Company: EQS
Filing Date: 2025-04-10
Form Type: 10-K
Source: 0001712543-25-000016
Chunk: 33

Company: EQUUS TOTAL RETURN, INC.
Filing Date: 2025-04-10
Form: 10-K
Item: Item 8
Chunk 33
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able 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 Margins 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.

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  TableOfContents  

  (2)      LIQUIDITY AND FINANCING ARRANGEMENTS  

As of December
31, 2024, we had cash and cash equivalents of $0.3 million. Our operating cash flow and cash on hand is not sufficient to meet operating
requirements or to finance routine capital expenditures through the next twelve months. We are therefore seeking liquidity from the sale
of our portfolio interests, as well as seeking external debt and equity financing from third parties. In addition, we are actively seeking
to fulfill the conditions of redemption relating to certain shares of preferred stock received in connection with our recent sale of
Equus Energy as described in Note II Subsequent Events. Should any or all of the foregoing events not occur as contemplated, the
Fund will not have the necessary funds to maintain normal operations and, therefore, substantial doubt would exist about the Fund’s
ability to continue as a going concern.

During the first
three quarters of 2024 and all of 2023, we borrowed sufficient funds to maintain the Fund’s RIC status by utilizing a margin account
with a securities brokerage firm. If we seek to requalify as a RIC, there is no assurance that such arrangement will be available in the
future. If we are unable to borrow funds to make qualifying investments, we may not requalify as a RIC. We would then continue to be subject
to corporate income tax on the Fund’s net investment income and realized capital gains, and distributions to stockholders would
continue to be subject to income tax as ordinary dividends. If we continue to be a BDC and generate significant income and gains, but
do not requalify as a RIC, we will be subject to corporate level tax and the non-deductibility of dividends, any of which could be material
to us and our stockholders.

  (3)