EQUUS TOTAL RETURN, INC. 10-K

Item 8. Financial Statements and Supplementary Data Index to Financial Statements Page Report of Independent Registered Public Accounting Firm - (BDO USA, P.C.; Houston, TX; PCAOB ID#243) 39 Balance Sheets —As of December 31, 2024 and 202 3 41 Statements of Operations —For the years ended December 31, 2024, 2023 and 202 2 42 Statements of Changes in Net Assets —For the years ended December 31, 2024, 2023 and 202 2 43 Statements of Cash Flows — For the years ended December 31, 2024, 2023 and 2022 44 Statements of Selected Per Share Data and Ratios - For the years ended December 31, 2024, 2023, 2022, 2021 and 2020 45 Schedule of Investments —December 31, 202 4 46 Schedule of Investments —December 31, 202 3 48 Notes to Financial Statements 50 Schedules of Investments in and Advances to Affiliates — For the year ended December 31, 202 4 75 38 TableOfContents Report of Independent Registered Public Accounting Firm Shareholders and Board of Directors Equus Total Return, Inc. Houston, Texas 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, 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. 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, 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 Uncertainty 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. Basis for Opinion These financial statements and the selected per share data and ratios are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and the selected per share data and ratios based on our audits. 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. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the selected per share data and ratios are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. 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. 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, 2024, and 2023 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 a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 39 TableOfContents Valuation of Limited Liability Company Investments A s 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.    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, 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.  The primary procedures we performed to address this critical audit matter included:    · Testing 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. · Utilizing 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 Fund's auditor since 2014. Houston, Texas April 10, 2025 40 TableOfContents EQUUS TOTAL RETURN, INC. BALANCE SHEETS December 31, 2024 December 31, 2023 (in thousands, except shares and per share amounts) Assets Investments in portfolio securities at fair value: Control investments (cost at $18,611 and $16,364, respectively) $ 27,500 $ 40,853 Total investments in portfolio securities at fair value 27,500 40,853 U.S. Treasury Bills — 44,955 Cash and cash equivalents 262 6,533 Restricted cash — 450 Accounts receivable from affiliates 678 139 Accrued interest 1,470 225 Other assets 26 392 Total assets 29,936 93,547 Liabilities and net assets Accounts payable 332 172 Accrued compensation 1 29 Accounts payable to related parties 93 104 Borrowing under margin account — 44,955 Total liabilities 426 45,260 Commitments and contingencies (See Note 6) Net assets Common stock, $.001 par value per share; 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, 2024 and December 31, 2023 Common stock, par value $ 14 $ 14 Capital in excess of par value 74,785 74,785 Accumulated deficit (45,289 ) (26,512 ) Total net assets $ 29,510 $ 48,287 Shares of common stock issued and outstanding, $.001 par value, 100,000 and 50,000 shares authorized, respectively 13,586 13,586 Net asset value per share $ 2.17 $ 3.55 The accompanying notes are an integral part of these financial statements 41 TableOfContents EQUUS TOTAL RETURN, INC. STATEMENTS OF OPERATIONS Year Ended December 31, (in thousands, except per share amounts) 2024 2023 2022 Investment income: Interest income: Control investments $ 1,245 $ 225 $ — Total interest income 1,245 225 — Interest from U.S. Treasury Bills 29 24 — Total investment income 1,274 249 — Expenses: Compensation expense 1,761 1,937 1,564 Professional fees 1,439 1,110 815 Professional liability expenses 582 661 720 Director fees and expenses 317 334 325 General and administrative expenses 189 133 130 Mailing, printing and other expenses 127 71 56 Taxes 36 13 15 Interest expense 138 25 4 Total expenses 4,589 4,284 3,629 Net investment loss (3,315 ) (4,035 ) (3,629 ) Net realized gain: U.S. Treasury Bills 138 34 1 Net realized gain 138 34 1 Net unrealized appreciation (depreciation) of portfolio securities: Control investments (15,600 ) 16,950 2,500 Net change in net unrealized appreciation (depreciation) of portfolio securities (15,600 ) 16,950 2,500 Income Taxes Federal income taxes — — — Net increase (decrease) in net assets resulting from operations $ (18,777 ) $ 12,949 $ (1,128 ) Net increase (decrease) in net assets resulting from operations per share: Basic and diluted $ (1.38 ) $ 0.96 $ (0.08 ) Weighted average shares outstanding: Basic and diluted 13,586 