Equus Total Return (NYSE: EQS) boosts NAV in Q1 2026 but flags going concern risks

Rhea-AI Filing Summary

Equus Total Return, Inc. reported a sharp rise in net asset value for the quarter ended March 31, 2026, but under severe liquidity pressure. Net assets grew to $20.9 million, or $1.50 per share, up from $16.6 million, or $1.19 per share at December 31, 2025.

The net increase in net assets from operations was $4.1 million, driven mainly by $5.0 million of unrealized appreciation on its control investment in Morgan E&P, partly offset by a net investment loss of $0.9 million as expenses exceeded investment income. Total investments at fair value rose to $21.8 million, with approximately 74% of net asset value concentrated in a single energy portfolio company.

Despite these valuation gains, cash and cash equivalents were only $0.1 million, and management states there is substantial doubt about the company’s ability to continue as a going concern. A $2.0 million senior convertible note matured on February 7, 2026 and remains unpaid while discussions continue over conversion or extension. Morgan E&P also faces its own going concern uncertainties and an overdue $3.0 million senior loan, underscoring the funding and refinancing risks facing the group.

Positive

• NAV and valuation uplift: Net assets rose from $16.6 million to $20.9 million and NAV per share increased from $1.19 to $1.50 in the quarter, driven largely by a $5.0 million unrealized gain on the control investment in Morgan E&P and realized gains on non-affiliate investments.

Negative

• Going concern uncertainty and minimal cash: Management states substantial doubt about the company’s ability to continue as a going concern, with only $0.1 million of cash on March 31, 2026 and no committed financing to fund operations for the next twelve months.
• Overdue senior convertible note and subsidiary debt: A $2.0 million senior convertible note matured on February 7, 2026 and remains unpaid while terms are renegotiated, and Morgan E&P carries an overdue $3.0 million senior loan, highlighting heightened refinancing and default risk.
• High concentration in a single energy asset: Approximately 74.1% of net asset value and 58.1% of total assets are tied to one energy portfolio company, increasing sensitivity of NAV and share price to sector and single-issuer developments.

Insights

Credit and special situations analyst

Strong NAV gains are overshadowed by acute liquidity stress and overdue debt.

Equus Total Return shows a higher net asset value mainly from a $5.0 million unrealized gain on its majority-owned energy investment, lifting NAV per share from $1.19 to $1.50. This is largely a mark-to-model movement in Level 3 assets, not cash generation.

Operating cash generation remains weak: investment income was $0.3 million versus $1.2 million of expenses, producing a net investment loss and leaving just $0.1 million of cash at quarter-end. Management explicitly notes substantial doubt about the company’s ability to continue as a going concern without new financing, capital infusions, or asset sales.

Credit risk is elevated. A $2.0 million senior convertible note matured on February 7, 2026 and remains unpaid, while negotiations over conversion or extension have not yet produced an agreement. The warrant liability has also increased to about $1.18 million, and key subsidiary Morgan E&P carries an overdue $3.0 million senior loan and its own going concern warning. Subsequent filings and debt resolutions will be important to understand how these obligations are addressed.

Key Figures

Net assets: $20.9M NAV per share: $1.50 Net increase in net assets from operations: $4.1M +5 more

8 metrics

Net assets $20.9M As of March 31, 2026, up from $16.6M at December 31, 2025

NAV per share $1.50 As of March 31, 2026; previously $1.19 at December 31, 2025

Net increase in net assets from operations $4.1M Three months ended March 31, 2026

Unrealized gain on control investment $5.0M Net change in unrealized appreciation on control investments in Q1 2026

Net investment loss $0.9M Three months ended March 31, 2026, as expenses exceeded investment income

Cash and cash equivalents $0.1M As of March 31, 2026, indicating tight liquidity

Convertible note principal $2.0M Senior convertible note matured February 7, 2026 and unpaid at March 31, 2026

Warrant liability $1.18M Fair value of warrant liability as of March 31, 2026

Key Terms

going concern, business development company, Level 3 investments, asset coverage ratio, +2 more

6 terms

going concern financial

"substantial doubt exists about our ability to continue as a going concern"

A going concern is a business that is expected to continue its operations and meet its obligations for the foreseeable future, rather than shutting down or selling off assets. This assumption matters to investors because it indicates stability and ongoing profitability, making the business a more reliable investment. Think of it as believing a restaurant will stay open and serve customers, rather than closing down suddenly.

business development company regulatory

"We elected to be treated as a BDC under the Investment Company Act of 1940"

A business development company is a publicly traded investment vehicle that lends to and buys stakes in smaller or privately held companies, acting like a combination of a lender, investor, and business partner. It matters to investors because BDCs offer the potential for higher regular income through dividends and diversified exposure to growing businesses, but they can also carry greater credit and liquidity risk than typical stocks or bonds—think higher-yielding but riskier income instruments.

Level 3 investments financial

"Investments measured at fair value on a recurring basis... Significant Unobservable Inputs (Level 3)"

asset coverage ratio regulatory

"Under the 1940 Act, BDCs are required to have an asset coverage ratio of 200%"

Asset coverage ratio measures how much of a company’s debt or preferred claims could be paid off using its tangible assets if the business had to be sold. It’s a safety check for investors and creditors, showing the size of the asset “cushion” available to meet obligations; a higher ratio means more protection, like having enough savings and sellable belongings to cover outstanding bills, while a low ratio signals greater risk of loss.

full cost method technical

"Morgan uses the full cost method of accounting for oil and natural gas properties"

The full cost method is an accounting approach that treats nearly all exploration and development spending as an asset on the balance sheet rather than as immediate expense, then spreads that cost over the life of the discovered resource. For investors, it can make profits look steadier and assets larger in the short term, but it can also mask failed projects and trigger big write-downs later if expected reserves or prices fall—similar to counting every shopping trip as a long-term pantry investment instead of a current expense.

senior convertible promissory note financial

"the Fund issued a one-year senior convertible promissory note bearing interest at the rate of 10.0% per annum"

10-Q Quarterly Reports: What Changes Quarter to Quarter →

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2026

or

☐ 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 13,966,696 shares of the registrant’s common stock, $.001 par value, outstanding, as of March 31, 2026.

Table of Contents 

EQUUS TOTAL RETURN, INC.

(A Delaware Corporation)

INDEX

	Page
PART I. FINANCIAL INFORMATION
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
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3. Quantitative and Qualitative Disclosure about Market Risk	41
Item 4. Controls and Procedures	41
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	42
Item 1A. Risk Factors	42
Item 6. Exhibits	42
SIGNATURE	43

2

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EQUUS TOTAL RETURN, INC.

CONDENSED BALANCE SHEETS

(Unaudited)

Part I. Financial Information

Item 1. Unaudited Condensed Financial Statements

		March 31, 2026				December 31, 2025
(in thousands, except shares and per share amounts)
Assets
Investments in portfolio securities at fair value:
Control investments (cost at $10,500 and $10,500, respectively)		$	15,500			$	10,500
Non-affiliate investments (cost at $1,196 and $1,418, respectively)			6,302				6,776
Total investments in portfolio securities at fair value			21,802				17,276
Cash and cash equivalents			140				133
Accounts receivable from affiliates			1,641				1,145
Accrued interest			3,063				2,748
Other assets			23				36
Total assets			26,669				21,338
Liabilities and net assets
Accounts payable and other			535				414
Accrued compensation			3				3
Accounts payable to related parties			1,787				1,371
Convertible notes payable			2,232				2,123
Warrant liability, at fair value			1,182				857
Total liabilities			5,739				4,768
Commitments and contingencies (See Note 7)
Net assets
Preferred stock, $.001 par value per share; 10,000,000 shares authorized as of March 31, 2026 and December 31, 2025
Common stock, $.001 par value per share; 100,000,000 shares authorized as of March 31, 2026 and December 31, 2025, and 13,966,696  shares outstanding as of March 31, 2026 and December 31, 2025
Common stock, par value		$	14			$	14
Capital in excess of par value			76,257				76,009
Accumulated deficit			(55,341	)			(59,453	)
Total net assets		$	20,930			$	16,570
Shares of common stock issued and outstanding, $.001 par value, 100,000,000 and 50,000,000 shares authorized, respectively			13,967				13,967
Net asset value per share		$	1.50			$	1.19

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

3

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EQUUS TOTAL RETURN, INC.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

		Three Months Ended March 31,
(in thousands, except per share amounts)		2026				2025
Investment income:
Control investments		$	315			$	315
Non-affiliate investments			—				22
Total investment income			315				337
Interest income			0				1
Total investment income			315				338
Expenses:
Compensation expense			608				570
Professional fees			304				353
Transaction costs			—				307
Professional liability expenses			2				50
Director fees and expenses			76				77
General and administrative expenses			43				48
Mailing, printing and other expenses			42				11
Taxes			—				3
Interest expense - related party			109				29
Total expenses			1,184				1,448
Net investment loss			(869	)			(1,110	)
Net realized gain (loss):
Control investments			—				(4,111	)
Non-affiliate investments			558				—
Other			—				(155	)
Net realized gain (loss)			558				(4,266	)
Net unrealized appreciation (depreciation) of portfolio securities:
Control investments			5,000				5,111
Non-affiliate investments			(252	)			4,208
Net change in net unrealized appreciation (depreciation) of portfolio securities			4,748				9,319
Net change in net unrealized depreciation on warrant liability			(325	)			—
Net increase in net assets resulting from operations		$	4,112			$	3,943
Net increase in net assets resulting from operations per share:
Basic		$	0.29			$	0.30
Diluted		$	0.24			$	0.25
Weighted average shares outstanding:
Basic			13,967				13,586
Diluted			17,300				15,549

