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 September 30, 2020 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 | --- | --- | |-------------------------------------------------------------------------------------------------|--------------------- ...

PART I. FINANCIAL INFORMATION [Item 1. Unaudited Condensed Financial Statements](index=3&type=section&id=Item%201.%20Unaudited%20Condensed%20Financial%20Statements) Unaudited condensed financial statements for H1 2020 show net assets decreased to **$41.5 million** from **$46.0 million**, with a **$4.6 million** net decrease from operations [Condensed Balance Sheets](index=3&type=section&id=Condensed%20Balance%20Sheets) As of June 30, 2020, total assets were **$68.8 million** and net assets were **$41.5 million**, a decrease from **$46.0 million** at year-end 2019 Condensed Balance Sheet Highlights (in thousands) | Metric | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Total investments at fair value | $37,755 | $40,648 | | Total assets | $68,767 | $75,086 | | Total liabilities | $27,298 | $29,097 | | **Total net assets** | **$41,469** | **$45,989** | | Net asset value per share | $3.07 | $3.40 | [Condensed Statements of Operations](index=4&type=section&id=Condensed%20Statements%20of%20Operations) For H1 2020, the company reported a net investment loss of **$1.6 million** and a net decrease in net assets from operations of **$4.6 million**, driven by unrealized depreciation Six Months Ended June 30, (in thousands, except per share data) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Total investment income | $208 | $106 | | Total expenses | $1,797 | $1,893 | | **Net investment loss** | **($1,589)** | **($1,787)** | | Net realized (loss) gain | $8 | ($2,757) | | Net change in unrealized appreciation/depreciation | ($3,019) | $8,822 | | **Net (decrease) increase in net assets from operations** | **($4,600)** | **$4,278** | | **Net (decrease) increase per share** | **($0.34)** | **$0.32** | [Condensed Statements of Changes in Net Assets](index=5&type=section&id=Condensed%20Statements%20of%20Changes%20in%20Net%20Assets) Net assets decreased from **$46.0 million** to **$41.5 million** in H1 2020, primarily due to a **$4.6 million** net loss from operations and **$3.0 million** unrealized depreciation - The company's net assets decreased by **$4.52 million** in the first six months of 2020, from **$45.99 million** to **$41.47 million**[16](index=16&type=chunk) - The decrease was driven by a net investment loss of **$1.59 million** and a net unrealized depreciation of portfolio securities totaling **$3.0 million**[15](index=15&type=chunk)[16](index=16&type=chunk) [Condensed Statements of Cash Flows](index=6&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) For H1 2020, net cash provided by operating activities was **$0.3 million**, a turnaround from **$2.0 million** used in H1 2019, with cash decreasing by **$1.7 million** Cash Flow Summary for Six Months Ended June 30, (in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $284 | ($2,027) | | Net cash (used in) provided by financing activities | ($1,991) | $9 | | **Net decrease in cash and cash equivalents** | **($1,707)** | **($2,018)** | | Cash and cash equivalents at end of period | $2,549 | $5,677 | [Schedules of Investments](index=8&type=section&id=Schedules%20of%20Investments) As of June 30, 2020, total investments were **$64.8 million**, highly concentrated in shipping (66.3%) and energy (13.3%), reflecting a non-diversified status - The Fund is classified as a "non-diversified" investment company, with significant concentration in a few portfolio companies[36](index=36&type=chunk) Portfolio Composition by Industry as of June 30, 2020 (as % of Net Assets) | Industry | Fair Value (in thousands) | % of Net Assets | | :--- | :--- | :--- | | Shipping products and services | $27,500 | 66.3% | | Energy | $5,500 | 13.3% | | Financial services | $3,778 | 9.1% | | Business products and services | $977 | 2.4% | | **Total** | **$37,755** | **91.1%** | - As of June 30, 2020, **90.1%** of the Fund's assets at fair value were in qualifying investments under the 1940 Act[35](index=35&type=chunk) [Notes to Condensed Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) Notes detail business, accounting policies, and portfolio specifics, highlighting COVID-19 impacts, Level 3 valuations, and substantial doubt about Equus Energy's going concern status - The COVID-19 pandemic has constrained the Fund's ability to source new investments, facilitate dispositions, and consummate a substantial transaction due to travel restrictions and economic dislocation[56](index=56&type=chunk)[57](index=57&type=chunk) - The Fund periodically borrows funds via a margin account to purchase U.S. Treasury bills to maintain its RIC tax status. As of June 30, 2020, it had borrowed **$27.0 million** for this purpose[63](index=63&type=chunk)[69](index=69&type=chunk) - As of June 30, 2020, investments valued using significant unobservable inputs (Level 3) totaled **$34.0 million**, representing the majority of the portfolio securities' fair value[93](index=93&type=chunk)[97](index=97&type=chunk) - The Fund has a Plan of Reorganization to terminate its BDC election and restructure as a publicly-traded operating company, but cannot assure when or if this will be completed[122](index=122&type=chunk) - The fair value of the investment in Equus Energy, LLC decreased by **$2.5 million** in H1 2020 due to falling oil prices. Factors raise substantial doubt about Equus Energy's ability to continue as a going concern[119](index=119&type=chunk)[130](index=130&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the significant negative impact of COVID-19 and oil price collapse on the Fund's portfolio, leading to a **9.7%** NAV per share decrease and ongoing reorganization challenges - The Fund's net asset value decreased from **$3.40** per share at year-end 2019 to **$3.07** per share as of June 30, 2020, a decrease of **9.7%**[183](index=183&type=chunk) - The economic disruption from the coronavirus and the oil price collapse have created substantial doubt about portfolio company Equus Energy's ability to continue as a going concern[178](index=178&type=chunk) - The Fund's Plan of Reorganization to become an operating company is ongoing but faces constraints due to the pandemic's impact on travel and deal-making[169](index=169&type=chunk) Changes in Unrealized Appreciation/Depreciation (Six Months Ended June 30, 2020) | Portfolio Company | Change in Fair Value (in millions) | Reason | | :--- | :--- | :--- | | MVC | ($1.4) | Decrease in share price | | Equus Energy, LLC | ($2.5) | Decrease in oil prices and mineral acreage values | | PalletOne, Inc. | $1.0 | Improved operating performance | [Quantitative and Qualitative Disclosure about Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20about%20Market%20Risk) The Fund is exposed to financial market risks, primarily interest rate changes on debt and price changes on equity, with private company investments less directly impacted by short-term volatility - The company is subject to market risks including interest rate changes on debt securities and price changes for marketable equity securities[201](index=201&type=chunk) - A major portion of the investment portfolio consists of debt and equity in private companies, whose fair value is less directly impacted by short-term market volatility compared to public equities[203](index=203&type=chunk) [Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the Fund's disclosure controls and procedures were effective as of June 30, 2020, with no material changes to internal control over financial reporting - As of June 30, 2020, the CEO and CFO concluded that the Fund's disclosure controls and procedures were effective[205](index=205&type=chunk) - There were no changes in internal control over financial reporting during the quarter ended June 30, 2020, that materially affected, or are reasonably likely to materially affect, internal controls[205](index=205&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The