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 March 31,
2014

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 12,673,646 shares of the registrant’s
common stock, $.001 par value, outstanding, as of May 15, 2014.





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                                                           | 5   
|Statements of Cash Flows                                                                      | 6   
|Supplemental Information—Selected Per Share Data and Ratios                                   | 7   
|Schedule of Investments                                                                       | 8   
|Notes to Financial Statements                                                                 | 12  
|Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 23  
|Item 3. Quantitative and Qualitative Disclosure about Market Risk                             | 28  
|Item 4. Controls and Procedures                                                               | 28  
|PART II. OTHER INFORMATION                                                                    |     
|Item 1. Legal Proceedings                                                                     | 28  
|Item 1A. Risk Factors                                                                         | 30  
|Item 6. Exhibits                                                                              | 31  
|SIGNATURE                                                                                     | 32  
|                                                                                              |     

Table of Contents2





EQUUS TOTAL RETURN, INC.

BALANCE SHEETS



Part I. Financial Information

Item  1. Financial Statements





|                                                                                               |  | March 31,
                                                                                2014 |         | December 31,
                                                                                2013
|---------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------- | ------- | -------------------------------------------------------------------------------------------------
|                                                                                               |  | (unaudited)                                                                                    |         |                                                                                                  
|(in thousands, except per share amounts)                                                       |  |                                                                                                |         |                                                                                                  
|Assets                                                                                         |  |                                                                                                |         |                                                                                                  
|Investments in portfolio securities at fair value:                                             |  |                                                                                                |         |                                                                                                  
|Control investments (cost at $15,863 and $15,789 respectively)                                 |  | $                                                                                              | 11,179  |                                                                                                  
|Affiliate investments (cost at $350 and $350 respectively)                                     |  |                                                                                                | 250     |                                                                                                  
|Non-affiliate investments (cost at $1,321 and $1,321 respectively)                             |  |                                                                                                | 2,081   |                                                                                                  
|Total investments in portfolio securities at fair value                                        |  |                                                                                                | 13,510  |                                                                                                  
|Cash and cash equivalents                                                                      |  |                                                                                                | 18,690  |                                                                                                  
|Restricted cash and temporary cash investments                                                 |  |                                                                                                | —       |                                                                                                  
|Accounts receivable from investments                                                           |  |                                                                                                | 386     |                                                                                                  
|Accrued interest receivable                                                                    |  |                                                                                                | 444     |                                                                                                  
|Accounts receivable and other                                                                  |  |                                                                                                | 28      |                                                                                                  
|Total assets                                                                                   |  |                                                                                                | 33,058  |                                                                                                  
|Liabilities and net assets                                                                     |  |                                                                                                |         |                                                                                                  
|Accounts payable and accrued liabilities                                                       |  |                                                                                                | 254     |                                                                                                  
|Accounts payable to related parties                                                            |  |                                                                                                | 125     |                                                                                                  
|Borrowing under margin account                                                                 |  |                                                                                                | —       |                                                                                                  
|Total liabilities                                                                              |  |                                                                                                | 379     |                                                                                                  
|                                                                                               |  |                                                                                                |         |                                                                                                  
|Commitments and contingencies                                                                  |  |                                                                                                |         |                                                                                                  
|                                                                                               |  |                                                                                                |         |                                                                                                  
|Net assets                                                                                     |  | $                                                                                              | 32,679  |                                                                                                  
|                                                                                               |  |                                                                                                |         |                                                                                                  
|Net assets consist of:                                                                         |  |                                                                                                |         |                                                                                                  
|Common stock, par value                                                                        |  | $                                                                                              | 10      |                                                                                                  
|Capital in excess of par value                                                                 |  |                                                                                                | 51,700  |                                                                                                  
|Undistributed net investment losses                                                            |  |                                                                                                | (15,007 | )                                                                                                
|Unrealized depreciation of portfolio securities, net                                           |  |                                                                                                | (4,024  | )                                                                                                
|Total
    net assets                                                                           |  | $                                                                                              | 32,679  |                                                                                                  
|Shares of common stock issued and outstanding, $.001 par value,
    50,000 shares authorized   |  |                                                                                                | 10,562  |                                                                                                  
|Shares of preferred stock issued and outstanding, $.001 par
    value, 5,000 shares authorized |  |                                                                                                | —       |                                                                                                  
|Net asset value per share                                                                      |  | $                                                                                              | 3.09    |                                                                                                  
|                                                                                               |  |                                                                                                |         |                                                                                                  



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





Table of Contents3







EQUUS TOTAL RETURN, INC.

STATEMENTS OF OPERATIONS

(Unaudited)





|                                                                |  | Three months ended March 31,
|--------------------------------------------------------------- |  | ----------------------------
|(in thousands, except per share amounts)                        |  | 2014                        
|Investment income (loss):                                       |  |                             
|Interest income (loss), net:                                    |  |                             
|Control investments                                             |  | $                           
|Non-affiliate investments                                       |  |                             
|Total interest income                                           |  |                             
|Interest from temporary cash investments                        |  |                             
|Total investment income (loss)                                  |  |                             
|                                                                |  |                             
|Expenses:                                                       |  |                             
|Professional fees                                               |  |                             
|Compensation expense                                            |  |                             
|General and administrative expense                              |  |                             
|Director fees and expenses                                      |  |                             
|Mailing, printing and other expenses                            |  |                             
|Taxes                                                           |  |                             
|Total expenses                                                  |  |                             
|                                                                |  |                             
|Net investment loss                                             |  |                             
|                                                                |  |                             
|Net realized loss:                                              |  |                             
|Temporary cash investments                                      |  |                             
|Net realized loss                                               |  |                             
|                                                                |  |                             
|Net unrealized depreciation of portfolio securities:            |  |                             
|End of period                                                   |  |                             
|Beginning of period                                             |  |                             
|Net change in unrealized depreciation of portfolio securities   |  |                             
|                                                                |  |                             
|Net decrease in net assets resulting from operations            |  | $                           
|                                                                |  |                             
|Net decrease in net assets resulting from operations per share: |  |                             
|Basic and diluted                                               |  | $                           
|Weighted average shares outstanding:                            |  |                             
|Basic and diluted                                               |  |                             





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

Table of Contents4







EQUUS TOTAL RETURN, INC.

STATEMENTS OF CHANGES IN NET ASSETS

(Unaudited)





|                                                         |  | Three
    months ended March 31,
|-------------------------------------------------------- |  | --------------------------------
|(in thousands)                                           |  | 2014                            
|                                                         |  |                                 
|                                                         |  |                                 
|Net decrease in net assets resulting
    from operations |  | $                               
|Net assets at beginning of period                        |  |                                 
|Net assets at end of period                              |  | $                               



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







































































































Table of Contents5







EQUUS TOTAL RETURN, INC.

STATEMENTS OF CASH FLOWS

(Unaudited)





|                                                                                          |  | Three months ended March 31,
|----------------------------------------------------------------------------------------- |  | ----------------------------
|(in thousands)                                                                            |  | 2014                        
|Reconciliation of decrease in net assets resulting from operations to net cash            |  |                             
|provided by (used in) operating activities:                                               |  |                             
|Net decrease in net assets resulting from operations                                      |  | $                           
|Adjustments to reconcile net decrease in net assets resulting from operations to net cash |  |                             
|provided by (used in) operating activities:                                               |  |                             
|Net realized loss                                                                         |  |                             
|Net change in unrealized depreciation of portfolio securities                             |  |                             
|Changes in operating assets and liabilities:                                              |  |                             
|Purchase of portfolio securities                                                          |  |                             
|Principal payments received from portfolio securities                                     |  |                             
|Sales of temporary cash investments, net                                                  |  |                             
|Increase in accounts receivable from investments                                          |  |                             
|Increase in accounts receivable and other                                                 |  |                             
|(Increase) decrease in accrued interest receivable                                        |  |                             
|Increase in accounts payable and accrued liabilities                                      |  |                             
|Increase (decrease) in accounts payable to
    related parties                            |  |                             
|Net cash provided by (used in) operating activities                                       |  |                             
|Cash flows from financing activities:                                                     |  |                             
|Repayments under margin account                                                           |  |                             
|Net cash used in financing activities                                                     |  |                             
|Net decrease in cash and cash equivalents                                                 |  |                             
|Cash and cash equivalents at beginning of period                                          |  |                             
|                                                                                          |  |                             
|Cash and cash equivalents at end of period                                                |  | $                           
|                                                                                          |  |                             
|Supplemental disclosure of cash flow information:                                         |  |                             
|Income taxes paid                                                                         |  | $                           









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



















Table of Contents6







EQUUS TOTAL RETURN, INC.

SUPPLEMENTAL INFORMATION—SELECTED PER
SHARE DATA AND RATIOS

(Unaudited)





|                                                                                     |  | Three months ended March 31,
|------------------------------------------------------------------------------------ |  | ----------------------------
|                                                                                     |  | 2014                        
|                                                                                     |  |                             
|Investment income (loss)                                                             |  | $                           
|Expenses                                                                             |  |                             
|Net investment loss                                                                  |  |                             
|                                                                                     |  |                             
|Net realized loss                                                                    |  |                             
|Net change in unrealized depreciation of portfolio securities                        |  |                             
|Net decrease in net assets resulting from operations                                 |  |                             
|Net assets at beginning of period                                                    |  |                             
|Net assets at end of period                                                          |  | $                           
|Weighted average number of shares outstanding during period,                         |  |                             
|in thousands                                                                         |  |                             
|Market price per share:                                                              |  |                             
|Beginning of period                                                                  |  | $                           
|End of period                                                                        |  | $                           
|Selected information and ratios:                                                     |  |                             
|Ratio of expenses to average net assets                                              |  |                             
|Ratio of net investment loss to average net assets                                   |  |                             
|Ratio of net decrease in net assets resulting from operations to average  net assets |  |                             
|Total return on market price (1)                                                     |  |                             



(1)Total
return = [(ending market price per share - beginning price per share) / beginning market price per share].



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









































Table of Contents7







EQUUS TOTAL RETURN, INC.

