EQUUS TOTAL RETURN, INC.

Previous wording

*Operating Activities.*We use cash to make new investments and follow-on investments in our existing portfolio companies. We record these investments at cost on the applicable trade date. Realized gains or losses are computed using the specific identification method. On an ongoing basis, we carry our investments in our financial statements at fair value, as determined by our board of directors. See “Critical Accounting Policies – Valuation of Investments” below. As of December 31, 2024, we had invested 91.9% of our assets in securities of portfolio companies that constituted qualifying investments under the 1940 Act. At that time, we had invested 100% in membership interests in limited liability companies.

Current wording

*Operating Activities.*We use cash to make new investments and follow-on investments in our existing portfolio companies. We record these investments at cost on the applicable trade date. Realized gains or losses are computed using the specific identification method. On an ongoing basis, we carry our investments in our financial statements at fair value, as determined by our board of directors. See “Critical Accounting Estimates – Valuation of Investments” below. As of December 31, 2025, we had invested 104.3% of our net assets in securities of portfolio companies that constituted qualifying investments under the 1940 Act. At that time, we had invested 0% of our net assets in membership interests in limited liability companies.

Previous wording

*Financing Activities.*From time to time, we use leverage to finance a portion of our investments. We then repay such debt from the sale of portfolio securities. Under the 1940 Act, we have the ability to borrow funds and issue debt securities or preferred stock that are referred to as senior securities, subject to certain restrictions, including an overall limitation on the amount of outstanding debt, or leverage, relative to equity of 1.5:1. Because of the nature and size of our portfolio investments, we have periodically borrowed funds to make qualifying investments in order to maintain our qualification as a RIC. Duringthe first three quarters of 2024 and all of 2023, we borrowed such funds by accessing a margin account with a securities brokerage firm. We invested the proceeds of these margin loans in high-quality securities such as U.S. Treasury securities until they were repaid. We refer to these high-quality investments as “restricted assets” because they are not generally available for investment in portfolio companies under the terms of borrowing. If, in the future, we seek to requalify as a RIC and cannot borrow funds to make such qualifying investments at the end of any future quarter, we would not so requalify and would, as a non-RIC, be subject to corporate-level income tax on our net investment income and realized capital gains, if any. In addition, our distributions to stockholders would be taxable as ordinary dividends to the extent paid from earnings and profits. See “Federal Income Tax Considerations.”

Current wording

*Financing Activities.*From time to time, we use leverage to finance a portion of our investments. We then repay such debt from the sale of portfolio securities. Under the 1940 Act, we have the ability to borrow funds and issue debt securities or preferred stock that are referred to as senior securities, subject to certain restrictions, including an overall limitation on the amount of outstanding debt, or leverage, relative to equity of 1.5:1. Because of the nature and size of our portfolio investments, we have periodically borrowed funds to make qualifying investments in order to maintain our qualification as a RIC. During the first three quarters of 2024 and all of 2023, we borrowed such funds by accessing a margin account with a securities brokerage firm. We invested the proceeds of these margin loans in high-quality securities such as U.S. Treasury securities until they were repaid. We refer to these high-quality investments as “restricted assets” because they are not generally available for investment in portfolio companies under the terms of borrowing. If, in the future, we seek to requalify as a RIC and cannot borrow funds to make such qualifying investments at the end of any future quarter, we would not so requalify and would, as a non-RIC, be subject to corporate-level income tax on our net investment income and realized capital gains, if any. In addition, our distributions to stockholders would be taxable as ordinary dividends to the extent paid from earnings and profits. See “Federal Income Tax Considerations.”

Previous wording

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. The awards are each subject to a vesting requirement over a 3-year period unless the recipient thereof is 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. We account for share-based compensation using the fair value method, as prescribed by ASC 718, Compensation—Stock Compensation. 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. Inasmuch as all existing awards under the Incentive Plan became fully-vested prior to 2021, we recorded no compensation expense relating to awards made under the Incentive Plan for the years ended December 31, 2024, 2023 and 2022.

Current wording

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. The awards are each subject to a vesting requirement over a 3-year period unless the recipient thereof is 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. We account for share-based compensation using the fair value method, as prescribed by ASC 718, Compensation—Stock Compensation. 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. Inasmuch as all existing awards under the Incentive Plan became fully-vested prior to 2021, we recorded no compensation expense relating to awards made under the Incentive Plan for the years ended December 31, 2024, 2023 and 2022. During the year ended December 31, 2025, we awarded an additional 380,523 shares of restricted stock under the Incentive Plan to officers of the Fund and to consultants of Morgan. These awards were fully vested as of the date of grant.

Previous wording

Because of the inherent uncertainty of the valuation of portfolio securities which do not have readily ascertainable market values, amounting to $27.5 million and $40.9 million as of December 31, 2024 and 2023, respectively, our fair value determinations may materially differ from the values that would have been used had a ready market existed for the securities. SeeNote 3 to the financial statements included in Item 8.

Current wording

Because of the inherent uncertainty of the valuation of portfolio securities which do not have readily ascertainable market values, amounting to $12.5 million and $27.5 million as of December 31, 2025 and 2024, respectively, our fair value determinations may materially differ from the values that would have been used had a ready market existed for the securities. SeeNote 3to the financial statements included in Item 8.

Previous wording

U.S. GDP increased at an annualized rate of 2.3% in the fourth quarter of 2024, which was relatively consistent with consensus estimates for the quarter, but lower than GDP growth for the third quarter of 2024 (3.1%), as well as the fourth quarter of 2023 (3.2%). Overall GDP growth for the full year 2024 was 2.8% compared to 2.9% in 2023. The increase in GDP during the fourth quarter of 2024 was driven principally by consumer spending, offset by a decrease in business investment during the quarter. The Congressional Budget Office is projecting GDP growth of 1.9% for 2025 and 1.8% for 2026. The CBO report was released prior to the inauguration of the new U.S. President and the administration’s imposition of tariffs which has resulted in a downward adjustment to GDP forecasts. Citing tariff concerns, Morgan Stanley revised its GDP growth forecast for 2025 and 2026 from 1.9% and 1.3%, respectively, to 1.5% and 1.2%. (Sources:Bureau of Economic Analysis; Morgan Stanley; Congressional Budget Office).

Current wording

U.S. GDP increased at an annualized rate of 0.7% in the fourth quarter of 2025, well below consensus estimates of 3.0% for the quarter and substantially lower than GDP growth for the third quarter of 2025 (4.4%), as well as the fourth quarter of 2024 (2.1%). For the full year 2025, GDP growth was 2.1% as compared to 2.8% in 2024. The sharp decrease in GDP during the fourth quarter of 2025 was driven principally by decreases in government and consumer spending, and exports, as well as a decrease in business investment during the quarter. The Congressional Budget Office is projecting GDP growth of 2.5% for 2026 and 1.8% for 2027. The CBO report was released prior to the start of hostilities with Iran and a sharp increase in short-term energy prices which has resulted in a downward adjustment to other, more recent, GDP forecasts. Goldman Sachs, which initially predicted GDP growth of 2.9% for 2026, has now revised its estimate to 2.2%, citing oil price spikes and supply chain risks, and has also increased its estimate of the probability of a U.S. recession to 25%. (Sources:Bureau of Economic Analysis; Goldman Sachs; Congressional Budget Office).

Previous wording

As of February 2025, the U.S. unemployment rate stood at 4.1%, and has remained largely stable for a considerable period, fluctuating between 3.4% and 4.1% for the previous 36 months. With the advent of tariffs, government layoffs, and a more aggressive deportation policy for undocumented immigrants, most economists are projecting the unemployment rate to increase during the remainder of 2025. Moreover, the labor participation rate remains at approximately 62.5%, below the pre-pandemic high of 63.3% of February 2020. Most of the recent employment gains in 2023 and 2024 were due to gains in the leisure and hospitality industry, construction, trade, transportation, and utilities. (Sources:U.S. Bureau of Labor Statistics; Trading Economics).

Current wording

As of February 2026, the U.S. unemployment rate stood at 4.4%, and has remained largely stable for a considerable period, fluctuating between 3.54% and 4.4% for the previous 36 months. With the advent of tariffs, government layoffs, and a more aggressive deportation policy for undocumented immigrants, most economists are projecting the unemployment rate to increase slightly to 4.5% during the remainder of 2026. Moreover, the labor participation rate remains at approximately 62.5%, the same rate as one year previously, and still below the pre-pandemic high of 63.3% of February 2020. Most of the recent employment gains in 2024 and 2025 were due to gains in healthcare and healthcare services, government, and retail trade. (Sources:U.S. Bureau of Labor Statistics; Trading Economics).

