What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-04-17 compared with 2025-04-10 · 1066 added, 985 removed, 378 unchanged (84% of the section changed)

3 unchanged sentences

PCAOB ID#243)

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

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

Statements of Changes in Net Assets —For the years ended December 31, 2024, 2023 and 202 2

Statements of Cash Flows —

For the years ended December 31, 2024, 2023 and 2022

Balance Sheets As of December 31, 2025 and 2024

Statements of Operations For the years ended December 31, 2025, 2024 and 2023

Statements of Changes in Net Assets For the years ended December 31, 2025, 2024 and 2023

Statements of Cash Flows For the years ended December 31, 2025, 2024 and 2023

Statements of Selected Per Share Data and Ratios - For the years ended December 31, 2025, 2024, 2023, 2022 and 2021

Schedule of Investments —December

Schedule of Investments —December 31, 202 3

Schedule of Investments December 31, 2025

Schedule of Investments December 31, 2024

Notes to Financial Statements

Schedules of Investments in and Advances to Affiliates —

For the year ended December 31, 202 4

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Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors Equus Total Return,

Houston, Texas

on the Financial Statements

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

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

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

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

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

five years in the period ended December 31, 2024.

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

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

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

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

Schedules of Investments in and Advances to Affiliates For the year ended December 31, 2025

of Independent Registered Public Accounting Firm

and Board of Directors

Total Return, Inc.

on the Financial Statements

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

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

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

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

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

five years in the period ended December 31, 2024.

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

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

We have audited

the accompanying balance sheets of Equus Total Return, Inc.

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

31, 2025 and 2024, the related statements of operations, changs in net assets, and cash flows for each of the three years in the period

ended December 31, 2025, and the related notes and financial statement schedules listed in Tabe of Contents in Item 15(a)(1) (collectively

referred to as the “ financial statements”).

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

the financial position of the Fund at December 31, 2025 and 2024, 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, 2025, and the selected per share data and ratios for each of the five

years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying

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

As discussed in Note 2 to the financial

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

as a going concern.

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

The financial statements do not

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

These financial

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.

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

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

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

Accordingly, we express

no such opinion.

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

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

Going Concern Uncertainty

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 raise 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.

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.

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.

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.

we express no such opinion.

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 procedures include confirmation of securities owned as of December 31, 2025, and 2024 by correspondence with the custodians.

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

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

We believe that

our audits provide a reasonable basis for our opinion.

The critical audit matter

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

be communicated to the audit committee and that:

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

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

The communication of the critical audit matter does not

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

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

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of Limited Liability Company Investments

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

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

Management has determined that these

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

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

Management engaged an independent third-party valuation

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

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

The principal considerations

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

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

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

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

Auditing these elements was

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

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

(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.

Valuation of Limited Liability Company Investments

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

$10.5 million as of December 31, 2025, which includes a $10.5 million investment in Morgan E&P, Inc.

(“Morgan”) debt

and a $0.0 of investment in common stock of Morgan.

Management has determined that the investment is a Level 3 investment in

accordance with Accounting Standards Codification Topic 820 and utilizes 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 investment in Morgan.

identified the valuation of the Fund’s investment in Morgan 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 the

investment, which include the guideline transaction method and the discounted cash flow method, and (ii) the use of

unobservable inputs in these valuation techniques, including acreage value multiples, production multiples, estimated future

production, and discount rates.

Auditing these elements was complex because it involved especially subjective auditor

judgment, including the use of personnel with specialized skills and knowledge.

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

the reasonableness of the estimated future production by:

(i) comparing to historical production

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

evidence obtained in other areas of the audit.

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

(i) evaluating

the appropriateness of the valuation techniques applied to each limited liability

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

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

reasonable by comparing to independent data sources.

/s/ BDO USA, P.C.

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

Houston, Texas

April 10, 2025

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Testing the reasonableness of the estimated future production

(i) comparing to historical production volumes and future production decline analyses (ii) comparing to historical production volumes

and historical production decline analyses derived from analogous wells and (iii) 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 the investment in Morgan, (ii) evaluating whether unobservable inputs utilized by management, including the acreage

value multiples, production multiples, and discount rates were reasonable by comparing to independent data sources, and (iii) performing

an independent evaluation of production multiples and acreage value multiples and comparing to management’s measurement of the

fair value of Morgan.

BDO USA, P.C.

have served as the Fund's auditor since 2014.

EQUUS TOTAL RETURN, INC.

BALANCE SHEETS

(in thousands, except shares and per share amounts)

1 unchanged sentence

Control investments (cost at $10,500 and $18,611, respectively)

Non-affiliate investments (cost at $1,418 and $0, respectively)

Total investments in portfolio securities at fair value

Treasury Bills

Cash and cash equivalents

Restricted cash

Accounts receivable from affiliates

1 unchanged sentence

Liabilities and net assets

Accounts payable

Accounts payable and other

Accrued compensation

Accounts payable to related parties

Borrowing under margin account

Notes payable

Warrant liability, at fair value

Total liabilities

Commitments and contingencies (See Note 7)

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, 2025 and December 31, 2024

Common stock, $.001 par value per share;

100,000,000 shares authorized as of December 31, 2025 and December 31, 2024, and 13,966,696 and 13,586,173 shares outstanding as of December 31, 2025 and December 31, 2024, respectively

Common stock, par value

4 unchanged sentences

Net asset value per share

The accompanying notes

are an integral part of these financial statements

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The accompanying notes are an integral part of these

financial statements

EQUUS TOTAL RETURN, INC.

STATEMENTS OF OPERATIONS

2 unchanged sentences

Investment income:

Interest income:

Control investments

Total interest income

Interest from U.S.

