As a RIC, we are required to distribute to our stockholders, in a timely manner, at least 90% of our taxable net investment income each year. If we do not distribute, in a timely manner, 98.2% of our taxable net capital gains and 90% of our taxable net investment income each year (as well as any portion of the respective 2% balances not distributed in the previous year), we will be subject to a 4% non-deductible federal excise tax on certain undistributed income of regulated investment companies. Under the 1940 Act, we are not permitted to pay dividends to stockholders unless we meet certain asset coverage requirements. If taxable net investment income is retained, we will be subject to federal income and excise taxes. We reserve 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 our stockholders will be able to claim their proportionate share of the federal income taxes paid by the Fund on such gains as a credit against their own federal income tax liabilities. Stockholders will also be entitled to increase the adjusted tax basis of their fund shares by the difference between their undistributed capital gains and their tax credit.

We invest in companies that are believed to have a high potential for capital appreciation, and we intend to realize the majority of our profits upon the sale of our investments in portfolio companies. Consequently, most of the companies in which we invest do not have established policies of paying annual dividends. However, a portion of the investments in portfolio securities held by the Fund consists of interest-bearing subordinated debt securities or dividend-paying preferred stock.

Item 6.Selected Financial Data

The following is a summary of selected financial data and per share data of the Fund for the five years ended December 31, 20142016 (in thousands, except per share data):

Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Equus is a BDC that provides financing solutions for privately held middle market and small capitalization companies. We began operations in 1983 and have been a publicly traded closed-end fund since 1991. Our investment objective is to seek the highest total return, consisting of capital appreciation and current income. On May 15, 2014, we announced that the Fund had adopted a Plan of Reorganization that would, if effected, transform Equus into an operating company. On January 6, 2017, our shareholders authorized our Board to withdraw our BDC election, although we will not withdraw this election unless and until we have entered into a definitive agreement to effect a Consolidation. Further, we will require a subsequent affirmative vote from holders of a majority of our outstanding voting shares to enter into any such definitive agreement or change the nature of our business. See “Significant Developments – Plan of Reorganization and Share Exchange with MVC Capital” and “–Authorization to Withdraw BDC Election” above.

As a BDC, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70% of the Fund’s total assets in “qualifying assets,” including securities of private U.S. companies, certain public U.S. companies with a total market capitalization not in excess of $250 million, cash, cash equivalents, U.S. government securities and short-term high-quality debt investments. Equus is a RIC under Subchapter M of the Code. To qualify as a RIC, we must meet certain source of income and asset diversification requirements. If we comply with the provisions of Subchapter M, the Fund generally does not have to pay corporate-level income taxes on any income that distributed to our stockholders.

Investment Income. We generate investment income from interest payable on the debt securities that the Fund holds, dividends received on equity interests in our portfolio companies and capital gains, if any, realized upon sales of equity and, to a lesser extent, debt securities in the investment portfolio. Our equity investments may include shares of common and preferred stock, membership interests in limited liability companies and warrants to purchase additional equity interests. These equity securities may or may not pay dividends, and the exercise prices of warrants that we acquire in connection with debt investments, if any, vary by investment. Our debt investments in portfolio companies may be in the form of senior or subordinated loans and may be unsecured or have a first or second lien on some or all of the assets of the borrower. Our loans typically have a term of three to seven years and bear interest at fixed or floating rates. Interest on these debt securities is generally payable either quarterly or semiannually. Some promissory notes held by the Fund provide that a portfolio company may elect to pay interest in cash or provide that discount interest may accrete in the form of original issue discount or payment-in-kind (PIK) over the life of the notes by adding unpaid interest amounts to the principal balance. Amortization of principal on our debt investments is generally deferred for several years from the date of initial investment. The principal amount of these debt securities and any accrued but unpaid interest generally will become due at maturity. We also earn interest income at market rates on investments in short-term marketable securities. From time to time, we generate income from time to time in the form of commitment, origination, structuring, and structuringextension fees in connection with our investments. We recognize all such fees when earned.

