What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2025-04-10 compared with 2024-04-02 · 814 added, 723 removed, 549 unchanged (74% of the section changed)

3 unchanged sentences

PCAOB ID#243)

Balance Sheets —As of December 31, 2023 and December 31, 202 2

Balance Sheets —As of December 31, 2024 and 202 3

Statements of Operations —For the years ended December 31, 2024, 2023 and 202 2

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For the year ended December 31, 202 4

Report of Independent Registered Public Accounting

and Board of Directors

Total Return, Inc.

Opinion on the Financial Statements

We have audited

the accompanying balance sheets of Equus Total Return, Inc.

(the “Fund”), including the schedules of investments, as of December

31, 2023 and 2022, the related statements of operations, changes in net assets, and cash flows for each of the three years in the period

ended December 31, 2023, and the related notes and financial statement schedule listed in the Table of Contents in Item 15(a)(1) (collectively

referred to as the “

financial statements”) and the selected per share data and ratios for each of the five years in the period

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of

December 31, 2023 and 2022, and the results of its operations, changes in net assets and its cash flows for each of the three years in

the period ended December 31, 2023, and the selected per share data and ratios for each of the five years in the period then ended, in

conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors Equus Total Return,

Houston, Texas

on the Financial Statements

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

(the “Fund”), including the schedules of investments,

as of December 31, 2024 and 2023, the related statements of operations, changes in net assets, and cash flows for each of the three years

in the period ended December 31, 2024, and the related notes and financial statement schedule listed in the Table of Contents in Item

15(a)(1) (collectively referred to as the “financial statements”) and the selected per share data and ratios for each of the

five years in the period ended December 31, 2024.

In our opinion, the financial statements present fairly, in all material respects, the

financial position of the Fund as of December 31, 2024 and 2023, and the results of its operations, changes in net assets and its cash

flows for each of the three years in the period ended December 31, 2024, and the selected per share data and ratios for each of the five

years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

on the Financial Statements

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

(the “Fund”), including the schedules of investments,

as of December 31, 2024 and 2023, the related statements of operations, changes in net assets, and cash flows for each of the three years

in the period ended December 31, 2024, and the related notes and financial statement schedule listed in the Table of Contents in Item

15(a)(1) (collectively referred to as the “financial statements”) and the selected per share data and ratios for each of the

five years in the period ended December 31, 2024.

In our opinion, the financial statements present fairly, in all material respects, the

financial position of the Fund as of December 31, 2024 and 2023, and the results of its operations, changes in net assets and its cash

flows for each of the three years in the period ended December 31, 2024, and the selected per share data and ratios for each of the five

years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying

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

As discussed in Note 2 to the financial

statements, the Fund has insufficient operating cash flows and cash on hand that raises substantial doubt about its ability to continue

as a going concern.

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

The financial statements do not

include any adjustments that might result from the outcome of this uncertainty.

These financial

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

public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required

to be independent with respect to the Fund in accordance with the U.S.

federal securities laws and the applicable rules and regulations

of the Securities and Exchange Commission and the PCAOB.

We conducted our

audits in accordance with the standards of the PCAOB.

We are a public

accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent

with respect to the Fund in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities

and Exchange Commission and the PCAOB.

our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable

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

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for

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

we express no such opinion.

Our audits included

performing procedures to assess the risks of material misstatement of the financial statements and the selected per share data and ratios,

whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis,

evidence regarding the amounts and disclosures in the financial statements and the selected per share data and ratios.

Our procedures

included confirmation of securities owned as of December 31, 2023, and 2022 by correspondence with the custodians.

Our audits also included

evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation

of the financial statements and the selected per share data and ratios.

We believe that our audits provide

a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below

is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to

the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our

especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our

opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate

opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Control Investment

in Note 3 to the financial statements, the Fund’s control investment portfolio has a total estimated fair value of $40.9 million

at December 31, 2023, which includes $32.6 million of limited liability company investments.

These limited liability company investments

have been determined to be Level 3 investments and utilize inputs that are unobservable and significant to the fair value measurement.

Management engaged an independent third-party firm to assist in the determination of the fair value estimate of the Fund’s limited

liability company Investments.

We identified

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

The principal considerations for our

determination are significant judgments involved in the determination of (i) the valuation techniques utilized to value these investments

which include the guideline transaction method, guideline public company method and the discounted cash flow method, and (ii) the use

of unobservable inputs in these valuation techniques which include acreage value, proved reserve multiple, daily production multiple and

discount rate.

Auditing these elements was complex because it involved especially subjective auditor judgment, including the extent of

specialized skills and knowledge needed.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the

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

Accordingly, we express

no such opinion.

included performing procedures to assess the risks of material misstatement of the financial statements and the selected per share data

and ratios, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining,

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

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

audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the

overall presentation of the financial statements and the selected per share data and ratios.

We believe that

our audits provide a reasonable basis for our opinion.

The critical audit matter

communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to

be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements

and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not

alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter

below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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of Limited Liability Company Investments

described in Note 3 to the financial statements, the Fund’s control investment portfolio has a total estimated fair value of $27.5

million at December 31, 2024, which includes $17.0 million of limited liability company investments.

Management has determined that these

limited liability company investments are Level 3 investments in accordance with Accounting Standards Codification Topic 820 and utilize

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

Management engaged an independent third-party valuation

firm and reserve engineers to assist in the determination of the fair value estimate of the Fund’s limited liability company Investments.

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

The principal considerations

for our determination are significant judgments involved in the determination of (i) the valuation techniques utilized to value these

investments which include the guideline transaction method, guideline public company method, the discounted cash flow method and

transaction price method, and (ii) the use of unobservable inputs in these valuation techniques, which include, acreage value multiples,

estimated future production, proved reserve multiple, daily production multiple and discount rate.

Auditing these elements was

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

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

Testing the completeness

and accuracy of the underlying information used as inputs in both the guideline transaction method, guideline public company method

and the discounted cash flow method.

Testing mathematical accuracy of the discounted cash flow method.

Utilizing personnel

with specialized knowledge and skill in valuation to assist in:

(i) evaluating the appropriateness of the valuation

models applied to each limited liability company investment (ii) evaluating whether unobservable inputs, including the acreage value,

proved reserve multiple, daily production multiple, and discount rate were reasonable, and (iii) testing mathematical accuracy of

the guideline transaction method and guideline public company method.

the reasonableness of the estimated future production by:

(i) comparing to historical production

volumes and historical production decline analyses and (ii) assessing the consistency with

evidence obtained in other areas of the audit.

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

(i) evaluating

the appropriateness of the valuation techniques applied to each limited liability

company investment and (ii) evaluating whether unobservable inputs, including the acreage

value multiples, proved reserve multiple, daily production multiple, and discount rate were

reasonable by comparing to independent data sources.

/s/ BDO USA, P.C.

We have served as the Company's auditor since

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

Houston, Texas

April 10, 2025

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EQUUS TOTAL RETURN, INC.

BALANCE SHEETS

(in thousands, except shares and per share amounts)

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Common stock, $.001 par value per share;

100,000,000 shares authorized as of December 31, 2023 and December 31, 2022, respectively, and 13,586,173 and 13,518,146 shares outstanding as of December 31, 2023 and December 31, 2022, respectively

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

Preferred stock, $.001 par value per share;

10,000,000 shares authorized as of December 31, 2023 and December 31, 2022 respectively

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

Common stock, par value

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Net asset value per share

The accompanying notes are an

integral part of these financial statements

EQUUS TOTAL RETURN, INC.

The accompanying notes

are an integral part of these financial statements

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STATEMENTS OF OPERATIONS

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Investment income:

Interest and dividend income:

Interest income:

Control investments

Total interest and dividend income

Total interest income

Interest from U.S.

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Net realized gain:

Escrow receivable

Treasury Bills

Net realized gain

Net unrealized appreciation of portfolio securities:

Net unrealized appreciation (depreciation) of portfolio securities:

Control investments

Net change in net unrealized appreciation of portfolio securities

Federal and state income, excise and other taxes

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

Federal income taxes

Net increase (decrease) in net assets resulting from operations

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Basic and diluted

The accompanying notes are an

integral part of these financial statements

The accompanying notes are

an integral part of these financial statements

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EQUUS TOTAL RETURN, INC.

STATEMENTS OF CHANGES IN NET ASSETS

OF CHANGES IN NET ASSETS

(in thousands)

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Total Net Assets

Balances as of January 1, 2021

Recharacterization of net capital gains

Net increase in net assets resulting from operations

Balances as of December 31, 2024

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Issuance of shares

Net imcrease in net assets resulting from operations

Net increase in net assets resulting from operations

Balances as of December 31, 2022

The accompanying notes are an integral part of these

financial statements.