Fund is occasionally involved in legal proceedings incidental to operations, which management does not expect to materially affect financial condition or results - The company does not expect any current legal proceedings to have a material effect on its financial condition or results of operations[207](index=207&type=chunk) [Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) Primary risks include the Fund's Plan of Reorganization and the significant, uncertain economic disruption caused by the COVID-19 pandemic on operations and financial results - The Fund faces risks associated with its Plan of Reorganization to convert into an operating company[208](index=208&type=chunk) - The economic dislocation caused by the coronavirus pandemic presents a significant and evolving risk, with an uncertain impact on the Fund's business, results of operations, and financial condition[209](index=209&type=chunk) [Exhibits](index=39&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the report, including governance documents, material contracts, and certifications by the CEO and CFO - The report includes required exhibits, such as governance documents, material contracts, and officer certifications, primarily incorporated by reference from previous filings[212](index=212&type=chunk)[213](index=213&type=chunk) [Signature](index=40&type=section&id=SIGNATURE) - The report was signed on August 13, 2020, by John A. Hardy, the Chief Executive Officer of Equus Total Return, Inc[217](index=217&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 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 | --- | --- | |---------------------------------------------------------------------------------------------------------------- ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the year ended December 31, 2019 Or ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from 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 incorpora ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Unaudited Condensed Financial Statements](index=3&type=section&id=Item%201.%20Unaudited%20Condensed%20Financial%20Statements) Unaudited financial statements and notes detail business, policies, and investment valuations, highlighting net asset growth from portfolio appreciation [Condensed Balance Sheets](index=3&type=section&id=Condensed%20Balance%20Sheets) | Metric (in thousands) | Sep 30, 2019 | Dec 31, 2018 | Change | | :-------------------- | :----------- | :----------- | :----- | | Total Assets | $76,200 | $70,941 | +$5,259 | | Total Liabilities | $27,176 | $27,446 | -$270 | | Total Net Assets | $49,024 | $43,495 | +$5,529 | | Investments in portfolio securities at fair value | $42,904 | $35,015 | +$7,889 | | Cash and cash equivalents | $4,783 | $7,425 | -$2,642 | [Condensed Statements of Operations](index=4&type=section&id=Condensed%20Statements%20of%20Operations) | Metric (in thousands) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total Investment Income | $90 | $85 | $196 | $315 | | Total Expenses | $916 | $807 | $2,809 | $2,964 | | Net Investment Loss | $(826) | $(722) | $(2,613) | $(2,649) | | Net Realized (Loss) Gain | $10 | $3 | $(2,747) | $4 | | Net Change in Unrealized Appreciation of Portfolio Securities | $2,000 | $2,999 | $10,290 | $6,313 | | Net Change in Unrealized Depreciation of Portfolio Securities - Related Party | $(173) | $78 | $359 | $(461) | | Net Increase in Net Assets from Operations | $1,011 | $2,358 | $5,289 | $3,207 | | Basic and Diluted EPS | $0.07 | $0.17 | $0.39 | $0.24 | [Condensed Statements of Changes in Net Assets](index=5&type=section&id=Condensed%20Statements%20of%20Changes%20in%20Net%20Assets) | Metric (in thousands) | Jan 1, 2019 | Sep 30, 2019 | Change | | :-------------------- | :---------- | :----------- | :----- | | Total Net Assets | $43,495 | $49,024 | +$5,529 | | Undistributed Net Investment Losses | $(29,327) | $(31,940) | -$2,613 | | Unrealized Appreciation of Portfolio Securities, net | $19,310 | $29,600 | +$10,290 | | Share-based incentive compensation (9 months) | N/A | $240 | N/A | | Net increase in net assets resulting from operations (9 months) | N/A | $5,289 | N/A | [Condensed Statements of Cash Flows](index=6&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) | Metric (in thousands) | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :-------------------- | :----------------------------- | :----------------------------- | | Net Cash Used in Operating Activities | $(2,652) | $(1,596) | | Net Cash Provided by (Used in) Financing Activities | $10 | $(1,003) | | Net Decrease in Cash and Cash Equivalents | $(2,642) | $(2,599) | | Cash and Cash Equivalents and Restricted Cash at End of Period | $5,053 | $8,376 | [Supplemental Information—Selected Per Share Data and Ratios Schedules of Investments](index=7&type=section&id=Supplemental%20Information%E2%80%94Selected%20Per%20Share%20Data%20and%20Ratios%20Schedules%20of%20Investments) [Selected Per Share Data and Ratios](index=7&type=section&id=Selected%20Per%20Share%20Data%20and%20Ratios) | Metric | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net Investment Loss per share | $(0.20) | $(0.20) | | Net Realized Loss per share | $(0.20) | — | | Net Change in Unrealized Appreciation per share | $0.76 | $0.47 | | Net Increase in Net Assets per share | $0.39 | $0.24 | | Net Assets at End of Period per share | $3.63 | $3.45 | | Ratio of Expenses to Average Net Assets | 6.07% | 6.62% | | Ratio of Net Investment Loss to Average Net Assets | (5.65%) | (5.92%) | - Market price per share decreased from **$1.96** at the beginning of the period to **$1.61** at the end of September 30, 2019, while net assets per share increased, leading to a wider discount[16](index=16&type=chunk) [Schedule of Investments](index=8&type=section&id=Schedule%20of%20Investments) | Investment Type | Sep 30, 2019 | Dec 31, 2018 | | :-------------- | :----------- | :----------- | | Control Investments | $10,500 | $9,210 | | Affiliate Investments | $26,500 | $20,500 | | Non-affiliate Investments - Related Party | $4,927 | $4,328 | | Non-affiliate Investments | $977 | $977 | | Total Investments in Portfolio Securities | $42,904 | $35,015 | | Temporary Cash Investments | $26,991 | $26,981 | | Total Investments | $69,895 | $61,996 | | Type of Securities | Cost | Fair Value | Fair Value as Percentage of Net Assets | | :----------------- | :--- | :--------- | :------------------------------------- | | Common stock | $7,169 | $31,427 | 64.1% | | Limited liability company investments | $7,050 | $10,500 | 21.4% | | Secured and subordinated debt | $977 | $977 | 2.0% | | Total | $15,196 | $42,904 | 87.5% | | Industry | Fair Value | Fair Value as Percentage of Net Assets | | :--------------------------- | :--------- | :------------------------------------- | | Shipping products and services | $26,500 | 54.1% | | Energy | $10,500 | 21.4% | | Financial services | $4,927 | 10.0% | | Business products and services | $977 | 2.0% | | Total | $42,904 | 87.5% | - The company is a **"non-diversified"** investment company, with **54.1%** of net asset value in **"Shipping products and services"** and **21.4%** in **"Energy"** as of September 30, 2019, making it highly susceptible to changes in these sectors[23](index=23&type=chunk)[28](index=28&type=chunk) - As of September 30, 2019, **88.5%** of assets at fair value were in qualifying investments under the 1940 Act, and the company provides significant managerial assistance to portfolio companies comprising **86.2%** of total investment value[23](index=23&type=chunk) [Notes to Condensed Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) [Note 1. Description of Business and Basis of Presentation](index=12&type=section&id=Note%201.