SCHEDULE OF INVESTMENTS

MARCH 31, 2014

(Unaudited)

(in thousands, except share data)





|                                                                                                          |                                |                 |                                                                      |        |           |        |            |   |         
|--------------------------------------------------------------------------------------------------------- | ------------------------------ | --------------- | -------------------------------------------------------------------- | ------ | --------- | ------ | ---------- | - | --------
|Name and Location of                                                                                      |                                | Date of Initial |                                                                      |        |           |        | Cost of    |   | Fair    
|Portfolio Company                                                                                         | Industry                       | Investment      | Investment                                                           |        | Principal |        | Investment |   | Value(1)
|                                                                                                          |                                |                 |                                                                      |        |          
|Control Investments:  Majority-owned (3):                                                                 |                                |                 |                                                                      |        |           |        |            |  
|Equus Energy, LLC
                                 Houston, TX                                            | Energy                         | December 2011   | Member interest (100%)                                               |        |           | $      | 7,050      | $ | 8,000   
|Equus Media Development Company, LLC
                                 Houston, TX                         | Media                          | January 2007    | Member interest (100%)                                               |        |           |        | 3,000      |   | 216     
|Spectrum Management,
        Carrolton, TX                                                                | Business products and services | December 1999   | 285,000 units of Class A member interest (92.1%/82.5% fully diluted) |        |           |        | 2,850      |   | -       
|                                                                                                          |                                |                 |                                                                      |        |           |        |            |   |         
|                                                                                                          |                                |                 | 16% subordinated promissory note due 11/11 (2)                       | $      | 2,963     |        | 2,963      |   | 2,963   
|                                                                                                          |                                |                 |                                                                      |        |           |        | 5,813      |   | 2,963   
|Total Control Investments: Majority-owned (represents 82.7.% of total investments at fair value)          |                                |                 | $                                                                    | 15,863 | $         | 11,179
|Affiliate Investments (4):                                                                                |                                |                 |                                                                      |        |           |        |            |   |         
|PalletOne, Inc.
        Bartow, FL                                                                        | Shipping products and services | October 2001    | 350,000 shares of common stock (18.70%)                              |        |           | $      | 350        | $ | 250     
|Total Affiliate Investments (represents 1.9% of total investments at fair value)                          |                                |                 | $                                                                    | 350    | $         | 250   
|Non-Affiliate Investments (less than 5% owned):                                                           |                                |                 |                                                                      |        |           |       
|Orco Property Group
                                                                 Paris, France        | Real estate                    | April 2011      | 73,666 shares common stock                                           |        |           | $      | 125        | $ | 101     
|                                                                                                          |                                |                 | 10% promissory note due 2/18 (2)                                     | $      | 696       |        | 696        |   | 1,480   
|                                                                                                          |                                |                 |                                                                      |        |           |        | 821        |   | 1,581   
|Security Monitor Holding, LLC
                                                                 Boston, MA | Business products and services | November 2013   | 14% promissory note due 6/14 (2)                                     |        | 500       |        | 500        |   | 500     
|Total Non-Affiliate Investments (represents 15.4% of total investments at fair value)                     |                                |                 | $                                                                    | 1,321  | $         | 2,081 
|Total Investment in Portfolio Securities                                                                  |                                |                 |                                                                      |        |           | $      | 17,534     | $ | 13,510  







|(1) | See Note 3 to the financial statements, Valuation of Investments.                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Income-producing.                                                                                                                                                                    
|(3) | Majority owned investments are generally defined under the Investment Company Act of 1940 as companies in which we own more than 50% of the voting securities of the company.        
|(4) | Affiliate investments are generally defined under the Investment Company Act of 1940 as companies in which we own at least 5% but not more than 25% voting securities of the company.



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

Table of Contents8







EQUUS TOTAL RETURN, INC.

SCHEDULE OF INVESTMENTS – (Continued)

MARCH 31, 2014

(Unaudited)

Except for our holding of ordinary shares
of Orco Property Group S.A. (“OPG”), substantially all of our portfolio securities are restricted from public sale
without prior registration under the Securities Act of 1933 or other relevant foreign regulatory authority. We negotiate certain
aspects of the method and timing of the disposition of our investment in each portfolio company, including registration rights
and related costs.

We may invest up to 30% of our assets
in non-qualifying portfolio investments, as permitted by the Investment Company Act of 1940 (hereafter, the “1940 Act”).
Specifically, we may invest up to 30% of our assets in entities that are not considered “eligible portfolio companies”
(as defined in the 1940 Act), including companies located outside of the United States, entities that are operating pursuant to
certain exceptions under the 1940 Act, and publicly-traded entities with a market capitalization exceeding $250 million. As of
March 31, 2014, except for our holdings in OPG, all of our investments are in enterprises that are considered eligible portfolio
companies under the 1940 Act. We provide significant managerial assistance to portfolio companies that comprise 82.7% of the total
value of the investments in portfolio securities as of March 31, 2014.

Our investments in portfolio securities
consist of the following types of securities as of March 31, 2014 (in thousands):



|Type of Securities                    |  | Cost |        | Fair Value |  | Fair Value as
                                                                                                  Percentage of
                                                                                Net Assets
|------------------------------------- |  | ---- | ------ | ---------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Limited liability company investments |  | $    | 12,900 |            |  | $                                                                                                                                                                                                                       
|Secured and subordinated debt         |  |      | 4,159  |            |  |                                                                                                                                                                                                                         
|Common stock                          |  |      | 475    |            |  |                                                                                                                                                                                                                         
|Total                                 |  | $    | 17,534 |            |  | $                                                                                                                                                                                                                       



Interest payments are being received
and/or accrued on notes with a fair value of $2.0 million, while accrued interest has been impaired on notes receivable included
in secured and subordinated debt with a fair value of $3.0 million.



The following is a summary by industry of
the Fund’s investments in portfolio securities as of March 31, 2014 (in thousands):



|Industry                       |  | Fair Value |        | Fair Value as
                                                                                                  Percentage of
                                                                                Net Assets
|------------------------------ |  | ---------- | ------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Energy                         |  | $          | 8,000  |                                                                                                                                                                                                                         
|Business products and services |  |            | 3,463  |                                                                                                                                                                                                                         
|Real estate                    |  |            | 1,581  |                                                                                                                                                                                                                         
|Shipping products and services |  |            | 250    |                                                                                                                                                                                                                         
|Media                          |  |            | 216    |                                                                                                                                                                                                                         
|Total                          |  | $          | 13,510 |                                                                                                                                                                                                                         







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

Table of Contents9







EQUUS
TOTAL RETURN, INC.

SCHEDULE
OF INVESTMENTS

DECEMBER
31, 2013

(in
thousands, except share data)



|                                                                                                |                                |                 |                                                                      |        |           |        |            |   |         
|----------------------------------------------------------------------------------------------- | ------------------------------ | --------------- | -------------------------------------------------------------------- | ------ | --------- | ------ | ---------- | - | --------
|Name and Location of                                                                            |                                | Date of Initial |                                                                      |        |           |        | Cost of    |   | Fair    
|Portfolio Company                                                                               | Industry                       | Investment      | Investment                                                           |        | Principal |        | Investment |   | Value(1)
|                                                                                                |                                |                 |                                                                      |        |          
|Control Investments:  Majority-owned (3):                                                       |                                |                 |                                                                      |        |           |        |            |  
|Equus Energy, LLC
        Houston, TX                                                           | Energy                         | December 2011   | Member interest (100%)                                               |        |           | $      | 7,050      | $ | 8,000   
|Equus Media Development Company, LLC Houston,
TX                                                | Media                          | January 2007    | Member interest (100%)                                               |        |           |        | 3,000      |   | 216     
|Spectrum Management, LLC
        Carrolton, TX                                                  | Business products and services | December 1999   | 285,000 units of Class A member interest (92.1%/82.5% fully diluted) |        |           |        | 2,850      |   | -       
|                                                                                                |                                |                 | 16% subordinated promissory note due 11/11 (2)                       | $      | 2,889     |        | 2,889      |   | 2,889   
|                                                                                                |                                |                 |                                                                      |        |           |        | 5,739      |   | 2,889   
|Total Control Investments: Majority-owned (represents 39.0% of total investments at fair value) |                                | $               | 15,789                                                               | $      | 11,105   
|Affiliate Investments (4):                                                                      |                                |                 |                                                                      |        |           |        |            |   |         
|PalletOne, Inc.
        Bartow, FL                                                              | Shipping products and services | October 2001    | 350,000 shares of common stock (18.70%)                              |        |           | $      | 350        | $ | 250     
|Total Affiliate Investments (represents 0.9% of total investments at fair value)                |                                |                 | $                                                                    | 350    | $         | 250   
|Non-Affiliate Investments (less than 5% owned):                                                 |                                |                 |                                                                      |        |           |       
|Orco Property Group
        Paris, France                                                       | Real estate                    | April 2011      | 73,666 shares common stock                                           |        |           | $      | 125        | $ | 169     
|                                                                                                |                                |                 | 10% promissory note due 2/18 (2)                                     | $      | 696       |        | 696        |   | 1,480   
|                                                                                                |                                |                 |                                                                      |        |           |        | 821        |   | 1,649   
|Security Monitor Holding, LLC
        Boston, MA                                                | Business products and services | November 2013   | 14% promissory note due 5/14 (2)                                     |        | 500       |        | 500        |   | 500     
|Total Non-Affiliate Investments (represents 7.5% of total investments at fair value)            |                                |                 | $                                                                    | 1,321  | $         | 2,149 
|Total Investment in Portfolio Securities                                                        |                                |                 |                                                                      |        |           | $      | 17,460     |   | 13,504  
|Temporary Cash Investments                                                                      |                                |                 |                                                                      |        |           |        |            |   |         
|U.S. Treasury Bill                                                                              | Government                     | December 2013   | UST 0% 2/14                                                          |        | 15,000    | $      | 15,000     | $ | 15,000  
|Total Temporary Cash Investments (represents 52.6% of total investments at fair value)          |                                |                 | $                                                                    | 15,000 | $         | 15,000
|Total Investments                                                                               |                                |                 |                                                                      |        |           | $      | 32,460     | $ | 28,504  





|(1) | See Note 3 to the financial statements, Valuation of Investments.                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Income-producing.                                                                                                                                                                    
|(3) | Majority owned investments are generally defined under the Investment Company Act of 1940 as companies in which we own more than 50% of the voting securities of the company.        
|(4) | Affiliate investments are generally defined under the Investment Company Act of 1940 as companies in which we own at least 5% but not more than 25% voting securities of the company.





