EQUUS TOTAL RETURN, INC.

Net decrease in net assets resulting from operations

Balances as of December 31, 2021

The accompanying notes are an integral

part of these financial statements.

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TOTAL RETURN, INC.

STATEMENTS OF CASH FLOWS

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(in thousands)

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

Net increase (decrease) in net assets resulting from operations

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

Net realized (gain):

Escrow receivable

Cash flow from operating activities:

Net (decrease) increase in net assets resulting from operations

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

Treasury Bills

Net change in unrealized appreciation of portfolio securities:

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

Control investments

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Net proceeds from dispositions of portfolio securities

(Purchases) sales of U.S.

Sales (purchases) of U.S.

Treasury Bills, net

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Accounts receivable from affiliates

Accrued interest and dividend receivable

Accrued escrow receivable

Accrued interest

Accounts payable and accrued liabilities

Accounts payable to related parties

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

Cash flows from financing activities:

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Issuance of common stock

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities

Net (decrease) in cash and cash equivalents

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Income taxes paid

The accompanying notes are an

integral part of these financial statements.

The accompanying notes are an integral part

of these financial statements.

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EQUUS TOTAL RETURN, INC.

SELECTED PER SHARE DATA AND RATIOS

PER SHARE DATA AND RATIOS

Year ended December 31,

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Net change in unrealized appreciation of portfolio securities

Net change in unrealized depreciation of portfolio securities - related party

Net increase (decrease) in net assets resulting from operations

Net (decrease) increase in net assets resulting from operations

Capital transactions:

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

The accompanying notes are an integral

part of these financial statements.

The accompanying notes are an integral part

of these financial statements.

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EQUUS TOTAL RETURN, INC.

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2023

(in thousands, except share data)

OF INVESTMENTS DECEMBER 31, 2024

(in thousands, except share

Name and Location of

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

Treasury Bills

Treasury Bill

December 2023

Treasury bills (represents 52.4% of total investments at

Total Investments

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(3) Majority-owned investments are generally

defined under the Investment Company Act of 1940 as companies in which we own more than 50% of the voting secu

defined under the Investment Company Act of 1940 as companies in which we own more than 50% of the voting securities

of the company.

(4) Level 3 Portfolio Investments

(5) Income- producing

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SCHEDULE OF INVESTMENTS –

DECEMBER 31, 2024

(in thousands, except share data)

(in thousands, except share

Our portfolio securities

2 unchanged sentences

registration rights and related costs.

As a business development

company (“BDC”), we may invest up to 30% of our assets in non-qualifying portfolio investments, as permitted by the Investment

Company Act of 1940 (the “1940 Act”).

Specifically, we may invest up to 30% of our assets in entities that are not considered

“eligible portfolio companies”

(as defined in the 1940 Act), including companies located outside of the United States, entities

that are operating pursuant to certain exceptions under the 1940 Act, and publicly-traded entities with a market capitalization exceeding

$250 million.

As of December 31, 2023, we had invested 43.7% of our assets in securities of portfolio companies that constituted qualifying

investments under the 1940 Act.

As of December 31, 2023, none of our investments are considered non-qualifying assets as all of our investments

are in enterprises that are considered eligible portfolio companies the 1940 Act.

We provide significant managerial assistance to our

portfolio companies that comprise 100% of the total value of the investments in portfolio securities as of December 31, 2023.

As a business

development company (“BDC”), we may invest up to 30% of our assets in non-qualifying portfolio investments, as permitted by

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

Specifically, we may invest up to 30% of our assets in entities that

are not considered “eligible portfolio companies”

(as defined in the 1940 Act), including companies located outside of the

United States, entities that are operating pursuant to certain exceptions under the 1940 Act, and publicly-traded entities with a market

capitalization exceeding $250 million.

As of December 31, 2024, we had invested 91.9% of our assets in securities of portfolio companies

that constituted qualifying investments under the 1940 Act.

As of December 31, 2024, none of our investments are considered non-qualifying

assets as all of our investments are in enterprises that are considered eligible portfolio companies the 1940 Act.

We provide significant

managerial assistance to our portfolio companies that comprise 100% of the total value of the investments in portfolio securities as of

December 31, 2024.

We are classified

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company holding numerous investments.

Our investments in

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

Our investments

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

Type of Securities

5 unchanged sentences

Fair Value as Percentage of Net Assets

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EQUUS TOTAL RETURN, INC.

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2022

(in thousands, except share data)

OF INVESTMENTS DECEMBER 31, 2023

(in thousands, except share

Name and Location of

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Member interest (100%)

12% senior secured promissory note due 5/26 (5)

Total Control Investments:

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

Temporary Cash Investments

Treasury Bills

Treasury Bill

December 2023

Total Temporary Cash Investments (represents 27.7% of total investments at fair value)

Treasury bills (represents 52.4% of total investments at

Total Investments

7 unchanged sentences

(3) Majority-owned investments are generally

defined under the Investment Company Act of 1940 as companies in which we own more than 50% of the voting secu

defined under the Investment Company Act of 1940 as companies in which we own more than 50% of the voting securities

of the company.

(4) Level 3 Portfolio Investments

(5) Income- producing

The accompanying notes are an integral

part of these financial statements.

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SCHEDULE OF INVESTMENTS –

DECEMBER 31, 2023

(in thousands, except share data)

(in thousands, except share

Our portfolio securities

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

or other relevant regulatory authority.

We negotiate certain aspects of the method and timing of the disposition of our investment in

each portfolio company, including registration rights and related costs.

As an investment

company classified as a business development company (“BDC”) under the Investment Company Act of 1940 (hereafter, the “1940

Act”), we may invest up to 30% of our assets in non-qualifying portfolio investments, as permitted by the 1940 Act.

Specifically,

we may invest up to 30% of our assets in entities that are not considered “eligible portfolio companies”

(as defined in the

1940 Act), including companies located outside of the United States, entities that are operating pursuant to certain exceptions under

the 1940 Act, and publicly- traded entities with a market capitalization exceeding $250 million.

As of December 31, 2022, we had invested

37.6% of our assets in securities of portfolio companies that constituted qualifying investments under the 1940 Act.

As of December 31,

2022, all of our investments are in enterprises that are considered eligible portfolio companies under the 1940 Act.

We typically negotiate certain aspects of the method and timing of the disposition of our investment in each portfolio company, including

registration rights and related costs.

As a business

development company (“BDC”), we may invest up to 30% of our assets in non-qualifying portfolio investments, as permitted by

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

Specifically, we may invest up to 30% of our assets in entities that

are not considered “eligible portfolio companies”

(as defined in the 1940 Act), including companies located outside of the

United States, entities that are operating pursuant to certain exceptions under the 1940 Act, and publicly-traded entities with a market

capitalization exceeding $250 million.

As of December 31, 2023, we had invested 43.7% of our assets in securities of portfolio companies

that constituted qualifying investments under the 1940 Act.

As of December 31, 2023, none of our investments are considered non-qualifying

assets as all of our investments are in enterprises that are considered eligible portfolio companies the 1940 Act.

We provide significant

managerial assistance to a portfolio company that comprises 100% of the total value of the investments in portfolio securities as of December

managerial assistance to our portfolio companies that comprise 100% of the total value of the investments in portfolio securities as of

December 31, 2023.

We are classified

2 unchanged sentences

that may be invested in the securities of a single issuer.

The value of one segment called ‘Energy’

includes one portfolio

company and was 44.4% of our net asset value, 37.6% of our total assets and 100% of our investments in portfolio company securities (at

fair value) as of December 31, 2022.

Changes in business or industry trends or in the financial condition, results of operations, or the

market’s assessment of any single portfolio company will affect the net asset value and the market price of our common stock to

a greater extent than would be the case if we were a “diversified”

The value of one segment called “Energy”

includes our two remaining

portfolio companies and was 84.6% of our net asset value, 43.7% of our total assets and 100% of our investments in portfolio company securities

(at fair value) as of December 31, 2023.

Changes in business or industry trends or in the financial condition, results of operations,

or the market’s assessment of any single portfolio company will affect the net asset value and the market price of our common stock

to a greater extent than would be the case if we were a “diversified”

company holding numerous investments.

Our investments in

portfolio securities consist of the following types of securities as of December 31, 2022 (in thousands):

Our investments

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

Type of Securities

1 unchanged sentence

Limited liability company investments

Secured and subordinated debt

The following

1 unchanged sentence

Fair Value as Percentage of Net Assets

The accompanying notes are an

integral part of these financial statements.

EQUUS TOTAL RETURN, INC.

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EQUUS TOTAL RETURN,

NOTES TO FINANCIAL STATEMENTS

24 unchanged sentences

and no shares of preferred stock outstanding.

