10-Q 1 d10q.txt FORM 10-Q FOR PERIOD ENDED 6/30/2002 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES --- EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2002 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ___ EXCHANGE ACT OF 1934 Commission File Number 0-17526 EQUUS CAPITAL PARTNERS, L.P. ---------------------------- (Exact name of registrant as specified in its charter) Delaware 76-0264305 ----------------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 2929 Allen Parkway, Suite 2500 Houston, Texas 77019-2120 ----------------------------------------- ------------------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (713) 529-0900 -------------- Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered None None ----------------------------------------- ------------------------------------

Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partners' Interests ------------------------------------ (Title of Class) 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 --- As of June 30, 2002, 12,187 units ("Units") of limited partners' interests in the Partnership were held by non-affiliates of the registrant. The net asset value of a Unit at June 30, 2002 was $119.43. There is no established market for such Units. Documents incorporated by reference: None. EQUUS CAPITAL PARTNERS, L.P. (A Delaware Limited Partnership) INDEX

ii Part I. Financial Information Item 1. Financial Statements EQUUS CAPITAL PARTNERS, L.P. STATEMENTS OF ASSETS, LIABILITIES AND PARTNERS' CAPITAL JUNE 30, 2002 AND DECEMBER 31, 2001 (Unaudited)

The accompanying notes are an integral part of these financial statements. 1 EQUUS CAPITAL PARTNERS, L.P. STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2002 AND 2001 (Unaudited)

The accompanying notes are an integral part of these financial statements. 2 EQUUS CAPITAL PARTNERS, L.P. STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001

The accompanying notes are an integral part of these financial statements. 3 EQUUS CAPITAL PARTNERS, L.P. STATEMENTS OF CHANGES IN PARTNERS' CAPITAL FOR THE SIX MONTHS ENDED JUNE 30, 2002 (Unaudited)

The accompanying notes are an integral part of these financial statements. 4 EQUUS CAPITAL PARTNERS, L.P. STATEMENTS OF CHANGES IN PARTNERS' CAPITAL FOR THE SIX MONTHS ENDED JUNE 30, 2001 (Unaudited)

The accompanying notes are an integral part of these financial statements. 5 EQUUS CAPITAL PARTNERS, L.P. STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (Unaudited)

The accompanying notes are an integral part of these financial statements. 6 EQUUS CAPITAL PARTNERS, L.P. STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (Unaudited) (Continued)

The accompanying notes are an integral part of these financial statements. 7 EQUUS CAPITAL PARTNERS, L.P. SELECTED PER UNIT DATE AND RATIOS FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (Unaudited)

The accompanying notes are an integral part of these financial statements. 8 EQUUS CAPITAL PARTNERS, L.P. SCHEDULE OF ENHANCED YIELD INVESTMENTS JUNE 30, 2002 (Unaudited)