Previous wording

Beginning in 2021 and continuing through 2022, consumer prices increased the most in four decades, reaching a high of 8.3%, before steadily declining, more or less, throughout 2023 and 2024, finishing the year at 2.9%. This trend has continued into January 2025, where the U.S. Bureau of Labor Statistics reported an annualized rate of 3.0%. Notwithstanding a projected slowing of the U.S. economy for 2025, most economists are projecting similar rates of inflation for 2025 as compared to 2024, principally due to the effect of expected tariffs on imported goods. (Sources:U.S. Bureau of Labor Statistics; Morgan Stanley).

Current wording

Beginning in 2021 and continuing through 2022, consumer prices increased the most in four decades, reaching a high of 8.3%, before steadily declining, more or less, throughout 2023 and continuing through 2025, finishing the year at 2.7%. This trend has continued into January 2026, where the U.S. Bureau of Labor Statistics reported an annualized rate of 2.4%. Notwithstanding a projected slowing of the U.S. economy for 2026, most economists are projecting similar rates of inflation for 2026 as compared to 2025, principally due to the continued effect of expected tariffs on imported goods and an increase in short-term energy prices. (Sources:U.S. Bureau of Labor Statistics; Morgan Stanley).

Previous wording

Private equity activity increased from $1.9 trillion in 2023 to $2.1 trillion in 2024, reversing a downward trend from 2021 and 2022 and the highs experienced during the Covid-19 pandemic. Nevertheless, private equity fundraising was lower for the third straight year due to a weak exit environment that has constrained liquidity, with fund flows down 30% in 2024 as compared to 2023. (Source:S&P Global)

Current wording

Private equity activity plateaued at $2.1 trillion in 2025, matching the same amount in 2024, which was only up slightly over 2023, all of which years are substantially below the post-pandemic highs of 2021 and 2022. Private equity fundraising was lower again for the fourth straight year due to a weak exit environment that has constrained liquidity, with fund flows down 23% in 2025 as compared to 2024, which was itself down 30% from 2023. (Source:S&P Global)

Previous wording

During 2024, our net asset value decreased from $3.55 per share as of December 31, 2023 to $2.17 per share as of December 31, 2024. As of December 31, 2024, our common stock was trading at a 62.9% discount to our net asset value as compared to 59.2% as of December 31, 2023.

Current wording

During 2025, our net asset value decreased from $2.17 per share as of December 31, 2024 to $1.19 per share as of December 31, 2025. As of December 31, 2025, our common stock was trading at a 18.5% premium to our net asset value as compared to a 49.3% discount as of December 31, 2024.

Previous wording

As of December 31, 2023, we had total assets of $93.5 million, of which $40.9 million were invested in portfolio investments and $6.5 million were invested in cash and cash equivalents.

Current wording

As of December 31, 2025, we had total assets of $21.3 million, of which $17.3 million were invested in portfolio investments and $0.1 million were invested in cash and cash equivalents.

Previous wording

*Operating Activities.*We used $51.4 million in cash for operating activities in 2023 principally due to $8.3 million in investments, $4.3 million in fees to professional advisors, director and other fees, along with $38.9 million increase in net investments in U.S. Treasury bills.

Current wording

*Operating Activities.*We used $2.1 million in cash for operating activities in 2025, principally due to $1.6 million used in connection with the purchase of investments, $2.2 million paid in fees to professional advisors, directors and other fees, which amount was offset by $1.7 million received from sales in investments.

Previous wording

Financing Activities. We provided $39.1 million in cash from financing activities for 2023, principally in connection with net borrowings on margin. We did not declare any dividends in 2023.

Current wording

Financing Activities. We generated $2.0 million in cash from financing activities for 2025, principally in connection with borrowings.

Previous wording

Financing Activities. We used $45.0 million in cash from financing activities for 2024, principally in connection with repayments net of borrowings on margin. We did not declare any dividends in 2024.

