Equus Total Return, Inc. Files Q3 2024 10-Q

TL;DR

**EQUUS FILES Q3 10-Q** - Check financials for period ending 9/30/24.

AI Summary

Equus Total Return, Inc. filed its 10-Q for the quarterly period ended September 30, 2024. The company, incorporated in Delaware, is registered with the SEC under file number 814-00098. Its principal executive offices are located at 700 Louisiana Street, Houston, Texas. The company's common stock is registered on the New York Stock Exchange.

Why It Matters

This filing provides investors with the latest financial performance and operational details for Equus Total Return, Inc. during the third quarter of 2024.

Risk Assessment

Risk Level: low — This is a standard quarterly filing providing financial information and does not inherently indicate increased risk.

Key Players & Entities

• EQUUS TOTAL RETURN, INC. (company) — Registrant
• September 30, 2024 (date) — Quarterly period end date
• Delaware (jurisdiction) — State of incorporation
• 700 Louisiana Street, Houston, Texas (location) — Principal executive offices address
• New York Stock Exchange (company) — Exchange where common stock is registered

FAQ

Key Financial Figures

• $18,611 — r value: Control investments (cost at $18,611 and $16,364, respectively) $ 37,500 $
• $16,364 — ontrol investments (cost at $18,611 and $16,364, respectively) $ 37,500 $ 40,853 To
• $250 million — with a market capitalization exceeding $250 million. As of September 30, 2024, we had inves
• $5.0 million — s with a total enterprise value between $5.0 million and $75.0 million, although we may enga
• $75.0 m — terprise value between $5.0 million and $75.0 million, although we may engage in transa
• $68.27 — the third quarter of 2024, and stood at $68.27 as of September 30, 2024. Natural gas p
• $2.92 — ishing the first nine months of 2024 at $2.92 per MMBTU. Relative oil price stability
• $1.1 million — 24, we had cash and cash equivalents of $1.1 million. We had $37.5 million of our net assets
• $37.5 million — ash equivalents of $1.1 million. We had $37.5 million of our net assets of $40.2 million inve
• $40.2 million — had $37.5 million of our net assets of $40.2 million invested in portfolio securities. As o
• $6.5 million — 23, we had cash and cash equivalents of $6.5 million. We had $40.9 million of our net assets
• $40.9 million — ash equivalents of $6.5 million. We had $40.9 million of our net assets of $48.3 million inve
• $48.3 million — had $40.9 million of our net assets of $48.3 million invested in portfolio securities. We e
• $55.5 million — —As of September 30, 2024, we had $55.5 million of restricted cash and U.S. Treasury Bi
• $55.0 million — ts applicable to a RIC. Of this amount, $55.0 million was invested in U.S. Treasury Bills and

Filing Documents

• f10q_equus09302024.htm (10-Q) — 609KB
• ex311_302ceocertification.htm (EX-31.1) — 9KB
• ex312_302cfocertification.htm (EX-31) — 9KB
• ex321_906ceocertification.htm (EX-32.1) — 4KB
• ex322_906cfocertification.htm (EX-32.2) — 5KB
• 0001712543-24-000068.txt ( ) — 637KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Unaudited Condensed Financial Statements

Item 1. Unaudited Condensed Financial Statements 3 Condensed Balance Sheets 3 Condensed Statements of Operations 4 Condensed Statements of Changes in Net Assets 5 Condensed Statements of Cash Flows 6 Supplemental Information—Selected Per Share Data and Ratios 7 Schedules of Investments 8 Notes to Condensed Financial Statements 12

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 38

Quantitative and Qualitative Disclosure about Market Risk

Item 3. Quantitative and Qualitative Disclosure about Market Risk 44

Controls and Procedures

Item 4. Controls and Procedures 44

OTHER INFORMATION

PART II. OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings 46

Risk Factors

Item 1A. Risk Factors 46

Exhibits

Item 6. Exhibits 47 SIGNATURE 48 2 Table of Contents EQUUS TOTAL RETURN, INC. CONDENSED BALANCE SHEETS (Unaudited)