%20Description%20of%20Business%20and%20Basis%20of%20Presentation) - Equus Total Return, Inc. is a **BDC** and **RIC**, trading on the **NYSE** under **'EQS'**, with an investment strategy focused on total return in companies with enterprise values between **$5.0 million** and **$75.0 million**[31](index=31&type=chunk) - The company uses wholly-owned taxable subsidiaries to hold certain income-producing investments and LLCs, helping satisfy the **RIC** tax requirement that at least **90%** of gross revenue must consist of investment income, preserving **RIC** status and tax advantages[31](index=31&type=chunk) [Note 2. Liquidity and Financing Arrangements](index=13&type=section&id=Note%202.%20Liquidity%20and%20Financing%20Arrangements) - As of September 30, 2019, cash and cash equivalents were **$4.8 million**, and restricted cash and temporary cash investments totaled **$27.3 million**, primarily from a quarter-end margin loan to maintain **RIC** diversification requirements[33](index=33&type=chunk) - The company borrowed **$27.0 million** via a margin account as of September 30, 2019, collateralized by **$27.3 million** in restricted cash and U.S. Treasury bills, to maintain its **RIC** status[35](index=35&type=chunk) - The company believes its operating cash flow and cash on hand are sufficient to meet operating requirements and finance routine follow-on investments for the next twelve months[33](index=33&type=chunk) [Note 3. Significant Accounting Policies](index=14&type=section&id=Note%203.%20Significant%20Accounting%20Policies) [Valuation of Investments](index=14&type=section&id=Valuation%20of%20Investments) - Investments without readily available market quotations are valued quarterly through a multi-step process involving internal professionals, independent valuation firms (for investments over **$2.5M** held >1 year), management, and approval by the Audit Committee and Board[38](index=38&type=chunk) - Valuation methodologies include yield analysis, enterprise value (EV) analysis, net asset value analysis, liquidation analysis, and discounted cash flow analysis, considering factors like security covenants, collateral, portfolio company performance, and market ratios[38](index=38&type=chunk)[40](index=40&type=chunk) [Fair Value Measurement](index=15&type=section&id=Fair%20Value%20Measurement) - Fair value measurements are categorized into **Level 1** (quoted prices in active markets), **Level 2** (observable inputs other than Level 1), and **Level 3** (unobservable inputs)[40](index=40&type=chunk) | Investment Type | Total | Level 1 | Level 2 | Level 3 | | :-------------- | :---- | :------ | :------ | :------ | | Control investments | $10,500 | $— | $— | $10,500 | | Affiliate investments | $26,500 | $— | $— | $26,500 | | Non-affiliate investments - related party | $4,927 | $4,927 | $— | $— | | Non-affiliate investments | $977 | $— | $— | $977 | | Total investments | $42,904 | $4,927 | $— | $37,977 | | Temporary cash investments | $26,991 | $26,991 | $— | $— | | Total investments and temporary cash investments | $69,895 | $31,918 | $— | $37,977 | - As of September 30, 2019, **$37.977 million** of total investments were classified as **Level 3**, indicating reliance on significant unobservable inputs and management judgment for valuation[42](index=42&type=chunk) | Metric | Control Investments | Affiliate Investments | Non-affiliate Investments | Total | | :-------------------------- | :------------------ | :-------------------- | :------------------------ | :------ | | Fair value as of Jan 1, 2019 | $9,210 | $20,500 | $977 | $30,687 | | Realized losses | — | $(2,789) | — | $(2,789) | | Change in unrealized appreciation | $4,290 | $6,000 | — | $10,290 | | Proceeds from sales/dispositions | $(211) | — | — | $(211) | | Fair value as of Sep 30, 2019 | $10,500 | $26,500 | $977 | $37,977 | [Other Significant Accounting Policies](index=18&type=section&id=Other%20Significant%20Accounting%20Policies) - Investment transactions are recorded on an accrual basis, with realized gains/losses computed using specific identification; investments are classified as **Control** (**>25%** voting, or **>50%** board), **Affiliate** (**5-25%** voting), or **Non-affiliate** (**<5%** voting) per the **1940 Act**[46](index=46&type=chunk) - Interest income is recognized on an accrual basis, and **Payment in Kind (PIK)** interest is added to the principal balance of loans and recorded as interest income, requiring distribution to stockholders to maintain **RIC** status[46](index=46&type=chunk)[48](index=48&type=chunk) - Share-based compensation is accounted for using the fair value method, with grant date fair value amortized as expense over the vesting period[48](index=48&type=chunk) - The company intends to qualify as a **Regulated Investment Company (RIC)** for federal income tax purposes, avoiding corporate income taxes on distributed income or gains[48](index=48&type=chunk) [Accounting Standards Recently Adopted and Not Yet Adopted](index=19&type=section&id=Accounting%20Standards%20Recently%20Adopted%20and%20Not%20Yet%20Adopted) - Adoption of **ASU 2016-02 (Leases)** on January 1, 2019, had no material impact due to the absence of operating leases[48](index=48&type=chunk) - The company adopted new **SEC** rules for disclosing changes in net assets in **Form 10-Q**, effective January 1, 2019, without material impact[50](index=50&type=chunk) - **ASU 2016-13 (Credit Losses)** and **ASU 2018-13 (Fair Value Measurement)** are not expected to materially impact financial statements upon future adoption[50](index=50&type=chunk) [Note 4. Related Party Transactions and Agreements](index=20&type=section&id=Note%204.%20Related%20Party%20Transactions%20and%20Agreements) - Independent Directors receive annual fees (**$40,000**), meeting fees (**$2,000** in-person, **$1,000** telephonic), and expense reimbursements; Committee chairs receive an additional **$50,000** annual fee[51](index=51&type=chunk) - The Fund paid Kenneth I. Denos, P.C., a director's professional corporation, **$0.07 million** for services during each of the three months ended September 30, 2019 and 2018, and **$0.3 million** for each of the nine months ended September 30, 2019 and 2018[51](index=51&type=chunk) [Note 5. Portfolio Securities](index=21&type=section&id=Note%205.%20Portfolio%20Securities) - Net change in unrealized appreciation was **$10.7 million** for the nine months ended September 30, 2019, increasing total net unrealized appreciation to **$27.7 million**[54](index=54&type=chunk) - Key drivers of unrealized appreciation for the nine months ended September 30, 2019, included: PalletOne, Inc.: **+$6.0 million** due to improved operating performance; Equus Energy, LLC: **+$1.5 million** due to increased mineral acreage prices and crude oil prices; MVC Capital, Inc.: **+$0.4 million** due to share price increase and dividend payments[54](index=54&type=chunk) - The dissolution of Equus Media Development Company, LLC resulted in a **$2.8 million** transfer of unrealized depreciation to realized loss during the nine months ended September 30, 2019[54](index=54&type=chunk) [Note 6. Plan of Reorganization](index=22&type=section&id=Note%206.%20Plan%20of%20Reorganization) - The company plans a reorganization to merge with MVC Capital or an operating company, or to terminate its **BDC** election and restructure as a publicly-traded operating company in energy, natural resources, technology, and/or financial services[56](index=56&type=chunk) - Shareholder authorization to withdraw the **BDC** election expired on July 31, 2019, but is expected to be renewed, with actual withdrawal contingent on a definitive "Consolidation" agreement and a subsequent affirmative shareholder vote[56](index=56&type=chunk) [Note 7. 2016 Equity Incentive Plan](index=22&type=section&id=Note%207.%202016%20Equity%20Incentive%20Plan) - The 2016 Equity Incentive Plan allows for awards of restricted stock and common stock purchase options, with a maximum of **2,434,728 shares**, to align interests and retain key personnel[57](index=57&type=chunk) - As of September 30, 2019, **280,000 shares** of restricted stock remained unvested[57](index=57&type=chunk) | Period | 2019 (in thousands) | 2018 (in thousands) | | :----- | :--- | :--- | | Three Months Ended Sep 30 | $0.08 | $0.08 | | Nine Months Ended Sep 30 | $0.2 | $0.4 | [Note 8. Equus Energy, LLC](index=23&type=section&id=Note%208.