Treasury Bills

Non-affiliate investments

Total investment income

Interest income

Total investment income

Compensation expense

Professional fees

Transaction costs

Professional liability expenses

5 unchanged sentences

Net investment loss

Net realized gain:

Net realized loss (gain):

Control investments

Non-affiliate investments

Treasury Bills

Net realized gain

Net realized (loss) gain

Net unrealized appreciation (depreciation) of portfolio securities:

Control investments

Non-affiliate investments

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

Federal income taxes

Net increase (decrease) in net assets resulting from operations

Net increase (decrease) in net assets resulting from operations per share:

Basic and diluted

Net change in net unrealized depreciation on warrant liability

Net decrease in net assets resulting from operations

Net decrease in net assets resulting from operations per share:

Weighted average shares outstanding:

Basic and diluted

The accompanying notes are

an integral part of these financial statements

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The accompanying notes are an integral part of these

financial statements

EQUUS TOTAL RETURN, INC.

OF CHANGES IN NET ASSETS

STATEMENTS OF CHANGES IN NET ASSETS

(in thousands)

3 unchanged sentences

Total Net Assets

Balances as of December 31, 2024

Net decrease in net assets resulting from operations

Balances as of December 31, 2023

Balances as of January 1, 2023

Issuance of shares

1 unchanged sentence

Balances as of December 31, 2023

Net increase in net assets resulting from operations

Balances as of December 31, 2024

Share-based incentive compensation

Shares subscribed but not issued

Issuance of warrants

Net decrease in net assets resulting from operations

Balances as of December 31, 2025

The accompanying notes are an integral

part of these financial statements.

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TOTAL RETURN, INC.

The accompanying notes are an integral part of these

financial statements.

EQUUS TOTAL RETURN, INC.

STATEMENTS OF CASH FLOWS

2 unchanged sentences

Cash flow from operating activities:

Net (decrease) increase in net assets resulting from operations

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

Net decrease in net assets resulting from operations

Adjustments to reconcile net decrease in net assets resulting from operations to net cash used in operating activities:

Net realized loss:

Control investments

Non-affiliate investments

Treasury Bills

1 unchanged sentence

Control investments

Non-affiliate investments

Net change in unrealized appreciation of warrant payable

Share-based incentive compensation

Purchase of portfolio securities

Write-off of receivable from portfolio company

PIK interest payable

Amortization of debt discount

Transaction costs

Net proceeds from dispositions of portfolio securities

3 unchanged sentences

Accounts receivable from affiliates

Accrued interest

Accrued interest receivable

Accounts payable and accrued liabilities

Accounts payable to related parties

Net cash provided by (used in) operating activities

Net cash (used in) provided by operating activities

Cash flows from financing activities:

1 unchanged sentence

Repayments under margin account

Issuance of common stock

Net cash (used in) provided by financing activities

Issuance of notes payable and warrants liability

Net cash provided by (used in) financing activities

Net decrease in cash and cash equivalents

1 unchanged sentence

Cash and cash equivalents and restricted cash at end of period

Non-cash operating and financing activities:

Shares subscribed but not issued

Supplemental disclosure of cash flow information:

Interest paid

Income taxes paid

The accompanying notes are an integral part

of these financial statements.

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Interest paid in kind on note payable

The accompanying notes are an integral part of these

financial statements.

EQUUS TOTAL RETURN, INC.

PER SHARE DATA AND RATIOS

SELECTED PER SHARE DATA AND RATIOS

Year ended December 31,

3 unchanged sentences

Net change in unrealized appreciation of portfolio securities

Net change in unrealized depreciation of warrant liability

Net (decrease) increase in net assets resulting from operations

2 unchanged sentences

Dilutive effect of shares issued

Decrease in net assets resulting from capital transactions

Dilutive effect of warrants issued

Decrease (increase) in net assets resulting from capital transactions

Net increase (decrease) in net assets

10 unchanged sentences

Total return on market price (1)

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

The accompanying notes are an integral part

of these financial statements.

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(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.

EQUUS TOTAL RETURN, INC.

OF INVESTMENTS DECEMBER 31, 2024

(in thousands, except share

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2025

(in thousands, except share data)

Name and Location of

3 unchanged sentences

Majority-owned (3) :

Equus Energy, LLC (4)

December 2011

Member interest (100%)

Morgan E&P, Inc.

6,800,000 common stock (5)

12% senior secured promissory note due 5/26 (5)(6)

1 unchanged sentence

Majority-owned (represents 60.8% of total investments at fair value)

Non-Affiliate Investments:

Less than 5% owned (4) :

CitroTech, Inc.

Environmental

February 2025

Warrants (exercisable into 312,500 common stock) (5)

591,039 shares common stock

Total Non-Affiliate Investments (represents 39.2% of total investments at fair value)

Total Investments

(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.

(1) Under Section 55(a) of the 1940

Act, qualifying assets must represent at least 70% of the total assets at the time of acquisitions of any non-qualifying.

As of December

31, 2025, none of the Fund’s total assets were considered non-qualifying assets.

(2) 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

(3) Majority owned investments

are generally defined under the 1940 Act as companies in which we own more than 50% of the voting securities of such company.

(4) Non-affiliate investments

are generally defined under the 1940 Act as companies in which we own less than 5% of the voting securities of such company.

(5) Level 3 Portfolio Investment.

(6) Income producing.

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SCHEDULE OF INVESTMENTS –

DECEMBER 31, 2024

(in thousands, except share

Our portfolio securities

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

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

SCHEDULE OF INVESTMENTS – (Continued)

DECEMBER 31, 2025

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):

(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”)

or an exemption from registration thereunder.

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.

of December 31, 2025, we had invested 81.0% of our assets in securities of portfolio companies that constituted qualifying investments

under the 1940 Act.

As of December 31, 2025, 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 60.8% of the total value of the investments in portfolio securities as of December 31, 2025.

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 one portfolio company and was 63.4% of our net asset

value, 49.2% of our total assets and 60.8% of our investments in portfolio company securities (at fair value) as of December 31, 2025.

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, 2025 (in thousands):

Type of Securities

Fair Value as Percentage of Net Assets

Limited liability company investments

Value as Percentage of Net Assets

Secured and subordinated debt

The following

is a summary by industry of the Fund’s investments in portfolio securities as of December 31, 2024 (in thousands):

Fair Value as Percentage of Net Assets

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The following is a summary by industry of the Fund’s

investments in portfolio securities as of December 31, 2025 (in thousands):

Value as Percentage of Net Assets

Environmental

EQUUS TOTAL RETURN, INC.