The accompanying notes are an integral part of these financial statements. 9 EQUUS CAPITAL PARTNERS, L.P. SCHEDULE OF ENHANCED YIELD INVESTMENTS JUNE 30, 2002 (Unaudited) (Continued) All of the Partnership's Enhanced Yield Investments are restricted from public sale without prior registration under the Securities Act of 1933. The Partnership negotiates certain aspects of the method and timing of the disposition of the Partnership's Enhanced Yield Investments in each Portfolio Company, including registration rights and related costs. The Partnership does not expect to incur significant costs, including costs of any such registration, in connection with the future disposition of its portfolio securities. As defined in the Investment Company Act of 1940, all of the Partnership's investments are in eligible Enhanced Yield Investments. The Partnership provides significant managerial assistance to all of the Portfolio Companies in which it has invested. The accompanying notes are an integral part of these financial statements. 10 EQUUS CAPITAL PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS JUNE 30, 2002 AND 2001 (Unaudited) (1) Organization and business purpose Equus Capital Partners, L.P. (the "Partnership"), a Delaware limited partnership, completed the sale of 12,310 units of limited partners' interest ("Units") to 1,428 limited partners as of December 31, 1990. Each Unit required a capital contribution to the Partnership of $1,000 less applicable selling commission discounts and may not be sold, transferred or assigned without the consent of Equus Capital Corporation, a Delaware corporation (the "Managing Partner"), which consent may not be unreasonably withheld. The Partnership seeks to achieve current income and capital appreciation principally by making investments in "mezzanine" securities, consisting primarily of subordinated debt or preferred stock combined with equity participations in common stock or rights to acquire common stock, and subsequently disposing of such investments ("Enhanced Yield Investments"). The Partnership has elected to be treated as a business development company under the Investment Company Act of 1940, as amended. The Partnership was scheduled to terminate by December 31, 1999, subject to the right of the Independent General Partners (as defined below) to extend the term for up to four additional years if they determine that such extension is in the best interest of the Partnership. The agreement has been extended through December 31, 2002. The Partnership has only two remaining investments, and is planning to dispose of such investments and distribute the proceeds from such dispositions before the end of 2002. The Partnership will be dissolved after the disposition of the two remaining investments. The Managing Partner is wholly owned by Equus Capital Management Corporation. (2) Management The Partnership has three general partners, consisting of the Managing Partner and two independent, individual general partners (the "Independent General Partners"). As compensation for services rendered to the Partnership, each Independent General Partner receives a fee of $750 for each meeting of the Independent General Partners attended and reimbursement of all out-of-pocket expenses relating to attendance at such meetings. Until the year 2002, each Independent General Partner received an annual fee of $13,500. This fee was discontinued in 2002. Pursuant to the Partnership agreement, the Managing Partner has made a general partner's capital contribution to the Partnership of $125,316, or approximately one percent of the Partnership's contributed capital, and each Independent General Partner has made a capital contribution of $1,000. The Partnership has entered into a management agreement with Equus Capital Management Corporation, a Delaware corporation (the "Management Company"). Pursuant to such agreement, the Management Company performs certain management and administrative services necessary for the operation of the Partnership. The Management Company receives a management fee at an annual rate equal to 2.5% of the available capital and is payable quarterly in arrears. Since Available Capital, as calculated, was depleted in the third quarter of 2001, no additional management fees are payable. In addition, the Management Company will receive an incentive fee equal to 10% of the Partnership's cumulative distributions from Enhanced Yield Investments (excluding returns of capital) over the life of the Partnership, subject to payment of a priority return to the limited partners. Payment of the incentive fees is subject to the payment of $3,269,069 in cumulative accrued priority returns owed to limited partners at June 30, 2002 (See Note 4). It is highly unlikely that any incentive fees will be paid. The Management Company also receives compensation for providing certain administrative services to the 11 Partnership on terms determined by the Independent General Partners as being no less favorable to the Partnership than those obtainable from competent unaffiliated parties. The Management Company also has management agreements with Equus II Incorporated ("EQS"), a Delaware corporation, and with Equus Equity Appreciation Fund L.P. ("EEAF"), a Delaware limited partnership. The Managing Partner is a wholly-owned subsidiary of the Management Company, which in turn is controlled by a privately owned corporation. The Managing Partner is also the managing general partner of EEAF. (3) Significant Accounting Policies Valuation of Investments - Enhanced yield investments are carried at fair value with the net change in unrealized appreciation or depreciation included in the determination of partner's capital. Valuations of enhanced yield investments are performed in accordance with generally accepted accounting principles 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 Enhanced Yield Investments - 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 Enhanced Yield Investments - The fair value of investments for which no market exists (including most investments made by the Partnership) is determined on the basis of procedures established in good faith by the Managing Partner and approved by the Independent General Partners of the Partnership. As a general principle, the current "fair value" of an investment would be the amount the Partnership might reasonably expect to receive for it upon its current sale. Appraisal valuations are necessarily subjective and the Managing Partner's estimate of values may differ materially from amounts actually received upon the disposition of enhanced yield investments. 