EQUUS TOTAL RETURN, INC.

Previous wording

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.

Current wording

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 the extent we re-qualify as a RIC, 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.

Previous wording

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.

Current wording

On June 13, 2016, our shareholders approved the adoption of our 2016 Equity Incentive Plan (“2016 Plan”). On March 19, 2026, our shareholders approved the adoption of our 2025 Equity Incentive Plan (“2025 Plan”, and together with the 2016 Plan, the “Incentive Plans”). The Incentive Plans are 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 Plans are 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 Plans permit 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 2016 Plan is 2,434,728 shares, and the maximum number of shares of common stock that are subject to awards granted under the 2025 Plan are 2,793,338 shares. The term of the 2016 Plan will expire on June 13, 2026 and the term of the 2025 Plan will expire on March 19, 2036. During 2017, we granted awards of restricted stock under the 2016 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. These were fully vested as of September 30, 2020. During 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 at the grant date. No awards have yet been made under the 2025 Plan. 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.

Previous wording

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.

Current wording

Impact of Economic and Geopolitical Events on the Oil and Gas Sector. Oil prices experienced a slow and steady decline beginning in the first quarter of 2024 and continuing until the end of 2025. The conflict in Iran, which commenced in February, 2026, has resulted in dramatically increased spot prices, ending the first quarter of 2026 at $101.30 per barrel. Conversely, since the beginning of 2024, natural gas prices steadily increased before declining in the first three quarters of 2025 and recovering at the end of 2025, and thereafter declining throughout the first three months of 2026, ending the quarter at $2.88 per MMBTU. Prior to the onset of hostilities in the Middle East, relative oil and gas price stability had 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.

Previous wording

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).

Current wording

The U.S. Economy. U.S. GDP increased at an annualized rate of 2.0% for the first quarter of 2026 as compared to an increase of 0.5% for the fourth quarter of 2025, below consensus estimates of 2.0% for the quarter. The principal drivers of the increase over the fourth quarter of 2025 were the effect of the government shutdown during the fourth quarter, as well as increases in gross private domestic investment, government spending, and net exports. The Congressional Budget Office has projected full-year GDP growth of 2.2% for 2026, with a slowdown to 1.8% in 2027. (Sources: Federal Reserve Bank of Atlanta; Bureau of Economic Analysis; The Congressional Budget Office).

Previous wording

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).

Current wording

Employment and Housing. The U.S. added an estimated 115,000 jobs in April 2026 as compared to 178,000 jobs added in March 2026. The unemployment rate in April 2026 held relatively steady at 4.3%, unchanged from March 2026. However, the labor force participation rate decreased to 61.8%, the lowest since October 2021. The Congressional Budget Office now projects the unemployment rate for all of 2026 to decrease to 4.2% before increasing slightly to 4.4% in both 2027 and 2028. Persistently high borrowing costs continue to suppress sales volumes of both new and existing homes. Despite these headwinds, mid-level home prices have continued to rise moderately, outpacing inflation and driven by constrained supply. Conflicting economic signals—such as stable unemployment amid inflation pressures and high energy prices—have kept mortgage rates elevated, with the 30-year fixed rate averaging 6.25% to 6.35% in April 2026. Acquisition and refinancing activity is unlikely to rebound meaningfully until 2027 (Sources: Federal Reserve Bank of Chicago; Bureau of Labor Statistics; Congressional Budget Office).

Previous wording

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.

Current wording

During the three months ended March 31, 2026, our net asset value increased from $1.19 per share to $1.50 per share, an increase of 26.1%. As of March 31, 2026, our common stock is trading at a 18.5% discount to our net asset value as compared to 18.5% premium to our net asset value as of December 31, 2025.

Previous wording

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. Ifwe seek to requalify as a RIC and areunable 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.

Current wording

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.

Previous wording

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.

Current wording

Total investment income was comparable at $0.3 for the three months ended March 31, 2026 and 2025, respectively.

Previous wording

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.

Current wording

Transaction costs, relating to the issuance of a convertible promissory note described in Note 5 of the financial statement footnotes above were $0 and $0.3 million for the three months ended March 31, 2026 and 2025, respectively.

Previous wording

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”).

Current wording

During the three months ended March 31, 2026, we recorded an increase of $5.0 million in fair value of our equity holding in Morgan E&P, Inc. (“Morgan”), largely as a result of the substantial increase in oil prices during the quarter, as well as increases in the forward price for oil in future periods.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

During the three months ended March 31,2025, 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.

Previous wording

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.

Current wording

On February 10, 2025, we purchased from CitroTech, 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 (“CITR Warrant”) to acquire an aggregate of 1,875,000 shares of CITR common stock at an exercise price of $0.50 per share. The shares of CITR are traded on the NYSE American Stock Exchange and, as of March 31, 2025, the closing trading price of CITRI shares was $1.20. Accordingly, during the three months ended March 31, 2025, we recorded an increase of $3.0 million in fair value of the CITR Note and $1.3 million increase in the fair value of the CITR Warrant.

Previous wording

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.

Current wording

During the three months ended March 31, 2026, with respect to the warrants issued, we recognized depreciation of the warrant liability of $0.3 million.

Previous wording

Management performed an evaluation of the Fund’s activity through the date the financial statements were issued, noting no subsequent events.

Current wording

Management performed an evaluation of the Fund’s activity through the date the financial statements were issued, noting the following subsequent events: