equus_10qa.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 1

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period to

Commission File Number 814-00098

EQUUS TOTAL RETURN, INC.

(Exact name of registrant as specified in its charter)

Delaware		76-0345915
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

700 Louisiana St., 41st Floor Houston, Texas		77002
(Address of principal executive offices)		(Zip Code)

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Registrant’s telephone number, including area code: (713) 529-0900

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Name of each exchange on which registered
Common Stock		New York Stock Exchange

☐ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No

☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☐

☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☒

Smaller Reporting Company ☐

Emerging Growth Company ☐

☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐ Indicate by check mark whether the registrant is a shell company. Yes ☐ No ☒

There were 13,586,173 shares of the registrant’s common stock, $.001 par value, outstanding, as of March 31, 2025.

EXPLANATORY NOTE

Equus Total Return, Inc. (“Equus” or the “Company”) is filing this Amendment No. 1 on Form 10-Q/A (“Amended 10-Q”) which supersedes and replaces in its entirety the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 19, 2025 (“Original Filing”).

The sole purpose of this Amended 10-Q is to provide the required Inline XBRL tagging, which was inadvertently omitted from the Original Filing. No other changes to the Original Filing have been made.

This Amended 10-Q does not reflect events occurring after the Original Filing except as noted above. This Amended 10-Q continues to speak as of the date of the Original Filing and the Company has not otherwise updated disclosures contained therein or herein to reflect events that occurred at a later date.

EQUUS TOTAL RETURN, INC.

(A Delaware Corporation)

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Condensed Financial Statements		4
Condensed Balance Sheets		4
Condensed Statements of Operations		5
Condensed Statements of Changes in Net Assets		6
Condensed Statements of Cash Flows		7
Supplemental Information—Selected Per Share Data and Ratios		8
Schedules of Investments		9
Notes to Condensed Financial Statements		13
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		33
Item 3. Quantitative and Qualitative Disclosure about Market Risk		39
Item 4. Controls and Procedures		39
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		41
Item 1A. Risk Factors		41
Item 6. Exhibits		42
SIGNATURE		43

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EQUUS TOTAL RETURN, INC.

CONDENSED BALANCE SHEETS

(Unaudited)

Part I. Financial Information

Item 1. Unaudited Condensed Financial Statements

	March 31, 2025			December 31, 2024

(in thousands, except shares and per share amounts)
Assets
Investments in portfolio securities at fair value:
Control investments (cost at $10,500 and $18,611, respectively)	$	24,500		$	27,500
Non-affiliate investments (cost at $4,250 and $0, respectively)		8,458			—
Total investments in portfolio securities at fair value		32,958			27,500
Cash and cash equivalents		667			262
Accounts receivable from affiliates		1,024			678
Accrued interest		1,807			1,470
Other assets		28			26
Total assets		36,484			29,936
Liabilities and net assets
Accounts payable		271			332
Accrued compensation		13			1
Accounts payable to related parties		411			93
Notes payable		1,592			—
Total liabilities		2,287			426

Commitments and contingencies (See Note 2)

Net assets

Common stock, $.001 par value per share; 100,000,000 shares authorized as of March 31, 2025 and December 31, 2024, and 13,586,173 shares outstanding as of March 31, 2025 and December 31, 2024

Preferred stock, $.001 par value per share; 10,000,000 shares authorized as of March 31, 2025 and December 31, 2024

Common stock, par value	$	14		$	14
Capital in excess of par value		75,529			74,785
Accumulated deficit		(41,346	)		(45,289	)
Total net assets	$	34,197		$	29,510
Shares of common stock issued and outstanding, $.001 par value, 100,000 and 50,000 shares authorized, respectively		13,586			13,586
Net asset value per share	$	2.52		$	2.17

The accompanying notes are an integral part of these financial statements.

