Equus Total Return, Inc.: Form 10-Q/A for the period ended Sep 30, 2025

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, 2024, 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, 2024 (“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 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 December 31, 2025. 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 (“Incentive Plan”). On January 10, 2017, the SEC issued an order approving the Incentive Plan and certain awards intended to be made thereunder. The Incentive Plan is 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 Plan is 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 Plan permits 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 Incentive Plan is 2,434,728 shares. The term of the Incentive Plan will expire on June 13, 2026. On March 17, 2017, we granted awards of restricted stock under the 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. During the quarter ended September 30, 2025, we awarded an additional 380,523 shares of restricted stock under the Incentive Plan. As of September 30, 2020, all awards granted under the Incentive Plan, including the new awards recently granted, were fully-vested. 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, 2024.

Current Market Conditions

Impact of Economic and Geopolitical Events on the Oil and Gas Sector. Beginning in the second quarter of 2022, crude prices began a steady decline following increases that were largely due to increased post-Covid demand and the buildup and subsequent invasion of Ukraine by Russian forces. Prices began a rise and fall in successive quarters between the third quarters of 2023 and the fourth quarter of 2024 before experiencing a slow and steady decline from the end of 2024 and throughout 2025, and stood at $63.17 as of September 30, 2025. Natural gas prices experienced high volatility in 2022 before collapsing in 2023 and then steadily increasing each quarter thereafter until the first quarter of 2025 before declining in the second and third quarters of 2025, finishing the quarter ended September 30, 2025 at $3.12 per MMBTU. Relative oil and gas price stability has 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 is expected to increase at an annualized rate of 3.9% for the third quarter of 2025 as compared to an increase of 3.8% for the second quarter of 2025 and a 0.5% contraction in the first quarter of the year. Actual GDP results for the third quarter of 2025 have been delayed due to the shutdown of the federal government. Consensus estimates for the third quarter of 2025 have varied significantly, but the actual growth rate is expected to be almost a full percentage point higher than the third quarter of 2024 which saw annualized GDP growth of 2.8%. The principal drivers of the increases over the second and third quarters of 2025 were consumer spending and gains in private-sector activity, including manufacturing and auto output. The Congressional Budget Office continues to project full-year GDP growth of 1.9% for 2025, with a modest slowdown to 1.8% in 2026. (Sources: Federal Reserve Bank of Atlanta; Bureau of Economic Analysis; The Congressional Budget Office).

Employment and Housing. The U.S. added an estimated 57,000 jobs in October 2025 after a relatively weak third quarter in which job growth averaged just 37,000 per month—almost as slow as the 35,000 per month averaged in the second quarter of 2025 which was the slowest hiring pace since early 2020. The unemployment rate in October 2025 held relatively steady at 4.3%, unchanged from September and August 2025. The labor force participation rate also held steady at 62.3% as of August 31, 2025 which remained relatively unchanged from the end of the second quarter of 2025. The Congressional Budget Office now projects the unemployment rate for the fourth quarter of 2025 will increase to 4.5 before tapering to 4.2% for 2026 and 4.4% for 2027. Persistently high borrowing costs relative to the pandemic lows continue to suppress sales volumes of both new and existing homes, with existing home sales presently at only 2.8% of available inventory, its lowest level in decades. Despite these headwinds, mid-level home prices have continued to rise, outpacing inflation and driven by constrained supply. Conflicting economic signals—such as stable unemployment amid weak job creation and negative revisions—have kept mortgage rates elevated, with the 30-year fixed rate averaging 6.25% in October 2025. Acquisition and refinancing activity is unlikely to rebound meaningfully until early 2026 (Sources: Federal Reserve Bank of Chicago; Bureau of Labor Statistics; Congressional Budget Office).

Consumer Prices. After experiencing substantial increases in 2022 and into 2023, consumer price growth continued to moderate through 2024 and into the first nine months of 2025. As of October 2025, the consumer price index was up 3.0% over the previous 12-month period, up from 2.9% in September and August 2025, marking the ninth consecutive quarter of relatively stable inflation. Consensus estimates for the remainder of 2025 are that inflation will remain consistent with the previous 10 months of the year. Thus far, the effect of the current administration’s tariff policy remains muted, but many analysts still anticipate upward pressure on prices, with inflation expected to accelerate in 2026. (Sources: Bureau of Economic Analysis; Bureau of Labor Statistics; Morgan Stanley Research; Goldman Sachs).

Interest Rates. Principally as a response to weaker employment figures and restrained inflation, the Federal Reserve cut interest rates in each of the FOMC’s September and October 2025 meetings by 25 basis points each time, with the federal funds rate range now down to between 3.75% and 4.00%. However, the Federal Reserve Chair declined to signal its intention to further reduce rates in its upcoming December 2025 meeting. Given the uncertainty regarding the U.S. economy and the effect of current tariff policy, commentators are mixed in forecasting further rate cuts in late 2025 or early 2026. (Sources: The Wall Street Journal; The Federal Reserve Board).

Mergers and Acquisitions. Global merger and acquisition activity in the quarter ended September 30, 2025 has rebounded significantly, with total transaction value up 234% as compared to the third quarter of 2024 and substantial increases in large deal volume in the third quarter of 2025 as compared to the third quarter of 2024. Merger and acquisition activity and transaction values in September 2025 were up 41% and 110%, respectively, as compared to September 2024 activity increasing 41% in September 2025 as compared to September 2025. Technology, energy, life sciences, and telecommunications represented the sectors which experienced the most significant increases in deal activity during the third quarter of 2025. Heading into 2026, expectations for increased consolidation remain high, driven largely by transactions in the technology sector, especially in AI, cloud infrastructure, and financial services. (Sources: Ernst & Young; Bloomberg).