13,526 13,518 The accompanying notes are an integral part of these financial statements 42 TableOfContents EQUUS TOTAL RETURN, INC. STATEMENTS OF CHANGES IN NET ASSETS Common Stock (in thousands) Number of Shares Par Value Capital in Excess of Par Value Accumulated Deficit Total Net Assets Balances as of December 31, 2024 13,586 14 74,785 (45,289 ) $ 29,510 Net decrease in net assets resulting from operations — — — (18,777 ) (18,777 ) Balances as of December 31, 2023 13,586 14 74,785 (26,512 ) 48,287 Issuance of shares 68 1 100 — 101 Net increase in net assets resulting from operations — — — 12,949 12,949 Balances as of December 31, 2022 13,518 13 74,685 (39,461 ) 35,237 Net decrease in net assets resulting from operations — — — (1,128 ) (1,128 ) Balances as of December 31, 2021 13,586 $ 13 $ 74,685 $ (38,333 ) $ 36,365 The accompanying notes are an integral part of these financial statements. 43 TableOfContents EQUUS TOTAL RETURN, INC. STATEMENTS OF CASH FLOWS Year Ended December 31, (in thousands) 2024 2023 2022 Cash flow from operating activities: Net (decrease) increase in net assets resulting from operations $ (18,777 ) $ 12,949 $ (1,128 ) Adjustments to reconcile net (decrease) increase in net assets resulting from operations to net cash provided by (used in) operating activities: U.S. Treasury Bills (138 ) (34 ) (1 ) Net change in unrealized appreciation (depreciation) of portfolio securities: Control investments 15,600 (16,950 ) (2,500 ) Purchase of portfolio securities (2,247 ) (8,253 ) (150 ) Net proceeds from dispositions of portfolio securities — — — Sales (purchases) of U.S. Treasury Bills, net 45,093 (38,923 ) (3,497 ) Changes in operating assets and liabilities: Accounts receivable from affiliates (539 ) 211 — Accrued interest (1,245 ) (225 ) — Other assets 366 (11 ) (6 ) Accounts payable and accrued liabilities 132 (227 ) (410 ) Accounts payable to related parties (11 ) 103 (12 ) Net cash provided by (used in) operating activities 38,234 (51,359 ) (7,704 ) Cash flows from financing activities: Borrowings under margin account 161,907 85,923 16,997 Repayments under margin account (206,862 ) (46,966 ) (13,499 ) Issuance of common stock — 101 — Net cash (used in) provided by financing activities (44,955 ) 39,058 3,498 Net (decrease) in cash and cash equivalents (6,721 ) (12,301 ) (4,206 ) Cash and cash equivalents and restricted cash at beginning of period 6,983 19,284 23,490 Cash and cash equivalents and restricted cash at end of period $ 262 $ 6,983 $ 19,284 Supplemental disclosure of cash flow information: Interest paid $ 138 $ 25 $ 4 Income taxes paid $ 36 $ 13 $ 53 The accompanying notes are an integral part of these financial statements. 44 TableOfContents EQUUS TOTAL RETURN, INC. SELECTED PER SHARE DATA AND RATIOS Year ended December 31, 2024 2023 2022 2021 2020 Investment income $ 0.09 $ 0.02 $ — $ — $ 0.02 Expenses 0.33 0.32 0.27 0.26 0.38 Net investment loss (0.24 ) (0.30 ) (0.27 ) (0.26 ) (0.36 ) Net realized gain (loss) 0.01 0.01 — 0.03 1.37 Net change in unrealized appreciation of portfolio securities (1.15 ) 1.25 0.19 0.42 (2.05 ) Net (decrease) increase in net assets resulting from operations (1.38 ) 0.96 (0.08 ) 0.19 (0.91 ) Capital transactions: Shares issued for portfolio securities — — — — 0.01 Dilutive effect of shares issued — (0.02) — — — Decrease in net assets resulting from capital transactions — (0.02) — — 0.01 Net increase (decrease) in net assets (1.38 ) 0.94 (0.08 ) 0.19 (0.90 ) Net assets at beginning of period 3.55 2.61 2.69 2.50 3.40 Net assets at end of period, basic and diluted $ 2.17 $ 3.55 $ 2.61 $ 2.69 $ 2.50 Weighted average number of shares outstanding during period, in thousands 13,586 13,526 13,518 13,518 13,518 Market price per share: Beginning of period $ 1.45 $ 1.43 $ 2.38 $ 2.16 $ 1.82 End of period $ 1.10 $ 1.45 $ 1.43 $ 2.38 $ 2.16 Selected information and ratios: Ratio of expenses to average net assets 11.80 % 8.87 % 10.14 % 9.77 % 13.00 % Ratio of net investment loss to average net assets (8.52 %) (8.36 %) (10.14 %) (9.77 %) (12.20 %) Ratio of net increase (decrease) in net assets resulting from operations to average net assets (48.28 %) 26.82 % (3.15 %) 7.38 % (30.82 %) Total return on market price (1) (24.14 %) 1.40 % (39.92 %) 10.19 % 18.68 % (1) Total return = [(ending market price per share + year-to-date dividends paid - beginning market price per share) / beginning market price per share ]. The accompanying notes are an integral part of these financial statements. 