Current wording

Financing Activities. We used $45.0 million in cash from financing activities for 2024, principally in connection with repayments net of borrowings on margin.

Previous wording

Total income from portfolio securities was $1.3 million for 2024 and $0.3 for 2023. Compensation expense decreased to $1.8 million in 2024 from $1.9 million in 2023.

Current wording

Total income from portfolio securities was $1.4 million for 2025 and $1.3 million for 2024. Compensation expense increased to $2.1 million in 2025 from $1.8 million in 2024.

Previous wording

As a result of the factors described above, net investment loss after expenses was $3.3 million for 2024 as compared to a net investment loss of $4.0 million in 2023.

Current wording

As a result of the factors described above, net investment loss after expenses was $3.7 million for 2025 as compared to a net investment loss of $3.3 million in 2024.

Previous wording

During 2024, we made an $2.2 million investment in Morgan E&P, LLC.

Current wording

During 2024, we made a $2.2 million investment in Morgan E&P, Inc.

Previous wording

During 2024, we recorded a decrease of $15.6 million in net unrealized appreciation, from an unrealized appreciation of $24.5 million at December 31, 2023 to a net unrealized appreciation of $8.9 million at December 31, 2024. Such change in unrealized appreciation resulted primarily from the decrease in the fair value of our holdings in Morgan E&P, LLC of $9.6 million, principally due to a lower forward price curve for oil, as well as the reclassification of certain of its proved reserves from producing to non-producing. The change in unrealized appreciation also resulted from the decrease in fair value of our holding in Equus Energy, LLC of $6.0 million, principally due to decreases in the forward curve for oil and natural gas and its effect on the economic prospects of Equus Energy regarding future development of its oil and gas properties. SeeSubsequent Events below where we sold our interest in Equus Energy in March 2025 for a combination of cash and preferred stock valued at $4.0 million.

Current wording

During 2024, we recorded a decrease of $15.6 million in net unrealized appreciation, from an unrealized appreciation of $24.5 million at December 31, 2023 to a net unrealized appreciation of $8.9 million at December 31, 2024. Such change in unrealized appreciation resulted primarily from the decrease in the fair value of our holdings in Morgan E&P, Inc. of $9.6 million, principally due to a lower forward price curve for oil, as well as the reclassification of certain of its proved reserves from producing to non-producing. The change in unrealized appreciation also resulted from the decrease in fair value of our holding in Equus Energy, LLC of $6.0 million, principally due to decreases in the forward curve for oil and natural gas and its effect on the economic prospects of Equus Energy regarding future development of its oil and gas properties. SeeSubsequent Eventsbelow where we sold our interest in Equus Energy in March 2025 for a combination of cash and preferred stock valued at $4.0 million.

Previous wording

During 2023, we recorded an increase of $17.0 million in net unrealized appreciation, from an unrealized appreciation of $7.5 million at December 31, 2022 to a net unrealized appreciation of $24.5 million at December 31, 2023. Such change in unrealized appreciation resulted primarily from the increase in the fair value of our holdings in Morgan E&P, LLC of $22.6 million, principally due to substantial increases in Morgan’s reserves and the reclassification of certain of its proved reserves from undeveloped to producing. The increase in the fair value of Morgan was offset by the decrease in fair value of our holding in Equus Energy, LLC of $5.7 million, principally due to decreases in the forward curve for natural gas and its effect on the economic prospects of Equus Energy regarding future development of its gas properties.

Current wording

During 2023, we recorded an increase of $17.0 million in net unrealized appreciation, from an unrealized appreciation of $7.5 million at December 31, 2022 to a net unrealized appreciation of $24.5 million at December 31, 2023. Such change in unrealized appreciation resulted primarily from the increase in the fair value of our holdings in Morgan E&P, Inc. of $22.6 million, principally due to substantial increases in Morgan’s reserves and the reclassification of certain of its proved reserves from undeveloped to producing. The increase in the fair value of Morgan was offset by the decrease in fair value of our holding in Equus Energy, LLC of $5.7 million, principally due to decreases in the forward curve for natural gas and its effect on the economic prospects of Equus Energy regarding future development of its gas properties.