The accompanying notes are an integral part of these financial statements

4

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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 December 31, 2024			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
Balances as of December 31, 2025			13,967				14				76,009				(59,453	)			16,570
Shares subscribed but not issued			—				—				248				—				248
Net increase in net assets resulting from operations			—				—				—				4,112				4,112
Balances as of March 31, 2026			13,967			$	14			$	76,257			$	(55,341	)		$	20,930

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

5

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EQUUS TOTAL RETURN, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

		Three Months ended March 31,
(in thousands)		2026				2025
Cash flow from operating activities:
Net increase in net assets resulting from operations		$	4,113			$	3,943
Adjustments to reconcile net decrease in net assets resulting from operations to net cash used in operating activities:
Net realized (loss) gain:
Control investments			—				4,111
Non-affiliate investments			(558	)			—
Other			—				155
Net change in unrealized (appreciation) depreciation of portfolio securities:
Control investments			(5,000	)			(5,111	)
Non-affiliate investments			252				(4,208	)
Net change in unrealized depreciation of warrant liability			325				—
Purchase of portfolio securities			—				(1,500	)
Write-off of receivable from portfolio company			—				(155	)
PIK interest payable			50				30
Amortization of debt discount			59				—
Transaction costs			—				307
Net proceeds from dispositions of portfolio securities			780				1,250
Changes in operating assets and liabilities:
Accounts receivable from affiliates			(248	)			(346	)
Accrued interest receivable			(315	)			(337	)
Other assets			13				(2	)
Accounts payable and accrued liabilities			121				(49	)
Accounts payable to related parties			416				318
Net cash provided by  (used in) operating activities			7				(1,594	)
Cash flows from financing activities:
Issuance of notes payable and warrant liability			—				2,000
Net cash provided by financing activities			—				2,000
Net increase in cash and cash equivalents			7				406
Cash and cash equivalents and restricted cash at beginning of period			133				262
Cash and cash equivalents and restricted cash at end of period		$	140			$	668
Non-cash operating and financing activities:
Shares subscribed but not issued		$	248			$	—
Supplemental disclosure of cash flow information:
Interest paid in kind on note payable		$	50			$	3
Delaware Franchise taxes paid		$	—			$	36

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

6

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EQUUS TOTAL RETURN, INC.

SUPPLEMENTAL INFORMATION—SELECTED PER SHARE DATA AND RATIOS

(Unaudited)

		Three Months ended March 31,
		2026				2025
Investment income		$	0.02			$	0.02
Expenses			(0.08	)			(0.11	)
Net investment loss			(0.06	)			(0.08	)
Net realized gain (loss)			0.04				(0.31	)
Net change in unrealized appreciation of portfolio securities			0.34				0.69
Net change in unrealized depreciation of warrant payable			(0.02	)			—
Net increase in net assets resulting from operations			0.30				0.28
Capital transactions:
Dilutive effect of warrants issued			0.01				0.05
Increase in net assets resulting from capital transactions			0.01				0.05
Net increase in net assets			0.31				0.33
Net assets at beginning of period			1.19				2.17
Net assets at end of period, basic and diluted		$	1.50			$	2.50
Weighted average number of shares outstanding during period,
in thousands			13,967				13,586
Market price per share:
Beginning of period		$	1.41			$	1.10
End of period		$	1.84			$	1.01
Selected information and ratios:
Ratio of expenses to average net assets			(6.31	%)			(4.54	%)
Ratio of net investment loss to average net assets			(4.63	%)			(3.48	%)
Ratio of net increase in net assets resulting from operations to average net assets			21.94	%			12.38	%
Return on net asset value			26.32	%			15.88	%
Total return on market price (1)			30.50	%			(8.18	%)

(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

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EQUUS TOTAL RETURN, INC.

SCHEDULE OF INVESTMENTS

March 31, 2026

(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):
Morgan E&P, Inc.  Houston, TX			Energy				April 2023			6,800,000 shares common stock (5)						$	—			$	5,000
										12% senior secured promissory note due 5/26 (5)(6)		$	10,500				10,500				10,500
																	10,500				15,500
Total Control Investments: Majority-owned (represents 71.1% of total investments at fair value)																	10,500				15,500
Non-Affiliate Investments:  Less than 5% owned (4):
CitroTech, Inc.  Pomona, CA			Environmental				February 2025			Warrants (exercisable into 312,500 common stock) (7)							—				2,000
										498,458 shares common stock (7)							1,196				4,302
																	1,196				6,302
Total Non-Affiliate Investments (represents 28.9% of total investments at fair value)																	1,196				6,302
Total Investments																$	11,696			$	21,802

(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, 2026, 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 3 Portfolio Investment.

(6) Income producing.

(7) Securities pledged as collateral for $2.0 million senior convertible note. See Note 5 to the financial statements, Convertible Senior Note. 

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

8

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EQUUS TOTAL RETURN, INC.

SCHEDULE OF INVESTMENTS – (Continued)

March 31, 2026

(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 March 31, 2026, we had invested 81.7% of our total assets in securities of portfolio companies that constituted qualifying investments under the 1940 Act. As of March 31, 2026, 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 71.1% of the total value of the investments in portfolio securities as of March 31, 2026.

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 74.1% of our net asset value, 58.1% of our total assets and 71.1% of our investments in portfolio company securities (at fair value) as of March 31, 2026. 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, 2026 (in thousands):

Type of Securities		Cost				Fair Value				Fair Value as Percentage of Net Assets
Secured and subordinated debt		$	10,500			$	10,500				50.2	%
Warrants			—				2,000				9.6	%
Common stock			1,196				9,302				44.4	%
Total		$	11,696			$	21,802				104.2	%

The following is a summary by industry of the Fund’s investments in portfolio securities as of March 31, 2026 (in thousands):

Industry				Fair Value				Fair Value as Percentage of Net Assets
	Energy			$	15,500				74.1	%
	Environmental				6,302				30.1	%
	Total			$	21,802				104.2	%

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

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EQUUS TOTAL RETURN, INC.

SCHEDULE OF INVESTMENTS

December 31, 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 (3):
Morgan E&P, Inc.  Houston, TX			Energy				April 2023			Common Stock (5)						$	—			$	—
										12% senior secured promissory note due 5/26 (5)(6)		$	10,500				10,500				10,500
																	10,500				10,500
Total Control Investments: Majority-owned (represents 60.8% of total investments at fair value)																	10,500				10,500
Non-Affiliate Investments:  Less than 5% owned (4):
CitroTech, Inc.  Pomona, CA			Environmental				February 2025			Warrants (exercisable into 312,500 common stock) (5)			—				—				2,000
										591,039 shares common stock			—				1,418				4,776
																	1,418				6,776
Total Non-Affiliate Investments (represents 39.2% of total investments at fair value)																	1,418				6,776
Total Investments																$	11,918			$	17,276

(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, 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)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, 2025

(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, 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		Cost				Fair Value				Fair Value as Percentage of Net Assets
Secured and subordinated debt		$	10,500			$	10,500				63.4	%
Warrants			—				2,000				12.1	%
Common stock			1,418				4,776				28.8	%
Total		$	11,918			$	17,276				104.3	%

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

Industry				Fair Value				Fair Value as Percentage of Net Assets
	Energy			$	10,500				63.4	%
	Environmental				6,776				40.9	%
	Total			$	17,276				104.3	%

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, 2026

(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, 2026, 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 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 may 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.

From time to time, we may have certain wholly-owned taxable subsidiaries (“Taxable Subsidiaries”) each of which may hold one or more portfolio investments listed on our Schedules of Investments. Although we are no longer a RIC, the purpose of these Taxable Subsidiaries is, to the extent we re-qualify as a RIC, 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 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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Impact of Economic and Geopolitical Events on the Oil and Gas Sector—Oil prices experienced a slow and steady decline beginning in the first quarter of 2024 and continuing until the end of 2025. The conflict in Iran, which commenced in February, 2026, has resulted in dramatically increased spot prices, ending the first quarter of 2026 at $101.30 per barrel. Conversely, since the beginning of 2024, natural gas prices steadily increased before declining in the first three quarters of 2025 and recovering at the end of 2025, and thereafter declining throughout the first three months of 2026, ending the quarter at $2.88 per MMBTU. Prior to the onset of hostilities in the Middle East, relative oil and gas price stability had been a significant factor in increased consolidation activity in the Williston Basin region in North Dakota where Morgan E&P, Inc. 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 statement of these interim financial statements.

The results of operations for the three months ended March 31, 2026 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, 2025, 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.

Convertible Loan Overdue—As of March 31, 2026, our convertible senior note of $2.0 million has matured and remains unpaid. We are in discussions with representatives of the holder of the note regarding its possible conversion into common stock or an extension of the maturity date. However, as of the date of filing of this Quarterly Report, no agreements have been reached regarding any of the foregoing.

Cash and Cash Equivalents—As of March 31, 2026, we had cash and cash equivalents of $0.1 million. As of December 31, 2025, we had cash and cash equivalents of $0.1 million.

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, 2026.

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, with the exception of the first quarter of 2026, 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 $0.1 million as of March 31, 2026. 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 portfolio 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.

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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:

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

2. 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;

3.    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;

4. 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

5. 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 value of our equity interest in Morgan, we have given more emphasis to a market approach that examines comparable acreage transactions proximate to where Morgan holds its leasehold interests. 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 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 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. In the case 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 2-year stock variance to determine value.

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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 months ended March 31, 2026 and for the year ended December 31, 2025.

