What changed in this filing

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Item 1. Business

2026-04-17 compared with 2025-04-10 · 365 added, 424 removed, 91 unchanged (90% of the section changed)

(“we,”

“us,”

“our,”

“Equus”

the “Company”

or 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.

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

In connection with this strategic investment change, the shareholders also approved the change of name from Equus II Incorporated

to Equus Total Return, Inc.

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 bonds, 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 a financing.

We seek to achieve capital appreciation

by making investments in equity and equity-oriented securities issued by privately-owned companies or smaller public companies in transactions

negotiated directly with such companies.

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

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

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

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

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

Internal Revenue Code of 1986.

Equus Total Return, Inc.

“us,” “our,” “Equus” the “Company” or 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.

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.

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 bonds, 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 a financing.

We seek to achieve capital appreciation by making investments

in equity and equity-oriented securities issued by privately-owned companies or smaller public companies in transactions negotiated directly

with such companies.

Equus is a closed-end management

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

of 1940 (“1940 Act”).

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

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

Prior to the fourth

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

Internal Revenue Code

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

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

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

income, we will be taxed at regular corporate rates.

During the fourth quarter

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

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

be taxed at regular corporate rates.

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

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

Business Development Company

Requirements ”

Regulated Investment Company Tax Status ,”

respectively.

Our principal

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

corporate website is located at www.equuscap.com .

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

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

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

Our shares are traded

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

Significant Developments

Financing and Investment Transactions .

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

· Issuance of Convertible Note and Warrants .

On February 10, 2025, we issued

a 1-year senior convertible promissory note bearing interest at the rate of 10.0% per annum in exchange for $2.0 million in cash (“Equus

Note”).

The Equus Note is convertible into shares of the Fund’s common stock at a conversion price of $1.50 per share.

Contemporaneously

with the issuance of the Note, the Fund also issued two common stock purchase warrants to acquire an aggregate of 2,000,000 shares of

the Fund’s common stock at an exercise price of $1.50 per share.

· New Portfolio Investment .

On February 10, 2025, we purchased from General

Enterprise Ventures, Inc., a developer of fire suppression products (“GEVI”), a 1-year senior convertible promissory note

bearing interest at the rate of 10% per annum, in exchange for $1.5 million in cash (“GEVI Note”).

The GEVI Note is convertible

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

Contemporaneously with the purchase of the GEVI Note,

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

price of $0.50 per share.

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· Sale of Equus Energy .

On March 3, 2025, we sold Equus Energy to North American

Energy Opportunities Corp., a developer of upstream oil and gas assets (“NAEOC”).

The consideration provided by NAEOC consisted

of $1.25 million in cash and 27,500 shares of preferred stock, redeemable within 6 months of the date of issuance at $100.00 per share,

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

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

already held by Equus Energy.

of Geopolitical Events on the Oil and Gas Sector .

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

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

invasion of Ukraine by Russian forces.

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

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

Natural gas prices experienced high volatility in 2022 before

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

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

Morgan E&P, LLC holds its development rights.

Authorization

to Withdraw BDC Election .

Holders of a majority of our outstanding common stock have previously approved our cessation as a BDC under

the 1940 Act and have authorized our Board to cause the Fund’s withdrawal of its election to be classified as a BDC, effective as

of a date designated by the Board and our Chief Executive Officer.

Although this authorization has since expired, we expect to receive

an additional authorization from our stockholders in the future.

This authorization is a consequence of our expressed intent to transform

Equus into an operating company or a permanent capital vehicle.

Notwithstanding any such authorization to withdraw our BDC election, we

will not submit any such withdrawal unless and until Equus has entered into a definitive agreement to effect a transformative transaction.

Further, even if we are again authorized to withdraw our election as a BDC, we will require a subsequent affirmative vote from holders

of a majority of our outstanding voting shares to enter into any such definitive agreement or change the nature of our business.

we are presently evaluating various opportunities that could enable us to accomplish this transformation, we cannot assure you that we

will be able to do so within any particular time period or at all.

Moreover, we cannot assure you that the terms of any such transformative

transaction would be acceptable to us.

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

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

at the appropriate time to protect and enhance shareholder value.

These activities include continuous monitoring and intensive reviews

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

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

pursuing suitable new investments for the Fund.

