##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





(Mark One)

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

For the quarterly period ended June 30, 2010

or



| ̈ | 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.)
|                                                               | 
|Eight Greenway Plaza, Suite 930 Houston, Texas                 |  | 77046                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

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





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  x    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted 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 and post 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 x |  | Smaller Reporting Company  ̈

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

There were 8,861,646 shares of the registrants common stock, $.001 par value, outstanding, as of August 12, 2010.









---

##### Table of Contents

EQUUS TOTAL RETURN, INC.

(A Delaware Corporation)

INDEX



|                                                                                              |  |     
|--------------------------------------------------------------------------------------------- |  | ----
|                                                                                              |  | PAGE
|PART I. FINANCIAL INFORMATION                                                                 |  |     
|Item 1. Financial Statements                                                                  |  |     
|Balance Sheets                                                                                |  | 3   
|Statements of Operations                                                                      |  | 4   
|Statements of Changes in Net Assets                                                           |  | 6   
|Statements of Cash Flows                                                                      |  | 7   
|Supplemental InformationSelected Per Share Data and Ratios                                   |  | 8   
|Schedule of Portfolio Securities                                                              |  | 9   
|Notes to Financial Statements                                                                 |  | 15  
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 23  
|Item 3. Quantitative and Qualitative Disclosure about Market Risk                             |  | 30  
|Item 4. Controls and Procedures                                                               |  | 30  
|PART II. OTHER INFORMATION                                                                    |  |     
|Item 1. Legal Proceedings                                                                     |  | 30  
|Item 1A. Risk Factors                                                                         |  | 31  
|Item 6. Exhibits                                                                              |  | 31  
|SIGNATURE                                                                                     |  | 32  



---

##### Table of Contents

EQUUS TOTAL RETURN, INC.

BALANCE SHEETS

Part
I. Financial Information

Item 1. Financial Statements



|                                                                                  |  |              |         |   |                  |   |         |  
|--------------------------------------------------------------------------------- |  | ------------ | ------- | - | ---------------- | - | ------- | -
|                                                                                  |  | June 30,2010 |         |   | December 31,2009 |  
|(in thousands, except per share amounts)                                          |  | (Unaudited)  |         |   |                  |  
|Assets                                                                            |  |              |         |   |                  |   |         |  
|Investments in portfolio securities at fair value:                                |  |              |         |   |                  |   |         |  
|Control investments (cost at $34,173 and $35,315 respectively)                    |  | $            | 21,412  |   |                  | $ | 28,729  |  
|Affiliate investments (cost at $923 and $8,973 respectively)                      |  |              | 633     |   |                  |   | 2,128   |  
|Non-affiliate investments (cost at $19,575 and $13,350 respectively)              |  |              | 5,070   |   |                  |   | 11,554  |  
|                                                                                  |  |              |         |   |                  |   |         |  
|Total investments in portfolio securities at fair value                           |  |              | 27,115  |   |                  |   | 42,411  |  
|Restricted cash & temporary investments                                           |  |              | 19,190  |   |                  |   | 30,299  |  
|Cash                                                                              |  |              | 3,426   |   |                  |   | 535     |  
|Temporary cash investments                                                        |  |              | 4,727   |   |                  |   | 5,510   |  
|Accounts receivable and other                                                     |  |              | 47      |   |                  |   | 47      |  
|Accrued interest receivable due from portfolio companies                          |  |              | 2,571   |   |                  |   | 2,205   |  
|                                                                                  |  |              |         |   |                  |   |         |  
|Total assets                                                                      |  | $            | 57,076  |   |                  | $ | 81,007  |  
|                                                                                  |  |              |         |   |                  |   |         |  
|Liabilities and net assets                                                        |  |              |         |   |                  |   |         |  
|Liabilities:                                                                      |  |              |         |   |                  |   |         |  
|Accounts payable and accrued liabilities                                          |  | $            | 118     |   |                  | $ | 107     |  
|Accounts payable - related parties                                                |  |              | 70      |   |                  |   |        |  
|Borrowing under margin account                                                    |  |              | 19,000  |   |                  |   | 29,999  |  
|                                                                                  |  |              |         |   |                  |   |         |  
|Total liabilities                                                                 |  |              | 19,188  |   |                  |   | 30,106  |  
|                                                                                  |  |              |         |   |                  |   |         |  
|Commitments and contingencies                                                     |  |              |         |   |                  |   |         |  
|Net assets:                                                                       |  |              |         |   |                  |   |         |  
|Preferred stock, $.001 par value, 5,000 shares authorized, no shares outstanding  |  |              |        |   |                  |   |        |  
|Common stock, $.001 par value, 50,000 shares authorized, 8,862 shares outstanding |  |              | 9       |   |                  |   | 9       |  
|Additional paid-in capital                                                        |  |              | 70,599  |   |                  |   | 70,604  |  
|Undistributed net investment losses                                               |  |              | (5,164  | ) |                  |   | (4,485  | )
|Unrealized depreciation of portfolio securities, net                              |  |              | (27,556 | ) |                  |   | (15,227 | )
|                                                                                  |  |              |         |   |                  |   |         |  
|Total net assets                                                                  |  | $            | 37,888  |   |                  | $ | 50,901  |  
|                                                                                  |  |              |         |   |                  |   |         |  
|Net assets per share                                                              |  | $            | 4.28    |   |                  | $ | 5.74    |  
|                                                                                  |  |              |         |   |                  |   |         |  

The accompanying notes are an integral part of these financial statements.



3



---

##### Table of Contents

EQUUS TOTAL RETURN, INC.

STATEMENTS OF OPERATIONS

(Unaudited)



|                                                                             |  |                            |         |   |      |   |        |  
|---------------------------------------------------------------------------- |  | -------------------------- | ------- | - | ---- | - | ------ | -
|                                                                             |  | Three months endedJune 30, |        
|(in thousands, except per share amounts)                                     |  | 2010                       |         |   | 2009 |  
|Investment income:                                                           |  |                            |         |   |      |   |        |  
|Interest and dividend income from portfolio securities:                      |  |                            |         |   |      |   |        |  
|Control investments                                                          |  | $                          | 273     |   |      | $ | 241    |  
|Affiliate investments                                                        |  |                            | 13      |   |      |   | (1     | )
|Non-affiliate investments                                                    |  |                            | 538     |   |      |   | 461    |  
|                                                                             |  |                            |         |   |      |   |        |  
|Total interest and dividend income                                           |  |                            | 824     |   |      |   | 701    |  
|Interest from temporary cash investments                                     |  |                            | 3       |   |      |   | 14     |  
|                                                                             |  |                            |         |   |      |   |        |  
|Total investment income                                                      |  |                            | 827     |   |      |   | 715    |  
|Expenses:                                                                    |  |                            |         |   |      |   |        |  
|Management fee                                                               |  |                            |        |   |      |   | 352    |  
|Administrative fees                                                          |  |                            |        |   |      |   | 113    |  
|Compensation expense                                                         |  |                            | 201     |   |      |   |       |  
|Professional fees                                                            |  |                            | 833     |   |      |   | 293    |  
|Director fees and expenses                                                   |  |                            | 113     |   |      |   | 140    |  
|Mailing, printing and other expenses                                         |  |                            | 251     |   |      |   | 72     |  
|General and administrative expense                                           |  |                            | 46      |   |      |   |       |  
|Interest expense                                                             |  |                            | 15      |   |      |   | 11     |  
|Taxes                                                                        |  |                            |        |   |      |   | 23     |  
|                                                                             |  |                            |         |   |      |   |        |  
|Total expenses                                                               |  |                            | 1,459   |   |      |   | 1,004  |  
|                                                                             |  |                            |         |   |      |   |        |  
|Net investment income (loss)                                                 |  |                            | (632    | ) |      |   | (289   | )
|Net realized gain (loss) on portfolio securities:                            |  |                            |         |   |      |   |        |  
|Temporary cash investments                                                   |  |                            | (1      | ) |      |   | (8     | )
|                                                                             |  |                            |         |   |      |   |        |  
|Total net realized gain (loss) on portfolio securities                       |  |                            | (1      | ) |      |   | (8     | )
|Net unrealized appreciation (depreciation) of portfolio securities:          |  |                            |         |   |      |   |        |  
|End of period                                                                |  |                            | (27,556 | ) |      |   | (8,043 | )
|Beginning of period                                                          |  |                            | (15,926 | ) |      |   | (1,941 | )
|                                                                             |  |                            |         |   |      |   |        |  
|Net change in unrealized appreciation (depreciation) of portfolio securities |  |                            | (11,630 | ) |      |   | (6,102 | )
|                                                                             |  |                            |         |   |      |   |        |  
|Net increase (decrease) in net assets resulting from operations              |  | $                          | (12,263 | ) |      | $ | (6,399 | )
|                                                                             |  |                            |         |   |      |   |        |  
|Net increase (decrease) in net assets resulting from operations per share:   |  |                            |         |   |      |   |        |  
|Basic and diluted                                                            |  | $                          | (1.38   | ) |      | $ | (0.72  | )
|                                                                             |  |                            |         |   |      |   |        |  
|Weighted average shares outstanding, in thousands                            |  |                            |         |   |      |   |        |  
|Basic and diluted                                                            |  |                            | 8,862   |   |      |   | 8,862  |  
|                                                                             |  |                            |         |   |      |   |        |  

The accompanying notes are an integral part of these financial statements.



4



---

##### Table of Contents

EQUUS TOTAL RETURN, INC.

STATEMENTS OF OPERATIONS

(Unaudited)



|                                                                             |  |                           |         |   |      |   |        |  
|---------------------------------------------------------------------------- |  | ------------------------- | ------- | - | ---- | - | ------ | -
|                                                                             |  | Six months endedJune 
30, |        
|(in thousands, except per share amounts)                                     |  | 2010                      |         |   | 2009 |  
|Investment income:                                                           |  |                           |         |   |      |   |        |  
|Interest and dividend income from portfolio securities:                      |  |                           |         |   |      |   |        |  
|Control investments                                                          |  | $                         | 577     |   |      | $ | 522    |  
|Affiliate investments                                                        |  |                           | 26      |   |      |   | 24     |  
|Non-affiliate investments                                                    |  |                           | 1,068   |   |      |   | 1,009  |  
|                                                                             |  |                           |         |   |      |   |        |  
|Total interest and dividend income                                           |  |                           | 1,671   |   |      |   | 1,585  |  
|Interest from temporary cash investments                                     |  |                           | 7       |   |      |   | 35     |  
|                                                                             |  |                           |         |   |      |   |        |  
|Total investment income                                                      |  |                           | 1,678   |   |      |   | 1,620  |  
|Expenses:                                                                    |  |                           |         |   |      |   |        |  
|Management fee                                                               |  |                           |        |   |      |   | 714    |  
|Administrative fees                                                          |  |                           |        |   |      |   | 226    |  
|Compensation expense                                                         |  |                           | 549     |   |      |   |       |  
|Professional fees                                                            |  |                           | 1,177   |   |      |   | 639    |  
|Director fees and expenses                                                   |  |                           | 213     |   |      |   | 245    |  
|Mailing, printing and other expenses                                         |  |                           | 280     |   |      |   | 160    |  
|General and administrative expense                                           |  |                           | 90      |   |      |   |       |  
|Interest expense                                                             |  |                           | 24      |   |      |   | 22     |  
|Taxes                                                                        |  |                           | 24      |   |      |   | 30     |  
|                                                                             |  |                           |         |   |      |   |        |  
|Total expenses                                                               |  |                           | 2,357   |   |      |   | 2,036  |  
|                                                                             |  |                           |         |   |      |   |        |  
|Net investment income (loss)                                                 |  |                           | (679    | ) |      |   | (416   | )
|Net realized gain (loss) on portfolio securities:                            |  |                           |         |   |      |   |        |  
|Temporary cash investments                                                   |  |                           | (5      | ) |      |   | (32    | )
|                                                                             |  |                           |         |   |      |   |        |  
|Total net realized gain (loss) on portfolio securities                       |  |                           | (5      | ) |      |   | (32    | )
|Net unrealized appreciation (depreciation) of portfolio securities:          |  |                           |         |   |      |   |        |  
|End of period                                                                |  |                           | (27,556 | ) |      |   | (8,043 | )
|Beginning of period                                                          |  |                           | (15,227 | ) |      |   | (3,055 | )
|                                                                             |  |                           |         |   |      |   |        |  
|Net change in unrealized appreciation (depreciation) of portfolio securities |  |                           | (12,329 | ) |      |   | (4,988 | )
|                                                                             |  |                           |         |   |      |   |        |  
|Net increase (decrease) in net assets resulting from operations              |  | $                         | (13,013 | ) |      | $ | (5,436 | )
|                                                                             |  |                           |         |   |      |   |        |  
|Net increase (decrease) in net assets resulting from operations per share:   |  |                           |         |   |      |   |        |  
|Basic and diluted                                                            |  | $                         | (1.46   | ) |      | $ | (0.62  | )
|                                                                             |  |                           |         |   |      |   |        |  
|Weighted average shares outstanding, in thousands                            |  |                           |         |   |      |   |        |  
|Basic and diluted                                                            |  |                           | 8,862   |   |      |   | 8,717  |  
|                                                                             |  |                           |         |   |      |   |        |  

The accompanying notes are an integral part of these financial statements.



5



---

##### Table of Contents

EQUUS TOTAL RETURN, INC.

STATEMENTS OF CHANGES IN NET ASSETS

(Unaudited)



|                                                                                |  |                           |         |   |      |   |        |  
|------------------------------------------------------------------------------- |  | ------------------------- | ------- | - | ---- | - | ------ | -
|                                                                                |  | Six months endedJune 
30, |        
|(in thousands)                                                                  |  | 2010                      |         |   | 2009 |  
|Net increase (decrease) in net assets resulting from operations                 |  |                           | (13,013 | ) |      |   | (5,436 | )
|Capital share transactions:                                                     |  |                           |         |   |      |   |        |  
|Dividend declared                                                               |  |                           |        |   |      |   | (921   | )
|Shares issued in dividend                                                       |  |                           |        |   |      |   | 919    |  
|                                                                                |  |                           |         |   |      |   |        |  
|Net increase (decrease) in net assets resulting from capital share transactions |  |                           |        |   |      |   | (2     | )
|                                                                                |  |                           |         |   |      |   |        |  
|Increase (decrease) in net assets                                               |  |                           | (13,013 | ) |      |   | (5,438 | )
|Net assets at beginning of period                                               |  |                           | 50,901  |   |      |   | 78,435 |  
|                                                                                |  |                           |         |   |      |   |        |  
|Net assets at end of period                                                     |  | $                         | 37,888  |   |      | $ | 72,997 |  
|                                                                                |  |                           |         |   |      |   |        |  

The accompanying notes are an integral part of these financial statements.



6



---

##### Table of Contents

EQUUS TOTAL RETURN, INC.

STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                                                                                 |  |                           |         |   |      |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                                                                                 |  | Six months endedJune 
30, |        
|(in thousands)                                                                                                                                   |  | 2010                      |         |   | 2009 |  
|Reconciliation of increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating
activities:            |  |                           |         |   |      |   |         |  
|Net increase (decrease) in net assets resulting from operations                                                                                  |  | $                         | (13,013 | ) |      | $ | (5,436  | )
|Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in)
operating activities: |  |                           |         |   |      |   |         |  
|Net realized (gain) loss                                                                                                                         |  |                           | 5       |   |      |   | 32      |  
|Net change in unrealized (appreciation) depreciation of portfolio securities                                                                     |  |                           | 12,329  |   |      |   | 4,988   |  
|Changes in operating assets and liabilities:                                                                                                     |  |                           |         |   |      |   |         |  
|Purchase of portfolio securities                                                                                                                 |  |                           | (200    | ) |      |   | (720    | )
|Principal payments received from portfolio securities                                                                                            |  |                           | 3,500   |   |      |   | 142     |  
|Sales (purchases) of restricted temporary cash investments                                                                                       |  |                           | 11,104  |   |      |   | 3,936   |  
|(Increase) decrease in accounts receivable and other                                                                                             |  |                           |        |   |      |   | (20     | )
|Increase in accrued interest receivable due from portfolio securities                                                                            |  |                           | (699    | ) |      |   | (708    | )
|Increase (decrease) in accounts payable and accrued liabilities                                                                                  |  |                           | 11      |   |      |   | (110    | )
|Increase in accounts payable - related parties                                                                                                   |  |                           | 70      |   |      |   |        |  
|Decrease in due to adviser                                                                                                                       |  |                           |        |   |      |   | (103    | )
|                                                                                                                                                 |  |                           |         |   |      |   |         |  
|Net cash provided by (used in) operating activities                                                                                              |  |                           | 13,107  |   |      |   | 2,001   |  
|Cash flows from financing activities:                                                                                                            |  |                           |         |   |      |   |         |  
|Borrowings under margin account                                                                                                                  |  |                           | 39,999  |   |      |   | 83,040  |  
|Repayments under margin account                                                                                                                  |  |                           | (50,998 | ) |      |   | (86,968 | )
|Dividends paid                                                                                                                                   |  |                           |        |   |      |   | (2      | )
|                                                                                                                                                 |  |                           |         |   |      |   |         |  
|Net cash provided by (used in) financing activities                                                                                              |  |                           | (10,999 | ) |      |   | (3,930  | )
|                                                                                                                                                 |  |                           |         |   |      |   |         |  
|Net decrease in cash and cash equivalents                                                                                                        |  |                           | 2,108   |   |      |   | (1,929  | )
|Cash and cash equivalents at beginning of period                                                                                                 |  |                           | 6,045   |   |      |   | 8,656   |  
|                                                                                                                                                 |  |                           |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                                                                                       |  | $                         | 8,153   |   |      | $ | 6,727   |  
|                                                                                                                                                 |  |                           |         |   |      |   |         |  
|Non-cash operating and financing activities:                                                                                                     |  |                           |         |   |      |   |         |  
|Shares issued in lieu of cash dividend                                                                                                           |  | $                         |        |   |      | $ | 919     |  
|                                                                                                                                                 |  |                           |         |   |      |   |         |  
|Accrued interest or dividends exchanged for portfolio securities                                                                                 |  | $                         | 333     |   |      | $ | 489     |  
|                                                                                                                                                 |  |                           |         |   |      |   |         |  
|Supplemental disclosure of cash flow information:                                                                                                |  |                           |         |   |      |   |         |  
|Interest paid                                                                                                                                    |  | $                         | 7       |   |      | $ | 41      |  
|                                                                                                                                                 |  |                           |         |   |      |   |         |  
|Income taxes paid                                                                                                                                |  | $                         | 24      |   |      | $ | 17      |  
|                                                                                                                                                 |  |                           |         |   |      |   |         |  

The accompanying notes are an integral part of these financial statements.



7



---

##### Table of Contents

EQUUS TOTAL RETURN, INC.

SUPPLEMENTAL INFORMATIONSELECTED PER SHARE DATA AND RATIOS

(Unaudited)



|                                                                                               |  |                          |        |    |      |   |        |   
|---------------------------------------------------------------------------------------------- |  | ------------------------ | ------ | -- | ---- | - | ------ | --
|                                                                                               |  | Six months
endedJune 30, |       
|                                                                                               |  | 2010                     |        |    | 2009 |  
|Investment income                                                                              |  | $                        | 0.19   |    |      | $ | 0.19   |   
|Expenses                                                                                       |  |                          | (0.26  | )  |      |   | (0.23  | ) 
|                                                                                               |  |                          |        |    |      |   |        |   
|Net investment income (loss)                                                                   |  |                          | (0.07  | )  |      |   | (0.04  | ) 
|Net realized gain (loss) on portfolio securities                                               |  |                          |       |    |      |   |       |   
|Net change in unrealized appreciation (depreciation) of portfolio securities                   |  |                          | (1.39  | )  |      |   | (0.57  | ) 
|                                                                                               |  |                          |        |    |      |   |        |   
|Net increase (decrease) in net assets resulting from operations                                |  |                          | (1.46  | )  |      |   | (0.61  | ) 
|Capital transactions:                                                                          |  |                          |        |    |      |   |        |   
|Dividend declared                                                                              |  |                          |       |    |      |   | (0.11  | ) 
|Dilutive effect of shares issued in common stock dividend                                      |  |                          |       |    |      |   | (0.20  | ) 
|                                                                                               |  |                          |        |    |      |   |        |   
|Decrease in net assets resulting from capital transactions                                     |  |                          |       |    |      |   | (0.31  | ) 
|                                                                                               |  |                          |        |    |      |   |        |   
|Net increase (decrease) in net assets                                                          |  |                          | (1.46  | )  |      |   | (0.92  | ) 
|Net assets at beginning of period                                                              |  |                          | 5.74   |    |      |   | 9.16   |   
|                                                                                               |  |                          |        |    |      |   |        |   
|Net assets at end of period, basic and diluted                                                 |  | $                        | 4.28   |    |      | $ | 8.24   |   
|                                                                                               |  |                          |        |    |      |   |        |   
|Weighted average number of shares outstanding during period (in thousands)                     |  |                          | 8,862  |    |      |   | 8,717  |   
|Market value per share at end of period                                                        |  | $                        | 2.68   |    |      | $ | 3.23   |   
|Selected ratios:                                                                               |  |                          |        |    |      |   |        |   
|Ratio of expenses to average net assets                                                        |  |                          | 5.31   | %  |      |   | 2.69   | % 
|Ratio of net investment gain (loss) to average net assets                                      |  |                          | (1.53  | )% |      |   | (0.55  | )%
|Ratio of net increase (decrease) in net assets resulting from operations to average net assets |  |                          | (29.31 | )% |      |   | (7.18  | )%
|Total return on market price*                                                                  |  |                          | (16.25 | )% |      |   | (22.33 | )%



|* | Adjusted for dividends and can be calculated as the current market value plus year-to-date dividends declared less the beginning market value, divided by the beginning
market value. There were no dividends paid in the six months ending June 30, 2010.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The accompanying notes
are an integral part of these financial statements.



8



---

##### Table of Contents

EQUUS TOTAL RETURN, INC.

SCHEDULE OF PORTFOLIO SECURITIES

JUNE 30, 2010

(Unaudited)



|                                                                                                    |  |                                |        |                           |   |                                                                                        |  |                |        |                   |   |              |  |   |           
|--------------------------------------------------------------------------------------------------- |  | ------------------------------ | ------ | ------------------------- | - | -------------------------------------------------------------------------------------- |  | -------------- | ------ | ----------------- | - | ------------ |  | - | ----------
|Name and Location of
Portfolio Company                                                              |  | Industry                       |        | Date of InitialInvestment |   | Investment                                                                             |  | Principal      |        | Cost ofInvestment |   | FairValue(1)
|                                                                                                    |  |                                |        |                           |   |                                                                                        |  | (in thousands)
|Control investments: Majority-owned (5):                                                            |  |                                |        |                           |   |                                                                                        |  |                |        |                   |   |              | 
|Equus Media Development Company, LLC
Houston, TX                                                    |  | Media                          |        | January 2007              |   | Member interest (100%)                                                                 |  |                |        |                   | $ | 4,000        |  | $ | 1,680     
|Riptide Entertainment, LLC
Miami, FL                                                                |  | Entertainment and leisure      |        | December 2005             |   | Member interest (64.67%)
8% promissory notes (4)                                       |  | $              | 10,010 |                   |   | 6510,010     |  |   | 181      
|                                                                                                    |  |                                |        |                           |   |                                                                                        |  |                |        |                   |   |             
|                                                                                                    |  |                                |        |                           |   |                                                                                        |  |                |        |                   |   | 10,075       |  |   | 181       
|Sovereign Business Forms, Inc.
Houston, TX                                                          |  | Business products and services |        | August 1996               |   | 1,214,630 shares of common stock
(64.66% / 55.00% Fully Diluted)                       |  |                |        |                   |   | 5,080        |  |   | 4,547     
|                                                                                                    |  |                                |        |                           |   | 12% promissory notes (2)                                                               |  |                | 3,108  |                   |   | 3,108        |  |   | 3,108     
|                                                                                                    |  |                                |        |                           |   |                                                                                        |  |                |        |                   |   |             
|                                                                                                    |  |                                |        |                           |   |                                                                                        |  |                |        |                   |   | 8,188        |  |   | 7,655     
|Spectrum Management, LLC
Carrollton, TX                                                             |  | Business products and services |        | December 1999             |   | 285,000 units of Class A member interest (79%)
16% subordinated promissory note (2)(3) |  |                | 1,690  |                   |   | 2,8501,690   |  |   | 2,8921,690
|                                                                                                    |  |                                |        |                           |   |                                                                                        |  |                |        |                   |   |             
|                                                                                                    |  |                                |        |                           |   |                                                                                        |  |                |        |                   |   | 4,540        |  |   | 4,582     
|Total Control investments: Majority-owned (represents 52.0% of total
investments at fair value)     |  | $                              | 26,803 |                           | $ | 14,098                                                                                
|Control Investments: Non-majority owned(6):                                                        
|ConGlobal Industries Holding, Inc.
San Ramon, CA                                                    |  | Shipping products and services |        | February 1997             |   | 24,397,303 shares of common stock (32.22%)
7% promissory note (2)                      |  |                | 6,000  |                   | $ | 1,3706,000   |  | $ | 1,3146,000
|                                                                                                    |  |                                |        |                           |   |                                                                                        |  |                |        |                   |   |             
|                                                                                                    |  |                                |        |                           |   |                                                                                        |  |                |        |                   |   | 7,370        |  |   | 7,314     
|Total Control Investments: Non-majority Owned (represents 27.0% of total
investments at fair value) |  | $                              | 7,370  |                           | $ | 7,314                                                                                 
|Total Control Investments: (represents 79.0% of total investments at fair
value)                    |  | $                              | 34,173 |                           | $ | 21,412                                                                                
|Affiliate Investments(7):                                                                           |  |                                |        |                           |   |                                                                                        |  |                |        |                   |   |              |  |   |           
|PalletOne, Inc.
Bartow, FL                                                                          |  | Shipping products and services |        | October 2001              |   | 350,000 shares of common stock (20%
/ 18.70% Fully Diluted)                            |  |                |        |                   |   | 350          |  |   | 50        
|RP&C International Investments LLC
New York, NY                                                     |  | Healthcare                     |        | September 2006            |   | Member interest (17.20%)                                                               |  |                |        |                   |   | 573          |  |   | 583       
|Total Affiliate Investments (represents 2.3% of total investments at fair
value)                    |  | $                              | 923    |                           | $ | 633                                                                                   

The accompanying notes are an integral part of these financial statements.



9



---

##### Table of Contents

EQUUS TOTAL RETURN, INC.

SCHEDULE OF PORTFOLIO SECURITIES  (Continued)

JUNE 30, 2010

(Unaudited)



|                                                                                      |  |                                |        |                           |   |                                                                                                           |  |                |       |                   |   |              |  |   |      
|------------------------------------------------------------------------------------- |  | ------------------------------ | ------ | ------------------------- | - | --------------------------------------------------------------------------------------------------------- |  | -------------- | ----- | ----------------- | - | ------------ |  | - | -----
|Name and Location ofPortfolio Company                                                 |  | Industry                       |        | Date of InitialInvestment |   | Investment                                                                                                |  | Principal      |       | Cost ofInvestment |   | FairValue(1)
|                                                                                      |  |                                |        |                           |   |                                                                                                           |  | (in thousands)
|Non-Affiliate Investments (less than 5% owned):                                       |  |                                |        |                           |   |                                                                                                           |  |                |       |                   |   |              | 
|1848 Capital Partners LLC
Miami, FL                                                   |  | Entertainment and leisure      |        | January 2008              |   | 18% promissory note (2)(3)                                                                                |  | $              | 3,731 |                   | $ | 3,731        |  | $ | 1,334
|Big Apple Entertainment Partners LLC
New York, NY                                     |  | Entertainment and leisure      |        | October 2007              |   | 18% promissory note (2)(3)                                                                                |  |                | 3,233 |                   |   | 3,233        |  |   | 3,233
|Infinia Corporation                                                                   |  | Alternative energy             |        | June 2007                 |   | 115,180 shares preferred stock (1.02%/0.79% Fully Diluted)                                                |  |                |       |                   |   | 8,000        |  |   |     
|Kennewick, WA                                                                         |  |                                |        |                           |   | Option to purchase 16,000 shares of common stock at $6.50 per share through December 19, 2012             |  |                |       |                   |   |             |  |   |     
|                                                                                      |  |                                |        |                           |   |                                                                                                           |  |                |       |                   |   |             
|                                                                                      |  |                                |        |                           |   |                                                                                                           |  |                |       |                   |   | 8,000        |  |   |     
|London Bridge Entertainment Partners Ltd
London UK                                    |  | Entertainment and leisure      |        | August 2008               |   | 18% promissory note (2)(3)                                                                                |  |                | 2,816 |                   |   | 2,816        |  |   | 303  
|The Bradshaw Group Richardson,
TX                                                     |  | Business products and services |        | May 2000                  |   | 576,828 Class B Shares 12.25% preferred stock
38,750 Class C shares preferred stock                       |  |                |       |                   |   | 1,795       |  |   | 97  
|                                                                                      |  |                                |        |                           |   | 788,649 Class D shares 15% preferred stock                                                                |  |                |       |                   |   |             |  |   |     
|                                                                                      |  |                                |        |                           |   | 2,218,109 Class E shares 8% preferred stock                                                               |  |                |       |                   |   |             |  |   |     
|                                                                                      |  |                                |        |                           |   | Warrant to buy 2,229,450 shares of common stock through May 2016                                          |  |                |       |                   |   |             |  |   |     
|                                                                                      |  |                                |        |                           |   |                                                                                                           |  |                |       |                   |   |             
|                                                                                      |  |                                |        |                           |   |                                                                                                           |  |                |       |                   |   | 1,795        |  |   | 97   
|Trulite, Inc.
El Dorado Hills, CA                                                     |  | Alternative energy             |        | August 2008               |   | Warrants to buy 8,934,211 shares of common stock through at $0.01 - $0.38 per share through November 2015 |  |                |       |                   |   |             |  |   | 103  
|Total Non-Affiliate Investments (represents 18.7% of total investments at
fair value) |  | $                              | 19,575 |                           | $ | 5,070                                                                                                    
|Total Investments                                                                     |  | $                              | 54,671 |                           | $ | 27,115                                                                                                   



|(1) | See Note 3 to the financial statements, Valuation of Investments.
|--- | -----------------------------------------------------------------

|(2) | Income-producing.
|--- | -----------------

|(3) | Income on these securities is paid-in-kind by the issuance of additional securities, accrual to maturity or through accretion of original issue discount.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Non-income producing.
|--- | ---------------------

|(5) | Majority owned investments are generally defined under the Investment Company Act of 1940 as companies in which the Fund owns more than 50% of the voting securities of
the company.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Non-majority owned control investments are generally defined under the Investment Company Act of 1940 as companies in which the Fund owns more than 25% but not more
than 50% of the voting securities of the company.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Affiliate investments are generally defined under the Investment Company Act of 1940 as companies in which the Fund owns at least 5% but not more than 25% voting
securities of the company.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The accompanying notes are an integral part of these financial statements.