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

Table of Contents10







EQUUS
TOTAL RETURN, INC.

SCHEDULE
OF INVESTMENTS – (Continued)

DECEMBER
31, 2013

(in
thousands, except share data)



Except for our holding of ordinary shares
of OPG, substantially all of our portfolio securities are restricted from public sale
without prior registration under the Securities Act of 1933 or other relevant foreign regulatory authority. We negotiate certain
aspects of the method and timing of the disposition of our investment in each portfolio company, including registration rights
and related costs.



We may invest up to 30% of our assets in non-qualifying
portfolio investments, as permitted by the  1940 Act. Specifically,
we may invest up to 30% of our assets in entities that are not considered “eligible portfolio companies” (as defined
in the 1940 Act), including companies located outside of the United States, entities that are operating pursuant to certain exceptions
under the 1940 Act, and publicly-traded entities with a market capitalization exceeding $250 million. As of December 31, 2013,
except for our holdings in OPG, all of our investments are in enterprises that are considered eligible portfolio companies under
the 1940 Act. We provide significant managerial assistance to portfolio companies that comprise 82.2% of the total value of the investments
in portfolio securities as of December 31, 2013.



Our investments in portfolio securities consist
of the following types of securities as of December 31, 2013 (in thousands):



|Type of Securities                    |  | Cost |        | Fair Value |  | Fair Value as
        Percentage of
        Net Assets
|------------------------------------- |  | ---- | ------ | ---------- |  | ------------------------------------------------------
|Limited liability company investments |  | $    | 12,900 |            |  | $                                                     
|Secured and subordinated debt         |  |      | 4,085  |            |  |                                                       
|Common stock                          |  |      | 475    |            |  |                                                       
|Total                                 |  | $    | 17,460 |            |  | $                                                     



Interest payments are being received and/or
accrued on notes with a fair value of $2.0 million, while accrued interest has been impaired on notes receivable included in secured
and subordinated debt with a fair value of $2.9 million.



The following is a summary by industry of our
investments in portfolio securities as of December 31, 2013 (in thousands):

|Industry                       |  | Fair Value |        | Fair Value as
        Percentage of
        Net Assets
|------------------------------ |  | ---------- | ------ | ------------------------------------------------------
|Energy                         |  | $          | 8,000  |                                                       
|Business products and services |  |            | 3,389  |                                                       
|Real estate                    |  |            | 1,649  |                                                       
|Shipping products and services |  |            | 250    |                                                       
|Media                          |  |            | 216    |                                                       
|Total                          |  | $          | 13,504 |                                                       





















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

Table of Contents11







EQUUS TOTAL RETURN, INC.

NOTES TO FINANCIAL
STATEMENTS

MARCH 31, 2014

(Unaudited)



| | (1) | Description of Business and Basis of Presentation
| | --- | -------------------------------------------------



Description of Business— Equus
Total Return, Inc. (“we,” “us,” “our,” “Equus,” the “Company,” and
the “Fund”), 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. Our shares trade on the New York Stock Exchange under
the symbol ‘EQS’. On August 11, 2006, our shareholders approved a change of the Fund’s investment strategy to
a total return investment objective. This new 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.



We attempt to maximize the return to stockholders
in the form of current investment income and long-term capital gains by investing in the debt and equity securities of companies
with a total enterprise value of between $5.0 million and $75.0 million, although we may engage in transactions with smaller or
larger investee companies from time to time. We seek to invest primarily in companies pursuing growth either through acquisition
or organically, leveraged buyouts, management buyouts and recapitalizations of existing businesses or special situations. Our income-producing
investments consist principally of debt securities including subordinate debt, debt convertible into common or preferred stock,
or debt combined with warrants and common and preferred stock. Debt and preferred equity financing may also be used to create long-term
capital appreciation through the exercise and sale of warrants received in connection with the financing. We seek 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. Given market conditions over the past several years and the performance of our portfolio,
our management and Board of Directors believe it is prudent to continue to review alternatives to refine and further clarify the
current strategies.



We elected to be treated as a Business Development
Company (“BDC”) under the Investment Company Act of 1940 (“1940 Act”). We currently qualify as a regulated
investment company (“RIC”) for federal income tax purposes and, therefore, are not required to pay corporate income
taxes on any income or gains that we distribute to our stockholders. We have certain wholly owned taxable subsidiaries (“Taxable
Subsidiaries”) each of which holds one or more portfolio investments listed on our Schedules of Investments. The purpose
of these Taxable Subsidiaries is to permit us to hold certain income-producing investments or portfolio companies organized as
limited liability companies, or LLCs, (or other forms of pass-through entities) and still satisfy the RIC tax requirement that
at least 90% of our gross revenue for income tax purposes must consist of investment income. Absent the Taxable Subsidiaries, a
portion of the gross income of these income-producing investments or of any LLC (or other pass-through entity) portfolio investment,
as the case may be, would flow through directly to us for the 90% test. To the extent that such income did not consist of investment
income, it could jeopardize our ability to qualify as a RIC and, therefore, cause us to incur significant federal income taxes.
The income of the LLCs (or other pass-through entities) owned by Taxable Subsidiaries is taxed to the Taxable Subsidiaries and
does not flow through to us, thereby helping us preserve our RIC status and resultant tax advantages. We do not consolidate the
Taxable Subsidiaries for income tax purposes and they may generate income tax expense because of the Taxable Subsidiaries’
ownership of the portfolio investments. We reflect any such income tax expense on our Statements of Operations.



Basis of Presentation—In accordance
with Article 6 of Regulation S-X under the Securities Act of 1933 and Securities Exchange Act of 1934, we do not consolidate portfolio
company investments, including those in which we have a controlling interest. Our interim unaudited 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 months
ended March 31, 2014 are not necessarily indicative of results that ultimately may be achieved for the year. The interim unaudited
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, 2013, as filed with the Securities and Exchange Commission
(“SEC”).

Table of Contents12









| | (2) | Liquidity and Financing Arrangements
| | --- | ------------------------------------



Liquidity—There are several factors
that may materially affect our liquidity during the reasonably foreseeable future. We view this period as the twelve month period
from the date of the financial statements in this Form 10-Q, i.e., the period through March 31, 2015. We are evaluating
the impact of current market conditions on our portfolio company valuations and their ability to provide current income. We have
followed valuation techniques in a consistent manner; however, we are cognizant of current market conditions that might affect
future valuations of portfolio securities. We believe that our 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 Cash Equivalents—As of
March 31, 2014, we had cash and cash equivalents of $18.7 million. We had $13.5 million of our net assets of $32.7 million invested
in portfolio securities.



As of December 31, 2013, we had cash and cash
equivalents of $19.1 million. We had $13.5 million of our net assets of $33.2 million invested in portfolio securities. We also
had $15.2 million of restricted cash and temporary cash investments, including primarily the proceeds of a quarter-end margin loan
that we incurred to maintain the diversification requirements applicable to a RIC to maintain our pass-through tax treatment. Of
this amount, $15.0 million was invested in U.S. Treasury bills and $0.2 million represented a required 1% brokerage margin deposit.
These securities were held by a securities brokerage firm and pledged along with other assets to secure repayment of the margin
loan. The U.S. Treasury bills were sold on January 2, 2014 and we subsequently repaid this margin loan. The margin interest was
paid on January 22, 2014.



Dividends— We will pay out net
investment income and/or realized capital gains, if any, on an annual basis as required under the 1940 Act.



Investment Commitments—As of March
31, 2014, we had no outstanding commitments to our portfolio company investments.



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



RIC Borrowings, Restricted Cash and Temporary
Cash Investments—We may periodically borrow 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 we are
unable to borrow funds to make qualifying investments, we may no longer qualify as a RIC. We 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 materially adverse to us and our stockholders.



We had no RIC borrowings or restricted cash
as of March 31, 2014.



As of December 31, 2013, we borrowed $15.0
million to make qualifying investments to maintain our RIC status by utilizing a margin account with a securities brokerage firm.
We collateralized such borrowings with restricted cash and temporary cash investments in U.S. Treasury bills of $15.2 million.
The U.S. Treasury bills were sold on January 2, 2014 and the total amount borrowed was repaid at that time. The margin interest
was paid on January 22, 2014.



Certain Risks and Uncertainties—
Economic conditions since 2008 and resulting market dislocations have resulted in a significant decline in the availability of
debt and equity. 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 these years and continuing into the
first three months of 2014, 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 have previously
undertaken to provide necessary liquidity include monetizations, the suspension of dividends and the internalization of management.
Although we cannot assure you that such initiatives will be sufficient, we believe we have sufficient liquidity to meet our 2014
operating requirements.

Table of Contents13







| | (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 GAAP requires us to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Although we believe the estimates and assumptions used in preparing these 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 our
Board of Directors. As a general principle, the current “fair value” of an investment would be the amount we 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.



Thinly Traded and Over-the-Counter Securities—Generally,
we value securities that are traded in the over-the-counter market or on a stock exchange at the average of the prevailing bid
and ask prices on the date of the relevant period end. However, we may apply a discount to the market value of restricted or thinly
traded public securities to reflect the impact that these restrictions have on the value of these securities. We review factors,
including the trading volume, total securities outstanding and our percentage ownership of securities to determine whether the
trading levels are active (Level 1) or inactive (Level 2) or unobservable (Level 3). These types of securities represented 11.0%
of our investments in portfolio securities as of March 31, 2014 and December 31, 2013, respectively. We utilized independent pricing
services with certain of our fair value estimates. To corroborate “bid/ask” quotes from independent pricing services,
we perform a market-yield approach to validate prices obtained or obtain other evidence.



During the first twelve months after an investment
is made, the original investment value is utilized to determine the fair value unless significant developments have occurred during
this twelve month period which would indicate a material effect on the portfolio company (such as results of operations or changes
in general market conditions). After the twelve month period, or if material events have occurred within the twelve month period,
we consider a two-step process when appraising investments of privately held companies. The first step involves determining the
enterprise value of the portfolio company. During this step, we consider three different valuation approaches: a market approach,
an income approach, and an asset approach. The particular facts and circumstances of each portfolio company determine which approach,
or combination of approaches, will be utilized. The second step when appraising equity investments of privately held companies
involves allocating value to the various debt and equity securities of the company. We allocate value to these securities based
on their relative priorities. For equity securities such as warrants, we may also incorporate alternative methodologies including
the Black-Scholes Option Pricing Model.