%20Equus%20Energy%2C%20LLC) - Equus Energy, LLC, a wholly-owned subsidiary, invests in oil & gas properties, holding working interests in **141 wells** across Texas and Oklahoma, including a **50%** interest in Conger Field wells and interests in the Eagle Ford Shale play[59](index=59&type=chunk) | Metric | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Operating Revenue | $120 | $278 | $481 | $855 | | Total Operating Expenses | $322 | $364 | $956 | $1,097 | | Operating Loss before Income Tax Expense | $(202) | $(86) | $(475) | $(242) | | Net Loss | $(202) | $(86) | $(475) | $(242) | - Equus Energy's operators intend to delay new drilling and recompletion projects until 2020, anticipating a gradual rise in crude oil prices[59](index=59&type=chunk) - Equus Energy follows the **Full Cost Method of Accounting** for oil and gas properties, capitalizing all acquisition, exploration, and development costs, and amortizing them over the estimated productive life of proved reserves using the unit-of-production method[67](index=67&type=chunk) [Note 9. Subsequent Events](index=26&type=section&id=Note%209.%20Subsequent%20Events) - On October 5, 2019, the company sold **$27.0 million** in U.S. Treasury Bills and repaid the associated margin loan[68](index=68&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Discusses Equus Total Return, Inc.'s BDC and RIC business, investment strategy, reorganization plan, market conditions, liquidity, and operations, highlighting net asset value increase [Business Overview and Strategy](index=27&type=section&id=Business%20Overview%20and%20Strategy) - Equus is a **BDC** and **RIC**, listed on the **NYSE (EQS)**, focused on maximizing total return through capital appreciation and current income from debt and equity investments in companies with enterprise values between **$5.0 million** and **$75.0 million**[69](index=69&type=chunk)[71](index=71&type=chunk) - The company utilizes wholly-owned taxable subsidiaries to hold certain income-producing investments, ensuring compliance with the **90%** investment income requirement for **RIC** tax status[71](index=71&type=chunk) [Plan of Reorganization](index=28&type=section&id=Plan%20of%20Reorganization) - The Plan of Reorganization involves a potential merger with MVC Capital, Inc. or an operating company, or restructuring Equus as a publicly-traded operating company focused on energy, natural resources, technology, and/or financial services[72](index=72&type=chunk) - Shareholder authorization to withdraw the **BDC** election expired on July 31, 2019, and a subsequent affirmative vote will be required to enter into any definitive agreement for "Consolidation" or change the business nature[74](index=74&type=chunk) [2016 Equity Incentive Plan](index=29&type=section&id=2016%20Equity%20Incentive%20Plan) - The 2016 Equity Incentive Plan aims to promote equity ownership and retention among key personnel, with **844,500 restricted shares** granted on March 17, 2017, subject to a **3-year** vesting period[75](index=75&type=chunk) | Period | 2019 (in thousands) | 2018 (in thousands) | | :----- | :--- | :--- | | Three Months Ended Sep 30 | $0.08 | $0.08 | | Nine Months Ended Sep 30 | $0.2 | $0.4 | [Current Market Conditions](index=29&type=section&id=Current%20Market%20Conditions) - U.S. GDP growth was **1.9%** in **Q3 2019**, following **2.0%** and **3.1%** in **Q1** and **Q2**, respectively, with a tight labor market but signs of weakening business investment[76](index=76&type=chunk) - Global M&A activity slowed in Q1 2019 but accelerated in Q2, with approximately **$2 trillion** in global transactions and **$2.4 trillion** in undeployed capital, leading to higher median valuation multiples (**11x EBITDA**) and constrained investment yields[76](index=76&type=chunk) - The company's net asset value increased by **12.7%** from **$3.22** to **$3.63 per share** during the nine months ended September 30, 2019, but its common stock traded at a **55.6% discount** to NAV, up from **39.1%** at December 31, 2018[78](index=78&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) - Cash is generated from maturities, security sales, and borrowings, and used for additional investments and stockholder dividends[79](index=79&type=chunk) - The company periodically borrows funds, often through margin accounts, to make qualifying investments and maintain its **RIC** tax status, noting that failure to qualify would result in corporate income tax[79](index=79&type=chunk) - Management believes current operating cash flow and cash on hand are sufficient to meet operating requirements and finance routine capital expenditures for the next twelve months[79](index=79&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) [Investment Income and Expense](index=30&type=section&id=Investment%20Income%20and%20Expense) | Metric (in millions) | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net Investment Loss | $(0.8) | $(0.7) | $(2.6) | $(2.6) | | Investment Income | $0.1 | $0.1 | $0.2 | $0.3 | | Total Expense | $0.9 | $0.8 | $2.8 | $3.0 | - The decrease in total expenses for the nine months ended September 30, 2019, was mainly due to a decline in professional fees[80](index=80&type=chunk) [Realized Gains and Losses on Sales of Portfolio Securities](index=31&type=section&id=Realized%20Gains%20and%20Losses%20on%20Sales%20of%20Portfolio%20Securities) - A realized loss of **$2.8 million** was incurred from the dissolution and liquidation of Equus Media Development Company LLC (EMDC) during the nine months ended September 30, 2019[81](index=81&type=chunk) [Changes in Unrealized Appreciation/Depreciation of Portfolio Securities](index=31&type=section&id=Changes%20in%20Unrealized%20Appreciation%2FDepreciation%20of%20Portfolio%20Securities) - Net change in unrealized appreciation was **$10.7 million** for the nine months ended September 30, 2019, increasing total net unrealized appreciation to **$27.7 million**[83](index=83&type=chunk) - Key contributors to unrealized appreciation included PalletOne, Inc. (**+$6.0 million**), Equus Energy, LLC (**+$1.5 million**), and MVC Capital, Inc. (**+$0.4 million**)[83](index=83&type=chunk) - The dissolution of EMDC resulted in a **$2.8 million** transfer of unrealized depreciation to realized loss[83](index=83&type=chunk) [Dividends](index=31&type=section&id=Dividends) - As a **BDC**, the company is required to distribute net investment income and/or realized capital gains annually under the **1940 Act**[83](index=83&type=chunk) [Portfolio Securities](index=31&type=section&id=Portfolio%20Securities) - Received **$0.2 million** in dividends as additional MVC shares during the nine months ended September 30, 2019[83](index=83&type=chunk) - Dissolved Equus Media Development Company, LLC (EMDC) and transferred its assets, including **$211,000** in cash, to the Fund[83](index=83&type=chunk) [Subsequent Events](index=32&type=section&id=Subsequent%20Events) - On October 5, 2019, the company sold **$27.0 million** in U.S. Treasury Bills and repaid the associated margin loan[85](index=85&type=chunk) [Item 3. Quantitative and Qualitative Disclosure about Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20about%20Market%20Risk) Details exposure to financial market risks from interest rate changes and equity prices, noting no derivative use and the impact of significant market shifts on private company valuations - The company is exposed to market risks from changes in interest rates (debt securities, outstanding debt) and marketable equity security prices[86](index=86&type=chunk) - It does not use derivative financial instruments to mitigate market risks[86](index=86&type=chunk) - While modest public market equity price changes do not significantly impact private company valuations, significant shifts can affect carrying values and realized gains/losses[86](index=86&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including CEO and CFO, evaluated disclosure controls and procedures as effective, with no material changes to internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated by management, CEO, and