45 TableOfContents EQUUS TOTAL RETURN, INC. SCHEDULE OF INVESTMENTS DECEMBER 31, 2024 (in thousands, except share data) Name and Location of Date of Initial Cost of Fair Portfolio Company (1) Industry Investment Investment Principal Investment Value (2) Control Investments: Majority-owned (3) : Equus Energy, LLC (4) Houston, TX Energy December 2011 Member interest (100%) $ 8,111 $ 4,000 Morgan E&P, LLC (4) Houston, TX Energy April 2023 Member interest (100%) — 13,000 12% senior secured promissory note due 5/26 (5) $ 10,500 10,500 10,500 10,500 23,500 Total Control Investments: Majority-owned (represents 100% of total investments at fair value) 18,611 27,500 Total Investments $ 18,611 $ 27,500 (1) Under Section 55 (a) of the 1940 Act, qualifying assets must represent at least 70% of total assets at the time of acquisitions of any non-qualifying assets. As of none of the Fund's total assets were considered non-qualifying assets. See Note 3 to the financial statements, Valuation of Investments. (2) See Note 3 to the financial statements, Valuation of Investments. (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 securities of the company. (4) Level 3 Portfolio Investments (5) Income- producing 46 TableOfContents SCHEDULE OF INVESTMENTS – (Continued) DECEMBER 31, 2024 (in thousands, except share data) Our portfolio securities are restricted from public sale without prior registration under the Securities Act of 1933 (hereafter, the “Securities 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, 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 as a “non-diversified” investment company under the 1940 Act, which means we are not limited in the proportion of our assets that may be invested in the securities of a single issuer. The value of one segment called “Energy” includes our two remaining portfolio companies and was 93.2% of our net asset value, 91.9% of our total assets and 100% of our investments in portfolio company securities (at fair value) as of December 31, 2024. 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, 2024 (in thousands): Type of Securities Cost Fair Value Fair Value as Percentage of Net Assets Limited liability company investments $ 8,111 $ 17,000 57.6 % Secured and subordinated debt 10,500 10,500 35.6 % Total $ 18,611 $ 27,500 93.2 % The following is a summary by industry of the Fund’s investments in portfolio securities as of December 31, 2024 (in thousands): Industry Fair Value Fair Value as Percentage of Net Assets Energy $ 27,500 93.2 % Total $ 27,500 93.2 % 47 TableOfContents EQUUS TOTAL RETURN, INC. SCHEDULE OF INVESTMENTS DECEMBER 31, 2023 (in thousands, except share data) Name and Location of Date of Initial Cost of Fair Portfolio Company (1) Industry Investment Investment Principal Investment Value (2) Control Investments: Majority-owned (3) : Equus Energy, LLC (4) Houston, TX Energy December 2011 Member interest (100%) $ 8,111 $ 10,000 Morgan E&P, LLC (4) Houston, TX Energy April 2023 Member interest (100%) — 22,600 12% senior secured promissory note due 5/26 (5) $ 8,253 8,253 8,253 8,253 30,853 Total Control Investments: Majority-owned (represents 47.6% of total investments at fair value) 16,364 40,853 U.S. Treasury Bills U.S. Treasury Bill Government December 2023 UST 0% 1/24 44,955 44,955 44,955 Total U.S. Treasury bills (represents 52.4% of total investments at fair value) 44,955 44,955 Total Investments $ 61,319 $ 85,808 (1) Under Section 55 (a) of the 1940 Act, qualifying assets must represent at least 70% of total assets at the time of acquisitions of any non-qualifying assets. As of none of the Fund's total assets were considered non-qualifying assets. See Note 3 to the financial statements, Valuation of Investments. (2) See Note 3 to the financial statements, Valuation of Investments. (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 securities of the company. (4) Level 3 Portfolio Investments (5) Income- producing 48 TableOfContents SCHEDULE OF INVESTMENTS – (Continued) DECEMBER 31, 2023 (in thousands, except share data) Our portfolio securities are restricted from public sale without prior registration under the Securities Act of 1933 (hereafter, the “Securities 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 our portfolio companies that comprise 100% of the total value of the investments in portfolio securities as of December 31, 2023. We are classified as a “non-diversified” investment company under the 1940 Act, which means we are not limited in the proportion of our assets that may be invested in the securities of a single issuer. 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, 2023 (in thousands): Type of Securities Cost Fair Value Fair Value as Percentage of Net Assets Limited liability company investments $ 8,111 $ 32,600 67.5 % Secured and subordinated debt 8,253 8,253 17.1 % Total $ 16,364 $ 40,853 84.6 % The following is a summary by industry of the Fund’s investments in portfolio securities as of December 31, 2023 (in thousands): Industry Fair Value Fair Value as Percentage of Net Assets Energy $ 40,853 84.6 % Total $ 40,853 84.6 % 49 TableOfContents EQUUS TOTAL RETURN, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2024, 2023 AND 2022 (1) ORGANIZATION AND BUSINESS PURPOSE About the Company— Equus Total Return, Inc. (“we,” “us,” “our,” “Equus” the “Company” and the “Fund”), a Delaware corporation, was formed by Equus Investments II, L.P. (the “Partnership”) on August 16, 1991. On July 1, 1992, the Partnership was reorganized and all of the assets and liabilities of the Partnership were transferred to the Fund in exchange for shares of common stock of the Fund. Our shares trade on the New York Stock Exchange (“NYSE”) under the symbol ‘EQS’. On August 11, 2006, our