For a discussion

of requirements necessary to maintain our status as a BDC and as a RIC, please see “ Business Development Company Requirements ”

and “ Regulated Investment Company Tax Status ,” respectively.

Our principal office is located

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

Our corporate website is located

at www.equuscap.com .

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

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

filed or furnished to the Securities and Exchange Commission (“SEC”).

Our shares are traded on The New York Stock Exchange

(“NYSE”) under the ticker symbol “EQS”.

Impact of Geopolitical Events

on the Oil and Gas Sector .

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

years, with geopolitical conflicts being a significant contributor to short-term price changes.

In the aftermath of the commencement of

hostilities in Ukraine in 2022, oil prices began a rise and fall in successive quarters between the third quarter of 2023 and the fourth

quarter of 2024 before experiencing a slow and steady decline from the end of 2024 and throughout 2025, and stood at $57.26 as of December

The recent conflict with Iran, while not greatly affecting long-term prices, has had a dramatic effect on spot prices in the

first quarter of 2026.

Since the beginning of 2024, natural gas prices steadily increased before declining in the first three quarters

of 2025 and recovering at the end of the year, finishing the year ended December 31, 2025 at $4.00 per MMBTU.

Recent long-term oil price

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

holds its development rights.

Authorization to Withdraw

BDC Election .

Holders of a majority of our outstanding common stock have previously approved our cessation as a BDC under the 1940

Act and have authorized our Board to cause the Fund’s withdrawal of its election to be classified as a BDC, effective as of a date

designated by the Board and our Chief Executive Officer.

Although this authorization has since expired, we expect to receive an additional

authorization from our stockholders in the future.

This authorization is a consequence of our expressed intent to transform Equus into

an operating company or a permanent capital vehicle.

Notwithstanding any such authorization to withdraw our BDC election, we will not

submit any such withdrawal unless and until Equus has entered into a definitive agreement to effect a transformative transaction.

even if we are again authorized to withdraw our election as a BDC, we will require a subsequent affirmative vote from holders of a majority

of our outstanding voting shares to enter into any such definitive agreement or change the nature of our business.

While we are presently

evaluating various opportunities that could enable us to accomplish this transformation, we cannot assure you that we will be able to

do so within any particular time period or at all.

Moreover, we cannot assure you that the terms of any such transformative transaction

would be acceptable to us.

Our Board and

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

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

time to protect and enhance shareholder value.

These activities include continuous monitoring and intensive reviews of portfolio company

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

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

new investments for the Fund.

Investment Objective

To the extent

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

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

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

of our investment.

As a result of our endeavors in the energy sector, we may also seek to purchase or develop working interests, mineral

interests, and revenue leasehold interests in oil and gas properties, although we remain open to exploring investment opportunities in

a variety of other sectors.

Should we continue to grow and develop Equus as a closed-end fund or permanent capital vehicle instead of

an operating company, we intend to include investments in progressively larger enterprises.

To the extent we remain a BDC

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

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

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

As a result of our endeavors in the energy sector, we may also seek to purchase or develop working interests, mineral interests, and revenue

leasehold interests in oil and gas properties, although we remain open to exploring investment opportunities in a variety of other sectors.

Should we continue to grow and develop Equus as a closed-end fund or permanent capital vehicle instead of an operating company, we intend

to include investments in progressively larger enterprises.

Investment Strategy

Our investment

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

With respect to capital appreciation, Equus

is a “growth-at-reasonable-price”

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

at reasonable prices.

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

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

Debt and preferred equity financing may also be

used to create long-term capital appreciation through the exercise and sale of warrants received in connection with a financing.

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

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

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Our investment strategy attempts

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

With respect to capital appreciation, Equus is a “growth-

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

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

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

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

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

Given market conditions over the

past several years and the performance of our portfolio, our Management and Board believe it prudent to continue to review alternatives

to refine and further clarify the current strategies.

Investment Criteria

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

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

Competency and Ownership .

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

successful performance.

Consistent with our investment

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

We may modify some or

all of these criteria from time to time.

Management Competency and

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

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

We believe that significant management

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

to maximize shareholder value.

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

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

Target Market .

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

in their respective markets.

These positions may be as leadership positions within a given industry or market niche positions in which

the product or service has a demonstrated competitive advantage.