CFO, and deemed effective at a reasonable assurance level as of September 30, 2019[87](index=87&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter ended September 30, 2019[87](index=87&type=chunk) [PART II. OTHER INFORMATION](index=33&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) A shareholder lawsuit regarding the 2016 Equity Incentive Plan was dismissed, and other incidental legal proceedings are not expected to materially affect financial condition or operations - A shareholder lawsuit challenging the 2016 Equity Incentive Plan was dismissed by the Chancery Court and affirmed by the Delaware Supreme Court on May 16, 2019[89](index=89&type=chunk) - The company does not expect other legal proceedings incidental to its normal business to materially affect its financial condition or results of operations[89](index=89&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) Refers to the Annual Report on Form 10-K for risk factors; new risks from planned operating company conversion and related transactions will be disclosed in future filings - Readers should refer to the **Annual Report on Form 10-K** for a comprehensive discussion of risk factors[90](index=90&type=chunk) - New risks may arise from the planned conversion to an operating company and related transactions, which will be identified and disclosed in subsequent filings[90](index=90&type=chunk) [Item 6. Exhibits](index=34&type=section&id=Item%206.%20Exhibits) Lists various exhibits filed by the company, including corporate governance documents, material contracts, and certifications - The exhibits include corporate governance documents (Restated Certificate of Incorporation, Bylaws), material contracts (Safekeeping Agreement, Share Exchange Agreement with MVC Capital, Inc.), and the 2016 Equity Incentive Plan[92](index=92&type=chunk) [SIGNATURE](index=35&type=section&id=SIGNATURE) The report is signed by John A. Hardy, CEO, on November 13, 2019, certifying compliance with Section 13 or 15(d) of the Securities Exchange Act of 1934 - The report was signed by **John A. Hardy, Chief Executive Officer**, on **November 13, 2019**[96](index=96&type=chunk)

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Unaudited Condensed Financial Statements](index=3&type=section&id=Item%201.%20Unaudited%20Condensed%20Financial%20Statements) This section presents the company's unaudited condensed financial statements, investment schedules, and related notes for the reporting period [Condensed Balance Sheets](index=3&type=section&id=Condensed%20Balance%20Sheets) | Metric (in thousands) | June 30, 2019 | December 31, 2018 | | :-------------------- | :------------ | :---------------- | | Total Assets | $74,970 | $70,941 | | Total Liabilities | $27,037 | $27,446 | | Total Net Assets | $47,933 | $43,495 | | Net Asset Value per Share | $3.55 | $3.22 | - Total investments in portfolio securities at fair value increased from **$35,015 thousand** at December 31, 2018, to **$40,995 thousand** at June 30, 2019[10](index=10&type=chunk) [Condensed Statements of Operations](index=4&type=section&id=Condensed%20Statements%20of%20Operations) | Metric (in thousands) | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Investment Income | $91 | $117 | $106 | $230 | | Total Expenses | $887 | $1,053 | $1,893 | $2,157 | | Net Investment Loss | $(797) | $(936) | $(1,787) | $(1,927) | | Net Realized (Loss) Gain | $(2,767) | $(1) | $(2,757) | $1 | | Net Change in Unrealized Appreciation of Portfolio Securities | $4,789 | $1,950 | $8,290 | $3,314 | | Net Increase in Net Assets from Operations | $1,301 | $793 | $4,278 | $849 | | Basic and Diluted EPS | $0.10 | $0.06 | $0.32 | $0.06 | - Net increase in net assets resulting from operations significantly increased to **$4,278 thousand** for the six months ended June 30, 2019, compared to $849 thousand for the same period in 2018, primarily driven by a substantial increase in net unrealized appreciation of portfolio securities[15](index=15&type=chunk) [Condensed Statements of Changes in Net Assets](index=5&type=section&id=Condensed%20Statements%20of%20Changes%20in%20Net%20Assets) | Metric (in thousands) | Balances at January 1, 2019 | Balances at June 30, 2019 | | :-------------------- | :-------------------------- | :------------------------ | | Total Net Assets | $43,495 | $47,933 | | Capital in Excess of Par Value | $55,741 | $55,901 | | Undistributed Net Investment Losses | $(29,327) | $(31,114) | | Unrealized Appreciation of Portfolio Securities, net | $19,310 | $27,600 | - Net assets increased by **$4,438 thousand** from January 1, 2019, to June 30, 2019, primarily due to net increase in net assets resulting from operations and share-based incentive compensation[19](index=19&type=chunk) [Condensed Statements of Cash Flows](index=6&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) | Metric (in thousands) | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :-------------------- | :----------------------------- | :----------------------------- | | Net Cash (Used in) Provided by Operating Activities | $(2,027) | $4,495 | | Net Cash Provided by (Used in) Financing Activities | $9 | $(6,001) | | Net Decrease in Cash and Cash Equivalents | $(2,019) | $(1,506) | | Cash and Cash Equivalents and Restricted Cash at End of Period | $5,677 | $9,469 | - The company experienced a net cash outflow from operating activities of **$2,027 thousand** for the six months ended June 30, 2019, a significant change from the $4,495 thousand inflow in the prior year period[24](index=24&type=chunk) [Supplemental Information—Selected Per Share Data and Ratios](index=7&type=section&id=Supplemental%20Information%E2%80%94Selected%20Per%20Share%20Data%20and%20Ratios) | Metric | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :---------------------------------------------------------- | :----------------------------- | :----------------------------- | | Net Asset Value at End of Period, Basic and Diluted | $3.55 | $3.26 | | Market Price per Share: End of Period | $1.64 | $2.36 | | Ratio of Expenses to Average Net Assets | 4.14% | 4.95% | | Ratio of Net Investment Loss to Average Net Assets | (3.91%) | (4.42%) | | Ratio of Net Increase in Net Assets Resulting from Operations to Average Net Assets | 9.36% | 1.95% | - The net asset value per share increased from $3.22 at the beginning of the period to **$3.55** at the end of the period for the six months ended June 30, 2019[25](index=25&type=chunk) - However, the market price per share decreased from $1.96 to $1.64 during the same period, resulting in a **53.8% discount to NAV** as of June 30, 2019[25](index=25&type=chunk)[161](index=161&type=chunk) [Schedules of Investments](index=8&type=section&id=Schedules%20of%20Investments) Investment Type | Investment Type (in thousands) | June 30, 2019 Fair Value | December 31, 2018 Fair Value | | :----------------------------- | :----------------------- | :--------------------------- | | Control Investments | $10,500 | $9,210 | | Affiliate Investments | $24,500 | $20,500 | | Non-Affiliate Investments - Related Party | $5,018 | $4,328 | | Non-Affiliate Investments | $977 | $977 | | Temporary Cash Investments | $26,990 | $26,981 | | Total Investments | $67,985 | $61,996 | Industry Concentration | Industry (in thousands) | June 30, 2019 Fair Value | % of Net Assets (June 30, 2019) | | :--------------------------- | :----------------------- | :------------------------------ | | Shipping products and services | $24,500 | 51.1% | | Energy | $10,500 | 21.9% | | Financial services | $5,018 | 10.5% | | Business products and services | $977 | 2.0% | | Total | $40,995 | 85.5% | - As of June 30, 2019, **87.8% of assets** at fair value were in qualifying investments under the 1940 Act, and the company provides significant managerial assistance to portfolio companies comprising **85.4% of total investment value**[32](index=32&type=chunk) - The company is classified as a 'non-diversified' investment company, with 'Shipping products and services' representing **51.1% of net asset value** and 'Energy' representing **21.9% of