shareholders approved the change of the Fund’s investment strategy to a total return investment objective. This strategy seeks to provide the highest total return, consisting of capital appreciation and current income. In connection with this strategic investment change, the shareholders also approved the change of name from Equus II Incorporated to Equus Total Return, Inc. On January 20, 2021, holders of a majority of the outstanding common stock of the Fund approved the restatement of our Certificate of Incorporation to increase the number of our authorized shares of common stock from 50,000,000 to 100,000,000, and the number of our authorized shares of preferred stock from 5,000,000 to 10,000,000. As of December 31, 2024, we had 13,586,173 shares of common stock outstanding 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 seek to achieve capital appreciation by making investments in equity and equity- oriented securities issued by privately-owned companies in transactions negotiated directly with such companies. Given market conditions over the past several years and the performance of our portfolio, our Management and Board 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. Prior to 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. We 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. 50 TableOfContents (2) LIQUIDITY AND FINANCING ARRANGEMENTS As of December 31, 2024, we had cash and cash equivalents of $0.3 million. 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 future. 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. Use of 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. Consolidation —In accordance with Article 6 of Regulation S-X under the Securities Act of 1933, we do not consolidate portfolio company investments. Under 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 . 51 TableOfContents Valuation of Investments— For most of our investments, market quotations are not available. With respect to investments for which market quotations are not readily available or when such market quotations are deemed not to represent fair value, our Board has approved a multi-step valuation process each quarter, as described below: 1. Each portfolio company or investment is reviewed by our investment professionals; 2. 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; 3. 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; 4. 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; and 5. 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. The yield analysis uses loan spreads and other relevant information implied by market data involving identical or comparable assets or liabilities. Under the EV analysis, the EV of a portfolio company is first determined and allocated over the portfolio company’s securities in order of their preference relative to one another (i.e., “waterfall” allocation). To determine the EV, we typically use a market multiples approach that considers relevant and applicable market trading data of guideline public companies, transaction metrics from precedent M&A transactions and/or a discounted cash flow analysis. The net asset value analysis is used to derive a value of an underlying investment (such as real estate property) by dividing a relevant earnings stream by an appropriate capitalization rate. For this purpose, we consider capitalization rates for similar properties as may be obtained from guideline public companies and/or relevant transactions. The liquidation analysis is intended to approximate the net recovery value of an investment based on, among other things, assumptions regarding liquidation proceeds based on a hypothetical liquidation of a portfolio company’s assets. The discounted cash flow analysis uses valuation techniques to convert future cash flows or earnings to a range of fair values from which a single estimate may be derived utilizing an appropriate discount rate. The measurement is based on the net 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; the nature and realizable value of any collateral; 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; 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 its value. 52 TableOfContents 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. 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. Fair Value Measurement—Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and sets out a fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Inputs are broadly defined as assumptions market participants would use in pricing an asset or liability. The three levels of the fair value hierarchy are described below: Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2—Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly; and fair value is determined through the use of models or other valuation methodologies. Level 3—Inputs are unobservable for the asset or liability and include situations where there is little, if any, market activity for the asset or liability. The inputs into the determination of fair value are based upon the best information under the circumstances and may require significant management judgment or estimation. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific 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. 53 TableOfContents 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, 2024 and 2023. As of December 31, 2024, 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, 2024 (in thousands) Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets Investments: Control investments $ 27,500 $ — $ — $ 27,500 Total investments $ 27,500 $ — — $ 27,500 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 (in thousands) Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets Investments: Control investments $ 40,853 $ — $ — $ 40,853 Total investments 40,853 — — 40,853 U.S. Treasury Bills 44,955 44,955 — — Total investments and U.S. Treasury Bills $ 85,808 $ 44,955 $ — $ 40,853 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) (in thousands) Control Investments Affiliate Investments Non-affiliate Investments Total Fair value as of January 1, 2024 $ 40,853 $ — $ — $40,853 Change in unrealized appreciation (15,600 ) — — (15,600) Purchases of portfolio securities 2,247 — — 2,247 Fair value as of December 31, 2024 $ 27,500 $ — $ — $27,500 54 TableOfContents 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) Control Investments Affiliate Investments Non-affiliate Investments Total Fair value as of January 1, 2023 $ 15,650 $ — $ — $15,650 Change in unrealized appreciation 16,950 — — 16,950 Purchases of portfolio securities 8,253 — — 8,253 Fair value as of December 31, 2023 $ 40,853 $ — $ — $40,853 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 (Level 3) (in thousands) Control Investments Affiliate Investments Non-affiliate Investments Total Fair value as of January 1, 2022 $ 13,000 $ — $ — $13,000 Change in unrealized appreciation 2,500 — — 2,500 Purchases of portfolio securities 150 — — 150 Fair value as of December 31, 2022 $ 15,650 $ — $ — $15,650 Fair value measurements can be sensitive to changes in one or more of the valuation inputs. Changes in discount rates, EBITDA or EBITDA multiples (or revenue or revenue multiples), each in isolation, may change the fair value of certain of our investments. Generally, an increase/(decrease) in market yields, discount rates, or an increase/(decrease) in EBITDA or EBITDA multiples (or revenue or revenue multiples) may result in a corresponding increase/(decrease), respectively, in the fair value of certain of our investments. In the case of our holdings in Morgan 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. 55 TableOfContents 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, 2024: Range (in thousands) Fair Value Valuation Techniques Unobservable Inputs Minimum Maximum Weighted Average Limited liability company investments Equus Energy, LLC Acreage Value (per acre) $1,000 $4,000 $1,784 $ 4,000 Guideline Transaction Method Proved Reserve Multiple 6.2x 10.8x 8.65x Daily Production Multiple 24,921.7x 45,307.1x 40,787.19x Discounted Cash Flow Discount Rate 10.9% 10.9% 10.9% Transaction Price $4,000 $4,000 $4,000 Morgan E&P, LLC Guideline Public Company Method Proved Reserve Multiple 6,415x 7,342x 6,878.5x Daily Production Multiple 29,948x 40,946x 35,447x 13,000 Guideline Transaction Method Proved Reserve Multiple 5,304x 8,786x 7,045x Daily Production Multiple 22,297x 32,595x 27,446x Discounted Cash Flow Discount Rate 11.7% 12.6% 12.15% Senior debt Morgan E&P, LLC 10,500 Yield analysis Discount for lack of marketability 11.52% 12.0% 11.76% $ 27,500 56 TableOfContents 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: Range (in thousands) Fair Value Valuation Techniques Unobservable Inputs Minimum Maximum Weighted Average Limited liability company investments Acreage Value (per acre) $1,500 $11,000 $4,062 Equus Energy, LLC $ 10,000 Guideline Transaction Method Proved Reserve Multiple 4.2x 10.9x 9.0x Daily Production Multiple 19,577.2x 47,197.76x 41,648.4x Discounted Cash Flow Discount Rate 12.8% 12.8% 12.8% Guideline Public Company Method Proved Reserve Multiple 10,180x 13,953x 12,067x Daily Production Multiple 44,054x 58,025x 51,040x Morgan E&P, LLC 22,600 Guideline Transaction Method Proved Reserve Multiple 8,878x 12,716x 10,797x Daily Production Multiple 32,565x 59,790x 46,178x Discounted Cash Flow Discount Rate 10.9% 12.9% 11.90% Senior debt Morgan E&P, LLC 8,253 Yield analysis Discount for lack of marketability 11.13% 12.0% 11.57% $ 40,853 57 TableOfContents 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 asset value for the changes in the value of our publicly held securities, if applicable, and material changes in the value of private securities, generally determined on a quarterly basis or as announced in a press release, and report those amounts to Lipper Analytical Services, Inc. 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, 2024, we have no assets going through foreclosure. Realized 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. 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. 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. 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. 