10-Q 1 f10q_equus03312025.htm FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

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

For the quarterly period ended March 31, 2025

☐

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

For the transition period to

Commission File Number 814-00098

EQUUS TOTAL RETURN, INC.

(Exact name of registrant as specified in its charter)

Delaware	76-0345915
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

700 Louisiana St., 41^st Floor Houston, Texas	77002
(Address of principal executive offices)	(Zip Code)

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Registrant’s telephone number, including area code: (713) 529-0900

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Name of each exchange

on which registered

Common Stock

New York Stock Exchange

☐ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No

☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☐

☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☒

Smaller Reporting Company ☐

Emerging Growth Company ☐

☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐ Indicate by check mark whether the registrant is a shell company. Yes ☐ No ☒

There were 13,586,173 shares of the registrant’s common stock, $.001 par value, outstanding, as of March 31, 2025.

	Page
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Condensed Financial Statements	3
Condensed Balance Sheets	3
Condensed Statements of Operations	4
Condensed Statements of Changes in Net Assets	5
Condensed Statements of Cash Flows	6
Supplemental Information—Selected Per Share Data and Ratios	7
Schedules of Investments	8
Notes to Condensed Financial Statements	12
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3. Quantitative and Qualitative Disclosure about Market Risk	41
Item 4. Controls and Procedures	41
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	42
Item 1A. Risk Factors	42
Item 6. Exhibits	43
SIGNATURE	44

	March 31, 2025			December 31, 2024

(in thousands, except shares and per share amounts)
Assets
Investments in portfolio securities at fair value:
Control investments (cost at $10,500 and $18,611, respectively)	$	24,500		$	27,500
Non-affiliate investments (cost at $4,250 and $0, respectively)		8,458			—
Total investments in portfolio securities at fair value		32,958			27,500
Cash and cash equivalents		667			262
Accounts receivable from affiliates		1,024			678
Accrued interest		1,807			1,470
Other assets		28			26
Total assets		36,484			29,936
Liabilities and net assets
Accounts payable		271			332
Accrued compensation		13			1
Accounts payable to related parties		411			93
Notes payable		1,592			—
Total liabilities		2,287			426

Commitments and contingencies (See Note 2)

Net assets

Common stock, $.001 par value per share; 100,000,000 shares authorized as of March 31, 2025 and December 31, 2024, and 13,586,173 shares outstanding as of March 31, 2025 and December 31, 2024

Preferred stock, $.001 par value per share; 10,000,000 shares authorized as of March 31, 2025 and December 31, 2024

Common stock, par value	$	14		$	14
Capital in excess of par value		75,529			74,785
Accumulated deficit		(41,346	)		(45,289	)
Total net assets	$	34,197		$	29,510
Shares of common stock issued and outstanding, $.001 par value, 100,000 and 50,000 shares authorized, respectively		13,586			13,586
Net asset value per share	$	2.52		$	2.17

	Three Months Ended March 31,
(in thousands, except per share amounts)	2025			2024
Investment income:
Control investments	$	315		$	283
Non-affiliate investments		22			—
Total investment income		337			283
Interest income		1			—
Total investment income		338			283

Expenses:
Compensation expense		570			428
Professional fees		353			567
Transaction costs		307			—
Professional liability expenses		50			150
Director fees and expenses		77			84
General and administrative expenses		48			33
Mailing, printing and other expenses		11			65
Taxes		3			14
Interest expense		29			32
Total expenses		1,448			1,373

Net investment loss		(1,110	)		(1,090	)

Net realized (loss) gain:
Control investments		(4,111	)		—
Other		(155	)		—
U.S. Treasury Bills		—			45
Net realized (loss) gain		(4,266	)		45

Net unrealized appreciation (depreciation) of portfolio securities:
Control investments		5,111			(1,350	)
Non-affiliate investments		4,208			—
Net change in net unrealized appreciation (depreciation) of portfolio securities		9,319			(1,350	)

Net increase (decrease) in net assets resulting from operations	$	3,943		$	(2,395	)

Net increase (decrease) in net assets resulting from operations per share:
Basic	$	0.30		$	(0.17	)
Diluted	$	0.25		$	(0.17	)
Weighted average shares outstanding:
Basic		13,586			13,586
Diluted		15,549			13,586

	Common Stock
(in thousands)	Number of Shares		Par Value		Capital in Excess of Par Value		Accumulated Deficit			Total Net Assets

Balances as of January 1, 2024		13,586		14		74,785		(26,512	)		48,287

Net decrease in net assets resulting from operations		—		—		—		(2,395	)		(2,395	)

Balances as of March 31, 2024		13,586	$	14	$	74,785	$	(28,907	)	$	45,892

Balances as of January 1, 2025		13,586		14		74,785		(45,289	)		29,510

Issuance of warrants		—		—		744		—			744

Net increase in net assets resulting from operations		—		—		—		3,943			3,943

Balances as of March 31, 2025		13,586	$	14	$	75,529	$	(41,346	)	$	34,197

Name and Location of			Date of Initial					Cost of		Fair
Portfolio Company ⁽¹⁾	Industry		Investment		Investment	Principal		Investment		Value⁽²⁾