The market in which a potential portfolio company operates should either

be sizeable or have significant growth potential.

of Profitability and Favorable Growth Potential .

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

expectation of a return to profitability in the near future.

Ability to Provide

Regular Cash Interest and Distributions .

We look for companies with strong cash flow models sufficient to provide regular and consistent

interest and/or preferred dividend payments.

Assistance and Substantial Equity .

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

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

With regard to

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

This position may be as a minority shareholder

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

direction and strategies of the portfolio company.

Exit and Potential for Appreciation .

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

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

We believe that significant management ownership in small

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

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

management with those of the Fund to enhance potential returns.

Substantial Target Market .

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

These positions may be as leadership positions within a given industry or market niche positions in which the product or service

has a demonstrated competitive advantage.

The market in which a potential portfolio company operates should either be sizeable or have

significant growth potential.

History of Profitability

and Favorable Growth Potential .

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

of a return to profitability in the near future.

Ability to Provide Regular

Cash Interest and Distributions .

We look for companies with strong cash flow models sufficient to provide regular and consistent interest

and/or preferred dividend payments.

Management Assistance and

Substantial Equity .

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

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

With regard to equity investments,

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

This position may be as a minority shareholder with certain

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

and strategies of the portfolio company.

Plausible Exit and Potential

for Appreciation .

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

with such strategies as may be achievable.

Investment Operations

Our investment operations consist principally of the following

basic activities:

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

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

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

Subject to the approval of our Board, we may compensate

certain referrals with finder’s fees to the extent permissible under applicable law and consistent with industry practice.

Our investment operations consist

principally of the following basic activities:

Investment Selection.

Historically,

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

from prospective portfolio companies and referrals from investment banks, business brokers, commercial, regional and local banks, attorneys,

accountants and other members of the financial community.

Subject to the approval of our Board, we may compensate certain referrals with

finder’s fees to the extent permissible under applicable law and consistent with industry practice.

Due Diligence.

Once a potential investment is identified, we undertake a due diligence review using information provided by the prospective portfolio

company and publicly available information.

Management may also seek input from consultants, investment bankers and other knowledgeable

potential investment is identified, we undertake a due diligence review using information provided by the prospective portfolio company

and publicly available information.

Management may also seek input from consultants, investment bankers and other knowledgeable sources.

The due diligence review will typically include, but is not limited to:

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Background checks on members of management;

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

and services and competitors.

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

Structuring Investments.

negotiate investments in private transactions directly with the owner or issuer of the securities acquired.

Management structures the

terms of a proposed investment, including the purchase price, the type of security to be purchased and our future involvement in the portfolio

company’s business.

We seek to structure the terms of the investment to provide for the capital needs of the portfolio company while

maximizing our opportunities for current income and capital appreciation.

In addition, we may invest with other co-investors including

private equity firms, business development companies, small business investment companies, venture capital groups, institutional investors

and individual investors.

We typically negotiate investments in private transactions directly with the owner or issuer of the securities acquired.

structures the terms of a proposed investment, including the purchase price, the type of security to be purchased and our future involvement

in the portfolio company’s business.

We seek to structure the terms of the investment to provide for the capital needs of the portfolio

company while maximizing our opportunities for current income and capital appreciation.

In addition, we may invest with other co-investors

including private equity firms, business development companies, small business investment companies, venture capital groups, institutional

investors and individual investors.

Providing Management Assistance

9 unchanged sentences

In connection with their service as directors of portfolio companies, officers

and directors of the Fund may receive and retain directors’

fees or reimbursement for expenses incurred, and may participate in

and directors of the Fund may receive and retain directors’ fees or reimbursement for expenses incurred, and may participate in

incentive stock option plans for non-employee directors, if any.

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Follow-On Investments

Following our

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

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

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

our position in a portfolio company.

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

of the funds required.

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

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

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

Following our initial investment,

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

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

In addition, follow-on

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

a portfolio company.

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

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

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

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

Disposition of Investments

The method and

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

capital losses.

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

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

securities in a portfolio company.

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

stockholders.

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

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

In some cases, we seek registration rights for our portfolio

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

To the extent

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

The method and timing of the

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

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

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

portfolio company.

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

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

appropriate method and timing of the disposition of the investment.