Market approach—The market approach
typically employed by our management calculates the enterprise value of a company as a multiple of earnings before interest,
taxes, depreciation and amortization (“EBITDA”) generated by the company for the trailing twelve month period. 
Adjustments to the company’s EBITDA, including those for non-recurring items, may be considered. Multiples are estimated
based on current market conditions and past experience in the private company marketplace and are subjective in nature. We will
apply liquidity and other discounts it deems appropriate to equity valuations where applicable. We 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.



Income approach—The income approach
typically utilized by our management calculates the enterprise value of a company utilizing a discounted cash flow model incorporating
projected future cash flows of the company.  Projected future cash flows consider the historical performance of the company
as well as current and projected market participant performance. Discount rates are estimated based on current market conditions
and past experience in the private company marketplace and are subjective in nature. We will apply liquidity and other discounts
we deem appropriate to equity valuations where applicable.

Table of Contents14







Asset approach—We consider the
asset approach to determine the fair value of significantly deteriorated investments demonstrating circumstances indicative of
a liquidation analysis. This situation may arise when a portfolio company: 1) cannot generate adequate cash flow to meet the principal
and interest payments on its indebtedness; 2) is not successful in refinancing its debt upon maturity; 3) we believe the credit
quality of a loan has deteriorated due to changes in the business and underlying asset or market conditions which may result in
the company’s inability to meet future obligations; or 4) the portfolio company’s reorganization or bankruptcy. Consideration
is also given as to whether a liquidation event would be orderly or forced.



We base adjustments upon such factors as the
portfolio company’s earnings, cash flow and net worth, the market prices for similar securities of comparable companies,
an assessment of the company’s current and future financial prospects and various other factors and assumptions. In the case
of unsuccessful operations, we may base a portfolio company’s fair value upon the company’s estimated liquidation value.
Fair valuations are necessarily subjective, and management’s estimate of fair value may differ materially from amounts actually
received upon the disposition of its portfolio securities. Also, any failure by a portfolio company to achieve its business plan
or obtain and maintain its financing arrangements could result in increased volatility and result in a significant and rapid change
in its value.



Our general intent is to hold our loans to
maturity when appraising our privately held debt investments. As such, we believe that the fair value will not exceed the cost
of the investment. However, in addition to the previously described analysis involving allocation of value to the debt instrument,
we perform a yield analysis to determine if a debt security has been impaired.



The Audit Committee of the Board of Directors
may engage independent, third-party valuation firms to conduct independent appraisals and review management’s preliminary
valuations of each privately-held investment in order to make their own independent assessment. Any third-party valuation data
would be considered as one of many factors in a fair value determination. The Audit Committee then would recommend the fair values
for all privately-held securities based on all relevant factors to the Board of Directors for final approval.



Because of the inherent uncertainty
of the valuation of portfolio securities which do not have readily ascertainable market values, amounting to $13.4 million
and $13.3 million as of March 31, 2014 and December 31, 2013, respectively, our fair value determinations may materially
differ from the values that would have been used had a ready market existed for the securities. As of March 31, 2014 and
December 31, 2013 respectively, one of the Fund’s portfolio investments, the 73,666 ordinary shares of Orco Property
Group, S.A. (“OPG”), was publicly listed on the NYSE Euronext Paris Exchange, along with €1,200,790 [$1.5
million] in newly-issued 6-year OPG Notes. However, as of March 31, 2014 and December 31, 2013 respectively, there had been
no significant trading activity in the OPG Notes.



On a daily basis, we adjust our net asset value
for the changes in the value of our publicly held securities, if applicable, and material changes in the value of 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’sand The Wall Street Journal.



Foreign Exchange—We record temporary
changes in foreign exchange rates of portfolio securities denominated in foreign currencies as changes in fair value. These changes
are therefore reflected as unrealized gains or losses until realized.



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



We classify our investments in accordance with
the requirements of the 1940 Act. Under the 1940 Act, “Control Investments” are defined as investments in companies
in which we own more than 25% of the voting securities or maintain greater than 50% representation on the portfolio company’s
governing board. Under the 1940 Act, “Affiliate Investments” are defined as those non-control investments in companies
in which we own 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—We
record interest income, adjusted for amortization of premium and accretion of discount, on an accrual basis to the extent that
we expect to collect such amounts. We stop accruing interest on investments when we determine that interest is no longer collectible.
We may also impair the accrued interest when we determine that all or a portion of the current accrual is uncollectible. If we
receive any cash after determining that interest is no longer collectible, we treat such cash as payment on the principal balance
until the entire principal balance has been repaid, before we recognize any additional interest income. We accrete or amortize
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.

Table of Contents15







Payment in Kind Interest (PIK)—We
have loans in our portfolio that may pay PIK interest. We add PIK interest, if any, computed at the contractual rate specified
in each loan agreement, to the principal balance of the loan and record it as interest income. To maintain our status as a RIC,
we must pay out to stockholders this non-cash source of income in the form of dividends even if we have not yet collected any cash
in respect of such investments.



Cash Flows—For purposes of the
Statements of Cash Flows, we consider all highly liquid temporary cash investments purchased with an original maturity of three
months or less to be cash equivalents. We include our investing activities within cash flows from operations. We exclude “Restricted
Cash & Temporary Cash Investments” used for purposes of complying with RIC requirements from cash equivalents. See
Note 2 for further discussion of the Fund’s RIC borrowings.



Income Taxes—We intend to comply
with the requirements of the Internal Revenue Code necessary for us to qualify as a RIC. So long as we comply with these requirements,
we generally will not be subject to corporate-level federal income taxes on otherwise taxable income (including net realized capital
gains) distributed to stockholders. Therefore, we did not record a provision for federal income taxes in our financial statements.
We borrow money from time to time to maintain our tax status under the Internal Revenue Code as a RIC. See Note 2 for further discussion
of our RIC borrowings.



All corporations incorporated in the State
of Delaware are required to file an Annual Report and to pay a franchise tax. As a result, we paid Delaware Franchise tax in the
amount of $0.01 million for the year ended December 31, 2013.



Texas margin tax applies to legal entities
conducting business in Texas. 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. As a result,
we did not owe state income tax for the year ended December 31, 2013.



Fair Value Measurement—Fair value
is defined 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. We have 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 our 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. As previously described, we consider
a two step process when appraising investments of privately held companies. The first step involves determining the enterprise
value of the portfolio company. During this step, we consider three different valuation approaches: a market approach, an income
approach, and a cost approach. The particular facts and circumstances of each portfolio company determine which approach, or combination
of approaches, will be utilized. The second step when appraising equity investments of privately held companies involves allocating
value to the various debt and equity securities of the company. We allocate value to these securities based on their relative priorities.
For equity securities such as warrants, we may also incorporate alternative methodologies including the Black-Scholes Option Pricing
Model. Yield analysis is also employed to determine if a debt security has been impaired.



We will record unrealized depreciation on investments
when we determine that the fair value of a security is less than its cost basis, and will record unrealized appreciation when we
determine that the fair value is greater than its cost basis.





Table of Contents16





As of March 31, 2014, 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 March 31, 2014 (unaudited)
|------------------------- |  | ------------------------------------------------------------
|(in thousands)            |  | Total                                                       
|Assets                    |  |                                                             
|Investments:              |  |                                                             
|Control investments       |  | $                                                           
|Affiliate investments     |  |                                                             
|Non-affiliate investments |  |                                                             
|Total investments         |  | $                                                           







As of December 31, 2013, 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, 2013
|------------------------------------------------ |  | ---------------------------------------------------
|(in thousands)                                   |  | Total                                              
|Assets                                           |  |                                                    
|Investments:                                     |  |                                                    
|Control investments                              |  | $                                                  
|Affiliate investments                            |  |                                                    
|Non-affiliate investments                        |  |                                                    
|Total investments                                |  |                                                    
|Temporary cash investments                       |  |                                                    
|Total investments and temporary cash investments |  | $                                                  





The following table provides a reconciliation
of fair value changes during the three months ended March 31, 2014 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                                                    
|Fair value as of December 31, 2013          |  | $                                                                          
|Purchases of portfolio securities           |  |                                                                            
|Fair value as of March 31, 2014 (unaudited) |  | $                                                                          





The following table provides a reconciliation
of fair value changes during the three months ended March 31, 2013 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                                                    
|Fair value as of December 31, 2012               |  | $                                                                          
|Change in unrealized appreciation (depreciation) |  |                                                                            
|Purchases of portfolio securities                |  |                                                                            
|Proceeds from sales/dispositions                 |  |                                                                            
|Fair value as of March 31, 2013 (unaudited)      |  | $                                                                          



Table of Contents17







Significant Unobservable Inputs —
Our investment portfolio is not composed of homogeneous debt and equity securities that can be valued with a small number of inputs.
Instead, the majority of our investment portfolio is composed of complex debt and equity securities with distinct contract terms
and conditions. As such, our valuation of each investment in our portfolio is unique and complex, often factoring in numerous different
inputs, including historical and forecasted financial and operational performance of the portfolio company, project cash flows,
market multiples comparable market transactions, the priority of our securities compared with those of other investors, credit
risk, interest rates, independent valuations and reviews and other inputs.