OF INVESTMENTS DECEMBER 31, 2023

(in thousands, except share

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2024

(in thousands, except share data)

Name and Location of

3 unchanged sentences

Majority-owned (3) :

Equus Energy, LLC (4)

Energy, LLC (4)

December 2011

Member interest (100%)

Morgan E&P, LLC (4)

Member interest (100%)

2 unchanged sentences

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

Treasury Bills

Treasury Bill

December 2023

Treasury bills (represents 52.4% of total investments at

Total Investments

(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

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

As of December 31, 2024, none of the Fund's total assets were considered non- qualifying assets.

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

3 Portfolio Investments

(5) Income-producing

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SCHEDULE OF INVESTMENTS –

SCHEDULE OF INVESTMENTS – (Continued)

DECEMBER 31, 2024

(in thousands, except share

Our portfolio securities

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

(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):

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.

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” included 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

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

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Secured and subordinated debt

The following

is a summary by industry of the Fund’s investments in portfolio securities as of December 31, 2023 (in thousands):

Fair Value as Percentage of Net Assets

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EQUUS TOTAL RETURN,

The following is a summary by industry of the Fund’s

investments in portfolio securities as of December 31, 2024 (in thousands):

Value as Percentage of Net Assets

EQUUS TOTAL RETURN, INC.

NOTES TO FINANCIAL STATEMENTS

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(1) ORGANIZATION AND BUSINESS PURPOSE

About the Company—

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.

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.

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

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

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

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

distribute to our stockholders.

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

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

stockholders.

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

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

The purpose of these Taxable

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

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

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

Absent the Taxable Subsidiaries, a portion of the gross

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

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

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

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

To the extent that such income did

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

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

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

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

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

We do not consolidate the Taxable Subsidiaries for income

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

The Taxable Subsidiaries may generate income

tax expense because of the Taxable Subsidiaries’

(“we,” “us,” “our,” “Equus” the “Company” and the “Fund”),

a Delaware corporation, was formed on August 16, 1991.

Our shares trade on the New York Stock Exchange (“NYSE”) under the

symbol ‘EQS’.

Our investment strategy, as approved by our shareholders, is based on a total return investment objective.

strategy seeks to provide the highest total return, consisting of capital appreciation and current income.

We are authorized under our

Certificate of Incorporation to issue up to 100,000,000 shares of common stock and up to 10,000,000 shares of preferred stock.

As of December

31, 2025, we had 13,966,696 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

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 are subject to normal corporate rates of taxation of our income

and gains and are not 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

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 requalify 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 Margin 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.

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

(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

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.

As of December 31, 2025, we

had cash and cash equivalents of $0.1 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.

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.

(3) SIGNIFICANT ACCOUNTING POLICIES

The following

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

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

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

Other potentially dilutive common stock, and the related

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

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

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

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

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

We have identified valuation of investments

and revenue recognition as our most critical accounting estimates.

Consolidation —In

The following is a summary of significant accounting

policies followed by the Fund in the preparation of its financial statements:

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.

believe the estimates and assumptions used in preparing these financial statements and related notes are reasonable in light of known

facts and circumstances, actual results could differ from those estimates.

We have identified valuation of investments and revenue recognition

as our most critical accounting estimates.

Consolidation —In

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

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

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

the investment company or its consolidated subsidiaries.

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Investments—

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

With respect to investments for which market quotations

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

process each quarter, as described below:

Value Measurements — 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.

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

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.

into the determination of fair value are based upon the best information under the circumstances and may require significant management

judgment or estimation.

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:

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

With respect to investments with a fair value exceeding

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

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

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

Our Management produces a report that summarizes each of our portfolio

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

The Audit Committee of our Board reviews and discusses the preliminary

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

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

The Board discusses valuations and determines the fair value of each

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

the Audit Committee.

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

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

of operations or changes in general market conditions).

Investments are

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

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

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

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

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

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).

We determine the fair value

of equity securities, warrants, and other ownership interests in our portfolio companies using valuation methods appropriate for each

When an instrument is traded in an active public market, we generally use the quoted market price as of the measurement date.

For privately held or infrequently traded equity positions, we may consider factors such as the portfolio company’s financial performance,

recent transactions, market conditions, and the rights and preferences of the security.

For derivative securities such as warrants, we

estimate the value of warrant positions using option-pricing techniques.

Other investments are valued

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

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

The yield analysis uses loan spreads and other relevant information implied

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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”

To determine the EV, we typically use a market multiples approach that considers relevant and applicable market trading data

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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

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

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

covenants, call protection provisions, and information rights;

In estimating

the fair value of our equity interest in Morgan, we have given equal emphasis to an income approach that examines expected cash flows

from the development of leasehold interests held by Morgan, with a market approach that examines comparable acreage values.

Our management

received advice and assistance from a third-party valuation firm to support our determination of the fair value of this investment.

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 portfolio company’s ability to make payments;

the principal markets in which the portfolio company does business;

publicly available financial ratios of peer

the principal market;

publicly available financial ratios of peer companies;

the principal

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.

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In addition to

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

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

The yield analysis considers changes in interest rates

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

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

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

Fair Value Measurement—Fair

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

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

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.

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.

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

3 investments is the discounted cash

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

The discounted

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

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

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

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

The valuation based on the inputs determined to be

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

The determination of fair value using these methodologies

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

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

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

To assess the

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

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

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

The market approach to determining

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

(1) applying to the portfolio company’s

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

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

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

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

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

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

Application of these

valuation methodologies involves a significant degree of judgment by Management.

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

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

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

Further, such investments are generally subject

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

If we were required to liquidate a portfolio

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

been recorded.

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

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

basis, our valuation process as described above.

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

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

There were no transfers to or from

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

As of December

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:

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.

Our general intent

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

As such, we believe that the fair value will not

exceed the cost of the investment.