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, Enhanced Yield Investments are carried at appraised values as determined quarterly by the Managing Partner, subject to the approval of the Independent General Partners. 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 Partnership's common equity investments may be 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 Management Company's experience in the private company marketplace, and are necessarily subjective in nature. Most of the Portfolio Companies utilize a high degree of leverage. From time to time, Portfolio Companies are in default of certain covenants in their loan agreements. In the event a Portfolio Company cannot generate adequate cash flow to meet the principal and interest payments on such indebtness or is not successful in refinancing the debt upon its maturity, the Partnership's investment could be reduced or eliminated through foreclosure on the Portfolio Company's assets or the Portfolio Company's reorganization or bankruptcy. When the Managing Partner has a reasonable belief that the Portfolio Company will be able to restructure the loan agreements to adjust for any defaults, the Portfolio 12 Company's securities continue to be valued assuming that the company is a going concern. The Partnership 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 conditions of the issuer. Certificates of deposit purchased by the Partnership generally will be valued at their face value, plus interest accrued to the date of valuation. Investment Transactions - Investment transactions are recorded on the accrual method. Realized gains and losses on investments sold are computed on a specific identification basis. Income Taxes - No provision for income taxes has been made since all income and losses are allocable to the partners for inclusion in their respective tax returns. Profits and Losses for tax purposes are determined and allocated as of the end of each calendar quarter. Profits and Losses are allocated first to reflect such cash distributions made or scheduled to be made (other than as to distributions of capital), and thereafter in a manner designed to reflect cash distributions projected to be made. Cash Flows - For purposes of the Statements of Cash Flows, the Partnership considers all highly liquid temporary cash investments purchased with an original maturity of three months or less to be cash equivalents. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires the use of certain estimates and assumptions by management in determining the reported amounts of assets and liabilities, disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Because uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements, actual results could differ from these estimates. (4) Allocations and Distributions The Partnership's cumulative net distributions from Enhanced Yield Investments in excess of returns of capital will be shared in proportion to the partners' capital contributions until the limited partners have received a priority return, and thereafter are designed so that such distributions generally will ultimately be shared 80% by the general and limited partners in proportion to their capital contributions, 10% by the Managing Partner as an incentive distribution and 10% by the Management Company as an incentive fee. The priority return of $3,269,069 at June 30, 2002 is equal to the cumulative, non-compounded return on the average daily amount of the gross capital contributions represented by Enhanced Yield Investments ranging from 10 to 12% per annum, depending on the date of the original contribution, less amounts previously distributed related to such return. For financial reporting purposes, net unrealized appreciation or depreciation is allocated to the partners' capital accounts as if it were realized. Based on current valuations of Enhanced Yield Investments, the Management Company would not receive any incentive fee upon the sale of the Partnership's investments. Income from any source other than Enhanced Yield Investments is generally allocated to the partners in proportion to the partners' capital contributions. Indirect expenses of the Partnership are allocated between Enhanced Yield Investments and Temporary Cash Investments on a pro-rata basis based on the average assets from each type of investment. Subject to certain provisions in the Partnership agreement, net investment income and gains and 13 losses on investments are generally allocated between the general partners and the limited partners on the same basis as cash distributions. (5) Temporary Cash Investments Temporary cash investments, which represent the short-term utilization of cash prior to investment in Enhanced Yield Investments, distributions to the partners or payment of expenses, consisted of money market accounts earning interest from a range of 0.75% to1.48%, at June 30, 2002. (6) Enhanced Yield Investments The Partnership made no new investments during the six months ended June 30, 2002 and 2001, respectively. During the six months ended June 30, 2001, the Partnership received note payments in the amount of $26,800 and management fees in the amount of $25,000 from Artegraft, Inc. in the form of a 9% demand note. During the six months ended June 30, 2001, the Partnership realized a net capital loss of $1,131,624. In 1993, the Partnership wrote off its investment in Tennis Cards, Inc. and foreclosed on its collateral which consisted of an inventory of tennis trading cards. On February 22, 2001, the Partnership sold the entire inventory of tennis trading cards for net proceeds of $49,500. In addition, the Partnership wrote off its entire investment in Paracelsus Healthcare Corporation ("Paracelsus"), which went through bankruptcy, realizing a capital loss of $1,181,124. (7) Unrealized Appreciation on Enhanced Yield Investments There was no change in unrealized appreciation during the six months ended June 30, 2002. Unrealized appreciation of Enhanced Yield Investments increased by $1,299,309 during the six months ended June 30, 2001. Such increase resulted from the increase in the estimated fair value of one Enhanced Yield Investments in the amount of $125,000 and the transfer of net unrealized appreciation to net realized loss from the write-off of one Enhanced Yield Investments in the amount of $1,174,309. 