EQS Net Assets Decline Amid Soaring Expenses, Portfolio Shifts

TL;DR

**EQS is bleeding cash with rising expenses and a concentrated, volatile portfolio; steer clear until they show a clear path to profitability.**

AI Summary

EQUUS TOTAL RETURN, INC. (EQS) reported a significant net decrease in net assets resulting from operations of $4.244 million for the nine months ended September 30, 2025, a substantial improvement from the $8.122 million decrease in the prior year. Total investment income increased to $1.051 million for the nine months ended September 30, 2025, up from $948 thousand in the same period of 2024, driven by new non-affiliate investments. However, total expenses surged to $4.167 million for the nine months ended September 30, 2025, from $3.601 million in 2024, primarily due to a rise in compensation expense to $1.923 million from $1.334 million and new transaction costs of $307 thousand. The company experienced a net realized loss of $7.016 million for the nine months ended September 30, 2025, compared to a gain of $131 thousand in 2024, largely from non-affiliate investments. Net unrealized appreciation of portfolio securities was $7.046 million, a positive reversal from a $5.600 million depreciation in the prior year. Net asset value per share declined to $1.90 as of September 30, 2025, from $2.17 at December 31, 2024. The company's portfolio remains highly concentrated in the Energy sector, representing 86.2% of its net asset value.

Why It Matters

For investors, EQS's continued net asset decline and significant expense increases, particularly in compensation and new transaction costs, signal potential operational inefficiencies and a challenging investment environment. The shift from 100% control investments in Energy to including non-affiliate investments and an Environmental sector exposure, while diversifying, introduces new risks and a substantial realized loss of $2.750 million from non-affiliate investments. The high concentration in the Energy sector (86.2% of net assets) means EQS's performance is heavily tied to a volatile industry, impacting its employees and the broader market through its BDC activities. Competitively, EQS's non-diversified status makes it more susceptible to single-company or industry-specific downturns compared to diversified BDCs.

Risk Assessment

Risk Level: high — The company's 'non-diversified' investment status means 86.2% of its net asset value is concentrated in the Energy sector, specifically Morgan E&P, Inc., making it highly vulnerable to industry-specific downturns. Furthermore, the ratio of expenses to average net assets increased significantly to (14.88%) for the nine months ended September 30, 2025, from (8.14%) in the prior year, indicating escalating operational costs relative to its asset base.

Analyst Insight

Investors should exercise extreme caution and consider divesting, given the persistent net asset decline, rising expenses, and high concentration risk in a volatile sector. Await evidence of sustained profitability and a more diversified investment strategy before considering any new positions.

Financial Highlights

debt To Equity

0.18

revenue

$1,051,000

operating Margin

N/A

total Assets

$31,401,000

total Debt

$4,897,000

net Income

N/A

eps

N/A

gross Margin

N/A

cash Position

$329,000

revenue Growth

10.9%

Revenue Breakdown

Key Numbers

• $4.244M — Net decrease in net assets from operations (Improved from $8.122M decrease in 2024, but still a significant loss.)
• $1.051M — Total investment income (Increased from $948K in 2024, driven by non-affiliate investments.)
• $4.167M — Total expenses (Increased from $3.601M in 2024, primarily due to compensation and transaction costs.)
• $7.016M — Net realized loss (Significant loss compared to $131K gain in 2024, mainly from non-affiliate investments.)
• $7.046M — Net unrealized appreciation of portfolio securities (Positive reversal from $5.600M depreciation in 2024.)
• $1.90 — Net asset value per share (Decreased from $2.17 at December 31, 2024.)
• 86.2% — Portfolio concentration in Energy (High concentration in a single, volatile industry.)
• (14.88%) — Ratio of expenses to average net assets (Increased from (8.14%) in 2024, indicating rising operational costs.)
• 104.55% — Total return on market price (Significant increase from (6.21%) in 2024, despite declining NAV.)
• 13,966,696 — Shares of common stock outstanding (Increased from 13,586,173 shares at December 31, 2024.)

