 million in investments, along with $4.6 million in fees to professional advisors, directors and

Financing Activities .

We used $45.0 million in cash from financing activities for 2024, principally in connection with repayments net of borrowings on margin.

We did not declare any dividends in 2024.

Year Ended December 31, 2023

As of December

31, 2023, we had total assets of $93.5 million, of which $40.9 million were invested in portfolio investments and $6.5 million were invested

in cash and cash equivalents.

As of December

31, 2023, we also had $45.4 million of U.S.

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We used $51.4 million in cash for operating activities in 2023 principally due to $8.3 million in investments, $4.3

million in fees to professional advisors, director and other, $17.0 million increase in unrealized appreciation, along with $38.9

million in fees to professional advisors, director and other fees, along with $38.9

million increase in net investments in U.S.

1 unchanged sentence

Financing Activities .

We provided $39.1 million in cash from financing activities for 2023, principally in connection with borrowings on margin..

We did not declare any dividends in 2023.

We provided $39.1 million in cash from financing activities for 2023, principally in connection with net borrowings on margin.

not declare any dividends in 2023.

Results of Operations Investment Income and Expense

Year Ended December 31, 2023 as compared

to Year Ended December 31, 2022

Total income from

portfolio securities was $0.3 million for 2023 and $0 for 2022.

Compensation expense

increased to $1.9 million in 2023 from $1.6 million in 2022.

As a result of the

factors described above, net investment loss after expenses was $4.0 million for 2023 as compared to a net investment loss of $3.6 million

Year Ended December

31, 2024 as compared to Year Ended December 31, 2023

Total income from portfolio

securities was $1.3 million for 2024 and $0.3 for 2023.

Compensation expense decreased to

$1.8 million in 2024 from $1.9 million in 2023.

As a result of the factors described above,

net investment loss after expenses was $3.3 million for 2024 as compared to a net investment loss of $4.0 million in 2023.

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Summary of Portfolio Investment Activity

Year Ended December 31, 2024

During 2023, we made

an $8.3 million investment in Morgan E&P, LLC.

The following table includes summarizes investment activity during the

year ended December 31, 2023 (in thousands):

During 2024, we made an $2.2 million investment in Morgan

The following table includes summarizes investment activity

during the year ended December 31, 2024 (in thousands):

Morgan E&P, LLC

Year Ended December 31, 2023

During 2022, we made

a $0.15 million follow-on investment in Equus Energy, LLC.

The following table includes summarizes investment activity during the

year ended December 31, 2022 (in thousands):

Equus Energy, LLC

During 2023, we made an $8.3 million investment in Morgan

The following table includes summarizes investment activity

during the year ended December 31, 2023 (in thousands):

Morgan E&P, LLC

Year Ended December 31, 2022

During 2021, we made

a $0.35 million non-cash follow-on investment in Equus Energy, LLC.

The following table includes summarizes investment activity during the

year ended December 31, 2021 (in thousands):

During 2022, we made a $0.15 million follow-on investment

in Equus Energy, LLC.

The following table includes summarizes investment activity during

the year ended December 31, 2022 (in thousands):

Equus Energy, LLC

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Realized Gains and Losses

Year Ended December 31, 2024

We realized capital gains of $138 thousand

as a result of disposition of U.S.

Treasury bills.

Year Ended December 31, 2023

We realized capital gains of $34 thousand as a result

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Treasury bills.

Year Ended December 31, 2021

During 2021, we received a combination of escrowed

and contingent payments of $3.8 million from the sale of our interest in PalletOne, Inc.

in December 2020, realizing a capital gain of

$0.4 million.

Changes in Unrealized Appreciation of Portfolio

Changes in Unrealized Appreciation of Portfolio Securities

Year Ended December 31, 2024

During 2023, we recorded

an increase of $17.0 million in net unrealized appreciation, from an unrealized appreciation of $7.5 million at December 31, 2022 to a

net unrealized appreciation of $24.5 million at December 31, 2023.

Such change in unrealized appreciation resulted primarily from the

increase in the fair value of our holdings in Morgan E&P, LLC of $22.6 million, principally due to substantial increases in Morgan’s

reserves and the reclassification of certain of its proved reserves from undeveloped to producing.

The increase in the fair value

of Morgan was offset by the decrease in fair value of our holding in Equus Energy, LLC of $5.7 million, principally due to decreases in

the forward curve for natural gas and its effect on the economic prospects of Equus Energy regarding future development of its gas properties.

During 2024, we

recorded a decrease of $15.6 million in net unrealized appreciation, from an unrealized appreciation of $24.5 million at December 31,

2023 to a net unrealized appreciation of $8.9 million at December 31, 2024.

Such change in unrealized appreciation resulted primarily

from the decrease in the fair value of our holdings in Morgan E&P, LLC of $9.6 million, principally due to a lower forward price curve

for oil, as well as the reclassification of certain of its proved reserves from producing to non-producing.