net asset value** as of June 30, 2019, indicating high concentration risk[33](index=33&type=chunk)[34](index=34&type=chunk) [Notes to Condensed Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) [(1) Description of Business and Basis of Presentation](index=12&type=section&id=(1)%20Description%20of%20Business%20and%20Basis%20of%20Presentation) The company operates as a BDC and RIC, investing in companies with enterprise values of $5.0 to $75.0 million for total return - Equus Total Return, Inc. is a Delaware corporation, trading on the NYSE under 'EQS', with an investment strategy focused on total return (capital appreciation and current income)[47](index=47&type=chunk) - The Fund invests in debt and equity securities of companies with a total enterprise value of **$5.0 million to $75.0 million**, primarily targeting growth through acquisition or organically, leveraged buyouts, management buyouts, and recapitalizations[48](index=48&type=chunk) - The company qualifies as a Regulated Investment Company (RIC) for federal income tax purposes and uses wholly-owned Taxable Subsidiaries to hold certain income-producing investments, ensuring compliance with the **90% investment income test** for RIC status[49](index=49&type=chunk) [(2) Liquidity and Financing Arrangements](index=13&type=section&id=(2)%20Liquidity%20and%20Financing%20Arrangements) The company manages liquidity through cash flow and periodic borrowings via a collateralized margin account to maintain its RIC status | Metric (in thousands) | June 30, 2019 | December 31, 2018 | | :-------------------- | :------------ | :---------------- | | Cash and Cash Equivalents | $5,407 | $7,425 | | Restricted Cash and Temporary Cash Investments | $27,200 | $27,300 | | Borrowing under Margin Account | $27,000 | $27,000 | - The company periodically borrows funds via a margin account, collateralized by U.S. Treasury bills, to maintain its RIC status and avoid corporate income taxes[60](index=60&type=chunk)[61](index=61&type=chunk) - Market and economic volatility have constrained debt financing for small and medium-sized companies, leading Equus to shift strategies from originating new investments to preserving liquidity through monetizations, dividend suspension, and management internalization[64](index=64&type=chunk) [(3) Significant Accounting Policies](index=14&type=section&id=(3)%20Significant%20Accounting%20Policies) This section details key accounting policies, including the Board-approved process for valuing investments using a fair value hierarchy - Investments without readily available market quotations are valued quarterly through a multi-step process involving investment professionals, independent valuation firms (for investments over $2.5 million held for more than one year), Management, the Audit Committee, and final Board approval[66](index=66&type=chunk) Fair Value Measurement | Fair Value Measurement (in thousands) | Total | Level 1 (Quoted Prices) | Level 2 (Observable Inputs) | Level 3 (Unobservable Inputs) | | :------------------------------------ | :---- | :---------------------- | :-------------------------- | :---------------------------- | | **As of June 30, 2019:** | | | | | | Control investments | $10,500 | $— | $— | $10,500 | | Affiliate investments | $24,500 | $— | $— | $24,500 | | Non-affiliate investments - related party | $5,018 | $5,018 | $— | $— | | Non-affiliate investments | $977 | $— | $— | $977 | | Total investments | $40,995 | $5,018 | $— | $35,977 | | Temporary cash investments | $26,990 | $26,990 | $— | $— | | **As of December 31, 2018:** | | | | | | Control investments | $9,210 | $— | $— | $9,210 | | Affiliate investments | $20,500 | $— | $— | $20,500 | | Non-affiliate investments - related party | $4,328 | $4,328 | $— | $— | | Non-affiliate investments | $977 | $— | $— | $977 | | Total investments | $35,015 | $4,328 | $— | $30,687 | | Temporary cash investments | $26,981 | $26,981 | $— | $— | Level 3 Fair Value Changes | Level 3 Fair Value Changes (in thousands) | Control Investments | Affiliate Investments | Non-affiliate Investments | Total | | :---------------------------------------- | :------------------ | :-------------------- | :------------------------ | :---- | | **Six Months Ended June 30, 2019:** | | | | | | Fair value as of December 31, 2018 | $9,210 | $20,500 | $977 | $30,687 | | Realized losses | $(2,790) | $— | $— | $(2,790) | | Change in unrealized appreciation | $4,291 | $4,000 | $— | $8,291 | | Proceeds from sales/dispositions | $(211) | $— | $— | $(211) | | Fair value as of June 30, 2019 | $10,500 | $24,500 | $977 | $35,977 | | **Three Months Ended June 30, 2018:** | | | | | | Fair value as of December 31, 2017 | $8,212 | $16,686 | $977 | $25,875 | | Change in unrealized appreciation | $1,000 | $2,314 | $— | $3,314 | | Fair value as of June 30, 2018 | $9,212 | $19,000 | $977 | $29,189 | - The company records Payment in Kind (PIK) interest as interest income and adds it to the principal balance of the loan, which must be distributed to stockholders as dividends to maintain RIC status, even if cash has not yet been collected[99](index=99&type=chunk) [(4) Related Party Transactions and Agreements](index=20&type=section&id=(4)%20Related%20Party%20Transactions%20and%20Agreements) This section discloses compensation for Independent Directors and payments to a director-owned professional corporation for services - Independent Directors receive an annual fee of **$40,000**, plus $2,000 for in-person meetings and $1,000 for telephonic meetings[110](index=110&type=chunk) - Committee chairs receive an additional **$50,000 annual fee**[110](index=110&type=chunk) - Kenneth I. Denos, P.C., a professional corporation owned by a director, received **$0.2 million** for services provided to the Fund during each of the six months ended June 30, 2019 and 2018[111](index=111&type=chunk) [(5) Portfolio Securities](index=21&type=section&id=(5)%20Portfolio%20Securities) This note details significant portfolio activities, including dividends, a subsidiary dissolution, and drivers of unrealized appreciation - During the six months ended June 30, 2019, the company received **$0.2 million in dividends** (additional shares) from MVC Capital and dissolved Equus Media Development Company, LLC (EMDC), transferring its assets to the Fund[113](index=113&type=chunk)[176](index=176&type=chunk)[177](index=177&type=chunk) Drivers of Unrealized Appreciation Change | Driver of Unrealized Appreciation Change | Six Months Ended June 30, 2019 (in millions) | Six Months Ended June 30, 2018 (in millions) | | :--------------------------------------- | :------------------------------------------- | :------------------------------------------- | | MVC Capital, Inc. | +$0.7 | -$0.4 | | PalletOne, Inc. | +$4.0 | +$2.3 | | Equus Energy, LLC | +$1.5 | +$1.0 | | EMDC (transfer to realized loss) | -$2.8 | N/A | | Total Net Change in Unrealized Appreciation | +$8.8 | +$2.9 | [(6) Plan of Reorganization](index=22&type=section&id=(6)%20Plan%20of%20Reorganization) The company is pursuing a Plan of Reorganization aiming for a merger, consolidation, or restructuring into an operating company - In May 2014, Equus entered a Share Exchange with MVC Capital, Inc., selling **2,112,000 shares** of its common stock for 395,839 shares of MVC, as a first step in a Plan of Reorganization[117](index=117&type=chunk)[152](index=152&type=chunk) - The company intends to finalize the Plan of Reorganization through a merger or consolidation with MVC or an operating company, or by restructuring as a publicly-traded operating company focused on specific sectors (energy, natural resources, technology, financial services)[118](index=118&type=chunk)[153](index=153&type=chunk) - Shareholders approved the cessation as a BDC in January 2019, authorizing the Board to withdraw its BDC election, but this withdrawal is contingent on entering a definitive 'Consolidation' agreement[119](index=119&type=chunk)[155](index=155&type=chunk) [(7) 2016 Equity Incentive Plan](index=22&type=section&id=(7)%202016%20Equity%20Incentive%20Plan) The 2016 Equity