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EQUUS TOTAL RETURN, INC.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended March 31,
(in thousands, except per share amounts)	2025			2024
Investment income:
Control investments	$	315		$	283
Non-affiliate investments		22			—
Total investment income		337			283
Interest income		1			—
Total investment income		338			283

Expenses:
Compensation expense		570			428
Professional fees		353			567
Transaction costs		307			—
Professional liability expenses		50			150
Director fees and expenses		77			84
General and administrative expenses		48			33
Mailing, printing and other expenses		11			65
Taxes		3			14
Interest expense		29			32
Total expenses		1,448			1,373

Net investment loss		(1,110	)		(1,090	)

Net realized (loss) gain:
Control investments		(4,111	)		—
Other		(155	)		—
U.S. Treasury Bills		—			45
Net realized (loss) gain		(4,266	)		45

Net unrealized appreciation (depreciation) of portfolio securities:
Control investments		5,111			(1,350	)
Non-affiliate investments		4,208			—
Net change in net unrealized appreciation (depreciation) of portfolio securities		9,319			(1,350	)

Net increase (decrease) in net assets resulting from operations	$	3,943		$	(2,395	)

Net increase (decrease) in net assets resulting from operations per share:
Basic	$	0.30		$	(0.17	)
Diluted	$	0.25		$	(0.17	)
Weighted average shares outstanding:
Basic		13,586			13,586
Diluted		15,549			13,586

The accompanying notes are an integral part of these financial statements.

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EQUUS TOTAL RETURN, INC.

CONDENSED STATEMENTS OF CHANGES IN NET ASSETS

(Unaudited)

	Common Stock
(in thousands)	Number of Shares		Par Value		Capital in Excess of Par Value		Accumulated Deficit			Total Net Assets

Balances as of January 1, 2024		13,586		14		74,785		(26,512	)		48,287

Net decrease in net assets resulting from operations		—		—		—		(2,395	)		(2,395	)

Balances as of March 31, 2024		13,586	$	14	$	74,785	$	(28,907	)	$	45,892

Balances as of January 1, 2025		13,586		14		74,785		(45,289	)		29,510

Issuance of warrants		—		—		744		—			744

Net increase in net assets resulting from operations		—		—		—		3,943			3,943

Balances as of March 31, 2025		13,586	$	14	$	75,529	$	(41,346	)	$	34,197

The accompanying notes are an integral part of these financial statements.

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EQUUS TOTAL RETURN, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three months ended March 31,
(in thousands)	2025			2024
Cash flow from operating activities:
Net increase (decrease) in net assets resulting from operations	$	3,943		$	(2,395	)
Adjustments to reconcile net (decrease) increase in net assets resulting from operations to net cash provided by (used in) operating activities:
PIK interet payable		30			—
Transaction costs		306			—
Net realized loss (gain):
Control investments		4,111			—
Other		155			—
U.S. Treasury Bills		—			(45	)
Net change in unrealized (appreciation) depreciation of portfolio securities:
Control investments		(5,111	)		1,350
Non-affiliate investments		(4,208	)		—
Purchase of portfolio securities		(1,500	)		(2,247	)
Write-off of receivable from portfolio company		(155	)		—
Net proceeds from dispositions of portfolio securities		1,250			—
Purchases of U.S. Treasury bills, net		—			(7,970	)
Changes in operating assets and liabilities:
Accounts receivable from affiliates		(346	)		—
Accrued interest receivable		(337	)		(283	)
Other assets		(2	)		200
Accounts payable and accrued liabilities		(49	)		(33	)
Accounts payable to related parties		318			5
Net cash provided used in operating activities		(1,595	)		(11,418	)
Cash flows from financing activities:
Issuance of notes payable and warrants		2,000			—
Borrowings under margin account		—			52,970
Repayments under margin account		—			(44,955	)
Net cash provided by financing activities		2,000			8,015
Net increase (decrease) in cash and cash equivalents		405			(3,403	)
Cash and cash equivalents and restricted cash at beginning of period		262			6,983

Cash and cash equivalents and restricted cash at end of period	$	668		$	3,580
Non-cash operating and financing activities:
Warrants recognized at a discount	$	438		$	—
Supplemental disclosure of cash flow information:
Interest paid in kind on note payable	$	29		$	—
Income taxes paid	$	3		$	14

The accompanying notes are an integral part of these financial statements.