However, in addition to the previously described analysis involving allocation of value to the debt

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

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

the market interest rates and leverage levels.

Assuming the credit quality of the portfolio company remains stable, the Fund will use

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

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.

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

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

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.

of our investment in Morgan E&P, Inc.

(“Morgan”), we also examine acreage values in comparable transactions and assess

the impact upon the working interests held by Morgan.

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.

of our holding of shares and warrants in CitroTech, Inc.

(“CITR”), we examined the trading price of the CITR shares on the

relevant measurement date and, in the case of the warrants, employed a Black-Scholes analysis with a 1- and 2-year stock variance to determine

To assess the reasonableness

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

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

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

The market approach to determining the fair value

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

(1) applying to the portfolio company’s trailing

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

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

(2) subtracting

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

of payment to the equity securities we hold;

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

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

Application of these valuation

methodologies involves a significant degree of judgment by Management.

Due to the inherent uncertainty

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

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

from the values that may ultimately be received or settled.

Further, such investments are generally subject to legal and other restrictions

or otherwise are less liquid than publicly traded instruments.

If we were required to liquidate a portfolio investment in a forced or

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

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

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, 2025 and 2024.

As of December 31, 2025, 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

Fair Value Measurements as of December 31, 2025

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Quoted Prices in Active Markets for Identical Assets

Significant Other Observable Inputs

Significant Unobservable Inputs

investments $

Non-affiliate

Total investments $

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:

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

Fair Value Measurements as of December 31, 2024

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Significant Unobservable Inputs

investments $

Total investments $

Treasury Bills

Total investments and U.S.

Treasury Bills

The following table provides a reconciliation of fair

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

The following table provides a reconciliation of

fair value changes during 2025 for all investments for which we determine fair value using significant unobservable (Level 3) inputs:

Fair value measurements using significant unobservable inputs (Level 3)

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Control Investments

Affiliate Investments

Non-affiliate Investments

Fair value as of January 1, 2025

Realized gain (loss)

Change in unrealized appreciation

Purchases of portfolio securities

Transfers in (out) of Level 3

Fair value as of December 31, 2025

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The following table provides a reconciliation of

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Control Investments

Affiliate Investments

Non-affiliate Investments

Fair value as of January 1, 2024

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

value measurements using significant unobservable inputs (Level 3)

Fair value measurements using significant unobservable inputs (Level 3)

(in thousands)

Control Investments

Affiliate Investments

Non-affiliate Investments

Fair value as of January 1, 2023

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Fair value as of December 31, 2023

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.

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.

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The following table summarizes the significant non-observable

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Weighted Average

Limited liability company investments

Equus Energy, LLC

Acreage Value (per acre)

Guideline Transaction Method

Proved Reserve Multiple

Daily Production Multiple

Discounted Cash Flow

Discount Rate

Transaction Price

Morgan E&P, LLC

Equity Investments

Guideline Public Company Method

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Daily Production Multiple

Morgan E&P, Inc.

Guideline Transaction Method

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Daily Production Multiple

Acreage Value (per acre)

Discounted Cash Flow

Discount Rate

Morgan E&P, LLC

Morgan E&P, Inc.

Yield analysis

Discount for lack of marketability

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The following table summarizes the significant non-observable

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

Company specific yield

CitroTech, Inc.

(formerly General Enterprise Ventures, Inc.)

Black-Scholes

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:

(in thousands)

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Discount Rate

Transaction Price

Guideline Public Company Method

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Daily Production Multiple

Morgan E&P, LLC

Morgan E&P, Inc.

Guideline Transaction Method

3 unchanged sentences

Discount Rate

Morgan E&P, LLC

Morgan E&P, Inc.

Yield analysis

Discount for lack of marketability

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The various weighted

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

of minimum and maximum rates.

Company specific yield

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

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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 .

Transactions —

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,

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

Financial instruments not measured

at fair value

In estimating the fair

values of its financial instruments not measured at fair value, the Company used the following methods and assumptions.

The carrying amount for

cash and cash equivalents, accounts receivable from affiliates, accrued interest, other assets, accounts payable and other, accrued compensation

and accounts payable to related parties approximates fair value due to the short-term maturity of these assets and liabilities.

value of notes payable approximates carrying values as the notes have almost reached their maturity date.

The following table presents

the carrying amounts and estimated fair values of the Company’s financial instruments not measured at fair value as of December

31, 2025 and 2024:

Estimated Fair Value

(in thousands) Carrying

Cash and cash equivalents

Accounts receivable from affiliates

Accrued interest

Accounts payable and other

Accrued compensation

Accounts payable to related parties

Notes payable

Estimated Fair Value

(in thousands) Carrying

December 31, 2024

Cash and cash equivalents

Accounts receivable from affiliates

Accrued interest

Accounts payable and other

Accrued compensation

Accounts payable to related parties

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.

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.

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, 2025, we have no assets going through foreclosure.

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

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

Under the 1940 Act, “Control Investments”

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.

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

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

We accrete or amortize discounts and premiums on securities purchased

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

The amortized cost of investments represents the original cost

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

We stop accruing interest on investments when

we determine that interest is no longer collectible.

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

the current accrual is uncollectible.

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

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

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

relevant portfolio interest.

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

exists for the portfolio company to make a distribution.

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

We add PIK interest, if any, computed at

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

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

collected any cash in respect of such investments.

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

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

Cash and Cash

Equivalents and Restricted Cash —

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

liquid investments with original maturities of three months or less.

The Company’s cash balances may exceed Federal Deposit Insurance

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

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

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

in which those deposits are held.

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.

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.

Earnings Per Share —Basic

and diluted 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.

Diluted earnings per share adjusts the basic EPS for

the potential dilution that could occur if the Equus Note (1,333,333 shares) and Warrants (1,999,999 shares) were exercised or converted

into common stock.

The impact of the Equus Note and Warrants were anti-dilutive for the year ended December 31, 2025, due to the net loss

for the period.

We use the treasury stock method in the computation of earnings per share.

