10-Q

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 September 30, 2008

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 0-19509

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.)

2727 Allen Parkway, 13th Floor Houston, Texas	77019
(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 is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨ Accelerated filer  ¨ Non-accelerated filer  x Smaller Reporting Company  ¨

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

There were 8,260,671 shares of the registrant’s common stock, $.001 par value, outstanding, as of November 14, 2008. The net asset value of a share at September 30, 2008 was $11.41.

EQUUS TOTAL RETURN, INC.

(A Delaware Corporation)

INDEX

	PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets—September 30, 2008 and December 31, 2007	3
Statements of Operations—For the three months ended September 30, 2008 and 2007	4
Statements of Operations—For the nine months ended September 30, 2008 and 2007	5
Statements of Changes in Net Assets—For the nine months ended September 30, 2008 and 2007	6
Statements of Cash Flows—For the nine months ended September 30, 2008 and 2007	7
Selected Per Share Data and Ratios—For the nine months ended September 30, 2008 and 2007	8
Schedule of Portfolio Securities—September 30, 2008	9
Schedule of Portfolio Securities—December 31, 2007	12
Notes to Financial Statements	15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3. Quantitative and Qualitative Disclosure about Market Risk	28
Item 4. Controls and Procedures	29
PART II. OTHER INFORMATION
Item 6. Exhibits	29
SIGNATURE	31

2

EQUUS TOTAL RETURN, INC.

BALANCE SHEETS

SEPTEMBER 30, 2008 AND DECEMBER 31, 2007

	September 30, 2008			December 31, 2007
(in thousands, except per share amounts)	(unaudited)
Assets
Investments in portfolio securities at fair value:
Control investments (cost at $36,378 and $23,444 respectively)	$	38,477		$	25,646
Affiliate investments (cost at $18,173 and $14,721 respectively)		34,564			32,111
Non-affiliate investments (cost at $16,795 and $17,118 respectively)		11,000			14,345
Total investments in portfolio securities at fair value		84,041			72,102
Restricted cash & temporary investments, at cost which approximates fair value		55,544			30,296
Cash		53			28
Temporary cash investments, at cost which approximates fair value		9,048			30,912
Accounts receivable		8			107
Accrued interest and dividends receivable due from portfolio companies		1,179			1,023
Escrowed receivables, at fair value		—			262
Total assets	$	149,873		$	134,730
Liabilities and net assets
Liabilities:
Accounts payable and accrued liabilities	$	56		$	108
Due to adviser		588			1,410
Borrowing under margin account		54,994			29,996
Total liabilities		55,638			31,514
Commitments and contingencies		—			—
Net assets:
Preferred stock, $.001 par value, 5,000 shares authorized, no shares outstanding		—			—
Common stock, $.001 par value, 50,000 shares authorized, 8,261 and 8,401 shares outstanding		8			8
Additional paid-in capital		87,931			89,021
Undistributed net investment losses		(7,376	)		(3,772	)
Undistributed net capital gains		977			1,141
Unrealized appreciation of portfolio securities, net		12,695			16,818
Total net assets	$	94,235		$	103,216
Net assets per share	$	11.41		$	12.29

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

3

EQUUS TOTAL RETURN, INC.

STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

(Unaudited)

(in thousands, except per share amounts)	2008			2007
Investment income:
Interest and dividend income from portfolio securities:
Control investments	$	221		$	407
Affiliate investments		216			184
Non-affiliate investments		(233	)		158
Total interest and dividend income		204			749
Interest from temporary cash investments		88			402
Total investment income		292			1,151
Expenses:
Management fee		463			304
Incentive fee		14			(3	)
Professional fees		179			242
Administrative fees		113			113
Director fees and expenses		89			93
Mailing, printing and other expenses		55			38
Interest expense		4			23
Taxes		—			21
Offering costs		—			609
Total expenses		917			1,440
Net investment gain (loss)		(625	)		(289	)
Net realized gain (loss) on portfolio securities:
Control investments		(1	)		106
Affiliate investments		—			—
Non-affiliate investments		—			—
Total net realized gain (loss) on portfolio securities		(1	)		106
Net unrealized appreciation of portfolio securities:
End of period		12,695			1,319
Beginning of period		17,129			4,935
Net change in unrealized appreciation of portfolio securities		(4,434	)		(3,616	)
Net decrease in net assets resulting from operations	$	(5,060	)	$	(3,799	)
Net decrease in net assets resulting from operations, per share:
Basic and diluted	$	(0.60	)	$	(0.46	)
Weighted average shares outstanding, in thousands
Basic and diluted		8,497			8,270

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

4

EQUUS TOTAL RETURN, INC.

STATEMENTS OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

(Unaudited)

(in thousands, except per share amounts)	2008			2007
Investment income:
Interest and dividend income from portfolio securities:
Control investments	$	605		$	1,259
Affiliate investments		677			496
Non-affiliate investments		611			464
Total interest and dividend income		1,893			2,219
Interest from temporary cash investments		480			1,414
Total investment income		2,373			3,633
Expenses:
Management fee		1,485			1,225
Incentive fee		124			1,216
Professional fees		566			591
Administrative fees		338			338
Director fees and expenses		323			263
Mailing, printing and other expenses		226			255
Interest expense		20			66
Taxes		10			65
Offering costs		—			609
Total expenses		3,092			4,628
Net investment loss		(719	)		(995	)
Net realized gain (loss) on portfolio securities:
Control investments		626			1,492
Affiliate investments		351			3,747
Non-affiliate investments		—			19
Total net realized gain on portfolio securities		977			5,258
Net unrealized appreciation of portfolio securities:
End of period		12,695			1,319
Beginning of period		16,818			9,292
Net change in unrealized appreciation of portfolio securities		(4,123	)		(7,973	)
Net decrease in net assets resulting from operations	$	(3,865	)	$	(3,710	)
Net decrease in net assets resulting from operations per share:
Basic and diluted	$	(0.46	)	$	(0.45	)
Weighted average shares outstanding, in thousands
Basic and diluted		8,475			8,219

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

5

EQUUS TOTAL RETURN, INC.

STATEMENTS OF CHANGES IN NET ASSETS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

(Unaudited)

(in thousands)	2008			2007
Operations:
Net investment loss	$	(719	)	$	(995	)
Net realized gain on portfolio securities		977			5,258
Net change in unrealized appreciation of portfolio securities		(4,123	)		(7,973	)
Net increase (decrease) in net assets resulting from operations		(3,865	)		(3,710	)
Capital share transactions:
Dividends declared		(4,026	)		(3,081	)
Shares issued in lieu of cash dividend		1,920			1,417
Repurchase of common stock		(3,010	)		—
Decrease in net assets resulting from capital share transactions		(5,116	)		(1,664	)
Decrease in net assets		(8,981	)		(5,374	)
Net assets at beginning of period		103,216			93,236
Net assets at end of period	$	(94,235	)	$	87,862

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

6

EQUUS TOTAL RETURN, INC.

STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

(Unaudited)

(in thousands)	2008			2007
Reconciliation of increase (decrease) in net assets resulting from operations to net cash used in operating activities:
Net decrease in net assets resulting from operations	$	(3,865	)	$	(3,710	)
Adjustments to reconcile increase (decrease) in net assets resulting from operations to net cash used in operating activities:
Net realized gain on dispositions of portfolio securities		(977	)		(5,258	)
Net change in unrealized appreciation of portfolio securities		4,123			7,973
Amortization of original issue discount		166			44
Change in operating assets and liabilities:
Purchase of portfolio securities		(18,808	)		(24,469	)
Proceeds from dispositions of portfolio securities		3,915			6,658
Principal payments from portfolio securities		—			4,697
Purchases of restricted temporary cash investments		(25,248	)		(7	)
Decrease in accounts receivable		99			27
Increase in accrued interest and dividends receivable due from portfolio companies		(514	)		(1,303	)
Decrease in deferred offering costs		—			609
Decrease in accrued escrowed receivables		262			—
Decrease in accounts payable and accrued liabilities		(52	)		(117	)
Decrease in due to adviser		(822	)		(782	)
Net cash used in operating activities	$	(41,721	)	$	(15,638	)
Cash flows from financing activities:
Borrowings under margin account		140,992			89,947
Repayments under margin account		(115,994	)		(89,940	)
Dividends paid		(2,106	)		(1,664	)
Repurchase of common stock		(3,010	)		—
Cash paid for deferred offering costs		—			(25	)
Net cash provided by (used in) financing activities		19,882			(1,682	)
Net decrease in cash and cash equivalents		(21,839	)		(17,320	)
Cash and cash equivalents at beginning of period		30,940			51,499
Cash and cash equivalents at end of period	$	9,101		$	34,179
Non-cash financing activities:
Shares issued in lieu of cash dividend	$	1,920		$	1,417
Accrued interest or dividends exchanged for portfolio securities	$	358		$	481
Supplemental disclosure of cash flow information:
Interest paid	$	16		$	48
Income taxes paid	$	10		$	51

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

7

EQUUS TOTAL RETURN, INC.

SUPPLEMENTAL INFORMATION—SELECTED PER SHARE DATA AND RATIOS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

(Unaudited)

	2008			2007
Investment income	$	0.28		$	0.44
Expenses		0.36			0.56
Net investment loss		(0.08	)		(0.12	)
Net realized gain on portfolio securities		0.12			0.66
Net change in unrealized appreciation of portfolio securities		(0.49	)		(0.98	)
Net decrease in net assets resulting from operations		(0.45	)		(0.44	)
Capital Transactions:
Dividend declared		(0.47	)		(0.38	)
Share Repurchase		(0.36	)		—
Dilutive effect of shares issued in common stock dividend		0.40			(0.06	)
Decrease in net assets resulting from capital transactions		(0.43	)		(0.44	)
Net decrease in net assets		(0.88	)		(0.88	)
Net assets at beginning of period		12.29			11.42
Net assets at end of period, basic and diluted	$	11.41		$	10.54
Weighted average number of shares outstanding during period, in thousands		8,475			8,219
Market value per share at end of period	$	6.20		$	7.63
Ratio of expenses to average net assets		3.13	%		5.11	%
Ratio of net investment loss to average net assets		(0.73	)%		(1.10	)%
Ratio of net increase in net assets resulting from operations to average net assets		(3.91	)%		4.10	%
Total return on market price		5.77	%*		6.26	%

* Total return equals the change in the ending market value over the beginning of period price per share plus dividends declared per share during the period, divided by the beginning price.

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

8

EQUUS TOTAL RETURN, INC.

SCHEDULE OF PORTFOLIO SECURITIES

SEPTEMBER 30, 2008

(unaudited)

Name and Location of Portfolio Company	Industry	Date of Initial Investment	Investment	Principal		Cost of Investment		Fair Value(3)
				(amounts in thousands)
Control investments: Majority-owned (7):
Equus Media Development Company, LLC Houston, TX	Media	January 2007	Member Interest			$	5,000	$	5,000
Riptide Entertainment, LLC	Entertainment and leisure	December 2005	Member interest (64.67%)				65		65
Miami, FL			8% promissory notes	$	9,435		9,435		9,435
Sovereign Business Forms, Inc. (8)	Business products and services	August 1996(4)	1,214,630 shares of common stock(1)				5,080		4,405
Houston, TX			12% promissory notes(1)		3,250		3,250		3,250
Spectrum Management, LLC Carrollton, TX	Business products and services	December 1999(4)	285,000 units of Class A equity interest				2,850		6,103
			16% subordinated promissory note(1)		1,690		1,690		1,690
Total Control investments: Majority-owned (represents 35.6% of total investments at fair value)						$	27,370	$	29,948
Control Investments: Non-majority owned (6):
ConGlobal Industries Holding, Inc.	Shipping products and services	February 1997(4)	24,397,303 shares of common stock			$	1,370	$	444
San Ramon, CA			7% Promissory note	$	3,266		3,266		3,494
			Member interest in CCI-ANI Finance, LLC				2,734		2,926
			Member interest (66.7%) in JL Madre, LLC(1)				865		892
HealthSPAC, LLC	Healthcare	December 2006	Member interest (40%)				773		773
El Segundo, CA
Total Control Investments: Non-majority Owned (represents 10.2% of total investments at fair value)						$	9,008		8,529
Total Control Investments: (represents 45.8% of total investments at fair value)						$	36,378	$	38,477
Affiliate Investments (5):
Infinia Corporation Kennewick, WA	Alternative energy	June 2007	666,667 Class A Shares Preferred Stock			$	3,000	$	20,741
			160,720 Class B Shares Preferred Stock				5,000		5,000
Nickent Golf, Inc.	Entertainment and leisure	June 2007	13% Promissory Note(1)(2)	$	6,250		6,250		6,250
City of Industry, CA			3,000,000 shares Class A Convertible Preferred Stock				3,000		2,000
			Warrants to buy 15,000 shares of common stock at $1 per share through March 17, 2013				—		—
			Warrants to buy 463,917 shares of common stock at $0.97 per share through August 4, 2010, warrant terms subject to change				—		—
PalletOne, Inc.	Shipping products and services	October 2001(4)	350,000 shares of common stock				350		—
Bartow, FL
RP&C International Investments LLC	Healthcare	September 2006	Membership Interest (17.2%)				573		573
New York, NY
Total Affiliate Investments (represents 41.1% of total investments at fair value)						$	18,173	$	34,564

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

9

EQUUS TOTAL RETURN, INC.

SCHEDULE OF PORTFOLIO SECURITIES

SEPTEMBER 30, 2008

(unaudited)

(continued)

Name and Location of Portfolio Company	Industry	Date of Initial Investment	Investment	Principal		Cost of Investment		Fair Value(3)
				(amounts in thousands)
Non-Affiliate Investments (less than 5% owned):
1848 Capital Partners LLC	Entertainment and leisure	January 2008	18% Promissory note(1)(2)	$	3,000	$	3,000	$	3,000
Miami, FL
Big Apple Entertainment Partners LLC	Entertainment and leisure	October 2007	18% Promissory note(1)		3,000		3,000		3,000
New York, NY
Creekstone Florida Holdings, LLC Houston, TX	Real Estate	December 2005	17-19.8% subordinated promissory note(2)		4,000		4,000		—
London Bridge Entertainment Partners LLC	Entertainment and leisure	August 2008	18% Promissory note(1)		2,500		2,500		2,500
New York, NY
Metic Solutions, PLC	Business products and services	August 2008	Promissory note convertible into common stock (2)(9)		1,000		1,000		1,000
London, UK
The Bradshaw Group Richardson, TX	Business products and services	May 2000(4)	576,828 Class B Shares 12.25% preferred stock				1,795		—
			38,750 Class C shares preferred stock				—		—
			788,649 Class D shares 15% preferred stock				—		—
			2,218,109 Class E shares 8% preferred stock				—		—
			Warrant to buy 2,229,450 shares of common stock through May 2008				—		—
Trulite, Inc.	Alternative energy	August 2008	15% Promissory note(1)		1,500		1,500		1,500
Houston, TX
Total Non-Affiliate Investments (represents 13.1% of total investments at fair value)						$	16,795	$	11,000
Total Investments						$	71,346	$	84,041

(1) Income-producing. All other securities are considered non-income producing.