Expenses.Currently, our primary operating expenses include director fees and expenses, professional fees, compensation expense, and general and administrative fees.fees, and professional fees incurred in connection with our Plan of Reorganization. During 2016 and 2015, we did not incur any non-recurring expenses. During 2014, we incurred non-recurring expenses, including settlement expenses of $0.5 million, and legal expenses of $0.1 million related to the variouscertain legal proceedings described in Item 3 above. During 2013, we incurred non-recurring expenses, including settlement expenses of $0.5 million,

Non-Operating Subsidiary.We have established Equus Total Return (Canada) Inc. as a wholly-owned subsidiary to facilitate payments to Canadian personnel and legal expenses of $0.2 million relatedcontractors who provide services to the various legal proceedings described in Item 3 above. During 2012, we didFund. We consider Equus Total Return (Canada) Inc. a disregarded entity for accounting purposes, inasmuch as it does not incur any non-recurring expenses.have active operations.

Operating Activities. We use cash to make new investments and follow-on investments in our existing portfolio companies. We record these investments at cost on the applicable trade date. Realized gains or losses are computed using the specific identification method. On an ongoing basis, we carry our investments in our financial statements at fair value, as determined by our board of directors. See “—“Critical Accounting Policies – Valuation of Investments”Investments” below. As of December 31, 2014,2016, we had invested 51.4%86.4% of our net assets in securities of portfolio companies that constituted qualifying investments under the 1940 Act. At that time, we had invested 13.6%47.3% by value in shares of common stock, 27.7%15.1% in membership interests in limited liability companies, and 13.0%7.0% in various debt instruments.

Commitments. Under certain circumstances, we make follow-on investments in some of our portfolio companies. As of December 31, 2014,2016, we had no outstanding commitments to our portfolio company investments.

Financing Activities. From time to time, we use leverage to finance a portion of our investments. We then repay such debt from the sale of portfolio securities. Under the 1940 Act, we have the ability to borrow funds and issue debt securities or preferred stock that are referred to as senior securities, subject to certain restrictions including an overall limitation on the amount of outstanding debt, or leverage, relative to equity of 1:1. Because of the nature and size of our portfolio investments, we periodically borrow funds to make qualifying investments in order to maintain our qualification as a RIC. During 20142016 and 2013,2015, we borrowed such funds by accessing a margin account with a securities brokerage firm. We invest the proceeds of these margin loans in high-quality securities such as U.S. Treasury securities until they are repaid. We refer to these high-quality investments as “restricted assets” because they are not generally available for investment in portfolio companies under the terms of borrowing. If, in the future, we cannot borrow funds to make such qualifying investments at the end of any future quarter, we may not qualify as a RIC and would become subject to corporate-level income tax on our net investment income and realized capital gains, if any. In addition, our distributions to stockholders would be taxable as ordinary dividends to the extent paid from earnings and profits. See “Federal Income Tax Considerations.”

Distributions. On March 24, 2009,So long as we announced thatremain a BDC, we suspended our managed distribution policy and payment of quarterly distributions for an indefinite period, following the distribution of the first quarter dividend to be paid on March 30, 2009. As originally implemented, the policy provided for quarterly dividends at an annualized rate equal to 10% of the Fund’s market value per share as at the end of the preceding calendar year. We will continue to pay out net investment income and/or realized capital gains, if any, on an annual basis as required under the 1940 Act.

Possible Share Repurchase. As a closed-end BDC, our shares of common stock are not redeemable at the option of stockholders, and our shares currently trade at a discount to their net asset value. Our Board has determined that it would be in the best interests of our stockholders to reduce or eliminate this market value discount. Accordingly, we have been authorized to, and may from time to time, repurchase shares of our outstanding common stock (including by means of tender offers or privately negotiated transactions) in an effort to reduce or eliminate this market discount or to increase the net asset value of our shares. We are not required to undertake, and we have not previously undertaken, any such share repurchases, nor do we further anticipate taking any such action in 2015.2017.