10



---

##### Table of Contents

EQUUS TOTAL RETURN, INC.

SCHEDULE OF PORTFOLIO SECURITIES  (Continued)

JUNE 30, 2010

(Unaudited)



Substantially all of the Funds portfolio securities are restricted from public
sale without prior registration under the Securities Act of 1933. The Fund negotiates certain aspects of the method and timing of the disposition of the Funds investment in each portfolio company, including registration rights and related
costs.

As defined in the Investment Company Act of 1940, all of the Funds investments are in eligible portfolio
companies. The Fund provides significant managerial assistance to all of the portfolio companies in which it has invested. The Fund provides significant managerial assistance to portfolio companies that comprise 82.0% of the total value of the
investments in portfolio companies as of June 30, 2010.

The Funds investments in portfolio securities consist of
the following types of securities as of June 30, 2010 (in thousands):



|                                      |  |      |        |           |   |                                      |  |      |  
|------------------------------------- |  | ---- | ------ | --------- | - | ------------------------------------ |  | ---- | -
|Type of Securities                    |  | Cost |        | FairValue |   | Fair Value asPercentage ofNet Assets | 
|Secured and subordinated debt         |  | $    | 30,588 |           | $ | 15,849                               |  | 41.8 | %
|Common stock                          |  |      | 6,800  |           |   | 5,911                                |  | 15.6 | %
|Limited liability company investments |  |      | 7,488  |           |   | 5,155                                |  | 13.6 | %
|Options and warrants                  |  |      |       |           |   | 103                                  |  | 0.3  | %
|Preferred stock                       |  |      | 9,795  |           |   | 97                                   |  | 0.3  | %
|                                      |  |      |        |           |   |                                      |  |      |  
|Total                                 |  | $    | 54,671 |           | $ | 27,115                               |  | 71.6 | %
|                                      |  |      |        |           |   |                                      |  |      |  

Three notes receivable included in secured and subordinated debt with an estimated fair value of $4.9
million provide that all or a portion of interest is paid in kind or the original issue discount is accreted over the life of the notes, by adding such amount to the principal of the notes. For the remainder of the secured and subordinated debt,
cash payments of interest are currently being received and/or accrued on notes aggregating $10.7 million in fair value, while notes totaling $0.2 million are non-income producing.

The following is a summary by industry of the Funds investments in portfolio securities as of June 30, 2010 (in thousands):



|                               |  |           |        |                                       |      |  
|------------------------------ |  | --------- | ------ | ------------------------------------- | ---- | -
|Industry                       |  | FairValue |        | Fair Value asPercentage 
ofNet Assets |     
|                               | 
|                               | 
|Business products and services |  | $         | 12,334 |                                       | 32.6 | %
|Shipping products and services |  |           | 7,364  |                                       | 19.4 | %
|Entertainment and leisure      |  |           | 5,051  |                                       | 13.4 | %
|Media                          |  |           | 1,680  |                                       | 4.4  | %
|Healthcare                     |  |           | 583    |                                       | 1.5  | %
|Alternative energy             |  |           | 103    |                                       | 0.3  | %
|                               |  |           |        |                                       |      |  
|Total                          |  | $         | 27,115 |                                       | 71.6 | %
|                               |  |           |        |                                       |      |  

The accompanying notes are an integral part of these financial statements.



11



---

##### Table of Contents

EQUUS TOTAL RETURN, INC.

SCHEDULE OF PORTFOLIO SECURITIES

DECEMBER 31, 2009



|                                                                                                    |  |                                |        |                           |   |                                                                                                                              |  |                |        |                   |   |              |  |   |           
|--------------------------------------------------------------------------------------------------- |  | ------------------------------ | ------ | ------------------------- | - | ---------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------ | ----------------- | - | ------------ |  | - | ----------
|Name and Location ofPortfolio Company                                                               |  | Industry                       |        | Date of InitialInvestment |   | Investment                                                                                                                   |  | Principal      |        | Cost ofInvestment |   | FairValue(1)
|                                                                                                    |  |                                |        |                           |   |                                                                                                                              |  | (in thousands)
|Control Investments: Majority-owned(5):                                                             |  |                                |        |                           |   |                                                                                                                              |  |                |        |                   |   |              | 
|Equus Media Development Company, LLC
Houston, TX                                                    |  | Media                          |        | January 2007              |   | Member interest (100%)                                                                                                       |  |                |        |                   | $ | 5,000        |  | $ | 5,000     
|Riptide Entertainment, LLC
Miami, FL                                                                |  | Entertainment and leisure      |        | December 2005             |   | Member interest (64.67%)
8% promissory notes(4)                                                                              |  | $              | 10,010 |                   |   | 6510,010     |  |   | 3,151    
|                                                                                                    |  |                                |        |                           |   |                                                                                                                              |  |                |        |                   |   |             
|                                                                                                    |  |                                |        |                           |   |                                                                                                                              |  |                |        |                   |   | 10,075       |  |   | 3,151     
|Sovereign Business Forms, Inc.
Houston, TX                                                          |  | Business products and services |        | August 1996               |   | 1,214,630 shares of common stock
12% promissory notes(2)                                                                     |  |                | 3,250  |                   |   | 5,0803,250   |  |   | 4,2563,250
|                                                                                                    |  |                                |        |                           |   |                                                                                                                              |  |                |        |                   |   |             
|                                                                                                    |  |                                |        |                           |   |                                                                                                                              |  |                |        |                   |   | 8,330        |  |   | 7,506     
|Spectrum Management, LLC
Carrollton, TX                                                             |  | Business products and services |        | December 1999             |   | 285,000 units of Class A member interest
16% subordinated promissory note(2)(3)                                              |  |                | 1,690  |                   |   | 2,8501,690   |  |   | 3,2081,690
|                                                                                                    |  |                                |        |                           |   |                                                                                                                              |  |                |        |                   |   |             
|                                                                                                    |  |                                |        |                           |   |                                                                                                                              |  |                |        |                   |   | 4,540        |  |   | 4,898     
|Total Control Investments: Majority-owned (represents 48.5% of total
investments at fair value)     |  | $                              | 27,945 |                           | $ | 20,555                                                                                                                      
|Control Investments: Non-majority owned(6):                                                        
|ConGlobal Industries Holding, Inc.
San Ramon, CA                                                    |  | Shipping products and services |        | February 1997             |   | 24,397,303 shares of common stock
7% promissory note(2)                                                                      |  | $              | 6,000  |                   | $ | 1,3706,000   |  | $ | 2,1746,000
|                                                                                                    |  |                                |        |                           |   |                                                                                                                              |  |                |        |                   |   |             
|                                                                                                    |  |                                |        |                           |   |                                                                                                                              |  |                |        |                   |   | 7,370        |  |   | 8,174     
|Total Control Investments: Non-majority Owned (represents 19.3% of total
investments at fair value) |  | $                              | 7,370  |                           | $ | 8,174                                                                                                                       
|Total Control Investments: (represents 67.8% of total investments at fair
value)                    |  | $                              | 35,315 |                           | $ | 28,729                                                                                                                      
|Affiliate Investments(7):                                                                           |  |                                |        |                           |   |                                                                                                                              |  |                |        |                   |   |              |  |   |           
|Infinia Corporation Kennewick,
WA                                                                   |  | Alternative energy             |        | June 2007                 |   | 1,151,800 shares preferred stock
Option to purchase 16,000 shares common stock at $6.50 per share through December 19, 2012  |  |                |        |                   | $ | 8,000       |  | $ | 1,47911   
|                                                                                                    |  |                                |        |                           |   |                                                                                                                              |  |                |        |                   |   |             
|                                                                                                    |  |                                |        |                           |   |                                                                                                                              |  |                |        |                   |   | 8,000        |  |   | 1,490     
|Nickent Golf, Inc. City of
Industry, CA                                                             |  | Entertainment and leisure      |        | June 2007                 |   | 8% receivership certificate(4)                                                                                               |  |                | 50     |                   |   | 50           |  |   | 25        
|                                                                                                    |  |                                |        |                           |   | 3,000,000 shares Class A convertible preferred stock                                                                         |  |                |        |                   |   |             |  |   |          
|                                                                                                    |  |                                |        |                           |   | Warrants to buy 15,000 shares of common stock at $0.60 per share through March 17, 2013                                      |  |                |        |                   |   |             |  |   |          
|                                                                                                    |  |                                |        |                           |   | Warrants to buy 1,434,149 shares of common stock at $0.60 per share through August 16, 2012, warrant terms subject to change |  |                |        |                   |   |             |  |   |          
|                                                                                                    |  |                                |        |                           |   |                                                                                                                              |  |                |        |                   |   |             
|                                                                                                    |  |                                |        |                           |   |                                                                                                                              |  |                |        |                   |   | 50           |  |   | 25        
|PalletOne, Inc.
Bartow, FL                                                                          |  | Shipping products and services |        | October 2001              |   | 350,000 shares of common stock                                                                                               |  |                |        |                   |   | 350          |  |   |          
|RP&C International Investments LLC
New York, NY                                                     |  | Healthcare                     |        | September 2006            |   | Member interest (17.2%)                                                                                                      |  |                |        |                   |   | 573          |  |   | 613       
|Total Affiliate Investments (represents 5.0% of total investments at fair
value)                    |  | $                              | 8,973  |                           | $ | 2,128                                                                                                                       

The accompanying notes are an integral part of these financial statements.



12



---

##### Table of Contents

EQUUS TOTAL RETURN, INC.

SCHEDULE OF PORTFOLIO SECURITIES  (Continued)

DECEMBER 31, 2009



|                                                                                      |  |                                |        |                            |   |                                                                          |  |                |       |                   |   |              |  |   |       
|------------------------------------------------------------------------------------- |  | ------------------------------ | ------ | -------------------------- | - | ------------------------------------------------------------------------ |  | -------------- | ----- | ----------------- | - | ------------ |  | - | ------
|Name and Location of
Portfolio Company                                                |  | Industry                       |        | Date of Initial
Investment |   | Investment                                                               |  | Principal      |       | Cost
ofInvestment |   | FairValue(1)
|                                                                                      |  |                                |        |                            |   |                                                                          |  | (in thousands)
|Non-Affiliate Investments (less than 5% owned):                                      
|1848 Capital Partners LLC
Miami, FL                                                   |  | Entertainment and leisure      |        | January 2008               |   | 18% promissory note(2)(3)                                                |  | $              | 3,587 |                   | $ | 3,587        |  | $ | 3,587 
|Big Apple Entertainment Partners LLC
New York, NY                                     |  | Entertainment and leisure      |        | October 2007               |   | 18% promissory note(2)(3)                                                |  |                | 3,153 |                   |   | 3,153        |  |   | 3,153 
|London Bridge Entertainment Partners Ltd
London UK                                    |  | Entertainment and leisure      |        | August 2008                |   | 18% promissory note(2)(3)                                                |  |                | 2,707 |                   |   | 2,707        |  |   | 2,707 
|The Bradshaw Group Richardson,
TX                                                     |  | Business products and services |        | May 2000                   |   | 576,828 Class B Shares 12.25% preferred stock                            |  |                |       |                   |   | 1,796        |  |   |      
|                                                                                      |  |                                |        |                            |   | 38,750 Class C shares preferred stock                                    |  |                |       |                   |   |             |  |   |      
|                                                                                      |  |                                |        |                            |   | 788,649 Class D shares 15% preferred stock                               |  |                |       |                   |   |             |  |   |      
|                                                                                      |  |                                |        |                            |   | 2,218,109 Class E shares 8% preferred stock                              |  |                |       |                   |   |             |  |   |      
|                                                                                      |  |                                |        |                            |   | Warrant to buy 2,229,450 shares of common stock through May 2016         |  |                |       |                   |   |             |  |   |      
|                                                                                      |  |                                |        |                            |   |                                                                          |  |                |       |                   |   |             
|                                                                                      |  |                                |        |                            |   |                                                                          |  |                |       |                   |   | 1,796        |  |   |      
|Trulite, Inc. El Dorado Hills,
CA                                                     |  | Alternative energy             |        | August 2008                |   | 18% promissory note(2)(3)                                                |  |                | 2,107 |                   |   | 2,107       |  |   | 2,107
|                                                                                      |  |                                |        |                            |   | Warrants to buy 6,934,211 shares of common stock ranging from at $0.01 - |  |                |       |                   |   |              |  |   |       
|                                                                                      |  |                                |        |                            |   | $0.38 per share through November 2015                                    |  |                |       |                   |   |             |  |   |      
|                                                                                      |  |                                |        |                            |   |                                                                          |  |                |       |                   |   |             
|                                                                                      |  |                                |        |                            |   |                                                                          |  |                |       |                   |   | 2,107        |  |   | 2,107 
|Total Non-Affiliate Investments (represents 27.2% of total investments at
fair value) |  | $                              | 13,350 |                            | $ | 11,554                                                                  
|Total Investments                                                                     |  | $                              | 57,638 |                            | $ | 42,411                                                                  



|(1) | See Note 3 to the financial statements, Valuation of Investments.
|--- | -----------------------------------------------------------------

|(2) | Income-producing.
|--- | -----------------

|(3) | Income on these securities is paid-in-kind by the issuance of additional securities, accrual to maturity or through accretion of original issue discount.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Non-income producing.
|--- | ---------------------

|(5) | Majority owned investments are generally defined under the Investment Company Act of 1940 as companies in which the Fund owns more than 50% of the voting securities of
the company.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Non-majority owned control investments are generally defined under the Investment Company Act of 1940 as companies in which the Fund owns more than 25% but not more
than 50% of the voting securities of the company.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Affiliate investments are generally defined under the Investment Company Act of 1940 as companies in which the Fund owns at least 5% but not more than 25% voting
securities of the company.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The accompanying notes are an integral part of these financial statements.