(2) Income on these securities is paid-in-kind by the issuance of additional securities, accrued as interest for conversion to common stock or accreted through original issue discount.

(3) See “Business—Valuation.”

(4) Investments prior to June 30, 2005 were not selected by the current Adviser.

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

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

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

(8) In May 2008, Sovereign restructured its ownership and debt. As a result, the Fund’s ownership interest increased to majority-owned control investment.

(9) Note to accrue interest at a rate equal to the Bank of Scotland plus 2%. All accrued interest to convert with the note.

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

10

EQUUS TOTAL RETURN, INC.

SCHEDULE OF PORTFOLIO SECURITIES

SEPTEMBER 30, 2008

(Unaudited)

(Continued)

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

As defined in the Investment Company Act of 1940, all of the Fund’s investments are in eligible portfolio companies. The Fund provides significant managerial assistance to all of the portfolio companies in which it has invested. The Fund provides significant managerial assistance to portfolio companies that comprise 90% of the total value of the investments in portfolio companies as of September 30, 2008.

The Fund’s investments in portfolio securities consist of the following types of securities as of September 30, 2008 (in thousands):

Type of Securities	Cost		Fair Value		Fair Value as Percentage of Net Assets
Secured and subordinated debt	$	38,891	$	35,119	37.4	%
Preferred stock		12,795		27,741	29.4	%
Limited liability company investments		12,860		16,332	17.3	%
Common stock		6,800		4,849	5.1	%
Options and warrants		—		—	0.0	%
Total	$	71,346	$	84,041	89.2	%

Four notes receivable included in secured and subordinated debt with an estimated fair value of $10.5 million provide that all or a portion of interest is paid-in-kind or the original issue discount is accreted over the life of the notes, by adding such amount to the principal of the notes. For the remainder of secured and subordinated debt, cash payments of interest are currently being received on notes aggregating $11.9 million in fair value, while no cash payments are being received for notes totaling $12.9 million.

The following is a summary by industry of the Fund’s investments in portfolio securities as of September 30, 2008 (in thousands):

Industry	Fair Value		Fair Value as Percentage of Net Assets
Alternative energy	$	27,241	28.9	%
Entertainment and leisure		26,250	27.9	%
Business products and services		16,448	17.5	%
Shipping products and services		7,756	8.2	%
Media		5,000	5.3	%
Real estate		—	—
Healthcare		1,346	1.4	%
Total	$	84,041	89.2	%

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

11

EQUUS TOTAL RETURN, INC.

SCHEDULE OF PORTFOLIO SECURITIES

DECEMBER 31, 2007

Name and Location of Portfolio Company	Industry	Date of Initial Investment	Type of Securities	Principal	Cost of Investment	Fair Value(3)
				(amounts in thousands)
Control Investments: Majority-owned(7):
Equus Media Development Company, LLC	Media	January 2007(4)	Member Interest (100%)		$  5,000	$  5,000
Houston, TX
Riptide Entertainment, LLC Miami, FL	Entertainment and leisure	December 2005(4)	Member interest (64.67%)		65	65
			8% promissory notes	$4,835	4,835	4,835
Spectrum Management, LLC Carrollton, TX	Business products and services	December 1999	285,000 units of Class A equity interest		2,850	8,381
			16% subordinated promissory note(1)(2)	1,304	1,304	1,304
			12.75% subordinated promissory note(1)(2)	386	386	386
Total Control Investments: Majority-owned (represents 27.7% of total investments at fair value)					$14,440	$19,971
Control Investments: Non-majority-owned(6):
ConGlobal Industries Holding, Inc. Houston, TX	Shipping products and services	February 1997	24,397,303 shares of common stock		1,370	—
			Promissory note(2)	3,266	3,266	2,153
			Member interest in CCI-ANI Finance, LLC(2)		2,734	1,803
			Member interest (66.7%) in JL Madre, LLC(1)		1,000	1,035
			Member interest (28.3%) in JL Madre Equipment, LLC(1)		69	119
HealthSPAC, LLC	Healthcare	December 2006(4)	Member interest (40%)		565	565
El Segundo, CA
Total Control Investments: Non-majority-owned (represents 7.9% of total investments at fair value)					$  9,004	$  5,675
Total Control Investments: (represents 35.6% of total investments at fair value)					$23,444	$25,646
Affiliate Investments(5):
Infinia Corporation Kennewick, WA	Alternative energy	June 2007(4)	666,667 Class A Shares Preferred Stock		3,000	20,740
Nickent Golf, Inc. City of Industry, CA	Entertainment and leisure	June 2007(4)	13% Promissory Note(1)(2)	6,066	6,066	6,066
			2,000,000 shares Class A Convertible Preferred Stock		2,000	2,000
			Warrants to buy 463,917 shares of common stock at $0.97 per share through August 4, 2009, warrant terms subject to change		—	—
PalletOne, Inc. South Bartow, FL	Shipping products and services	October 2001	350,000 shares of common stock		350	—
RP&C International Investments LLC	Healthcare	September 2006(4)	Membership Interest (17.2%)		3,305	3,305
New York, NY
Total Affiliate Investments (represents 44.5% of total investments at fair value)					$14,721	$32,111

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

12

EQUUS TOTAL RETURN, INC.

SCHEDULE OF PORTFOLIO SECURITIES

DECEMBER 31, 2007

(continued)

Name and Location of Portfolio Company	Industry	Date of Initial Investment	Type of Securities	Principal	Cost of Investment	Fair Value(3)
				(amounts in thousands)
Non-Affiliate Investments (less than 5% owned)
Big Apple Entertainment Partners LLC	Entertainment and leisure	October 2007(4)	Promissory note(1)	$3,000	$  3,000	$  3,000
New York, NY
The Bradshaw Group Richardson, TX	Business products and services	May 2000	576,828 Class B Shares 12.25% preferred stock		1,795	485
			38,750 Class C shares preferred stock		—	—
			788,649 Class D shares 15% preferred stock		—	—
			2,218,109 Class E shares 8% preferred stock		—	—
			Warrant to buy 2,229,450 shares of common stock through May 2008		—	—
Creekstone Florida Holdings, LLC Houston, TX	Real estate	December 2005(4)	17-19.8% subordinated promissory note(1)(2)	4,000	4,166	4,166
Sovereign Business Forms, Inc.	Business products and services	August 1996	29,854 shares of preferred stock(1)(2)		2,985	1,522
Houston, TX			15% promissory notes(1)(2)	5,172	5,172	5,172
			Warrant to buy 551,894 shares of common stock at $1 per share through Aug 2008		—	—
			Warrant to buy 25,070 shares of common stock at $1.25 per share through Aug 2008		—	—
			Warrant to buy 273,450 shares of common stock at $1 per share through Oct 2009		—	—
Total Non-Affiliate Investments (represents 19.9% of total investments at fair value)					$17,118	$14,345
Total Investments					$55,283	$72,102

(1) Income-producing. All other securities are considered non-income producing.

(2) Income on these securities is paid-in-kind by the issuance of additional securities or through accretion of original issue discount.

(3) See “Business—Valuation.”

(4) Investments subsequent to June 30, 2005 were selected, and are managed, by the Adviser.

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

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

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

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

13

EQUUS TOTAL RETURN, INC.

SCHEDULE OF PORTFOLIO SECURITIES

DECEMBER 31, 2007

(Continued)

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

As defined in the Investment Company Act of 1940, all of the Fund’s investments are in eligible portfolio companies. The Fund provides significant managerial assistance to all of the portfolio companies in which it has invested. The Fund provides significant managerial assistance to portfolio companies that comprise 96% of the total value of the investments in portfolio companies as of December 31, 2007.

The Fund’s investments in portfolio securities consist of the following types of securities at December 31, 2007 (in thousands):

Type of Securities	Cost		Fair Value		Fair Value as Percentage of Net Assets
Secured and subordinated debt	$	28,195	$	27,083	26.3	%
Preferred stock		9,780		24,747	24.0	%
Limited liability company		12,738		11,891	11.5	%
Common stock		4,570		8,381	8.1	%
Options and warrants		—		—	0.0	%
Total	$	55,283	$	72,102	69.9	%

Six notes receivable included in secured and subordinated debt with an estimated fair value of $19.3 million provided that all or a portion of interest is paid-in-kind or the original issue discount is accreted over the life of the notes, by adding such amount to the principal of the notes. For the remainder of secured and subordinated debt, cash payments of interest are being made currently on notes aggregating $3.0 million in fair value, while no cash payments are being received for notes totalling $4.8 million.

The following is a summary by industry of the Fund’s investments as of December 31, 2007 (in thousands):

Industry	Fair Value		Fair Value as Percentage of Net Assets
Alternative energy	$	20,740	20.1	%
Business products and services		17,250	16.7	%
Entertainment and leisure		15,966	15.5	%
Shipping products and services		5,110	5.0	%
Media		5,000	4.8	%
Real estate		4,166	4.0	%
Healthcare		3,870	3.8	%
Total	$	72,102	69.9	%

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

14

EQUUS TOTAL RETURN, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2008 AND 2007

(1) Description of Business and Basis of Presentation

Description of Business—Equus Total Return, Inc. (the “Fund”), formerly Equus II Incorporated, a Delaware corporation, was formed by Equus Investments II, L.P. (the “Partnership”) on August 16, 1991. On July 1, 1992, the Partnership was reorganized and all of the assets and liabilities of the Partnership were transferred to the Fund in exchange for shares of common stock of the Fund. The shares of the Fund trade on the New York Stock Exchange under the symbol EQS. On August 11, 2006, shareholders of the Fund approved the change of the Fund’s investment strategy to a total return investment objective. This 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.

The Fund seeks to achieve capital appreciation by making investments in equity and equity-oriented securities issued by privately-owned companies in transactions negotiated directly with such companies. The Fund seeks to invest primarily in companies which intend to grow either by acquiring other businesses, including leveraged buyouts, or internally. The Fund may also invest in recapitalizations of existing businesses or special situations from time to time. The Fund’s investments in portfolio companies consist principally of equity securities such as common and preferred stock, but also include other equity-oriented securities such as debt convertible into common or preferred stock or debt combined with warrants, options or other rights to acquire common or preferred stock. The Fund elected to be treated as a business development company under the Investment Company Act of 1940 (“Investment Company Act”). For tax purposes, the Fund has elected to be treated as a regulated investment company (“RIC”). With shareholder approval on June 30, 2005, the Fund entered into an investment advisory agreement with Moore Clayton Capital Advisors, Inc. (the “Adviser”). Prior to this agreement, the Fund’s adviser was Equus Capital Management Corporation.

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

The Fund has decided to further the total return investment objective, with authorization from the Board of Directors (which includes all of the Fund’s independent directors) and approval of a majority of the shareholders, by amending the Fund’s Restated Certificate of Incorporation to change the name of the Fund from “Equus II Incorporated” to “Equus Total Return, Inc.” This proposal was approved by a majority of the shareholders on August 11, 2006.

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

The results of operations for the three and nine months ended September 30, 2008 are not necessarily indicative of results that ultimately may be achieved for the year. The interim unaudited consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Fund’s Form 10-K for the fiscal year ended December 31, 2007, as filed with the SEC. Certain prior period information has been reclassified to conform to current year presentation.

(2) Liquidity and Financing Arrangements

There are several factors that may materially affect the Fund’s liquidity during the reasonably foreseeable future. The Fund views this period as the twelve month period from the date of the financial statements in this Form 10-Q, i.e., the period through
September 30, 2009.

        Management is currently evaluating the impact of current market conditions on its portfolio company valuations and their ability to provide current income. Management has followed valuation techniques in a consistent manner; however, it is cognizant of current market conditions that might effect future valuations of portfolio securities. If necessary to meet the Fund’s investment commitments of $8.2 million, the Fund has a secured $7.5 million revolving line of credit facility with Amegy Bank. The Fund has not yet borrowed under this facility. The Fund believes that its operating cash flow and cash on hand will be sufficient to meet operating requirements and to finance routine capital expenditures through the next twelve months.

While the Fund seeks to pay dividends on a quarterly basis, the Board of Directors has approved the payment of these dividends to be in the Fund’s common stock until further notice; thus, the future dividends should not affect the Fund’s liquidity.

As of September 30, 2008, the Fund had cash and temporary cash investments of $9.1 million. The Fund had $84.0 million of its net assets of $94.2 million invested in portfolio securities. Restricted assets totaled $55.5 million, of which $55.0 million was invested in U.S. Treasury Bills for the purpose of satisfying the diversification requirement to maintain the Fund’s pass-through tax treatment and $0.5 million represented a required 1% brokerage margin deposit. These securities are held by a securities brokerage firm and are pledged along with cash to secure the payment of the margin account balance. The U.S. Treasury bills were sold and the margin loan was repaid to the brokerage firm on October 2, 2008.

15

EQUUS TOTAL RETURN, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2008 AND 2007

On September 11, 2008, the Fund repurchased an aggregate of 423,960 shares of its common stock for $3.0 million, representing 4.9% of its outstanding shares, from unaffiliated third parties in a private transaction at the shares’ market price computed as the 5-day volume-weighted average closing price prior to the date of sale.

On February 19, 2008, the Fund revised its managed distribution policy to pay 10% of the Fund’s market value based on the 2007 year-end closing price of $6.31. In accordance with the revised policy, the Fund announced the declaration of a third quarter dividend of $0.158 per share on August 7, 2008. A dividend in the amount of $1.4 million was paid on September 29, 2008 to shareholders of record as of August 25, 2008. The dividend was payable in shares of common stock or in cash by specific election of the shareholders, and such election was made by September 22, 2008. The Fund paid $0.7 million in cash and issued 103,702 additional shares at an effective price of $6.62 per share. A dividend in the amount of $1.3 million was paid on June 30, 2008, to shareholders of record as of May 27, 2008. The dividend was payable in shares of common stock or in cash by specific election of the shareholders, and such election was made by June 23, 2008. The Fund paid $0.7 million in cash, and issued 84,727 additional shares of its common stock at an effective price of $7.04 per share. A dividend in the amount of $1.3 million was paid on March 31, 2008 to shareholders of record as of February 29, 2008. The dividend was payable in shares of common stock or in cash by specific election of the shareholders, and such election was made by March 24, 2008. The Fund paid $0.7 million in cash, and issued 95,023 additional shares of its common stock at an effective price of $6.71 per share. The classification of these dividends as between ordinary income, capital gain and return of capital will not be known until December 31, 2008, since any purchase or sale of a portfolio company during the remainder of the year will affect the classification. See Note (11) for the Fund’s fourth quarter dividend.

Under certain circumstances, the Fund may be called on to make follow-on investments in certain portfolio companies. If the Fund does not have sufficient funds to make follow-on investments, the portfolio company in need of the investment may be negatively impacted. Also, the Fund’s equity interest in the estimated fair value of the portfolio company could be reduced. In August 2008, the Fund entered into an agreement for a $7.5 million revolving line of credit facility with Amegy Bank National Association. The line of credit is intended to enable the Fund to make follow-on investments. The Fund has not yet borrowed under the facility.