As of March 31, 2026, 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:

					Fir Value Measurements as of March 31, 2026
(in thousands)		Total				Quoted Prices in Active Markets for Identical Assets (Level 1)					Significant Unobservable Inputs (Level 3)
Assets
Investments:
Control investments	$	15,500			$	—				$	15,500
Non-affiliate investments		6,302				4,302					2,000
Total investments	$	21,802			$	4,302				$	17,500

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 valuations:

					Fir Value Measurements as of December 31, 2025
(in thousands)		Total				Quoted Prices in Active Markets for Identical Assets (Level 1)					Significant Unobservable Inputs (Level 3)
Assets
Investments:
Control investments	$	10,500			$	—				$	10,500
Non-affiliate investments		6,776				4,776					2,000
Total investments	$	17,276			$	4,776				$	12,500

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The following table provides a reconciliation of fair value changes during the three months ended March 31, 2026 for all investments for which we determine fair value using unobservable (Level 3) factors:

						Fair value measurements using significant unobservable inputs (Level 3)
(in thousands)						Control Investments				Affiliate Investments				Non-affiliate Investments				Total
Fair value as of January 1, 2026						$	10,500			$	—			$	2,000		$	12,500
Change in unrealized appreciation							5,000				—				—			5,000
Fair value as of March 31, 2026						$	15,500			$	—			$	2,000		$	17,500

The following table provides a reconciliation of fair value changes during the three months ended March 31, 2025 for all investments for which we determine fair value using unobservable (Level 3) factors:

						Fair value measurements using significant unobservable inputs (Level 3)
(in thousands)						Control Investments				Affiliate Investments				Non-affiliate Investments				Total
Fair value as of January 1, 2025						$	27,500			$	—			$	—		$	27,500
Sale of portfolio securities							(4,000	)			—				—			(4,000)
Purchases of portfolio securities							—				—				2,750			2,750
Change in unrealized appreciation							908				—				—			908
Fair value as of March 31, 2025						$	24,408			$	—			$	2,750		$	27,158

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, we 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 inputs in the fair value measurements of our Level 3 investments by category of investment and valuation technique as of March 31, 2026 (fair value expressed in thousands; acreage range expressed in dollars and not rounded):

Range

(in thousands)

Fair Value

Valuation Techniques

Unobservable Inputs

Minimum

Maximum

Weighted Average

Equity Investments

Guideline Public Company Method

Proved Reserve Multiple

9,582x

12,171x

10,877x

Daily Production Multiple

32,767x

37,031x

34,899x

Morgan E&P, Inc.

$         5,000

Guideline Transaction Method

Proved Reserve Multiple

8,969x

11,937x

10,453x

Daily Production Multiple

36,221x

45,333x

40,777x

Acreage Value (per acre)

$      5,000

$        6,000

$         5,500

Discounted Cash Flow

Discount Rate

11.4%

12.9%

12.15%

Senior debt

Morgan E&P, Inc.

10,500

Yield analysis

Company specific yield

11.13%

12.0%

11.57%

Warrant

CitroTech, Inc. (formerly General Enterprise Ventures, Inc.)

2,000

Black-Scholes

Volatility

18.4%

63.2%

40.8%

$       17,500

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, 2025 (fair value expressed in thousands; acreage range expressed in dollars and not rounded):

Range

(in thousands)

Fair Value

Valuation Techniques

Unobservable Inputs

Minimum

Maximum

Weighted Average

Limited liability company investments

Guideline Public Company Method

Proved Reserve Multiple

6,615x

9,080x

7,848x

Daily Production Multiple

23,801x

28,451x

26,126x

Morgan E&P, Inc.

$                 -

Guideline Transaction Method

Proved Reserve Multiple

8,969x

11,937x

10,453x

Daily Production Multiple

35,000x

45,333x

40,168x

Acreage Value (per acre)

$      2,000

$        6,000

$         4,000

Discounted Cash Flow

Discount Rate

11.8%

13.3%

12.55%

Senior debt

Morgan E&P, Inc.

10,500

Yield analysis

Company specific yield

10.46%

12.0%

11.23%

Warrant

CitroTech, Inc. (formerly General Enterprise Ventures, Inc.

2,000

Black-Scholes

Volatility

38.2%

123.6%

80.9%

$         12,500

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The various weighted averages in the tables 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 market values, our fair value determinations may materially differ from the values that would have been used had a ready market existed 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.

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. 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 March 31, 2026, we have no assets going through foreclosure. 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. 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.

Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation—Realized gains or losses are measured by the difference between the net proceeds from the sale or redemption of an investment or a financial instrument and the cost basis of the investment or financial instrument, without regard to unrealized appreciation or depreciation previously recognized, and includes investments written-off during the period net of recoveries and realized gains or losses from in-kind redemptions. Net change in unrealized appreciation or depreciation reflects the net change in the fair value of the portfolio company investments and financial instruments and the reclassification of any prior period unrealized appreciation or depreciation on exited investments and financial instruments to realized gains or losses.

Payment in Kind Interest (PIK)—From time to time, we have 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 regain our status as a RIC, we will be required to 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. To the extent we remain BDC and a RIC, 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.

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Earnings Per Share—Basic and diluted per share calculations are computed utilizing the weighted-average number of shares of common stock outstanding for the period. 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 three months ended March 31, 2026 due to the net loss for the periods.

The following table presents the computation of basic and diluted earnings per share for the three months ended March 31, 2026 and 2025 respectively:

(in thousands, except share and per-share data)		March 31, 2026				March 31, 2025
Net income attributable to common shareholders		$	4,113			$	3,943
Weighted average shares outstanding - basic			13,967				13,586
Effect of dilutive securities		$	(0.05	)		$	(0.05	)
Weighted average shares outstanding - diluted			17,300				15,549
Basic earnings per share		$	0.29			$	0.30
Diluted earnings per share		$	0.24			$	0.25

Distributable Earnings—The components that make up distributable earnings (accumulated undistributed deficit) on the Condensed Balance Sheet as of March 31, 2026 and December 31, 2025 are as follows:

(in thousands)		March 31, 2026				December 31, 2025
Accumulated undistributed net investment losses		$	(59,337	)		$	(58,468	)
Unrealized appreciation of portfolio securities, net			10,105				5,357
Unrealized appreciation of warrant payable			(622	)			(297	)
Accumulated undistributed net capital gains			(5,487	)			(6,045	)
Accumulated deficit		$	(55,341	)		$	(59,453	)

Taxes—Historically, the Company has filed an income tax return as a Regulated Investment Company (“RIC”). However, following the Company’s election not to qualify as a RIC in the fourth quarter of 2024, the Company is now classified as a C corporation for income tax purposes and is subject to guidance under ASC 740, accounting for income taxes.

The Company records income taxes for interim reporting periods based on an estimated annual effective tax rate. This estimated rate is reassessed each quarter and may fluctuate due to changes in forecasted annual operating income, adjustments to the valuation allowance on deferred tax assets, and changes in actual or projected permanent book-to-tax differences. The Company’s effective tax rate for the three months ended March 31, 2026 was 0.0%, and accordingly, no income tax expense or benefit was recorded for the quarter.

The Company 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 three months ended March 31, 2026, 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.

On July 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.

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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 quarter ended March 31, 2026. The Company continues to evaluate the impact of the Act on its financial statements and will update its estimates as additional guidance becomes available.

Texas margin tax applies to entities conducting business in Texas and is based on Texas-sourced taxable margin. 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. For the quarter ended March 31, 2026, no provision for margin tax expense has been recorded.

ASC Topic 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 filings

Segments—Equus operates in 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 primary GAAP profit or loss metric used in making operating decisions, which can be found on the Statement of Operations along with significant expenses. 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 470”). 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.

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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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.

Accounting Standards Recently Adopted—On January 1, 2025, we adopted 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 was effective for the December 31, 2025 financial statements and has been adopted prospectively. Although the impact of this standard had no effect on the financial condition or results of operations, See Note 3 for additional disclosures related to this guidance.

On January 1, 2026, we adopted ASU 2024-04, “Debt with Conversion and Other Options (Subtopic 470-20), Induced Conversions of Convertible Debt Instruments”. The amendments in this update was to clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. Under the amendments, to account for a settlement of a convertible debt instrument as an induced conversion, an inducement offer is required to provide the debt holder with, at a minimum, the consideration (in form and amount) issuable under the conversion privileges provided in the terms of the instrument. An entity should assess whether this criterion is satisfied as of the date the inducement offer is accepted by the holder. If, when applying this criterion, the convertible debt instrument had been exchanged or modified (without being deemed substantially different) within the one-year period leading up to the offer acceptance date, an entity should compare the terms provided in the inducement offer with the terms that existed one year before the offer acceptance date. The amendments do not change the other criteria that are required to be satisfied to account for a settlement transaction as an induced conversion. The amendments in this Update also make additional clarifications to assist stakeholders in applying the guidance. Under the amendments, the incorporation, elimination, or modification of a VWAP formula does not automatically cause a settlement to be accounted for as an extinguishment; 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 in this Update also clarify that the induced conversion guidance applies to a convertible debt instrument that is not currently convertible as long as it had a substantive conversion feature as of both its issuance date and the date the inducement offer is accepted. This update has been adopted prospectively.

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(4) Related Party Transactions and Agreements

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. 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.

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 such services.

Accounts payable to related parties were $1.8 million and $1.4 million as of March 31, 2026 and December 31, 2025, respectively.

As of March 31, 2026 and December 31, 2025, we paid $1.6 million and $1.1 million, respectively, to various third-party vendors on behalf of Morgan. As of March 31, 2026 and December 31, 2025, the accrued interest on Morgan’s senior debt was $3.1 million and $2.7 million, respectively.