2016 Equity Incentive Plan

On June 13, 2016, our shareholders approved the adoption of our Incentive Plan. On January 10, 2017, the SEC issued an order approving the Incentive Plan and certain awards intended to be made thereunder.  The Incentive Plan is intended to promote the interests of the Fund by encouraging officers, employees, and directors of the Fund and its affiliates to acquire or increase their equity interest in the Fund and to provide a means whereby they may develop a proprietary interest in the development and financial success of the Fund, to encourage them to remain with and devote their best efforts to the business of the Fund, thereby advancing the interests of the Fund and its stockholders. The Incentive Plan is also intended to enhance the ability of the Fund and its affiliates to attract and retain the services of individuals who are essential for the growth and profitability of the Fund.  The Incentive Plan permits the award of restricted stock as well as common stock purchase options.  The maximum number of shares of common stock that are subject to awards granted under the Incentive Plan is 2,434,728 shares.  The term of the Incentive Plan will expire on June 13, 2026.  No awards have yet been granted under the Incentive Plan and, consequently, no compensation expense has been recorded for the year ended December 31, 2016.

Critical Accounting Policies and Estimates

We follow the accounting and reporting guidance in FASB Accounting Standards Codification 946.Topic 946“Financial Services – Investment Companies.” Our financial statements are based on the selection and application of significant accounting policies, which require management to make significant estimates and assumptions. We believe that the following are some of the more critical judgment areas in the application of our accounting policies that currently affect our financial condition and results of operations.

Valuation of Investments— Portfolio

For most of our investments, market quotations 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 GAAP 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 generally valued at their quoted market price at the close of business on the valuation date.

Privately-held portfolio securities—The fair value ofnot available. With respect to investments for which no market exists is determined on the basis of procedures established in good faith byquotations are not readily available or when such market quotations are deemed not to represent fair value, our Board of Directors. Ashas approved a general principle, the current “fair value” of an investment would be the amount we might reasonably expect to receive for it upon its current sale, in an orderly manner. Appraisal valuations are necessarily subjective and the estimated values arrived at by the Fund may differ materially from amounts actually received upon the disposition of portfolio securities.multi-step valuation process each quarter, as described below:

Thinly Traded and Over-the-Counter Securities—Generally, we value securities that are traded in the over-the-counter market or on a stock exchange at the average of the prevailing bid and ask prices on the date of the relevant period end. However, we may apply a discount to the market value of restricted or thinly traded public securities to reflect the impact that these restrictions have on the value of these securities. We review factors, including the trading volume, total securities outstanding and our percentage ownership of securities to determine whether the trading levels are active (Level 1) or inactive (Level 2) or unobservable (Level 3). As of December 31, 2014, these securities, consisting of our holdings in the OPG Notes, represented 5.3% of our investments in portfolio securities. We utilized independent pricing services with certain of our fair value estimates. To corroborate “bid/ask” quotes from independent pricing services, we perform a market-yield approach to validate prices obtained or obtain other evidence.

During the first twelve months after an investment is made, we rely on the original investment amount to determine the fair value unless significant developments have occurred during this 12twelve month period which would indicate a material effect on the portfolio company (such as results of operations or changes in general market conditions). After the 12 month period, or if material events have occurred within the twelve month period, we consider

Investments are valued utilizing a two-step process when appraising investments of privately held companies. The first step involves determining theyield analysis, enterprise value (“EV”) analysis, net asset value analysis, liquidation analysis, discounted cash flow analysis, or a combination of methods, as appropriate. The yield analysis uses loan spreads and other relevant information implied by market data involving identical or comparable assets or liabilities. Under the portfolio company. During this step, we consider three different valuation approaches:EV analysis, the EV of a market approach, an income approach, and an asset approach. The particular facts and circumstances of each portfolio company determine which approach, or combination of approaches, will be utilized. The second step when appraising equity investments of privately held companies involves allocating value tois first determined and allocated over the various debt and equity securities of the company. We allocate value to these securities based on their relative priorities. For equity securities such as warrants, we may also incorporate alternative methodologies including the Black-Scholes Option Pricing Model.

Market approach – The market approach typically employed by Management calculates the enterprise value of a company as a multiple of earnings before interest, taxes, depreciation and amortization (“EBITDA”) generated by the company for the trailing twelve month period. Adjustments to the company’s EBITDA, including those for non-recurring items, may be considered. Multiples are estimated based on current market conditions and past experience in the private company marketplace and are subjective in nature. We will apply liquidity and other discounts we deem appropriate to equity valuations where applicable. We may also use, when available, third-party transactions in a portfolio company’s securities asin order of their preference relative to one another (i.e., “waterfall” allocation). To determine the basisEV, we typically use a market multiples approach that considers relevant and applicable market trading data of valuation (the “private market method”). The private market method will be used only with respect to completedguideline public companies, transaction metrics from precedent M&A transactions and/or firm offers made by sophisticated, independent investors.