During the nine months ended September 30, 2008, the Fund borrowed sufficient funds to maintain the Fund’s RIC status by utilizing a margin account with a securities brokerage firm. There is no assurance that such arrangement will be available in the future. If the Fund is unable to borrow funds to make qualifying investments, it may no longer qualify as a RIC. The Fund would then be subject to corporate income tax on the Fund’s net investment income and realized capital gains, and distributions to stockholders would be subject to income tax as ordinary dividends. Failure to continue to qualify as a RIC could be material to us and the Fund’s stockholders.

As of September 30, 2008, the Fund borrowed $55.0 million to make qualifying investments to maintain its RIC status by utilizing a margin account with a securities brokerage firm. The Fund collateralized such borrowings with restricted cash and temporary investments in U.S. Treasury bills of $55.5 million as of September 30, 2008. The U.S. Treasury bills were sold and the total amount borrowed was repaid on October 2, 2008.

As of December 31, 2007, the Fund borrowed $30.0 million to make qualifying investments to maintain its RIC status by utilizing a margin account with a securities brokerage firm. The Fund collateralized such borrowings with restricted cash and temporary investments in U.S. Treasury bills of $30.3 million. The U.S. Treasury bills matured and the total amount borrowed was repaid on January 3, 2008.

(3) Significant Accounting Policies

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

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

16

EQUUS TOTAL RETURN, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2008 AND 2007

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 Securities and Exchange Commission (“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 valued at their quoted market price at the close of business on the valuation date, less a discount to reflect the estimated effects of restrictions on the sale of such securities (“Valuation Discount”), if applicable.

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

Generally, cost is the primary factor used to determine fair value until significant developments affecting the portfolio company (such as results of operations or changes in general market conditions) provide a basis for use of an appraisal valuation. Thereafter, portfolio investments are carried at appraised values as determined quarterly by the Adviser, subject to the approval of the Board of Directors. Appraisal valuations are based upon such factors as a 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, the appraisal may be based upon liquidation value.

Most of the Fund’s common equity investments are appraised at a multiple of free cash flow generated by the portfolio company in its most recent fiscal year, less outstanding funded indebtedness and other senior securities such as preferred stock. Projections of current year free cash flow may be utilized and adjustments for non-recurring items are considered. Multiples utilized are estimated based on the Adviser’s experience in the private company marketplace, and are necessarily subjective in nature.

From time to time, portfolio companies are in default of certain covenants in their loan agreements. When the Adviser has a reasonable belief that the portfolio company will be able to restructure the loan agreements to adjust for any defaults, the portfolio company’s securities continue to be valued assuming that the company is a going concern. In the event a portfolio company cannot generate adequate cash flow to meet the principal and payments on such indebtedness or is not successful in refinancing the debt upon its maturity, the Fund’s investment could be reduced or eliminated through foreclosure on the portfolio company’s assets or the portfolio company’s reorganization or bankruptcy.

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

The fair values of debt securities, which are generally held to maturity, are determined on the basis of the terms of the debt securities and the financial condition of the issuer. Certificates of deposit purchased by the Fund generally will be valued at their face value, plus interest accrued to the date of valuation.

Because of the inherent uncertainty of the valuation of portfolio securities, which do not have readily ascertainable market values, amounting to $84.0 million (including no publicly traded securities) and $72.1 million (including no publicly traded securities) as of September 30, 2008 and December 31, 2007, respectively, the Fund’s estimate of fair value may materially differ from the value that would have been used had a ready market existed for the securities. Appraised values do not reflect brokers’ fees or other normal selling costs which might become payable on disposition of such investments.

On a daily basis, the Fund adjusts its net asset value for the changes in the value of its publicly held securities and material changes in the value of its private securities and reports those amounts to Lipper Analytical Services, Inc. Weekly and daily net asset values appear in various publications, including Barron’s and The Wall Street Journal.

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

17

EQUUS TOTAL RETURN, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2008 AND 2007

Escrowed Receivables, at Estimated Fair Value— In May 2007, the Fund sold its interest in The Drilltec Corporation (“Drilltec”). A portion of the proceeds from the sale was placed in a cash escrow account to secure the representations and warranties made to the respective purchasers. The Fund received the final payment of $0.3 million from The Drilltec Corporation escrow account in May 2008.

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

Income Taxes—The Fund intends to comply with the requirements of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gains) which is distributed to stockholders. Therefore, no provision for federal income taxes is recorded in the financial statements. The Fund borrows money from time to time to maintain its tax status under the Internal Revenue Code as a RIC. See Note 2 for further discussion of the Fund’s RIC borrowings.

In May 2006, the State of Texas enacted a bill that replaced the existing franchise tax with a margin tax. Effective January 1, 2007, the margin tax applies to legal entities conducting business in Texas, including previously non-taxable entities such as limited partnerships and limited liability partnerships. The margin tax is based on our Texas sourced taxable margin. The tax is calculated by applying a tax rate to a base that considers both revenue and expenses and therefore has the characteristics of an income tax.

(4) Fair Value Measurement

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value, outlines a fair value hierarchy based on inputs used to measure fair value and enhances disclosure requirements for fair value measurements. SFAS 157 does not change existing guidance as to whether an instrument is carried at fair value. The Fund adopted SFAS 157 for the quarter ending March 31, 2008. SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Fund has categorized all investments recorded at fair value in accordance with SFAS 157 based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, defined by SFAS 157 and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:

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

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

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

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

18

EQUUS TOTAL RETURN, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2008 AND 2007

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 September 30, 2008
(in thousands)	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Investments, at fair value	$	84,041	$	—	$	—	$	84,041

A reconciliation of the fair value of investments utilizing significant unobservable inputs is as follows (in thousands):

(in thousands)	Fair value measurements using unobservable inputs (Level 3)
Fair value as of December 31, 2007	$	72,102
Total realized gains		977
Change in unrealized appreciation		(4,123	)
Purchases, issuances and settlements, net		15,085
Transfers in (out) of Level 3		—
Fair value as of September 30, 2008	$	84,041

(5) Related Party Transactions and Agreements

Moore, Clayton & Co., Inc., a Delaware corporation, formed Moore Clayton Capital Advisors, Inc. (“MCCA”) in February 2005 for the purpose of managing the Fund. Moore, Clayton & Co., Inc., either directly or indirectly has a significant ownership interest in the Fund and, additionally, has two common directors. MCCA has no direct ownership in the Fund and has two common directors. MCCA acquired the outstanding stock of the two entities which owned the previous adviser, Equus Capital Management Corporation. Those two entities were individually owned by a current director of the Fund and a previous officer of the Fund who resigned with the change to the current adviser, Moore Clayton Capital Advisors, Inc.

The Fund entered into an investment advisory agreement dated June 30, 2005 (the “Advisory Agreement”) with Moore Clayton Capital Advisors, Inc. (the “Adviser”). This agreement was renewed in June 2008. Pursuant to the Advisory Agreement, the Adviser performs certain investment advisory services that are necessary for the operation of the Fund. The Adviser receives a base advisory fee at an annual rate of 2% of the net assets of the Fund, paid quarterly in arrears, as well as incentive fees in the following amounts: (i) 20% of the excess, if any, of the Fund’s net investment income for a quarter that exceeds a quarterly hurdle rate equal to 2% (8% annualized) of the Fund’s net assets, and (ii) 20% of the Fund’s net realized capital gain less unrealized capital depreciation paid on an annual basis. The advisory fees that the Fund pays represent the Adviser’s primary source of revenue. The Adviser is a wholly-owned subsidiary of MCC Global, NV, an international private equity investment and advisory firm.

The Advisory Agreement presently continues year-to-year, provided such continuance is approved at least annually by (i) a vote of a majority of the outstanding shares of the Fund, or (ii) a majority of the Independent Directors of the Fund. The Advisory Agreement may be terminated at any time, without the payment of any penalty, by the Board of Directors or the holders of a majority of the Fund’s shares on 60 days written notice to the Adviser, and would automatically terminate in the event of its “assignment” (as defined in the 1940 Act).

The Fund also entered into an administration agreement dated June 30, 2005 (“Administration Agreement”) with Equus Capital Administration Company, Inc. (the “Administrator”). This agreement was renewed in June 2008. Pursuant to the Administration Agreement, the Administrator provides (or arranges for suitable third parties to provide) all administrative services necessary for the operation of the Fund. The Fund reimburses the Administrator for the costs and expenses incurred by the Administrator in performing its obligations and providing personnel and facilities under the Administrative Agreement, provided that such reimbursements do not exceed $0.5 million per year.

19

EQUUS TOTAL RETURN, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2008 AND 2007

The Administration Agreement presently continues year-to-year, provided such continuance is approved at least annually by the Fund’s Board of Directors, including a majority of the Independent Directors. The Administration Agreement may be terminated at any time, without the payment of any penalty, by the Board of Directors, or by the Administrator, upon 60 days written notice to the other party, and would automatically terminate in the event of its “assignment” (as defined in the 1940 Act).

(6) Contractual Obligations

The Fund has entered into five contracts under which it expects to have material future commitments, including the Advisory Agreement between the Fund and the Adviser, pursuant to which the Adviser has agreed to serve as the Fund’s investment advisor; the Administration Agreement between the Fund and the Administrator, pursuant to which the Administrator has agreed to furnish the Fund with the facilities and administrative services necessary to conduct the Fund’s day-to-day operations and to provide managerial assistance on its behalf to portfolio companies to which the Fund is required to provide such assistance. The Advisory Agreement and the Administration Agreement may be terminated by either party without penalty upon not more than 60 days’ written notice to the other, see Note 5.

The remaining two commitments as of September 30, 2008 relate to the Fund’s portfolio company investments and are summarized as follows (in thousands):

Portfolio Company	Original Commitment		Remaining Commitment
RP&C International Investments LLC	$	11,100	$	5,000
HealthSPAC, LLC		5,000		3,227
			$	8,227

As compensation for services to the Fund, each Independent Director receives an annual fee of $20,000 paid quarterly in arrears, a fee of $2,000 for each meeting of the Board of Directors attended in person, a fee of $1,000 for participation in each telephonic meeting of the Board and a fee of $1,000 for each committee meeting attended, and reimbursement of all out-of-pocket expenses relating to attendance at such meetings. A quarterly fee of $2,500 is paid for the Chairman of the Independent Directors and the Chairman of the Audit Committee. An additional one-time fee of $5,000 was paid to the Chairman of the Independent Directors and the Chairman of the Audit Committee in September 2007, as approved by the Compensation Committee. Effective December 18, 2007, an annual fee of $15,000 for the Chairman of the Board of Directors was approved.

(7) Federal Income Tax Matters

The Fund is required to make distributions of any net taxable investment income on an annual basis, and may elect to distribute or retain net taxable realized capital gains. The Internal Revenue Service approved the Fund’s request, effective October 31, 1998, to change its year end for determining capital gains for purposes of Section 4982 of the Internal Revenue Code from December 31 to October 31.

The Fund was not required to make a distribution of ordinary income for 2007 under income tax regulations. The aggregate cost of investments for federal income tax purposes as of December 31, 2007 was $52.7 million. Such investments had unrealized appreciation of approximately $23.3 million and unrealized depreciation of $6.5 million for book purposes, or net unrealized appreciation of approximately $16.8 million. The Fund had unrealized appreciation of $26.4 million and unrealized depreciation of approximately $7.0 million for tax purposes, or net unrealized appreciation of $19.4 million as of December 31, 2007.

20

EQUUS TOTAL RETURN, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2008 AND 2007

The Fund adopted FASB Interpretation No. 48 entitled “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109,” referred to as “FIN 48,” as of January 1, 2007. FIN 48 clarifies the accounting for uncertain tax positions that may have been taken by an entity. Specifically, FIN 48 prescribes a more-likely-than-not recognition threshold to measure a tax position taken or expected to be taken in a tax return through a two-step process: (1) determining whether it is more likely than not that a tax position will be sustained upon examination by taxing authorities, after all appeals, based upon the technical merits of the position; and (2) measuring to determine the amount of benefit/expense to recognize in the financial statements, assuming taxing authorities have all relevant information concerning the issue. The tax position is measured at the largest amount of benefit/expense that is greater than 50 percent likely of being realized upon ultimate settlement. This pronouncement also specifies how to present a liability for unrecognized tax benefits in a classified balance sheet, but does not change the classification requirements for deferred taxes. Under FIN 48, if a tax position previously failed the more-likely-than-not recognition threshold, it should be recognized in the first subsequent financial reporting period in which the threshold is met. Similarly, a position that no longer meets this recognition threshold should no longer be recognized in the first financial reporting period that the threshold is no longer met.

The Fund is a flow-through, non-tax paying entity; further, the Fund’s net operating loss carry-forwards have been exhausted. Based upon an examination of the Fund’s tax position, the Fund determined that the aggregate exposure under FIN 48 did not have a material impact on its financial statements at January 1, 2008 or September 30, 2008. Therefore, the Fund has not recorded an adjustment to its financial statements related to the adoption of FIN 48. The Fund will continue to evaluate its tax positions in accordance with FIN 48, and recognize any future impact under FIN 48 as a charge to income in the applicable period in accordance with the standard.

The Fund’s accounting policy related to income tax penalties and interest assessments is to accrue for these costs and record a charge to expenses during the period that the Fund takes an uncertain tax position through resolution with the taxing authorities or expiration of the applicable statute of limitations.

(8) Dividends

On February 19, 2008, the Fund revised its managed distribution policy to pay 10% of the Fund’s market value based on the 2007 year-end closing price of $6.31. In accordance with the revised policy, the Fund announced the declaration of a third quarter dividend of $0.158 per share on August 7, 2008. A dividend in the amount of $1.4 million was paid on September 29, 2008 to shareholders of record as of August 25, 2008. The dividend was payable in shares of common stock or in cash by specific election of the shareholders, and such election was made by September 22, 2008. The Fund paid $0.7 million in cash and issued 103,702 additional shares at an effective price of $6.62 per share. A dividend in the amount of $1.3 million was paid on June 30, 2008, to shareholders of record as of May 27, 2008. The dividend was payable in shares of common stock or in cash by specific election of the shareholders, and such election was made by June 23, 2008. The Fund paid $0.7 million in cash, and issued 84,727 additional shares of its common stock at an effective price of $7.04 per share. A dividend in the amount of $1.3 million was paid on March 31, 2008 to shareholders of record as of February 29, 2008. The dividend was payable in shares of common stock or in cash by specific election of the shareholders, and such election was made by March 24, 2008. The Fund paid $0.7 million in cash, and issued 95,023 additional shares of its common stock at an effective price of $6.71 per share. The classification of these dividends as between ordinary income, capital gain and return of capital will not be known until December 31, 2008, since any purchase or sale of a portfolio company during the remainder of the year will affect the classification. See Note (11) for the Fund’s fourth quarter dividend.

(9) Portfolio Securities

During the nine months ended September 30, 2008, the Fund invested $8.0 million in new portfolio companies and made follow-on investments of $11.2 million in several follow-on investments, including $0.4 million in the form of interest and dividends paid-in-kind or original issue discount/premium amortization.

21

EQUUS TOTAL RETURN, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2008 AND 2007

The following table includes significant new and follow-on investments during the nine months ended September 30, 2008 (in thousands):

	New				Follow-On
Portfolio Company	Cash		Noncash		Cash		Noncash		Total
Infinia Corporation	$	—	$	—	$	5,000	$	—	$	5,000
Riptide Entertainment, LLC		—		—		4,600		—		4,600
1848 Capital Partners LLC		3,000		—		—		—		3,000
London Bridge Entertainment LLC		2,500		—		—		—		2,500
Trulite, Inc.		1,500		—		—		—		1,500
Nickent Golf, Inc.		—		—		1,000		184		1,184
Metic Solutions, PLC		1,000		—		—		—		1,000
HealthSpac, LLC		—		—		208		—		208
Various others		—		—		—		174		174
	$	8,000	$	—	$	10,808	$	358	$	19,166

During the nine months ended September 30, 2008, the Fund realized net capital gains of $1.0 million, including the following significant transactions (in thousands):

Portfolio Company	Industry	Type	Realized Gain
ConGlobal Industries Holding, Inc.	Shipping products and services	Control, non-majority	$	625
RP&C International Investments LLC	Healthcare	Affiliate		351
Various others				1
			$	977

Net unrealized appreciation on investments did not change significantly during the nine months ended September 30, 2008.

During the nine months ended September 30, 2007, the Fund invested $16.1 million in four new companies and made follow-on investments of $8.8 million in follow-on investments, including $0.3 million in the form of interest and dividends paid in kind or original issue discount/premium amortization.

The following table includes significant new and follow-on investments during the nine months ended September 30, 2007 (in thousands):

	New				Follow-On
Portfolio Company	Cash		Noncash		Cash		Noncash		Total
Nickent Golf, Inc	$	8,000	$	—	$	2,000	$	—	$	10,000
Equus Media Development Company, LLC		5,000		—		—		—		5,000
Riptide Entertainment, LLC		—		—		3,835		—		3,835
Infinia Corporation		3,000		—		—		—		3,000
RP&C International Investments LLC		—		—		2,009		—		2,009
HealthSpac, LLC		—		—		525		—		525
ConGlobal Industries Holdings, Inc.		—		—		—		273		273
Equus Media Finance Company, LLC		100		—		—		—		100
Various others		—		—		—		208		208
	$	16,100	$	—	$	8,369	$	481	$	24,950

22

EQUUS TOTAL RETURN, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2008 AND 2007

During the nine months ended September 30, 2007, the Fund realized net capital gains of $5.3 million, including the following significant transactions (in thousands):

Portfolio Company	Industry	Type	Realized Gain/ (Loss)
The Drilltec Corporation	Residential building products	Control		3,829
Champion Windows	Residential building products	Control		1,403
Cedar Lodge Holdings, Inc.	Real Estate	Control		608
Alenco Window Holdings, LLC	Residential building products	Control		165
Equicom	Telecommunications	Control		136
ConGlobal Industries Holding, Inc.	Shipping products and services	Control, non-majority		58
Turf Grass Holdings, Inc.	Residential building products	Control		(960	)
Various others				19
			$	5,258

Net unrealized appreciation on investments decreased by $8.0 million during the nine months ended September 30, 2007, from a net unrealized appreciation of $9.3 million to a net unrealized appreciation of $1.3 million. Such decrease in appreciation resulted from a transfer of $3.6 million in net unrealized appreciation to net realized appreciation for sale of The Drilltec Corporation. The decrease in appreciation was also a result of the decline in estimated fair market values of ConGlobal Industries Holding, Inc. and Pallet One, resulting from a decline in operations for the period.

(10) Recent Accounting Pronouncements

Fair Value Measurements—On February 12, 2008, FASB Staff Position No. FAS 157-2—Effective Date of FASB No. 157, or FSP 157-2 was issued, which deferred the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities to fiscal years beginning after November 15, 2008, with early adoption permitted in certain cases. We deferred the adoption of SFAS 157 for our nonfinancial assets and liabilities. We are assessing the potential impact that adoption of SFAS 157 for our nonfinancial assets and liabilities may have on our financial statements.

On October 10, 2008, FASB Staff Position No. 157-3—Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active, or FSP 157-3, was issued. FSP 157-3 provides an illustrative example of how to determine the fair value of a financial asset in an inactive market. The FSP does not change the fair value measurement principles set forth in SFAS 157. Since adopting SFAS 157 in January 2008, our practices for determining the fair value of our investment portfolio have been, and continue to be, consistent with the guidance provided in the example in FSP 157-3. Therefore, our adoption of FSP 157-3 did not affect our practices for determining the fair value of our investment portfolio and does not have a material effect on our financial position or results of operations.

Fair Value Option for Financial Assets and Financial Liabilities—In February 2007, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 159—The Fair Value Option for Financial Assets and Financial Liabilities, or SFAS 159. Among other requirements, SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. SFAS 159 was effective for the first fiscal year that begins after November 15, 2008. Based upon our review, we have elected not to adopt SFAS 159 for financial liabilities that were in our portfolio as of September 30, 2008. However, we may elect to apply SFAS 159 to future financial liabilities. The impact on our financials from the potential application of SFAS 159 to a future liability depends upon the attributes of the specific financial liability.

(11) Subsequent Events

On November 10, 2008, the Fund announced a dividend of $0.158 per share for the fourth quarter of 2008. The dividend will be payable on December 22, 2008 in shares of common stock.

23

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

Overview

Equus Total Return, Inc. is a business development company which invests in equity and equity-oriented securities issued by privately-owned companies in transactions negotiated directly with such companies. The Fund made four new investments other than follow-on investments during the nine months ended September 30, 2008 and 2007.

The valuation of the Fund’s investments is the most significant area of judgment impacting the financial statements. The Fund’s portfolio investments are valued at estimates of fair value, with the net change in unrealized appreciation or depreciation included in the determination of net assets. Almost all of the long-term investments are in privately-held or restricted securities, the valuation of which is necessarily subjective. Actual values may differ materially from the Fund’s estimated fair value. Portfolio valuations are determined quarterly by the Adviser, subject to the approval of the Board of Directors, and are based on a number of relevant factors.

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

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

Since the Fund is a closed-end business development company, stockholders have no right to present their shares to the Fund for redemption. Because the shares continue to trade at a discount, the Board of Directors has determined that it would be in the best interest of the Fund’s stockholders for the Fund to be authorized to attempt to reduce or eliminate the market value discount from net asset value. Accordingly, from time to time the Fund may, but is not required to, repurchase its shares (including by means of tender offers) to attempt to reduce or eliminate the discount or to increase the net asset value of those shares.

Significant Accounting Policies

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

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

Valuation of Investments—Portfolio investments are carried at fair value with the net change in unrealized appreciation or depreciation included in the determination of net assets. Valuations of portfolio securities are performed in accordance with accounting principles generally accepted in the United States of America and the financial reporting policies of the Securities and Exchange Commission (“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 valued at their quoted market price at the close of business on the valuation date, less a discount to reflect the estimated effects of restrictions on the sale of such securities (“Valuation Discount”), if applicable.

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

Generally, cost is the primary factor used to determine fair value until significant developments affecting the portfolio company (such as results of operations or changes in general market conditions) provide a basis for use of an appraisal valuation. Thereafter, portfolio investments are carried at appraised values as determined quarterly by the Adviser, subject to the approval of the Board of Directors. Appraisal valuations are based upon such factors as a 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, the appraisal may be based upon liquidation value.

24

Most of the Fund’s common equity investments are appraised at a multiple of free cash flow generated by the portfolio company in its most recent fiscal year, less outstanding funded indebtedness and other senior securities such as preferred stock. Projections of current year free cash flow may be utilized and adjustments for non-recurring items are considered. Multiples utilized are estimated based on the Adviser’s experience in the private company marketplace, and are necessarily subjective in nature.

From time to time, portfolio companies are in default of certain covenants in their loan agreements. When the Adviser has a reasonable belief that the portfolio company will be able to restructure the loan agreements to adjust for any defaults, the portfolio company’s securities continue to be valued assuming that the company is a going concern. In the event a portfolio company cannot generate adequate cash flow to meet the principal and payments on such indebtedness or is not successful in refinancing the debt upon its maturity, the Fund’s investment could be reduced or eliminated through foreclosure on the portfolio company’s assets or the portfolio company’s reorganization or bankruptcy.

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

The fair values of debt securities, which are generally held to maturity, are determined on the basis of the terms of the debt securities and the financial condition of the issuer. Certificates of deposit purchased by the Fund generally will be valued at their face value, plus interest accrued to the date of valuation.

Because of the inherent uncertainty of the valuation of portfolio securities, which do not have readily ascertainable market values, amounting to $86.2 million (including no publicly traded securities) and $72.1 million (including no publicly traded securities) as of September 30, 2008 and December 31, 2007, respectively, the Fund’s estimate of fair value may materially differ from the value that would have been used had a ready market existed for the securities. Appraised values do not reflect brokers’ fees or other normal selling costs which might become payable on disposition of such investments.

On a daily basis, the Fund adjusts its net asset value for the changes in the value of its publicly held securities and material changes in the value of its private securities and reports those amounts to Lipper Analytical Services, Inc. Weekly and daily net asset values appear in various publications, including Barron’s and The Wall Street Journal.

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

Because of the nature and size of the portfolio investments, the Fund may periodically borrow funds to make qualifying investments to maintain its tax status as a RIC. During the nine months ended September 30, 2008 and 2007, the Fund borrowed such funds by utilizing a margin account with a securities brokerage firm. There is no assurance that such arrangement will be available in the future. If the Fund is unable to borrow funds to make qualifying investments, it may no longer qualify as a RIC. The Fund would then be subject to corporate income tax on its net investment income and realized capital gains, and distributions to stockholders would be subject to income tax as ordinary dividends.

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.

Current Market Conditions

During the quarter ended September 30, 2008, the state of the economy in the U.S. and abroad continued to deteriorate to what many believe is a recession, which could be long-term. Banks and others in the financial services industry have continued to report significant write-downs in fair value of their assets. The failure of a number of banks and investment companies, distressed mergers and acquisitions, and the government take-over of the nation’s two largest government-sponsored mortgage companies lead to the passage of the $700 billion Emergency Economic Stabilization of 2008 in early October 2008. In addition, the stock market has declined significantly, with both the S&P 500 and the NYSE (on which EQS trades), declining over 30%. These events have significantly constrained the availability of debt and equity capital for the market as a whole, and the financial services sector in particular.

        These and other events have also lead to rising unemployment, deteriorating consumer confidence and a general reduction in spending by both consumers and business, adversely affecting a number of industries including those in which the Fund’s portfolio companies operate. Further, consistent with other companies in the financial services sector, the Fund has been affected adversely by many of these events. Between June 30, 2008 and November 13, 2008, the closing price of the Fund’s common stock has declined approximately 30% and is trading at a 55% discount.

Liquidity and Capital Resources

There are several factors that may materially affect the Fund’s liquidity during the reasonably foreseeable future. The Fund views this period as the twelve month period from the date of the financial statements in this Form 10-Q, i.e., the period through
September 30, 2009.

Management is currently evaluating the impact of current market conditions on its portfolio company valuations and their ability to provide current income. Management has followed valuation techniques in a consistent manner; however, it is cognizant of current market conditions that might effect future valuations of portfolio securities. If necessary to meet the Fund’s investment commitments of $8.2 million, the Fund has a secured $7.5 million revolving line of credit facility with Amegy Bank. The Fund has not yet borrowed under this facility. The Fund believes that its operating cash flow and cash on hand will be sufficient to meet operating requirements and to finance routine capital expenditures through the next twelve months.

While the Fund seeks to pay dividends on a quarterly basis, the Board of Directors has approved the payment of these dividends to be in the Fund’s common stock until further notice; thus, the future dividends should not affect the Fund’s liquidity.

As previously noted, the Fund may periodically borrow funds to make qualifying investments to maintain its tax status as a RIC. During the nine months ended September 30, 2008 and 2007, the Fund borrowed such funds by utilizing a margin account with a securities brokerage firm. There is no assurance that such arrangement will be available in the future.

Investors should not place undue reliance on the Fund’s forward-looking statements regarding income and liabilities, which are current only as to the date hereof. The Fund undertakes no obligation to release publicly any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

25

Results of Operations

Investment Income and Expense

Net investment loss after all expenses was $0.7 and $1.0 for the nine months ended September 30, 2008 and 2007 respectively and $0.6 and $0.3 for the three months ended September 30, 2008 and 2007, respectively. Total income from portfolio securities was $2.0 million and $2.2 million for the nine months ended September 30, 2008 and 2007 respectively and $0.3 million and $0.8 million for the three months ended September 30, 2008 and 2007 respectively. The net investment loss generated at September 30, 2008 compared to 2007, is due primarily to the decline in total income from portfolio securities for the nine months ended September 30, 2008, compared to the nine months ended September 30, 2007, along with the offering costs incurred at September 30, 2007 and declining incentive fees.

Interest from temporary cash investments decreased to $0.5 million for the nine months ended September 30, 2008 from $1.4 million for the nine months ended September 30, 2007, and to $0.1 million for the three months ended September 30, 2008 from $0.4 million for the three months ended September 30, 2007. The cash in temporary investments (excluding the margin account) decreased $21.9 million to $9.0 million as of September 30, 2008, and a corresponding decrease of $17.2 million for the nine months ended September, 2007, primarily due to the increase in new and follow-on investments.

The Adviser receives management fee compensation at an annual rate of 2% of the net assets of the Fund paid quarterly in arrears. Such fees increased by $0.3 million for the nine months ended September 30, 2008 and $0.2 million for the three months ended September 2008.

Incentive fees are calculated as follows: (i) 20% of the excess, if any, of the Fund’s net investment income for a quarter that exceeds a quarterly hurdle rate equal to 2% (8% annualized) of the Fund’s net assets, and (ii) 20% of the Fund’s net realized capital gain less unrealized capital depreciation paid on an annual basis. The proceeds of any sale are compared to the fair market valuation of the Fund’s portfolio companies at March 31, 2005. Incentive fee expense decreased by $1.1 million for the nine months ended September 30, 2008 as compared to the nine months ended September 30, 2007, and remained relatively unchanged the three months ended September 30, 2008 as compared to the three months ended September 30, 2007.

Professional fees remained relatively constant for the three and nine months ended September 30, 2008, as compared to the three and nine months ended September 30, 2007.

Administrative fees were unchanged for the three and nine months ended September 30, 2008 and 2007, respectively. The Fund reimburses the Administrator, ECAC, for the costs and expenses incurred in performing its obligations and providing personnel and facilities under the Administrative Agreement, provided that such reimbursements do not exceed $450,000 per year. The administrator receives $112,500 per quarter.

Realized Gains and Losses on Sales of Portfolio Securities

During the nine months ended September 30, 2008, the Fund realized net capital gains of $1.0 million, including the following significant transactions (in thousands):

Portfolio Company	Industry	Type	Realized Gain
ConGlobal Industries Holding, Inc.	Shipping products and services	Control, non-majority	$	625
RP&C International Investments LLC	Healthcare	Affiliate		351
Various others				1
			$	977

During the three months ended September 30, 2008, the Fund had no realized net capital gains.

26

During the nine months ended September 30, 2007, the Fund realized net capital gains of $5.3 million, including the following significant transactions (in thousands):

Portfolio Company	Industry	Type	Realized Gain/ (Loss)
The Drilltec Corporation	Residential building products	Control	$	3,829
Champion Window Holdings, Inc.	Residential building products	Control		1,403
Cedar Lodge Holdings, Inc.	Real Estate	Control		608
Alenco Window Holdings, LLC	Residential building products	Control		165
Equicom, Inc.	Telecommunications	Control		136
ConGlobal Industries Holding, Inc.	Shipping products and services	Control, non-majority		58
Turf Grass Holdings, Inc.	Residential building products	Control		(960	)
Various others				19
			$	5,258

During the three months ended September 30, 2007, the Fund realized net capital gains of $0.1 million, including the following significant transactions (in thousands):

Portfolio Company	Industry	Type	Realized Gain/ (Loss)
Equicom, Inc.	Telecommunications	Control		136
The Drilltec Corporation	Real Estate	Control		82
Cedar Lodge Holdings, Inc.	Residential building products	Control	$	(120	)
Various others				8
			$	106

Changes in Unrealized Appreciation/Depreciation of Portfolio Securities

Net unrealized appreciation on investments decreased by $4.1 million during the nine months ended September 30, 2008, from a net unrealized appreciation of $16.8 million to a net unrealized appreciation of $12.7 million. The decrease in appreciation was primarily a result of the decline in estimated fair market value of Creekstone Florida Holdings, LLC, resulting from a decline in the real estate market.

Net unrealized appreciation on investments decreased by $8.0 million during the nine months ended September 30, 2007, from a net unrealized appreciation of $9.3 million to a net unrealized appreciation of $1.3 million. Such decrease in appreciation resulted from a transfer of $3.6 million in net unrealized appreciation to net realized appreciation for sale of The Drilltec Corporation. The decrease in appreciation was also a result of the decline in estimated fair market values of ConGlobal Industries Holding, Inc. and Pallet One, resulting from a decline in operations for the period.

Dividends

On February 19, 2008, the Fund revised its managed distribution policy to pay 10% of the Fund’s market value based on the 2007 year-end closing price of $6.31. In accordance with this revised policy, the Fund announced the declaration of a third quarter dividend of $0.158 per share on August 7, 2008. A dividend in the amount of $1.4 million was paid on September 29, 2008 to shareholders of record as of August 25, 2008. The dividend was payable in shares of common stock or in cash by specific election of the shareholders, and such election was made by September 22, 2008. The Fund paid $0.7 million in cash and issued 103,702 additional shares at an effective price of $6.62 per share. A dividend in the amount of $1.3 million was paid on June 30, 2008, to shareholders of record as of May 27, 2008. The dividend was payable in shares of common stock or in cash by specific election of the shareholders, and such election was made by June 23, 2008. The Fund paid $0.7 million in cash, and issued 84,727 additional shares of its common stock at an effective price of $7.04 per share. A dividend in the amount of $1.3 million was paid on March 31, 2008 to shareholders of record as of February 29, 2008. The dividend was payable in shares of common stock or in cash by specific election of the shareholders, and such election was made by March 24, 2008. The Fund paid $0.7 million in cash, and issued 95,023 additional shares of its common stock at an effective price of $6.71 per share. The classification of these dividends as between ordinary income, capital gain and return of capital will not be known until December 31, 2008, since any purchase or sale of a portfolio company during the remainder of the year will affect the classification.

27

The Fund announced the declaration of a $0.125 dividend payable on September 24, 2007, to shareholders of record as of the close of business on August 21, 2007. The Fund paid $502,172 in cash and issued 73,069 additional shares of common stock at $7.85 per share on September 24, 2007, in payment of such dividend. The Fund paid a $0.125 dividend for shareholders of record as of May 21, 2007. The Fund paid $0.6 million in cash and issued 48,930 additional shares of common stock at $8.81 per share on June 25, 2007, in payment of such dividend. The Fund paid a $0.125 dividend for shareholders of record as of the close of business on February 26, 2007 on March 30, 2007. The Fund paid $0.6 million in cash and issued 52,650 additional shares of common stock at $8.63 per share, in payment of such dividend.

Portfolio Investments

The following table includes significant new and follow-on investments during the nine months ended September 30, 2008 (in thousands):

	New				Follow-On
Portfolio Company	Cash		Noncash		Cash		Noncash		Total
Infinia Corporation	$	—	$	—	$	5,000	$	—	$	5,000
Riptide Entertainment, LLC		—		—		4,600		—		4,600
1848 Capital Partners LLC		3,000		—		—		—		3,000
London Bridge Entertainment LLC		2,500		—		—		—		2,500
Trulite, Inc.		1,500		—		—		—		1,500
Nickent Golf, Inc.		—		—		1,000		184		1,184
Metic Solutions, PLC		1,000		—		—		—		1,000
HealthSpac, LLC		—		—		208		—		208
Various others		—		—		—		174		174
	$	8,000	$	—	$	10,808	$	358	$	19,166

The following table includes significant new and follow-on investments during the nine months ended September 30, 2007 (in thousands):

	New				Follow-On
Portfolio Company	Cash		Noncash		Cash		Noncash		Total
Nickent Golf, Inc	$	8,000	$	—	$	2,000	$	—	$	10,000
Equus Media Development Company, LLC		5,000		—		—		—		5,000
Riptide Entertainment, LLC		—		—		3,835		—		3,835
Infinia Corporation		3,000		—		—		—		3,000
RP&C International Investments LLC		—		—		2,009		—		2,009
HealthSpac, LLC		—		—		525		—		525
ConGlobal Industries Holdings, Inc.		—		—		—		273		273
Equus Media Finance Company, LLC		100		—		—		—		100
Various others		—		—		—		208		208
	$	16,100	$	—	$	8,369	$	481	$	24,950

Subsequent Events

On November 10, 2008, the Fund announced a dividend of $0.158 per share for the fourth quarter of 2008. The dividend will be payable on December 22, 2008 in shares of common stock.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

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

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

28

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

The Fund is classified as a “non-diversified” investment company under the Investment Company Act, which means the Fund is not limited in the proportion of its assets that may be invested in the securities of a single user. The value of one segment called Alternative Energy includes one portfolio company and was 27.5% of the net asset value and 30.9% of the Fund’s investments in portfolio company securities (at fair value) as of September 30, 2008. Changes in business or industry trends or in the financial condition, results of operations, or the market’s assessment of any single portfolio company will affect the net asset value and the market price of the Fund’s common stock to a greater extent than would be the case if the Fund were a “diversified” company holding numerous investments.

Item 4. Controls and Procedures

The Fund maintains disclosure controls and other procedures that are designed to ensure that information required to be disclosed by the Fund in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Fund’s management, including its 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 September 30, 2008. 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 September 30, 2008, that has materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.

Part II. Other Information

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(c) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007]

10. Material Contracts

(a) Investment Advisory Agreement dated June 30, 2005, between the Fund and Moore, Clayton Capital Advisors, Inc. [Incorporated by reference to Exhibit 10(a) to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005]

(b) Administration Agreement dated June 30, 2005, between the Fund and Equus Capital Administration Company. [Incorporated by reference to Exhibit 10(b) to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005]

(c) Safekeeping Agreement between the Fund and The Frost National Bank dated March 15, 2004. [Incorporated by reference to Exhibit 10(f) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004]

29

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

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

(f) Joint Code of Ethics of the Fund and Moore Clayton Capital Advisors, Inc. (Rule 17j-1) [Incorporated by reference to Exhibit 3(c) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007]

(g) Revolving Credit Note between the Fund and Amegy Bank National Association dated August 13, 2008 [filed herewith]

(h) Pledge and Security Agreement between the Fund and Amegy Bank National Association dated August 13, 2008 [filed herewith]

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

1. Certification by Chairman and Chief Executive Officer

2. Certification by Chief Financial Officer

32. Section 1350 Certifications

1. Certification by Chairman and Chief Executive Officer

2. Certification by Chief Financial Officer

30

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: November 14, 2008	/s/ Kenneth I. Denos
	Kenneth I. Denos
	Chief Executive Officer

31

EX-10.(G)

Exhibit 10(g)

REVOLVING CREDIT NOTE

$7,500,000.00 Houston, Texas August 13, 2008

1. FOR VALUE RECEIVED, and as hereinafter provided EQUUS TOTAL RETURN, INC., Delaware corporation (the “Borrower”), promises and agrees to pay unto the order of AMEGY BANK NATIONAL ASSOCIATION, a national banking association (“Lender”) at its office located at 4400 Post Oak Parkway, Houston, Harris County, Texas 77027, or at such other address or addresses as Lender may from time to time designate in writing to Borrower, in immediately available funds in lawful currency of the United States of America which at the time of payment is legal tender for the payment of public and private debts, the sum of up to SEVEN MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($7,500,000.00), or so much thereof as may be advanced pursuant to the hereinafter described Loan Agreement, together with interest on the unpaid principal balance from time to time owing hereunder from the date of advance hereunder until maturity, and otherwise in strict accordance with the terms and provisions hereof.

2. As used herein, the following terms shall have the meanings assigned:

“Amegy Prime Rate” means for any day a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate plus  ¹/2 of 1% and (b) the rate of interest in effect for such day as publicly announced from time to time by Lender as its “prime rate”. Such rate is a rate set by Lender based upon various factors including Lender’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by Lender shall take effect at the opening of business on the day specified in the public announcement of such change.

“Borrowing Date” means any Business Day on which Lender advances to Borrower a portion of the Loan hereunder.

“Borrowing Notice” shall mean a notice in writing given by Borrower to Lender substantially in the form of Exhibit B to the Loan Agreement requesting a Loan under the Loan Agreement.

“Business Day” means a day when Lender is open for business, other than a Saturday or Sunday.

“Control Account Agreement” means that certain Control Account Agreement of even date herewith between from Borrower in favor of Lender.

“Default Rate” means a per annum rate equal to the lesser of (a) the Amegy Prime Rate plus three percent (3%), and (b) the Maximum Rate.

“Event of Default” means the occurrence of an Event of Default (as defined in the Loan Agreement).

“Federal Funds Rate” means, for any day, the rate per annum (rounded upwards to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to Lender on such day on such transactions as determined by Lender.

“Loan Agreement” means that certain Loan Agreement executed by Borrower and Lender of even date herewith.

“Loan Documents” means this Note, the Loan Agreement, and other documents evidencing, securing and relating to the Loan.

“Loan(s)” means the Loan(s) evidenced by this Note, from the date hereof to the Maturity Date, during which period advances may be allowed up to the principal amount of this Note, bearing interest as herein set forth, and being payable in installments as herein set forth. All references to the Loan or Loans shall be references to the single indebtedness evidenced by the Note. The Loan is a revolving loan. Any sums repaid may be reborrowed, subject to the limitations set forth in the Loan Agreement.

“Maturity Date” means February 15, 2010.

“Maximum Rate” means, with respect to the holder hereof, the maximum nonusurious interest rate, if any, that at any time, or from time to time, may be under applicable law contracted for, taken, reserved, charged or received on the indebtedness evidenced by this Note.

“Pledge and Security Agreement” means that certain Pledge and Security Agreement of even date herewith from Borrower in favor of Lender pursuant to which Borrower has granted Lender a first and prior lien on and security interest in Borrower’s investment portfolio securities.

“Usury Laws” means all applicable federal or state usury laws regarding the use, forbearance, or detention of money.

3. Interest shall accrue on the outstanding principal balance of each Loan advanced pursuant to this Note, or any portion hereof, as follows:

(a) commencing on the Borrowing Date of the first Loan advanced hereunder (and on the Borrowing Date of the first Loan advanced hereunder following each Interest Reset Date as defined below) and continuing until and including the one hundred twentieth (120^th) day after such Loan is advanced, such Loan together with all other Loans advanced hereunder prior to the occurrence of an Interest Reset Date, shall accrue

interest at a rate equal to the greater of (i) five percent (5%) and (ii) the lesser of (y) the Amegy Prime Rate and (z) the Maximum Rate; and commencing on the one hundred twenty-first (121st) day after first Loan is advanced it and all other Loans advanced hereunder prior to the occurrence of an Interest-Rate Reset Date, will accrue interest at a rate equal to the greater of (i) five percent (5%) and (ii) the lesser of (y) the Amegy Prime Rate plus one percent (1%) and (z) the Maximum Rate.

(b) If all Loans hereunder are repaid in full and the outstanding principal balance of this Note is reduced to zero for at least ten (10) calendar days, the Borrowing Date of the first Loan advanced hereunder following such period when the loan balance was zero will be an “Interest Reset Date.”

(c) Unless otherwise specified by Borrower, all prepayments and repayments of Loans shall be applied against the outstanding Loans in their reverse order of incurrence, with the most recently incurred Loan being paid off first.

(d) If at any time and from time to time the rates of interest calculated pursuant to the Amegy Prime Rate would exceed the Maximum Rate, thereby causing the interest payable hereon to be limited to the Maximum Rate, then any subsequent reduction in the Amegy Prime Rate shall not reduce the rate of interest hereon below the Maximum Rate until the total amount of interest accrued hereon from and after the date of the first advance hereunder equals the amount of interest which would have accrued hereon if the Amegy Prime Rate had at all times been in effect.

4. In order to request a Loan hereunder, Borrower shall deliver to Lender a Borrowing Notice which must be received by Lender at least one (1) Business Day prior to the applicable Borrowing Date.

5. This Note and the Loans evidenced hereby shall be due and payable as follows:

(a) All accrued unpaid interest on the outstanding principal balance of this Note shall be due and payable in quarterly installments as it accrues, with the first installment due and payable on the—13th day of October, 2008, and continuing quarterly on the same date (or if there is no corresponding date in any month, on the last day of such month) until the Maturity Date.

(b) The entire principal sum of this Note then remaining unpaid, together with all accrued, unpaid interest thereon, shall be due and payable on the Maturity Date.

(c) Borrower is and shall be obligated to pay all principal, interest and any and all other amounts which become payable under this Note or under any of the other Loan Documents absolutely and unconditionally and without any abatement, postponement, diminution or deduction whatsoever and without any reduction for counterclaim or setoff whatsoever.

6. At any time and from time to time, Borrower on any Business Day may prepay the principal of the Loan then outstanding in whole or in part without premium or penalty. All

payments and prepayments of principal and/or interest to Lender shall be made by Borrower to Lender before 11:00 a.m. (Houston, Texas time), in federal or other immediately available funds at Lender’s banking office specified in the first paragraph of this Note. Any payment or prepayment received by Lender after 11:00 a.m. (Houston, Texas time) shall be deemed to have been received by Lender on the next succeeding Business Day. Should the principal of or interest on any Loan, or any expense or fee, become due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day.