13



---

##### Table of Contents

EQUUS TOTAL RETURN, INC.

SCHEDULE OF PORTFOLIO SECURITIES  (Continued)

DECEMBER 31, 2009

Substantially all of the Funds portfolio securities are restricted from public sale without prior registration under the Securities
Act of 1933. The Fund negotiates certain aspects of the method and timing of the disposition of the Funds investment in each portfolio company, including registration rights and related costs.

As defined in the Investment Company Act of 1940, all of the Funds investments are in eligible portfolio companies. The Fund
provides significant managerial assistance to all of the portfolio companies in which it has invested. The Fund provides significant managerial assistance to portfolio companies that comprise 77.7% of the total value of the investments in portfolio
securities as of December 31, 2009.

The Funds investments in portfolio securities consist of the following types
of securities at December 31, 2009 (in thousands):





|                                      |  |      |        |           |   |                                      |  |      |  
|------------------------------------- |  | ---- | ------ | --------- | - | ------------------------------------ |  | ---- | -
|Type of Securities                    |  | Cost |        | FairValue |   | Fair Value asPercentage ofNet Assets | 
|Secured and subordinated debt         |  | $    | 32,555 |           | $ | 25,671                               |  | 50.5 | %
|Limited liability company investments |  |      | 8,488  |           |   | 8,820                                |  | 17.3 | %
|Common stock                          |  |      | 6,800  |           |   | 6,430                                |  | 12.6 | %
|Preferred stock                       |  |      | 9,795  |           |   | 1,479                                |  | 2.9  | %
|Options and warrants                  |  |      |       |           |   | 11                                   |  | 0.0  | %
|                                      |  |      |        |           |   |                                      |  |      |  
|Total                                 |  | $    | 57,638 |           | $ | 42,411                               |  | 83.3 | %
|                                      |  |      |        |           |   |                                      |  |      |  

Three notes receivable included in secured and subordinated debt with an estimated fair value of $9.4
million provide that all or a portion of interest is paid-in-kind or the original issue discount is accreted over the life of the notes, by adding such amount to the principal of the notes. For the remainder of secured and subordinated debt, cash
payments of interest are currently being received and/or accrued on notes aggregating $13.1 million in fair value, while notes totaling $3.2 million are non-income producing.

The following is a summary by industry of the Funds investments as of December 31, 2009 (in thousands):





|                               |  |           |        |                                      |      |  
|------------------------------ |  | --------- | ------ | ------------------------------------ | ---- | -
|Industry                       |  | FairValue |        | Fair Value asPercentage ofNet Assets |     
|Entertainment and leisure      |  | $         | 12,624 |                                      | 24.8 | %
|Business products and services |  |           | 12,403 |                                      | 24.4 | %
|Shipping products and services |  |           | 8,174  |                                      | 16.1 | %
|Alternative energy             |  |           | 3,597  |                                      | 7.1  | %
|Media                          |  |           | 5,000  |                                      | 9.8  | %
|Healthcare                     |  |           | 613    |                                      | 1.1  | %
|                               |  |           |        |                                      |      |  
|Total                          |  | $         | 42,411 |                                      | 83.3 | %
|                               |  |           |        |                                      |      |  

The accompanying notes are an integral part of these financial statements.



14



---

##### Table of Contents

EQUUS TOTAL RETURN, INC.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2010 AND 2009

(Unaudited)

(1) Description
of Business and Basis of Presentation

Description of BusinessEquus Total Return, Inc. (the Fund,
EQS), formerly Equus II Incorporated, a Delaware corporation, was formed by Equus Investments II, L.P. (the Partnership) on August 16, 1991. On July 1, 1992, the Partnership was reorganized and all of the assets and
liabilities of the Partnership were transferred to the Fund in exchange for shares of common stock of the Fund. The shares of the Fund trade on the New York Stock Exchange under the symbol EQS. On August 11, 2006, shareholders of the Fund
approved the change of the Funds investment strategy to a total return investment objective. This strategy seeks to provide the highest total return, consisting of capital appreciation and current income. In connection with this strategic
investment change, the shareholders also approved the change of name from Equus II Incorporated to Equus Total Return, Inc.

The Fund seeks to achieve capital appreciation by making investments in equity and equity-oriented securities issued by privately-owned
companies in transactions negotiated directly with such companies. The Fund seeks to invest primarily in companies which intend to grow either by acquiring other businesses, including leveraged buyouts, or organically. The Fund may also invest in
recapitalizations of existing businesses or special situations from time to time. The Fund also invests in debt financing with the objective of generating regular interest income back to the Fund. Debt financing may also be used to create long-term
capital appreciation through the exercise and sale of warrants received in connection with the financing. The Fund elected to be treated as a business development company under the Investment Company Act of 1940 (1940 Act). For tax
purposes, the Fund has elected to be treated as a regulated investment company (RIC). Prior to July 1, 2009, the Fund was externally managed pursuant to an investment advisory agreement and also received certain administrative
services from an external administrator. Effective June 30, 2009, these arrangements were terminated. Since July 1, 2009, the Fund has directly employed its management team and has directly incurred the costs and expenses associated
with Fund operations. There is no outside investment advisory organization providing services to the Fund under a fee-based advisory agreement, or an administrative organization charging the Fund for services rendered.

Effective August 11, 2006, the Fund began to employ a total return investment style. The total return style combines both
growth and income investments and is intended to strike a balance between the potential for gain and the risk of loss. In the growth category, the Fund is a growth-at- reasonable-price investor. The Fund invests primarily in
privately owned companies and is open to virtually any potential growth investment in the privately owned arena. However, the Funds primary aim is to identify and acquire only those equity securities that meet its criteria for selling at
reasonable prices. The income investments made by the Fund consist principally of purchasing debt financing with the objective of generating regular interest income back to the fund as well as long-term capital appreciation through the
exercise and sale of warrants received in connection with the financing.

Basis of PresentationIn
accordance with Article 6 of Regulation S-X under the Securities Act of 1933 and Securities Exchange Act of 1934, the Fund does not consolidate portfolio company investments, including those in which it has a controlling interest. The Funds
interim consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, for interim financial information and in accordance with the requirements of reporting on
Form 10-Q and Article 10 of Regulation S-X, under the Securities Exchange Act of 1934, as amended. Accordingly, they are unaudited and exclude some disclosures required for annual financial statements. Management believes it has made all
adjustments, consisting solely of normal recurring accruals, necessary for the fair presentation of these interim financial statements.

The results of operations for the three and six months ended June 30, 2010 are not necessarily indicative of results that ultimately
may be achieved for the year. The interim unaudited consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Funds Form 10-K for the fiscal year ended
December 31, 2009, as filed with the Security and Exchange Commission (SEC). Certain prior period information has been reclassified to conform to current year presentation.

(2) Liquidity and Financing Arrangements

LiquidityThere are several factors that may materially affect the Funds liquidity during the reasonably foreseeable
future. The Fund views this period as the twelve month period from the date of the financial statements in this Form 10-Q, i.e., the period through June 30, 2011.



15



---

##### Table of Contents

Management is evaluating the impact of current market conditions on its portfolio company
valuations and their ability to provide current income. Management has followed valuation techniques in a consistent manner; however, it is cognizant of current market conditions that might effect future valuations of portfolio securities. The Fund
believes that its operating cash flow and cash on hand will be sufficient to meet operating requirements and to finance routine capital expenditures through the next twelve months.

Cash and Temporary InvestmentsAs of June 30, 2010, the Fund had cash and temporary cash investments of $8.2 million.
The Fund had $27.1 million of its net assets of $37.9 million invested in portfolio securities. Restricted assets totaled $19.2 million, of which $19.0 million were invested in U.S. Treasury Bills for the purpose of satisfying the diversification
requirement to maintain the Funds pass-through tax treatment and $0.2 million for the required 1% brokerage deposit. These securities are held by a securities brokerage firm and are pledged along with cash to secure the payment of the margin
account balance. The U.S. Treasury bills were sold and the margin loan was repaid to the brokerage firm on July 1, 2010.

As of December 31, 2009, the Fund had cash and temporary cash investments of $6.0 million. The Fund had $42.4 million of its net
assets of $50.9 million invested in portfolio securities. Restricted assets totaled $30.3, of which $30.0 million were invested in U.S. Treasury Bills for the purpose of satisfying the diversification requirement to maintain the Funds
pass-through tax treatment and $0.3 million for the required 1% brokerage deposit. These securities are held by a securities brokerage firm and are pledged along with cash to secure the payment of the margin account balance. The U.S. Treasury bills
were sold and the margin loan was repaid to the brokerage firm on January 4, 2010.

DividendsOn
March 24, 2009, the Fund announced that it suspended its managed distribution policy and payment of quarterly distributions for an indefinite period. As originally implemented, the policy provided for quarterly dividends at an annualized rate
equal to 10% of the Funds market value per share as at the end of the preceding calendar year. The Fund will continue to pay out net investment income and/or realized capital gains, if any, on an annual basis as required under the Investment
Company Act of 1940.

Revolving Line of Credit AgreementEffective February 15, 2010, the
Fund modified and extended its revolving line of credit agreement (the Credit Facility) with Amegy Bank of Texas. The Credit Facility was reduced to $5.0 million from $7.5 million and the maturity was extended to July 2011. The line of
credit is intended to enable the Fund to make follow-on investments, when necessary. The Fund can borrow up to $5.0 million under the Credit Facility, subject to a borrowing base equal to 20% of the value of the Funds eligible portfolio
assets. The Credit Facility bears a floating interest rate of the higher of (a) the Federal Funds Rate plus
1/2of 1% and (b) the rate of interest in
effect for such day as publicly announced from time to time by Lender as its prime rate. The Credit Facility is secured by substantially all of the Funds portfolio assets and securities. It contains certain restrictive covenants,
including, but not limited to, a requirement that the Funds net asset value not fall below $40 million. At June 30, 2010, the Funds net asset value was $37.9 million. Accordingly, the Fund is not eligible to draw upon the line of
credit. To date, the Fund has not borrowed any amounts under the Credit Facility.

Investment
CommitmentsAs of June 30, 2010, the Fund had no outstanding commitment to its portfolio company investments

Under certain circumstances, the Fund may be called on to make follow-on investments in certain portfolio companies. If the Fund does not
have sufficient funds to make follow-on investments, the portfolio company in need of the investment may be negatively impacted. Also, the Funds equity interest in the estimated fair value of the portfolio company could be reduced.

RIC Borrowings, Restricted Cash and Temporary InvestmentsAs of June 30, 2010 and December 31, 2009, the Fund
borrowed sufficient funds to maintain the Funds RIC status by utilizing a margin account with a securities brokerage firm. There is no assurance that such arrangement will be available in the future. If the Fund is unable to borrow funds to
make qualifying investments, it may no longer qualify as a RIC. The Fund would then be subject to corporate income tax on the Funds net investment income and realized capital gains, and distributions to stockholders would be subject to income
tax as ordinary dividends. Failure to continue to qualify as a RIC could be material to the Fund and the its stockholders.

As
of June 30, 2010, the Fund borrowed $19.0 million to make qualifying investments to maintain its RIC status by utilizing a margin account with a securities brokerage firm. The Fund collateralized such borrowings with restricted cash and
temporary investments in U.S. Treasury bills of $19.2 million. The U.S. Treasury bills were sold and the total amount borrowed was repaid on July 1, 2010.

As of December 31, 2009, the Fund borrowed $30.0 million to make qualifying investments to maintain its RIC status by utilizing a
margin account with a securities brokerage firm. The Fund collateralized such borrowings with restricted cash and temporary investments in U.S. Treasury bills of $30.3 million. The U.S Treasury bills were sold on January 4, 2010 and the total
amount borrowed was repaid at that time.



16



---

##### Table of Contents

Certain Risks and UncertaintiesEconomic conditions during 2009 and 2008 and
market dislocations resulted in the availability of debt and equity capital declining significantly and has had a continuing impact through the first half of 2010. Generally, the limited amount of available debt financing has shorter maturities,
higher interest rates and fees, and more restrictive terms than debt facilities available in the past. In addition, during 2010 the price of our common stock continued to fall well below our net asset value, thereby making it undesirable to issue
additional shares of our common stock. Because of these challenges, our near-term strategies shifted from originating debt and equity investments to preserving liquidity necessary to meet our operational needs. Key initiatives that we undertook
during 2009 and 2010 to provide necessary liquidity included the termination of certain follow-on investment commitments, monetizations, the suspension of dividends and the internalization of management. Although there can be no assurances that such
initiatives will be sufficient, we believe we have sufficient liquidity to meet our 2010 operating requirements.

(3) Significant
Accounting Policies

The following is a summary of significant accounting policies followed by the Fund in the preparation
of its financial statements:

Use of EstimatesThe preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Although management believes the estimates
and assumptions used in preparing these interim financial statements and related notes are reasonable in light of known facts and circumstances, actual results could differ from those estimates.

Valuation of InvestmentsPortfolio investments are carried at fair value with the net change in unrealized appreciation or
depreciation included in the determination of net assets. Valuations of portfolio securities are performed in accordance with accounting principles generally accepted in the United States of America and the financial reporting policies of the SEC.
The applicable methods prescribed by such principles and policies are described below:

Publicly-traded
portfolio securitiesInvestments in companies whose securities are publicly traded are generally valued at their quoted market price at the close of business on the valuation date.

Privately-held portfolio securitiesThe fair value of investments for which no market exists is determined on
the basis of procedures established in good faith by the Board of Directors of the Fund. As a general principle, the current fair value of an investment would be the amount the Fund might reasonably expect to receive for it upon its
current sale, in an orderly manner. Appraisal valuations are necessarily subjective and the estimated values arrived at by the Fund may differ materially from amounts actually received upon the disposition of portfolio securities.

Generally, cost is the primary factor used to determine fair value until significant developments affecting the portfolio company (such
as results of operations or changes in general market conditions) provide a basis for use of an appraisal valuation. Appraised values are determined quarterly by management, subject to the approval of the Board of Directors.

Most of the Funds common equity investments of privately held companies are appraised either at a multiple of earnings before
interest, taxes, depreciation and amoritization (EBITDA) generated by the company in its most recent fiscal year, less outstanding funded indebtedness and other senior securities such as preferred stock, utilizing a discounted cash flow
model which incorporates projected future cash flows of the company, or alternative methodology including the Black-Scholes Option Pricing Model. Projections of current year and future period cash flows may be utilized and adjustments for
non-recurring items are considered. EBITDA multiples and discount rates utilized are estimated based on current market conditions and past experience in the private company marketplace, and are necessarily subjective in nature. The Fund will apply
liquidity and other discounts it deems appropriate to equity valuations where applicable. In addition, if the valuation of a portfolio company deteriorates the Fund will perform a liquidation analysis of the assets when applicable to determine fair
value.