Key Players & Entities

• EQUUS TOTAL RETURN, INC. (company) — registrant
• Morgan E&P, Inc. (company) — control investment, Energy sector
• General Enterprise Ventures, Inc. (company) — non-affiliate investment, Environmental sector
• New York Stock Exchange (regulator) — exchange where EQS shares trade
• SEC (regulator) — filing oversight
• $4.244 million (dollar_amount) — net decrease in net assets resulting from operations for nine months ended Sept 30, 2025
• $1.051 million (dollar_amount) — total investment income for nine months ended Sept 30, 2025
• $4.167 million (dollar_amount) — total expenses for nine months ended Sept 30, 2025
• $7.016 million (dollar_amount) — net realized loss for nine months ended Sept 30, 2025
• 86.2% (dollar_amount) — percentage of net asset value in Energy sector

FAQ

Risk Factors

• Concentration Risk in Energy Sector [high — financial]: The company's portfolio is highly concentrated in the Energy sector, representing 86.2% of its net asset value. This significant exposure to a single, potentially volatile industry means that adverse changes in the energy market or the financial condition of a single portfolio company can disproportionately impact the company's net asset value and stock price.
• Net Realized Losses on Investments [high — financial]: The company reported a net realized loss of $7.016 million for the nine months ended September 30, 2025, a substantial shift from a $131,000 gain in the prior year. This loss was primarily driven by non-affiliate investments, indicating potential issues with the performance or valuation of these newer holdings.
• Increased Operating Expenses [medium — operational]: Total expenses surged to $4.167 million for the nine months ended September 30, 2025, up from $3.601 million in the prior year. This increase was largely due to a significant rise in compensation expense to $1.923 million from $1.334 million and new transaction costs of $307,000, impacting overall profitability.
• Declining Net Asset Value Per Share [high — financial]: Net asset value per share declined to $1.90 as of September 30, 2025, from $2.17 at December 31, 2024. This represents a decrease of approximately 12.4%, reflecting the negative impact of realized losses and increased expenses on shareholder equity.
• Warrant Liability [medium — financial]: The company recognized a warrant liability of $1.718 million as of September 30, 2025, which was not present in the prior year. Changes in the fair value of these warrants can introduce volatility to earnings and net asset value.
• Non-Diversified Investment Company Status [medium — regulatory]: As a non-diversified investment company under the 1940 Act, the company is not limited in the proportion of assets invested in a single issuer. This amplifies the impact of any single investment's performance on the overall portfolio, increasing risk compared to diversified funds.

Industry Context

The company operates as a business development company (BDC), primarily investing in debt and equity of private companies. Its heavy concentration in the Energy sector (86.2% of NAV) exposes it to the volatility and cyclical nature of this industry. The broader market for private debt and equity investments can be influenced by interest rate changes, economic growth, and investor sentiment towards riskier assets.

Regulatory Implications

As a non-diversified investment company under the 1940 Act, EQUUS TOTAL RETURN, INC. faces heightened scrutiny regarding its concentrated portfolio. The company must ensure its investments remain 'qualifying assets' to comply with regulatory limits, though it has stated all current investments meet this criteria. Changes in BDC regulations or interpretations could impact its investment strategies and operational flexibility.

What Investors Should Do

1. Monitor Energy Sector Performance
2. Analyze Expense Structure
3. Evaluate Realized vs. Unrealized Performance
4. Assess NAV Trend

Key Dates

• 2025-09-30: Quarterly Reporting Period End — Reflects the financial position and performance for the nine months ended this date, showing a net decrease in assets and a decline in NAV per share.
• 2024-12-31: Prior Fiscal Year End — Provides a baseline for comparison, with a higher NAV per share of $2.17 and a less severe net decrease in assets from operations.
• 2025-02: Investment in General Enterprise Ventures, Inc. — Marks the initiation of non-affiliate investments, which contributed new income but also led to realized losses in the current period.
• 2023-04: Investment in Morgan E&P, Inc. — Represents the primary 'Control Investment' and the largest component of the company's concentrated Energy sector exposure.

Glossary

Net assets resulting from operations

The change in the company's total net assets due to its investment activities and operational expenses over a period. (Indicates the overall profitability or loss generated by the company's core business activities.)

Net realized loss (gain)

The profit or loss realized from the sale or disposition of investment securities during a period. (Reflects actual profits or losses from investment decisions, impacting the company's bottom line.)

Net unrealized appreciation (depreciation)

The change in the fair value of investment securities that are still held by the company, reflecting market fluctuations. (Shows the impact of market movements on the value of the company's unrealized portfolio holdings.)

Net asset value (NAV) per share

The total value of a company's assets minus its liabilities, divided by the number of outstanding shares. (Represents the per-share value of the company's holdings and is a key metric for investor valuation.)

Control investments

Investments where the company has a majority ownership or significant influence, often requiring active management. (These are typically larger, more strategic investments that can significantly impact the company's performance.)