The following table summarizes the significant
observable inputs in the fair value measurements of our level 3 investments by category of investment and valuation technique as
of March 31, 2014:





|                                      |  |            |        |                      |  |                        |  | Range                             
|------------------------------------- |  | ---------- | ------ | -------------------- |  | ---------------------- |  | ----------------------------------
|(in thousands)                        |  | Fair Value |        | Valuation Techniques |  | Unobservable Inputs    |  | Minimum                           
|Secured and subordinated debt         |  | $          | 4,943  |                      |  | Yield Analysis         |  | Market interest rate              
|                                      |  |            |        |                      |  | Yield Analysis         |  | Discount for lack of marketability
|                                      |  |            |        |                      |  | Yield Analysis         |  | Discount for lack of marketability
|                                      |  |            |        |                      |  | Yield Analysis         |  | Control Premium                   
|                                      |  |            |        |                      |  | New Transaction        |  | Discount                          
|Common stock                          |  |            | 250    |                      |  | Pending Transaction    |  | Discount                          
|                                      |  |            |        |                      |  | Asset Approach         |  | Recovery Rate                     
|Limited liability company investments |  |            | 8,216  |                      |  | Income/Market Approach |  | Reserve Adjustment Factors        
|                                      |  | $          | 13,409 |                      |  |                        |  |                                   





| | (4) | Related Party Transactions and Agreements
| | --- | -----------------------------------------



Except as noted below, 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 $15,000 is paid to the Chairman of the Audit Committee and a quarterly fee of $3,750 is paid
to the Chairman of the Independent Directors. We may also pay other one-time or recurring fees to members of our Board of Directors
in special circumstances. None of our interested directors receive annual fees for their service on the Board of Directors.



In 2011, Equus Energy, LLC, a wholly-owned
subsidiary of the Fund, entered into a consulting agreement with Global Energy Associates, LLC (“Global Energy”) to
provide consulting services for energy related investments. Henry W. Hankinson, Director, is a managing partner and co-founder
of Global Energy. Payments to Global Energy totaled $18,750 for each of the three months ended March 31, 2014 and 2013.



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 pays a rate of $250 per hour for services
rendered.



| | (5) | Dividends
| | --- | ---------



We will pay out net investment income and/or
realized capital gains, if any, on an annual basis as required under the 1940 Act.



| | (6) | Portfolio Securities
| | --- | --------------------



During the three months ended March 31, 2014,
we capitalized legal and consulting expenses of $0.7 million relating to Spectrum Management. We also received a semi-annual interest
payment of $0.04 million in respect of our €1.2 million [$1.5 million] in OPG notes.





Table of Contents18







During the three months ended March 31, 2014,
we did not realize any significant gains or losses on sales of portfolio securities.



Net unrealized depreciation on investments
increased $0.07 million during the three months ended March 31, 2014, to a net unrealized depreciation of $4.0 million.  Such
increase in unrealized depreciation is due to the decrease in fair value of our holdings in OPG of $0.07 million due to
a decline in the price of our OPG shares.



During the three months ended March 31, 2013,
we capitalized legal and consulting expenses of $0.1 million relating to Spectrum. We also received a semi-annual interest payment
of $0.03 million and a 5.75% partial principal repayment of $9,000 in respect of our €1.2 million [$1.5 million] in OPG notes.



During the three months ended March 31, 2013,
we did not realize any significant gains or losses on sales of portfolio securities.



Net unrealized depreciation on investments
increased $0.7 million during the three months ended March 31, 2013, to a net unrealized depreciation of $17.9 million.  Such
decrease in unrealized depreciation is largely due to the following changes:



| | (i) | Decrease in fair value of Equus Energy, LLC of $0.2 million due to operating expenses;
| | --- | --------------------------------------------------------------------------------------



| | (ii) | Decrease in fair value of our holdings in OPG of $0.1 million due to a decline in the price of
our OPG shares and foreign exchange translation; and
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | Decrease in fair value of Spectrum of $0.4 million due to a decline in operating performance.
| | ----- | ---------------------------------------------------------------------------------------------



| | (7) | Equus Energy, LLC
| | --- | -----------------



Equus Energy, LLC (“Equus Energy”)
was formed in November 2011 as a wholly-owned subsidiary of the Fund to make investments in companies in the energy sector, with
particular emphasis on income-producing oil & gas properties. In December 2011, we contributed $250,000 to the capital of Equus
Energy. On December 27, 2012, we invested an additional $6.8 million in Equus Energy for the purpose of additional working capital
and to fund the purchase of $6.6 million in working interests in 129 producing and non-producing oil and gas wells. The working
interests include associated development rights of approximately 21,120 acres situated on 13 separate properties in Texas and Oklahoma.
The working interests range from a de minimus amount to 50% of the leasehold that includes these wells.



The wells are operated by a number of experienced
operators, including Chevron USA, Inc., which has operating responsibility for all of Equus Energy’s 40 producing well interests
located in the Conger Field, a productive oil and gas field on the edge of the Permian Basin that has experienced successful gas
and hydrocarbon extraction in multiple formations. Equus Energy, which holds a 50% working interest in each of these Conger Field
wells, is working with Chevron in a recompletion program of existing Conger Field wells to the Wolfcamp formation, a zone containing
oil as well as gas and natural gas liquids. Two recompletions in the Conger Field have been effected since the closing date of
the acquisition of the working interests and a third recompletion is planned during the second quarter of 2014, with additional
recompletions anticipated for the remainder of 2014 and beyond. Part of Equus Energy’s acreage rights described above also
includes a 50% working interest in possible new drilling to the base of the Canyon formation (appx. 8,500 feet) on 2,400 acres
in the Conger Field. Also included in the interests acquired by Equus Energy are working interests of 7.5% and 2.5% in the Burnell
and North Pettus Units, respectively, which collectively comprise approximately 13,000 acres located in the area known as the “Eagle
Ford Shale” play.



We do not consolidate Equus Energy or its wholly
owned subsidiaries and accordingly only the value of our investment in Equus Energy is included on our statement of assets and
liabilities. Our investment in Equus Energy is valued in accordance with our normal valuation procedures and is based on the values
of the underlying assets held by EQS Energy Holdings, Inc. a wholly-owned subsidiary of Equus Energy, net of associated liabilities.







Table of Contents19







Below is summarized consolidated financial
information for Equus Energy as of March 31, 2014 and December 31, 2013 and for the three months ended March 31, 2014 and 2013
respectively (in thousands).





|                                                           |  | March 31,
                                                                                2014 |        | December 31,
                    2013
|---------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------- | ------ | -------------------------------------
|                                                           |  | (Unaudited)                                                                                    |        | (Unaudited)                          
|Assets                                                     |  |                                                                                                |        |                                      
|CURRENT ASSETS:                                            |  |                                                                                                |        |                                      
|Cash                                                       |  | $                                                                                              | 406    |                                      
|Accounts receivable                                        |  |                                                                                                | 209    |                                      
|Total current assets                                       |  |                                                                                                | 615    |                                      
|                                                           |  |                                                                                                |        |                                      
|Oil and gas properties                                     |  |                                                                                                | 7,725  |                                      
|Less: accumulated depletion, depreciation and amortization |  |                                                                                                | (1,178 | )                                    
|Net oil and gas properties                                 |  |                                                                                                | 6,547  |                                      
|                                                           |  |                                                                                                |        |                                      
|Total assets                                               |  | $                                                                                              | 7,162  |                                      
|                                                           |  |                                                                                                |        |                                      
|Liabilities and members' capital                           |  |                                                                                                |        |                                      
|                                                           |  |                                                                                                |        |                                      
|CURRENT LIABILITIES:                                       |  |                                                                                                |        |                                      
|Accounts payable and other                                 |  | $                                                                                              | 121    |                                      
|Due to affiliate                                           |  |                                                                                                | 378    |                                      
|Total current liabilities                                  |  |                                                                                                | 499    |                                      
|                                                           |  |                                                                                                |        |                                      
|Asset retirement obligations                               |  |                                                                                                | 180    |                                      
|Total non-current liabilities                              |  |                                                                                                | 180    |                                      
|                                                           |  |                                                                                                |        |                                      
|Total liabilities                                          |  |                                                                                                | 679    |                                      
|                                                           |  |                                                                                                |        |                                      
|Members' capital                                           |  |                                                                                                |        |                                      
|Total members' capital                                     |  |                                                                                                | 6,483  |                                      
|                                                           |  |                                                                                                |        |                                      
|Total liabilities and members' capital                     |  | $                                                                                              | 7,162  |                                      





Revenue and direct operating expenses for the
various oil and gas assets included in the accompanying statements represent the net collective working and revenue interests acquired
by Equus Energy. The revenue and direct operating expenses presented herein relate only to the interests in the producing oil and
natural gas properties and do not represent all of the oil and natural gas operations of all of these properties. Direct operating
expenses include lease operating expenses and production and other related taxes. General and administrative expenses, depletion,
depreciation and amortization (“DD&A”) of oil and gas properties and federal and state taxes have been excluded
from direct operating expenses in the accompanying statements of revenue and direct operating expenses because the allocation
of certain expenses would be arbitrary and would not be indicative of what such costs would have been had Equus Energy been operated
as a stand-alone entity.The statements of revenue and direct operating expenses presented are not indicative of the financial
condition or results of operations of Equus Energy on a go forward basis due to changes in the business and the omission of various
operating expenses.





Table of Contents20











|                                                    |  | Three months ended March 31
|--------------------------------------------------- |  | ---------------------------
|                                                    |  | 2014                       
|                                                    |  | (Unaudited)                
|Operating revenue                                   |  | $                          
|Operating expenses                                  |  |                            
|Direct operating expenses                           |  |                            
|Depletion, depreciation, amortization and accretion |  |                            
|General and administrative                          |  |                            
|Total operating expenses                            |  |                            
|Operating income (loss) before income tax expense   |  |                            
|Income tax                                          |  |                            
|Net income (loss)                                   |  | $                          





Critical Accounting Policies for Equus
Energy– Equus Energy and its wholly-owned subsidiary EQS Energy Holdings, Inc. (collectively, the “Company”)
follow the Full Cost Method of Accounting for oil and gas properties. Under the full cost method, all costs associated
with property acquisition, exploration, and development activities are capitalized. Capitalized costs include lease acquisitions,
geological and geophysical work, delay rentals, costs of drilling, completing and equipping successful and unsuccessful oil and
gas wells and related costs. Gains or losses are normally not recognized on the sale or other disposition of oil and gas properties.
Gains or losses are normally reflected as an adjustment to the full cost pool.



The capitalized costs of oil and gas properties,
plus estimated future development costs relating to proved reserves and estimated cost of dismantlement and abandonment, net of
salvage value, are amortized on a unit-of-production method over the estimated productive life of the proved oil and gas reserves.
Unevaluated oil and gas properties are excluded from this calculation.  Depletion, depreciation and amortization expense for
the Company’s oil and gas properties totaled $0.2 million and $0.3 million for the quarters ended March 31, 2014 and March
31, 2013, respectively.