Financial Information

Part I. Financial Information

Unaudited Condensed Financial Statements

Item 1. Unaudited Condensed Financial Statements September 30, 2024 December 31, 2023 (in thousands, except shares and per share amounts) Assets Investments in portfolio securities at fair value: Control investments (cost at $18,611 and $16,364, respectively) $ 37,500 $ 40,853 Total investments in portfolio securities at fair value 37,500 40,853 U.S. Treasury bills 54,993 44,955 Cash and cash equivalents 1,149 6,533 Restricted cash 550 450 Accounts receivable from affiliates 143 139 Accrued interest 1,148 225 Other assets 23 392 Total assets 95,506 93,547 Liabilities and net assets Accounts payable 250 172 Accrued compensation 1 29 Accounts payable to related parties 97 104 Borrowing under margin account 54,993 44,955 Total liabilities 55,341 45,260 Commitments and contingencies (See Note 2) Net assets Common stock, $.001 par value per share; 100,000,000 shares authorized as of September 30, 2024 and December 31, 2023, respectively, and 13,586,173 shares outstanding as of September 30, 2024 and December 31, 2023, respectively Preferred stock, $.001 par value per share; 10,000,000 shares authorized as of September 30, 2024 and December 31, 2023 respectively Common stock, par value $ 14 $ 14 Capital in excess of par value 74,785 74,785 Accumulated deficit (34,634 ) (26,512 ) Total net assets $ 40,165 $ 48,287 Shares of common stock issued and outstanding, $.001 par value, 100,000 and 50,000 shares authorized, respectively 13,586 13,586 Net asset value per share $ 2.96 $ 3.55 The accompanying notes are an integral part of these financial statements. 3 Table of Contents EQUUS TOTAL RETURN, INC. CONDENSED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except per share amounts) 2024 2023 2024 2023 Investment income: Interest income: Control investments $ 322 $ 32 $ 924 $ 40

financial statements

financial statements. 5 Table of Contents EQUUS TOTAL RETURN, INC. CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) Nine months ended September 30, (in thousands) 2024 2023 Reconciliation of increase (decrease) in net assets resulting from operations to net cash (used in) operating activities: Net increase (decrease) in net assets resulting from operations $ (8,122 ) $ 11,891 Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash (used in) operating activities: Net realized (gain): U.S. Treasury bills (131 ) (22 ) Net change in unrealized appreciation of portfolio securities: Control investments 5,600 (15,000 ) Purchase of portfolio securities (2,247 ) (2,400 ) Purchases of U.S. Treasury bills, net (9,907 ) (11,967 ) Changes in operating assets and liabilities: Accounts receivable from affiliates (4 ) 210 Accrued interest receivable (923 ) (40 ) Other assets 369 (84 ) Accounts payable and accrued liabilities 50 (313 ) Accounts payable to related parties (7 ) 304 Net cash (used in) operating activities (15,322 ) (17,421 ) Cash flows from financing activities: Borrowings under margin account 161,907 40,968 Repayments under margin account (151,869 ) (28,979 ) Net cash provided by financing activities 10,038 11,989 Net decrease in cash and cash equivalents (5,284 ) (5,432 ) Cash and cash equivalents and restricted cash at beginning of period 6,983 19,284 Cash and cash equivalents and restricted cash at end of period $ 1,699 $ 13,852 Supplemental disclosure of cash flow information: Interest paid $ 129 $ 14 Income taxes paid $ 30 $ 10 The accompanying notes are an integral part of these