Non-affiliate investments

Investments in companies where the company does not have a controlling interest or a prior affiliation. (Represents diversification efforts or new investment strategies, but can also introduce new risks.)

1940 Act

The Investment Company Act of 1940, a U.S. federal law that regulates investment companies, including business development companies (BDCs). (Governs the company's operations, investment strategies, and diversification requirements.)

Year-Over-Year Comparison

Compared to the prior year's nine-month period, EQUUS TOTAL RETURN, INC. has seen a significant improvement in its net decrease in net assets from operations, narrowing from $8.122 million to $4.244 million. This was driven by a 10.9% increase in total investment income to $1.051 million, largely from new non-affiliate investments. However, total expenses rose by 15.7% to $4.167 million, primarily due to higher compensation and new transaction costs. The company also experienced a substantial shift from a net realized gain to a $7.016 million net realized loss, offset by a positive reversal in net unrealized appreciation from a depreciation of $5.600 million to an appreciation of $7.046 million. The net asset value per share has declined from $2.17 to $1.90, and the ratio of expenses to average net assets has worsened from (8.14%) to (14.88%).

Key Financial Figures

• $10,500 — r value: Control investments (cost at $10,500 and $18,611, respectively) $ 22,850 $
• $18,611 — ontrol investments (cost at $10,500 and $18,611, respectively) $ 22,850 $ 27,500 No
• $1,594 — 00 Non-affiliate investments (cost at $1,594 and $0, respectively) 5,178 —
• $0 — filiate investments (cost at $1,594 and $0, respectively) 5,178 — Total
• $250 million — with a market capitalization exceeding $250 million. As of September 30, 2025, 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
• $63.17 — 2024 and throughout 2025, and stood at $63.17 as of September 30, 2025. Natural gas p
• $3.12 — the quarter ended September 30, 2025 at $3.12 per MMBTU. Relative oil and gas price s

Filing Documents

• f10q_equus09302025.htm (10-Q) — 623KB
• ex311_302ceocertification.htm (EX-31.1) — 9KB
• ex312_302cfocertification.htm (EX-31.2) — 9KB
• ex321_906ceocertification.htm (EX-32.1) — 5KB
• ex322_906cfocertification.htm (EX-32.2) — 5KB
• 0000878932-25-000007.txt ( ) — 652KB

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 35

Quantitative and Qualitative Disclosure about Market Risk

Item 3. Quantitative and Qualitative Disclosure about Market Risk 42

Controls and Procedures

Item 4. Controls and Procedures 43

OTHER INFORMATION

PART II. OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings 44

Risk Factors

Item 1A. Risk Factors 44

Exhibits

Item 6. Exhibits 44 SIGNATURE 45 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, 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) $ 22,850 $ 27,500 Non-affiliate investments (cost at $1,594 and $0, respectively) 5,178 — Total investments in portfolio securities at fair value 28,028 27,500 Cash and cash equivalents 329 262 Accounts receivable from affiliates 580 678 Accrued interest 2,426 1,470 Other assets 38 26 Total assets 31,401 29,936 Liabilities and net assets Accounts payable 258 332 Accrued compensation 4 1 Accounts payable to related parties 985 93 Notes payable 1,932 — Warrant liability, at fair value 1,718 — Total liabilities 4,897 426 Commitments and contingencies (See Note 2) Net assets Common stock, $.001 par value per share; 100,000,000 shares authorized as of September 30, 2025 and December 31, 2024, and 13,966,696 and 13,586,173 shares outstanding as of September 30, 2025 and December 31, 2024, respectively Preferred stock, $.001 par value per share; 10,000,000 shares authorized as of September 30, 2025 and December 31, 2024 Common stock, par value $ 14 $ 14 Capital in excess of par value 76,023 74,785 Accumulated deficit (49,533 ) (45,289 ) Total net assets $ 26,504 $ 29,510 Shares of common stock issued and outstanding, $.001 par value, 100,000,000 and 50,000,000 shares authorized, respectively 13,967 13,586 Net asset value per share $ 1.90 $ 2.17 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) 2025 2024 2025 2024 Investment income: Control investments $ 322 $