7. All payments hereunder, whether designated as payments of principal or interest, shall be applied, in such order as Lender shall in its sole discretion determine, to unpaid and accrued interest, to the discharge of any expenses or damages for which the Lender may be entitled to receive reimbursement under the terms of this Note or under the terms of any document executed in connection herewith, or to unpaid principal balance hereof. Notwithstanding anything expressed or implied in this Note to the contrary, all past due principal and interest on this Note, whether due as the result of acceleration of maturity or otherwise, shall bear interest from the date the payment thereof shall have become due until the same have been fully discharged by payment at the Default Rate. In addition, Lender may charge and collect a late fee of five percent (5.0%) of any scheduled installment that is more than ten (10) days past due.

8. If an Event of Default shall occur and be continuing, then the holder of this Note shall have the option, in addition to the remedies provided in the other Loan Documents or at law or in equity, to declare this Note due and payable, whereupon the entire unpaid principal balance of this Note and all interest accrued thereon shall thereupon at once mature and become due and payable and shall bear interest from the date of such Event of Default until paid at the Default Rate, without grace, presentment for payment, demand, protest, notice of protest, notice of nonpayment, notice of intent to accelerate, notice of acceleration, or any other notice of any kind, ALL OF WHICH ARE HEREBY EXPRESSLY WAIVED BY THE BORROWER. The time of payment of this Note is also subject to acceleration in the event of the Event of Default.

9. This Note is secured by and is entitled to the benefit of, among other instruments: (a) the Pledge and Security Agreement, (b) the Control Account Agreement and (c) the other Loan Documents.

10. Time is of the essence in the performance and payment of this Note.

11. The remedies of Lender as provided herein and in the Loan Documents shall be cumulative and concurrent and may be pursued singly, successively, or together, at the sole discretion of Lender, and may be exercised as often as occasion therefor shall arise. No action, omission, or commission by Lender, including specifically, the failure to exercise any right, remedy, or recourse, shall be deemed a waiver or release of the same. A waiver or release shall exist and be effective only as set forth in a written document executed by Lender, and then only to the extent specifically recited therein. A waiver or a release with reference to any one event shall not be construed as continuing, or as a bar to, or as a waiver or release of, any subsequent right, remedy, or recourse as to any subsequent event.

12. THE BORROWER HEREBY EXPRESSLY WAIVES GRACE, AND ALL NOTICES, DEMANDS, PRESENTMENTS FOR PAYMENT, NOTICE OF NONPAYMENT, PROTEST AND NOTICE OF PROTEST, NOTICE OF INTENT TO ACCELERATE, NOTICE OF ACCELERATION OF THE INDEBTEDNESS DUE HEREUNDER, AND DILIGENCE IN COLLECTING THIS NOTE OR ENFORCING ANY SECURITY RIGHTS OF THE LENDER UNDER ANY DOCUMENT SECURING THIS NOTE.

13. If an Event of Default occurs and is continuing and this Note is placed in the hands of an attorney for collection (whether or not suit is filed), or suit or legal proceedings are brought to collect this Note, the Borrower agrees to pay the holder hereof the costs and reasonable attorney’s fees incurred in the collection hereof.

14. It is the intention of the parties hereto to comply with the Usury Laws; accordingly, it is agreed that notwithstanding any provisions to the contrary in this Note or the Loan Documents, in no event shall the Loan Documents require the payment or permit the collection of interest in excess of the maximum amount permitted by such laws, and any subsequent revisions, repeals, or judicial interpretations thereof to the extent that same are made applicable hereto. If any such excess of interest is contracted for, charged, or received under Loan Documents, or in the event the maturity of the indebtedness evidenced by this Note is accelerated in whole or in part, or in the event that all or part of the principal or interest of this Note shall be prepaid, so that under any of such circumstances the amount of interest contracted for, charged or received under this Note or any other Loan Documents, on the amount of principal actually outstanding from time to time under this Note shall exceed the maximum amount of interest permitted by the Usury Laws, then in any such event (a) the provisions of this paragraph shall govern and control, (b) neither Borrower nor any other person or entity now or hereafter liable for the payment of this Note shall be obligated to pay the amount of such interest to the extent that it is in excess of the maximum amount of interest permitted by the Usury Laws, (c) any such excess which may have been collected shall be either applied as a credit against the then unpaid principal amount of this Note or refunded to Borrower, at the holder’s option, and (d) the effective rate of interest shall be automatically reduced to the maximum lawful contract rate allowed under the Usury Laws as now or hereafter construed by the courts having jurisdiction thereof. It is further agreed, without limiting the foregoing, that the rate of interest contracted for, charged or received under this Note and any other Loan Documents shall be deemed not to exceed the maximum lawful rate if any method of calculation permitted by the Usury Laws including, but not limited to, amortization, prorating, allocating and spreading interest over the full term of the loan results in a determination that the rate of interest so contracted for, charged or received does not exceed the maximum lawful rate.

15. Any check, draft, money order or other instrument given in payment of all or any portion hereof may be accepted by the holder hereof and handled in collection in the customary manner, but the same shall not constitute payment hereunder or diminish any rights of the holder hereof except to the extent that actual cash proceeds of such instrument are unconditionally received by the holder and applied to this indebtedness in the manner elsewhere herein provided.

16. It is further agreed that the Lender shall have a first lien on all deposits and other sums at any time credited by or due from the Lender to the Borrower as collateral security for the payment of this Note, and the Lender, at its option, may at any time, without notice and without any liability, hold all or any part of any such deposits or other sums until all sums owing on this Note have been paid in full and/or apply or set off all or any part of any such deposits or other sums credited by or due from the Lender to or against any sums due on this Note in any manner and in any order of preference which the Lender, in its sole discretion, chooses.

17. The loan evidenced by this Note was negotiated and consummated in the State of Texas and it is understood and agreed that the legality, enforceability and construction hereof shall be governed by Texas law and, to the extent applicable, by the laws of the United States of America. The Borrower and the Lender expressly agree, pursuant to Section 346.004 of the Texas Finance Code, that Chapter 346 shall not apply to this Note or to any advance evidenced by this Note and that this Note and all such advances shall not be governed by or subject to the provisions of Chapter 346 in any manner whatsoever.

18. The Lender reserves the right, exercisable in the Lender’s sole discretion and without notice to the Borrower or any other person, to sell participations, to assign its interest or both, in all or any part of this Note or this debt or the debt evidenced hereby.

19. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

Executed on the date of the acknowledgment to be effective as of the date first written above.

BORROWER:
EQUUS TOTAL RETURN, INC.
By:	/s/    L’Sheryl Hudson
	L’Sheryl Hudson,
	Chief Financial Officer

EX-10.(H)

Exhibit 10(h)

Execution

PLEDGE AND SECURITY AGREEMENT

THIS PLEDGE AND SECURITY AGREEMENT (“Agreement”) is made as of the 13^th day of August, 2008, by EQUUS TOTAL RETURN, INC., Delaware corporation (hereinafter called “Debtor”), whose place of business, and chief executive office (as those terms are used in the Code) is located at 2727 Allen Parkway, Suite 1300, Houston, Texas 77019 and whose organizational identification number issued by the appropriate authority of the State of Delaware is 2271275, and whose federal taxpayer identification number is 76-0345915, in favor of AMEGY BANK NATIONAL ASSOCIATION, a national banking association (“Secured Party”), whose address is 4400 Post Oak Parkway, Houston, Harris County, Texas 77027, or at such other address or addresses as Secured Party may from time to time designate in writing to Debtor. Debtor hereby agrees with Secured Party as follows:

1. Definitions. As used in this Agreement, the following terms shall have the meanings indicated below:

(a) The term “Code” shall mean the Texas Business and Commerce Code as in effect in the State of Texas on the date of this Agreement or as it may hereafter be amended from time to time.

(b) The term “Collateral” shall mean (1) the Pledged Securities, (2) all money this day delivered to and deposited with Secured Party, and all money heretofore delivered or which shall hereafter be delivered to or come into the possession, custody or control of Secured Party representing proceeds of, payment on, or distributions related to any of the Pledged Securities during the existence of this Agreement or the Loan Agreement, and whether held in a general or special account, (3) any stock rights, rights to subscribe, liquidating dividends, stock dividends, property, cash distributions, dividends paid in stock, new securities, cash dividends or other property which Debtor may hereafter become entitled to receive on account of the Pledged Securities, (4) all Debtor’s rights, title and interest in that certain custody account (Account No. EQU02505) maintained with Secured Party, (5) all certificates, instruments, records, data and/or other documents evidencing the foregoing and following (including without limitation, any computer software on which such records and data may be located), (6) all renewals, replacements and substitutions of all of the foregoing, (7) all Additional Property (as hereinafter defined), and (8) all PRODUCTS and PROCEEDS of all of the foregoing; provided that “Collateral” shall not include any of the Excluded Assets. The designation of proceeds does not authorize Debtor to sell, transfer or otherwise convey any of the foregoing property. The delivery at any time by Debtor to Secured Party of any property as a pledge to secure payment or performance of any indebtedness or obligation in connection with the Loan Documents shall also constitute a pledge of such property as Collateral hereunder.

(c) The term “Pledged Securities” means any and all investment property, instruments, chattel paper and general intangibles owned by Debtor from time to time,

including all notes receivable, common and preferred stock, stock options, warrants, and other investments which at any given time are included in Debtor’s computation of Net Asset Value, except any of the foregoing that are Excluded Assets, and shall include without limitation (i) all publicly traded securities sold or issued by the companies listed on Schedule 1 owned by Debtor and pledged to Secured Party, including all income from, and all proceeds of, such securities, and (ii) all of the privately held securities issued or sold by the companies listed on Schedule 1 owned by Debtor and pledged to Secured Party, including all income from, and all proceeds of, such securities.

(d) The term “Excluded Assets” means any assets which are held from time to time in Account Number Z42-496693 maintained by Debtor with fidelity Investments and any account that replaces such account, and (iii) any other account in which assets are held to secure RIC Borrowings (as defined in the Loan Agreement) in compliance with Sections 7(d)(x) and 7(e)(iii) of the Loan Agreement.

(e) The term “Loan Agreement” means the Loan Agreement dated of even date herewith between Debtor and Secured Party, together with all amendments, restatements, and other modifications thereto.

(f) The term “Indebtedness” shall mean (i) all indebtedness, obligations and liabilities of Debtor to Secured Party of any kind or character, now existing or hereafter arising under the Loan Documents, whether direct, indirect, related, unrelated, fixed, contingent, liquidated, unliquidated, joint, several or joint and several, (ii) all accrued but unpaid interest on any of the indebtedness described in (i) above, (iii) all obligations of Debtor to Secured Party under any documents evidencing, securing, governing and/or pertaining to all or any part of the indebtedness described in (i) and (ii) above, (iv) all costs and expenses payable by Debtor under Section 18 of the Loan Agreement, and (v) all renewals, extensions, modifications and rearrangements of the indebtedness and obligations described in (i), (ii), (iii) and (iv) above.

(g) The term “Additional Property” means any of the following property which Debtor becomes entitled to receive or shall receive in connection with any other Collateral, except to the extent any of the following constitutes Excludcd Assets: (a) any stock certificate, including without limitation, any certificate representing a stock dividend or any certificate in connection with any recapitalization, reclassification, merger, consolidation, conversion, sale of assets, combination of shares, stock split or spin-off; (b) any option, warrant, subscription or right, whether as an addition to or in substitution of any other Collateral; (c) any dividends or distributions of any kind whatsoever, whether distributable in cash, stock or other property; (d) any interest, premium or principal payments; and (e) any conversion or redemption proceeds; provided, however, that until the occurrence of an Event of Default, “Additional Property” shall not include any cash dividends or interest paid on the Collateral (except interest paid on any certificate of deposit pledged hereunder).

(h) The term “Loan Documents” shall have the meaning given such term in the Loan Agreement.

(i) The term “Net Asset Value” shall have the meaning given such term in the Loan Agreement.

(j) The term “Event of Default” shall have the meaning given such term in the Loan Agreement.

All words and phrases used herein which are expressly defined in Section 1.201, Chapter 8 or Chapter 9 of the Code shall have the meaning provided for therein. Other words and phrases defined elsewhere in the Code shall have the meaning specified therein except to the extent such meaning is inconsistent with a definition in Section 1.201, Chapter 8 or Chapter 9 of the Code. Capitalized terms not otherwise defined herein have the meanings specified in the Loan Agreement.

2. Security Interest. As security for the Indebtedness, Debtor, for value received, hereby grants to Secured Party a continuing security interest in the Collateral.

3. Additional Property. All Additional Property received by Debtor shall be received in trust for the benefit of Secured Party. All Additional Property and all certificates or other written instruments or documents evidencing and/or representing the Additional Property that is received by Debtor, together with such instruments of transfer as Secured Party may request, shall promptly be delivered to or deposited with Secured Party or Secured Party’s bailee, (any such bailee, together with its successors in such capacity, the “Bailee”) and held by Secured Party or Bailee as Collateral under the terms of this Agreement. If the Additional Property received by Debtor shall be shares of stock or other securities, such shares of stock or other securities shall be duly endorsed in blank or accompanied by proper instruments of transfer and assignment duly executed in blank with, if reasonably requested by Secured Party, signatures guaranteed by a bank or member firm of the New York Stock Exchange, all in form and substance reasonably satisfactory to Secured Party. Secured Party shall be deemed to have possession of any Collateral in transit to Secured Party or its agent.

4. Control Agreement; Stock Power. Debtor agrees, at the request of the Secured Party, to execute and to cause the Bailee to execute promptly a control agreement whereby the Secured Party may direct the Bailee to follow directives issued by Secured Party with respect to Collateral held by Bailee. The Secured Party hereby agrees not to issue directives or exercise any other rights under any such control agreement unless an Event of Default has occurred and is continuing. Debtor also agrees, at the request of the Secured Party, to execute additional stock powers in blank in connection with any certificates evidencing all or part of the Collateral.

5. Voting Rights. As long as no Event of Default shall have occurred hereunder, any voting rights incident to any stock or other securities pledged as Collateral may be exercised by Debtor; provided, however, that Debtor will not exercise, or cause to be exercised, any such voting rights, without the prior written consent of Secured Party, if the direct or indirect effect of such vote will result in an Event of Default hereunder.

6. Maintenance of Collateral. Other than the exercise of reasonable care to assure the safe custody of any Collateral in Secured Party’s possession from time to time, Secured Party does not have any obligation, duty or responsibility with respect to the Collateral. Without

limiting the generality of the foregoing, Secured Party shall not have any obligation, duty or responsibility to do any of the following: (a) ascertain any maturities, calls, conversions, exchanges, offers, tenders or similar matters relating to the Collateral or informing Debtor with respect to any such matters; (b) fix, preserve or exercise any right, privilege or option (whether conversion, redemption or otherwise) with respect to the Collateral unless (i) Debtor makes written demand to Secured Party to do so, (ii) such written demand is received by Secured Party in sufficient time to permit Secured Party to take the action demanded in the ordinary course of its business, and (iii) Debtor provides additional collateral, acceptable to Secured Party in its sole discretion; (c) collect any amounts payable in respect of the Collateral (Secured Party being liable to account to Debtor only for what Secured Party may actually receive or collect thereon); (d) sell all or any portion of the Collateral to avoid market loss; (e) sell all or any portion of the Collateral unless and until (i) Debtor makes written demand upon Secured Party to sell the Collateral, and (ii) Debtor provides additional collateral, acceptable to Secured Party in its sole discretion; or (f) hold the Collateral for or on behalf of any party other than Debtor.