The following table presents the computation of

basic and diluted earnings per share as of December 31, 2025, 2024, and 2023, respectively:

(in thousands, except share and per-share data)

Year Ended December

Net income (loss) attributable to common shareholders

Weighted average shares outstanding - basic

Weighted average shares outstanding - diluted

Basic earnings per share

Diluted earnings per share

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.

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The following

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

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

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, 2025, 2024 and 2023:

Cash and cash equivalents at end of period

Restricted cash at end of period

Cash and cash equivalents and restricted cash at

end of period

Taxes —

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

Cash and cash equivalents and restricted cash at end of period

Taxes — Historically,

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

However, as a result of the Company’s election to not

qualify as a RIC in the fourth quarter of 2024, the Company is now classified as a C corporation for income tax purposes and subject to

guidance under ASC 740, accounting for income taxes.

This change in tax status is reflected in the footnotes below.

records deferred tax assets to the extent the Company believes these assets will more-likely-than-not be realized.

In making such determinations,

the Company considers all available positive and negative evidence, including future reversals of existing temporary differences, projected

future taxable income, tax planning strategies and recent financial operations.

For the year ended December 31, 2025, the Company believes

its deferred tax assets will more-likely-than-not be realized and has recorded a valuation allowance against its net deferred tax assets.

4, 2025, Public Law No.

119-21, commonly referred to as the One Big Beautiful Bill Act (the “Act”), was enacted.

Key provisions

of the Act affecting the Company include:

(i) a permanent reduction in the corporate tax rate, (ii) the permanent extension of 100% bonus

depreciation for qualified property, and (iii) modifications to the calculation of the §163(j) business interest expense limitation.

In accordance

with ASC 740, the Company recognized the effects of the new tax law in the period of enactment.

The adoption of the Act did not result

in any material impact to current or deferred income tax expense for the year ended December 31, 2025.

The Company continues to evaluate

the impact of the Act on its financial statements and will update its estimates as additional guidance becomes available.

740-10, Income Taxes, provides that a tax benefit from an uncertain position may be recognized in the financial statements when it is

more-likely-than-not that the position will be sustained upon examination, including resolutions of any related appeals or litigation

processes, based on technical merits.

This guidance also addresses measurement, derecognition, classification, interest and penalties,

accounting for interim periods, disclosure and transition.

The Company has no material uncertain tax positions in its prior or current

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 $0.02 million for the year ended December 31, 2025, $0.03 million for the year ended December 31, 2024, $0.03 million

for the year ended December 31, 2023, 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.

Because the margin tax is calculated

on a base that incorporates both revenue and expense elements, it is treated as an income tax under ASC 740.

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.

year ended December 31, 2025, no state income tax is expected.

No state income tax was due for the years ended December 31, 2024 and 2023.

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:

&NegativeThickSpace;

Distributable Earnings —The

components that make up distributable earnings (accumulated undistributed deficit) on the Balance Sheet as of December 31, 2025 and 2024

are as follows:

(in thousands)

December 31, 2025

December 31, 2024

Accumulated undistributed net investment losses

Unrealized appreciation of portfolio securities, net

Unrealized appreciation of warrant payable

Accumulated undistributed net capital gains

Accumulated deficit

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.

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.

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

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

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

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.

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Segments —Equus

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.

During the year ended December 31, 2025, we awarded an additional 380,523 shares of restricted

stock under the Incentive Plan of which, 200,523 shares were awarded to officers of the Fund and 180,000 shares were awarded to consultants

These awards were fully vested at the grant date.

The Fund recorded $0.3 million of share-based incentive expense related to

the shares awarded to officers of the Fund, and charged Morgan $0.4 million of share-based incentive expense related to the shares issued

to the consultants of Morgan.

As of December 31, 2025, pursuant to agreements entered into with the Morgan consultants, we were obligated

to issue an additional 180,000 Equus shares thereunder, and charged Morgan $0.3 million related to this obligation.

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

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

Convertible Note —The

Fund accounts for the Convertible Note under ASC 470-20, “ Debt—Debt with Conversion and other Options” (“ASC

The Convertible Note is assessed under ASC 815, Derivatives and Hedging , for any conversion features which may require

bifurcation, and the substantial premium model in accordance with ASC 470.

Based on our assessment, separate accounting for the conversion

feature of the Convertible Note is not required.

The Fund is not required to account for the Convertible Note at fair value and did not

elect to measure it at fair value in accordance with ASC 815, Derivatives and Hedging , and ASC 825, Financial Instruments.

In accordance with ASC Topic

470-20, when the Fund issues convertible note with warrants, the Fund treats the fair value of the warrants as a debt discount, recorded

as a contra-liability against the convertible note, and amortizes the balance over the life of the underlying note as interest expense

in the consolidated statements of operations using the effective interest rate.

The offset to the contra-liability is recorded as either

equity or liability in the Fund’s consolidated balance sheets depending on the accounting treatment of the warrants.

Warrants —The

Fund evaluates all contracts on its own equity, including common stock purchase warrants, to determine whether such instruments should

be classified as equity or as assets or liabilities in accordance with ASC 815-40, Contracts in Entity’s Own Equity.

Contracts that

require or may be settled in the Fund’s own shares are classified as equity when (i) the contract is indexed to the Fund’s

own stock, as defined in ASC 815-40, and (ii) the contract meets all equity classification conditions, including that the contract requires

physical settlement or net-share settlement, or provides the Fund with the ability to settle the contract in shares.

Contracts that require

net-cash settlement, or that provide the counterparty with a choice of net-cash settlement, or that allow the holder of the contracts

to get more favorable terms if other securities are issued with better terms, are classified as assets or liabilities.

Additionally, contracts

that contain provisions requiring net-cash settlement upon the occurrence of an event that is outside the Fund’s control, or that

otherwise fail to meet the equity classification criteria under ASC 815-40, are classified as assets or liabilities.

Contracts classified as

assets or liabilities are initially recognized at fair value and subsequently remeasured at each reporting date, with changes in fair

value recognized in consolidated statements of operations.

The Fund reassesses the classification of such contracts at each reporting

date to determine whether a change in classification is required.