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EQUUS TOTAL RETURN, INC.

SUPPLEMENTAL INFORMATION—SELECTED PER SHARE DATA AND RATIOS

(Unaudited)

	Three Months ended March 31,
	2025			2024

Investment income	$	0.03		$	0.02
Expenses		(0.11	)		(0.09	)

Net investment loss		(0.08	)		(0.07	)

Net realized (loss) gain		(0.31	)		—
Net change in unrealized appreciation of portfolio securities		0.69			(0.10	)
Net increase (decrease) in net assets resulting from operations		(0.30	)		(0.17	)
Capital transactions:
Dilutive effect of warrants issued		(0.05	)		—
Increase in net assets resulting from capital transactions		(0.05	)		—
Net increase (decrease) in net assets		0.35			(0.17	)
Net assets at beginning of period		2.17			3.55
Net assets at end of period	$	2.52		$	3.38
Weighted average number of shares outstanding during period,
in thousands		13,586			13,586
Market price per share:
Beginning of period	$	1.10		$	1.45
End of period	$	1.01		$	1.46
Selected information and ratios:
Ratio of expenses to average net assets		(4.54	)%		(2.92	)%
Ratio of net investment loss to average net assets		(3.48	)%		(2.31	)%
Ratio of net increase (decrease) in net assets resulting from operations to average net assets		12.38	%		(5.09	)%
Return on net asset value		15.88	%		(4.96	)%
Total return on market price ⁽¹⁾		(8.18	)%		0.69	%

⁽¹⁾

Total return = [(ending market price per share - beginning price per share) / beginning market price per share].

The accompanying notes are an integral part of these financial statements.

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EQUUS TOTAL RETURN, INC.

SCHEDULE OF INVESTMENTS

March 31, 2025

(Unaudited)

(in thousands, except share data)

Name and Location of

Date of Initial

Cost of

Fair

Portfolio Company ⁽¹⁾

Industry

Investment

Principal

Investment

Value⁽²⁾

Control Investments: Majority-owned ⁽³⁾:

Morgan E&P, LLC ⁽⁶⁾

Houston, TX

Energy

April 2023

Member interest (100%)

—

14,000

12% senior secured promissory note due 5/26 ⁽⁷⁾

10,500

24,500

Total Control Investments: Majority-owned (represents 74.1% of total investments at fair value)

10,500

24,500

Non-Affiliate Investments: Less than 5% owned ⁽⁴⁾:

General Enterprise Ventures, Inc. ⁽⁵⁾

Pomona, CA

Environmental

February 2025

Warrants (1,875,000 convertible common stock)

—

1,300

10% senior secured promissory note due 2/26 ⁽⁷⁾

1,500

4,500

1,500

5,800

North American Energy Opportunities Corp. ⁽⁶⁾

New York, NY

Energy

March 2025

27,500 Cl A Redeemable Preferred Shares

2,750

2,658

Total Non-Affiliate Investments (represents 25.9% of total investments at fair value)

4,250

8,458

Total Investments

14,750

32,958

⁽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 March 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.

⁽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 2 Portfolio Investment.

⁽⁶⁾Level 3 Portfolio Investment.

⁽⁷⁾Income producing.

The accompanying notes are an integral part of these financial statements.

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EQUUS TOTAL RETURN, INC.