7. Representations and Warranties. Debtor hereby represents and warrants the following to Secured Party:

(a) Authority. The execution, delivery and performance of this Agreement and all of the other Loan Documents by Debtor have been duly authorized by all necessary corporate action of Debtor.

(b) Accuracy of Information. All information heretofore, herein or hereafter supplied to Secured Party by or on behalf of Debtor with respect to the Collateral is true and correct. The exact legal name, organizational identification number and federal taxpayer identification number of Debtor are correctly shown in the first paragraph hereof.

(c) Enforceability. This Agreement and the other Loan Documents constitute legal, valid and binding obligations of Debtor, enforceable in accordance with their respective terms, except as limited by bankruptcy, insolvency or similar laws of general application relating to the enforcement of creditors’ rights and except to the extent specific remedies may generally be limited by equitable principles.

(d) Ownership and Liens. Debtor has good and marketable title to the Collateral free and clear of all liens, security interests, encumbrances or adverse claims, except for the security interests created by this Agreement and the other Loan Documents and any security interests permitted under Section 7(d)(ii) of the Loan Agreement. No dispute, right of setoff, counterclaim or defense exists with respect to all or any part of the Collateral. Debtor has not executed any other security agreement currently affecting the Collateral and no financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any recording office except as may have been executed or filed in favor of Secured Party.

(e) No Conflicts or Consents. Neither the ownership, the intended use of the Collateral by Debtor, the grant of the security interest by Debtor to Secured Party herein nor the exercise by Secured Party of its rights or remedies hereunder, will (i) conflict with

any provision of (A) any domestic or foreign law, statute, rule or regulation, (B) the articles or certificate of incorporation or bylaws of Debtor, or (C) any agreement, judgment, license, order or permit applicable to or binding upon Debtor or otherwise affecting the Collateral, or (ii) result in or require the creation of any lien, charge or encumbrance upon any assets or properties of Debtor or of any person except as may be expressly contemplated in the Loan Documents. Except as expressly contemplated in the Loan Documents, no consent, approval, authorization or order of, and no notice to or filing with, any court, governmental authority or third party is required or deemed preferable in connection with the grant by Debtor of the security interest herein or the exercise by Secured Party of its rights and remedies hereunder.

(f) Security Interest. Debtor has and will have at all times full right, power and authority to grant a security interest in the Collateral to Secured Party in the manner provided herein, free and clear of any lien, security interest or other charge or encumbrance except any security interests permitted under Section 7(d)(ii) of the Loan Agreement. This Agreement creates a legal, valid and binding security interest in favor of Secured Party in the Collateral.

(g) Location/Identity. Debtor’s place of business and chief executive office (as those terms are used in the Code), as the case may be, is located at the address set forth on the first page hereof. Except as specified elsewhere herein, all Collateral and records concerning the Collateral shall be kept at such address or held by Bailee. Debtor’s organizational structure, state of organization, and organizational number (the Organizational Information’) are as set forth on the first page hereof. Borrower shall not change its Organizational Information without complying with Section 15 of this Agreement with respect to such change.

(h) Solvency of Debtor. As of the date hereof, and after giving effect to this Agreement and the completion of all other transactions contemplated by Debtor at the time of the execution of this Agreement, (i) Debtor is and will be solvent, (ii) the fair saleable value of Debtor’s assets exceeds and will continue to exceed Debtor’s liabilities (both fixed and contingent), (iii) Debtor is paying and will continue to be able to pay its debts as they mature, and (iv) if Debtor is not an individual, Debtor has and will have sufficient capital to carry on Debtor’s businesses and all businesses in which Debtor is about to engage.

(i) Securities. Any certificates evidencing securities pledged as Collateral are valid and genuine and have not been altered. All securities pledged as Collateral have been duly authorized and validly issued, are fully paid and non-assessable, and were not issued in violation of the preemptive rights of any party or of any agreement by which Debtor or the issuer thereof is bound. No restrictions or conditions exist with respect to the transfer or voting of any securities pledged as Collateral, except as has been disclosed to Secured Party in writing.

8. Affirmative Covenants. Debtor will comply with the covenants contained in this Section at all times during the period of time this Agreement is effective unless Secured Party shall otherwise consent in writing.

(a) Ownership and Liens. Debtor will maintain good and marketable title to all Collateral free and clear of all liens, security interests, encumbrances or adverse claims, except for the security interest created by this Agreement and the security interests and other encumbrances expressly permitted by the other Loan Documents. Debtor will not permit any dispute, right of setoff, counterclaim or defense to exist with respect to all or any part of the Collateral. Debtor will cause any financing statement or other security instrument with respect to the Collateral to be terminated, except as may exist or as may have been filed in favor of Secured Party or in connection with a lien permitted under Section 7(d)(ii) of the Loan Agreement. Debtor hereby irrevocably appoints Secured Party as Debtor’s attorney-in-fact, such power of attorney being coupled with an interest, with full authority in the place and stead of Debtor and in the name of Debtor or otherwise, for the purpose of terminating any financing statements currently filed with respect to the Collateral except in connection with any lien permitted under Section 7(d)(ii) of the Loan Agreement. Debtor will defend at its expense Secured Party’s right, title and security interest in and to the Collateral against the claims of any third party except the holder of any lien permitted under Section 7(d)(ii) of the Loan Agreement.

(b) Inspection of Books and Records. Debtor will keep adequate records concerning the Collateral and will permit Secured Party and all representatives and agents appointed by Secured Party to inspect Debtor’s books and records of or relating to the Collateral at any time during normal business hours, to make and take away photocopies, photographs and printouts thereof and to write down and record any such information.

(c) Adverse Claim. Debtor covenants and agrees to promptly notify Secured Party of any claim, action or proceeding affecting title to the Collateral, or any part thereof, or the security interest created hereunder and, at Debtor’s expense, defend Secured Party’s security interest in the Collateral against the claims of any third party. Debtor also covenants and agrees to promptly deliver to Secured Party a copy of all written notices received by Debtor with respect to the Collateral, including without limitation, notices received from the issuer of any securities pledged hereunder as Collateral.

(d) Further Assurances. Debtor will contemporaneously with the execution hereof and from time to time thereafter at its expense promptly execute and deliver all further instruments and documents and take all further action necessary or appropriate or that Secured Party may reasonably request in order (i) to perfect and protect the security interest created or purported to be created hereby and the first priority of such security interest, (ii) to enable Secured Party to exercise and enforce its rights and remedies hereunder in respect of the Collateral, and (iii) to otherwise effect the purposes of this Agreement, including without limitation: (A) executing (if requested) and filing any financing or continuation statements, or any amendments thereto; (B) obtaining written confirmation from the issuer of any securities pledged as Collateral of the pledge of such securities, in form and substance satisfactory to Secured Party; (C) cooperating with Secured Party in registering the pledge of any securities pledged as Collateral with the issuer of such securities; (D) delivering notice of Secured Party’s security interest in any securities pledged as Collateral to any financial intermediary, clearing corporation or

other party required or deemed preferable by Secured Party, in form and substance satisfactory to Secured Party; and (E) obtaining written confirmation of the pledge of any securities constituting Collateral from any financial intermediary, clearing corporation or other party required or deemed preferable by Secured Party, in form and substance reasonably satisfactory to Secured Party. If all or any part of the Collateral is securities issued by an agency or department of the United States, Debtor covenants and agrees, at Secured Party’s request, to cooperate in registering such securities in Secured Party’s name or with Secured Party’s account maintained with a Federal Reserve Secured Party.

(e) Control Agreements. Debtor will cooperate with Secured Party in obtaining a control agreement in form and substance satisfactory to Secured Party with respect to Collateral for which such agreement is required or deemed preferable for perfection of a security interest pursuant to the Code (as determined by Secured Party in its reasonable discretion). Secured Party agrees that it shall not exercise its rights under any such control agreement unless an Event of Default has occurred and is continuing.

9. Negative Covenants. Debtor will comply with the covenants contained in this Section at all times during the period of time this Agreement is effective, unless Secured Party shall otherwise consent in writing.

(a) Transfer or Encumbrance. Debtor will not (i) sell, assign (by operation of law or otherwise) or transfer Debtor’s rights in any of the Collateral, (ii) grant a lien or security interest in or execute, authorize, file or record any financing statement or other security instrument with respect to the Collateral to any party other than Secured Party, or (iii) deliver actual or constructive possession of any certificate, instrument or document evidencing and/or representing any of the Collateral to any party other than Secured Party; provided, however, Debtor may add or delete Collateral solely as permitted under Section 1 of the Loan Agreement.

(b) Impairment of Security Interest. Debtor will not take or fail to take any action which would in any manner impair the value or enforceability of Secured Party’s security interest in any Collateral.

(c) Restrictions on Securities. Debtor will not, after the date of this Agreement, enter into any agreement creating any restriction or condition upon the transfer, voting or control of any securities pledged as Collateral, except as consented to in writing by Secured Party.

10. Rights of Secured Party. Secured Party shall have the rights contained in this Section at all times during the period of time this Agreement is effective.

(a) Power of Attorney. Debtor hereby irrevocably appoints Secured Party as Debtor’s attorney-in-fact, such power of attorney being coupled with an interest, with full authority in the place and stead of Debtor and in the name of Debtor or otherwise, to take any action and to execute any instrument which Secured Party may from time to time in Secured Party’s discretion deem necessary or appropriate to accomplish the purposes of this Agreement, including without limitation, the following action: (i) transfer any

securities, instruments, documents or certificates pledged as Collateral in the name of Secured Party or its nominee; (ii) use any interest, premium or principal payments, conversion or redemption proceeds or other cash proceeds received in connection with any Collateral to reduce any of the Indebtedness; (iii) exchange any of the securities pledged as Collateral for any other property upon any merger, consolidation, reorganization, recapitalization or other readjustment of the issuer thereof, and, in connection therewith, to deposit and deliver any and all of such securities with any committee, depository, transfer agent, registrar or other designated agent upon such terms and conditions as Secured Party may deem necessary or appropriate; (iv) exercise or comply with any conversion, exchange, redemption, subscription or any other right, privilege or option pertaining to any securities pledged as Collateral; provided, however, except as provided herein, Secured Party shall not have a duty to exercise or comply with any such right, privilege or option (whether conversion, redemption or otherwise) and shall not be responsible for any delay or failure to do so; and (v) file any claims or take any action or institute any proceedings which Secured Party may deem necessary or appropriate for the collection and/or preservation of the Collateral or otherwise to enforce the rights of Secured Party with respect to the Collateral. Secured Party agrees that it shall not exercise its rights under this Section 10(a) unless an Event of Default has occurred and is continuing.

(b) Performance by Secured Party. If Debtor fails to perform any agreement or obligation provided herein, Secured Party may itself perform, or cause performance of, such agreement or obligation, and the expenses of Secured Party incurred in connection therewith shall be a part of the Indebtedness, secured by the Collateral and payable by Debtor on demand.

Notwithstanding any other provision herein to the contrary, Secured Party does not have any duty to exercise or continue to exercise any of the foregoing rights and shall not be responsible for any failure to do so or for any delay in doing so.

11. Events of Default. The occurrence of any Event of Default as defined in the Loan Agreement shall constitute an Event of Default hereunder.

12. Remedies and Related Rights. If an Event of Default shall have occurred, and without limiting any other rights and remedies provided herein, under any of the other Loan Documents or otherwise available to Secured Party, Secured Party may exercise one or more of the rights and remedies provided in this Section.

(a) Remedies. Secured Party may from time to time at its discretion, without limitation and without notice except as expressly provided in any of the Loan Documents:

(i) exercise in respect of the Collateral all the rights and remedies of a secured party under the Code (whether or not the Code applies to the affected Collateral);

(ii) reduce its claim to judgment or foreclose or otherwise enforce, in whole or in part, the security interest granted hereunder by any available judicial procedure;

(iii) sell or otherwise dispose of, at its office, on the premises of Debtor or elsewhere, the Collateral, as a unit or in parcels, by public or private proceedings, and by way of one or more contracts (it being agreed that the sale or other disposition of any part of the Collateral shall not exhaust Secured Party’s power of sale, but sales or other dispositions may be made from time to time until all of the Collateral has been sold or disposed of or until the Indebtedness has been paid and performed in full), and at any such sale or other disposition it shall not be necessary to exhibit any of the Collateral;

(iv) buy the Collateral, or any portion thereof, at any public sale;

(v) buy the Collateral, or any portion thereof, at any private sale if the Collateral is of a type customarily sold in a recognized market or is of a type which is the subject of widely distributed standard price quotations;

(vi) apply for the appointment of a receiver for the Collateral, and Debtor hereby consents to any such appointment; and

(vii) at its option, retain the Collateral in satisfaction of the Indebtedness whenever the circumstances are such that Secured Party is entitled to do so under the Code or otherwise, to the full extent permitted by the Code, Secured Party shall be permitted to elect whether such retention shall be in full or partial satisfaction of the Indebtedness.

In the event Secured Party shall elect to sell the Collateral, Secured Party may sell the Collateral without giving any warranties with respect thereto and shall he permitted to specifically disclaim any warranties of title or the like. If Secured Party sells any of the Collateral for cash, Secured Party will credit Debtor for the full amount received, less any cost or foreclosure and sale. Further, if Secured Party sells any of the Collateral on credit, Debtor will be credited only with payments actually made by the purchaser and received by Secured Party. In the event the purchaser fails to pay for the Collateral, Secured Party may resell the Collateral and Debtor shall be credited with the proceeds of the sale. Debtor agrees that in the event Debtor is entitled to receive any notice under the Code, as it exists in the state governing any such notice, of the sale or other disposition of any Collateral, reasonable notice shall be deemed given when such notice is deposited in a depository receptacle under the care and custody of the United States Postal Service, postage prepaid, addressed to such party at its address set forth on the first page hereof, ten (10) days prior to the date of any public sale, or after which a private sale, of any of such Collateral is to be held. Secured Party shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Secured Party may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Debtor further acknowledges and agrees that the redemption by Secured Party of any certificate

of deposit pledged as Collateral shall be deemed to be a commercially reasonable disposition under Section 9.610 of the Code.

(b) Private Sale of Securities. Debtor recognizes that Secured Party may be unable to effect a public sale of all or any part of the securities pledged as Collateral because of restrictions in applicable federal and state securities laws and that Secured Party may, therefore, determine to make one or more private sales of any such securities to a restricted group of purchasers who will be obligated to agree, among other things, to acquire such securities for their own account, for investment and not with a view to the distribution or resale thereof. Debtor acknowledges that each any such private sale may be at prices and other terms less favorable than what might have been obtained at a public sale and, notwithstanding the foregoing, agrees that each such private sale shall be deemed to have been made in a commercially reasonable manner and that Secured Party shall have no obligation to delay the sale of any such securities for the period of time necessary to permit the issuer to register such securities for public sale under any federal or state securities laws. Debtor further acknowledges and agrees that any offer to sell such securities which has been made privately in the manner described above to not less than five (5) bona fide offerees shall be deemed to involve a “public sale” for the purposes of Chapter 9 of the Code, notwithstanding that such sale may not constitute a “public offering” under any federal or state securities laws and that Secured Party may, in such event, bid for the purchase of such securities.