We attempt to maximize

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

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

or larger investee companies from time to time.

We seek to invest primarily in companies pursuing growth either through acquisition or

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

Our income-producing

investments consist principally of debt securities including subordinated debt, debt convertible into common or preferred stock, or debt

combined with warrants and common and preferred stock.

Debt and preferred equity financing may also be used to create long-term capital

appreciation through the exercise and sale of warrants received in connection with the financing.

We attempt to

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

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

with smaller or larger investee companies from time to time.

We seek to invest primarily in companies pursuing growth either through acquisition

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

producing investments consist principally of debt securities including subordinated debt, debt convertible into common or preferred stock,

or debt combined with warrants and common and preferred stock.

Debt and preferred equity financing may also be used to create long-term

capital appreciation through the exercise and sale of warrants received in connection with the financing.

We seek to achieve capital appreciation

3 unchanged sentences

of Directors believe it prudent to continue to review alternatives to refine and further clarify the current strategies.

We elected to be

treated as a BDC under the Investment Company Act of 1940 Act (“1940 Act”), although our shareholders have previously authorized

us to withdraw this election and, although such authorization has expired, will likely do so again in the future.

We currently qualify

as a regulated investment company (“RIC”) for federal income tax purposes and, therefore, are not required to pay corporate

income taxes on any income or gains that we distribute to our stockholders.

We have certain wholly owned taxable subsidiaries (“Taxable

Subsidiaries”) each of which holds one or more portfolio investments listed on our Schedules of Investments.

The purpose of these

Taxable Subsidiaries is to permit us to hold certain income- producing investments or portfolio companies organized as limited liability

companies, or LLCs, (or other forms of pass-through entities) and still satisfy the RIC tax requirement that at least 90% of our gross

revenue for income tax purposes must consist of investment income.

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

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

directly to us for the 90% test.

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

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

The income of the LLCs (or other pass-through

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

our RIC status and resultant tax advantages.

We do not consolidate the Taxable Subsidiaries for income tax purposes, with the exception

of Texas Margins Tax, which is an entity level tax.

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

to be treated as a BDC under the Investment Company Act of 1940 Act (“1940 Act”), although our shareholders have previously

authorized us to withdraw this election and, although such authorization has expired, will likely do so again in the future.

the fourth quarter of 2024, we qualified as a regulated investment company (“RIC”) for federal income tax purposes and, therefore,

were not required to pay corporate income taxes on any income or gains that we would have distributed

distribute to our stockholders.

During the fourth quarter of 2024, we elected to not qualify as a RIC and, consequently, we will

be subject to normal corporate rates of taxation of our income and gains and will not be permitted to deduct distributions paid to our

stockholders.

have certain wholly owned taxable subsidiaries (“Taxable Subsidiaries”) that were created to help us maintain our RIC

status, each of which holds one or more portfolio investments listed on our Schedules of Investments.

The purpose of these Taxable

Subsidiaries was to permit us to hold certain income- producing investments or portfolio companies organized as limited liability

companies, or LLCs, (or other forms of pass-through entities) and still satisfy the RIC tax requirement that at least 90% of our

gross revenue for income tax purposes must consist of investment income.

Absent the Taxable Subsidiaries, a portion of the gross

income of these income-producing investments or of any LLC (or other pass-through entity) portfolio investment, as the case may be,

would flow through directly to us for the 90% test.

Since we have elected to not qualify as a RIC, the income of these Taxable

Subsidiaries may be taxable to Equus, which is now classified as a Subchapter C or corporation.

To the extent that such income did

not consist of investment income, it could jeopardize our ability to re qualify as a RIC

and, therefore, cause us to incur federal income taxes as described above.

The income of the LLCs (or other pass-through entities)

owned by Taxable Subsidiaries is taxed to the Taxable Subsidiaries and does not flow through to us, thereby helping us obtain (or

preserve, as the case may be) RIC status and the resultant tax advantages.

We do not consolidate the Taxable Subsidiaries for income

tax purposes, with the exception of Texas Margins Tax, which is an entity level tax.

The Taxable Subsidiaries may generate income

tax expense because of the Taxable Subsidiaries’

ownership of the portfolio companies.

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

We reflect any such income tax expense

on our Statements of Operations.

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(2) LIQUIDITY AND FINANCING ARRANGEMENTS

1 unchanged sentence

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

We had $40.9 million of our net assets of $48.3 million invested in portfolio

We also had $45.4 million of U.S.

Treasury bills and restricted cash, including primarily the proceeds of a quarter-end

margin loan that we incurred to maintain the diversification requirements applicable to a RIC.

Of this amount, $45.0 million was invested

Treasury bills and $0.4 million represented a required 1% brokerage margin deposit.

These securities were held by a securities

brokerage firm and pledged along with other assets to secure repayment of the margin loan.

Treasury bills matured January 4,

2024 and we subsequently repaid this margin loan.

The margin interest was paid on February 4, 2024.

As of December 31,

2022, we had cash and cash equivalents of $19.3 million.

We had $15.7 million of our net assets of $35.2 million invested in portfolio

We also had $6.0 million of U.S.

Treasury bills and restricted cash, including primarily the proceeds of a quarter-end

margin loan that we incurred to maintain the diversification requirements applicable to a RIC.

Of this amount, $6.0 million was invested

Treasury bills and $0.06 million represented a required 1% brokerage margin deposit.

These securities were held by a securities

brokerage firm and pledged along with other assets to secure repayment of the margin loan.

Treasury bills matured January 3,

2023 and we subsequently repaid this margin loan.

The margin interest was paid on February 3, 2023.

During 2023 and 2022,

we borrowed sufficient funds to maintain the Fund’s RIC status by utilizing a margin account with a securities brokerage firm.

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

If we are unable to borrow funds to make qualifying investments,

we may no longer qualify as a RIC.

We would then be subject to corporate income tax on the Fund’s net investment income and realized

capital gains, and distributions to stockholders would be subject to income tax as ordinary dividends.

If we continue to be a BDC, failure

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

Our operating cash flow and cash on hand is not sufficient to meet operating

requirements or to finance routine capital expenditures through the next twelve months.

We are therefore seeking liquidity from the sale

of our portfolio interests, as well as seeking external debt and equity financing from third parties.

In addition, we are actively seeking

to fulfill the conditions of redemption relating to certain shares of preferred stock received in connection with our recent sale of

Equus Energy as described in Note II Subsequent Events .

Should any or all of the foregoing events not occur as contemplated, the

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

ability to continue as a going concern.

During the first

three quarters of 2024 and all of 2023, we borrowed sufficient funds to maintain the Fund’s RIC status by utilizing a margin account

with a securities brokerage firm.

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

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

We would then continue to be subject

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

continue to be subject to income tax as ordinary dividends.

If we continue to be a BDC and generate significant income and gains, but

do not requalify as a RIC, we will be subject to corporate level tax and the non-deductibility of dividends, any of which could be material

to us and our stockholders.

(3) SIGNIFICANT ACCOUNTING POLICIES

The following is

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

Earnings Per Share —Basic earnings per share is computed by dividing net

increase (decrease) in net assets resulting from operations by the weighted-average number of shares of common stock outstanding

for the period.

Other potentially dilutive common stock, and the related impact to earnings, are considered when calculating earnings

per share on a diluted basis.

Estimates —The preparation of financial statements in accordance with accounting principles generally accepted in the

United States (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts and disclosures in

the financial statements.

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

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

We have identified

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

The following

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

Per Share —Basic earnings per share is computed by dividing net increase (decrease) in net assets resulting from operations by

the weighted-average number of shares of common stock outstanding for the period.

Other potentially dilutive common stock, and the related

impact to earnings, are considered when calculating earnings per share on a diluted basis.

Estimates —The preparation of financial statements in accordance with accounting principles generally accepted in the United

States (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts and disclosures in the financial

Although we believe the estimates and assumptions used in preparing these financial statements and related notes are reasonable

in light of known facts and circumstances, actual results could differ from those estimates.

We have identified valuation of investments

and revenue recognition as our most critical accounting estimates.

Consolidation —In

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

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

from consolidating any entity other than another investment company, except that ASC 946 provides for the consolidation of a controlled

operating company that provides substantially all of its services to the investment company or its consolidated subsidiaries .

Valuation of Investments—

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:

Accounting Standards Committee (“ASC”) 946, we are precluded from consolidating any entity other than another investment company,

except that ASC 946 provides for the consolidation of a controlled operating company that provides substantially all of its services to

the investment company or its consolidated subsidiaries .