Income approach – The income approach typically utilized by Management calculates the enterprise value of a company utilizing a discounted cash flow model incorporating projectedanalysis. The net asset value analysis is used to derive a value of an underlying investment (such as real estate property) by dividing a relevant earnings stream by an appropriate capitalization rate.

For this purpose, we consider capitalization rates for similar properties as may be obtained from guideline public companies and/or relevant transactions. The liquidation analysis is intended to approximate the net recovery value of an investment based on, among other things, assumptions regarding liquidation proceeds based on a hypothetical liquidation of a portfolio company’s assets. The discounted cash flow analysis uses valuation techniques to convert future cash flows or earnings to a range of the company. Projected future cash flows consider the historical performance of the company as well as current and projected market participant performance. Discount rates are estimatedfair values from which a single estimate may be derived utilizing an appropriate discount rate. The measurement is based on the net present value indicated by current market conditions and past experience in the private company marketplace and are subjective in nature. We will apply liquidity and other discounts we deem appropriate to equity valuations where applicable.expectations about those future amounts.

Asset approach – WeIn applying these methodologies, additional factors that we consider the asset approach to determine thein fair value pricing our investments may include, as we deem relevant: security covenants, call protection provisions, and information rights; the nature and realizable value of significantly deteriorated investments demonstrating circumstances indicative of a liquidation analysis. This situation may arise when a portfolio company: 1) cannot generate adequate cash flow to meet the principal and interest payments on its indebtedness; 2) is not successful in refinancing its debt upon maturity; 3) we believe the credit quality of a loan has deteriorated due to changes in the business and underlying asset or market conditions may result in the company’s inability to meet future obligations; or 4)any collateral; the portfolio company’s reorganizationability to make payments; the principal markets in which the portfolio company does business; publicly available financial ratios of peer companies; the principal market; and enterprise values, among other factors. Also, any failure by a portfolio company to achieve its business plan or bankruptcy. Consideration is also given as to whetherobtain and maintain its financing arrangements could result in increased volatility and result in a liquidation event would be orderly or forced.significant and rapid change in its value.

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

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

The Audit Committee of the Board of Directors may engage independent, third-party valuation firms to conduct independent appraisals and review Management’s preliminary valuations of each privately-held investmentrecord unrealized depreciation on investments when we determine that the Fund (a) has held for more than one year and (b) holds on its books at a fair value of at least $2.0 million in order to make their own independent assessment. Any third-party valuation data would be considered as one of many factors in a security is less than its cost basis, and will record unrealized appreciation when we determine that the fair value determination. The Audit Committee then would recommend the fair values for all privately-held securities based on all relevant factors to the Board of Directors for final approval.is greater than its cost basis.

Because of the inherent uncertainty of the valuation of portfolio securities which do not have readily ascertainable market values, amounting to $15.7$25.6 million and $13.3$16.2 million as of December 31, 20142016 and 2013,2015, respectively, our fair value determinations may materially differ from the values that would have been used had a ready market existed for the securities. As of December 31, 2014,2016 and December 31, 2015, one of our portfolio investments, 404,968 common shares of MVC, was publicly listed on the NYSE with 468,608 common shares and our holding of €1,200,790 [$1.5 million] in OPG notes was publicly listed on the Luxembourg Stock Exchange. As of December 31, 2013, the 73,666 ordinary428,662 common shares, of OPG were publicly listed on the NYSE Euronext Paris Exchange, and our holding of €1,200,790 [$1.5 million] in Notes was listed on the Luxembourg Stock Exchange. On April 3, 2014, we sold all of our 73,666 remaining shares of OPG, wherein we received $61,867 in net proceeds and reported a realized loss of $0.06 million.respectively.

We adjust our net asset value for the changes in the value of our publicly held securities, if applicable, and material changes in the value of private securities, generally determined on a quarterly basis or as announced in a press release, and report those amounts to Lipper Analytical Services, Inc. Our net asset value appears in various publications, includingBarron’sandThe Wall Street Journal.