(c) Application of Proceeds. If any Event of Default shall have occurred and be continuing, Secured Party may at its discretion apply or use any cash held by Secured Party as Collateral, and any cash proceeds received by Secured Party in respect of any sale or other disposition of, collection from, or other realization upon, all or any part of the Collateral as follows in such order and manner as Secured Party may elect:

(i) to the repayment or reimbursement of the reasonable costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) incurred by Secured Party in connection with (A) the administration of the Loan Documents, (B) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, the Collateral, and (C) the exercise or enforcement of any of the rights and remedies of Secured Party hereunder,

(ii) to the payment or other satisfaction of any liens and other encumbrances upon the Collateral;

(iii) to the satisfaction of the Indebtedness;

(iv) by holding such cash and proceeds as Collateral;

(v) to the payment of any other amounts required by applicable law (including without limitation, Section 9.615(a)(3) of the Code or any other applicable statutory provision); and

(vi) by delivery to Debtor or any other party lawfully entitled to receive such cash or proceeds whether by direction of a court of competent jurisdiction or otherwise.

(d) Deficiency. In the event that the proceeds of any sale of, collection from, or other realization upon, all or any part of the Collateral by Secured Party are insufficient to pay all amounts to which Secured Party is legally entitled, Debtor and any party who guaranteed or is otherwise obligated to pay all or any portion of the Indebtedness shall be liable for the deficiency, together with interest thereon as provided in the Loan Documents, to the full extent permitted by the Code.

(e) Non-Judicial Remedies. In granting to Secured Party the power to enforce its rights hereunder without prior judicial process or judicial hearing, Debtor expressly waives, renounces and knowingly relinquishes any legal right which might otherwise require Secured Party to enforce its rights by judicial process. Debtor recognizes and concedes that non-judicial remedies are consistent with the usage of trade, are responsive to commercial necessity and are the result of a bargain at arm’s length. Nothing herein is intended to prevent Secured Party or Debtor from resorting to judicial process at either party’s option.

(f) Voting Rights. Upon the occurrence and during the continuation of an Event of Default, Debtor will not exercise any voting rights with respect to securities pledged as Collateral. Debtor hereby irrevocably appoints Secured Party as Debtor’s attorney-in-fact (such power of attorney being coupled with an interest) and proxy to exercise any voting rights with respect to Debtor’s securities pledged as Collateral upon the occurrence and during the continuation of an Event of Default.

(g) Dividend Rights and Interest Payments. Upon the occurrence and during the continuation of an Event of Default:

(i) all rights of Debtor to receive and retain the dividends and interest payments which it would otherwise be authorized to receive and retain pursuant to Section 3 shall automatically cease, and all such rights shall thereupon become vested with Secured Party which shall thereafter have the sole right to receive, hold and apply as Collateral such dividends and interest payments; and

(ii) all dividend and interest payments which are received by Debtor contrary to the provisions of clause (i) of this Subsection shall be received in trust for the benefit of Secured Party, shall be segregated from other funds of Debtor, and shall be forthwith paid over to Secured Party in the exact form received (properly endorsed or assigned if requested by Secured Party), to be held by Secured Party as Collateral.

13. INDEMNITY. DEBTOR HEREBY INDEMNIFIES AND AGREES TO HOLD HARMLESS SECURED PARTY, AND ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND REPRESENTATIVES (EACH A “INDEMNIFIED PERSON”) FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS,

CLAIMS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND OR NATURE (COLLECTIVELY, THE “CLAIMS”) WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST, ANY INDEMNIFIED PERSON ARISING IN CONNECTION WITH THE LOAN DOCUMENTS, THE INDEBTEDNESS OR THE COLLATERAL (INCLUDING WITHOUT LIMITATION, THE ENFORCEMENT OF THE LOAN DOCUMENTS AND THE DEFENSE OF ANY INDEMNIFIED PERSON’S ACTIONS AND/OR INACTIONS IN CONNECTION WITH THE LOAN DOCUMENTS BUT EXCLUDING CLAIMS ARISING FROM SUCH INDEMNIFIED PERSON’S OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT). THE INDEMNIFICATION PROVIDED FOR IN THIS SECTION SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT AND SHALL EXTEND AND CONTINUE TO BENEFIT EACH INDIVIDUAL OR ENTITY WHO IS OR HAS AT ANY TIME BEEN AN INDEMNIFIED PERSON HEREUNDER

14. Miscellaneous.

(a) Entire Agreement. This Agreement and the other Loan Documents contain the entire agreement of Secured Party and Debtor with respect to the Collateral. If the parties hereto are parties to any other prior agreement, either written or oral, relating to the Collateral, the terms of this Agreement shall amend and supersede the terms of such prior agreements as to transactions on or after the effective date of this Agreement.

(b) Amendment. No modification, consent or amendment of any provision of this Agreement or any of the other Loan Documents shall be valid or effective unless the same is in writing and authenticated by the party against whom it is sought to be enforced, except to the extent of amendments specifically permitted by the Code without authentication by the Debtor.

(c) Actions by Secured Party. The lien, security interest and other security rights of Secured Party hereunder shall not be impaired by (i) any renewal, extension, increase or modification with respect to the Indebtedness, (ii) any surrender, compromise, release, renewal, extension, exchange or substitution which Secured Party may grant with respect to the Collateral, or (iii) any release or indulgence granted to any endorser, guarantor or surety of the Indebtedness. The taking of additional security by Secured Party shall not release or impair the lien, security interest or other security rights of Secured Party hereunder or affect the obligations of Debtor hereunder.

(d) Waiver by Secured Party. Secured Party may waive any Event of Default without waiving any other prior or subsequent Event of Default. Secured Party may remedy any default without waiving the Event of Default remedied. Neither the failure by Secured Party to exercise, nor the delay by Secured Party in exercising, any right or remedy upon any Event of Default shall be construed as a waiver of such Event of Default or as a waiver of the right to exercise any such right or remedy at a later date. No single or partial exercise by Secured Party of any right or remedy hereunder shall exhaust the same or shall preclude any other or further exercise thereof, and every such right or remedy hereunder may be exercised at any time. No waiver of any provision hereof or

consent to any departure by Debtor therefrom shall be effective unless the same shall be in writing and signed by Secured Party and then such waiver or consent shall be effective only in the specific instances, for the purpose for which given and to the extent therein specified. No notice to or demand on Debtor in any case shall of itself entitle Debtor to any other or further notice or demand in similar or other circumstances.

(e) Costs and Expenses. Debtor will upon demand pay to Secured Party the amount of any and all costs and expenses (including without limitation, reasonable attorneys’ fees and expenses), which Secured Party may incur in connection with (i) the transactions which give rise to the Loan Documents, (ii) the preparation of this Agreement and the perfection and preservation of the security interests granted under the Loan Documents, (iii) the administration of the Loan Documents, (iv) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, the Collateral, (v) the exercise or enforcement of any of the rights of Secured Party under the Loan Documents, or (vi) the failure by Debtor to perform or observe any of the provisions hereof.

(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAWS, EXCEPT TO THE EXTENT PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST GRANTED HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF TEXAS.

(g) Venue. This Agreement has been entered into in the county in Texas where Secured Party’s address for notice purposes is located, and it shall be performable for all purposes in such county. Courts within the State of Texas shall have jurisdiction over any and all disputes arising under or pertaining to this Agreement and venue for any such disputes shall be in the county or judicial district where this Agreement has been executed and delivered.

(h) Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable, shall not impair or invalidate the remainder of this Agreement and the effect thereof shall be confined to the provision held to be illegal, invalid or unenforceable.

(i) No Obligation. Nothing contained herein shall be construed as an obligation on the part of Secured Party to extend or continue to extend credit to Debtor.

(j) Notices. All notices, requests, demands or other communications required or permitted to be given pursuant to this Agreement shall be in writing and given by (i) personal delivery, (ii) expedited delivery service with proof of delivery, or (iii) United States mail, postage prepaid, registered or certified mail, return receipt requested, sent to the intended addressee at the address set forth on the first page hereof or to such different address as the addressee shall have designated by written notice sent pursuant to the

terms hereof and shall be deemed to have been received either, in the case of personal delivery, at the time of personal delivery, in the case of expedited delivery service, as of the date of first attempted delivery at the address and in the manner provided herein, or in the case of mail, upon deposit in a depository receptacle under the care and custody of the United States Postal Service. Either party shall have the right to change its address for notice hereunder to any other location within the continental United States by notice to the other party of such new address at least thirty (30) days prior to the effective date of such new address.

(k) Binding Effect and Assignment. This Agreement (i) creates a continuing security interest in the Collateral, (ii) shall be binding on Debtor and the heirs, executors, administrators, personal representatives, successors and assigns of Debtor, and (iii) shall inure to the benefit of Secured Party and its successors and assigns. Without limiting the generality of the foregoing, Secured Party may pledge, assign or otherwise transfer the Indebtedness and its rights under this Agreement and any of the other Loan Documents to any other party, so long as, when no Event of Default exists, it receives prior written consent from Debtor to such assignment, pledge, or transfer. Debtor’s rights and obligations hereunder may not be assigned or otherwise transferred without the prior written consent of Secured Party.

(l) Termination. It is contemplated by the parties hereto that from time to time there may be no outstanding Indebtedness, but notwithstanding such occurrences, this Agreement shall remain valid and shall be in full force and effect as to subsequent outstanding Indebtedness. Upon (i) the satisfaction in full of the Indebtedness, (ii) the termination or expiration of any commitment of Secured Party to extend credit to Debtor, (iii) written request for the termination hereof delivered by Debtor to Secured Party, and (iv) written release delivered by Secured Party to Debtor, this Agreement and the security interests created hereby shall terminate. Upon termination of this Agreement and Debtor’s written request, Secured Party will, at Debtor’s sole cost and expense, return to Debtor such of the Collateral as shall not have been sold or otherwise disposed of or applied pursuant to the terms hereof and execute and deliver to Debtor such documents as Debtor shall reasonably request to evidence such termination. Upon the sale of any Collateral that is permitted by the Loan Agreement, the security interest created by this Agreement in such Collateral shall be automatically released, and Secured Party will, at Debtor’s expense, return to Debtor such Collateral being sold and execute and deliver to Debtor such documents as Debtor shall reasonably request to evidence such termination.

(m) Cumulative Rights. All rights and remedies of Secured Party hereunder are cumulative of each other and of every other right or remedy which Secured Party may otherwise have at law or in equity or under any of the other Loan Documents, and the exercise of one or more of such rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of any other rights or remedies. Further, except as specifically noted as a waiver herein, no provision of this Agreement is intended by the parties to this Agreement to waive any rights, benefits or protection afforded to Secured Party under the Code.

(n) Gender and Number. Within this Agreement, words of any gender shall be held and construed to include the other gender, and words in the singular number shall be held and construed to include the plural and words in the plural number shall be held and construed to include the singular, unless in each instance the context requires otherwise.

(o) Descriptive Headings. The headings in this Agreement are for convenience only and shall in no way enlarge, limit or define the scope or meaning of the various and several provisions hereof.

15. Financing Statement Filings. Debtor recognizes that financing statements pertaining to the Collateral have been or may be filed in one or more of the following jurisdictions: the location of Debtor’s principal residence, the location of Debtor’s place of business, the location of Debtor’s chief executive office, or other such place as the Debtor may be “located” under the provisions of the Code. Without limitation of any other covenant herein, Debtor will neither cause or permit any change in the location of (i) any Collateral (except if such Collateral will subsequently be located with the Bailee, at the Debtor’s address in the first paragraph of this Agreement, or with Secured Party), (ii) any records concerning any Collateral, or (iii) Debtor’s principal residence, the location of Debtor’s place of business, or the location of Debtor’s chief executive office, as the case may be, to a jurisdiction other than as represented in Subsection 7(g), nor will Debtor change its name or the Organizational Information as represented in Subsection 7(g), unless Debtor shall have notified Secured Party in writing of such change at least thirty (30) days prior to the effective date of such change, and shall have first taken all action required or reasonably deemed preferable by Secured Party for the purpose of further perfecting or protecting the security interest in favor of Secured Party in the Collateral. In any written notice furnished pursuant to this Subsection, Debtor will expressly state that the notice is required by this Agreement and contains facts that may require additional filings of financing statements, amendments or other notices for the purpose of continuing perfection of Secured Party’s security interest in the Collateral.

Without limiting Secured Party’s rights hereunder, Debtor authorizes Secured Party to file financing statements or amendments thereto under the provisions of the Code as amended from time to time.

Remainder of this page intentionally left blank.

Signature page follows.

EXECUTED as of the date first written above.

DEBTOR:
EQUUS TOTAL RETURN, INC.
By:	/s/    L’Sheryl Hudson
	L’Sheryl Hudson
	Chief Financial Officer
SECURED PARTY:
AMEGY BANK NATIONAL ASSOCIATION, a national banking association
By:	/s/    Robert T. Caughlin
Name:	Robert T. Caughlin
Title:	Assistant Vice President

Signature Page

Pledge and Security Agreement

Schedule I

Pledged Securities

EX-31.1

EXHIBIT 31.1

Form of Quarterly Certification Required

by Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934

I, Kenneth I. Denos, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Equus Total Return, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

a. Designed such disclosure controls and procedures. or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b. [Reserved]

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation;

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s first fiscal quarter in the case of a quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting, and;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a. All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.

Date: November 14, 2008

/s/ Kenneth I. Denos

Kenneth I. Denos

Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Form of Quarterly Certification Required

by Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934

I, L’Sheryl D. Hudson, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Equus Total Return, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

a. Designed such disclosure controls and procedures. or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b. [Reserved]

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation;

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s first fiscal quarter in the case of a quarterly report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting, and;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a. All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.

Date: November 14, 2008

/s/ L’Sheryl D. Hudson

L’Sheryl D. Hudson

Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the accompanying Quarterly Report of Equus Total Return, Inc. (the “Fund”) on Form 10-Q for the quarter ended September 30, 2008 (the “Report”), I, Kenneth I. Denos, Chief Executive Officer of the Fund, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) To my knowledge, the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund.

Dated: November 14, 2008	/s/ Kenneth I. Denos
	Kenneth I. Denos
	Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the accompanying Quarterly Report of Equus Total Return, Inc. (the “Fund”) on Form 10-Q for the quarter ended September 30, 2008 (the “Report”), I, L’Sheryl D. Hudson, Chief Financial Officer of the Fund, hereby certify, pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) To my knowledge, the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund.

Dated: November 14, 2008	/s/ L’Sheryl D. Hudson
	L’Sheryl D. Hudson
	Chief Financial Officer