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Investments—

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

With respect to investments for which market quotations

are not readily available or when such market quotations are deemed not to represent fair value, our Board has approved a multi-step valuation

process each quarter, as described below:

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

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

With respect to investments with a fair value exceeding

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

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

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

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

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

During the first

twelve months after an investment is made, we rely on the original investment amount to determine the fair value unless significant developments

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

or changes in general market conditions).

Investments are valued

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

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

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.

first twelve months after an investment is made, we rely on the original investment amount to determine the fair value unless significant

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

of operations or changes in general market conditions).

Investments are

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

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

The yield analysis uses loan spreads and other relevant information implied

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present value indicated by current market expectations about those future amounts.

In applying these

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

security covenants,

call protection provisions, and information rights;

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

In addition to the previously described analysis involving allocation of value to the debt

instrument, we perform a yield analysis assuming a hypothetical current sale of the security to determine if a debt security has been

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

the market interest rates and leverage levels.

We record unrealized

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

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

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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In addition to

the previously described analysis involving allocation of value to the debt instrument, we perform a yield analysis assuming a hypothetical

current sale of the security to determine if a debt security has been impaired.

The yield analysis considers changes in interest rates

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

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

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

Fair Value Measurement—Fair

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management judgment or estimation.

In certain cases,

the inputs used to measure fair value may fall into different levels of the fair value hierarchy.

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

In such cases, an investment’s

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to the investment.

Investments for which

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

One of the primary

valuation methods used to estimate the fair value of these Level 3 investments is the discounted cash flow method (although a liquidation

analysis, option theoretical, or other methodology may be used when more appropriate).

The discounted cash flow approach to determine

fair value (or a range of fair values) involves applying an appropriate discount rate(s) to the estimated future cash flows using various

relevant factors depending on investment type, including comparing the latest arm’s length or market transactions involving the

subject security to the selected benchmark credit spread, assumed growth rate (in cash flows), and capitalization rates/multiples (for

determining terminal values of underlying portfolio companies).

The valuation based on the inputs determined to be the most reasonable

and probable is used as the fair value of the investment.

The determination of fair value using these methodologies may take into consideration

a range of factors including, but not limited to, the price at which the investment was acquired, the nature of the investment, local

market conditions, trading values on public exchanges for comparable securities, current and projected operating performance, financing

transactions subsequent to the acquisition of the investment and anticipated financing transactions after the valuation date.

To assess the reasonableness

of the discounted cash flow approach, the fair value of equity securities, including warrants, in portfolio companies may also consider

the market approach—that is, through analyzing and applying to the underlying portfolio companies, market valuation multiples of

publicly-traded firms engaged in businesses similar to those of the portfolio companies.

The market approach to determining the fair value

of a portfolio company’s equity security (or securities) will typically involve:

(1) applying to the portfolio company’s trailing

twelve months (or current year projected) EBITDA, a low to high range of enterprise value to EBITDA multiples that are derived from an

analysis of publicly-traded comparable companies, in order to arrive at a range of enterprise values for the portfolio company;

(2) subtracting

from the range of calculated enterprise values the outstanding balances of any debt or equity securities that would be senior in right

of payment to the equity securities we hold;

and (3) multiplying the range of equity values derived therefrom by our ownership share of

such equity tranche in order to arrive at a range of fair values for our equity security (or securities).

Application of these valuation

methodologies involves a significant degree of judgment by Management.

Due to the inherent

uncertainty of determining the fair value of Level 3 investments that do not have a readily available market value, the fair value of

the investments may differ significantly from the values that would have been used had a ready market existed for such investments and

may differ materially from the values that may ultimately be received or settled.

Further, such investments are generally subject to legal

and other restrictions or otherwise are less liquid than publicly traded instruments.

If we were required to liquidate a portfolio investment

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

With respect to Level 3 investments, where sufficient market quotations are not readily available or for which no or an insufficient number

of indicative prices from pricing services or brokers or dealers have been received, we undertake, on a quarterly basis, our valuation

process as described above.

We assess the levels

of the investments at each measurement date, and transfers between levels are recognized on the subsequent measurement date closest in

time to the actual date of the event or change in circumstances that caused the transfer.

There were no transfers to or from Level 3 for

the years ended December 31, 2023 and 2022.

Investments for

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

primary valuation methods used to estimate the fair value of these Level

3 investments is the discounted cash

flow method (although a liquidation analysis, option theoretical, or other methodology may be used when more appropriate).

The discounted

cash flow approach to determine fair value (or a range of fair values) involves applying an appropriate discount rate(s) to the estimated

future cash flows using various relevant factors depending on investment type, including comparing the latest arm’s length or market

transactions involving the subject security to the selected benchmark credit spread, assumed growth rate (in cash flows), and capitalization

rates/multiples (for determining terminal values of underlying portfolio companies).

The valuation based on the inputs determined to be

the most reasonable and probable is used as the fair value of the investment.

The determination of fair value using these methodologies

may take into consideration a range of factors including, but not limited to, the price at which the investment was acquired, the nature

of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating

performance, financing transactions subsequent to the acquisition of the investment and anticipated financing transactions after the valuation

To assess the

reasonableness of the discounted cash flow approach, the fair value of equity securities, including warrants, in portfolio companies may

also consider the market approach—that is, through analyzing and applying to the underlying portfolio companies, market valuation

multiples of publicly-traded firms engaged in businesses similar to those of the portfolio companies.

The market approach to determining

the fair value of a portfolio company’s equity security (or securities) will typically involve:

(1) applying to the portfolio company’s

trailing twelve months (or current year projected) EBITDA, a low to high range of enterprise value to EBITDA multiples that are derived

from an analysis of publicly-traded comparable companies, in order to arrive at a range of enterprise values for the portfolio company;

(2) subtracting from the range of calculated enterprise values the outstanding balances of any debt or equity securities that would be

senior in right of payment to the equity securities we hold;

and (3) multiplying the range of equity values derived therefrom by our ownership

share of such equity tranche in order to arrive at a range of fair values for our equity security (or securities).

Application of these

valuation methodologies involves a significant degree of judgment by Management.

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inherent uncertainty of determining the fair value of Level 3 investments that do not have a readily available market value, the fair

value of the investments may differ significantly from the values that would have been used had a ready market existed for such investments

and may differ materially from the values that may ultimately be received or settled.

Further, such investments are generally subject

to legal and other restrictions or otherwise are less liquid than publicly traded instruments.

If we were required to liquidate a portfolio

investment in a forced or liquidation sale, we might realize significantly less than the value at which such investment had previously

been recorded.

With respect to Level 3 investments, where sufficient market quotations are not readily available or for which no or an

insufficient number of indicative prices from pricing services or brokers or dealers have been received, we undertake, on a quarterly

basis, our valuation process as described above.

the levels of the investments at each measurement date, and transfers between levels are recognized on the subsequent measurement date

closest in time to the actual date of the event or change in circumstances that caused the transfer.

There were no transfers to or from

Level 3 for the years ended December 31, 2024 and 2023.

As of December

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Significant Unobservable Inputs

Control investments $

Total investments

Treasury bills

investments $

Total investments $

As of December 31,

2022, investments measured at fair value on a recurring basis are categorized in the tables below based on the lowest level of significant

input to the valuations:

As of December 31, 2023, investments measured at fair

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

Fair Value Measurements as of December 31, 2023

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Significant Unobservable Inputs

Control investments $

Total investments

Treasury Bills

Total investments $

The following table

provides a reconciliation of fair value changes during 2023 for all investments for which we determine fair value using significant unobservable

(Level 3) inputs:

Total investments and U.S.

Treasury Bills

The following table provides a reconciliation of fair

value changes during 2024 for all investments for which we determine fair value using significant unobservable (Level 3) inputs:

Fair value measurements using significant unobservable inputs (Level 3)

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Fair value as of December 31, 2024

The following table

provides a reconciliation of fair value changes during 2022 for all investments for which we determine fair value using significant unobservable

(Level 3) inputs:

Fair value measurements using significant unobservable inputs

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The following table provides a reconciliation of

fair value changes during 2023 for all investments for which we determine fair value using significant unobservable (Level 3) inputs:

Fair value measurements using significant unobservable inputs (Level 3)

(in thousands)

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Fair value as of December 31, 2023

The following table provides a reconciliation

of fair value changes during 2021 for all investments for which we determine fair value using significant unobservable (Level 3) inputs:

Fair value measurements using significant unobservable inputs (Level 3)

The following table provides a reconciliation of

fair value changes during 2022 for all investments for which we determine fair value using significant unobservable (Level 3) inputs:

value measurements using significant unobservable inputs (Level 3)

(in thousands)

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and Equus Energy, we may also consider acreage value, proved reserve multiples, daily production multiples, and discount rates.