(4) RELATED PARTY TRANSACTIONS AND AGREEMENTS

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.

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.

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.

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

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

of $300 per hour for services rendered.

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, 2025, we

accrued $0.3 million in unpaid director fees, as well as $0.6 million and $0.5 million in accrued but unpaid compensation to our Chief

Executive Officer and our Chief Compliance Officer, respectively.

As of December 31, 2025 and 2024, we paid $1.1 million and $0.7

million, respectively on behalf of Morgan.

As of December 31, 2025 and 2024, the accrued interest on Morgan’s senior debt was

$2.7 million and $1.5 million, respectively.

ISSUANCE OF EQUUS SECURITIES

Convertible Senior Note

On February 7, 2025, the

Fund issued a one-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.

Pursuant to the terms of the Equus Note, the holder has the right, at its option, at any time to convert the Equus Note

into a number of fully-paid and nonassessable shares of Equus common stock determined by dividing (i) the sum of the outstanding principal

balance and accrued but unpaid interest of the Equus Note being converted by (ii) the conversion price.

The Fund has the right, at

any time and from time to time, to prepay the Equus Note in whole or in part without premium or penalty.

All interest payments may be

made in cash and/or in shares of Equus common stock at the sole option of the Fund.

All payments due under the Equus Note are senior to

all other indebtedness of the Fund and its subsidiaries.

The Fund is required to reserve sufficient authorized but unissued shares of

its common stock to satisfy the holder of the Equus Note upon the conversion thereof.

Pursuant to the Subscription Agreement entered into

by the Fund and the holder of the Equus Note, the Fund is also required to cause certain stockholders of the Fund to approve the issuance

of Equus shares in the event of a conversion of the Equus Note and the Warrants described below.

Further, the Fund is restricted from

incurring or guaranteeing further indebtedness, subject to certain exceptions, without the consent of the holder of the Equus Note.

February 7, 2026, the Equus Note matured and remains unpaid.

The Equus Note requires the lender to provide written notice of default but,

as of the date of filing of this Annual Report on Form 10-K, no such notice has been provided.

The Fund accounts for

the Equus Note under ASC 470-20, “ Debt—Debt with Conversion and other Options ” (“ASC 470”).

Equus Note is assessed under ASC 815 for any conversion features which may require bifurcation.

The Fund is not required to account

for the debt instrument at fair value, and did not elect to measure debt at fair value in accordance with ASC 815, Derivatives

and Hedging , and ASC 825, Financial Instruments .

We evaluated the conversion feature of the Equus Note offering for an

embedded derivative in accordance with ASC 815, Derivatives and Hedging , and the substantial premium model in accordance with

ASC 470, Debt .

Based on our assessment, separate accounting for the conversion feature of the Equus Note is not required.

$2,123,111 and $0 in convertible notes payable as of December 31, 2025, and December 31, 2024, respectively.

As of December 31,

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

2025, the fair value of the convertible note based on level 2 inputs using the lattice model was $2,202,885, with an effective

interest rate of 31.53%.

The balances as of December

31, 2025 were as follows:

Carrying amount

Maturity date

Conversion price

Conversion shares

About Investment, Ltd

$2,123,111 (a)

Including accrued interest of $182,222 as of December 31, 2025.

Collateral for the Equus Note consists of the Fund’s holdings in CitroTech, Inc.

as shown in the Schedule of Investments.

The net carrying amount

of the liability and equity components of the Note was as follows:

December 31, 2025

Note liability component:

PIK’d interest

Debt discount (equity component)

Net carrying amount

Interest expense recognized

related to the convertible note at December 31, 2025 was $182,222.

Stock Purchase Warrants

Contemporaneously

with the issuance of the Equus Note, the Fund also issued two common stock purchase warrants (collectively, the “Warrants”)

to acquire an aggregate of 1,999,999 shares of the Fund’s common stock at an exercise price of $1.50 per share.

Ordinarily, the Fund would

account for warrants issued to purchase shares of its common stock as equity in accordance with FASB ASC 480, Accounting for Derivative

Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, Distinguishing Liabilities from Equity.

However, since the terms of the Warrants may be modified by the holders thereof in the event of the subsequent issuance of Equus securities

with terms deemed by such holders to be more favorable than the Warrants, we have accounted for the Warrants as a liability.

Fund accounts for the Warrants as a liability under fair value Level 3 hierarchy, using a Black-Scholes option pricing model.

significant unobservable assumption is expected volatility.

The assumptions used to measure the fair value at inception and as of

December 31, 2025, under this model include the following:

The net carrying amount

of the liability related to the Warrants was as follows:

December 31, 2025

Warrant liability component:

Warrant at inception

Unrealized gain or warrant liability

Net carrying amount of the warrant liability

(6) 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

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

The Company is also

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

This combination results in

a marginal blended tax rate of approximately 21.6%.

At each of December 31, 2024, and 2023,

the tax effected amount of U.S.

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

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

can be carried forward indefinitely.

The Company has determined, after weighing

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

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

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During the current period, the Company

has estimated a taxable loss.

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, 2025 and 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, 2025,

and 2024, the tax effected amount of U.S.

Federal net operating loss carryforwards (“NOLs”) totaled $7.5 and $6.8 million

respectively.

As of December 31, 2025, $1.4 million in NOLs will begin to expire in varying amounts between 2036 and 2037, and the remaining

$6.1 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 $7.9 million was established at December 31, 2025 to completely offset the DTA as

of that date.

During the current period, the

Company has estimated a taxable loss.

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

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

All of the Company’s

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

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

The provision for income taxes for the years ended

December 31, 2025 and 2024, respectively, consisted of the following:

Years Ended December 31,

Current (expense) benefit:

Total current (expense) benefit

Deferred (expense) benefit:

Total deferred (expense) benefit

Total benefit (expense):

Total benefit (expense)

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

for uncertain tax positions.