The Fund may also use, when available, third-party transactions in a portfolio companys securities as the basis
of valuation (the private market method). The private market method will be used only with respect to completed transactions or firm offers made by sophisticated, independent investors.

For valuation purposes, the Fund uses the income approach to value its debt instruments. Since the Funds general intent is to hold
its loans to maturity, the fair value will not exceed the cost of the investment. A change in the assumptions the Fund uses to estimate fair value of debt securities using the yield analysis could have a material impact on the determination of fair
value. If credit quality deteriorates or a debt security is in workout status, the Fund may consider other factors in determining the fair value of the debt security, including the fair value attributable to the debt security from the enterprise
value of the portfolio company or the proceeds that would be received in an orderly or forced liquidation.

From time to time,
portfolio companies will default on certain covenants in loan agreements. When management has a reasonable belief that the portfolio company will be able to restructure the loan agreements to adjust for any defaults, the portfolio companys
securities continue to be valued assuming that the company is a going concern. In the event a portfolio company cannot



17



---

##### Table of Contents

generate adequate cash flow to meet the principal and interest payments on such indebtedness, is not successful in refinancing the debt upon its maturity; Fund management believes the credit
quality of a loan has deteriorated from changes in the business, underlying asset or market conditions and the company may not have the ability to meet future obligations; or the investment may be reduced or eliminated through foreclosure on the
portfolio companys assets or the portfolio companys reorganization or bankruptcy; the Fund may consider alternative methodology in determining the fair value of the debt security. These methodologies include the fair value attributable
to the debt security from the enterprise value of the portfolio company or an asset based approach including an analysis of the possible proceeds received in an orderly or forced liquidation.

Certificates of deposit purchased by the Fund generally will be valued at their face value, plus interest accrued to the date of
valuation.

The Audit Committee of the Board may engage independent, third-party valuation firms to conduct independent
appraisals and review managements preliminary valuations in order to make their own independent assessment of each privately-held investment that the Fund (a) has held for more than one year and (b) holds on its books at a fair value
of at least $2.0 million. The Audit Committee will review and evaluate the preliminary valuations of management and those of any third-party valuations firms, if so retained, and will review and evaluate any third-party firm supplements to reflect
any comments from management and/or Audit Committee members. Any third-party valuation data would be considered as one of many factors in a fair value determination. The Audit Committee then would recommend to the full Board fair values for all
privately-held securities based on all relevant factors.

Because of the inherent uncertainty of the valuation of portfolio
securities which do not have readily ascertainable market values, amounting to $27.1 million and $42.4 million as of June 30, 2010 and December 31, 2009, respectively, the Funds fair value determinations may materially differ from
the values that would have been used had a ready market existed for the securities. There were no publicly traded securities as of June 30, 2010 and December 31, 2009.

On a daily basis, the Fund adjusts its net asset value for the changes in the value of its publicly held securities, if applicable, and
material changes in the value of its private securities, generally determined on a quarterly basis or as announced in a press release, and reports those amounts to Lipper Analytical Services, Inc. Weekly and daily net asset values appear in various
publications, including Barrons and The Wall Street Journal.

Investment
TransactionsInvestment transactions are recorded on the accrual method. Realized gains and losses on investments sold are computed on a specific identification basis.

The Fund classifies its investments in accordance with the requirements of the 1940 Act. Under the 1940 Act, Control
Investments are defined as investments in companies in which EQS owns more than 25% of the voting securities or maintains greater than 50% of the board representation. Under the 1940 Act, Affiliate Investments are defined as those
non-control investments in companies in which EQS owns between 5% and 25% of the voting securities. Under the 1940 Act, Non-affiliate Investments are defined as investments that are neither Control Investments nor Affiliate Investments.

Interest Income RecognitionThe Fund records interest income, adjusted for amortization of premium and accretion
of discount, on an accrual basis to the extent that it expects to collect such amounts. The Fund accretes or amortizes discounts and premiums on securities purchased over the life of the respective security using the effective yield method. The
amortized cost of investments represents the original cost adjusted for the accretion of discount and/or amortization of premium on debt securities. The Fund stops accruing interest on investments when it determines that interest is no longer
collectible. If the Fund receives any cash after determining that interest is no longer collectible, it treats such cash as payment on the principal balance until the entire principal balance has been repaid, before it recognizes any additional
interest income.

Payment in Kind InterestThe Fund has loans in its portfolio that may pay payment in kind
(PIK) interest. The Fund adds PIK interest, if any, computed at the contractual rate specified in each loan agreement, to the principal balance of the loan and recorded as interest income. To maintain its status as a RIC, the Fund must
pay out to stockholders this non-cash source of income in the form of dividends even if it has not yet collected any cash in respect of such investments.

Cash FlowsFor purposes of the Statements of Cash Flows, the Fund considers all highly liquid temporary cash investments
purchased with an original maturity of three months or less to be cash equivalents. The Fund includes its investing activities within cash flows from operations. The Fund excludes Restricted Cash & Temporary Investments used for
purposes of complying with RIC requirements from cash equivalents.

Income TaxesThe Fund intends to comply with
the requirements of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net



18



---

##### Table of Contents

realized capital gains) which is distributed to stockholders. Therefore, no provision for federal income taxes is recorded in the financial statements. The Fund borrows money from time to time to
maintain its tax status under the Internal Revenue Code as a RIC. See Note 2 for further discussion of the Funds RIC borrowings.

Texas margin tax applies to legal entities conducting business in Texas, including previously non-taxable entities such as limited
partnerships and limited liability partnerships. The margin tax is based on our Texas sourced taxable margin. The tax is calculated by applying a tax rate to a base that considers both revenue and expenses and therefore has the characteristics of an
income tax.

Fair Value Measurement In September 2006, the Financial Accounting Standard Board (FASB) issued
guidance regarding Fair Value Measurementswhich defined fair value, establishes a framework for measuring fair value, outlined a fair value hierarchy based on inputs used to measure fair value and enhanced disclosure requirements for
fair value measurements. The guidance did not change existing guidance as to whether an instrument is carried at fair value. The Fund adopted changes issued by the FASB to fair value disclosures of financial instruments which defines fair value as
the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Fund has categorized all investments recorded at fair value based upon the level of judgment associated with the inputs used to
measure their fair value. Hierarchical levels, directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:

Level 1  Inputs are unadjusted, quoted prices in active markets for identical assets at the measurement date. The types of assets
carried at Level 1 fair value generally are equities listed in active markets.

Level 2  Inputs (other than quoted prices
included in Level 1) are either directly or indirectly observable for the asset in connection with market data at the measurement date and for the extent of the instruments anticipated life. Fair valued assets that are generally included in
this category are warrants held in a public company.

Level 3  Inputs reflect managements best estimate of what
market participants would use in pricing the asset at the measurement date. It includes prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. Generally, assets carried at fair value and
included in this category are debt, warrants and/or other equity investments held in a private company. For loan and debt securities, the Fund has performed a yield analysis assuming a hypothetical current sale of the security. The yield analysis
considers changes in interest rates and changes in leverage levels of the portfolio company as compared to the market interest rates and leverage levels. Assuming the credit quality of the portfolio company remains stable, the Fund will use the
value determined by the yield analysis as the fair value for that security.

The Fund will record unrealized depreciation on
investments when it determines that the fair value of a security is less than its cost basis, and will record unrealized appreciation when it determines that the fair value is greater than its cost basis.

As of June 30, 2010, investments measured at fair value on a recurring basis are categorized in the tables below based on the lowest
level of significant input to the valuations:



|                                    |  |       |        |                                                             |   |                                             |  |                                        |   |  |   |       
|----------------------------------- |  | ----- | ------ | ----------------------------------------------------------- | - | ------------------------------------------- |  | -------------------------------------- | - |  | - | ------
|                                    |  |       |        | Fair Value Measurements As of June 30, 2010                
|(in thousands)                      |  | Total |        | Quoted Prices inActive Markets forIdentical Assets(Level
1) |   | Significant OtherObservable Inputs(Level 2) |  | SignificantUnobservableInputs(Level 3)
|Assets                              |  |       |        |                                                             |   |                                             |  |                                        |   |  |   |       
|Investments:                        |  |       |        |                                                             |   |                                             |  |                                        |   |  |   |       
|Control investments                 |  | $     | 21,412 |                                                             | $ |                                            |  | $                                      |  |  | $ | 21,412
|Affiliate investments               |  |       | 633    |                                                             |   |                                            |  |                                        |  |  |   | 633   
|Non-Affiliate investments           |  |       | 5,070  |                                                             |   |                                            |  |                                        |  |  |   | 5,070 
|                                    |  |       |        |                                                             |   |                                             |  |                                        |   |  |   |       
|Total assets reported at fair value |  | $     | 27,115 |                                                             | $ |                                            |  | $                                      |  |  | $ | 27,115



19



---

##### Table of Contents

As of December 31, 2009, investments measured at fair value on a recurring basis are
categorized in the tables below based on the lowest level of significant input to the valuations:



|                                                                                                                                                                                                           |  |                                                                          |        |   |                                                             |   |        |                                             |  |   |                                         |   |  |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------ | ------ | - | ----------------------------------------------------------- | - | ------ | ------------------------------------------- |  | - | --------------------------------------- | - |  | - | ------- | -
|                                                                                                                                                                                                           |  |                                                                          |        |   | Fair Value Measurements As of December 31, 2009             |  
|(in thousands)                                                                                                                                                                                             |  | Total                                                                    |        |   | Quoted Prices inActive Markets forIdentical Assets(Level
1) |   |        | Significant OtherObservable Inputs(Level 2) |  |   | SignificantUnobservableInputs
(Level 3) |  
|Assets                                                                                                                                                                                                     |  |                                                                          |        |   |                                                             |   |        |                                             |  |   |                                         |   |  |   |         |  
|Investments:                                                                                                                                                                                               |  |                                                                          |        |   |                                                             |   |        |                                             |  |   |                                         |   |  |   |         |  
|Control investments                                                                                                                                                                                        |  | $                                                                        | 28,729 |   |                                                             | $ |       |                                             |  | $ |                                        |   |  | $ | 28,729  |  
|Affiliate investments                                                                                                                                                                                      |  |                                                                          | 2,128  |   |                                                             |   |       |                                             |  |   |                                        |   |  |   | 2,128   |  
|Non-Affiliate investments                                                                                                                                                                                  |  |                                                                          | 11,554 |   |                                                             |   |       |                                             |  |   |                                        |   |  |   | 11,554  |  
|                                                                                                                                                                                                           |  |                                                                          |        |   |                                                             |   |        |                                             |  |   |                                         |   |  |   |         |  
|Total assets reported at fair value                                                                                                                                                                        |  | $                                                                        | 42,411 |   |                                                             | $ |       |                                             |  | $ |                                        |   |  | $ | 42,411  |  
|                                                                                                                                                                                                           |  |                                                                          |        |   |                                                             |   |        |                                             |  |   |                                         |   |  |   |         |  
|                                                                                                                                                                                                          
|The following table provides a reconciliation of fair value changes during the six months ending June 30, 2010 for all investments
for which we determine fair value using unobservable (Level 3) factors: | 
|                                                                                                                                                                                                           | 
|                                                                                                                                                                                                           |  | Fair value measurements using significant unobservable inputs 
(Level 3) |       
|(in thousands)                                                                                                                                                                                             |  | Control  Investments                                                     |        |   | Affiliate  Investments                                      |   |        | Non-affiliate  Investments                  |  |   | Total                                   |  
|Fair value as of December 31, 2009                                                                                                                                                                         |  | $                                                                        | 28,729 |   |                                                             | $ | 2,128  |                                             |  | $ | 11,554                                  |   |  | $ | 42,411  |  
|Total realized gains (losses)                                                                                                                                                                              |  |                                                                          |       |   |                                                             |   |       |                                             |  |   |                                        |   |  |   |        |  
|Change in unrealized appreciation (depreciation)                                                                                                                                                           |  |                                                                          | (6,174 | ) |                                                             |   | (780   | )                                           |  |   | (5,375                                  | ) |  |   | (12,329 | )
|Purchases, issuances and settlements, net                                                                                                                                                                  |  |                                                                          | (1,143 | ) |                                                             |   | (50    | )                                           |  |   | (1,774                                  | ) |  |   | (2,967  | )
|Change in control                                                                                                                                                                                          |  |                                                                          |       |   |                                                             |   | (665   | )                                           |  |   | 665                                     |   |  |   |        |  
|Transfers in (out) of Level 3                                                                                                                                                                              |  |                                                                          |       |   |                                                             |   |       |                                             |  |   |                                        |   |  |   |        |  
|                                                                                                                                                                                                           |  |                                                                          |        |   |                                                             |   |        |                                             |  |   |                                         |   |  |   |         |  
|Fair value as of June 30, 2010                                                                                                                                                                             |  | $                                                                        | 21,412 |   |                                                             | $ | 633    |                                             |  | $ | 5,070                                   |   |  | $ | 27,115  |  
|                                                                                                                                                                                                           |  |                                                                          |        |   |                                                             |   |        |                                             |  |   |                                         |   |  |   |         |  
|                                                                                                                                                                                                          
|The following table provides a reconciliation of fair value changes during the six months ending June 30, 2009 for all investments
for which we determine fair value using unobservable (Level 3) factors: | 
|                                                                                                                                                                                                           | 
|                                                                                                                                                                                                           |  | Fair value measurements using unobservable inputs (Level 3)              |       
|(in thousands)                                                                                                                                                                                             |  | Control  Investments                                                     |        |   | Affiliate  Investments                                      |   |        | Non-affiliate  Investments                  |  |   | Total                                   |  
|Fair value as of December 31, 2008                                                                                                                                                                         |  | $                                                                        | 36,885 |   |                                                             | $ | 20,974 |                                             |  | $ | 10,135                                  |   |  | $ | 67,994  |  
|Total realized gains (losses)                                                                                                                                                                              |  |                                                                          |       |   |                                                             |   |       |                                             |  |   |                                        |   |  |   |        |  
|Change in unrealized appreciation (depreciation)                                                                                                                                                           |  |                                                                          | (1,273 | ) |                                                             |   | (2,978 | )                                           |  |   | (737                                    | ) |  |   | (4,988  | )
|Purchases, issuances and settlements, net                                                                                                                                                                  |  |                                                                          | 209    |   |                                                             |   | 369    |                                             |  |   | 489                                     |   |  |   | 1,067   |  
|Transfers in (out) of Level 3                                                                                                                                                                              |  |                                                                          |       |   |                                                             |   |       |                                             |  |   | 737                                     |   |  |   | 737     |  
|                                                                                                                                                                                                           |  |                                                                          |        |   |                                                             |   |        |                                             |  |   |                                         |   |  |   |         |  
|Fair value as of June 30, 2009                                                                                                                                                                             |  | $                                                                        | 35,821 |   |                                                             | $ | 18,365 |                                             |  | $ | 10,624                                  |   |  | $ | 64,810  |  
|                                                                                                                                                                                                           |  |                                                                          |        |   |                                                             |   |        |                                             |  |   |                                         |   |  |   |         |  



20



---

##### Table of Contents

ReclassificationCertain amounts for the three and six months ended
June 30, 2009 have been reclassified in the comparative financial statements to be comparable to the presentation in the three and six months ended June 30, 2010. These reclassifications had no effect on net assets, net income or cash
flows from operating activities.