(5) 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. On February 7, 2026, the Equus Note matured and remains unpaid as of March 31, 2026 and is continuing. The Equus Note requires the lender to provide written notice of default but, as of the date of filing of this Quarterly Report on Form 10-Q, no such notice has been provided. The Fund is in discussions with representatives of the holder of the Equus Note regarding conversion into common stock or an extension of the maturity date. However, as of the date of filing of this Quarterly Report, no agreements have been reached regarding any of the foregoing.

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

The Fund has $2,232,222 and $2,123,111 in convertible notes payable as of March 31, 2026, and December 31, 2025, respectively.

The balances as of March 31, 2026 were as follows:

	Carrying amount	Collateral	Issue date	Maturity date	Conversion price	Conversion shares
About Investment, Ltd	$2,232,222(a)	(b)	2/7/2025	2/7/2026	$1.50	1,999,999

(a) Including accrued interest of $232,222 as of March 31, 2026.

(b) Collateral for the Equus Note consists of the Fund’s holdings in CitroTech, Inc. as shown in the Schedule of Investments.

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The net carrying amount of the liability and equity components of the Note was as follows:

	March 31, 2026	December 31, 2025
Note liability component:
Principal	$2,000,000	$2,000,000
PIK’d interest	232,222	182,222
Debt discount	-	(59,111)
Net carrying amount	$2,232,222	$2,123,111

Interest expense recognized related to the convertible note for the three months ended March 31, 2026 and 2025 was

$109,111 and $29,444, respectively.

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 of which 1,333,333 were issued to the holder of the Equus Note.

^(a)Initially, 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, during the quarter ended September 30, 2025, we concluded since the terms of the Warrants issued to the Equus Note holder may be modified by the holder 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 should account for the Warrants as a liability. Accordingly, we recorded an immaterial out-of-period adjustment to reclassify the initial value of the warrants of $437,500 from APIC to warrant liability and a write up to its absolute initial value of $560,000 and to record the subsequent change in fair value, which was unrealized appreciation of approximately $235,000 from inception to March 31, 2025.

Subsequent to reclassification of the Warrants as described above, the Fund accounts for the Warrants as a liability under fair value Level 3 hierarchy, using a Black-Scholes option pricing model. The assumptions used to measure the fair value as of March 31, 2026 under this model include the following:

Stock price	$1.84
Exercise price	$1.50
Expected volatility	48.8%
Expected term (years)	3.85
Risk free rate	3.87%
Dividend yield	0.0%

The net carrying amount of the liability related to the Warrants was as follows:

	March 31, 2026	December 31, 2025
Warrant liability component:
Warrant at inception	$560,000	$560,000
Unrealized depreciation on warrant liability	621,592	(297,000)
Net carrying amount of the warrant liability	$1,181,592	$857,000

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(6) Portfolio Securities

In the first quarter of 2026, we sold 92,581 shares of CitroTech, Inc. for gross proceeds of $0.8 million.

(7) Conversion to an Operating Company

Authorization to Withdraw BDC Election—In previous years, holders of a majority of the outstanding common stock of the Fund approved our cessation as a BDC under the 1940 Act and authorized our Board to cause the Fund’s withdrawal of its election to be classified as a BDC, effective as of a date designated by the Board and our Chief Executive Officer. Although this authorization has since expired, we may receive a further authorization from our shareholders in the future as a consequence of our expressed intent to transform Equus into an operating company. Notwithstanding any such authorization to withdraw our BDC election, we will not submit any such withdrawal unless and until Equus has entered into a definitive agreement to effect a transformative transaction. Further, even if we are again authorized to withdraw our election as a BDC, we will require a subsequent affirmative vote from holders of a majority of our outstanding voting shares to enter into any such definitive agreement or change the nature of our business. While we are presently evaluating various opportunities that could enable us to accomplish this transformation, we cannot assure you that we will be able to do so within any particular time period or at all, and, although we expect that our shareholders will grant a further authorization, we do not expect to cause the Fund to withdraw its election to be classified as BDC prior to June 30, 2026. Moreover, we cannot assure you that the terms of any such transformative transaction would be acceptable to us.

Increase in Authorized Shares—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. The increase is intended to help facilitate the transformation of Equus into an operating company and provide sufficient authorized shares to evaluate larger business concerns as possible acquisition or merger candidates.

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(8) 2016 Equity Incentive Plan

Share-Based Incentive Compensation—On June 13, 2016, our shareholders approved the adoption of our 2016 Equity Incentive Plan (“2016 Plan”). On March 19, 2026, our shareholders approved the adoption of our 2025 Equity Incentive Plan (“2025 Plan”, and together with the 2016 Plan, the “Incentive Plans”). The Incentive Plans are 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 Plans are 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 Plans permit 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 2016 Plan is 2,434,728 shares, and the maximum number of shares of common stock that are subject to awards granted under the 2025 Plan are 2,793,338 shares. The term of the 2016 Plan will expire on June 13, 2026 and the term of the 2025 Plan will expire on March 19, 2036. During 2017, we granted awards of restricted stock under the 2016 Plan to certain of our directors and executive officers in the aggregate amount of 844,500 shares. These awards were each subject to a vesting requirement over a 3-year period unless the recipient thereof was 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 Fund. These were fully vested as of September 30, 2020. During 2025, we awarded an additional 380,523 shares of restricted stock under the Incentive Plan to officers of the Fund and to consultants of Morgan. These awards were fully vested at the grant date. No awards have yet been made under the 2025 Plan. We account for share-based compensation using the fair value method, as prescribed by ASC 718. 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. In the case of the most recent awards under the Incentive Plan which were fully-vested, we recognized share-based compensation expense on the date of grant, based on the number of restricted shares awarded and our closing trading price per share on such date.

(9) Morgan E&P, Inc.

Morgan E&P, Inc. (“Morgan”) was organized by the Fund on April 3, 2023 as a Delaware limited liability company and a wholly-owned subsidiary of the Fund. On September 5, 2025, Morgan converted to a Delaware corporation. During 2023 and 2024, Morgan acquired 6,547 net acres, in the Bakken/Three Forks formation in the Williston Basin of North Dakota. 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.

Under the terms of the Purchase and Sale Agreement covering the initial acreage acquired by Morgan, Morgan is required to drill and complete a minimum of six wells within 18 months of receiving the first drilling permits. The average cost of drilling a new horizontal well is approximately $8.2 million. During the fourth quarter of 2023, Morgan sold certain of its wellbore interest in its initial 2 wells to a third party for $5.6 million in cash in exchange for a net revenue interest of approximately 27% in these wells.

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.

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. In February 2024, we increased the total amount of the facility to

$10.5 million. As of March 31, 2026, the facility had been fully-drawn. On May 13, 2026, we agreed to extend the maturity date of the facility to May 13, 2028.

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Going-Concern—The accompanying unaudited condensed consolidated financial statements of Morgan have been prepared on a going concern basis, which contemplates the near-term sale of quantities of oil and gas, realization of assets and the satisfaction of liabilities and other commitments in the normal course of business. As such, the unaudited condensed consolidated 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 Morgan be unable to continue as a going concern. As of March 31, 2026, Morgan does not have sufficient cash resources to fund its present operations. Morgan is presently seeking external financing to enable it to continue operations over the twelve months from the date of this quarterly report, but we cannot assure you that Morgan will be successful in doing so, or that such endeavors will generate sufficient liquidity to enable Morgan to continue operations over the next twelve months. These factors raise substantial doubt about Morgan’s ability to continue as a going concern.

Senior Loan Overdue— On August 14, 2025, Morgan obtained a senior short-term loan of $3.0 million for near-term drilling and work-over operations. As of May 12, 2026, this loan has matured and remains unpaid.

We do not consolidate the financial results of Morgan with the financial results of the Fund and, accordingly, only the value of our investment in Morgan is included on our balance sheets. Our investment in Morgan is valued in accordance with our normal valuation procedures and is based in part on a reserve report prepared for Morgan by Cawley, Gillespie, & Associates, Inc., an independent petroleum engineering firm, the transactions and values of comparable companies in this sector, and the estimated value of leasehold mineral interests associated with the acreage held by Morgan. A valuation of Morgan was performed by a third-party valuation firm, who recommended a value range of Morgan consistent with the fair value determined by our Management (See Schedule of Investments).

Below is summarized unaudited condensed financial information for Morgan E&P, Inc. as of March 31, 2026 and December 31, 2025 and for the three -months ended March 31, 2026 and 2025, respectively, (in thousands):

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MORGAN E&P, INC.

Unaudited Condensed Balance Sheet

		March 31, 2026				December 31, 2025
Assets:
Cash		$	140			$	18
Revenue receivables			(7	)			—
Joint interest billing receivables			2,044				2,014
Other receivables			54				49
Prepaids and other current assets			52				72
Current assets			2,283				2,153
Property, plant and equipment
Oil and gas properties, net - full cost method			11,625				11,644
Other property, plant and equipment, net			20				23
Total property, plant and equipment - net			11,645				11,667
Other noncurrent assets
Operating lease right-of-use assets, net			173				185
Total noncurrent assets			173				185
Total assets		$	14,101			$	14,005
Liabilities and Stockholder's Deficit:
Current liabilities
Accounts payable		$	6,088			$	6,263
Revenue payable			407				214
Short-term loan payable			2,983				2,958
Current portion of operating lease liabilities			56				54
Current portion of long-term notes payable - Due to parent			10,500				10,500
Deferred Income			7				5
Due to parent			1,641				1,148
Accrued liabilities			10,651				10,544
Accrued liabilities - Due to parent			3,063				2,749
Total current liabilities			35,396				34,435
Long-term liabilities
Asset retirement obligations			8				5
Long-term operating lease liabilities			139				153
Note payable - Due to parent			—				—
Long-term accrued liabilities - Due to parent			—				—
Total long-term liabilities			147				158
Total liabilities			35,543				34,593
Stockholder's deficit
Preferred stock, $0.001 par value, 10,000,000 shares authorized,
zero shares issued as of March 31, 2026 and December 31, 2025, respectively			—				—
Common stock, $0.001 par value, 100,000,000 shares authorized,
6,800,000 shares issued as of March 31, 2026 and December 25, 2025, respectively			7				7
Common stock discount			(7	)			(7	)
Accumulated deficit			(21,442	)			(20,588	)
Total stockholder's deficit			(21,442	)			(20,588	)
Total liabilities and stockholders' deficit		$	14,101			$	14,005

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MORGAN E&P, INC.