The components of the net deferred tax assets (liabilities)

in the Fund’s balance sheets were as follows:

As of December 31,

Deferred tax assets:

Total income tax benefit (provision)

The actual income tax benefit (provision) differs from

the expected income tax benefit (provision) as computed by applying the United States federal corporate income tax rate of 21% for the

periods indicated below, as follows:

Federal Statutory Rate

State & Local Income Taxes, Net of

Federal Income Tax Effect

State income taxes - Other, Net

State Change in Valuation Allowance

State income taxes - 2024 Return to Provision

Changes in Valuation Allowances

Nontaxable or Nondeductible Items

Effective Tax Rate

Federal Statutory Rate

State & Local Income Taxes, Net of

Federal Income Tax Effect

State income taxes - Other, Net

State Change in Valuation Allowance

State income taxes - 2024 Return to Provision

Changes in Valuation Allowances

Nontaxable or Nondeductible Items

Change in Tax Status

Effective Tax Rate

The components of the net deferred

income tax assets (liabilities) recognized are as follows:

December 31, 2025

December 31, 2024

December 31, 2023

Deferred noncurrent income tax assets:

Net operating loss carry-forwards

Charitable Contributions

Net operating loss carryforwards

Total Deferred Tax Assets

Capital loss carry-forwards

Gross deferred noncurrent income tax assets

Valuation allowance

Deferred Tax Assets after Valuation Allowance

Deferred tax liabilities:

Mark to Market Unrealized Gain/Loss

Total net deferred tax assets (liabilities)

The provision for income taxes varies from the maximum federal statutory

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

Years Ended December 31,

Income tax expense (benefit) at federal statutory rate

Change in tax status

Effect of state income taxes

Non-deductible Permanent Items

2023 Return to Provision Adjustment

Change in valuation allowance

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

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

authorities or expiration of the applicable statute of limitations.

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

We believe that there are no tax positions

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

Deferred noncurrent income tax assets

Deferred noncurrent income tax liabilities:

Unrealized Gain/Loss

Deferred noncurrent income tax liabilities

Net noncurrent deferred income tax assets (liabilities)

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.

(7) COMMITMENTS AND CONTINGENCIES

Lease Commitments .

We had an operating lease for office space that expired in September 2014.

had an operating lease for office space that expired in September 2014.

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

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

under the operating lease agreement, inclusive of common area maintenance costs, was $132,000 for the year ended December 31, 2025 and

$93,000 for the years ended December 31, 2024, and 2023, respectively.

We have no other leases.

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

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

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

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

Follow-on investments may include capital infusions

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

company to generate cash flows to service the debt.

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

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

While the outcome of these legal proceedings cannot at this

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

condition or results of operations.

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Portfolio Companies.

of December 31, 2025 and, 2024, we had no 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

Legal Proceedings.

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.

(8) PORTFOLIO SECURITIES

2025 Portfolio Activity

The following table summarizes significant

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

Morgan E&P, LLC

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.

The following table summarizes significant investment

activity during the year ended December 31, 2025 (in thousands):

CitroTech, Inc.

North American Energy Opportunites Corp

During 2025, we recorded a decrease of $3.5

million in net unrealized appreciation, from an unrealized appreciation of $8.9 million at December 31, 2024 to a net unrealized

appreciation of $5.4 million at December 31, 2025.

Such change in unrealized appreciation resulted primarily from the increase in

fair value of our holdings in CitroTech, Inc.

(formerly, General Enterprise Ventures, Inc.) of $5.4 million and the reversal of the

unrealized loss of $4.1 million when we sold our interest in Equus Energy, offset by the decrease in the fair value of our holdings

in Morgan E&P, Inc.

of $13.0 million, principally due to a lower forward price curve for oil, as well as the elimination of

certain reserves of Morgan due to its limited production.

During 2025, we also recorded a decrease in the fair value of our holding

of redeemable Series A Preferred Stock of North American Energy Opportunities Corp.

of $2.75 million due to the failure of certain

conditions to redemption that were required to occur prior to August 31, 2025.

2024 Portfolio Activity

The following table summarizes significant

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

The following table summarizes significant investment

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

Morgan E&P, LLC

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

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

Such change in unrealized appreciation resulted primarily

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

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

The increase in the

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

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

its gas properties.

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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.

We sold our interest in Equus Energy in March 2025 for a combination of cash and preferred stock valued at

$4.0 million.

2023 Portfolio Activity

The following table

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

Portfolio Company

Equus Energy, LLC

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.

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”

See Subsequent Events

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

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Below is selected financial information

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

and 2022 (in thousands):

EQUUS ENERGY, LLC and SUBSIDIARY

Condensed Consolidated Balance

Current assets:

Cash and cash equivalents

Accounts receivable

Total current assets

Oil and gas properties

accumulated depletion, depreciation and amortization

Net oil and gas properties

Total assets $

Liabilities and member's deficit

Current liabilities:

Accounts payable and other

Due to affiliate

Total current liabilities

Asset retirement obligations

Total liabilities

Total member's deficit

Total liabilities and member's deficit $

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EQUUS ENERGY, LLC and SUBSIDIARY

Condensed Consolidated Statements

of Operations

Operating revenue

Operating expenses

Direct operating expenses

Depletion, depreciation, amortization and accretion

Professional fees

General and administrative

Total operating expenses

Net operating loss

Non-operating income

Total other income

Net (loss) income

EQUUS ENERGY, LLC and SUBSIDIARY

Condensed Consolidated Statements

of Cash Flows

Year ended December 31,

Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to

net cash used in operating activities:

Depletion, depreciation and amortization

Accretion expense

Changes in operating assets and liabilites:

Accounts receivable

Prepaid expenses and other current assets

Accounts payable and accrued liabilities

Due to Parent

Net cash used in operating

Cash flows from investing activities:

Investment in oil & gas properties

Net cash used in investing activities

Cash flows from financing activities:

Capital contribution

Net cash provided by investing

Net decrease in cash

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

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The following table summarizes significant investment

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

Morgan E&P, LLC

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

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

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

The acreage and associated mineral rights were

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

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

and draws that we determine.

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.

(9) MORGAN E&P, INC.