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. 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. If we seek 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. 58 TableOfContents 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: December 31, 2024 2023 2022 Cash and cash equivalents at end of period $ 262 $ 6,533 $ 19,224 Restricted cash at end of period — 450 60 Cash and cash equivalents and restricted cash at end of period $ 262 $ 6,983 $ 19,284 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 in Texas. 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. 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. Distributable Earnings —The components that make up distributable earnings (accumulated undistributed deficit) on the Balance Sheet as of December 31, 2024 and 2023 are as follows: ​ December 31, 2024 December 31, 2023 Accumulated undistributed net investment losses $ (54,780 ) $ (51,465 ) Unrealized appreciation of portfolio securities, net 8,889 24,489 Accumulated undistributed net capital gains 602 464 Accumulated deficit $ (45,289 ) $ (26,512 ) Share-Based 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. 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. As of December 31, 2020, all shares were vested. 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. 59 TableOfContents 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 expenses. 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. As of December 31, 2024, we accrued $62,000 in director fees. (5) FEDERAL INCOME TAX MATTERS 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 or settled. 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. 60 TableOfContents 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 allowance. 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. The provision for income taxes for the years ended December 31, 2024 consisted of the following: Years Ended December 31, 2024 Current (expense) benefit: Federal $ - State - Total current (expense) benefit - Deferred (expense) benefit: Federal - State - Total deferred (expense) benefit - Total benefit (expense): Federal - State - 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, 2024 Deferred tax assets: Charitable Contributions $ 4,347 Net operating loss carryforwards 6,754,679 Total Deferred Tax Assets 6,759,026 Valuation allowance (4,892,336) Deferred Tax Assets after Valuation Allowance 1,866,690 Deferred tax liabilities: Mark to Market Unrealized Gain/Loss (1,866,690) 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, 2024 Income tax expense (benefit) at federal statutory rate $ (3,939,998) Change in tax status (954,402) Effect of state income taxes - Non-deductible Permanent Items 1,935 2023 Return to Provision Adjustment 128 Change in valuation allowance 4,892,337 Total $ - 61 TableOfContents The 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. All of the 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 date. (6) COMMITMENTS AND CONTINGENCIES Lease Commitments . We had an operating lease for office space that expired in September 2014. Our current office space lease is month-to-month. Rent expense 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, 2024 and, 2023, we had $0 and $1.7 million in outstanding commitments to our portfolio company investments. 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. 62 TableOfContents (7) PORTFOLIO SECURITIES 2024 Portfolio Activity The following table summarizes significant investment activity during the year ended December 31, 2024 (in thousands): Investment Activity New Investments Existing Investments Portfolio Company Cash Non-Cash Follow-On Cash PIK Total Morgan E&P, LLC $ — $ — $ 2,247 $ — $ 2,247 $ — $ — $ 2,247 $ — $ 2,247 During 2024, we recorded a decrease of $15.6 million in net unrealized appreciation, from an unrealized appreciation of $24.5 million at December 31, 2023 to a net unrealized appreciation of $8.9 million at December 31, 2024. Such change in unrealized appreciation resulted primarily from the decrease in the fair value of our holdings in Morgan E&P, LLC of $9.6 million, principally due to a lower forward price curve for oil, as well as the reclassification of certain of its proved reserves from producing to non-producing. The change in unrealized appreciation also resulted from the decrease in fair value of our holding in Equus Energy, LLC of $6.0 million, principally due to 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, 2023 (in thousands): Investment Activity New Investments Existing Investments Portfolio Company Cash Non-Cash Follow-On Cash PIK Total Morgan E&P, LLC $ 8,253 $ — $ — $ — $ 8,253 $ 8.253 $ — $ — $ — $ 8,253 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. 63 TableOfContents 2022 Portfolio Activity The following table summarizes significant investment activity during the year ended December 31, 2022 (in thousands): Investment Activity New Investments Existing Investments Portfolio Company Cash Non-Cash Follow-On Cash PIK Total Equus Energy, LLC $ — $ — $ 150 $ — $ 150 $ — $ — $ 150 $ — $ 150 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. (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. On December 27, 2012, we invested an additional $6.8 million in Equus Energy for the purpose of additional working capital and to fund the purchase of $6.6 million in working interests that, as of December 31, 2024, consisted of 136 producing and non- producing oil and gas wells. 