SCHEDULE OF INVESTMENTS – (Continued)

March 31, 2025

(Unaudited)

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 such registration is available. 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 March 31, 2025, we had invested 90.4% of our assets in securities of portfolio companies that constituted qualifying investments under the 1940 Act. As of March 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 under the 1940 Act. We provide significant managerial assistance to our portfolio companies that comprise 74.3% of the total value of the investments in portfolio securities as of March 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 two portfolio companies and was 79.4% of our net asset value, 74.4% of our total assets and 82.4% of our investments in portfolio company securities (at fair value) as of March 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 March 31, 2025 (in thousands):

Type of Securities	Cost		Fair Value		Fair Value as Percentage of Net Assets

Limited liability company investments	$	—	$	14,000		40.9	%
Secured and subordinated debt		12,000		15,000		43.9	%
Preferred stock		2,750		2,658		7.8	%
Options and warrants		—		1,300		3.8	%
Total	$	14,750	$	32,958		96.4	%

The following is a summary by industry of the Fund’s investments in portfolio securities as of March 31, 2025 (in thousands):

Industry	Fair Value		Fair Value as Percentage of Net Assets
Energy	$	27,158		79.4	%
Environmental		5,800		17.0	%
Total	$	32,958		96.4	%

The accompanying notes are an integral part of these financial statements.

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EQUUS TOTAL RETURN, INC.

SCHEDULE OF INVESTMENTS

December 31, 2024

(Unaudited)

(in thousands, except share data)

Name and Location of

Date of Initial

Cost of

Fair

Portfolio Company ⁽¹⁾

Industry

Investment

Principal

Investment

Value⁽²⁾

Control Investments: Majority-owned ⁽³⁾:

Equus Energy, LLC ⁽⁴⁾

Houston, TX

Energy

December 2011

Member interest (100%)

8,111

4,000

Morgan E&P, LLC ⁽⁴⁾

Houston, TX

Energy

April 2023

Member interest (100%)

—

13,000

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

10,500

23,500

Total Control Investments: Majority-owned (represents 100% of total investments at fair value)

18,611

27,500

Total Investments

18,611

27,500

⁽¹⁾Under Section 55(a) of the 1940 Act, qualifying assets must represent at least 70% of the 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.

⁽²⁾See Note 3 to the financial statements, Valuation of 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⁾Level 3 Portfolio Investment.

⁽⁵⁾Income producing.

The accompanying notes are an integral part of these financial statements.

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EQUUS TOTAL RETURN, INC.

SCHEDULE OF INVESTMENTS – (Continued)

DECEMBER 31, 2024

(in thousands, except share data)

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 under the 1940 Act. We provide significant managerial assistance to our portfolio companies that comprise 100% of the total value of the investments in portfolio securities as of December 31, 2024.

We are classified as a “non-diversified” investment company under the 1940 Act, which means we are not limited in the proportion of our assets that may be invested in the securities of a single issuer. The value of one segment called “Energy” includes our two remaining portfolio companies and was 93.2% of our net asset value, 91.9% of our total assets and 100% of our investments in portfolio company securities (at fair value) as of December 31, 2024. Changes in business or industry trends or in the financial condition, results of operations, or the market’s assessment of any single portfolio company will affect the net asset value and the market price of our common stock to a greater extent than would be the case if we were a “diversified” company holding numerous investments.

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

Type of Securities	Cost		Fair Value		Fair Value as Percentage of Net Assets

Limited liability company investments	$	8,111	$	17,000		57.6	%
Secured and subordinated debt		10,500		10,500		35.6	%

Total	$	18,611	$	27,500		93.2	%

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

Industry	Fair Value		Fair Value as Percentage of Net Assets
Energy	$	27,500		93.2	%
Total	$	27,500		93.2	%

The accompanying notes are an integral part of these financial statements.

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EQUUS TOTAL RETURN, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

March 31, 2025

(Unaudited)

(1) Description of Business and Basis of Presentation

Description of Business—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. As of March 31, 2025, we had 100,000,000 shares of common stock and 10,000,000 shares of preferred stock authorized for issuance, of which 13,568,173 shares of common stock and no shares of preferred stock were outstanding.