Capitalized oil and gas property costs are
limited to an amount (the ceiling limitation) equal to the sum of the following:



| | (a) | As of March 31, 2014, the present value of estimated future net revenue from the projected production of proved oil and gas reserves, calculated at the simple arithmetic average, first-day-of-the-month prices during the twelve-month period before the balance sheet date  (with consideration of price changes only to the extent provided by contractual arrangements) and a discount factor of 10%;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | The cost of investments in unproved and unevaluated properties excluded from the costs being amortized; and
| | --- | -----------------------------------------------------------------------------------------------------------



| | (c) | The lower of cost or estimated fair value of unproved properties included in the costs being amortized.
| | --- | -------------------------------------------------------------------------------------------------------



When it is determined that oil and gas property
costs exceed the ceiling limitation, an impairment charge is recorded to reduce its carrying value to the ceiling limitation. 
The Company did not recognize an impairment loss on their oil and gas properties during 2013 or during the three months ended March
31, 2014.



The costs of certain unevaluated leasehold
acreage and certain wells being drilled are not amortized. The Company excludes all costs until proved reserves are found or until
it is determined that the costs are impaired. Costs not amortized are periodically assessed for possible impairment or reduction
in value. If a reduction in value has occurred, costs being amortized are increased accordingly.



Revenue Recognition -Revenue
is recognized for oil and natural gas sales under the sales method of accounting. Under this method, revenue is recognized
on production as it is taken and delivered to its purchasers. The volumes sold may be more or less than the volumes entitled
to, based on the owner’s net leasehold interest. These differences result from production imbalances, which are
not significant, and are reflected as adjustments to proven reserves and future cash flows in the unaudited summarized oil
and gas information included herein.



Table of Contents21







Accounting Policy on Depletion
- The Company employs the “Units of Production” method in calculating depletion of its proved oil and gas properties,
wherein capitalized costs, as adjusted for future development costs and asset retirement obligations, are amortized over the total
estimated proved reserves.



Asset Retirement Obligations
- The fair value of asset retirement obligations are recorded in the period in which they are incurred if a reasonable estimate
of fair value can be made, and the corresponding cost is capitalized as part of the carrying amount of the related long-lived asset. 
The fair value of the asset retirement obligation is measured using expected future cash outflows discounted at the Company’s
credit-adjusted risk-free interest rate.  Fair value, to the extent possible, should include a market risk premium for unforeseeable
circumstances.  No market risk premium was included in the Company’s asset retirement obligation fair value estimate
since a reasonable estimate could not be made.  The liability is accreted to its then present value each period, and the capitalized
cost is depleted or amortized over the estimated recoverable reserves using the units-of-production method.



| | (8) | Subsequent Events
| | --- | -----------------



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



On April 3, 2014, we sold all of our 73,666
remaining shares of OPG, wherein we received $61,867 in net proceeds.







On May 15, 2014, the Fund announced that it had adopted a Plan
of Reorganization (also referred to hereinafter as the "Plan") within the meaning of Section 2(a)(33) of the 1940 Act. 
Under the terms of the Plan, Equus intends to pursue a merger or consolidation with MVC Capital, Inc. ("MVC"), a BDC
traded on the New York Stock Exchange, or a subsidiary of MVC, or one or more of MVC's portfolio companies (referred to in the
Plan as a "Consolidation") within the next twelve months.  Absent Equus merging or consolidating with/into MVC,
the present intention is for Equus to (i) consummate the Consolidation, (ii) terminate its election to be classified as a BDC,
and (iii) be restructured as a publicly-traded operating company focused on the energy and/or financial services sectors.



On May 14, 2014, a Share Exchange Agreement was entered into between MVC and Equus as a first step in the
Plan, wherein MVC received 2,112,000 shares of the Fund in exchange for Equus receiving 395,839 shares of MVC.  The exchange
was determined based on each company's respective net asset values per share, calculated as of May 12, 2014.  The number of
MVC shares that were received by Equus is subject to adjustment following MVC's release of its Form 10-Q, which will include its
published net asset value per share for the quarter ended April 30, 2014.  If a Consolidation has not occurred within one
year from the date of the share exchange, MVC has the right, to the extent permitted by applicable law, to rescind the exchange,
recover its shares that have been issued to Equus, and return to Equus the 2,112,000 shares issued by the Fund.  As part of
the reorganization, MVC may also acquire additional Equus shares from time to time, either through Equus' direct sale to MVC of
newly-issued shares from treasury (which would require the approval of a majority of Equus shareholders) or through the purchase
of Equus shares from existing shareholders.













Table of Contents22





Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations



Overview



Equus Total Return, Inc. (“we,”
“us,” “our,” “Equus,” the “Company,” and the “Fund”), 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. Our shares trade on the New York Stock Exchange under the symbol EQS. On August 11, 2006, our
shareholders approved the change of the Fund’s investment strategy to a total return investment objective. This new 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.



We attempt to maximize the return to stockholders
in the form of current investment income and long-term capital gains by investing in the debt and equity securities of companies
with a total enterprise value of between $5.0 million and $75.0 million, although we may engage in transactions with smaller or
larger investee companies from time to time. We seek to invest primarily in companies pursuing growth either through acquisition
or organically, leveraged buyouts, management buyouts and recapitalizations of existing businesses or special situations. Our income-producing
investments consist principally of debt securities including subordinate debt, debt convertible into common or preferred stock,
or debt combined with warrants and common and preferred stock. Debt and preferred equity financing may also be used to create long-term
capital appreciation through the exercise and sale of warrants received in connection with the financing. We seek 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. Given market conditions over the past several years and the performance of our portfolio,
our management and Board of Directors believe it is prudent to continue to review alternatives to refine and further clarify the
current strategies.



We elected to be treated as a Business Development
Company (“BDC”) under the Investment Company Act of 1940 Act (“1940 Act”). We currently qualify as a regulated
investment company (“RIC’) for federal income tax purposes and, therefore, are not required to pay corporate income
taxes on any income or gains that we distribute to our stockholders. We have certain wholly owned Taxable Subsidiaries each of
which holds one or more portfolio investments listed on our Schedules of Investments. The purpose of these Taxable Subsidiaries
is to permit us to hold certain income-producing investments or portfolio companies organized as limited liability companies, or
LLCs, (or other forms of pass-through entities) and still satisfy the RIC tax requirement that at least 90% of our gross revenue
for income tax purposes must consist of investment income. Absent the Taxable Subsidiaries, a portion of the gross income of these
income-producing investments or of any LLC (or other pass-through entity) portfolio investment, as the case may be, would flow
through directly to us for the 90% test. To the extent that such income did not consist of investment income, it could jeopardize
our ability to qualify as a RIC and, therefore, cause us to incur significant federal income taxes. The income of the LLCs (or
other pass-through entities) owned by Taxable Subsidiaries is taxed to the Taxable Subsidiaries and does not flow through to us,
thereby helping us preserve our RIC status and resultant tax advantages. We do not consolidate the Taxable Subsidiaries for income
tax purposes and they may generate income tax expense because of the Taxable Subsidiaries’ ownership of the portfolio investments.
We reflect any such income tax expense on our Statements of Operations.



Critical Accounting Policies



Our financial statements are based on the selection
and application of significant accounting policies, which require management to make significant estimates and assumptions. We
believe that the following are some of the more critical judgment areas in the application of our accounting policies that currently
affect our financial condition and results of operations.



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 our
Board of Directors. As a general principle, the current “fair value” of an investment would be the amount we 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.

Table of Contents23







Thinly Traded and Over-the-Counter Securities—Generally,
we value securities that are traded in the over-the-counter market or on a stock exchange at the average of the prevailing bid
and ask prices on the date of the relevant period end. However, we may apply a discount to the market value of restricted or thinly
traded public securities to reflect the impact that these restrictions have on the value of these securities. We review factors,
including the trading volume, total securities outstanding and our percentage ownership of securities to determine whether the
trading levels are active (Level 1) or inactive (Level 2) or unobservable (Level 3). These types of securities represented 11.0%
of our investments in portfolio securities as of March 31, 2014 and December 31, 2013, respectively. We utilized independent pricing
services with certain of our fair value estimates. To corroborate “bid/ask” quotes from independent pricing services,
we perform a market-yield approach to validate prices obtained or obtain other evidence.



During the first twelve months after an investment
is made, the original investment amount is utilized to determine the fair value unless significant developments have occurred during
this twelve month period which would indicate a material effect on the portfolio company (such as results of operations or changes
in general market conditions). After the twelve month period, or if material events have occurred within the twelve month period,
Fund management considers a two-step process when appraising investments of privately held companies. The first step involves determining
the enterprise value of the portfolio company. During this step, our management considers three different valuation approaches:
a market approach, an income approach, and an asset approach. The particular facts and circumstances of each portfolio company
determine which approach, or combination of approaches, will be utilized. The second step when appraising equity investments of
privately held companies involves allocating value to the various debt and equity securities of the company. Fund management allocates
value to these securities based on their relative priorities. For equity securities such as warrants, the Fund may also incorporate
alternative methodologies including the Black-Scholes Option Pricing Model.



Market approach—The market approach
typically employed by our management calculates the enterprise value of a company as a multiple of earnings before interest,
taxes, depreciation and amortization (“EBITDA”) generated by the company for the trailing twelve month period. 
Adjustments to the company’s EBITDA, including those for non-recurring items, may be considered. Multiples are estimated
based on current market conditions and past experience in the private company marketplace and are subjective in nature. We will
apply liquidity and other discounts we deem appropriate to equity valuations where applicable. We 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.



Income approach—The income approach
typically utilized by our management calculates the enterprise value of a company utilizing a discounted cash flow model incorporating
projected future cash flows of the company.  Projected future cash flows consider the historical performance of the company
as well as current and projected market participant performance. Discount rates are estimated based on current market conditions
and past experience in the private company marketplace and are subjective in nature. We will apply liquidity and other discounts
we deem appropriate to equity valuations where applicable.