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 gas and hydrocarbon extraction in multiple formations. Equus Energy, which holds a 50% working interest in each of these Conger Field wells, is seeking to effect a recompletion program of existing Conger Field wells to the Wolfcamp formation, a zone containing oil as well as gas and natural gas liquids. Part of Equus Energy’s acreage rights described above also includes a 50% working interest in possible new drilling to the base of the Canyon formation (appx. 8,500 feet) on 2,400 acres in the Conger Field. Also included in the interests acquired by Equus Energy are working interests of 7.5% and 2.5% in the Burnell and North Pettus Units, respectively, which collectively comprise approximately 13,000 acres located in the area known as the “Eagle Ford Shale” play. 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. 64 TableOfContents 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 Condensed Consolidated Balance Sheets December 31, December 31, 2024 2023 Assets Current assets: Cash and cash equivalents $ 7 $ 71 Accounts receivable 207 167 Total current assets 214 238 Oil and gas properties 8,164 8,173 Less: accumulated depletion, depreciation and amortization (8,112 ) (8,097 ) Net oil and gas properties 52 77 Total assets $ 266 $ 315 Liabilities and member's deficit Current liabilities: Accounts payable and other $ 127 $ 105 Due to affiliate 128 126 Total current liabilities 255 231 Asset retirement obligations 226 233 Total liabilities 481 464 Total member's deficit (215 ) (149 ) Total liabilities and member's deficit $ 266 $ 315 65 TableOfContents EQUUS ENERGY, LLC and SUBSIDIARY Condensed Consolidated Statements of Operations Year Ended December 31, 2024 2023 2022 Operating revenue $ 633 $ 646 $ 1,063 Operating expenses Direct operating expenses 420 504 420 Depletion, depreciation, amortization and accretion 18 4 4 Salaries — 324 383 Professional fees 143 654 713 General and administrative 131 117 75 Total operating expenses 712 1,603 1,596 Net operating loss (79 ) (958 ) (533) Non-operating income Other income 13 1,000 - Total other income 13 1,000 - Net (loss) income $ (66 ) $ 42 $ (533) EQUUS ENERGY, LLC and SUBSIDIARY Condensed Consolidated Statements of Cash Flows Year ended December 31, 2024 2023 2022 Cash flows from operating activities: Net income (loss) $ (66 ) $ 42 $ (533 ) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depletion, depreciation and amortization 15 2 2 Accretion expense 3 2 2 Changes in operating assets and liabilites: Accounts receivable (40 ) 41 7 Prepaid expenses and other current assets — 12 (12 ) Accounts payable and accrued liabilities 22 (5 ) 7 Due to Parent 2 (224 ) — Net cash used in operating activities (64 ) (130 ) (527 ) Cash flows from investing activities: Investment in oil & gas properties — (4 ) (58 ) Net cash used in investing activities — (4 ) (58 ) Cash flows from financing activities: Capital contribution — — 150 Net cash provided by investing activities — — 150 Net decrease in cash (64 ) (134 ) (435 ) Cash and cash equivalents at beginning of period 71 205 640 Cash and cash equivalents at end of period $ 7 $ 71 $ 205 66 TableOfContents (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. 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. 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. 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. During the 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, 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 December 31, 2024 December 31, 2023 Assets: Cash $ 15 $ 2,441 Revenue receivables 343 464 Joint interest billing receivables 1,738 1,391 Other receivables 2 — Prepaids and other current assets 35 133 Current assets 2,133 4,429 Property, plant and equipment Oil and gas properties, net - full cost method 6,959 10,326 Other property, plant and equipment, net 34 46 Total property, plant and equipment - net 6,993 10,372 Other noncurrent assets Operating lease right-of-use assets, net 227 270 Total noncurrent assets 227 270 Total assets $ 9,353 $ 15,071 Liabilities and Member's Deficit: Current liabilities Accounts payable $ 6,656 $ 2,372 Revenue payable 319 221 Prepayments from working interest owners — 122 Current portion of operating lease liabilities 47 28 Due to parent 550 13 Accrued liabilities 3,162 5,383 Total current liabilities 10,734 8,139 Long-term liabilities Asset retirement obligations 4 4 Long-term operating lease liabilities 207 254 Note payable - Due to parent 10,500 8,253 Long-term accrued liabilities - Due to parent 1,471 225 Total long-term liabilities 12,182 8,736 Commitments and contingencies (Note 10) Member's deficit (13,563 ) (1,804 ) Total liabilities and member's deficit $ 9,353 $ 15,071 67 TableOfContents