14 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Significant Accounting Policies Valuation of Investments - Enhanced yield investments are carried at fair value with the net change in unrealized appreciation or depreciation included in the determination of partner's capital. Valuations of enhanced yield investments are performed in accordance with generally accepted accounting principles 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 Enhanced Yield Investments - 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 Enhanced Yield Investments - The fair value of investments for which no market exists (including most investments made by the Partnership) is determined by the Managing Partner on the basis of procedures established in good faith by the Managing Partner and approved by the Independent General Partners of the Partnership. As a general principle, the current "fair value" of an investment would be the amount the Partnership might reasonably expect to receive for it upon its current sale. Appraisal valuations are necessarily subjective and the Managing Partner's estimate of values may differ materially from amounts actually received upon the disposition of enhanced yield investments. 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, Enhanced Yield Investments are carried at appraised values as determined quarterly by the Managing Partner, subject to the approval of the Independent General Partners. 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 Partnership's common equity investments may be 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 Management Company's experience in the private company marketplace, and are necessarily subjective in nature. Most of the Portfolio Companies utilize a high degree of leverage. From time to time, Portfolio Companies are in default of certain covenants in their loan agreements. In the event a Portfolio Company cannot generate adequate cash flow to meet the principal and interest payments on such indebtness or is not successful in refinancing the debt upon its maturity, the Partnership's investment could be reduced or eliminated through foreclosure on the Portfolio Company's assets or the Portfolio Company's reorganization or bankruptcy. When the Managing Partner 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. The Partnership 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 15 of the terms of the debt securities and the financial conditions 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. Investment Transactions - Investment transactions are recorded on the accrual method. Realized gains and losses on investments sold are computed on a specific identification basis. Income Taxes - No provision for income taxes has been made since all income and losses are allocable to the partners for inclusion in their respective tax returns. Profits and Losses for tax purposes are determined and allocated as of the end of each calendar quarter. Profits and Losses are allocated first to reflect such cash distributions made or scheduled to be made (other than as to distributions of capital), and thereafter in a manner designed to reflect cash distributions projected to be made. Cash Flows - For purposes of the Statements of Cash Flows, the Partnership considers all highly liquid temporary cash investments purchased with an original maturity of three months or less to be cash equivalents. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires the use of certain estimates and assumptions by management in determining the reported amounts of assets and liabilities, disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Because uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements, actual results could differ from these estimates. Liquidity and Capital Resources The Partnership's total contributed capital was $12,435,691, consisting of $12,307,375 (net of $2,625 in selling commission discounts on sales to affiliates) for 12,310 units of limited partners' interests ("Units") from 1,428 limited partners, $125,316 from the Managing Partner and $3,000 from the Independent General Partners. Net proceeds to the Partnership, after payment of selling commissions and wholesale marketing assistance fees of $1,228,375 and payment of $615,500 as reimbursement of offering costs, were $10,591,816. At June 30, 2002, the Partnership had $970,378 (at cost) invested in Enhanced Yield Investments of two companies, which have an estimated fair value of $1,100,000 at such date. At June 30, 2002, the Partnership had $408,350 in cash and temporary cash investments. In order to allow Follow-on Investments in Enhanced Yield Investments when such opportunities arise, the Partnership may utilize proceeds from existing Enhanced Yield Investments. Management believes that temporary cash investments and proceeds from existing Enhanced Yield Investments provide the Partnership with the liquidity necessary to pay operating expenses of the Partnership as well as make certain Follow-on Investments. Net investment income and the proceeds from the sale of Enhanced Yield Investments are distributed to the extent such amounts are not reserved for payment of expenses and contingencies or used to make Follow-on Investments in existing Enhanced Yield Investments. Results of