The change in unrealized appreciation

also resulted from the decrease in fair value of our holding in Equus Energy, LLC of $6.0 million, principally due to decreases in the

forward curve for oil and natural gas and its effect on the economic prospects of Equus Energy regarding future development of its oil

and gas properties.

See Subsequent Events below where we sold our interest in Equus Energy in March 2025 for a combination of cash

and preferred stock valued at $4.0 million.

Year Ended December 31, 2023

During 2022, we recorded

an increase of $2.5 million in net unrealized appreciation, from an unrealized appreciation of $5.0 million at December 31, 2021 to a

net unrealized appreciation of $7.5 million at December 31, 2022.

Such change in unrealized appreciation resulted primarily from the increase

in the fair value of our holdings in Equus Energy, LLC of $2.65 million, principally due to an increase in the cost basis of this investment,

as well as increases in oil and gas prices, as well as increases in the short- and long-term forward pricing curves for these commodities

During 2023, we

recorded an increase of $17.0 million in net unrealized appreciation, from an unrealized appreciation of $7.5 million at December 31,

2022 to a net unrealized appreciation of $24.5 million at December 31, 2023.

Such change in unrealized appreciation resulted primarily

from the increase in the fair value of our holdings in Morgan E&P, LLC of $22.6 million, principally due to substantial increases

in Morgan’s reserves and the reclassification of certain of its proved reserves from undeveloped to producing.

The increase in the

fair value of Morgan was offset by the decrease in fair value of our holding in Equus Energy, LLC of $5.7 million, principally due to

decreases in the forward curve for natural gas and its effect on the economic prospects of Equus Energy regarding future development of

its gas properties.

Year Ended December 31, 2022

During 2021, we recorded

an increase of $5.6 million in net unrealized appreciation, from an unrealized depreciation of $0.6 million at December 31, 2020 to a

net unrealized appreciation of $5.0 million at December 31, 2021.

Such change in unrealized appreciation resulted primarily from the increase

in the fair value of our holdings in Equus Energy, LLC of $6.0 million, principally due to an increase in the cost basis of this investment,

as well as increases in oil and gas prices, as well as increases in the short- and long-term forward pricing curves for these commodities

we recorded an increase of $2.5 million in net unrealized appreciation, from an unrealized appreciation of $5.0 million at December 31,

2021 to a net unrealized appreciation of $7.5 million at December 31, 2022.

Such change in unrealized appreciation resulted primarily

from the increase in the fair value of our holdings in Equus Energy, LLC of $2.65 million, principally due to an increase in the cost

basis of this investment, as well as increases in oil and gas prices, as well as increases in the short- and long-term forward pricing

curves for these commodities during 2022.

Portfolio Securities

As of December 31,

2023, we had active investments in the following portfolio companies:

Morgan E&P, LLC

As of December 31, 2024, we had active investments in

the following portfolio companies:

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Morgan E&P, LLC

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

On May 22, 2023, Morgan completed the acquisition of 4,747.52 net acres, in the Bakken/Three Forks formation in the Williston

Basin of North Dakota, and acquired approximately 1,100 additional acres on September 26, 2023.

The acreage and associated mineral rights

were acquired from Pro Energy I LLC (“Pro Energy”), a company whose principals have decades of oil and gas experience and

who have themselves drilled over 1,800 horizontal wells in the Williston Basin over a 10-year period.

In May 2023, we entered into an

agreement with Morgan to provide it up to $10.0 million in senior debt financing, subject to a schedule of disbursements and draws that

we determine.

As of December 31, 2023, we advanced Morgan $8.3 million under this facility (See Subsequent Events below where we

increased the total amount of the facility to $10.5 million and where we advanced, subsequent to year-end, an additional $2.0 million

under the facility).

During 2023, Morgan substantially increased its reserves, completed the drilling of two new wells, and also reclassified

certain of its proved reserves from undeveloped to producing.

As a result, the fair value of this holding was $22.6 million at December

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

wholly-owned subsidiary of the Fund.

On May 22, 2023, Morgan completed the acquisition of 4,747.52 net acres, in the Bakken/Three

Forks formation in the Williston Basin of North Dakota, and acquired approximately 1,100 additional acres on September 26, 2023.

acreage and associated mineral rights were acquired from Pro Energy I LLC (“Pro Energy”), a company whose principals

have decades of oil and gas experience and who have themselves drilled over 1,800 horizontal wells in the Williston Basin over a

10-year period.

In May 2023, we entered into an agreement with Morgan to provide it up to $10.0 million in senior debt financing,

which amount was subsequently amended to $10.5 million, subject to a schedule of disbursements and draws that we determine.

December 31, 2024, we advanced Morgan $10.5 million under this facility.

During 2023 and 2024, Morgan substantially increased its

reserves and completed the drilling of two new wells.