We attempt to maximize the return to stockholders in the form of current investment income and long-term capital gains by investing in the debt and equity securities of companies with a total enterprise value between $5.0 million and $75.0 million, although we may engage in transactions with smaller or larger investee companies from time to time. We seek to invest primarily in companies pursuing growth either through acquisition or organically, leveraged buyouts, management buyouts and recapitalizations of existing businesses or special situations. Our income-producing investments consist principally of debt securities including subordinated debt, debt convertible into common or preferred stock, or debt combined with warrants and common and preferred stock. Debt and preferred equity financing may also be used to create long-term capital appreciation through the exercise and sale of warrants received in connection with the financing. We seek to achieve capital appreciation by making investments in equity and equity-oriented securities issued by privately-owned companies in transactions negotiated directly with such companies. Given market conditions over the past several years and the performance of our portfolio, our Management and Board of Directors believe it prudent to continue to review alternatives to refine and further clarify the current strategies.

We elected to be treated as a BDC under the Investment Company Act of 1940 Act (“1940 Act”), although our shareholders authorized us to withdraw this election in previous years (which authorization has since expired) and will likely do so again in the future. Prior to the fourth quarter of 2024, we qualified as a regulated investment company (“RIC”) for federal income tax purposes and, therefore, were not required to pay corporate income taxes on any income or gains that we would have distributed distribute to our stockholders. During the fourth quarter of 2024, we elected to not qualify as a RIC and, consequently, we will be subject to normal corporate rates of taxation of our income and gains and will not be permitted to deduct distributions paid to our stockholders.

We have certain wholly-owned taxable subsidiaries (“Taxable Subsidiaries”) 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. 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 Margins Tax, which is an entity level tax. The Taxable Subsidiaries may generate income tax expense because of the Taxable Subsidiaries’ ownership of the portfolio companies. We reflect any such income tax expense on our Statements of Operations.

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Impact of Economic and Geopolitical Events on the Oil and Gas Sector—Beginning in the second quarter of 2022, crude prices began a steady decline following increases that were largely due to increased post-Covid demand and the buildup and subsequent invasion of Ukraine by Russian forces. Prices began to increase and fall in successive quarters between the third quarter of 2023 and the third quarter of 2024 before stabilizing, and stood at $71.48 as of March 31, 2025. Natural gas prices experienced high volatility in 2022 before collapsing in 2023 and then steadily increasing each quarter thereafter, finishing the quarter ended March 31, 2025 at $4.11 per MMBTU. Relative oil price stability has been a significant factor in increased consolidation activity in the Williston Basin region in North Dakota where Morgan E&P, LLC holds its development rights.

Basis of Presentation—In accordance with Article 6 of Regulation S-X under the Securities Act and the Securities Exchange Act of 1934, as amended (“Exchange Act”), we do not consolidate portfolio company investments, including those in which we have a controlling interest. Our interim unaudited financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), for interim financial information and in accordance with the requirements of reporting on Form 10-Q and Article 10 of Regulation S-X, under the Exchange Act. Accordingly, they are unaudited and exclude some disclosures required for annual financial statements. We believe that we have made all adjustments, consisting solely of normal recurring accruals, necessary for the fair presentation of these interim financial statements.

The results of operations for the three months ended March 31, 2025 are not necessarily indicative of results that ultimately may be achieved for the remainder of the year. The interim unaudited financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Fund’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as filed with the SEC.

(2) Liquidity and Financing Arrangements; Going Concern

Liquidity—There are several factors that may materially affect our liquidity during the reasonably foreseeable future. We are evaluating the impact of current market conditions on our portfolio company valuations and their ability to provide current income. We have followed valuation techniques in a consistent manner; however, we are cognizant of current market conditions that might affect future valuations of portfolio securities.

Cash and Cash Equivalents—As of March 31, 2025, we had cash and cash equivalents of $0.7 million. We had $33.0 million of our net assets of $34.2 million invested in portfolio securities.

As of December 31, 2024, we had cash and cash equivalents of $0.3 million. We had $27.5 million of our net assets of $29.5 million invested in portfolio securities.

Dividends—So long as we remain a BDC, we will pay out net investment income and/or realized net capital gains, if any, on an annual basis as required under the 1940 Act.

Investment Commitments—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. We had no follow-on commitments as of March 31, 2025.