Finally, industry

trends, market forecasts, and comparable transactions in sectors in which we hold a Level 3 investment are also taken into account when

assessing the value of these investments.

The following table

summarizes the significant non-observable inputs in the fair value measurements of our Level 3 investments by category of investment and

valuation technique as of December 31, 2023:

Finally, industry trends, market forecasts, and comparable

transactions in sectors in which we hold a Level 3 investment are also taken into account when assessing the value of these investments.

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The following table summarizes the significant non-observable

inputs in the fair value measurements of our Level 3 investments by category of investment and valuation technique as of December 31,

(in thousands)

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Limited liability company investments

Acreage Value (per acre)

Equus Energy, LLC

Acreage Value (per acre)

Guideline Transaction Method

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Discount Rate

Transaction Price

Morgan E&P, LLC

Guideline Public Company Method

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Daily Production Multiple

Morgan E&P, LLC

Guideline Transaction Method

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Discount for lack of marketability

The following table

summarizes the significant non-observable inputs in the fair value measurements of our Level 3 investments by category of investment and

valuation technique as of December 31, 2022:

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The following table summarizes the significant non-observable

inputs in the fair value measurements of our Level 3 investments by category of investment and valuation technique as of December 31,

(in thousands)

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Discount Rate

weighted averages in the table above were determined based on acreage, reserves, production and, in the case of discount rates, an

arithmetic average of minimum and maximum rates.

Because of the inherent uncertainty of the valuation of portfolio securities which

do not have readily ascertainable market values, our fair value determinations may materially differ from the values that would have

been used had a ready market existed for the securities.

Guideline Public Company Method

Proved Reserve Multiple

Daily Production Multiple

Morgan E&P, LLC

Guideline Transaction Method

Proved Reserve Multiple

Daily Production Multiple

Discounted Cash Flow

Discount Rate

Morgan E&P, LLC

Yield analysis

Discount for lack of marketability

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The various weighted

averages in the table above were determined based on acreage, reserves, production and, in the case of discount rates, an arithmetic average

of minimum and maximum rates.

Because of the inherent uncertainty of the valuation of portfolio securities which do not have readily ascertainable

market values, our fair value determinations may materially differ from the values that would have been used had a ready market existed

for the securities.

We adjust our net

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

Investment Transactions —

Investment transactions are recorded at fair value

on the trade date.

Current-period changes in fair value of investments are reflected as a component of the net unrealized appreciation

of portfolio securities on the Statements of Operations.

The net change in unrealized appreciation primarily reflects the change in investment

fair values as of the last business day of the reporting period, including the reversal of previously recorded unrealized gains or losses

for investments sold during the period.

Realized gains or losses are recognized as the difference between the net proceeds received (excluding

prepayment fees, if any) and the amortized cost basis of the investment using the specific identification method without regard to unrealized

gains or losses previously recognized, and include investments written off during the period, net of recoveries.

As of December

31, 2023, we have no assets going through foreclosure .

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

We classify our investments

in accordance with the requirements of the 1940 Act.

Transactions —

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

Current-period changes in fair value of

investments are reflected as a component of the net unrealized appreciation of portfolio securities on the Statements of Operations.

net change in unrealized appreciation primarily reflects the change in investment fair values as of the last business day of the reporting

period, including the reversal of previously recorded unrealized gains or losses for investments sold during the period.

Realized gains

or losses are recognized as the difference between the net proceeds received (excluding prepayment fees, if any) and the amortized cost

basis of the investment using the specific identification method without regard to unrealized gains or losses previously recognized, and

include investments written off during the period, net of recoveries.

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

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

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

Under the 1940 Act, “Control Investments”

are defined as investments

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

as investments in companies in which the Fund owns more than 25% of the voting securities or maintains greater than 50% of the board

representation.

Under the 1940 Act, “Affiliate Investments”

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

5% and 25% of the voting securities.

are defined as those non-control investments in companies in

which we own between 5% and 25% of the voting securities.

Under the 1940 Act, “Non-affiliate Investments”

are defined as investments that are neither

Control Investments nor Affiliate Investments.

Interest and Dividend

Income Recognition —We record interest income, adjusted for amortization of premium and accretion of discount, on an accrual

basis to the extent that we expect to collect such amounts.

We accrete or amortize discounts and premiums on securities purchased over

the life of the respective security using the effective yield method.

The amortized cost of investments represents the original cost adjusted

for the accretion of discount and/or amortization of premium on debt securities.

We stop accruing interest on investments when we determine

that interest is no longer collectible.

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

accrual is uncollectible.

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

on the principal balance until the entire principal balance has been repaid, before we recognize any additional interest income.

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

portfolio interest.

Dividend income is recorded as dividends are declared by the portfolio company or at the point an obligation exists

for the portfolio company to make a distribution.

Payment in Kind

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

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

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

To maintain our status as

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

in respect of such investments.

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.

are defined as

investments that are neither Control Investments nor Affiliate Investments.

and Dividend Income Recognition —We record interest income, adjusted for amortization of premium and accretion of discount, on

an accrual basis to the extent that we expect to collect such amounts.

We accrete or amortize discounts and premiums on securities purchased

over the life of the respective security using the effective yield method.

The amortized cost of investments represents the original cost

adjusted for the accretion of discount and/or amortization of premium on debt securities.

We stop accruing interest on investments when

we determine that interest is no longer collectible.

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

the current accrual is uncollectible.

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

as payment on the principal balance until the entire principal balance has been repaid, before we recognize any additional interest income.

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

relevant portfolio interest.

Dividend income is recorded as dividends are declared by the portfolio company or at the point an obligation

exists for the portfolio company to make a distribution.

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

We add PIK interest, if any, computed at

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

to requalify as a RIC, we must pay out to stockholders this non-cash source of income in the form of dividends even if we have not yet

collected any cash in respect of such investments.

We will continue to pay out net investment income and/or realized capital gains, if

any, on an annual basis as required under the 1940 Act.

Cash and Cash

Equivalents and Restricted Cash —

Cash includes unrestricted demand deposits at highly

rated financial institutions and highly liquid investments with original maturities of three months or less.

The Company’s cash

balances may exceed Federal Deposit Insurance Corporation (“FDIC”) insured limits from time to time.

Although the Company

bears risk to amounts in excess of those insured by the FDIC, it does not anticipate any losses as a result due to the financial position

and creditworthiness of the depository institutions in which those deposits are held.

We include our investing activities within

cash flows from operations.

The following table

provides a reconciliation of cash and cash equivalents and restricted cash as reported within the consolidated balance sheet that sums

to the total of the same amounts shown in the consolidated statement of cash flows as of December 31, 2023, 2022 and 2021:

Cash includes unrestricted demand deposits at highly rated financial institutions and highly

liquid investments with original maturities of three months or less.

The Company’s cash balances may exceed Federal Deposit Insurance

Corporation (“FDIC”) insured limits from time to time.

Although the Company bears risk to amounts in excess of those insured

by the FDIC, it does not anticipate any losses as a result due to the financial position and creditworthiness of the depository institutions

in which those deposits are held.

We include our investing activities within cash flows from operations.

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The following

table provides a reconciliation of cash and cash equivalents and restricted cash as reported within the consolidated balance sheet that

sums to the total of the same amounts shown in the consolidated statement of cash flows as of December 31, 2024, 2023 and 2022:

Cash and cash equivalents at end of period

Restricted cash at end of period

Cash and cash equivalents and restricted cash at end of period

Taxes —Although

we are not required to maintain our RIC status as a BDC, historically, we have nevertheless complied with the requirements of the Code

necessary to qualify as a RIC and, as such, are generally not subject to federal income taxes on otherwise taxable income (including net

realized capital gains) if distributed to stockholders.

For the year ended December 31, 2023, no tax accrual for income or excise tax

For the year ended December 31, 2021, we accrued a $0.04 million in corporate level income and excise tax in lieu of making

a distribution of the net capital gain for the sale of PalletOne, Inc.

This tax was paid in March 2022.

We borrow money from time to time

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

See Note 1 for discussion of Taxable Subsidiaries and see Note 2 for further discussion

of the Fund’s RIC borrowings.

All corporations

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

As a result, we paid Delaware

Franchise tax in the amount of $0.03 million for the year ended December 31, 2023, $0.02 million for the year ended December 31, 2022,

$0.03 million for the year ended December 31, 2021, respectively.

Texas margin tax

applies to legal entities conducting business in Texas.

Cash and cash equivalents and restricted cash at

end of period

Taxes —

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

However, as a result of the

Company’s election to not qualify as a RIC in the fourth quarter of 2024, the Company is now classified as a C corporation for

income tax purposes and subject to guidance under ASC 740, accounting for income taxes.

This change in tax status is reflected in

the footnotes below.