Unaudited Condensed Statement of Operations

		For the Three Months Ended March 31,				For the Three Months Ended March 31,
		2026				2025
Oil and gas revenue			265				172
Operating costs and expenses
Lease operating			22				43
Production and ad valorem taxes			26				17
Marketing, transportation and gathering			5				6
Depreciation, depletion, and amortization			35				51
General and administrative			429				306
Total operating costs and expenses			517				423
Loss from operations			(252	)			(251	)
Other income (expense)
Rental income			18				—
Interest expense			(620	)			(315	)
Total other income (expense), net			(602	)			(315	)
Net loss		$	(854	)		$	(566	)

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MORGAN E&P, INC.

Unaudited Condensed Statement of Cash Flows

		Three Months Ended				Three Months Ended
		March 31, 2026				March 31, 2025
Cash flows from operating activities:
Net loss		$	(854	)		$	(566	)
Adjustments to reconcile net loss to cash flows provided by (used in) operating activities:
Depreciation, depletion, amortization			35				51
Amortization of right-of-use asset			12				10
Amortization of loan origination fees			25				—
Changes in operating assets and liabilities:
Accounts receivable - oil and natural gas sales			7				(150	)
Accounts receivable - joint interest billings			(30	)			71
Other receivables			(5	)			—
Prepaids and other current assets			20				—
Accounts payable			(160	)			125
Revenue payable			193				(105	)
Due to parent			493				474
Deferred income			2				—
Current portion of operating lease liabilities			(12	)			(11	)
Accrued liabilities			101				(211	)
Accrued liabilities - due to parent			314				—
Long-term accrued liabilities - due to parent			—				315
Net cash provided by (used in) operating activities			141				3
Cash flows from investing activities:
Capital expenditures			(19	)			—
Net cash used in investing activities			(19	)			—
Cash flows from financing activities:
Proceeds from note payable - affiliate			—				—
Net cash provided by financing activities			—				—
Net change in cash			122				3
Cash at beginning of period			18				15
Cash at end of period			140			$	18
Supplemental Disclosure of Cash Flow Information
Cash paid for interest:		$	47			$	—
Non-cash investing and financing activities
Changes in capital accounts payable and capital accruals		$	9			$	(10	)
Change in asset retirement obligations		$	3			$	—

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Critical Accounting Policies for Morgan

Acquisitions—Morgan evaluates each acquisition of oil and gas properties to determine whether each should be accounted for as an acquisition of assets or business in accordance with Accounting Standards Update No. 2017-01: Business Combinations (Topic 805) Clarifying the Definition of a Business (“ASU 2017-01”).

Asset acquisitions are recorded at the cost of acquiring the property. The results of operations of the oil and gas properties acquired in the Company’s acquisitions have been included in the consolidated financial statements since the closing dates of the respective acquisitions. A business combination may result in the recognition of a bargain purchase gain or goodwill based on the measurement of the fair value of the assets and liabilities acquired at the acquisition date as compared to the fair value of consideration transferred, adjusted for purchase price adjustments. The initial accounting for business combinations may not be complete and adjustments to provisional amounts, or recognition of additional assets acquired, or liabilities assumed, may occur as more detailed analyses are completed and additional information is obtained about the facts and circumstances that existed as of the acquisition dates.

Oil & Gas Properties—The method of accounting for oil and natural gas properties determines what costs are capitalized and how these costs are ultimately matched with revenue and expenses. Morgan uses the full cost method of accounting for oil and natural gas properties. Under the full cost method, all direct costs and certain indirect costs associated with the acquisition, exploration, and development of oil and natural gas properties are capitalized.

Oil and gas properties include costs that are excluded from costs being depleted or amortized. Oil and natural gas property costs excluded represent investments in unproved properties and include non-producing leasehold, geological and geophysical costs associated with leasehold or drilling interests and exploration costs. The Company excludes these costs until the project is evaluated and proved reserves are established or impairment is determined. Excluded costs are reviewed at least annually to determine if impairment has occurred. The amount of any evaluated or impaired oil and natural gas properties is transferred to capitalized costs being amortized. For the three months ended March 31, 2026 and 2025, the Company transferred $0.1 million and $0.1 million, respectively, to the full cost pool.

Oil and natural gas properties are depleted using the units-of-production method. The depletion expense is significantly affected by the unamortized historical and future development costs and the estimated proved oil and natural gas reserves. Estimation of proved oil and natural gas reserves relies on professional judgment and the use of factors that cannot be precisely determined. Holding all other factors constant, if proved oil and natural gas reserves were revised upward or downward, earnings would increase or decrease, respectively. Subsequent proved reserve estimates that are materially different from those reported would change the depletion expense recognized during the future reporting period. Proceeds from the sales or disposition of oil and natural gas of proved and unproved properties are accounted for as a reduction of capitalized costs with no gain or loss recognized, unless such reduction would significantly alter the relationship between capitalized costs and proved reserves, in which case the gain or loss is recognized in the statement of income. In general, a significant alteration occurs when the deferral of gains or losses will result in an amortization rate materially different from the amortization rate calculated upon recognition of gains or losses. Abandonments of properties are accounted for as adjustments of capitalized costs with no loss recognized.

Under the full cost accounting rules, total capitalized costs are limited to a ceiling equal to the present value of future net revenue, discounted at 10% per annum, plus the lower of cost or fair value of unevaluated properties less income tax effects (the “ceiling limitation”). Future net revenue used to calculate the ceiling do not include cash outflows associated with settling asset retirement obligations. Morgan performs an annual ceiling test to evaluate whether the net book value of the full cost pool exceeds the ceiling limitation. If capitalized costs (net of accumulated depreciation, depletion, and amortization) are greater than the discounted future net revenue or ceiling limitation, a write-down or impairment of the full cost pool is required. A write-down of the carrying value of the full cost pool is a non-cash charge that reduces earnings and impacts members’ equity in the period of occurrence and typically results in lower depreciation, depletion, and amortization expense in future periods. Once incurred, a write-down is not reversible at a later date. The risk that Morgan will be required to write-down the carrying value of oil and natural gas properties increases during a period when oil or gas prices are depressed. In addition, a write-down may occur if estimates of proved reserves are substantially reduced or estimates of future development costs increase significantly.

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Income Taxes— Morgan was a single-member limited liability company that had elected to be taxed as a C Corporation under Subchapter C of the Internal Revenue Code from inception. Although Morgan later converted to a corporation, its federal tax treatment remained unchanged because of the original election. For state tax purposes, Morgan will file a combined Texas margin tax filing with its direct parent, Equus Total Return, Inc., and its related affiliates.

Morgan records income taxes for interim reporting periods based on an estimated annual effective tax rate. This estimated rate is reassessed each quarter and may fluctuate due to changes in forecasted annual operating income, adjustments to the valuation allowance on deferred tax assets, and changes in actual or projected permanent book-to-tax differences. Morgan’s effective tax rate for the three months ended March 31, 2026 and 2025 was 0.0%, and accordingly, no income tax expense or benefit was recorded for the quarter.

Morgan records deferred tax assets to the extent Morgan believes these assets will more-likely-than-not be realized. In making such determinations, Morgan 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. In the event Morgan were to determine that it would be able to realize deferred income tax assets in the future in excess of their net recorded amount, an adjustment to the valuation allowance would be made which would reduce the provision for income taxes . For the three months ended March 31, 2026 and 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.

On July 4, 2025, Public Law No. 119-21, the Act was signed into law by the U.S. government. Key provisions of the Act effecting Morgan include: (i) the permanent reduction of the corporate tax rate, (ii) the permanent extension of 100% bonus depreciation for qualified property, and (iii) modifications to the calculation for excess business interest expense limitation under

§ 163(j) to adjusted taxable income calculation on the business interest expense limitation.

In accordance with ASC 740, Morgan has 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 quarter ended September 30, 2025. Morgan continues to evaluate the impact of the Act on its financial statements and will update its estimates as additional guidance becomes available.

ASC Topic 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. Morgan has no material uncertain tax positions in its prior or current filings

Asset Retirement Obligations—The fair value of asset retirement obligations are recorded in the period in which they are incurred if a reasonable estimate of fair value can be made, and the corresponding cost is capitalized as part of the carrying amount of the related long-lived asset. The fair value of the asset retirement obligation is measured using expected future cash outflows discounted at Morgan’s credit- adjusted risk-free interest rate. Fair value, to the extent possible, should include a market risk premium for unforeseeable circumstances. No market risk premium was included in Morgan’s asset retirement obligation fair value estimate since a reasonable estimate could not be made. The liability is accreted to its then present value each period, and the capitalized cost is depleted or amortized over the estimated recoverable reserves using the units-of-production method. If the obligation is settled for other than the carrying amount of the liability, the Company will record the difference to the full cost pool.