Asset Coverage Ratio—Under the 1940 Act, BDCs are required to have an asset coverage ratio of 200%, meaning that the maximum debt that may be incurred by a BDC is the BDC’s net asset value. Pursuant to amendments made to the 1940 Act in March 2018, BDCs may now, with stockholder or board of directors approval, reduce this ratio to 150%, meaning that the maximum debt that may be incurred by a BDC is two times the BDC’s net asset value. In November 2019, we obtained approval of our shareholders to reduce our asset coverage ratio to 150%. This authorization permits Equus to borrow up to twice the value of the Fund’s net assets. Other than the convertible note financing undertaken in February 2025 described under Issuance of Equus Securities in Note 5 below, we have not yet undertaken any other additional borrowings.

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Certain Risks and Uncertainties and Going Concern—Market and economic volatility which has become endemic in the past few years, together with the economic dislocation caused by the onset of the coronavirus, has constrained the availability of debt financing for small and medium-sized companies such as Equus and its portfolio companies. Such debt financing generally has shorter maturities, higher interest rates and fees, and more restrictive terms than debt facilities available in the past. In addition, during these years and continuing into the fourth quarter of 2024, the price of our common stock remained well below our net asset value, thereby making it undesirable to issue additional shares of our common stock below net asset value.

Because of these challenges, our near-term strategies shifted from originating debt and equity investments to preserving liquidity necessary to meet our operational needs. Key initiatives that we have previously undertaken to provide necessary liquidity include monetizations, the suspension of dividends and the internalization of management. We are also evaluating potential opportunities that could enable us to effect a change to our business and become an operating company as described in Note 6 – Conversion to an Operating Company.

The accompanying unaudited condensed financial statements of the Fund have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and other commitments in the normal course of business.

Our cash and cash equivalents totaled $0.7 million as of March 31, 2025. We do not currently have the necessary cash on hand and/or projected future cash flows to fund our operating activities. It is possible the Fund will require loans, capital investment from one or more sources, or will be required to dispose of certain of its investments, to cover a potential cash shortfall. The Fund does not presently have any existing commitments to fund any such shortfall, should it occur, and cannot guarantee that it will be able to execute on such plans in the future. Because we do not currently have committed financing to fund our operations for at least twelve months from the issuance of these unaudited condensed consolidated financial statements, substantial doubt exists about our ability to continue as a going concern.

The unaudited condensed financial statements do not include adjustments relating to the recoverability and classification of assets and their carrying amount, or the amount and classification of liabilities that may result should the Fund be unable 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 our 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. Although we believe the estimates and assumptions used in preparing these financial statements and related notes are reasonable in light of known facts and circumstances, actual results could differ from those estimates. We have identified valuation of investments and revenue recognition as our most critical accounting estimates.

Consolidation—In accordance with Article 6 of Regulation S-X under the Securities Act of 1933, we do not consolidate portfolio company investments. Under Accounting Standards Committee (“ASC”) 946, we are precluded from consolidating any entity other than another investment company, except that ASC 946 provides for the consolidation of a controlled operating company that provides substantially all of its services to the investment company or its consolidated subsidiaries.

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 certain exceptions as determined by our Management, 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;

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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; and

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

During the first twelve months after an investment is made, we rely on the original investment amount to determine the fair value unless significant developments have occurred during this twelve-month period which would indicate a material effect on the portfolio company (such as results of operations or changes in general market conditions).