Asset approach—We consider the
asset approach to determine the fair value of significantly deteriorated investments demonstrating circumstances indicative of
a liquidation analysis. This situation may arise when a portfolio company: 1) cannot generate adequate cash flow to meet the principal
and interest payments on its indebtedness; 2) is not successful in refinancing its debt upon maturity; 3) we believe the credit
quality of a loan has deteriorated due to changes in the business and underlying asset or market conditions which may result in
the company’s inability to meet future obligations; or 4) the portfolio company’s reorganization or bankruptcy. Consideration
is also given as to whether a liquidation event would be orderly or forced.



We base adjustments upon such factors as the
portfolio company’s earnings, cash flow and net worth, the market prices for similar securities of comparable companies,
an assessment of the company’s current and future financial prospects and various other factors and assumptions. In the case
of unsuccessful operations, we may base a portfolio company’s fair value upon the company’s estimated liquidation value.
Fair valuations are necessarily subjective, and management’s estimate of fair value may differ materially from amounts actually
received upon the disposition of its portfolio securities. Also, any failure by a portfolio company to achieve its business plan
or obtain and maintain its financing arrangements could result in increased volatility and result in a significant and rapid change
in its value.



Our general intent is to hold our loans to
maturity when appraising its privately held debt investments. As such, we believe that the fair value will not exceed the cost
of the investment. However, in addition to the previously described analysis involving allocation of value to the debt instrument,
we perform a yield analysis to determine if a debt security has been impaired.



Table of Contents24







The Audit Committee of the Board of Directors
may engage independent, third-party valuation firms to conduct independent appraisals and review management’s preliminary
valuations of each privately-held investment in order to make their own independent assessment. Any third-party valuation data
would be considered as one of many factors in a fair value determination. The Audit Committee then would recommend the fair values
for all privately-held securities based on all relevant factors to the Board of Directors for final approval.



Because of the inherent uncertainty
of the valuation of portfolio securities which do not have readily ascertainable market values, amounting to $13.4 million
and $13.3 million as of March 31, 2014 and December 31, 2013, respectively, our fair value determinations may materially
differ from the values that would have been used had a ready market existed for the securities. As of March 31, 2014 and
December 31, 2013 respectively, one of the Fund’s portfolio investments, the 73,666 ordinary shares of Orco Property
Group, S.A. (“OPG”), was publicly listed on the NYSE Euronext Paris Exchange, along with €1,200,790 [$1.5
million] in newly-issued 6-year OPG Notes. However, as of March 31, 2014 and December 31, 2013 respectively, there had been
no significant trading activity in the OPG Notes.



On a daily basis, we adjust our net asset value
for the changes in the value of our publicly held securities, if applicable, and material changes in the value of 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





On May 15, 2014, we announced
that we had adopted a Plan of Reorganization, which may involve the transformation of the Fund into an operating company, which
will likely result in the loss of our status as a RIC for Federal income tax purposes.  However, if we do not effect a transformation
of the Fund into an operating company, we intend to comply with the requirements of the Internal Revenue Code necessary for us
to qualify as a RIC. So long as we comply with these requirements, we generally will not be subject to corporate-level federal
income taxes on otherwise taxable income (including net realized capital gains) distributed to stockholders. Therefore, we did
not record a provision for federal income taxes in our financial statements.  As of December 31, 2013, we had a capital loss
carry-forward of $32.5 million which may be used to offset future capital gains. We may borrow money from time to time to maintain
our status as a RIC under the Internal Revenue Code. See Note 2 for further discussion of our RIC borrowings.  See also “Subsequent
Events” and “Risk Factors” on pages 27 and 30.





Interest Income Recognition



We record interest income, adjusted for amortization
of premium and accretion of discount, on an accrual basis to the extent that we expect to collect such amounts. We stop accruing
interest on investments when we determine that interest is no longer collectible. We may also impair the accrued interest when
we determine that all or a portion of the current accrual is uncollectible. If we receive any cash after determining that interest
is no longer collectible, we treat such cash as payment on the principal balance until the entire principal balance has been repaid,
before we recognize any additional interest income. We accrete or amortize 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



We have loans in our portfolio that may pay
PIK interest. We add PIK interest, if any, computed at the contractual rate specified in each loan agreement, to the principal
balance of the loan and record it as interest income. To maintain the Fund’s status as a RIC, we must pay out to our stockholders
this non-cash source of income in the form of dividends even if we have not yet collected any cash in respect of such investments.



Current Market Conditions



Overall economic conditions in the United States
have improved, albeit marginally. However, the economic recovery has been hampered by slower growth and persistent high unemployment
levels. The U.S. Congressional Budget Office is forecasting higher growth in 2014 (3.1%), with a projected unemployment rate exceeding
6.0% until 2017.



Further, the banking industry continues to
experience additional bank failures as regulators continue to impose strict capital requirements. Additionally, future economic
expansion and business investment is threatened by perceptions of higher taxes and healthcare costs, as well as the high levels
of government deficit spending.



Table of Contents25







Market conditions for business transactions
including mergers and acquisitions and private equity investments improved significantly in 2013 compared with previous years,
and has continued through the first quarter of 2014, as corporations have been deleveraging and are holding significant amounts
of cash and many have begun to focus on acquisitions as part of future growth plans. Private equity firms as a group enjoyed more
success in 2013 in monetizing their investments through sales and public listings.



During the first quarter of 2014,
our net asset value decreased to $3.09 per share from  $3.14 per share. As of March 31, 2014, the closing price
of our common stock closed was $1.92, which is a discount of 37.9% to our net asset value.



Over the past several years, we have executed
certain initiatives to enhance liquidity, achieve a lower operational cost structure, provide more assistance to portfolio companies
and realize certain of our portfolio investments. Specifically, we changed the composition of our Board of Directors and management,
terminated certain of our follow-on investments, internalized the management of the Fund, suspended our managed distribution policy,
modified our investment strategy to pursue shorter term liquidation opportunities, pursued non-cash investment opportunities, and
sold certain of our legacy and underperforming investment holdings. We believe these actions continue to be necessary to protect
capital and liquidity during this turbulent economic period in order to preserve and enhance shareholder value. Because our management
is internalized, certain of our expenses should not increase commensurate with an increase in the size of the Fund and, therefore,
we expect to achieve efficiencies in our cost structure if we are able to grow the Fund.



Liquidity and Capital Resources



We generate cash primarily from maturities,
sales of securities and borrowings, as well as capital gains realized upon the sale of portfolio investments. We use cash primarily
to make additional investments, either in new companies or as follow-on investments in the existing portfolio companies and to
pay the dividends to our stockholders.



Because of the nature and size of the portfolio
investments, we may periodically borrow funds to make qualifying investments to maintain our tax status as a RIC. We often borrow
such funds by utilizing a margin account with a securities brokerage firm. There is no assurance that such arrangement will be
available in the future. If 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.



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.



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.



We are evaluating the impact of current market
conditions on our portfolio company valuations and their ability to provide current income. We have followed valuation techniques
in a consistent manner; however, we are cognizant of current market conditions that might affect future valuations of portfolio
securities. We believe that our 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 was $0.5 million and
$0.8 million for the three months ended March 31, 2014 and March 31, 2013, respectively. Investment income was
$0.3 million for the three months ended March 31, 2014. The investment income of ($0.1) generated  for the three months
ended March 31, 2013 is due primarily to due to the impairment of accrued interest income from Spectrum.



Total expenses were relatively unchanged at
$0.7 million for the three months ended March 31, 2014 and March 31, 2013, respectively.

Table of Contents26







Realized Gains and Losses on Sales of Portfolio Securities



During the three months ended March 31,
2014, we realized a loss of $0.1 million from the sale of temporary cash investments. We did not realize any net capital gains
or losses for the three months ended March 31, 2013.



Changes in Unrealized Appreciation/Depreciation of Portfolio
Securities



Net unrealized depreciation on investments
increased $0.07 million during the three months ended March 31, 2014, to a net unrealized depreciation of $4.0 million.  Such
increase in unrealized depreciation is largely due to the decrease in fair value of our holdings in OPG of $0.1 million due to
a decline in the price of OPG shares.



Net unrealized depreciation on investments
increased $0.7 million during the three months ended March 31, 2013, to a net unrealized depreciation of $17.9 million.  Such
decrease in unrealized depreciation is largely due to the following changes:



| | (i) | Decrease in fair value of Equus Energy of $0.2 million due to operating expenses;
| | --- | ---------------------------------------------------------------------------------



| | (ii) | Decrease in fair value of our holdings in OPG of $0.1 million due to a decline in the price of
OPG shares and foreign exchange translation; and
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | Decrease in fair value of our holdings in Spectrum of $0.4 million due to a decline in operating
performance.
| | ----- | -------------------------------------------------------------------------------------------------------------



Dividends



We will 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 three months ended March
31, 2014, we capitalized consulting expenses of $0.07 million relating to Spectrum Management. We also received a semi-annual
interest payment of $0.04 million in respect of our €1.2 million [$1.5 million] in OPG notes.



During the three months ended March 31, 2013,
we capitalized legal and consulting expenses of $0.1 million relating to Spectrum Management. We also received a semi-annual interest
payment of $0.03 million and a 5.75% partial principal repayment of $9,000 in respect of our €1.2 million [$1.5 million] in
OPG notes.



Subsequent Events



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



On April 3, 2014, we sold all of our 73,666
remaining shares of OPG, wherein we received $61,867 in net proceeds.





On May 15, 2014, the Fund announced that it had adopted a Plan
of Reorganization (also referred to hereinafter as the "Plan") within the meaning of Section 2(a)(33) of the 1940 Act. 
Under the terms of the Plan, Equus intends to pursue a merger or consolidation with MVC Capital, Inc. ("MVC"), a BDC
traded on the New York Stock Exchange, or a subsidiary of MVC, or one or more of MVC's portfolio companies (referred to in the
Plan as a "Consolidation") within the next twelve months.  Absent Equus merging or consolidating with/into MVC,
the present intention is for Equus to (i) consummate the Consolidation, (ii) terminate its election to be classified as a BDC,
and (iii) be restructured as a publicly-traded operating company focused on the energy and/or financial services sectors.