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

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

To the extent not paid

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

Current Portfolio Companies

For a description

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

Management’s Discussion and Analysis of Financial Condition

and Results of Operations–Portfolio Securities .”

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On a quarterly

basis, Management values our portfolio investments.

For a description of our portfolio

company investments as of December 31, 2025, see “ Management’s Discussion and Analysis of Financial Condition and Results

of Operations–Portfolio Securities .”

On a quarterly basis, Management

values our portfolio investments.

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

of our portfolio securities at “fair value”

are performed in accordance with accounting principles generally accepted in the

United States (“GAAP”).

The fair value

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

faith by the Board.

As a general principle, the current “fair value”

of an investment is the amount the Fund might reasonably

expect to receive upon its sale in an orderly manner.

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

adjustments to fair value upon such factors as the portfolio company’s earnings, cash flow and net worth, the market prices for

similar securities of comparable companies, an assessment of the company’s current and future financial prospects and various other

factors and assumptions.

In the case of unsuccessful or substantially declining operations, we may base a portfolio company’s fair

value upon the company’s estimated liquidation value.

Fair valuations are inherently subjective, and our estimate of fair value

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

Also, any failure by a portfolio

company to achieve its business plan or obtain and maintain its financing arrangements could result in increased volatility and result

in a significant and rapid change in its value.

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

As such, we believe the fair value will not

exceed the cost of the investment;

Valuations of our portfolio

securities at “fair value” are performed in accordance with accounting principles generally accepted in the United States

The fair value of investments

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

As a general principle, the current “fair value” of an investment is the amount the Fund might reasonably expect to

receive upon its sale in an orderly manner.

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

We base our adjustments to fair

value upon such factors as the portfolio company’s earnings, cash flow and net worth, the market prices for similar securities of

comparable companies, an assessment of the company’s current and future financial prospects and various other factors and assumptions.

In the case of unsuccessful or substantially declining operations, we may base a portfolio company’s fair value upon the company’s

estimated liquidation value.

Fair valuations are inherently subjective, and our estimate of fair value may differ materially from amounts

actually received upon the disposition of our portfolio securities.

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

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

Our general intent is to hold

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

As such, we believe the fair value will not exceed the cost

of the investment;

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

Our Management

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

of each privately-held investment in order to make their own independent assessment.

Any third- party valuation data would be considered

as one of many factors in a fair value determination.

Management would then present its fair value recommendations to the Audit Committee

of the Board of Directors for review.

Following review and any adjustments required thereby, the Audit Committee would, in turn, recommend

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

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

the closing market price on the date of valuation.

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

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

estimated impact of illiquidity caused by such restrictions.

Our Management may engage independent,

third-party valuation firms to conduct independent appraisals and review Management’s preliminary valuations of each privately-held

investment in order to make their own independent assessment.

Any third- party valuation data would be considered as one of many factors

in a fair value determination.

Management would then present its fair value recommendations to the Audit Committee of the Board of Directors

Following review and any adjustments required thereby, the Audit Committee would, in turn, recommend the fair values for all

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

To the extent that market quotations

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

date of valuation.

For securities which are of the same class as a class of public securities but are restricted from free trading (such

as Rule 144 stock), we establish our valuation by discounting the closing market price to reflect the estimated impact of illiquidity

caused by such restrictions.

We generally hold investments in debt securities to maturity.

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

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

Our Board reviews

the valuation policies on a quarterly basis to determine their appropriateness and reserves the right to hire and, from time to time,

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

We compete with

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

companies such as finance companies and commercial banks.

Many of our competitors are substantially larger and have considerably greater

financial, technical and marketing resources.

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

available to us.

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

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

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

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

of operations.

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

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

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Our principal

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

Should we remain a BDC and not transform

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

as currently conducted and contemplated.

Accordingly, we determine the fair value of

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

We value certificates of deposit

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

Our Board reviews the valuation

policies on a quarterly basis to determine their appropriateness and reserves the right to hire and, from time to time, utilizes independent

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

We compete with a large number

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

as finance companies and commercial banks.

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

and marketing resources.

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

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

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

In addition, many of our competitors

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

We cannot assure you that the

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

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

to identify and make investments that satisfy our investment objectives or meet our investment goals.

Our principal executive offices

are located at 700 Louisiana St., 41 st Floor, Houston, Texas 77002.

