Equus Total Return(EQS) - 2021 Q1 - Quarterly Report

Company Strategy and Transformation - Equus Total Return, Inc. aims to provide the highest total return through capital appreciation and current income [160]. - The company has approved an increase in authorized shares from 50 million to 100 million to facilitate its transformation into an operating company [167]. - Equus is evaluating opportunities to transform into an operating company, although no definitive agreements have been made yet [165]. - The company’s investment strategy focuses on companies with a total enterprise value between $5 million and $75 million, primarily in growth sectors [163]. - The management emphasizes the importance of achieving certain margins and levels of profitability for future investments [161]. Financial Performance - Equus Energy's net asset value increased from $2.50 to $2.52 per share, a rise of 0.79% [181]. - Equus Energy recorded a net change in unrealized appreciation of $1.5 million in Q1 2021, primarily due to increased crude oil prices [192]. - Investment income for Equus Energy declined to $0.0 million in Q1 2021 from $0.1 million in Q1 2020 [190]. - Equus Energy's net investment loss remained relatively unchanged at $1.0 million for Q1 2021 compared to $0.9 million in Q1 2020 [189]. - The Fund's common stock is trading at a 29.2% discount to its net asset value as of March 31, 2021 [181]. Economic Environment - As of April 25, 2021, 28.5% of U.S. adults had received at least one COVID-19 vaccine, which may impact future economic recovery and operations [174]. - The ongoing COVID-19 pandemic has created uncertainties that could materially affect the company’s operations and investment opportunities [171]. - The U.S. GDP growth for Q1 2021 was annualized at 5.0%, with a forecast of 6.0% for the entire year [177]. - The unemployment rate in the U.S. decreased to 6.0% in Q1 2021, down from a peak of 14.7% in April 2020 [177]. - The average home prices in the U.S. increased by 15.8% year-over-year by the end of Q1 2021 [177]. Market Activity - M&A activity in 2020 totaled $3.6 trillion, a 7.7% decrease from 2019, but rebounded to $1.3 trillion in Q1 2021, a 94% increase year-over-year [179]. - Private equity firms deployed $708.4 billion across 5,309 transactions in 2020, marking a 7.3% decrease from 2019 [180]. Operational Adjustments - The company has transitioned to remote operations to minimize employee exposure to COVID-19, utilizing cloud-based systems for communication and record-keeping [175]. - The asset coverage ratio was reduced from 200% to 150%, allowing the company to borrow up to twice the value of its net assets [168]. - The company has not incurred additional borrowings beyond a margin loan for U.S. Treasury bills since the asset coverage ratio reduction [168].