(4) Related Party Transactions and Agreements

The Fund had entered into an investment advisory agreement dated June 30, 2005 with Moore Clayton Capital Advisors, Inc., pursuant to
which Moore Clayton Capital Advisors, Inc. (MCCA), provided investment advisory services in exchange for an advisory fee. The Fund also had entered into an administration agreement dated June 30, 2005 with Equus Capital
Administration Company, Inc. (ECAC), pursuant to which ECAC provided administrative services in exchange for an administrative fee. The Funds Board of Directors terminated the advisory agreement and the administrative agreement
effective June 30, 2009. The Fund is now internally managed. This means that the Fund directly employs its management team and incur the costs and expenses associated with Fund operations. There is no outside investment advisory
organization providing services to the Fund under a fee-based advisory agreement, or an administrative organization charging the Fund for services rendered since June 30, 2009.

As compensation for services to the Fund, each Independent Director receives an annual fee of $20,000 paid quarterly in arrears, a fee of
$2,000 for each meeting of the Board of Directors attended in person, a fee of $1,000 for participation in each telephonic meeting of the Board and a fee of $1,000 for each committee meeting attended, and reimbursement of all out-of-pocket expenses
relating to attendance at such meetings. A quarterly fee of $2,500 is paid to the Chairman of the Independent Directors and the Chairman of the Audit Committee. An annual fee of $15,000 is paid to the Chairman of the Board of Directors. In respect
of services provided to the Fund by members of the Board not in connection with their roles and duties as directors, the Fund shall pay a rate of $250 per hour for services rendered ($0.02 million is included in Compensation expense in the June 30,
2010 Statements of Operations).

During the quarter ended June 30, 2010, the Fund ratified and approved the use of A+
Filings, LLC (A+ Filings) to file its reports with the Securities and Exchange Commission. Mr. Kenneth I. Denos, Secretary of the Fund, holds a majority of the voting shares of A+ Filings. The Fund paid $4,000 for services rendered
during the period.

(5) Dividends

On February 27, 2009, the Fund announced the declaration of a first quarter dividend of $0.1075 per share. The Fund issued 296,528
additional shares of its common stock at an effective price of $3.10 per share and paid $2,000 in cash for fractional shares. This dividend was 100% qualified and classified as 21% ordinary income and 79% return of capital.

On March 24, 2009, the Fund announced that it suspended its managed distribution policy and payment of quarterly distributions for
an indefinite period, following the distribution of the first quarter dividend, paid on March 30, 2009. The Fund will continue to pay out net investment income and/or realized capital gains, if any, on an annual basis as required under the
Investment Company Act of 1940.

(6) Portfolio Securities

During the six months ended June 30, 2010, the Fund received payment in full of a promissory note issued by Trulite, in the amount of
$2.6 million, which included interest income of $0.3 million and received a distribution from Equity Media Development Company of $1.0 million. During the six months ended June 30, 2010, the Fund also had investment activity of $0.5 million in
several follow-on investments, including $0.3 million in the form of accrued interest and dividends received in the form of paid-in-kind (PIK). The following table includes significant investment activity during the six months ended June 30,
2010 (in thousands):



|                                         |  |                     |   |                      |   |           |  |     |     |       |   |     |  |   |    
|---------------------------------------- |  | ------------------- | - | -------------------- | - | --------- |  | --- | --- | ----- | - | --- |  | - | ---
|                                         |  | Investment Activity |   |                     
|                                         |  | New Investments     |   | Existing Investments |   |          
|Portfolio Company                        |  | Cash                |   | PIK                  |   | Follow-On |  | PIK |     | Total
|Trulite, Inc.                            |  | $                   |  |                      | $ |          |  | $   | 200 |       | $ |    |  | $ | 200
|1848 Capital Partners LLC                |  |                     |  |                      |   |          |  |     |    |       |   | 144 |  |   | 144
|London Bridge Entertainment Partners Ltd |  |                     |  |                      |   |          |  |     |    |       |   | 109 |  |   | 109
|Big Apple Entertainment Partners LLC     |  |                     |  |                      |   |          |  |     |    |       |   | 80  |  |   | 80 
|                                         |  |                     |   |                      |   |           |  |     |     |       |   |     |  |   |    
|                                         |  | $                   |  |                      | $ |          |  | $   | 200 |       | $ | 333 |  | $ | 533
|                                         |  |                     |   |                      |   |           |  |     |     |       |   |     |  |   |    

Net unrealized depreciation on investments increased
by $ 12.3 million during the six months ended June 30, 2010, to a net unrealized depreciation of $ 27.6 million. Such increase in depreciation resulted primarily from the following changes:



| | (i) | Decline in estimated fair market value of 1848 Capital Partners LLC (1848) of $2.4 million. The management of 1848 has indicated that the company will have
to raise outside capital to repay the promissory note due to the Fund upon maturity in January 2011. Due to the uncertainty of the recoverability of the promissory note, the Fund determined that the fair value of the promissory note was impaired.
The promissory note is personally guaranteed jointly and serverally by the principals of 1848, who also guarantee the Big Apple Entertainment Partners LLC and London Bridge Entertainment Partners Ltd promissory notes.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



21



---

##### Table of Contents

| | (ii) | Decline in fair market value of Equus Media Development Company, LLC (EMDC) of $2.3 million. In June, the Fund received a distribution of $1.0 million
from EMDC. Currently, EMDC holds $1.7 million in cash and has a remaining funding commitment of $0.6 under its agreement with Kopleson Entertainment. In addition, if Kopleson Entertainment generates $0.2 million of income for EMDC, that event will
trigger an additional $1.0 million funding obligation of EMDC. EMDC has written down the fair value of its assets.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | Decline in fair market value of Infinia Corporation of $1.5 million. Infinia has informed the Fund of its significant capital and liquidity needs. Based on these
factors, the nominal equity holdings of the Fund and the future potential dilution, the Fund has written down the investment to $0.
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | Decline in fair market value of London Bridge Entertainment Partners Ltd (London Bridge) of $2.5 million. London Bridge has experienced a working capital
shortfall and required an additional $0.6 million investment from the Fund in July 2010. Based on the current condition of London Bridge, the Fund determined the fair value of the loan was impaired. The loan is senior in liquidation preference and
is guaranteed by the management principals, many of which guarantee the 1848 Capital Partners LLC and Big Apple Entertainment Partners LLC promissory notes.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (v) | Decline in fair market value of Riptide Entertainment, LLC (Riptide) of $3.0 million. Riptide owns subordinated debt interest in both Big Apple
Entertainment Partners LLC and London Bridge directly and through derivative entities and equity directly in London Bridge. The Fund has determined the value of these investments to be impaired based on the operating results and liquidity concerns
of both companies.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vi) | Decline in fair market value of ConGlobal Industries Holding, Inc. (ConGlobal) of $0.9 million. ConGlobal has experienced a decline in its storage business
due to the increasing activity of shipping containers. While the activity has contributed to revenue through other services of the company, the contribution margin of these services is less than the storage revenue and has had a negative impact on
its operating cash flow.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vii) | Increase in fair market value of The Bradshaw Group of $0.1 million. The Bradshaw Group has seen an incremental increase in business activity during the past twelve
months which has improved the value of the Funds equity holdings.
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (viii) | Increase in fair market value of PalletOne, Inc. of $0.1 million. PalletOne, Inc. has continued to generate cash flows which have reduced debt levels. The Fund believes
the performance of the company in recent years and its continued debt reduction initiatives has created value for its equity holdings.
| | ------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ix) | Increase in fair market value of Sovereign Business Forms, Inc. (Sovereign) of $0.3 million. Sovereign has continued to reduce its debt which has caused a
corresponding increase to the value of the equity held by the Fund in Sovereign.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (x) | Increase in fair market value of Trulite, Inc. (Trulite) of $0.1 million. The Fund holds approximately nine million warrants in Trulite, many with a nominal
exercise price. Based on Trulites recent equity raise and repayment of the Funds debt, the Fund determined the warrants have increased in value.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

During the six months ended June 30, 2009, the Fund made follow-on investments of $1.2 million in several portfolio companies,
including $0.5 million in the form of interest and dividends paid-in-kind or original issue discount/premium amortization.

The following table includes significant new and follow-on investments during the six months ended June 30, 2009 (in thousands):



|                                         |  |                     |   |                      |   |           |  |     |     |       |   |     |  |   |      
|---------------------------------------- |  | ------------------- | - | -------------------- | - | --------- |  | --- | --- | ----- | - | --- |  | - | -----
|                                         |  | Investment Activity |   |                     
|                                         |  | New Investments     |   | Existing Investments |   |          
|Portfolio Company                        |  | Cash                |   | PIK                  |   | Follow-On |  | PIK |     | Total
|Nickent Golf, Inc.                       |  | $                   |  |                      | $ |          |  | $   | 370 |       | $ |    |  | $ | 370  
|Riptide Entertainment, LLC               |  |                     |  |                      |   |          |  |     | 350 |       |   |    |  |   | 350  
|1848 Capital Partners LLC                |  |                     |  |                      |   |          |  |     |    |       |   | 312 |  |   | 312  
|Big Apple Entertainment Partners LLC     |  |                     |  |                      |   |          |  |     |    |       |   | 76  |  |   | 76   
|London Bridge Entertainment Partners Ltd |  |                     |  |                      |   |          |  |     |    |       |   | 101 |  |   | 101  
|                                         |  |                     |   |                      |   |           |  |     |     |       |   |     |  |   |      
|                                         |  | $                   |  |                      | $ |          |  | $   | 720 |       | $ | 489 |  | $ | 1,209
|                                         |  |                     |   |                      |   |           |  |     |     |       |   |     |  |   |      



22



---

##### Table of Contents

During the six months ended June 30, 2009, the Fund realized a net capital loss of
$0.03 million from the sale of U. S. Treasury Bills.

Net unrealized depreciation on investments increased by
$5.0 million during the six months ended June 30, 2009, from a net unrealized depreciation of $3.0 million to a net unrealized depreciation of $8.0 million. Such decrease in depreciation resulted primarily from decrease in estimated fair
market value of Infinia Corporation, Sovereign Business Forms, Inc., Spectrum Management, Inc., and Metic Group plc, resulting primarily from decreases in operations for the period.

(7) Recent Accounting Pronouncements

Effective January 1, 2010, the Fund adopted changes issued by the FASB to add new requirements for disclosures about significant
transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances and settlements relating to Level 3 measurements. In addition, the update clarifies existing fair value disclosures about the level of disaggregation
and about inputs and valuation techniques used to measure fair value. The adoption of this standard had no impact on our financial position and results of operations.

In January 2010, the FASB issued changes to disclosure requirements for fair value measurements. Specifically, the changes require a
reporting entity to disclose, in the reconciliation of fair value measurements using significant unobservable inputs (Level 3), separate information about purchases, sales, issuances, and settlements (that is, on a gross basis rather than as one net
number). These changes become effective for the Fund beginning January 1, 2011. Other than the additional disclosure requirements, the Fund does not anticipate that the adoption of this standard will have a material effect on our financial
position and results of operations.

(8) Subsequent Events

Management performed an evaluation of the Funds events and transactions through the date the financial statements were available to
be issued, noting the following subsequent events:

On July 1, 2010, the Fund sold U.S. Treasury bills for $19.0 million
and repaid the margin loan.

On July 1, 2010, the Fund invested $0.6 million in London Bridge Entertainment Partners Ltd
as a follow-on investment in the form of an 18% promissory note. The note was funded to assist London Bridge Entertainment Partners Ltd in meeting immediate working capital requirements and is due August 28, 2010. The $0.6 million note is
senior to other debt and equity in liquidation preference, restricts the company from incurring any debt senior or equal in liquidation preference, prohibits payment to subordinated debt and equity, and is personally guaranteed by the individuals
who control the management of the company.



|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

Overview

Equus
Total Return, Inc. is a business development company which invests in equity and equity-oriented securities issued by privately-owned companies in transactions negotiated directly with such companies. The Fund did not make any new investments other
than follow-on investments during the six months ended June 30, 2010 and June 30, 2009.

The valuation of the
Funds investments is the most significant area of judgment impacting the financial statements. The Funds portfolio investments are valued at estimates of fair value, with the net change in unrealized appreciation or depreciation included
in the determination of net assets. Almost all of the long-term investments are in privately-held or restricted securities, the valuation of which is necessarily subjective. Actual values may differ materially from the Funds estimated fair
value.

Most of the Funds portfolio companies utilize leverage, and the leverage magnifies the return on its
investments. For example, if a portfolio company has a total enterprise value of $10.0 million and $7.5 million in funded indebtedness, its equity is valued at $2.5 million. If the enterprise value increases or decreases by 20%, to $12.0 million or
$8.0 million, respectively, the value of the equity increases or decreases by 80%, to $4.5 million or $0.5 million, respectively. This disproportionate increase or decrease adds a level of volatility to the Funds equity-oriented portfolio
securities.

On June 12, 2009, the Fund and its Board of Directors announced plans to internalize Fund
management. The Funds investment advisory agreement with MCCA was terminated June 30, 2009. The Fund now directly employs its management team and incurs the costs and expenses associated with Fund operations. There is no outside
investment advisory organization providing services to the Fund under a fee-based advisory agreement, or an administrative organization charging the Fund for services rendered.



23



---

##### Table of Contents

The Fund derives its cash flow from interest and dividends received and sales of securities
from its investment portfolio. The Fund pays certain general and administrative fees and interest expense on its existing debt. The Fund also spends its cash on new investments, or follow-on investments which may be required by certain portfolio
companies. Because the investments are illiquid, the Fund utilizes leverage to provide the required funds, and the leverage is then repaid from the sale of portfolio securities.

Since the Fund is a closed-end business development company, stockholders do not have the right to present their shares to the Fund for
redemption. Because the Fund shares continue to trade at a discount, the Board of Directors has determined that it would be in the best interest of the Funds stockholders for the Fund to be authorized to attempt to reduce or eliminate the
market value discount from net asset value. Accordingly, from time to time the Fund may, but is not required to, repurchase its shares (including by means of tender offers) to attempt to reduce or eliminate the discount or to increase the net asset
value of those shares.