Should we remain a BDC and not transform into an operating

company or a permanent capital vehicle, we believe our office facilities are suitable and adequate for our operations as currently conducted

and contemplated.

Business Development Company Requirements

Qualifying Assets .

As a BDC, we may not acquire any asset other than qualifying assets, as defined by the 1940 Act, unless, at the time the acquisition is

made, the value of our qualifying assets represents at least 70% of the value of our total assets.

The principal categories of qualifying

assets relevant to our business are the following:

· Securities purchased in transactions not involving any public offering

from an issuer that is an eligible portfolio company.

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

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

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

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

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

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

exceed $250 million.

Qualifying assets may also include follow-on

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

subsequently did not meet the definition;

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

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

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

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

To include certain

securities above as qualifying assets for the purpose of the 70% test, a BDC must make available to the issuer of those securities significant

managerial assistance, such as providing significant guidance and counsel concerning the management, operations, or business objectives

and policies of a portfolio company.

a BDC, we may not acquire any asset other than qualifying assets, as defined by the 1940 Act, unless, at the time the acquisition is made,

the value of our qualifying assets represents at least 70% of the value of our total assets.

The principal categories of qualifying assets

relevant to our business are the following:

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

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

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

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

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

To include certain securities

above as qualifying assets for the purpose of the 70% test, a BDC must make available to the issuer of those securities significant managerial

assistance, such as providing significant guidance and counsel concerning the management, operations, or business objectives and policies

of a portfolio company.

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

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

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

As noted above, we have previously received this authorization

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

by our stockholders in the future.

We may not change the nature

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

outstanding voting securities, as defined in the 1940 Act.

As noted above, we have previously received this authorization from our shareholders

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

in the future.

This authorization was a consequence of our plan to effect a transformation of Equus by:

(i) acquiring

or merging with an operating company based in the energy, natural resources, technology, or financial services sectors, and (ii) terminating

the Fund’s election to be classified as a BDC under the 1940 Act.

Notwithstanding any future authorization to withdraw our BDC election,

we will also require a separate affirmative vote of the holders of a majority of our outstanding voting securities to consummate a transformation

of Equus and change the nature of our business (see “

Significant Developments−Authorization to Withdraw BDC Election”

(i) acquiring or merging with

an operating company based in the energy, natural resources, technology, or financial services sectors, and (ii) terminating the Fund’s

election to be classified as a BDC under the 1940 Act.

Notwithstanding any future authorization to withdraw our BDC election, we will

also require a separate affirmative vote of the holders of a majority of our outstanding voting securities to consummate a transformation

of Equus and change the nature of our business (see “ Significant Developments−Authorization to Withdraw BDC Election”

Temporary Investments.

Pending investment in portfolio companies, we invest our available funds in interest- bearing bank accounts, money market mutual funds,

Treasury securities and/or certificates of deposit with maturities of less than one year (collectively, “Temporary Investments”).

Temporary Investments may also include commercial paper (rated or unrated) and other short-term securities.

Temporary Investments constituting

cash, cash items, securities issued or guaranteed by the U.S.

investment in portfolio companies, we invest our available funds in interest- bearing bank accounts, money market mutual funds, U.S.

securities and/or certificates of deposit with maturities of less than one year (collectively, “Temporary Investments”).

Investments may also include commercial paper (rated or unrated) and other short-term securities.

Temporary Investments constituting cash,

cash items, securities issued or guaranteed by the U.S.

Treasury or U.S.

Government agencies and high quality debt securities (commercial

paper rated in the two highest rating categories by Moody’s Investor Services, Inc.

or Standard & Poor’s Corporation,

paper rated in the two highest rating categories by Moody’s Investor Services, Inc.

or Standard & Poor’s Corporation,

or if not rated, issued by a company having an outstanding debt issue so rated, with maturities of less than one year at the time of investment)

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for purposes of the BDC provisions of the 1940 Act.

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

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

the senior stockholders’

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

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

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Sales Below Net Asset Value .

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

net asset value per share only upon the approval of the policy by stockholders holding a majority of our issued shares, including a majority

of shares held by nonaffiliated stockholders.

We may, in accordance with certain conditions established by the SEC, sell shares below

net asset value in connection with the distribution of rights to all of our stockholders.

