Equus Total Return Reports Decline in Net Assets, Increased Liabilities, and Liquidity Concerns

As of September 30, 2024, Equus Total Return, Inc. reported total investments in portfolio securities at fair value of $37.5 million, a decrease from $40.9 million at the end of 2023. The company saw an increase in U.S. Treasury bills, which rose to $55.0 million from $45.0 million. However, cash and cash equivalents significantly decreased to $1.1 million from $6.5 million. Total assets increased slightly to $95.5 million, while total liabilities rose to $55.3 million, resulting in a decrease in total net assets to $40.2 million from $48.3 million. The net asset value per share also fell to $2.96 from $3.55.

Investment income for the third quarter of 2024 was $334,000, a substantial increase from $42,000 in the same period of 2023. Total interest income also rose to $322,000 from $32,000 year-over-year. Total expenses decreased to $1.0 million from $1.2 million, leading to a reduced net investment loss of $683,000 compared to $1.1 million in the prior year. However, the net increase in net assets resulting from operations was a loss of $9.6 million, contrasting with a gain of $7.1 million in the third quarter of 2023.

For the nine months ended September 30, 2024, the company reported a net decrease in net assets of $8.1 million, compared to an increase of $11.9 million in the same period of 2023. Net cash used in operating activities improved slightly to $(15.3 million) from $(17.4 million). Borrowings under margin accounts surged to $161.9 million from $41.0 million, reflecting increased leverage.

Equus Total Return is transitioning from a Business Development Company (BDC) to an operating company, with plans to seek shareholder approval for this change in 2024 or 2025. The company has also amended its credit facility with Morgan E&P, increasing the total available amount to $10.5 million, which has been fully drawn as of September 30, 2024.

The company faces liquidity challenges, with insufficient cash resources to fund operations and no existing commitments to cover potential cash shortfalls. Management is exploring options such as securing financing, selling assets, or shutting in wells to address these issues. The financial statements are prepared on a going concern basis, indicating uncertainty about the company's ability to continue operations without additional funding.

Overall, Equus Total Return's financial performance reflects significant challenges, including declining net asset values, increased liabilities, and ongoing liquidity concerns, while also showing some positive trends in investment income.