Incentive Plan aligns stakeholder interests through restricted stock and option grants - The 2016 Equity Incentive Plan, approved by shareholders and the SEC, allows for awards of restricted stock and common stock purchase options, with a maximum of **2,434,728 shares**[120](index=120&type=chunk)[156](index=156&type=chunk) - On March 17, 2017, **844,500 shares of restricted stock** were granted to directors and executive officers, subject to a 3-year vesting period[120](index=120&type=chunk)[156](index=156&type=chunk) Compensation Expense | Metric (in millions) | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :------------------- | :----------------------------- | :----------------------------- | | Compensation Expense | $0.2 | $0.3 | [(8) Equus Energy, LLC](index=23&type=section&id=(8)%20Equus%20Energy,%20LLC) This note details the operations, financials, and accounting policies of Equus Energy, LLC, a wholly-owned oil and gas subsidiary - Equus Energy, LLC, a wholly-owned subsidiary, holds working interests in **141 producing and non-producing oil and gas wells** across approximately 21,520 acres in Texas and Oklahoma[122](index=122&type=chunk) Financial Summary | Metric (in thousands) | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating Revenue | $217 | $282 | $361 | $577 | | Total Operating Expenses | $302 | $394 | $634 | $733 | | Net Loss | $(85) | $(112) | $(273) | $(156) | - Equus Energy follows the **Full Cost Method of Accounting** for oil and gas properties, capitalizing all acquisition, exploration, and development costs, and amortizing them using the unit-of-production method over proved reserves[136](index=136&type=chunk)[137](index=137&type=chunk) - Capitalized oil and gas property costs are subject to a ceiling limitation based on the present value of estimated future net revenue from proved reserves, with an impairment charge recorded if costs exceed this limit[138](index=138&type=chunk)[139](index=139&type=chunk) [(9) Subsequent Events](index=26&type=section&id=(9)%20Subsequent%20Events) This section notes the post-period sale of U.S. Treasury Bills and repayment of a margin loan - On July 5, 2019, the company sold **$27.0 million of U.S. Treasury Bills** and used the proceeds to repay the associated margin loan[179](index=179&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, operational results, investment strategy, and Plan of Reorganization - The Fund's investment strategy aims for total return by investing in debt and equity securities of companies with enterprise values between **$5.0 million and $75.0 million**, while maintaining BDC and RIC status[150](index=150&type=chunk)[151](index=151&type=chunk) - The company's net asset value (NAV) increased by **10.2%** from $3.22 per share to $3.55 per share during the six months ended June 30, 2019, though its common stock traded at a **53.8% discount to NAV**[161](index=161&type=chunk) - Key liquidity initiatives include changes in Board/Management, termination of certain follow-on investments, internalization of management, suspension of managed distribution policy, and modification of investment strategy to pursue shorter-term liquidation opportunities[162](index=162&type=chunk) Financial Performance Summary | Metric (in millions) | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Investment Loss | $(0.8) | $(0.9) | $(1.8) | $(1.9) | | Investment Income | $0.1 | $0.1 | $0.1 | $0.2 | | Total Expense | $0.9 | $1.1 | $1.9 | $2.2 | - The company realized a loss of **$2.8 million** from the dissolution and liquidation of Equus Media Development Company LLC (EMDC) during the six months ended June 30, 2019[171](index=171&type=chunk) - Net change in unrealized appreciation of portfolio securities was **$8.8 million** for the six months ended June 30, 2019, primarily driven by increases in the fair value of PalletOne, Inc. (+$4.0 million) and Equus Energy, LLC (+$1.5 million)[173](index=173&type=chunk) [Item 3. Quantitative and Qualitative Disclosure about Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20about%20Market%20Risk) The company is exposed to interest rate and equity price risks but does not use derivative financial instruments for hedging - The company is subject to financial market risks from changes in interest rates (for debt securities and outstanding debt) and changes in marketable equity security prices[180](index=180&type=chunk) - A major portion of the investment portfolio consists of debt and equity investments in private companies, whose fair values are not significantly impacted by modest changes in public market equity prices, but can be affected by significant changes[182](index=182&type=chunk) - The company **does not use derivative financial instruments** to mitigate market risks[180](index=180&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the Fund's disclosure controls and procedures were effective as of the reporting date - The Fund's disclosure controls and procedures were evaluated as **effective** at a reasonable assurance level as of June 30, 2019[184](index=184&type=chunk) - There were **no material changes** in internal control over financial reporting during the quarter ended June 30, 2019[184](index=184&type=chunk) [PART II. OTHER INFORMATION](index=33&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) This section details the favorable resolution of a shareholder lawsuit regarding the 2016 Equity Incentive Plan - A shareholder lawsuit concerning the 2016 Equity Incentive Plan, alleging breach of fiduciary duties, was filed against the Fund and its Board[186](index=186&type=chunk) - The Chancery Court granted summary judgment in favor of the Fund on November 13, 2018, which was **affirmed by the Delaware Supreme Court** on May 16, 2019, terminating the proceedings[186](index=186&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) This section highlights new risks related to the company's planned conversion into an operating company - Readers should refer to the Annual Report on Form 10-K for the year ended December 31, 2018, for a comprehensive discussion of risk factors[189](index=189&type=chunk) - **New risks may arise** in connection with the company's efforts to convert into an operating company and potential consolidation transactions[188](index=188&type=chunk) [Item 6. Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents and material contracts - Key exhibits include the Restated Certificate of Incorporation, Amended and Restated Bylaws, Share Exchange Agreement with MVC Capital, Inc., and the 2016 Equity Incentive Plan[192](index=192&type=chunk)[193](index=193&type=chunk) - The report includes certifications by the Chief Executive Officer and Chief Financial Officer as required by Rule 13a-14(a)/15d-14(a) and Section 1350[193](index=193&type=chunk) [SIGNATURE](index=36&type=section&id=SIGNATURE) This section contains the formal signature block confirming the report's filing

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%2E%20FINANCIAL%20INFORMATION) [Item 1. Unaudited Condensed Financial Statements](index=3&type=section&id=Item%201%2E%20Unaudited%20Condensed%20Financial%20Statements) Equus Total Return, Inc. reported increased assets and net assets for Q1 2019, driven by unrealized appreciation [Condensed Balance Sheets](index=3&type=section&id=Condensed%20Balance%20Sheets) Condensed Balance Sheets (in thousands) | Financial Metric (in thousands) | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Total Investments at Fair Value | $39,050 | $35,015 | | Total Assets | $73,734 | $70,941 | | Total Liabilities | $27,182 | $27,446 | | Total Net Assets | $46,552 | $43,495 | | Net Asset Value Per Share | $3.44 | $3.22 | - The company's net assets increased by approximately **$3.1 million** during the first quarter of 2019, primarily due to an increase in the fair value of its investment portfolio[10](index=10&type=chunk) [Condensed Statements of Operations](index=4&type=section&id=Condensed%20Statements%20of%20Operations) Condensed Statements of Operations (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :--- | :--- | :--- | | Total Investment Income | $16 | $113 | | Total Expenses | $1,006 | $1,104 | | Net Investment Loss | $(990) | $(991) | | Net Change in Unrealized Appreciation | $3,957 | $1,045 | | Net Increase in Net Assets from Operations | $2,977 | $56 | | Earnings Per Share (Basic and Diluted) | $0.22 | $0.00 | - The net increase in net assets was primarily driven by a significant net change in unrealized appreciation of portfolio securities, amounting to **$4.0 million** in Q1 2019, compared to **$1.1 million** in Q1 2018[13](index=13&type=chunk) [Condensed Statements of Changes in Net Assets](index=5&type=section&id=Condensed%20Statements%20of%20Changes%20in%20Net%20Assets) Condensed Statements of Changes in Net Assets (in thousands) | Description (in thousands) | Amount | | :--- | :--- | | Net Assets at December 31, 2018 | $43,495 | | Share-based incentive compensation | $80 | | Net increase in net assets from operations | $2,977 | | Net Assets at March 31, 2019 | $46,552 | [Condensed Statements of Cash Flows](index=6&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) Condensed Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(1,103) | $(1,608) | | Net Cash (Used in) Provided by Financing Activities | $(4) | $994 | | Net Decrease in Cash and Cash Equivalents | $(1,107) | $(614) | | Cash, Cash Equivalents, and Restricted Cash at End of Period | $6,588 | $10,361 | [Schedules of Investments](index=8&type=section&id=Schedules%20of%20Investments) - The company is classified as a "non-diversified" investment company, with significant concentration in its portfolio. As of March 31, 2019, the investment in PalletOne, Inc. ("Shipping products and services") represented **48.3%** of net asset value, and the investment in Equus Energy, LLC ("Energy") represented **22.6%** of net asset value[38](index=38&type=chunk) Investments by Type (in thousands) | Investment Type (in thousands) | Fair Value (Mar 31, 2019) | % of Net Assets | | :--- | :--- | :--- | | Common stock | $27,362 | 58.8% | | Limited liability company investments | $10,711 | 23.0% | | Secured and subordinated debt | $977 | 2.1% | | **Total** | **$39,050** | **83.9%** | Investments by Industry (in thousands) | Industry (in thousands) | Fair Value (Mar 31, 2019) | % of Net Assets | | :--- | :--- | :--- | | Shipping products and services | $22,500 | 48.3% | | Energy | $10,500 | 22.6% | | Financial services | $4,862 | 10.4% | | Business products and services | $977 | 2.1% | | Media | $211 | 0.5% | | **Total** | **$39,050** | **83.9%** | [Notes to Condensed Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) - The company operates as a Business Development Company (BDC) and qualifies as a Regulated Investment Company (RIC) for tax purposes, allowing it to avoid corporate income taxes on distributed income[54](index=54&type=chunk) - The company periodically borrows funds via a margin account to make qualifying investments needed to maintain its RIC status. As of March 31, 2019, it had borrowed **$27.0 million** for this purpose, collateralized by U.S. Treasury bills[64](index=64&type=chunk)[65](index=65&type=chunk) - A significant portion of the company's investments (**$34.2 million**) are classified as Level 3 assets, meaning their fair values are determined using unobservable inputs and significant management judgment, leading to inherent valuation uncertainty[88](index=88&type=chunk)[92](index=92&type=chunk) - The company is pursuing a Plan of Reorganization to transition from a BDC to a publicly-traded operating company. Shareholders have authorized the withdrawal of its BDC election, contingent on entering a definitive agreement for a merger or consolidation[117](index=117&type=chunk)[118](index=118&type=chunk)[120](index=120&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202%2E%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the Plan of Reorganization, with net asset value increasing due to unrealized gains - The company's primary strategic focus is the 'Plan of Reorganization' to transition from a BDC into a publicly-traded operating company, potentially through a merger or consolidation[154](index=154&type=chunk)[155](index=155&type=chunk) - On January 21, 2019, shareholders approved the company's cessation as a BDC, authorizing the Board to withdraw its BDC election, though this action is contingent upon securing a definitive consolidation agreement[158](index=158&type=chunk) Net Investment Loss and Expenses (in millions) | Metric | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net Investment Loss | $1.0 million | $1.0 million | | Investment Income | $0.01 million | $0.1 million | | Total Expense | $1.0 million | $1.1 million | - The net change in unrealized appreciation of **$4.0 million** in Q1 2019 was primarily due to fair value increases in MVC (**$0.6M**), PalletOne, Inc. (**$2.0M**), and Equus Energy, LLC (**$1.5M**)[175](index=175&type=chunk) [Item 3. Quantitative and Qualitative Disclosure about Market Risk](index=33&type=section&id=Item%203%2E%20Quantitative%20and%20Qualitative%20Disclosure%20about%20Market%20Risk) The company faces market risks from interest rate changes and equity price fluctuations in its private investments - The company's main market risks are changes in interest rates for debt securities and changes in equity security prices[182](index=182&type=chunk) - A major portion of the investment portfolio consists of debt and equity in private companies. While modest public market changes do not significantly impact their value, significant market shifts can affect valuations and the timing of realized gains or losses[184](index=184&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204%2E%20Controls%20and%20Procedures) Management concluded disclosure controls were effective, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the Fund's disclosure controls and procedures were **effective** at a reasonable assurance level as of March 31, 2019[186](index=186&type=chunk) - **No changes** in internal control over financial reporting occurred during the quarter ended March 31, 2019, that materially affected, or are reasonably likely to materially affect, internal controls[186](index=186&type=chunk) [PART II. OTHER INFORMATION](index=34&type=section&id=PART%20II%2E%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=34&type=section&id=Item%201%2E%20Legal%20Proceedings) The company is defending a shareholder lawsuit regarding its 2016 Equity Incentive Plan, with an appeal pending - A shareholder lawsuit was filed by Samuel Zalmanoff regarding the Fund's 2016 Equity Incentive Plan, alleging a breach of fiduciary duties of disclosure[188](index=188&type=chunk) - The Fund was granted summary judgment on November 13, 2018, but the plaintiff appealed to the Delaware Supreme Court. The company intends to vigorously defend its position[188](index=188&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A%2E%20Risk%20Factors) No material changes to existing risk factors, but the Plan of Reorganization may introduce new risks - The company states there have been **no changes** to the risk factors since its 2018 Form 10-K filing[191](index=191&type=chunk) - The company acknowledges that its efforts to convert into an operating company under the Plan of Reorganization may subject it to a number of new risks, which will be identified in subsequent filings[190](index=190&type=chunk) [Item 6. Exhibits](index=35&type=section&id=Item%206%2E%20Exhibits) This section lists key exhibits filed with the Form 10-Q, including corporate documents and CEO/CFO certifications - The report lists various exhibits, including corporate governance documents, material contracts, and required CEO/CFO certifications under Rule 13a-14(a) and Section 1350[194](index=194&type=chunk)[195](index=195&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the year ended December 31, 2018 Or ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 814-00098 | --- | --- | |------------------------------------------------------------------------------------------------------------------------------ ...