Federal Income Taxes

WeSo long as we maintain our status as a BDC, we intend to comply with the requirements of the Code necessary for us to qualify as a RIC. So long as we comply with these requirements, we generally will not be subject to corporate-level federal income taxes on otherwise taxable income (including net realized capital gains) distributed to stockholders. Therefore, we did not record a provision for federal income taxes in our financial statements. As of December 31, 2014,2016, we had a capital loss carry forward of$31.931.3million which may be used to offset future capital gains. We may borrow money from time to time to maintain our status as a RIC under the Code. See “—“Overview – Financing Activities”Activities” above.

Interest Income Recognition

We record interest income, adjusted for amortization of premium and accretion of discount, on an accrual basis to the extent that we expect to collect such amounts. We stop accruing interest on investments when we determine that interest is no longer collectible. We may also impair the accrued interest when we determine that all or a portion of the current accrual is uncollectible. If we receive any cash after determining that interest is no longer collectible, we treat such cash as payment on the principal balance until the entire principal balance has been repaid, before we recognize any additional interest income. We accrete or amortize discounts and premiums on securities purchased over the life of the respective security using the effective yield method. The amortized cost of investments represents the original cost adjusted for the accretion of discount and/or amortization of premium on debt securities.

Payment in Kind Interest

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

Recent Accounting Pronouncements

In June 2013,May 2014, the Financial Accounting Standards Board (“FASB”)FASB issued Accounting Standards Update (“ASU”) 2013-08, Financial Services—Investment Companies. ASU 2013-08 provides clarifying2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 supersedes the revenue recognition requirements under ASC 606, Revenue Recognition, and most industry-specific guidance to determine ifthroughout the Industry Topics of the ASC. The core principle of the guidance is that an entity qualifiesshould recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Under the new guidance, an entity is required to perform the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The new guidance will significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. Additionally, the guidance requires improved disclosures as an investment company.to the nature, amount, timing and uncertainty of revenue that is recognized. In March 2016, the FASB issued ASU 2013-08 also requires an investment company2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarified the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarified the implementation guidance regarding performance obligations and licensing arrangements. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606) — Narrow-Scope Improvements and Practical Expedients, which clarified guidance on assessing collectability, presenting sales tax, measuring noncash consideration, and certain transition matters. The new guidance will be effective for the annual reporting period beginning after December 15, 2017, including interim periods within that reporting period. Early adoption would be permitted for annual reporting periods beginning after December 15, 2016. The Company expects to measure non-controlling interests in other investment companies at fair value. The following disclosures will also be required uponcomplete its assessment of the impact of adoption of ASU 2013-08: (i) whether2014-09 during the first half of 2017.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an entity is an investment company and is applying the accounting and reporting guidance for investment companies; (ii) information about changes, if any, inEntity’s Ability to Continue as a Going Concern (“ASU 2014-15”), which requires management to assess an entity’s statusability to continue as an investment company;a going concern, and (iii) information about financial support provided or contractually required to be provided by an investment company to any of its investees.provide related footnote disclosures in certain circumstances. The requirements of ASU 2013-08 wereamendments in this update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Fund beginningadopted ASU 2014-15 as of and for the annual period ended December 31, 2016, which did not have any impact on its financial statements.

In May 2015, the FASB issued ASU 2015-07, Fair Value Measurements — Disclosures for Certain Entities that Calculate Net Asset Value per Share. This amendment updates guidance intended to eliminate the diversity in practice surrounding how investments measured at net asset value under the practical expedient with future redemption dates have been categorized in the first quarterfair value hierarchy. Under the updated guidance, investments for which fair value is measured at net asset value per share using the practical expedient should no longer be categorized in the fair value hierarchy, while investments for which fair value is measured at net asset value per share but the practical expedient is not applied should continue to be categorized in the fair value hierarchy. The updated guidance requires retrospective adoption for all periods presented and is effective for interim and annual reporting periods beginning after December 15, 2015, with early adoption permitted. The Company adopted this standard during the three months ended March 31, 2016. There was no impact of 2014.the adoption of this new accounting standard on the Company’s financial statements as none of its investments are measured through the use of the practical expedient.

In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities.  Among other things, this ASU requires that pubic business entities use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.  ASU No. 2016-01 is effective for public entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017.  Our adoption of ASU 2013-08 didNo. 2016-01 is not anticipated to have a material effect on our financial positionstatements.