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.

we converted Morgan into a Delaware corporation taxed according to the requirements of Subchapter C of the Internal Revenue Code.

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.

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

As of December 31, 2025 and 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, Inc.

as of December 31, 2025 and 2024 and for the years ended December

31, 2025, December 31, 2024, and the period from inception (April 3, 2023) through December 31, 2023, respectively, (in thousands):

Mo rg an E&P, Inc.

Condensed Balance Sheets

December 31, 2025

7 unchanged sentences

Oil and gas properties, net - full cost method

Other property, plant and equipment, net

Other property, plant and equipment

Total property, plant and equipment - net

2 unchanged sentences

Total noncurrent assets

Liabilities and Member's Deficit:

Liabilities, Member's and Stockholder's Deficit

Current liabilities

1 unchanged sentence

Revenue payable

Prepayments from working interest owners

Current portion of operating lease liabilities

Short-term loan payable

Current portion of operating lease liablities

Deferred income

Due to parent

Note payable - Due to parent

Accrued liabilities

Accrued liabilities - Due to parent

Total current liabilities

1 unchanged sentence

Asset retirement obligations

Long-term operating lease liabilities

Long-term operating lease liablities

Note payable - Due to parent

Long-term accrued liabilities - Due to parent

Long-term accrued liablities - Due to parent

Total long-term liabilities

Commitments and contingencies (Note 10)

Total liabilities

Commitments and Contingencies (Note 9 and Note 10)

Member's deficit

Total liabilities and member's deficit

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Morgan E&P, LLC

Condensed Statements

of Operations

Stockholder's deficit

Preferred stock, $0.001 par value, 10,000,000 shares authorized,

zero shares issued at December 31, 2025

Common stock, $0.001 par value, 100,000,000 shares authorized

6,800,000 shares issued at December 31, 2025

Common stock discount

Accumulated deficit

Total stockholder's deficit

Total liabilities, member's and stockholder's deficit

Mo rg an E&P, Inc.

Condensed Statements of Operations

Period from inception

Year Ended December 31,

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

Oil, natural gas and natural gas liquid revenues

(April 3, 2023)

through December 31, 2023

Oil and gas revenue

Operating costs and expenses

Lease operating

Production and other taxes

Marketing, transportation and gathering expense

Production and ad valorem taxes

Marketing, transportation and gathering

Depreciation, depletion and amortization

Impairment of oil and gas properties

Bad debt expense

General and administrative

Total expenses

Total operating costs and expenses

Other income (expense)

Interest income

Rental income

Interest expense

Total other expense, net

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Morgan E&P, LLC

Condensed Statements

of Cash Flows

Total other income (expense), net

Mo rg an E&P, Inc.

Condensed Statements of Cash Flows

Year Ended December 31,

1 unchanged sentence

Cash flows from operating activities

Adjustments to reconcile net loss to net cash flows

(used in) provided by operating activities

Adjustments to reconcile net loss to cash flows used in

operating activities

Depreciation, depletion and amortization

Amortization of deferred financing costs

Amortization of right-of-use asset

Provision for credit losses

Impairment of oil and gas properties

Changes in operating assets and liabilities

Accounts receivable –

oil and natural gas sales

Accounts receivable –

joint interest billings

Accounts receivable – oil and natural gas sales

Accounts receivable – joint interest billings

Other receivables

6 unchanged sentences

Accrued liabilities

Long-term accrued liabilities - due to parent

Net cash provided (used in) by operating activities

Accrued liabilities - due to parent

Net cash used in operating activities

Cash flows from investing activities

5 unchanged sentences

Proceeds from note payable - affiliate

Net cash provided by financing activities

Proceeds from short-term debt

Deferred financing costs paid

Cash flows provided by financing activities

Net change in cash

Beginning of period

End of period

Supplemental disclosure for noncash financing

and investing activities

Operating lease right-of-use assets additions

Beginning of year

Supplemental disclosure of cash flow information

Cash paid for interest

Noncash investing and financing activities:

Operating lease right-of-use assets

Acquisition of oil and natural gas working interests funded by

accrued liabilities

Change in capital accounts payable and capital accruals

Prepayments applied to joint interest receivables

Capital expenditures funded by accrued liabilities

Prepayments applied to joint interest

Change in asset retirement costs

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(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.

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

Improvements to Income

Tax Disclosures”.

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

taxes paid, and other disclosures.

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

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

In November 2024,

FASB issued ASU 2024-03, “Income Statement –

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

Disaggregation of Income Statement Expenses”.

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

of specified information about certain costs and expenses.

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

beginning after December 15, 2026.

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 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 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”.

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

13 unchanged sentences

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

4 unchanged sentences

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

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

consolidated financial statements.

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

Improvements to Reportable Segment Disclosures”.

The amendments in this ASU require improved reportable segment information on

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

See Note 3 –

Segments for the incremental disclosures.

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

financial statements.

Accounting Standards Recently

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

This update was effective for the December 31, 2025 financial statements and has been adopted prospectively.

impact of this standard had no effect on the financial condition or results of operations, See Notes 3 and 6 for additional disclosures

related to this guidance.

(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

of Convertible Note and Warrants .

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

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

The Equus Note is convertible into shares

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

Contemporaneously with the issuance of the Note, the Fund also

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

price of $1.50 per share.

New Portfolio

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

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

Note”).

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

Contemporaneously

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

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

Equus Energy .

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

gas assets (“NAEOC”).

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

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

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in and Disagreements with Accountants on Accounting and Financial Disclosure

Our Management performed an evaluation of the Fund’s

activity through the date the financial statements were issued, noting the following subsequent events:

On February 7, 2025, we issued the Equus Note described

in Note 5 above.

On February 7, 2026, the Equus Note matured and remains unpaid.

The Equus Note requires the lender to provide written

notice of default but, as of the date of filing of this Annual Report on Form 10-K, no such notice has been provided.

During the period commencing January 1, 2026 until

the filing of this Annual Report on Form 10-K, we sold 122,581 of our shares of CitroTech, Inc.

Changes in and Disagreements with Accountants on Accounting

and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data