Operations Investment Income and Expenses Net investment income (loss) after all expenses amounted to $(63,681) and $1,363,794 for the six 16 months ended June 30, 2002 and 2001, respectively. No income was earned from Enhanced Yield Investments during the six months ended June 30, 2002. The Partnership earned $1,393,097 in income from Enhanced Yield Investments during the six months ended June 30, 2001. The decrease in income from Enhanced Yield Investments in 2002 is primarily due to no additional management fees or interest being received or accrued for Artegraft, Inc. and dividends paid in arrears in 2001 by MaxTech Holdings, Inc. The Management Company receives a management fee equal to 2.5% of the Available Capital. Available Capital is the amount of net offering proceeds from the sale of Units reduced by capital distributed to its holders of the Units and realized losses from the Partnership's investments. Such fee amounted to $1,586 for the six months ended June 30, 2001. Due to the depletion of Available Capital in the third quarter of 2001, no management fee was received for the six months ended June 30, 2002. Based on the level of Available Capital at June 30, 2002, the Management Company will receive no additional management fees from the Partnership. The Management Company is also allocated an incentive fee equal to 10% of the Partnership's cumulative distributions from Enhanced Yield Investments (excluding returns of capital) over the life of the Partnership, subject to payment of a priority return to the limited partners. The cumulative accrued priority return amounted to $3,269,069 at June 30, 2002. Based on current valuations of Enhanced Yield Investments, the Management Company would not receive any incentive fee upon the sale of the Partnership 's investments. Management fees and other expenses incurred directly by the Partnership are paid with funds provided from operations. Realized Gain or Loss on Enhanced Yield Investments During the six months ended June 30, 2002, there were no realized gains or losses on Enhanced Yield Investments. During the six months ended June 30, 2001, the Partnership realized a net capital loss of $1,131,624. In 1993, the Partnership wrote off its investment in Tennis Cards, Inc. and foreclosed on its collateral which consisted of an inventory of tennis trading cards. On February 22, 2001, the Partnership sold the entire inventory of tennis trading cards for net proceeds of $49,500. In addition, the Partnership wrote off its entire investment in Paracelsus Healthcare Corporation, which went through bankruptcy, realizing a capital loss of $1,181,124. Unrealized Gains and Losses on Enhanced Yield Investments There was no change to unrealized appreciation during the six months ended June 30, 2002. Unrealized appreciation of Enhanced Yield Investments increased by $1,299,309 during the six months ended June 30, 2001. Such increase resulted from the increase in the estimated fair value of Enhanced Yield Investments in one company and the transfer of net unrealized depreciation to net realized losses from the write-off of one Enhanced Yield Investment. Distributions During the six months ended June 30, 2002 and 2001, the Partnership made no cash distributions. Cumulative cash distributions to limited partners from inception to June 30, 2002, were $12,567,797 or $1,025.53 per weighted average number of Units outstanding. Enhanced Yield Investments The Partnership made no new investments during the six months ended June 30, 2002 and 2001, 17 respectively. During the six months ended June 30, 2001, the Partnership received note payments in the amount of $26,800 and management fees in the amount of $25,000 from Artegraft, Inc. in the form of a 9% demand note. Both of the companies in which the Partnership has investments at June 30, 2002 are privately held. They each have a small number of shareholders and do not generally make financial information available to the public. However, each company's operations and financial information are reviewed by the General Partners to determine the proper valuation of the Partnership's investment. Item 3. Quantitative and Qualitative Disclosure about Market Risk The Partnership is subject to financial market risks, including changes in interest rates with respect to its investments in debt securities, as well as changes in marketable equity security prices. The Partnership does not use derivative financial instruments to mitigate any of these risks. The return on the Partnership's investments is generally not affected by foreign currency fluctuations. The Partnership's investment in portfolio securities consists 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 Partnership's determination of fair value of these debt securities. The Partnership's debt securities are generally held to maturity and their fair values are determined on the basis of the terms of the debt security and the financial condition of the issuer. In addition, there were no significant changes to the factors that affect market risk from 2001 to the second quarter of 2002. The Partnership's investment portfolio consists of debt and equity investments in private companies. The Partnership would anticipate no impact on these investments from modest changes in public market equity prices. However, should significant changes in market equity prices occur, there could be a longer-term effect on valuations of private companies, which could affect the carrying value and the amount and timing of gains realized on these investments. Part II. Other Information Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None (b) Reports on Form 8-K No reports on Form 8-K were filed by the Partnership during the period for which this report is filed. 18 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: August 13, 2002 EQUUS CAPITAL PARTNERS, L.P. By: Equus Capital Corporation Managing General Partner /s/ Nolan Lehmann ---------------------------------------- Nolan Lehmann President and Principal Financial and Accounting Officer 19

EQUUS CAPITAL PARTNERS LP 10-Q