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Environmental Matters

We do not believe the existence of current environmental laws or interpretations thereof will materially hinder or adversely affect Morgan’s business operations; however, there can be no assurances of future effects on Morgan of new laws or interpretations thereof.

Environmental Contingencies

Morgan’s activities are subject to local, state, and federal laws and regulations governing environmental quality and pollution control in the United States. The exploration, drilling and production from wells, natural gas facilities, including the operation and construction of pipelines, plants and other facilities for transporting, processing, treating, or storing natural gas and other products, are subject to stringent environmental regulation by state and federal authorities, including the Environmental Protection Agency (“EPA”). Such regulation can increase the cost of planning, designing, installing, and operating such facilities.

Financing

On August 14, 2025, Morgan secured a $3 million loan facility, the proceeds of which were used to fund near-term drilling and work-over operations in the Bakken Shale formation of North Dakota’s Williston Basin on two existing but non-producing wells owned by Morgan.

(10) Subsequent Events

Management performed an evaluation of the Fund’s activity through the date the financial statements were issued, noting the following subsequent events:

· From the period commencing April 1, 2026 until the filing of this report on Form 10-Q, we sold an additional 173,767 shares of CitroTech, Inc.

· On May 13, 2026, we extended the maturity date of the Fund’s $10.5 million loan facility to Morgan from May 13, 2026 to May 13, 2028.

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

Equus Total Return, Inc. (“we,” “us,” “our,” “Equus,” and the “Fund”), a Delaware corporation, was formed on August 16, 1991. Our shares trade on the New York Stock Exchange under the symbol ‘EQS’. Our investment strategy seeks to provide the highest total return, consisting of capital appreciation and current income.

The information contained in this section should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this Quarterly Report and in conjunction with the financial statements and notes thereto in the Fund’s Form 10-K for the year ended December 31, 2025, as filed with the SEC. In addition, some of the statements in this report constitute forward-looking statements. The matters discussed in this Quarterly Report, as well as in future oral and written statements by management of Equus, that are forward-looking statements are based on current management expectations that involve substantial risks and uncertainties which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. Forward-looking statements relate to future events or our future financial performance. We generally identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar words. Important assumptions include our ability to originate new investments, achieve certain margins and levels of profitability, and the availability of additional capital. In light of these and other uncertainties, the inclusion of a forward-looking statement in this Quarterly Report should not be regarded as a representation by us that our plans or objectives will be achieved. The forward- looking statements contained in this Quarterly Report include statements as to:

• our future operating results;

• our business prospects and the prospects of our existing and prospective portfolio companies;

• the return or impact of current and future investments;

• our contractual arrangements and other relationships with third parties;

• the dependence of our future success on the general economy and its impact on the industries in which we invest;

• the financial condition and ability of our existing and prospective portfolio companies to achieve their objectives;

• our expected financings and investments;

• our regulatory structure and tax treatment;

• our ability to qualify and operate as a BDC and a RIC, including the impact of changes in laws or regulations governing our operations, or the operations of our portfolio companies;

• the adequacy of our cash resources and working capital;

• the timing of cash flows, if any, from the operations of our portfolio companies;

• the impact of fluctuations in interest rates on our business;

• the valuation of our investments in portfolio companies, particularly those having no liquid trading market;

• our ability to recover unrealized losses;

• market conditions and our ability to access additional capital, if deemed necessary;

• changes in interest rates and overall investment activity;

• developments in the global economy and resulting demand and supply for oil and natural gas;

• natural or man-made disasters and other external events that may disrupt our operations; and

• continued volatility of oil and natural gas prices.

There are a number of important risks and uncertainties that could cause our actual results to differ materially from those indicated by such forward-looking statements. For a discussion of factors that could cause our actual results to differ from forward-looking statements contained in this Quarterly Report, please see the discussion in Part II, “Item 1A. Risk Factors”, and in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (“10-K”). In particular, you should carefully consider the risks we have described in the 10-K and elsewhere in this Quarterly Report concerning our efforts to transform Equus into an operating company, as well as the coronavirus pandemic and the economic impact of the coronavirus on the Fund and our sole remaining portfolio company, as well as on oil and gas markets generally. You should not place undue reliance on these forward-looking statements. The forward-looking statements made in this Quarterly Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances occurring after the date this Quarterly Report is filed with the SEC.

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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 of 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 subordinate 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. To the extent that we remain a BDC, we will seek to achieve capital appreciation by making investments in equity and equity-oriented securities issued by privately-owned companies (and smaller public 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 is prudent to continue to review alternatives to refine and further clarify the current strategies.

We elected to be treated as a BDC under the 1940 Act. 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.

From time to time, we may have certain wholly-owned taxable subsidiaries (“Taxable Subsidiaries”) each of which may hold one or more portfolio investments listed on our Schedules of Investments. The purpose of these Taxable Subsidiaries is, to the extent we re-qualify as a RIC, 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 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.

Conversion to an Operating Company

Authorization to Withdraw BDC Election. In previous years, holders of a majority of the outstanding common stock of the Fund approved our cessation as a BDC under the 1940 Act and authorized our Board to cause the Fund’s withdrawal of its election to be classified as a BDC, effective as of a date designated by the Board and our Chief Executive Officer. Although this authorization has since expired, we may receive a further authorization from our shareholders in the future as a consequence of our expressed intent to transform Equus into an operating company. Notwithstanding any such authorization to withdraw our BDC election, we will not submit any such withdrawal unless and until Equus has entered into a definitive agreement to effect a transformative transaction. Further, even if we are again authorized to withdraw our election as a BDC, we will require a subsequent affirmative vote from holders of a majority of our outstanding voting shares to enter into any such definitive agreement or change the nature of our business. While we are presently evaluating various opportunities that could enable us to accomplish this transformation, we cannot assure you that we will be able to do so within any particular time period or at all, and, although we expect that our shareholders will grant a further authorization, we do not expect to cause the Fund to withdraw its election to be classified as BDC prior to June 30, 2026. Moreover, we cannot assure you that the terms of any such transformative transaction would be acceptable to us.

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Reduction in Asset Coverage Ratio

On November 14, 2019, our shareholders approved a reduction in our asset coverage ratio from 200% to 150%. Prior to the reduction, we were restricted in the amount that we could borrow to the value of our net assets. The reduction in our asset coverage from 200% to 150% means that we may now borrow up to twice the value of our net assets. Except for a margin loan that we have previously procured each quarter to acquire U.S. Treasury bills as part of the maintenance of our RIC status, we have not incurred any additional borrowings as a consequence of this authorization.

2016 Equity Incentive Plan

On June 13, 2016, our shareholders approved the adoption of our 2016 Equity Incentive Plan (“2016 Plan”). On March 19, 2026, our shareholders approved the adoption of our 2025 Equity Incentive Plan (“2025 Plan”, and together with the 2016 Plan, the “Incentive Plans”). The Incentive Plans are 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 Plans are 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 Plans permit 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 2016 Plan is 2,434,728 shares, and the maximum number of shares of common stock that are subject to awards granted under the 2025 Plan are 2,793,338 shares. The term of the 2016 Plan will expire on June 13, 2026 and the term of the 2025 Plan will expire on March 19, 2036. During 2017, we granted awards of restricted stock under the 2016 Plan to certain of our directors and executive officers in the aggregate amount of 844,500 shares. These awards were each subject to a vesting requirement over a 3-year period unless the recipient thereof was 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 Fund. These were fully vested as of September 30, 2020. During 2025, we awarded an additional 380,523 shares of restricted stock under the Incentive Plan to officers of the Fund and to consultants of Morgan. These awards were fully vested at the grant date. No awards have yet been made under the 2025 Plan. We account for share-based compensation using the fair value method, as prescribed by ASC 718. 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. In the case of the most recent awards under the Incentive Plan which were fully-vested, we recognized share-based compensation expense on the date of grant, based on the number of restricted shares awarded and our closing trading price per share on such date.

Critical Accounting Policies

See the Fund’s Critical Accounting Policies from the disclosure set forth in the Fund’s Annual Report on Form 10-K for the year ended December 31, 2025.

Current Market Conditions

Impact of Economic and Geopolitical Events on the Oil and Gas Sector. Oil prices experienced a slow and steady decline beginning in the first quarter of 2024 and continuing until the end of 2025. The conflict in Iran, which commenced in February, 2026, has resulted in dramatically increased spot prices, ending the first quarter of 2026 at $101.30 per barrel. Conversely, since the beginning of 2024, natural gas prices steadily increased before declining in the first three quarters of 2025 and recovering at the end of 2025, and thereafter declining throughout the first three months of 2026, ending the quarter at $2.88 per MMBTU. Prior to the onset of hostilities in the Middle East, relative oil and gas price stability had been a significant factor in increased consolidation activity in the Williston Basin region in North Dakota where Morgan E&P, Inc. holds its development rights.

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The U.S. Economy. U.S. GDP increased at an annualized rate of 2.0% for the first quarter of 2026 as compared to an increase of 0.5% for the fourth quarter of 2025, below consensus estimates of 2.0% for the quarter. The principal drivers of the increase over the fourth quarter of 2025 were the effect of the government shutdown during the fourth quarter, as well as increases in gross private domestic investment, government spending, and net exports. The Congressional Budget Office has projected full-year GDP growth of 2.2% for 2026, with a slowdown to 1.8% in 2027. (Sources: Federal Reserve Bank of Atlanta; Bureau of Economic Analysis; The Congressional Budget Office).