Significant Developments

The Board and management continue to believe that current market conditions and recent portfolio performance dictate the need to pursue a
different direction for the Fund and its shareholders. Accordingly, in addition to the writedowns described above, the following are key activities that occurred during the quarter:



| | (i) | Proxy Contest.The Funds 2010 nominated slate of directors was contested. In a successful attempt to support its slate, the Fund incurred expenses totaling
$0.9 million for the six months ended June 30, 2010 and spent a substantial amount of time.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | Board of Directors Changes. On May 12, 2010, Equus shareholders elected four new members to the Funds board of directors, each of whom had no prior
connection with the Fund. These four new individuals have sound finance and investment management backgrounds, execution and management expertise, access to deal flow across diverse industries around the world, and strength in global capital
markets. Summary biographies of the Funds board of directors, including these newly elected directors, can be viewed at the Funds website at www.equuscap.com.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | Leadership Changes. On June 8, 2010, the Fund announced the appointment of John A. Hardy as its Executive Chairman, Robert L. Knauss as Non-Executive
Chairman, and Fraser Atkinson as Chairman of the Funds audit committee. Mr. Hardy has had extensive experience in the insurance, finance and banking sectors, as well as international mergers and acquisitions. Mr. Knauss has
significant public company and corporate governance experience covering the past 20 years, and was also the former Dean of the University of Houston and Vanderbilt law schools. Mr. Atkinson was a partner at KPMG, LLP for over 14 years, having
left the firm in 2002 and was involved in both the technology and corporate finance sectors. Throughout his career he advised companies on over 300 financings.
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | Collection from Trulite. On June 30, 2010, the Fund announced that it had received $2.6 million in cash from Trulite, Inc. (Trulite) as full
payment of principal interest and collection costs owed pursuant to a promissory note issued by Trulite to the Fund in the principal amount of $2.3 million. The Fund retains certain warrants to acquire shares of Trulite stock that it received in
connection with its initial investment in Trulite.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Significant Accounting Policies

The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements:

Use of EstimatesThe preparation of financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Although management believes the estimates and assumptions used in preparing
these interim financial statements and related notes are reasonable in light of known facts and circumstances, actual results could differ from those estimates.

Valuation of InvestmentsPortfolio investments are carried at fair value with the net change in unrealized appreciation or
depreciation included in the determination of net assets. Valuations of portfolio securities are performed in accordance with accounting principles generally accepted in the United States of America and the financial reporting policies of the SEC.
The applicable methods prescribed by such principles and policies are described below:

Publicly-traded portfolio
securitiesInvestments in companies whose securities are publicly traded are generally valued at their quoted market price at the close of business on the valuation date.



24



---

##### Table of Contents

Privately-held portfolio securitiesThe fair value of investments for which no
market exists is determined on the basis of procedures established in good faith by the Board of Directors of the Fund. As a general principle, the current fair value of an investment would be the amount the Fund might reasonably expect
to receive for it upon its current sale, in an orderly manner. Appraisal valuations are necessarily subjective and the estimated values arrived at by the Fund may differ materially from amounts actually received upon the disposition of portfolio
securities.

Generally, cost is the primary factor used to determine fair value until significant developments affecting the
portfolio company (such as results of operations or changes in general market conditions) provide a basis for use of an appraisal valuation. Appraised values are determined quarterly by management, subject to the approval of the Board of Directors.

Most of the Funds common equity investments of privately held companies are appraised either at a multiple of EBITDA
generated by the company in its most recent fiscal year, less outstanding funded indebtedness and other senior securities such as preferred stock, utilizing a discounted cash flow model which incorporates projected future cash flows of the company,
or alternative methodology including the Black-Scholes Option Pricing Model. Projections of current year and future period cash flows may be utilized and adjustments for non-recurring items are considered. EBITDA multiples and discount rates
utilized are estimated based on current market conditions and past experience in the private company marketplace, and are necessarily subjective in nature. In addition, the Fund will apply appropriate liquidity and other discounts to equity
valuations where applicable.

The Fund may also use, when available, third-party transactions in a portfolio companys
securities as the basis of valuation (the private market method). The private market method will be used only with respect to completed transactions or firm offers made by sophisticated, independent investors.

For valuation purposes, the Fund uses the income approach to value its debt instruments. Since the Funds general intent is to hold
its loans to maturity, the fair value will not exceed the cost of the investment. A change in the assumptions the Fund uses to estimate fair value of debt securities using the yield analysis could have a material impact on the determination of fair
value. If credit quality deteriorates or a debt security is in workout status, the Fund may consider other factors in determining the fair value of the debt security, including the fair value attributable to the debt security from the enterprise
value of the portfolio company or the proceeds that would be received in an orderly or forced liquidation.

From time to time,
portfolio companies will default on certain covenants in loan agreements. When management has a reasonable belief that the portfolio company will be able to restructure the loan agreements to adjust for any defaults, the portfolio companys
securities continue to be valued assuming that the company is a going concern. In the event a portfolio company cannot generate adequate cash flow to meet the principal and interest payments on such indebtedness; is not successful in refinancing the
debt upon its maturity; Fund management believes the credit quality of a loan has deteriorated from changes in the business, underlying asset or market conditions and the company may not have the ability to meet future obligations; or the investment
may be reduced or eliminated through foreclosure on the portfolio companys assets or the portfolio companys reorganization or bankruptcy; the Fund may consider alternative methodology in determining the fair value of the debt security.
These methodologies include the fair value attributable to the debt security from the enterprise value of the portfolio company or an asset based approach including an analysis of the possible proceeds received in an orderly or forced liquidation.

Certificates of deposit purchased by the Fund generally will be valued at their face value, plus interest accrued to the date
of valuation.

The Audit Committee of the Board may engage independent, third-party valuation firms to conduct independent
appraisals and review managements preliminary valuations in order to make their own independent assessment of each privately-held investment that the Fund (a) has held for more than one year and (b) holds on its books at a fair value
of at least $2.0 million. The Audit Committee will review and evaluate the preliminary valuations of management and those of any third-party valuations firms, if so retained, and will review and evaluate any third-party firm supplements to reflect
any comments from management and/or Audit Committee members. Any third-party valuation data would be considered as one of many factors in a fair value determination. The Audit Committee then would recommend to the full Board fair values for all
privately-held securities based on all relevant factors.

Because of the inherent uncertainty of the valuation of portfolio
securities which do not have readily ascertainable market values, amounting to $27.1 million and $42.4 million as of June 30, 2010 and December 31, 2009, respectively, the Funds fair value determinations may materially differ from
the values that would have been used had a ready market existed for the securities. There were no publicly traded securities as of June 30, 2010 and December 31, 2009.



25



---

##### Table of Contents

On a daily basis, the Fund adjusts its net asset value for the changes in the value of its
publicly held securities, if applicable, and material changes in the value of its private securities, generally determined on a quarterly basis or as announced in a press release, and reports those amounts to Lipper Analytical Services, Inc. Weekly
and daily net asset values appear in various publications, including Barrons and The Wall Street Journal.

Federal
Income Taxes

The Fund intends to comply with the requirements of the Code necessary for us to qualify as a RIC. So long as
it complies with these requirements, the Fund generally will not be subject to corporate-level federal income taxes on otherwise taxable income (including net realized capital gains) distributed to stockholders. Therefore, the Fund did not record a
provision for federal income taxes in its financial statements. The Fund may borrow money from time to time to maintain its status as a RIC under the Code.

Interest Income Recognition

The Fund records interest income, adjusted for amortization of premium and accretion of discount, on an accrual basis to the extent that
it expects to collect such amounts. The Fund stops accruing interest on investments when it determines that interest is no longer collectible. If the Fund receives any cash after determining that interest is no longer collectible, it treats such
cash as payment on the principal balance until the entire principal balance has been repaid, before it recognizes any additional interest income. The Fund accretes or amortizes discounts and premiums on securities purchased over the life of the
respective security using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discount and/or amortization of premium on debt securities.

Payment in Kind Interest

The Fund has loans in its portfolio that may pay payment in kind (PIK) interest. The Fund adds PIK interest, if any, computed
at the contractual rate specified in each loan agreement, to the principal balance of the loan and recorded as interest income. To maintain its status as a RIC, the Fund must pay out to stockholders this non-cash source of income in the form of
dividends even if it has not yet collected any cash in respect of such investments.

Current Market Conditions

Since late 2007, the state of the economy in the U.S. has been suffering from the effects of a recession and the recovery has been
slow. Unemployment has remained high and consumer confidence has deteriorated. Banks and other financial service companies experienced difficulties as bank lending continues to be restrictive and future bank failures remain a
concern. Beginning in 2009 economic conditions improved slightly as Gross Domestic Product (GDP) showed positive growth. In addition, equity and credit markets have experienced an increase in asset values, lower volatility and
improving liquidity. Concerns regarding the extent of the recovery and its sustainability have increased uncertainty.

To the
extent that recessionary conditions continue or worsen, the financial results of middle-market companies, like those in which we invest, will continue to experience deterioration, which ultimately could lead to difficulty in meeting debt service
requirements and an increase in defaults. Many of the companies in which we invest have experienced difficult operating environments and access to capital has been limited.

Consistent with other companies in the financial services sector, the Funds performance has been adversely affected. Between
June 30, 2009 and June 30, 2010, the net asset value of the Fund declined from $8.24 per share to $4.28 per share. Based on the closing price of the Funds shares on June 30, 2010, the Funds common stock is trading at a
37.4% discount to its net asset value.

During 2009, the Fund executed a management internalization strategy initiated to
enhance liquidity, achieve a lower operational cost structure, provide more assistance to portfolio companies and enhance communication with shareholders. The Fund believes these actions continue to be necessary to protect capital and liquidity
during this turbulent economic period in order to preserve and enhance shareholder value.

Liquidity and Capital Resources

Because of the nature and size of the portfolio investments, the Fund may periodically borrow funds to make qualifying investments to
maintain its tax status as a RIC. During the six months ended June 30, 2010 and 2009, the Fund borrowed 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 the Fund is unable to borrow funds to make qualifying investments, it may no longer qualify as a RIC. The Fund would then be subject to corporate income tax on its net investment income and realized capital gains, and distributions to
stockholders would be subject to income tax as ordinary dividends.



26



---

##### Table of Contents

The Fund has the ability to borrow funds and issue forms of senior securities representing
indebtedness or stock, such as preferred stock, subject to certain restrictions. Net taxable investment income and net taxable realized gains from the sales of portfolio investments are intended to be distributed at least annually, to the extent
such amounts are not reserved for payment of expenses and contingencies or to make follow-on or new investments. Pursuant to the restrictions in the existing line of credit, the Fund is not allowed to incur additional indebtedness unless approved by
the lender.

The Fund reserves the right to retain net long-term capital gains in excess of net short-term capital losses for
reinvestment or to pay contingencies and expenses. Such retained amounts, if any, will be taxable to the Fund as long-term capital gains and stockholders will be able to claim their proportionate share of the federal income taxes paid on such gains
as a credit against their own federal income tax liabilities. Stockholders will also be entitled to increase the adjusted tax basis of their Fund shares by the difference between their undistributed capital gains and their tax credit.

Management is continually evaluating the impact of current market conditions on its portfolio company valuations and their ability to
provide current income. Management has applied valuation techniques in a manner it believes is reasonable given the current market conditions. The Fund believes that its operating cash flow and cash on hand will be sufficient to meet operating
requirements and to finance routine capital expenditures through the next twelve months.

Results of Operations

Investment Income and Expense

Net investment loss after all expenses was $0.7 million and $0.4 million for the six months ended June 30, 2010 and
June 30, 2009, respectively and $0.6 million and $0.3 million for the three months ended June 30, 2010 and June 30, 2009, respectively. The increase in net investment loss generated at June 30, 2010 compared to June 30,
2009 is due primarily to the increase in professional fees along with mailing and printing expenses associated with a proxy contest the Fund encountered in the second quarter. These increases were partially offset by the increase in total investment
income for the six months ended June 30, 2010 as compared to the six months ended June 30, 2009.

Total income from
portfolio securities remained relatively unchanged for the six months ended June 30, 2010 and June 30, 2009 respectively and the three months ended June 30, 2010 and June 30, 2009, respectively.

During the first six months of 2009, the Funds former investment adviser received management fee compensation at an annual rate of
2% of the net assets of the Fund paid quarterly in arrears. Such fees amounted to $0.7 million for the six months ended June 30, 2009 and $0.4 million for the three months ended June 30, 2009. The Fund also reimbursed Equus Capital
Administration Company, Inc. (ECAC) its former administrator, for the costs and expenses incurred in performing its obligations and providing personnel and facilities under the Funds Administration Agreement with ECAC, provided
that such reimbursements did not exceed $450,000 per year. ECAC received $0.2 million for the six months ended June 30, 2009 and $0.1 million for the three months ended June 30, 2009. As a result of the internalization management, the Fund
assumed these obligations directly beginning July 1, 2009.

Professional fees increased to $1.2 million for the six
months ended June 30, 2010 from $0.6 million for the six months ended June 30, 2009 and to $0.8 million for the three months ended June 30, 2010 from $0.3 million for the three months ended June 30, 2009. These increases were due
to the increase in legal fees ($0.4 million) and solicitiation costs ($0.2 million) associated with the Funds annual shareholder meeting held in May 2010 and resulting proxy contest.

Compensation expense was $0.5 million for the six months ended June 30, 2010 and $0.2 million for the three months ended
June 30, 2010, respectively. General and administrative fees were $0.1 for the six month ended June 30, 2010 and $0.05 million for the three months ended June 30, 2010. Before the internalization of management, there were no
compensation and general and administrative fees.

Realized Gains and Losses on Sales of Portfolio Securities

During the six months ended June 30, 2010, the Fund realized net capital losses of $0.005 million from the sale of U.S. Treasury
Bills.

During the three months ended June 30, 2010, the Fund realized net capital losses of $0.002 million from the sale
of U.S. Treasury Bills.

During the six months ended June 30, 2009, the Fund realized net capital losses of $0.03 million
from the sale of U.S. Treasury Bills.

During the three months ended June 30, 2009, the Fund realized net capital losses
of $0.01 million from the sale of U.S. Treasury Bills.