We are permitted

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

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

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

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

Fund Share Sales Below Net

Asset Value .

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

value per share only upon the approval of the policy by stockholders holding a majority of our issued shares, including a majority of

shares held by nonaffiliated stockholders.

We may, in accordance with certain conditions established by the SEC, sell shares below net

asset value in connection with the distribution of rights to all of our stockholders.

We may also issue shares at less than net asset

value in payment of dividends to existing stockholders.

No Redemption

No Redemption Rights .

Since we are a closed-end BDC, our stockholders have no right to present their shares to the Fund for redemption.

the possibility that our shares might trade at a discount, our Board has determined that it would be in the best interest of our stockholders

for the Fund to be authorized to attempt to reduce or eliminate a market value discount from net asset value.

Accordingly, from time to

time we may, but are not required to, repurchase our shares (including by means of tender offers) to attempt to reduce or eliminate any

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

Transactions .

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

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

the transactions.

Recognizing the possibility

that our shares might trade at a discount, our Board has determined that it would be in the best interest of our stockholders for the

Fund to be authorized to attempt to reduce or eliminate a market value discount from net asset value.

Accordingly, from time to time we

may, but are not required to, repurchase our shares (including by means of tender offers) to attempt to reduce or eliminate any discount

or to increase the net asset value of our shares.

Affiliated Transactions .

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

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

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

Regulated Investment Company Tax Status

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

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

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

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

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

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

If we requalify

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

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

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

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

While we are not

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

the Code, among other requirements.

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

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

As a BDC, we have historically

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

qualification is not a prerequisite to qualifying as a BDC.

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

we may seek to requalify at a later date.

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

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

If we requalify as a RIC and

annually distribute to our stockholders in a timely manner at least 90% of our investment company taxable income, we will not be subject

to federal income tax on the portion of our taxable income and capital gains we distribute to our stockholders.

Taxable income generally

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

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

While we are not required to

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

among other requirements.

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

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

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

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

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

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

If we fail to satisfy

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

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

In addition, should we choose

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

be subject to a 4.0% nondeductible Federal exercise tax.

If we fail to satisfy the 90%

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

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

In addition, in that case, all of our distributions

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have been necessary in recent years.

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We act as the

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

by the 1940 Act and the rules and regulations thereunder.

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

of our securities.

We act as the custodian of our

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

and the rules and regulations thereunder.

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

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

Transfer and Disbursing Agent

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

The principal

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

We employ Equiniti Group as

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

The principal business office

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

Certifications

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

Executive Officer.

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

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

In July 2025, pursuant to Section

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

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

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

Forward-Looking Statements

All statements

contained herein that are not historical facts including, but not limited to, statements regarding anticipated activity are “forward-looking

statements”

within the meaning of the federal securities laws, involve a number of risks and uncertainties, and are based on the

All statements contained

herein that are not historical facts including, but not limited to, statements regarding anticipated activity are “forward-looking

statements” within the meaning of the federal securities laws, involve a number of risks and uncertainties, and are based on the

beliefs and assumptions of Management, based on information currently available to Management.

Actual results may differ materially.

some cases, readers can identify forward- looking statements by words such as “may,”

“will,”

“should,”

“expect,”

“objective,”

“plan,”

“intend,”

“anticipate,”

“believe,”

“Management believes,”

“estimate,”

“predict,”

“project,”

“potential,”

“forecast,”

“continue,”

“strategy,”

or “position”

or the negative of such terms or other variations of them or

some cases, readers can identify forward- looking statements by words such as “may,” “will,” “should,”

“expect,” “objective,” “plan,” “intend,” “anticipate,” “believe,”

“Management believes,” “estimate,” “predict,” “project,” “potential,” “forecast,”

“continue,” “strategy,” or “position” or the negative of such terms or other variations of them or

by comparable terminology.

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

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

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

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

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

offered or reducing the yield necessary to consummate the investment;

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

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

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

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

which could affect the Fund’s operating results;

Among the factors that could

cause actual results to differ materially are the following:

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

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

(ii) the substantially greater

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

reducing the yield necessary to consummate the investment;

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

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

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

(v) the default

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

could affect the Fund’s operating results;

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

(vii) our ability

to retain key management personnel;

(vii) our ability to

retain key management personnel;

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

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

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

What changed 10-K

Item 1. Business