Employment and Housing. The U.S. added an estimated 115,000 jobs in April 2026 as compared to 178,000 jobs added in March 2026. The unemployment rate in April 2026 held relatively steady at 4.3%, unchanged from March 2026. However, the labor force participation rate decreased to 61.8%, the lowest since October 2021. The Congressional Budget Office now projects the unemployment rate for all of 2026 to decrease to 4.2% before increasing slightly to 4.4% in both 2027 and 2028. Persistently high borrowing costs continue to suppress sales volumes of both new and existing homes. Despite these headwinds, mid-level home prices have continued to rise moderately, outpacing inflation and driven by constrained supply. Conflicting economic signals—such as stable unemployment amid inflation pressures and high energy prices—have kept mortgage rates elevated, with the 30-year fixed rate averaging 6.25% to 6.35% in April 2026. Acquisition and refinancing activity is unlikely to rebound meaningfully until 2027 (Sources: Federal Reserve Bank of Chicago; Bureau of Labor Statistics; Congressional Budget Office).

Consumer Prices. Following a stable 2025, consumer prices began to edge upward in March 2026 and currently stand at 3.8% on an annualized basis, the highest in nearly three years, largely driven by increases in energy prices and housing costs. Consensus estimates for the remainder of 2026 are that inflation will remain above 3.3% for the remainder of the year. (Sources: Bureau of Economic Analysis; Bureau of Labor Statistics; Morgan Stanley Research; Goldman Sachs).

Interest Rates. After cutting interest rates in each of the FOMC’s September and October 2025 meetings by 25 basis points each time, the Fed has since determined to hold rates steady, declining to make further cuts during the remainder of 2025 and the first quarter of 2026. The April 2026 FOMC meeting which declined to cut the federal funds rate further, experienced four dissenting votes, the most in more than three decades. The new incoming Federal Reserve Chair is expected to be more aggressive than his predecessor regarding inflation, and consensus estimates are that he will be less inclined toward early rate cuts in 2026. (Sources: The Wall Street Journal; The Federal Reserve Board).

Mergers and Acquisitions. Global merger and acquisition activity strengthened meaningfully through late 2025 and into 2026, with deal volumes and aggregate transaction values continuing to recover from the depressed levels of the prior year. The rebound that began in the third quarter of 2025 — when global deal value surged sharply from 2024 levels and large-cap transactions returned to the market — has carried forward into 2026 as financing conditions stabilized and strategic buyers re-entered the pipeline. Technology, energy, life sciences, and telecommunications remain the most active sectors, with technology-driven transactions, particularly in artificial intelligence, cloud infrastructure, and financial services, continuing to anchor overall deal momentum. Expectations for further consolidation in 2026 remain high, supported by improving credit markets, strong balance-sheet capacity among strategic acquirers, and a growing backlog of private-equity-sponsored transactions preparing to come to market. (Sources: Ernst & Young; Bloomberg).

Private Equity. Private equity activity accelerated in the final months of 2025 and continued into 2026 with a more complex but still resilient profile. In the first quarter of 2026, global PE fundraising totaled $161.6 billion, a 15% increase from $140 billion in the fourth quarter of 2025, though still 6% below the $172.7 billion raised in the first quarter of 2025, reflecting a market that is stabilizing but not yet fully recovered. Deal activity showed a similar pattern, as U.S. private-equity investment reached $228 billion in the first quarter of 2026, supported by several large, high-conviction transactions, even as overall deal volume fell to a five-year low, underscoring a shift toward fewer but larger deals. The first quarter of 2026 witnessed 5,100 transactions valued at an aggregate of $481.6 billion, a sequential decline from the unusually strong second half of 2025 but still well above the stagnant levels of earlier years, suggesting normalization rather than contraction. For the remainder of 2026, analysts expect modest year-over-year growth in PE activity, building on the late-2025 rebound while the fundraising environment continues to recover more slowly. (Sources: Foley & Lardner; Ernst & Young).

During the three months ended March 31, 2026, our net asset value increased from $1.19 per share to $1.50 per share, an increase of 26.1%. As of March 31, 2026, our common stock is trading at a 18.5% discount to our net asset value as compared to 18.5% premium to our net asset value as of December 31, 2025.

Over the past several years, we have executed certain initiatives to enhance liquidity, achieve a lower operational cost structure, provide more assistance to portfolio companies and realize certain of our portfolio investments. Specifically, we changed the composition of our Board of Directors and Management, terminated certain of our follow-on investments, internalized the management of the Fund, suspended our managed distribution policy, modified our investment strategy to pursue shorter term liquidation opportunities, pursued non-cash investment opportunities, and sold certain of our legacy and underperforming investment holdings. We believe these actions continue to be necessary to protect capital and liquidity in order to preserve and enhance shareholder value. Because our Management is internalized, certain of our expenses should not increase commensurate with an increase in the size of the Fund and, therefore, to the extent we remain a BDC, we expect to achieve efficiencies in our cost structure if we are able to grow the Fund.

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Liquidity and Capital Resources

We generate cash primarily from maturities, sales of securities and borrowings, as well as capital gains realized upon the sale of portfolio investments. We use cash primarily to make additional investments, either in new companies or as follow-on investments in the existing portfolio companies and to pay the dividends to our stockholders.

Because of the nature and size of the portfolio investments, in the event we seek to requalify as a RIC, we may periodically borrow funds to make qualifying investments to maintain this tax status. In such case, we will borrow such funds by utilizing a margin account with a securities brokerage firm. There is no assurance that such arrangement will be available in the future. If we seek to requalify as a RIC and are unable to borrow funds to make qualifying investments, Equus would continue to be subject to corporate income tax on its net investment income and realized capital gains, and distributions to stockholders would continue to be subject to income tax as ordinary dividends.

The Fund has the ability to borrow funds and issue forms of senior securities representing indebtedness or stock, such as preferred stock, subject to certain restrictions. Net taxable investment income and net taxable realized gains from the sales of portfolio investments are intended to be distributed at least annually, to the extent such amounts are not reserved for payment of expenses and contingencies or to make follow-on or new investments.

On February 7, 2025, the Fund issued a one-year senior convertible promissory note bearing interest at 10% per annum in exchange for $2.0 million (“Equus Note”) On February 7, 2026, the Equus Note matured and remains unpaid as of March 31, 2026 and remains unpaid as of March 31, 2026 and continuing until the filing of this Quarterly Report on Form 10-Q.

We reserve the right to retain net long-term capital gains in excess of net short-term capital losses for reinvestment or to pay contingencies and expenses. Such retained amounts, if any, will be taxable to the Fund as long-term capital gains and stockholders will be able to claim their proportionate share of the federal income taxes paid on such gains as a credit against their own federal income tax liabilities. Stockholders will also be entitled to increase the adjusted tax basis of their Fund shares by the difference between their undistributed capital gains and their tax credit.

We are evaluating the impact of current market conditions on our portfolio company valuations and their ability to provide current income. We believe we have followed valuation techniques in a reasonably consistent manner; however, we are cognizant of current market conditions that might affect future valuations of portfolio securities.

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.

Results of Operations

Investment Income and Expense

Net investment loss was $0.9 million and $1.1 million for the three months ended March 31, 2026 and 2025,

respectively. The decrease was primarily due to $0.3 million in transaction costs related to the issuance of a convertible promissory note in described in Note 5, offset by an increase in interest expense of $0.1 million.

Total investment income was comparable at $0.3 for the three months ended March 31, 2026 and 2025, respectively.

Compensation expense was comparable at $0.6 million for the three months ended March 31, 2026 and 2025, respectively.

Professional fees were comparable at $0.3 million for the three months ended March 31, 2026 and 2025, respectively.

Transaction costs, relating to the issuance of a convertible promissory note described in Note 5 of the financial statement footnotes above were $0 and $0.3 million for the three months ended March 31, 2026 and 2025, respectively.

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Changes in Unrealized Appreciation/Depreciation of Portfolio Securities

During the three months ended March 31, 2026, we recorded an increase of $5.0 million in fair value of our equity holding in Morgan E&P, Inc. (“Morgan”), largely as a result of the substantial increase in oil prices during the quarter, as well as increases in the forward price for oil in future periods.

During the three months ended March 31, 2026, we recorded a decrease of $0.2 million in fair value of our equity holding in CitroTech. (“CITR”) due to the reversal of the unrealized appreciation of $0.5 million of the fair value of this investment due to the sale of shares, offset by the increase in unrealized appreciation of $0.3 million due to the increase in the closing share price at March 31, 2026.

During the three months ended March 31, 2025, we recorded an increase of $1.0 million in fair value of our equity holding in Morgan largely due to significant increases in the short and long-term price of crude oil.

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.

During the three months ended March 31, 2025, we recorded a $0.1 million decrease in fair value in our investment in NAEOC.

During the three months ended March 31,2025, with respect to our holding in Equus Energy, LLC, we recorded a reversal of the unrealized depreciation of $4.1 million of the fair value of this investment as a result of the sale of this investment.

On February 10, 2025, we purchased from CitroTech, Inc., a developer of fire suppression products (“CITR”), a 1-year senior convertible promissory note bearing interest at the rate of 10% per annum, in exchange for $1.5 million in cash (“CITR Note”). Contemporaneously with the purchase of the CITR Note, the Fund also received a common stock purchase warrant (“CITR Warrant”) to acquire an aggregate of 1,875,000 shares of CITR common stock at an exercise price of $0.50 per share. The shares of CITR are traded on the NYSE American Stock Exchange and, as of March 31, 2025, the closing trading price of CITRI shares was $1.20. Accordingly, during the three months ended March 31, 2025, we recorded an increase of $3.0 million in fair value of the CITR Note and $1.3 million increase in the fair value of the CITR Warrant.