27



---

##### Table of Contents

Changes in Unrealized Appreciation/Depreciation of Portfolio Securities

Net unrealized depreciation on investments increased by $12.3 million during the six months ended June 30, 2010, to a net unrealized
depreciation of $27.6 million. The depreciation of portfolio securities resulted primarily from the following changes:



| | (i) | Decline in estimated fair market value of 1848 Capital Partners LLC (1848) of $2.4 million. The management of 1848 has indicated that the company will have
to raise outside capital to repay the promissory note due to the Fund upon maturity in January 2011. Due to the uncertainty of the recoverability of the promissory note, the Fund determined that the fair value of the promissory note was impaired.
The promissory note is personally guaranteed jointly and serverally by the principals of 1848, who also guarantee the Big Apple Entertainment Partners LLC and London Bridge Entertainment Partners Ltd promissory notes.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | Decline in fair market value of Equus Media Development Company, LLC (EMDC) of $2.3 million. In June, the Fund received a distribution of $1.0 million from
EMDC. Currently EMDC holds $1.7 million in cash and has a remaining funding commitment of $0.6 under its agreement with Kopleson Entertainment. In addition, if Kopleson Entertainment generates $0.2 million of income for EMDC, that event will trigger
an additional $1.0 million funding obligation of EMDC. EMDC has written down the fair value of its assets.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | Decline in fair market value of Infinia Corporation of $1.5 million. Infinia has informed the Fund of its significant capital and liquidity needs. Based on these
factors, the nominal equity holdings of the Fund, and the future potential dilution, the Fund has written down the investment to $0.
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | Decline in fair market value of London Bridge Entertainment Partners Ltd (London Bridge) of $2.5 million. London Bridge has experienced a working capital
shortfall and required an additional $0.6 million investment from the Fund in July 2010. Based on the current condition of London Bridge, the Fund determined the fair value of the loan was impaired. The loan is senior in liquidation preference and
is guaranteed by the management principals, many of which guarantee the 1848 Capital Partners LLC and Big Apple Entertainment Partners LLC promissory notes.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (v) | Decline in fair market value of Riptide Entertainment, LLC (Riptide) of $3.0 million. Riptide owns subordinated debt interest in both Big Apple
Entertainment Partners LLC and London Bridge directly and through derivative entities and equity directly in London Bridge. The Fund has determined the value of these investments to be impaired based on the operating results and liquidity concerns
of both companies.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vi) | Decline in fair market value of ConGlobal Industries Holding, Inc. (ConGlobal) of $0.9 million. ConGlobal has experienced a decline in its storage business
due to the increasing activity of shipping containers. While the activity has contributed to revenue through other services of the company, the contribution margin of these services is less than the storage revenue and has had a negative impact on
its operating cash flow.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vii) | Increase in fair market value of The Bradshaw Group of $0.1 million. The Bradshaw Group has seen an incremental increase in business activity during the past twelve
months which has improved the value of the Funds equity holdings
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (viii) | Increase in fair market value of PalletOne, Inc. of $0.1 million. PalletOne, Inc. has continued to generate cash flows which have reduced debt levels. The Fund believes
the performance of the company in recent years and its continued debt reduction initiatives has created value for its equity holdings.
| | ------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ix) | Increase in fair market value of Sovereign Business Forms, Inc. (Sovereign) of $0.3 million. Sovereign has continued to reduce its debt which has caused a
corresponding increase to the value of the equity held by the Fund in Sovereign.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (x) | Increase in fair market value of Trulite, Inc. (Trulite) of $0.1 million. The Fund holds approximately nine million warrants in Trulite, many with a nominal
exercise price. Based on Trulites recent equity raise and repayment of the Funds debt, the Fund determined the warrants have increased in value.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net unrealized depreciation on investments increased by $5.0 million during the six months ended June 30, 2009, from a net
unrealized depreciation of $3.0 million to a net unrealized depreciation of $8.0 million. Such decrease in depreciation resulted primarily from decrease in estimated fair market value of Infinia Corporation, Sovereign Business Forms, Inc., Spectrum
Management, Inc., and Metic Group plc, resulting primarily from decreases in operations for the period.



28



---

##### Table of Contents

Dividends

On February 27, 2009, the Fund announced the declaration of a first quarter dividend of $0.1075 per share. The Fund issued 296,528
additional shares of its common stock at an effective price of $3.10 per share and paid $2,000 in cash for fractional shares. This dividend was 100% qualified and classified as 21% ordinary income and 79% return of capital.

On March 24, 2009, the Fund announced that it suspended its managed distribution policy and payment of quarterly distributions for
an indefinite period, following the distribution of the first quarter dividend, paid on March 30, 2009. The Fund will continue to pay out net investment income and/or realized capital gains, if any, on an annual basis as required under the
Investment Company Act of 1940.

Portfolio Investments

During the six months ended June 30, 2010, the Fund received payment in full for the Trulite promissory note, in the amount of $2.6
million, which included interest income of $0.3 million and received a distribution from Equity Media Development Company of $1.0 million. During the six months ended June 30, 2010, the Fund also had investment activity of $0.5 million in
several follow-on investments, including $0.3 million in the form of accrued interest and dividends received in the form of paid-in-kind (PIK). The following table includes significant investment activity during the six months ended June 30,
2010 (in thousands):



|                                         |  |                     |   |                      |   |           |  |     |     |       |   |     |  |   |    
|---------------------------------------- |  | ------------------- | - | -------------------- | - | --------- |  | --- | --- | ----- | - | --- |  | - | ---
|                                         |  | Investment Activity |   |                     
|                                         |  | New Investments     |   | Existing Investments |   |          
|Portfolio Company                        |  | Cash                |   | PIK                  |   | Follow-On |  | PIK |     | Total
|Trulite, Inc.                            |  | $                   |  |                      | $ |          |  | $   | 200 |       | $ |    |  | $ | 200
|1848 Capital Partners LLC                |  |                     |  |                      |   |          |  |     |    |       |   | 144 |  |   | 144
|London Bridge Entertainment Partners Ltd |  |                     |  |                      |   |          |  |     |    |       |   | 109 |  |   | 109
|Big Apple Entertainment Partners LLC     |  |                     |  |                      |   |          |  |     |    |       |   | 80  |  |   | 80 
|                                         |  |                     |   |                      |   |           |  |     |     |       |   |     |  |   |    
|                                         |  | $                   |  |                      | $ |          |  | $   | 200 |       | $ | 333 |  | $ | 533
|                                         |  |                     |   |                      |   |           |  |     |     |       |   |     |  |   |    

During the six months ended June 30, 2009, the
Fund made follow-on investments of $1.2 million in several portfolio companies, including $0.5 million in the form of interest and dividends paid-in-kind or original issue discount/premium amortization.

The following table includes significant new and follow-on investments during the six months ended June 30, 2009 (in thousands):



|                                         |  |                     |   |                      |   |           |  |     |     |       |   |     |  |   |      
|---------------------------------------- |  | ------------------- | - | -------------------- | - | --------- |  | --- | --- | ----- | - | --- |  | - | -----
|                                         |  | Investment Activity |   |                     
|                                         |  | New Investments     |   | Existing Investments |   |          
|Portfolio Company                        |  | Cash                |   | PIK                  |   | Follow-On |  | PIK |     | Total
|Nickent Golf, Inc.                       |  | $                   |  |                      | $ |          |  | $   | 370 |       | $ |    |  | $ | 370  
|Riptide Entertainment, LLC               |  |                     |  |                      |   |          |  |     | 350 |       |   |    |  |   | 350  
|1848 Capital Partners LLC                |  |                     |  |                      |   |          |  |     |    |       |   | 312 |  |   | 312  
|Big Apple Entertainment Partners LLC     |  |                     |  |                      |   |          |  |     |    |       |   | 76  |  |   | 76   
|London Bridge Entertainment Partners Ltd |  |                     |  |                      |   |          |  |     |    |       |   | 101 |  |   | 101  
|                                         |  |                     |   |                      |   |           |  |     |     |       |   |     |  |   |      
|                                         |  | $                   |  |                      | $ |          |  | $   | 720 |       | $ | 489 |  | $ | 1,209
|                                         |  |                     |   |                      |   |           |  |     |     |       |   |     |  |   |      



29



---

##### Table of Contents

|Item 3. | Quantitative and Qualitative Disclosure about Market Risk
|------- | ---------------------------------------------------------

The Fund is subject to financial market risks, including changes in interest rates with respect to investments in debt securities and
outstanding debt payable, as well as changes in marketable equity security prices. The Fund does not use derivative financial instruments to mitigate any of these risks. The return on investments is generally not affected by foreign currency
fluctuations.

The Funds investments in portfolio securities consist of some fixed rate debt securities. Since the debt
securities are generally priced at a fixed rate, changes in interest rates do not directly impact interest income. In addition, changes in market interest rates are not typically a significant factor in the determination of fair value of these debt
securities, since the securities are generally held to maturity. Their fair values are determined on the basis of the terms of the debt security and the financial condition of the issuer.

A major portion of the Funds investment portfolio consists of debt and equity investments in private companies. Modest changes in
public market equity prices generally do not significantly impact the estimated fair value of these investments. However, significant changes in market equity prices can have a longer-term effect on valuations of private companies, which could
affect the carrying value and the amount and timing of gains or losses realized on these investments. A small portion of the investment portfolio also consists of common stocks in publicly traded companies. These investments are directly exposed to
equity price risk, in that a hypothetical ten percent change in these equity prices would result in a similar percentage change in the fair value of these securities.

The Fund is classified as a non-diversified investment company under the Investment Company Act, which means the Fund is not
limited in the proportion of its assets that may be invested in the securities of a single user. The value of one segment called Shipping Products and Services includes two portfolio companies and was 19.4% of the net asset value and 27.2% of the
Funds investments in portfolio company securities (at fair value) at June 30, 2010. Changes in business or industry trends or in the financial condition, results of operations, or the markets assessment of any single portfolio
company will affect the net asset value and the market price of the Funds common stock to a greater extent than would be the case if the Fund were a diversified company holding numerous investments.



|Item 4. | Controls and Procedures
|------- | -----------------------

The Fund maintains disclosure controls and other procedures that are designed to ensure that information required to be disclosed by the
Fund in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to the
Funds management, including its Executive Chairman and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

The Funds management, with the participation of the Funds Executive Chairman and Chief Financial Officer, have evaluated the
effectiveness of the design and operations of the Funds disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of June 30, 2010. Based on their evaluation, the
Funds Executive Chairman (Principal Executive Officer) and Chief Financial Officer concluded that the Funds disclosure controls and procedures were effective at a reasonable assurance level. There has been no change in the Funds
internal control over financial reporting during the quarter ended June 30, 2010, that has materially affected, or is reasonably likely to materially affect, the Funds internal control over financial reporting.

Part II. Other Information



|Item 1. | Legal Proceedings
|------- | -----------------

On June 30, 2009, the Fund received a Wells notice from the staff of the Securities and Exchange Commission
(SEC). Based on discussions with the SEC staff, the Fund believes that the issues the staff intends to pursue relate to a one-time administrative fee that the Fund paid in 2005 and the compensation of a certain Fund officer during
approximately the same time period. The Wells notice notified the Fund that the staff intends to recommend that the SEC bring a civil action against the Fund for possible violations of the securities laws. The Fund has been cooperating with the SEC
in this inquiry. In accordance with SEC procedures, the Fund has presented its perspective on these issues to the staff. The SEC has not made a formal decision regarding an enforcement proceeding. The Fund also understands that three persons (two of
whom are formerly associated with the Fund and the Funds former investment adviser) received similar Wells notices relating to the 2005 activity. The Fund understands that these individuals also will have an opportunity to present their
perspectives on these issues before any formal decision is made on enforcement proceedings.

On April 26, 2010, the SEC
also subpoenaed records of the Fund in connection with certain trades in the Funds shares by SPQR Capital LLP, SAE Capital Ltd., Versatile Systems Inc., Mobiquity Investments Limited, and anyone associated with those entities. The Fund has
fully cooperated with the SECs request.



30



---

##### Table of Contents

From time to time, the Fund is also a party to certain legal proceedings incidental to the
normal course of our business including the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot at this time be predicted with certainty, the Fund does not expect that these
proceedings will have a material effect upon the Funds financial condition or results of operations.



|Item 1A. | Risk Factors
|-------- | ------------

There have been no material changes in the Funds risk factors from the disclosure set forth in the Annual Report on Form 10-K for
the year ended December 31, 2009.

Readers should carefully consider these risks and all other information contained in
the annual report on Form 10-K, including the Funds consolidated financial statements and the related notes thereto. The risks and uncertainties described below are not the only ones facing the Fund. Additional risks and uncertainties not
presently known to the Fund, or not presently deemed material by the Fund, may also impair its operations and performance.



|Item 6. | Exhibits
|------- | --------



|3. | Articles of Incorporation and by-laws
|-- | -------------------------------------



| | (a) | Restated Certificate of Incorporation of the Fund, as amended. [Incorporated by reference to Exhibit 3(a) to Registrants Annual Report on Form 10-K for the year
ended December 31, 2007.]
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | Certificate of Merger dated June 30, 1993, between the Fund and Equus Investments Incorporated [Incorporated by reference to Exhibit 3(c) to Registrants
Annual Report on Form 10-K for the year ended December 31, 2007.]
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | Amended and Restated Bylaws of the Fund. [Incorporated by reference to Exhibit 3(b) to Registrants Current Report on Form 8-K filed on June 9, 2010]
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------



|10. | Material Contracts.
|--- | -------------------



| | (c) | Safekeeping Agreement between the Fund and Amegy Bank dated August 16, 2008. [Incorporated by reference to Exhibit 10(c) to Registrants Annual
Report on Form 10-K for the year ended December 31, 2008.]
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | Form of Indemnification Agreement between the Fund and its directors and certain officers. [Incorporated by reference to Exhibit 10(g) to Registrants Annual
Report on Form 10-K for the year ended December 31, 2004.]
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (e) | Form of Release Agreement between the Fund and certain of its officers and former officers. [Incorporated by reference to Exhibit 10(h) to Registrants Annual
Report on Form 10-K for the year ended December 31, 2004.]
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (f) | Code of Ethics of the Fund (Rule 17j-1) [Incorporated by reference to Exhibit 10(f) to Registrants Annual Report on Form 10-K for the year ended December 31,
2009.]
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (g).1 | Revolving Credit Note between the Fund and Amegy Bank National Association dated August 13, 2008. [Incorporated by reference to Exhibit 10 (g) to
Registrants Quarterly Report on Form 10-Q for the quarter ended September 30, 2008.]
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (g).2 | First Extension and Modification Agreement between the Fund and Amegy Bank National Associated dated February 15, 2010. [Incorporated by reference to Exhibit
10(g).2 to Registrants Quarterly Report on Form 10-Q for the quarter ended March 31, 2010.]
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (h) | Pledge and Security Agreement between the Fund and Amegy Bank National Association dated August 13, 2008. [Incorporated by reference to Exhibit 10 (h) to
Registrants Quarterly Report on Form 10-Q for the quarter ended September 30, 2008.]
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|31. | Rule 13a-14(a)/15d-14(a) Certifications
|--- | ---------------------------------------



| | 1. | Certification by Principal Executive Officer
| | -- | --------------------------------------------



| | 2. | Certification by Chief Financial Officer
| | -- | ----------------------------------------



|32. | Section 1350 Certifications
|--- | ---------------------------



| | 1. | Certification by Principal Executive Officer
| | -- | --------------------------------------------



| | 2. | Certification by Chief Financial Officer
| | -- | ----------------------------------------



31



---

##### Table of Contents

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has caused this report to
be signed by the undersigned, thereunto duly authorized.



|                      |  |  |  |                         
|--------------------- |  |  |  | ------------------------
|                      |  |  |  | EQUUS TOTAL RETURN, INC.
|                      |  | 
|Date: August 13, 2010 |  |  |  | /s/ John A. Hardy       
|                      |  |  |  | John A. Hardy           
|                      |  |  |  | Executive Chairman      



32