All corporations incorporated in the State of Delaware are required

to file an Annual Report and to pay a franchise tax.

As a result, the Company paid Delaware Franchise tax in the amount of $0.03 million

for the year ended December 31, 2024, $0.03 million for the year ended December 31, 2023, $0.02 million for the year ended December 31,

2022, respectively.

Texas margin tax applies to legal entities conducting business

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

The tax is calculated

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

the year ended December 31, 2023, no state income tax is expected.

The tax is calculated by applying a tax rate to a base that considers

both revenue and expenses and therefore has the characteristics of an income tax.

For the year ended December 31, 2024, no state income

tax is expected.

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

3 unchanged sentences

&NegativeThickSpace;

December 31, 2023

December 31, 2022

Accumulated undistributed net investment losses

2 unchanged sentences

Accumulated deficit

Share-Based Incentive

Compensation —On June 13, 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

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

The maximum number of shares

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

The term of the Incentive Plan will

expire on June 13, 2026.

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

officers in the aggregate amount of 844,500 shares.

The awards are each subject to a vesting requirement over a 3-year period unless

the recipient thereof is terminated or removed from their position as a director or executive officer without “cause”, or

as a result of constructive termination, as such terms are defined in the respective award agreements entered into by each of the recipients

and the Fund.

Incentive Compensation —On June 13, 2016, our shareholders approved the adoption of our 2016 Equity Incentive Plan

(“Incentive Plan”).

The Incentive Plan is intended to promote the interests of the Fund by encouraging officers,

employees, and directors of the Fund and its affiliates to acquire or increase their equity interest in the Fund and to provide a

means whereby they may develop a proprietary interest in the development and financial success of the Fund, to encourage them to

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

stockholders.

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

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

The Incentive Plan permits the award of

restricted stock as well as common stock purchase options.

The maximum number of shares of common stock that are subject to awards

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

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

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

amount of 844,500 shares.

The awards are each subject to a vesting requirement over a 3-year period unless the recipient thereof is

terminated or removed from their position as a director or executive officer without “cause”, or as a result of

constructive termination, as such terms are defined in the respective award agreements entered into by each of the recipients and

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

We account for share-based compensation using the fair value method, as

prescribed by ASC 718, Compensation—Stock Compensation .

Accordingly, for restricted stock awards, we measure the grant date

fair value based upon the market price of our common stock on the date of the grant and amortize the fair value of the awards as share-based

compensation expense over the requisite service period, which is generally the vesting term.

Inasmuch as all existing awards under the

Incentive Plan became fully-vested prior to 2021, we recorded no compensation expense relating to awards made under the Incentive Plan

for the years ended December 31, 2023, 2022 and 2021.

Accordingly, for restricted stock awards, we measure the grant date fair

value based upon the market price of our common stock on the date of the grant and amortize the fair value of the awards as

share-based compensation expense over the requisite service period, which is generally the vesting term.

Inasmuch as all existing

awards under the Incentive Plan became fully-vested prior to 2021, we recorded no compensation expense relating to awards made under

the Incentive Plan for the years ended December 31, 2024, 2023 and 2022.

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Segments —Equus

operates as a single segment with a principal investment objective to maximize total return from generating current income from debt investments

and current income and capital appreciation from equity and equity-related investments.

The Company’s Investment Committee and Chief

Executive Officer collectively perform the function that allocates resources and assesses performance, and thus together, serve as the

Company’s chief operating decision maker (the “CODM”).

Among other metrics, the CODM uses net investment income as a

primary GAAP profit or loss metric used in making operating decisions, which can be found on the Statement of Operations along with significant

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

(4) RELATED PARTY TRANSACTIONS AND AGREEMENTS

Except as noted

below, as compensation for services to the Fund, each Independent Director receives an annual fee of $40,000 paid quarterly in arrears,

a fee of $2,000 for each meeting of the Board of Directors or committee thereof attended in person, a fee of $1,000 for participation

in each telephonic meeting of the Board or committee thereof, and reimbursement of all out-of-pocket expenses relating to attendance at

such meetings.

The chair of each of our standing committees (audit, compensation, and nominating and governance) also receives an annual

fee of $50,000, payable quarterly in arrears.

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

special circumstances.

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

We may also pay

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

None of our interested directors receive

annual fees for their service on the Board of Directors.

In respect of services

provided to the Fund by members of the Board not in connection with their roles and duties as directors, the Fund pays a rate of $300

per hour for services rendered.

noted below, as compensation for services to the Fund, each Independent Director receives an annual fee of $40,000 paid quarterly in

arrears, a fee of $2,000 for each meeting of the Board of Directors or committee thereof attended in person, a fee of $1,000 for

participation in each telephonic meeting of the Board or committee thereof, and reimbursement of all out-of-pocket expenses relating

to attendance at such meetings.

The chair of each of our standing committees (audit, compensation, and nominating and governance)

also receives an annual fee of $50,000, payable quarterly in arrears.

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

our Board of Directors in special circumstances.

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

of Directors.

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

of our interested directors receive annual fees for their service on the Board of Directors.

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

of $300 per hour for services rendered.

As of December

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

(5) FEDERAL INCOME TAX MATTERS

As a RIC, our tax

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

For the year ended December 31, 2022, we have incurred net investment losses and no net capital gains or losses.

no income or excise tax was accrued or paid.

While we incurred net investment losses and had net realized capital gains for the year ended

December 31, 2021, we accrued $0.04 million in corporate level income and excise tax in lieu of making a distribution.

This tax was paid

in March 2022.

Our year-end for

determining capital gains for purposes of Section 4982 of the Internal Revenue Service Code (the “Code”) is October 31.

In general, we may

take certain adjustments to the classification of net assets as a result of permanent book-to-tax differences, which may include differences

in the book and tax basis of certain assets and liabilities, and undistributed net capital gains for which we have loss carryforwards,

among other items.

During the year ended December 31, 2021, according and pursuant to ASC 946-20-50, we recharacterized $18.5 million

in accumulated undistributed net capital gains for which we had loss carryforwards, among other items.

Accordingly, this recharacterization

has increased capital in excess of par and decreased accumulated deficit.

There were no

material book-to-tax differences for net investment income/losses, realized gains or unrealized appreciation/depreciation.

For the years

ended December 31, 2023 and December 31, 2022, there are no capital loss carryforwards.

Reclassification

of returns of capital had no material book to tax differences for the three years ended December 31, 2023 and therefore has no material

book to tax differences impacting accumulated earnings during that three-year period.

We believe that any

aggregate exposure for uncertain tax positions should not have a material impact on our financial statements as of December 31, 2023 or

December 31, 2022.

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

50% likelihood of being realized upon ultimate settlement.

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

uncertain tax positions.

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

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

The Fund’s

accounting policy related to income tax penalties and interest assessments is to accrue for these costs and record a charge to expenses

during the period that the Fund takes an uncertain tax position through resolution with the taxing authorities or expiration of the applicable

statute of limitations.

All of the Fund’s

Deferred income tax assets and liabilities

are recorded based on enacted tax rates applicable to the future period when those temporary differences are expected to be recovered

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

The Company is also

subject to the Texas Gross Margin tax of .75% of modified taxable income as determined for Texas purposes.

This combination results in

a marginal blended tax rate of approximately 21.6%.

At each of December 31, 2024, and 2023,

the tax effected amount of U.S.

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

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

can be carried forward indefinitely.

The Company has determined, after weighing

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

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

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During the current period, the Company

has estimated a taxable loss.

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

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

All of the Company’s

federal and state tax returns for 2020 through 2023 remain open to examination.

We believe that there are no tax positions taken or expected

to be taken that would significantly increase or decrease unrecognized tax benefits within twelve months of the reporting date.

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

Years Ended December 31,

Current (expense) benefit:

Total current (expense) benefit

Deferred (expense) benefit:

Total deferred (expense) benefit

Total benefit (expense):

Total benefit (expense)

As of December 31, 2024, the Company has not recorded a reserve

for uncertain tax positions.

The components of the net deferred tax assets (liabilities)

in the Fund’s balance sheets were as follows:

As of December 31,

Deferred tax assets:

Charitable Contributions

Net operating loss carryforwards

Total Deferred Tax Assets

Valuation allowance

Deferred Tax Assets after Valuation Allowance

Deferred tax liabilities:

Mark to Market Unrealized Gain/Loss

Total net deferred tax assets (liabilities)

The provision for income taxes varies from the maximum federal statutory

rate of 21% for the year ended December 31 , 2024, as follows:

Years Ended December 31,

Income tax expense (benefit) at federal statutory rate

Change in tax status

Effect of state income taxes

Non-deductible Permanent Items

2023 Return to Provision Adjustment

Change in valuation allowance

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Fund’s accounting policy related to income tax penalties and interest assessments is to accrue for these costs and record a

charge to income tax expenses during the period that the Fund takes an uncertain tax position through resolution with the taxing

authorities or expiration of the applicable statute of limitations.