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) 2025 2024 Cash flow from operating activities: Net decrease in net assets resulting from operations $ (4,244 ) $ (8,122 ) Adjustments to reconcile net decrease in net assets resulting from operations to net cash used in operating activities: Net realized loss: Control investments 4,111 — Non-affiliate investments 2,750 — Other 155 — U.S. Treasury Bills — (131 ) Net change in unrealized (appreciation) depreciation of portfolio securities: Control investments (3,461 ) 5,600 Non-affiliate investments (3,585 ) — Net change in unrealized depreciation on warrant liability 1,158 Share-based incentive compensation 491 — Purchase of portfolio securities (1,594 ) (2,247 ) Write-off of receivable from portfolio company (155 ) — PIK interest payable 131 — Amortization of debt discount 361 Transaction costs 307 — Net proceeds from dispositions of portfolio securities 1,250 — Purchases of U.S. Treasury bills, net — (9,907 ) Changes in operating assets and liabilities: Accounts receivable from affiliates 539 (4 ) Accrued interest receivable (956 ) (923 ) Other assets (12 ) 369 Accounts payable and accrued liabilities (71 ) 50 Accounts payable to related parties 892 (7 ) Net cash used in operating activities (1,933 ) (15,322 ) Cash flows from financing activities: Borrowings under margin account — 161,907 Repayments under margin account — (151,869 ) Issuance of notes payable and warrants liability 2,000 — Net cash provided by financing activities 2,000 10,038 Net decrease in cash and cash equivalents 67 (5,284 ) Cash and cash equivalents and restricted cash at beginning of period 262 6,983 Cash and cash e

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 30, 2025 2024 Investment income $ 0.08 $ 0.07 Expenses (0.30 ) (0.26 ) Net investment loss (0.22 ) (0.19 ) Net realized (loss) gain (0.51 ) — Net change in unrealized appreciation of portfolio securities 0.51 (0.40 ) Net change in unrealized depreciation on warrant liability (0.08 ) — Net decrease in net assets resulting from operations (0.30 ) (0.59 ) Capital transactions: Dilutive effect of warrants issued 0.03 — Increase in net assets resulting from capital transactions 0.03 — Net decrease in net assets (0.27 ) (0.59 ) Net assets at beginning of period 2.17 3.55 Net assets at end of period, basic and diluted $ 1.90 $ 2.96 Weighted average number of shares outstanding during period, in thousands 13,618 13,586 Market price per share: Beginning of period $ 1.10 $ 1.45 End of period $ 2.25 $ 1.36 Selected information and ratios: Ratio of expenses to average net assets (14.88 %) (8.14 %) Ratio of net investment loss to average net assets (11.13 %) (6.00 %) Ratio of net increase in net assets resulting from operations to average net assets (15.15 %) (18.37 %) Return on net asset value (10.19 %) (16.82 %) Total return on market price (1) 104.55 % (6.21 %) (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, 2025 (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

financial statements

financial statements. 8 Table of Contents EQUUS TOTAL RETURN, INC. SCHEDULE OF INVESTMENTS – (Continued) September 30, 2025 (Unaudited) Our portfolio securities are restricted from public sale without prior registration under the Securities Act of 1933 (hereafter, the “Securities Act”) or pursuant to an exemption from such registration that 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 September 30, 2025, we had invested 89.3% of our total assets in securities of portfolio companies that constituted qualifying investments under the 1940 Act. As of September 30, 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 81.5% of the total value of the investments in portfolio securities as of September 30, 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 co

financial statements

financial statements. 9 Table of Contents 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 Investment Principal Investment Value (2) Control Investments: Majority-owned (3) : Equus Energy, LLC (4) Houston, TX Energy December 2011 Member interest (100%) $ 8,111 $ 4,000 Morgan E&P, LLC (4) Houston, TX Energy April 2023 Member interest (100%) — 13,000 12% senior secured promissory note due 5/26 (5) $ 10,500 10,500 10,500 10,500 23,500 Total Control Investments: Majority-owned (represents 100% of total investments at fair value) 18,611 27,500 Total Investments $ 18,611 $ 27,500 (1) Under Section 55(a) of the 1940 Act, qualifying assets must represent at least 70% of the total assets at the time of acquisition. 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

financial statements. 10 Table of Contents EQUUS TOTAL RETURN, INC. SCHEDULE OF INVESTMENTS – (Continued) DECEMBER 31, 2024 (in thousands, except share data) Our portfolio securities are restricted from public sale without prior registration under the Securities Act of 1933 (hereafter, the “Securities Act”) or pursuant to an exemption from such registration that 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 December 31, 2024, we had invested 91.9% of our total 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” incl

financial statements

financial statements. 11 Table of Contents EQUUS TOTAL RETURN, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS September 30, 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 September 30, 2025, we had 100,000,000 shares of common stock and 10,000,000 shares of preferred stock authorized for issuance, of which 13,966,696 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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