On May 14, 2014, a Share Exchange Agreement was entered into between MVC and Equus as a first step in the
Plan, wherein MVC received 2,112,000 shares of the Fund in exchange for Equus receiving 395,839 shares of MVC.  The exchange
was determined based on each company's respective net asset values per share, calculated as of May 12, 2014.  The number of
MVC shares that were received by Equus is subject to adjustment following MVC's release of its Form 10-Q, which will include its
published net asset value per share for the quarter ended April 30, 2014.  If a Consolidation has not occurred within one
year from the date of the share exchange, MVC has the right, to the extent permitted by applicable law, to rescind the exchange,
recover its shares that have been issued to Equus, and return to Equus the 2,112,000 shares issued by the Fund.  As part of
the reorganization, MVC may also acquire additional Equus shares from time to time, either through Equus' direct sale to MVC of
newly-issued shares from treasury (which would require the approval of a majority of Equus shareholders) or through the purchase
of Equus shares from existing shareholders.



Table of Contents27







Item  3. Quantitative and
Qualitative Disclosure about Market Risk



We are 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. In the future, in addition to our investment in OPG shares and the OPG Notes, we may invest in companies
outside the United States, including in Europe and Asia, which would give rise to exposure to foreign currency value fluctuations.
We do not use derivative financial instruments to mitigate any of these risks. The return on investments is generally not affected
by foreign currency fluctuations.





Our 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 affect 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. We determine their fair
values based on the terms of the relevant debt security and the financial condition of the issuer.



A major portion of our 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 stock 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.



We are classified as a “non-diversified”
investment company under the 1940 Act, which means we are not limited in the proportion of our assets that may be invested in the
securities of a single user. The value of one segment called “Energy” includes one portfolio company and was 24.5%
of the net asset value and 59.2% of our investments in portfolio company securities (at fair value) as of March 31, 2014. 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 our common stock to a greater extent than would be the
case if we 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 Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.



The Fund’s management, with the participation
of the Fund’s Chief Executive Officer 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 March 31, 2014. Based on their evaluation, the Fund’s Chief 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 March 31, 2014, 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



Champion Window Arbitration Claim—In
January 2006, we sold our 31.5% ownership interest in Champion Window, Inc. (“Champion”), a portfolio company of the
Fund, to Atrium Companies Inc. (“Atrium”) pursuant to a Stock Purchase Agreement (“SPA”) dated December
22, 2005. The SPA contained certain limited rights of indemnification for Atrium in connection with its purchase of such ownership
interest.



More than five years after the closing of the
sale of our Champion interest, Atrium filed suit in the District Court of Harris County, Texas against two former officers of Atrium’s
subsidiary, Champion, alleging, amongst other matters, that the former officers breached their fiduciary duties to Champion by
hiring undocumented workers. This action was commenced primarily as a result of an investigation by the U.S. Immigration and Customs
Enforcement agency (“ICE”) into Atrium’s hiring practices. On March 12, 2012, to protect its interests, we filed
a Petition in Intervention in the State Court Action seeking a declaration from the Court that Equus did not owe any obligation
to indemnify Atrium or Champion for any penalties, costs or fees associated with the investigation by ICE.



Table of Contents28







On March 16, 2012, Atrium and Champion filed
a claim with the American Arbitration Association in Dallas, Texas, against Equus and a number of the other sellers under the SPA.
In September 2013, all of Atrium and Champion’s claims including claims against its former officers described above, were
also consolidated in the Arbitration Action.



In the Arbitration Action, Atrium and Champion
seek damages arising from Equus’ and the other sellers’ indemnity obligations set forth in the SPA. Atrium claims
it is entitled to indemnification under the SPA for costs it has incurred in responding to an ongoing investigation by ICE. Atrium
entered into a Non-Prosecution Agreement with ICE. It appears that one condition of the Non-Prosecution Agreement required Atrium
to pay ICE $2,000,000. Atrium and Champion asserted two counts of breach of contract against Equus, both arising out of the alleged
obligation to indemnify Atrium and Champion pursuant to certain provisions of the SPA. Atrium and Champion also asserted claims
for fraudulent inducement against two former officers and directors of Champion. Through the arbitration, Atrium and Champion
seek to recover an unspecified amount in the form of alleged “losses, damages, assessments, penalties, interest, reasonable
attorneys’ and accountants’ fees, settlement costs, and other costs and expenses arising directly or indirectly out
of or incident to,” the alleged breach of the indemnity provisions in the SPA. As a consequence of their fraudulent inducement
claim against the two former officers and directors, Atrium and Champion alternatively seek equitable rescission of the SPA and
exemplary damages from the two former officers and directors.



Atrium and Champion have yet to specify the
amount of damages they seek from Equus or the other sellers pursuant to the alleged indemnity obligations under the SPA. Atrium
and Champion have disclosed the payment of $2 million to ICE to resolve the investigation and avoid prosecution for their hiring
practices.



We filed an answer to Atrium and Champion’s
claims on December 6, 2013. In our answer, we denied that we owed any indemnity obligations to Atrium or Champion and further denied
that the Fund is in any way liable to Atrium or Champion. To the extent Atrium and Champion are able to establish a right to an
indemnity, we will further contest the amount of the claimed indemnity, inasmuch as we believe (among other defenses) that the
indemnity obligation can only exist, if at all, with respect to damages arising as a direct and proximate result of employees who
were hired prior to the closing date of the 2006 sale of Champion and remained in continuous employment after the 2006 sale, and
not to any employee who may have been hired in the six years after the sale.



While we believe the Atrium claim is without
merit and we intend to continue to vigorously dispute the claim, there is a reasonable possibility of an adverse ruling which may
require the Fund to indemnify Atrium. If Equus is required to indemnify Atrium and Champion, we estimate that such indemnity obligation
could vary from $2.0 million to $3.0 million. Pursuant to the SPA, the indemnification obligation of Equus and the other sellers
is several and not joint, and any such indemnity, however uncertain, would likely be reduced proportionately to our percentage
ownership in Champion at the time of sale, which was 31.5% of Champion’s shares outstanding.



Indemnification Settlement—Effective
June 13, 2013, the Fund entered into a settlement agreement with Sam Douglass, a former director and executive officer of the Fund,
in respect of a claim for indemnification pursuant to the General Corporation Law of Delaware and an indemnification agreement
entered into by the Fund with Mr. Douglass on May 3, 2001. The settlement agreement provides for the reimbursement to Mr. Douglass
of actual expenses incurred, excluding any fines or penalties, in connection with an enforcement action initiated by the Securities
and Exchange Commission against Mr. Douglass in 2009. The settlement payment of $125,000 was made on June 24, 2013.



Lawsuit Settlement—On August 12,
2012, Paula Douglass filed a lawsuit against the Fund and members of the Board of Directors in the District Court of Harris County,
Texas. Ms. Douglass’ complaint alleged various causes of action, including minority shareholder oppression, dilution, and
breach of fiduciary duty, and sought unspecified damages and attorney’s fees. Effective June 13, 2013, the Fund entered into
a settlement agreement with Ms. Douglass, Sam Douglass, as well as certain trusts controlled by them. Pursuant to the settlement
agreement and in view of the estimated costs of protracted litigation and the associated disruption to the operations of the Fund,
the Board of Directors approved a payment of $402,254, in complete settlement of the lawsuit, as being in the best interests of
the Fund and its shareholders. The settlement payment was made on July 30, 2013. Ms. Douglass filed a motion to dismiss the lawsuit
with prejudice on August 8, 2013.



From time to time, the Fund is also a party
to certain 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, we
do not expect that these proceedings will have a material effect upon the Fund’s financial condition or results of operations.



Table of Contents29







Item 1A.
Risk Factors





In addition to the various risks identified
in the Fund’s Annual Report on Form 10-K for the year ended December 31, 2013, filed on March 31, 2014, are the following:



If we reorganize as an operating
company, we will likely not continue to qualify as a RIC under the Code.



On May 15, 2014, we announced that we
had adopted a Plan of Reorganization (also referred to hereinafter as the “Plan”) within the meaning of Section 2(a)(33)
of the 1940 Act.  The Plan contemplates the possible merger of the Fund with and into another BDC, or the restructuring of
the Fund as an operating company no longer subject to the 1940 Act.  If we were to reorganize as an operating company, we
may lose our status as a RIC.  If we fail to qualify as a RIC, we will be subject to corporate income tax, which would substantially
reduce the amount of income we might otherwise distribute to our shareholders.  See “Subsequent Events”
on page 27.



If we reorganize as an operating
company, we will not continue to operate as a BDC.



We have elected to be classified as a
BDC under the 1940 Act.  In connection with our announcement on May 15, 2014 to effect a Plan of Reorganization, if we effect
a reorganization of the Fund into an operating company, we will seek to terminate our BDC classification.  If we were to terminate
our election to be classified as a BDC and were still determined by the Securities and Exchange Commission to constitute an “investment
company,” we would be subject to significantly greater regulatory requirements and constraints than under which we presently
operate, the result of which would  have a material adverse effect on our results and financial condition.



If we reorganize as an operating
company, we may not be able to utilize our capital losses.



As of March 31, 2014, we have incurred
cumulative capital losses of $32.5 million, of which $15.6 million will begin expiring after 2017, with the remainder carried over
indefinitely.  Pursuant to the Plan of Reorganization announced on May 15, 2014, we may reorganize as an operating company. 
If we reorganize as an operating company, we may lose our ability to offset future income against our cumulative capital losses,
including capital losses that would otherwise continue past 2017.  If we reorganized as an operating company and were unable
to offset future income against these capital losses, the result could have a material adverse effect on our future operating results
and our financial condition.



Other than the foregoing, there have
been no material changes to the Fund’s risk factors from the disclosure set forth in the Annual Report on Form 10-K for
the year ended December 31, 2013.





Readers should carefully consider these risks
and all other information contained in the annual report on Form 10-K, including the Fund’s 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.







Table of Contents30









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 December 16, 2010.]w
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 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(d) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2011.]
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (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) | Share Exchange Agreement between the Fund and MVC Capital, Inc., dated May 14, 2014. [Incorporated by reference to
                                                                 Exhibit                                                                  10.1
                                                                 to                                                                                                    Current
                                                                 Report                                                                                                               on
                                                                 Form                                                                                    8-K,
                                                                 filed on May 15, 2014.]
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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

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

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



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

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

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















Table of Contents31





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: May 15, 2014 |  | /s/ John A. Hardy       
|                   |  | John A. Hardy           
|                   |  | Chief Executive Officer 





















































































































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