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

We believe that there are no tax positions

taken or expected to be taken that would significantly increase or decrease unrecognized tax benefits within twelve months of the reporting

(6) COMMITMENTS AND CONTINGENCIES

2 unchanged sentences

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

under the operating lease agreement, inclusive of common area maintenance costs, was $93,000 for the years ended December 31, 2023, December

31, 2022, and December 31, 2021, respectively.

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

We have no other leases.

Portfolio Companies.

As of December 31, 2023 and December 31, 2022, we had $1.7 million and $0 in outstanding commitments to our portfolio company investments.

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

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

If we do not have sufficient

funds to make follow-on investments, the portfolio company in need of the investment may be negatively impacted.

Also, our equity interest

in the estimated fair value of the portfolio company could be reduced.

Follow-on investments may include capital infusions which are expenditures

made directly to the portfolio company to ensure that operations are completed, thereby allowing the portfolio company to generate cash

flows to service the debt.

Legal Proceedings.

From time to time, the Fund is also a party to certain proceedings incidental to the normal course of our business including the enforcement

of our rights under contracts with our portfolio companies.

While the outcome of these legal proceedings cannot at this time be predicted

with certainty, we do not expect that these proceedings will have a material effect upon the Fund’s financial condition or results

of operations.

have sufficient funds to make follow-on investments, the portfolio company in need of the investment may be negatively impacted.

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

Follow-on investments may include capital infusions

which are expenditures made directly to the portfolio company to ensure that operations are completed, thereby allowing the portfolio

company to generate cash flows to service the debt.

From time to time, the Fund is also a party to certain proceedings incidental to the normal course of our business including

the enforcement of our rights under contracts with our portfolio companies.

While the outcome of these legal proceedings cannot at this

time be predicted with certainty, we do not expect that these proceedings will have a material effect upon the Fund’s financial

condition or results of operations.

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(7) PORTFOLIO SECURITIES

2024 Portfolio Activity

The following table

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

The following table summarizes significant

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

Morgan E&P, LLC

During 2023, we recorded

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

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

Such change in unrealized appreciation resulted primarily from

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

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

The increase in the fair value

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

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

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

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

Such change in unrealized appreciation resulted primarily

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

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

The change in unrealized appreciation

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

including (i) decreases in the forward curve for oil and natural gas and its effect on the economic prospects of Equus Energy regarding

future development of its oil and gas properties, and (ii) indications of interest from third parties regarding the possible sale of these

properties during the fourth quarter of 2024.

See Subsequent Events below where we sold our interest in Equus Energy in March 2025

for a combination of cash and preferred stock valued at $4.0 million.

2023 Portfolio Activity

The following table

summarizes significant investment activity during the year ended December 31, 2022 (in thousands):

Equus Energy, LLC

During 2022, we recorded

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

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

Such change in unrealized appreciation resulted primarily from

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

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

these commodities during 2022.

The following table summarizes significant

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

Morgan E&P, LLC

we recorded an increase of $17.0 million in net unrealized appreciation, from an unrealized appreciation of $7.5 million as of December

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

Such change in unrealized appreciation resulted primarily

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

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

The increase in the

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

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

its gas properties.

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2022 Portfolio Activity

During, 2021, we

received $3.8 million in cash from the escrow receivable related to the sale of PalletOne.

We recognized a capital gain of $0.4 million

due to the settlement of the escrow receivable in connection with this sale.

The following table

summarizes significant investment activity during the year ended December 31, 2022 (in thousands):

Portfolio Company

Equus Energy, LLC

During 2021, we recorded

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

a net unrealized appreciation of $5.0 million as of 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

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

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

Such change in unrealized appreciation resulted primarily

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

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

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(8) EQUUS ENERGY, LLC

Equus Energy, LLC

(“Equus Energy”) was formed in November 2011 as a wholly-owned subsidiary of the Fund to make investments in companies in

the energy sector, with particular emphasis on income-producing oil & gas properties.

In December 2011, we contributed $250,000 to

the capital of Equus Energy.

Equus Energy,

LLC (“Equus Energy”) was formed in November 2011 as a wholly-owned subsidiary of the Fund to make investments in companies

in the energy sector, with particular emphasis on income-producing oil & gas properties.

In December 2011, we contributed $250,000

to the capital of Equus Energy.

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 consisting of 136 producing and non- producing

oil and gas wells.

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

working capital.

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

working capital.

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

working capital.

The working interests include associated development rights of approximately 21,320 acres situated on 9 separate properties

in Texas and Oklahoma.

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

The wells are operated

by a number of operators, including Burk Royalty, which has operating responsibility for all of Equus Energy’s 22 producing well

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

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

and non- producing oil and gas wells.

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

the purpose of additional working capital.

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

for the purpose of additional working capital.

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

Energy for the purpose of additional working capital.

The working interests include associated development rights of approximately 21,320

acres situated on 9 separate properties in Texas and Oklahoma.

The working interests range from a de minimus amount to 50% of the

leasehold that includes these wells.

are operated by a number of operators, including Burk Royalty, which has operating responsibility for all of Equus Energy’s 22 producing

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

gas and hydrocarbon extraction in multiple formations.

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comprise approximately 13,000 acres located in the area known as the “Eagle Ford Shale”

Below is selected

financial information from the audited financial statements of Equus Energy as of December 31, 2023 and 2022, and for the years ended

December 31, 2023, 2022 and 2021 (in thousands):

See Subsequent Events

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

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Below is selected financial information

from the audited financial statements of Equus Energy as of December 31, 2024 and 2023, and for the years ended December 31, 2024, 2023

and 2022 (in thousands):

EQUUS ENERGY, LLC and SUBSIDIARY

3 unchanged sentences

Accounts receivable

Other current assets

Total current assets

12 unchanged sentences

Total liabilities and member's deficit $

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EQUUS ENERGY, LLC and SUBSIDIARY

1 unchanged sentence

of Operations

Year Ended December 31,

Operating revenue

1 unchanged sentence

Direct operating expenses

Gain on sale of oil and gas properties

Depletion, depreciation, amortization and accretion

Impairment of oil and gas properties

Professional fees

1 unchanged sentence

Total operating expenses

Loss from operations

Net operating loss

Non-operating income

Total other income

Net income (loss)

Net (loss) income

EQUUS ENERGY, LLC and SUBSIDIARY

7 unchanged sentences

Depletion, depreciation and amortization

Gain on sale of oil and gas properties

Accretion expense

Changes in operating assets and liabilities:

Changes in operating assets and liabilites:

Accounts receivable

2 unchanged sentences

Due to Parent

Net cash provided by (used in) operating

Net cash used in operating

Cash flows from investing activities:

Investment in oil & gas properties

Sale of oil & gas properties

Net cash used in investing activities

1 unchanged sentence

Capital contribution

Net cash (used in) provided by investing activities

Net (decrease) increase in cash

Net cash provided by investing

Net decrease in cash

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

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(9) MORGAN E&P, LLC

Morgan E&P, LLC (“Morgan”)

was organized by the Fund on April 3, 2023 as a Delaware limited liability company and a wholly-owned subsidiary of the Fund.

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”).

Under the terms of the Purchase

and Sale Agreement entered into by Morgan and Pro Energy, Morgan is required to drill and complete a minimum of six wells within 18 months

of receiving the first drilling permits.

The average cost of drilling a new horizontal well is approximately $8.2 million.

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, Morgan had drawn $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).

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

During 2023, Morgan acquired 5,897 net acres, in the Bakken/Three Forks formation in the Williston Basin of North Dakota,

and acquired approximately 810 additional net acres during the second quarter of 2024.

The acreage and associated mineral rights were

acquired from Pro Energy I LLC (“Pro Energy”) who received a carried working interest of 20% in the acquired acreage.

we entered into an agreement with Morgan to provide it up to $10.0 million in senior debt financing, subject to a schedule of disbursements

and draws that we determine.

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

As of December 31, 2024, Morgan had drawn

the full $10.5 million under this facility.

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

payment of $2.4 million in cash.