Change in Unrealized Depreciation on Warrant Liability

During the three months ended March 31, 2026, with respect to the warrants issued, we recognized depreciation of the warrant liability of $0.3 million.

Dividends

We will pay out net investment income and/or realized capital gains, if any, on an annual basis as required under the Investment Company Act of 1940.

Subsequent Events

Management performed an evaluation of the Fund’s activity through the date the financial statements were issued, noting the following subsequent events:

· From the period commencing April 1, 2026 until the filing of this report on Form 10-Q, we sold an additional 172,767 shares of CitroTech, Inc.

· On May 13, 2026, we extended the maturity date of the Fund’s $10.5 million loan facility to Morgan from May 13, 2026 to May 13, 2028.

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Item 3. Quantitative and Qualitative Disclosure about Market Risk

We are subject to financial market risks, including changes in interest rates with respect to investments in debt securities and outstanding debt payable, as well as changes in marketable equity security prices. In the future, we may invest in companies outside the United States, including in Europe and Asia, which would give rise to exposure to foreign currency value fluctuations. We do not use derivative financial instruments to mitigate any of these risks. The return on investments is generally not affected by foreign currency fluctuations.

Our investments in portfolio securities consist of some fixed-rate debt securities. Since the debt securities are generally priced at a fixed rate, changes in interest rates do not directly affect interest income. In addition, changes in market interest rates are not typically a significant factor in the determination of fair value of these debt securities, since the securities are generally held to maturity. We determine their fair values based on the terms of the relevant debt security and the financial condition of the issuer.

A major portion of our investment portfolio consists of debt and equity investments in private companies. Modest changes in public market equity prices generally do not significantly impact the estimated fair value of these investments. However, significant changes in market equity prices can have a longer-term effect on valuations of private companies, which could affect the carrying value and the amount and timing of gains or losses realized on these investments. A small portion of the investment portfolio could also consist of common stock in publicly traded companies. These investments are directly exposed to equity price risk, in that a hypothetical ten percent change in these equity prices would result in a similar percentage change in the fair value of these securities.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and other procedures that are designed to ensure that information required to be disclosed by the Fund in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management, with the participation of our Fund’s Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the design and operations of the Fund’s “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of March 31, 2026. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Fund’s disclosure controls and procedures were not effective due to the material weaknesses in internal control over financial reporting described below.

Material Weakness in Internal Control over Financing Reporting Existing as March 31, 2026

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company's annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

Management performed an assessment of the effectiveness of the Fund’s internal control over financial reporting as of March 31, 2026, based upon criteria in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, management has concluded that the Fund did not maintain effective internal control over financial reporting as of March 31, 2026, due to the material weaknesses described below.

A material weakness was identified in our internal control over financial reporting relating to our controls over applying technical accounting guidance to complex nonrecurring events and transactions.

Although this material weakness did not result in a material misstatement of our consolidated financial statements for the periods presented, there is a possibility that, had the material weakness continued undetected, it could have led to a material misstatement of complex non-recurring events and related disclosures. Accordingly, management has concluded that this control deficiency constitutes a material weakness.

Management concluded that the previously disclosed material weakness relating to the Fund’s controls relating to the design and operation of management review over the valuation of the Fund’s portfolio investments, including management’s review procedures over the completeness and accuracy of the underlying data and information supplied to third parties assisting management by recommending a range of reasonable fair values, continued to exist as of March 31, 2026.

Management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects the Fund’s financial condition, results of its operations, changes in its net assets and its cash flows for the periods presented. We believe that the consolidated financial statements included in this Quarterly Report on Form 10-Q are accurate.

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We have begun the process of, and we are focused on, enhancing effective internal control measures to improve our internal control over financial reporting and remediate the material weaknesses. Our internal control remediation efforts include the following:

· Working with consultants to establish controls and protocols relating applying technical accounting guidance to nonrecurring events and transactions.

· Enhancing existing controls that address the completeness and accuracy of underlying data and information supplied to third parties assisting management in its determination of fair value and in the performance of management review controls over the valuation of the Fund’s portfolio securities; and

· Enhancing policies and procedures to improve the precision of review and evidence of review procedures performed to demonstrate effective design and operation of such controls.

We believe our planned actions to enhance our processes and controls will address the material weakness, but these actions are subject to ongoing management evaluation, and we will need a period of execution to demonstrate remediation. We are committed to the continuous improvement of our internal control over financial reporting and will continue to diligently review our internal control over financial reporting.

There were no other changes in our internal control over financial reporting during the quarter ended September 30, 2025 that have materially affected, or are reasonably likely to affect, our internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

From time to time, the Fund is 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.

Item 1A. Risk Factors

In connection with our efforts to convert Equus into an operating company, we may be subject to a number of risks associated with this process, the transactions that would embody a consolidation of Equus with another company, as well as specific risks associated with the commercial enterprise with which Equus may seek to combine itself. We intend to identify, as will be reasonably possible, such risks and include the same in our subsequent filings and reports with the SEC.

Readers should carefully consider these risks and all other information contained in our annual report on Form 10-K (“10-K”) for the year ended December 31, 2025, including the Fund’s financial statements and the related notes thereto. The risks and uncertainties described in our 10-K and throughout this 10-Q are not the only ones facing the Fund.

Additional risks and uncertainties not presently known to us, or not presently deemed material by us, may also impair our operations and performance.

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Item 6. Exhibits

3. Articles of Incorporation or Bylaws

(a) Restated Certificate of Incorporation of the Fund. [Incorporated by reference to Exhibit 3(a) to Registrant’s Current Report on Form 8-K filed on January 21, 2021]

(b) Certificate of Merger, dated June 30, 1993, between the Fund and Equus Investments Incorporated [Incorporated by reference to Exhibit 3(b) to Registrant’s Annual Report on form 10-K for the year ended December 31, 2007]

(c) Amended and Restated Bylaws of the Fund [Incorporated by reference to Exhibit 3(c) to Registrant’s Current Report on Form 8-K filed on June 30, 2014]

10. Material Contracts

(a) Safekeeping Agreement between the Fund and Amegy Bank, dated August 16, 2008. [Incorporated by reference to Exhibit 10(c) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008]

(b) Form of Indemnification Agreement between the Fund and its directors and certain officers. [Incorporated by reference to Exhibit 10(d) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011]

(c) Code of Ethics of the Fund (Rule 17j-1). [Incorporated by reference to Exhibit 10(f) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009]

(d) 2016 Equity Incentive Plan, adopted June 13, 2016. [Incorporated by reference to Exhibit 1 to Registrant’s Definitive Proxy Statement filed on May 5, 2016]

(e) 2025 Equity Incentive Plan, adopted March 19, 2026. [Incorporated by reference to Exhibit 1 to Registrant’s Definitive Information Statement filed on April 10, 2026]

31. Rule 13a-14(a)/15d-14(a) Certifications

1. Certification by Chief Executive Officer*

2. Certification by Chief Financial Officer*

32. Rule 1350 Certifications

1. Certification by Chief Executive Officer*

2. Certification by Chief Financial Officer*

97. Policy Relating to Recovery of Erroneously Awarded Compensation.

1. Equus Total Return, Inc. Compensation Recoupment Policy [Incorporated by reference to Exhibit 97.1 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2023]

* Filed herewith

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SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed by the undersigned, thereunto duly authorized.

Dated: May 20, 2026

EQUUS TOTAL RETURN, INC.

/s/ John A. Hardy

John A. Hardy

Chief Executive Officer

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FAQ

How did Equus Total Return (EQS) perform in Q1 2026?

Equus Total Return reported a $4.1 million net increase in net assets from operations in Q1 2026. NAV per share rose from $1.19 to $1.50, mainly due to a $5.0 million unrealized gain on its control investment Morgan E&P, despite a recurring net investment loss.

What is Equus Total Return’s NAV and share count as of March 31, 2026?

As of March 31, 2026, Equus Total Return reported net assets of $20.9 million and 13,966,696 common shares outstanding. This equates to a net asset value of $1.50 per share, compared with $1.19 per share at December 31, 2025, reflecting higher portfolio valuations.

Why is there a going concern warning for Equus Total Return (EQS)?

Management notes substantial doubt about Equus Total Return’s ability to continue as a going concern. The company had only $0.1 million of cash at March 31, 2026 and currently lacks committed financing to fund operations for at least twelve months, potentially requiring loans, new capital, or asset sales.

What is the status of Equus Total Return’s $2.0 million senior convertible note?

The $2.0 million senior convertible note issued February 7, 2025 matured on February 7, 2026 and remains unpaid. Equus is discussing potential conversion into common stock or an extension of the maturity date with the holder, but no agreement has been reached as of the filing date.

How concentrated is Equus Total Return’s investment portfolio in Q1 2026?

Equus Total Return’s portfolio is highly concentrated. As of March 31, 2026, its energy segment, represented by one portfolio company, accounted for 74.1% of net asset value, 58.1% of total assets, and 71.1% of investments at fair value, increasing single-asset and sector exposure.

What were Equus Total Return’s investment income and expenses in Q1 2026?

For the three months ended March 31, 2026, investment income totaled $0.3 million, while expenses were $1.2 million. This produced a net investment loss of $0.9 million, which was more than offset at the NAV level by realized gains and significant unrealized appreciation on portfolio securities.

What role does Morgan E&P play in Equus Total Return’s results?

Morgan E&P is Equus Total Return’s key control investment and primary energy exposure. In Q1 2026, a $5.0 million unrealized gain on Morgan’s equity significantly boosted NAV. However, Morgan itself faces a going concern warning and an overdue $3.0 million senior loan, adding credit and valuation risk.