Morgan E&P, LLC Condensed Statements of Operations Year Ended December 31, Period from inception (April 3, 2023) through December 31, 2024 2023 Revenues Oil, natural gas and natural gas liquid revenues $ 2,710 $ 270 Expenses Lease operating 2,694 268 Production and other taxes 261 27 Marketing, transportation and gathering expense 85 — Depreciation, depletion and amortization 1,467 60 Accretion 1 — Impairment of oil and gas properties 6,678 — General and administrative 2,042 1,510 Total expenses 13,228 1,865 Other income (expense) Interest income 6 16 Interest expense (1,247 ) (225 ) Total other expense, net (1,241 ) (209 ) Net loss $ (11,759 ) $ (1,804 ) 68 TableOfContents Morgan E&P, LLC Condensed Statements of Cash Flows Year Ended December 31, Period from inception (April 3, 2023) through December 31, 2024 2023 Cash flows from operating activities Net loss $ (11,759 ) $ (1,804 ) Adjustments to reconcile net loss to net cash flows (used in) provided by operating activities Depreciation, depletion, and amortization 1,467 61 Amortization of right-of-use asset 43 12 Accretion 1 — Impairment of oil and gas properties 6,678 — Changes in operating assets and liabilities Accounts receivable – oil and natural gas sales 121 (464 ) Accounts receivable – joint interest billings (1,508 ) (291 ) Other receivables (2 ) — Prepaids and other current assets 98 (133 ) Accounts payable 4,284 85 Revenue payable 518 221 Prepayments from owners — 1,701 Due to parent 537 13 Current portion of operating lease liabilities (28 ) — Accrued liabilities (3,772 ) 810 Long-term accrued liabilities - due to parent 1,246 225 Net cash provided (used in) by operating activities (2,076 ) 436 Cash flows from investing activities Capital expenditures (2,597 ) (5,700 ) Acquisition of oil and gas properties — (500 ) Additions to other property, plant and equipment — (48 ) Net cash used in investing activities (2,597 ) (6,248 ) Cash flows from financing activities Proceeds from note payable - affiliate 2,247 8,253 Net cash provided by financing activities 2,247 8,253 Net change in cash (2,426 ) 2,441 Beginning of period 2,441 — End of period $ 15 $ 2,441 Supplemental disclosure for noncash financing and investing activities Operating lease right-of-use assets additions $ — $ (282 ) Acquisition of oil and natural gas working interests funded by accrued liabilities $ (3,019 ) $ — Change in capital accounts payable and capital accruals 849 (4,181 ) Prepayments applied to joint interest receivables 122 1,579 Change in asset retirement costs (1 ) 4 69 TableOfContents (10) RECENT ACCOUNTING PRONOUNCEMENTS Recent Accounting Standards —We consider the applicability and impact of all accounting standard updates (“ASU”) issued by the Financial Accounting Standards Board (“FASB”). ASUs not listed below were assessed and either determined to be not applicable or expected to have minimal impact on our financial statements. Accounting 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 15, 2024. 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. 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 conversion. The amendments in this Update also make additional clarifications to assist stakeholders in applying the guidance. Under the 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. This update 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. Accounting 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. 70 TableOfContents (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: Issuance of Convertible Note and Warrants . On February 10, 2025, we issued a 1-year senior convertible promissory note bearing interest at the rate of 10.0% per annum in exchange for $2.0 million in cash (“Equus Note”). The Equus Note is convertible into shares of the Fund’s common stock at a conversion price of $1.50 per share. Contemporaneously with the issuance of the Note, the Fund also issued two common stock purchase warrants to acquire an aggregate of 2,000,000 shares of the Fund’s common stock at an exercise price of $1.50 per share. New Portfolio Investment . On February 10, 2025, we purchased from General Enterprise Ventures, Inc., a developer of fire suppression products (“GEVI”), a 1-year senior convertible promissory note bearing interest at the rate of 10% per annum, in exchange for $1.5 million in cash (“GEVI Note”). The GEVI Note is convertible into shares of GEVI’s common stock at a conversion price of $0.40 per share. Contemporaneously with the purchase of the GEVI Note, the Fund also received a common stock purchase warrant to acquire an aggregate of 1,875,000 shares of GEVI common stock at an exercise price of $0.50 per share. Sale of Equus Energy . On March 3, 2025, we sold Equus Energy to North American Energy Opportunities Corp., a developer of upstream oil and gas assets (“NAEOC”). The consideration provided by NAEOC consisted of $1.25 million in cash and 27,500 shares of preferred stock, redeemable within 6 months of the date of issuance at $100.00 per share based upon fulfillment of certain conditions. 71 TableOfContents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.