financial statements

financial statements. 6 Table of Contents EQUUS TOTAL RETURN, INC. SUPPLEMENTAL INFORMATION—SELECTED PER SHARE DATA AND RATIOS (Unaudited) Nine months ended September, 2024 2023 Investment income $ 0.07 $ — Expenses (0.26 ) (0.23 ) Net investment loss (0.19 ) (0.23 ) Net change in unrealized appreciation (depreciation) of portfolio securities (0.40 ) 1.11 Net increase (decrease) in net assets (0.59 ) 0.88 Net assets at beginning of period 3.55 2.61 Net assets at end of period, basic and diluted $ 2.96 $ 3.49 Weighted average number of shares outstanding during period, in thousands 13,586 13,518 Market price per share: Beginning of period $ 1.45 $ 1.43 End of period $ 1.36 $ 1.48 Selected information and ratios: Ratio of expenses to average net assets (8.14 %) (7.75 %) Ratio of net investment loss to average net assets (6.00 %) 7.60 % Ratio of net increase (decrease) in net assets resulting from operations to average net assets (18.37 %) 28.87 % Return on net asset value (16.82 %) 33.72 % Total return on market price (1) (6.21 %) 3.50 % (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. 7 Table of Contents EQUUS TOTAL RETURN, INC. SCHEDULE OF INVESTMENTS September 30, 2024 (Unaudited) (in thousands, except share data) Name and Location of Date of Initial Cost of Fair Portfolio Company (1) Industry Investment Investment Principal Investment Value (2) Control Investments: Majority-owned (3) : Equus Energy, LLC (4) Houston, TX Energy December 2011 Member interest (100%) $ 8,111 $ 8,000 Morgan E&P, LLC (4) Houston, TX Energy April 2023 Member interest (100%) — 19,000 12% senior secured promissory note due 5/26 (5) $ 10,500 10,500 10,500 10,500 29,500 Total Control Investm

financial statements

financial statements. 8 Table of Contents EQUUS TOTAL RETURN, INC. SCHEDULE OF INVESTMENTS – (Continued) September 30, 2024 (Unaudited) 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 September 30, 2024, we had invested 39.3% of our assets in securities of portfolio companies that constituted qualifying investments under the 1940 Act. As of September 30, 2024, none of our investments are considered non-qualifying assets, inasmuch 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 September 30, 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 93.4% of our net asset value, 39.3%

financial statements

financial statements. 9 Table of Contents EQUUS TOTAL RETURN, INC. SCHEDULE OF INVESTMENTS DECEMBER 31, 2023 (Unaudited) (in thousands, except share data) Name and Location of Date of Initial Cost of Fair Portfolio Company (1) Industry Investment Investment Principal Investment Value (2) Control Investments: Majority-owned (3) : Equus Energy, LLC (4) Houston, TX Energy December 2011 Member interest (100%) $ 8,111 $ 10,000 Morgan E&P, LLC (4) Houston, TX Energy April 2023 Member interest (100%) — 22,600 12% senior secured promissory note due 5/26 (5) $ 8,253 8,253 8,253 8,253 30,853 Total Control Investments: Majority-owned (represents 47.6% of total investments at fair value) 16,364 40,853 U.S. Treasury Bills U.S. Treasury Bill Government December 2023 UST 0% 1/24 44,955 44,955 44,955 Total U.S. Treasury bills (represents 52.4% of total investments at fair value) 44,955 44,955 Total Investments $ 61,319 $ 85,808 (1) Under Section 55(a) of the 1940 Act, qualifying assets must represent at least 70% of the total assets at the time of acquisitions of any non-qualifying. As of December 31, 2023 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

financial statements. 10 Table of Contents EQUUS TOTAL RETURN, INC. SCHEDULE OF INVESTMENTS – (Continued) DECEMBER 31, 2023 (in thousands, except share data) Our portfolio securities are restricted from public sale without prior registration under the Securities Act of 1933 (hereafter, the “Securities Act”). We typically negotiate certain aspects of the method and timing of the disposition of our investment in each portfolio company, including registration rights and related costs. As a business development company (“BDC”), we may invest up to 30% of our assets in non-qualifying portfolio investments, as permitted by the Investment Company Act of 1940 (the “1940 Act”). Specifically, we may invest up to 30% of our assets in entities that are not considered “eligible portfolio companies” (as defined in the 1940 Act), including companies located outside of the United States, entities that are operating pursuant to certain exceptions under the 1940 Act, and publicly-traded entities with a market capitalization exceeding $250 million. As of December 31, 2023, we had invested 43.7% of our assets in securities of portfolio companies that constituted qualifying investments under the 1940 Act. As of December 31, 2023, none of our investments are considered non-qualifying assets, inasmuch 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, 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 ne

financial statements

financial statements. 11 Table of Contents EQUUS TOTAL RETURN, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS September 30, 2024 (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 September 30, 2024, 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 i

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