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Private Equity. Private equity activity during the first half of 2025 continued a softening trend which began in the fourth quarter 2024. However, beginning in August 2025 and continuing through the end of September 2025, private equity activity increased sharply as compared to the first half of the year, with PE funds contributing substantially to the rise in mergers and acquisition activity described above. Overall, PE transactions increased 28% in the third quarter of 2025 as compared to the second quarter of 2025, and 38% as compared to the third quarter of 2024. PE fundraising trends, however, remained subdued, extending the three-year decline that began in 2022, as limited partners exercised greater caution amid macroeconomic uncertainty. Despite persistent uncertainty surrounding global trade policies and interest rate trajectories, analysts now project an 8% increase in total private equity activity for all of 2025 compared to 2024 and a further increase of 5% in 2026. (Sources: Foley & Lardner; Ernst & Young).

During the nine months ended September 30, 2025, our net asset value decreased from $2.17 per share to $1.90 per share, a decrease of 12.4%. As of September 30, 2025, our common stock is trading at a 15.6% premium to our net asset value as compared to 49.3% discount to our net asset value as of December 31, 2024.

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.

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.

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.

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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 $1.4 million and $0.7 million for the three months ended September 30, 2025 and 2024, respectively, and $3.1 million and $2.7 million for the nine months ended September 30, 2025 and 2024, respectively, primarily due to an increase in compensation expense due additional shares issued under the equity incentive plan and an increase in interest expense related to the amortization of the debt discount, offset by a decrease in professional liability expenses.

Total investment income was comparable at $0.4 million and $0.3 million for the three months ended September 30, 2025 and 2024, respectively, and $1.0 million and $0.9 million for the nine months ended September 30, 2025 and 2024, respectively.

Compensation expense was $0.9 million and $0.4 million for the three months ended September 30, 2025 and 2024, respectively and $1.9 million and $1.3 million for the nine months ended September 30, 2025 and 2024 respectively, due to the officer bonuses related to dispositions and shares issued under the Equity Incentive Plan.

Professional fees were $0.3 million and $0.2 million for the three months ended September 30, 2025 and 2024, respectively and $0.8 million and $1.2 million for the nine months ended September 2025 and 2024, respectively.

Transaction costs, relating to the issuance of a convertible promissory note described in Note 5 of the financial statement footnotes above were $0.3 million for the nine months ended September 30, 2025 as compared to $0 for the nine months ended September 30, 2024.

Changes in Unrealized Appreciation/Depreciation of Portfolio Securities

During the nine months ended September 30, 2025, we recorded a decrease of $0.7 million in fair value of our equity holding in Morgan E&P, Inc. (“Morgan”).

On February 10, 2025, we purchased from General Enterprise Ventures, Inc., a developer of fire suppression products (“GEVI”), a 1-year senior convertible promissory note bearing interest at the rate of 10% per annum, in exchange for $1.5 million in cash (“GEVI Note”). Contemporaneously with the purchase of the GEVI Note, the Fund also received a common stock purchase warrant (“GEVI Warrant”) to acquire an aggregate of 1,875,000 shares of GEVI common stock at an exercise price of $0.50 per share. On August 28, 2025, GEVI effected a 1-for-6 reverse split of its outstanding shares, which therefore increased the exercise price of the GEVI Warrant to $3.00 per share and reduced the number of shares subject to the GEVI Warrant to 312,500 shares. On September 22, 2025, we converted the GEVI Note, inclusive of $1.5 million in principal and $93,699 in interest, as accrued, into an aggregate of 664,041 post reverse-split shares of GEVI common stock. The shares of GEVI are publicly traded and, as of September 30, 2025, the closing trading price of GEVI shares was $5.89 per share ($0.98 on a pre-split basis) as compared to $11.70 per share ($1.95 on a pre-split basis) at June 30, 2025. Accordingly, during the three months ended September 30, 2025, we recorded a decrease of $3.4 million in the fair value of the GEVI Note and a $2.0 million decrease in the fair value of the GEVI Warrant.

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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. The redemption conditions were not fulfilled by the 6-month deadline and, accordingly, at September 30, 2025, we valued the NAEOC preferred stock at $0.

At March 31, 2025, we valued our preferred stock in NAEOC at $2.7 million. Because the conditions to redemption of the preferred stock were not fulfilled by the redemption deadline of August 31, 2025, we recorded a realized loss of $2.7 million during the nine months ended September 30, 2025.

During the nine months ended September 30, 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.

During the nine months ended September 30, 2024, we made a $2.2 million follow-on debt investment in Morgan. During this period, we also recorded a decrease of $3.6 million in the fair value of our equity holding in Morgan. The decrease was primarily due to declines in oil prices, as well as declines in production during the period.

During the nine months ended September 30, 2024, with respect to our holding in Equus Energy, LLC, we recorded a decrease of $2.0 million in the fair value of our investment. The decrease was primarily due to the decrease in oil prices during the period.

Change in Unrealized Depreciation on Warrant Liability

During the nine months ended September 30, 2025, with respect to the warrants issued, we recognized depreciation of the warrant liability of $1.1 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 no subsequent events.

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.

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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.

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 September 30, 2025. 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 September 30, 2025

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 September 30, 2025, 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 September 30, 2025, 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 September 30, 2025.

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.

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In connection with our efforts to convert Equus into an operating company in furtherance of our plan to convert the Fund 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, 2024, 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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