Investments are valued utilizing various methodologies and approaches, including a yield analysis, enterprise value (“EV”) analysis, net asset value analysis, liquidation analysis, discounted cash flow analysis, or a combination of methods, as appropriate. The yield analysis uses loan spreads and other relevant information implied by market data involving identical or comparable assets or liabilities. Under the EV analysis, the EV of a portfolio company is first determined and allocated over the portfolio company’s securities in order of their preference relative to one another (i.e., “waterfall” allocation). To determine the EV, we typically use a market multiples approach that considers relevant and applicable market trading data of guideline public companies, transaction metrics from precedent M&A transactions and/or a discounted cash flow analysis. The net asset value analysis is used to derive a value of an underlying investment (such as real estate property) by dividing a relevant earnings stream by an appropriate capitalization rate. For this purpose, we consider capitalization rates for similar properties as may be obtained from guideline public companies and/or relevant transactions. The liquidation analysis is intended to approximate the net recovery value of an investment based on, among other things, assumptions regarding liquidation proceeds based on a hypothetical liquidation of a portfolio company’s assets. The discounted cash flow analysis uses valuation techniques to convert future cash flows or earnings to a range of fair values from which a single estimate may be derived utilizing an appropriate discount rate. The measurement is based on the net present value indicated by current market expectations about those future amounts.

In estimating the fair values of our equity interest in Equus Energy, we have given more emphasis to a market approach that examines developed and undeveloped reserves and mineral acreage values, as well as a market approach that examines comparable industry transactions involving oil and gas assets in proximity to the leasehold interests held by Equus Energy. In estimating the fair values of our equity interest in Morgan, we have given more emphasis to a market approach that examines Morgan’s reserves and production multiples, as well as an income approach that examines expected cash flows from the development of leasehold interests held by Morgan. Our management received advice and assistance from a third-party valuation firm to support our determination of the fair value of these investments.

In applying these methodologies, additional factors that we consider in fair value pricing our investments may include, as we deem relevant: security covenants, call protection provisions, and information rights; the nature and realizable value of any collateral; the portfolio company’s ability to make payments; the principal markets in which the portfolio company does business; publicly available financial ratios of peer companies; the principal market; and enterprise values, among other factors. Also, any failure by a portfolio company to achieve its business plan or obtain and maintain its financing arrangements could result in increased volatility and result in a significant and rapid change in its value.

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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 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. 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.

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

Fair Value Measurement—Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and sets out a fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Inputs are broadly defined as assumptions market participants would use in pricing an asset or liability. The three levels of the fair value hierarchy are described below:

Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2—Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly; and fair value is determined through the use of models or other valuation methodologies.

Level 3—Inputs are unobservable for the asset or liability and include situations where there is little, if any, market activity for the asset or liability. The inputs into the determination of fair value are based upon the best information under the circumstances and may require significant management judgment or estimation.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment.

Investments for which prices are not observable are generally private investments in the debt and equity securities of operating companies. A primary valuation method 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. In the case of our investments in Equus Energy and Morgan, we also examine acreage values in comparable transactions and assess the impact upon the working interests held by these two portfolio companies. 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.

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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) earnings before interest, taxes, depreciation, and amortization (“EBITDA”) a low to high range of enterprise value to EBITDA multiples that are derived from an analysis of publicly-traded comparable companies, in order to arrive at a range of enterprise values for the portfolio company; (2) subtracting from the range of calculated enterprise values the outstanding balances of any debt or equity securities that would be senior in right of payment to the equity securities we hold; and (3) multiplying the range of equity values derived therefrom by our ownership share of such equity tranche in order to arrive at a range of fair values for our equity security (or securities). Application of these valuation methodologies involves a significant degree of judgment by Management.

Due to the inherent uncertainty of determining the fair value of Level 3 investments that do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that may ultimately be received or settled. Further, such investments are generally subject to legal and other restrictions or otherwise are less liquid than publicly traded instruments. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we might realize significantly less than the value at which such investment had previously been recorded. With respect to Level 3 investments, where sufficient market quotations are not readily available or for which no or an insufficient number of indicative prices from pricing services or brokers or dealers have been received, we undertake, on a quarterly basis, our valuation process as described above.

We assess the levels of the investments at each measurement date, and transfers between levels are recognized on the subsequent measurement date closest in time to the actual date of the event or change in circumstances that caused the transfer. There were no transfers to or from Level 3 for the three ended March 31, 2025 and the year ended December 31, 2024.

As of March 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 valuations:

Amendment: SEC Form 10-Q/A filed by Equus Total Return Inc.