Control Investments: Majority-owned ⁽³⁾:
Morgan E&P, LLC ⁽⁶⁾ Houston, TX		Energy		April 2023	Member interest (100%)				—	$	14,000
					12% senior secured promissory note due 5/26 ⁽⁷⁾	$	10,500	$	10,500		10,500
									10,500		24,500
Total Control Investments: Majority-owned (represents 74.1% of total investments at fair value)									10,500		24,500
Non-Affiliate Investments: Less than 5% owned ⁽⁴⁾:
General Enterprise Ventures, Inc. ⁽⁵⁾ Pomona, CA		Environmental		February 2025	Warrants (1,875,000 convertible common stock)		—		—		1,300
					10% senior secured promissory note due 2/26 ⁽⁷⁾		1,500		1,500		4,500
									1,500		5,800
North American Energy Opportunities Corp. ⁽⁶⁾ New York, NY		Energy		March 2025	27,500 Cl A Redeemable Preferred Shares				2,750		2,658
Total Non-Affiliate Investments (represents 25.9% of total investments at fair value)									4,250		8,458
Total Investments								$	14,750	$	32,958

Type of Securities	Cost		Fair Value		Fair Value as Percentage of Net Assets

Limited liability company investments	$	—	$	14,000		40.9	%
Secured and subordinated debt		12,000		15,000		43.9	%
Preferred stock		2,750		2,658		7.8	%
Options and warrants		—		1,300		3.8	%
Total	$	14,750	$	32,958		96.4	%

			Fair Value Measurements as of March 31, 2025
(in thousands)		Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Investments:
Control investments	$	24,500	$	—	$	—	$	24,500
Non-affiliate investments		8,458		—		5,800		2,658
Total investments	$	32,958	$	—	$	5,800	$	27,158

			Fair Value Measurements as of December 31, 2024
(in thousands)		Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Investments:
Control investments	$	27,500	$	—	$	—	$	27,500
Total investments	$	27,500	$	—	$	—	$	27,500

	Fair value measurements using significant unobservable inputs (Level 3)
(in thousands)	Control Investments			Affiliate Investments		Non-affiliate Investments			Total
Fair value as of January 1, 2025	$	27,500		$	—	$	—		$27,500
Sale of portfolio securities		(4,000	)		—		—		(4,000)
Purchases of portfolio securities		—			—		2,750		2,750
Change in unrealized appreciation		1,000			—		(92	)	908
Fair value as of March 31, 2025	$	25,500		$	—	$	2,658		$27,158

(In thousands, except share and per-share data)	March 31,			March 31,
	2025			2024
Net income attributable to common shareholders	$	3,943		$	(2,395	)
Weighted average shares outstanding - basic		13,586			13,586
Effect of dilutive securities	$	(0.05	)	$	—
Weighted average shares outstanding - diluted		15,549			13,586
Basic earnings per share	$	0.30		$	(0.17	)
Diluted earnings per share	$	0.25		$	(0.17	)

	March 31, 2025			December 31, 2024
Accumulated undistributed net investment losses	$	(55,890	)	$	(54,780	)
Unrealized appreciation of portfolio securities, net		18,208			8,889
Accumulated undistributed net capital gains		(3,664	)		602
Accumulated deficit	$	(41,346	)	$	(45,289	)

	Carrying amount	Collateral	Issue date	Maturity date	Conversion price	Conversion shares
About Investment, Ltd	$1,591,944(a)	(b)	2/7/2025	2/7/2026	$1.50	1,999,999

	March 31, 2025
Liability component:
Principal	$2,000,000
Debt discount (equity component)	(437,500)
Net carrying amount	$1,562,500

Stock price	$1.24
Exercise price	$1.50
Expected volatility	38.0% - 41.0%
Expected term (years)	5.00
Risk free rate	4.34% - 4.35%
Dividend yield	0.0%

	March 31, 2025			December 31, 2024
Assets:
Cash	$	18		$	15
Revenue receivables		493			343
Joint interest billing receivables		1,667			1,738
Other receivables		2			2
Prepaids and other current assets		35			35
Current assets		2,215			2,133

Property, plant and equipment
Oil and gas properties, net - full cost method		6,921			6,959
Other property, plant and equipment, net		31			34
Total property, plant and equipment - net		6,952			6,993

Other noncurrent assets
Operating lease right-of-use assets, net		217			227
Total noncurrent assets		217			227

Total assets	$	9,384		$	9,353

Liabilities and Member's Deficit:

Current liabilities
Accounts payable	$	6,781		$	6,656
Revenue payable		214			319
Current portion of operating lease liabilities		48			47
Due to parent		1,024			550
Accrued liabilities		2,961			3,162
Total current liabilities		11,028			10,734

Long-term liabilities
Asset retirement obligations		4			4
Long-term operating lease liabilities		195			207
Note payable - Due to parent		10,500			10,500
Long-term accrued liabilities - Due to parent		1,786			1,471
Total long-term liabilities		12,485			12,182
Total liabilities		23,513			22,916

Retained earnings - beginning of year		(13,563	)		(1,804	)
Current year deficit		(566	)		(11,759	)
Member's deficit		(14,129	)		(13,563	)

Total liabilities and member's deficit	$	9,384		$	9,353

	•	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.

SEC Form 10-Q filed by Equus Total Return Inc.