Below is summarized

audited condensed consolidated financial information for Morgan E&P, LLC as of December 31, 2023 and for the period from inception

(April 3, 2023) through December 31, 2023, respectively, (in thousands):

audited condensed consolidated financial information for Morgan E&P, LLC as of December 31, 2024 and 2023 and for the year ended December

31, 2024 and the period from inception (April 3, 2023) through December 31, 2023, respectively, (in thousands):

Morgan E&P, LLC

Condensed Balance Sheets

Condensed Balance

December 31, 2024

Cash and cash equivalents

Oil and gas receivables:

December 31, 2023

Revenue receivables

Joint interest billing receivables

Other receivables

Prepaids and other current assets

2 unchanged sentences

Oil and gas properties, net - full cost method

Operating lease - right-of-use assets

Other property, plant and equipment, net

Total property, plant and equipment - net

Other noncurrent assets

Operating lease right-of-use assets, net

Total noncurrent assets

Liabilities and Member's Deficit:

3 unchanged sentences

Prepayments from working interest owners

Current portion of lease liabilities

Current portion of operating lease liabilities

Due to parent

5 unchanged sentences

Note payable - Due to parent

Long-term accrued liabilities

Long-term accrued liabilities - Due to parent

Total long-term liabilities

Total liabilities

Retained deficit

Total member's deficit

Commitments and contingencies (Note 10)

Member's deficit

Total liabilities and member's deficit

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Morgan E&P, LLC

Condensed Statements of Operations

From inception (April 3, 2023) to

December 31, 2023

Oil and gas revenues

Operating costs and expenses

Lease operating expense

Production and ad valorem taxes

Condensed Statements

of Operations

Year Ended December 31,

Period from inception (April 3, 2023) through December 31,

Oil, natural gas and natural gas liquid revenues

Lease operating

Production and other taxes

Marketing, transportation and gathering expense

Depreciation, depletion and amortization

Impairment of oil and gas properties

General and administrative

Total operating costs and expenses

Loss from operations

Total expenses

Other income (expense)

1 unchanged sentence

Interest expense

Total other income and expenses, net

Total other expense, net

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Morgan E&P, LLC

Condensed Statements of Cash Flows

From inception

(April 3, 2023) through

December 31, 2023

Condensed Statements

of Cash Flows

Year Ended December 31,

Period from inception (April 3, 2023) through December 31,

Cash flows from operating activities

Adjustments to reconcile net income to cash flows

used in operating activities:

Depreciation, depletion, amortization

Amortization of right-of-use assets

Adjustments to reconcile net loss to net cash flows

(used in) provided by operating activities

Depreciation, depletion, and amortization

Amortization of right-of-use asset

Impairment of oil and gas properties

Changes in operating assets and liabilities

Revenue receivables

Joint interest billing receivables

Accounts receivable –

oil and natural gas sales

Accounts receivable –

joint interest billings

Other receivables

Prepaids and other current assets

1 unchanged sentence

Revenue payable

Prepayments from working interest owners

Accounts payable - Due to parent

Prepayments from owners

Due to parent

Current portion of operating lease liabilities

Accrued liabilities

Net cash provided used in operating activities

Long-term accrued liabilities - due to parent

Net cash provided (used in) by operating activities

Cash flows from investing activities

Additions to oil and gas properties

Capital expenditures

Acquisition of oil and gas properties

2 unchanged sentences

Cash flows from financing activities

Proceeds from note payable - Due to parent

Net cash used by financing activities

Proceeds from note payable - affiliate

Net cash provided by financing activities

Net change in cash

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Beginning of period

End of period

Supplemental disclosure for noncash financing

and investing activities

Operating lease right-of-use assets additions

Acquisition of oil and natural gas working interests funded by

accrued liabilities

Change in capital accounts payable and capital accruals

Prepayments applied to joint interest receivables

Change in asset retirement costs

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(10) RECENT ACCOUNTING PRONOUNCEMENTS

4 unchanged sentences

to have minimal impact on our financial statements.

Accounting Standards

Not Yet Adopted —In November 2023, FASB issued ASU 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable

Segment Disclosures”.

The amendments in this ASU require improved reportable segment information on an annual and interim basis,

primarily through enhanced disclosures about significant segment expenses.

This update will be effective for financial statements issued

for fiscal years beginning after December 15, 2023, and interim periods for fiscal years beginning after December 15, 2024.

is currently evaluating the impact of this standard on the consolidated financial statements

In December 2023,

FASB issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures”.

The amendments in this ASU require

improved annual income tax disclosures surrounding rate reconciliation, income taxes paid, and other disclosures.

This update will be

effective for financial statements issued for fiscal years beginning after December 15, 2024.

Standards Not Yet Adopted —In December 2023, FASB issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income

Tax Disclosures”.

The amendments in this ASU require improved annual income tax disclosures surrounding rate reconciliation, income

taxes paid, and other disclosures.

This update will be effective for financial statements issued for fiscal years beginning after December

The Fund is currently evaluating the impact of this standard on the financial statements.

In November 2024,

FASB issued ASU 2024-03, “Income Statement –

Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40),

Disaggregation of Income Statement Expenses”.

The amendments in this Update require disclosure, in the notes to financial statements,

of specified information about certain costs and expenses.

This update will be effective for financial statements issued for fiscal years

beginning after December 15, 2026.

Early adoption is permitted.

is currently evaluating the impact of this standard on the consolidated financial statements.

Accounting Standards

Recently Adopted —

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820) - Fair Value Measurement

of Equity Securities Subject to Contractual Sale Restrictions”, which was issued to (1) clarify the guidance in Topic 820, Fair

Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an

equity security, (2) to amend a related illustrative example, and (3) to introduce new disclosure requirements for equity securities subject

to contractual sale restrictions that are measured at fair value in accordance with Topic 820.

The new guidance is effective for interim

and annual periods beginning after December 15, 2023.

There was no impact on the financial statements or financial statement disclosures.

The Fund is currently evaluating the impact of this standard on the

financial statements.

In January 2025,

FASB issued ASU 2025-01, “Income Statement –

Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40),

Clarifying the Effective Date”.

The amendment in this Update amends the effective date of Update 2024-03 to clarify that all public

business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026.

Early adoption of

Update 2024-03 is permitted.

The Fund is currently evaluating the impact of this standard on the consolidated financial statements.

In November 2024,

FASB issued ASU 2024-04, “Debt with Conversion and Other Options (Subtopic 470-20), Induced Conversions of Convertible Debt Instruments”.

The amendments in this Update clarify the requirements for determining whether certain settlements of convertible debt instruments should

be accounted for as an induced conversion.

Under the amendments, to account for a settlement of a convertible debt instrument as an induced

conversion, an inducement offer is required to provide the debt holder with, at a minimum, the consideration (in form and amount) issuable

under the conversion privileges provided in the terms of the instrument.

An entity should assess whether this criterion is satisfied as

of the date the inducement offer is accepted by the holder.

If, when applying this criterion, the convertible debt instrument had been

exchanged or modified (without being deemed substantially different) within the one-year period leading up to the offer acceptance date,

an entity should compare the terms provided in the inducement offer with the terms that existed one year before the offer acceptance date.

The amendments do not change the other criteria that are required to be satisfied to account for a settlement transaction as an induced

The amendments in this Update also make additional clarifications to assist stakeholders in applying the guidance.

amendments, the incorporation, elimination, or modification of a VWAP formula does not automatically cause a settlement to be accounted

for as an extinguishment;

an entity should instead assess whether the form and amount of conversion consideration are preserved (that

is, provided for in the inducement offer) using the fair value of an entity’s shares as of the offer acceptance date.

The amendments

in this Update also clarify that the induced conversion guidance applies to a convertible debt instrument that is not currently convertible

as long as it had a substantive conversion feature as of both its issuance date and the date the inducement offer is accepted.

will be effective for financial statements issued for fiscal years beginning after December 15, 2025.

Early adoption is permitted for

all entities that have adopted the amendments in update 2020-06.

The Fund is currently evaluating the impact of this standard on the

consolidated financial statements.

Standards Recently Adopted —On January 1, 2024, we adopted ASU 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures”.

The amendments in this ASU require improved reportable segment information on

an annual and interim basis, primarily through enhanced disclosures about significant segment expenses.

See Note 3 –

Segments for the incremental disclosures.

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(11) SUBSEQUENT EVENTS

Our Management performed

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

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.

Changes in and Disagreements

with Accountants on Accounting and Financial Disclosure

Our Management

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

of Convertible Note and Warrants .

On February 10, 2025, we issued a 1-year senior convertible promissory note bearing interest at

the rate of 10.0% per annum in exchange for $2.0 million in cash (“Equus Note”).

The Equus Note is convertible into shares

of the Fund’s common stock at a conversion price of $1.50 per share.

Contemporaneously with the issuance of the Note, the Fund also

issued two common stock purchase warrants to acquire an aggregate of 2,000,000 shares of the Fund’s common stock at an exercise

price of $1.50 per share.

New Portfolio

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.

Equus Energy .

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

gas assets (“NAEOC”).

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

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

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in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data