However, due to mechanical issues, these two wells were classified as non

producing during the fourth quarter of 2024.

As a result, the fair value of our debt and equity interest in Morgan was $23.5 million

at December 31, 2024.

Equus Energy, LLC

We formed Equus Energy,

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

We formed Equus

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

oil & gas properties.

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

On December 27, 2012, we invested

an additional $6.8 million in Equus Energy for the purpose of additional working capital and to fund the purchase of $6.6 million in working

interests presently represented by 136 producing and non-producing oil and gas wells, including associated development rights of approximately

21,520 acres situated on 10 separate properties in Texas and Oklahoma.

On September 30, 2020, the Fund provided an additional $0.6 million

in capital to Equus Energy for the purpose of additional working capital.

On June 30, 2021, the Fund provided an additional $0.35 million

in capital to Equus Energy for the purpose of additional working capital.

On December 31, 2022, the Fund provided an additional $0.15

million in capital to Equus Energy for the purpose of additional working capital.

The working interests held by Equus Energy range from

a de minimus amount to 50% of the leasehold production of these wells.

The wells are operated by a number of experienced operators

such as Burk Royalty, which has operating responsibility for leasehold interests in the Conger Field, representing approximately one-third

of the producing well interests.

The assets were purchased from Warren American Oil Company, LLC, a Tulsa-based oil and gas firm.

fair value of our holding in Equus Energy decreased from $15.65 million at December 31, 2022 to $10.0 million at December 31, 2023, principally

due to decreases in the forward curve for natural gas and its effect on the economic viability of Equus Energy’s gas reserves for

future development.

In December 2011, we contributed

$250,000 to the capital of Equus

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

to fund the purchase of $6.6 million in working interests that, as of December 31, 2024, consisted of 136 producing and non-producing

oil and gas wells, including associated development rights of approximately 21,520 acres situated on 9 separate properties in Texas and

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

working capital.

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

working capital.

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

working capital.

The working interests held by Equus Energy range from a de minimus amount to 50% of the leasehold production of

The wells are operated by a number of experienced operators such as Burk Royalty, which has operating responsibility for

leasehold interests in the Conger Field, representing approximately one-third of the producing well interests.

The assets were purchased

from Warren American Oil Company, LLC, a Tulsa-based oil and gas firm.

The fair value of our holding in Equus Energy decreased from $10.0

million at December 31, 2023 to $4.0 million at December 31, 2024, principally due to decreases in the forward curve for oil and natural

gas and its effect on the economic viability of Equus Energy’s gas reserves for future development.

See Subsequent Events below where we sold our interest in Equus Energy in March 2025 for a combination of cash and preferred

stock valued at $4.0 million.

Off Balance Sheet Arrangements

Our current office

space lease since December 31, 2020 is on a month-to-month basis.

office space lease since December 31, 2020 is on a month-to-month basis.

Rent expense, inclusive of common area maintenance costs, was

2 unchanged sentences

As of December

2023, we had $1.7 million in outstanding commitments to our portfolio company investments.

So long as we remain

a BDC, we will continue to pay out net investment income and/or realized capital gains, if any, on an annual basis as required under the

31, 2024, we had no outstanding commitments to our portfolio company investments.

we remain a BDC, we will continue to pay out net investment income and/or realized capital gains, if any, on an annual basis as required

under the 1940 Act.

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Subsequent Events

Our Management performed

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

On January 4, 2024,

our holding in $45.0 million in U.

Treasury Bills matured and we repaid our year-end margin loan.

On February 26, 2024,

we amended our credit facility with Morgan and increased the total amount that may be drawn under the facility from $10.0 to $10.5 million.

Also, during February and March 2024, we advanced Morgan an additional $2.2 million under this facility.

Our Management

performed an evaluation of the Fund’s activity through the date the financial statements were issued, noting the following subsequent

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

On February 10, 2025, we purchased from General Enterprise Ventures, Inc., a developer of fire suppression products (“GEVI”),

a 1-year senior convertible promissory note bearing interest at the rate of 10% per annum, in exchange for $1.5 million in cash (“GEVI

Note”).

The GEVI Note is convertible into shares of GEVI’s common stock at a conversion price of $0.40 per share.

Contemporaneously

with the purchase of the GEVI Note, the Fund also received a common stock purchase warrant to acquire an aggregate of 1,875,000 shares

of GEVI common stock at an exercise price of $0.50 per share.

Sale of Equus

On March 3, 2025, we sold Equus Energy to North American Energy Opportunities Corp., a developer of upstream oil and gas assets

(“NAEOC”).

The consideration provided by NAEOC consisted of $1.25 million in cash and 27,500 shares of preferred stock, redeemable

within 6 months of the date of issuance at $100.00 per share based upon fulfillment of certain conditions.

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 5. Market for Registrant’s Common Equity