Previous wording

New Portfolio Investment. 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”). The GEVI Note is convertible into shares of GEVI’s common stock at a conversion price of $0.40 per share. Contemporaneously with the purchase of the GEVI Note, the Fund also received a common stock purchase warrant to acquire an aggregate of 1,875,000 shares of GEVI common stock at an exercise price of $0.50 per share.

Current wording

On February 10, 2025, we purchased from CitroTech, Inc., (formerly, General Enterprise Ventures, Inc.) a developer of fire suppression products (“CITR”), a 1- year senior convertible promissory note bearing interest at the rate of 10% per annum, in exchange for $1.5 million in cash (“CITR Note”). Contemporaneously with the purchase of the CITR Note, the Fund also received a common stock purchase warrant to acquire an aggregate of 312,500 shares of CITR common stock at an exercise price of $3.00 per share (“CITR Warrant”). The shares of CITR are traded on the NYSE American Stock Exchange under the symbol ‘CITR’. In the third quarter of 2025, we converted the CITR Note and interest, as accrued, into 664,041 CITR shares, and in the fourth quarter of 2025, we sold 73,002 of our CITR shares. As of December 31, 2025, the CITR share price stood at $8.08 per share. Applying this price to the value of our remaining CITR shares and a Black-Scholes valuation analysis to the CITR Warrant, we valued our debt and equity interest in CITR at $6.8 million at December 31, 2025.

Previous wording

Morgan E&P, LLC (“Morgan”) was organized by the Fund on April 3, 2023 as a Delaware limited liability company and a wholly-owned subsidiary of the Fund. On May 22, 2023, Morgan completed the acquisition of 4,747.52 net acres, in the Bakken/Three Forks formation in the Williston Basin of North Dakota, and acquired approximately 1,100 additional acres on September 26, 2023. The acreage and associated mineral rights were acquired from Pro Energy I LLC (“Pro Energy”), a company whose principals have decades of oil and gas experience and who have themselves drilled over 1,800 horizontal wells in the Williston Basin over a 10-year period. In May 2023, we entered into an agreement with Morgan to provide it up to $10.0 million in senior debt financing, which amount was subsequently amended to $10.5 million, subject to a schedule of disbursements and draws that we determine. As of December 31, 2024, we advanced Morgan $10.5 million under this facility. During 2023 and 2024, Morgan substantially increased its reserves and completed the drilling of two new wells. However, due to mechanical issues, these two wells were classified as non producing during the fourth quarter of 2024. As a result, the fair value of our debt and equity interest in Morgan was $23.5 million at December 31, 2024.

Current wording

Morgan E&P, LLC (“Morgan”) was organized by the Fund on April 3, 2023 as a Delaware limited liability company and a wholly-owned subsidiary of the Fund. In 2025, we reorganized Morgan as a Delaware corporation taxed according to the requirements of Subchapter C of the Internal Revenue Code. On May 22, 2023, Morgan completed the acquisition of 4,747.52 net acres, in the Bakken/Three Forks formation in the Williston Basin of North Dakota, and acquired approximately 1,100 additional acres on September 26, 2023. The acreage and associated mineral rights were acquired from Pro Energy I LLC (“Pro Energy”), a company whose principals have decades of oil and gas experience and who have themselves drilled over 1,800 horizontal wells in the Williston Basin over a 10-year period. In May 2023, we entered into an agreement with Morgan to provide it up to $10.0 million in senior debt financing, which amount was subsequently amended to $10.5 million, subject to a schedule of disbursements and draws that we determine. As of December 31, 2024, we advanced Morgan $10.5 million under this facility. During 2025, the forward price curve for oil decreased compared to 2024. In addition, Morgan experienced substantial challenges with production and, as a consequence of these two factors, certain reserves were eliminated for consideration as being noneconomic. As a result, the fair value of our debt and equity interest in Morgan decreased from $23.5 million at December 31, 2024 to $10.5 million at December 31, 2025.

Previous wording

Our current office space lease since December 31, 2020 is on a month-to-month basis. Rent expense, inclusive of common area maintenance costs, was $97,000 for the year ended December 31, 2024.

Current wording

Our current office space lease since December 31, 2020 is on a month-to-month basis. Rent expense, inclusive of common area maintenance costs, was $132,000 for the year ended December 31, 2025.