In February 2016, the FASB issued ASU 2016 02, Leases, which requires lessees to recognize on the balance sheet a right of use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. The standard requires the use of a modified retrospective transition approach, which includes a number of optional practical expedients that entities may elect to apply. The new guidance is effective for annual periods beginning after December 15, 2018, and interim periods therein. Early application is permitted. The adoption of ASU 2016-02 will not have an impact on our financial statements as we currently have no operating leases and our principal offices are under a month-to-month lease arrangement.

In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718) —Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which is intended to improve the accounting for share-based payments and affects all organizations that issue share-based payment awards to their employees. ASU 2016-09 primarily simplifies the accounting for and classification of, income taxes related to share-based payment awards, including the impact of income taxes withheld on the classification of awards as equity or resultsliabilities and the classification of operations.income taxes on the statement of cash flows. ASU 2016-09 also permits an entity to elect a forfeiture rate assumption based on the estimated number of awards expected to vest or to account for forfeitures when they occur. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We elected to early adopt ASU 2016-09 effective January 1, 2016. The provisions of ASU 2019-06 should be adopted on a modified retrospective, retrospective or prospective basis, depending on the provision. We recently adopted an incentive plan for management; however, no issuances or awards have occurred to date. We are currently evaluating the impact ASU 2016-13 will have on future issuances and awards.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326) —Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which amends the financial instruments impairment guidance so that an entity is required to measure expected credit losses for financial assets based on historical experience, current conditions and reasonable and supportable forecasts. As such, an entity will use forward-looking information to estimate credit losses. ASU 2016-13 also amends the guidance in FASB ASC Subtopic No. 325-40, Investments-Other, Beneficial Interests in Securitized Financial Assets, related to the subsequent measurement of accretable yield recognized as interest income over the life of a beneficial interest in securitized financial assets under the effective yield method. ASU 2016-13 is effective for public business entities that meet the U.S. GAAP definition of an SEC filer, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are currently evaluating the impact of ASU 2016-13 on our financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force) (“ASU 2016-15”), which addresses the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under ASC 230, Statement of Cash Flows, and other topics. ASU 2016-15 provides guidance on eight specific cash flow issues including the statement of cash flows treatment of beneficial interests in securitized financial transactions as well as the treatment of debt prepayment and extinguishment costs. ASU 2016-15 also provides guidance on the predominance principle to clarify when cash receipts and cash payments should be separated into more than one class of cash flows. ASU 2016-15 is effective for public business entities for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We are currently evaluating the impact of ASU 2016-15 on our statements of cash flows.

From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by the Company as of the specified effective date. Management believes that the impact of recently issued standards and any that are not yet effective will not have a material impact on its financial statements upon adoption.

Current Market Conditions

Overall economic conditions in the United States have improved, albeit slowly, since the market downturn of 2008-09. The U.S. economy is experiencing relatively low unemployment, but grew at 2.43%only 1.6% in 2014,2016, down from 2.6% in 2015, and the International Monetary Fund is forecasting somewhat higher growth in 2015 (3.5%).2017 and 2018 at 2.3% and 2.5%, respectively. However, global growth for 20152017 and 2018 is predicted at 3.5%3.4% and 3.6%, respectively, largely driven by growth in the U.S. and Asia, with the Euro zone predicted to grow at only 1.2%.emerging markets. (Sources:ForbesBureau of Economic Analysis andNewsweekInternational Monetary Fund).

Market conditions for business transactions including mergers and acquisitions and private equity investments in 2016 improved to their highest level ($4.3 trillion) since prior to the 2008 financial crisis, as corporations have been deleveraging and are holding significant amounts of cash and many have focused on acquisitions as part of future growth plans. Private equity activityfunds increased 47%their assets under management to a projected $681 billion, up 9% from 2013 to 2014,2015, as private equity firms as a group enjoyed more success during the year in monetizing their investments through sales and public listings. (Sources:attracting investment capital. (Source:USA Today andFortuneForbes)

During 2014,2016, our net asset value decreasedincreased from $3.14$2.94 per share to $2.86$3.37 per share, a decreasean increase of 8.9%14.6%. As of December 31, 2014,2016, our common stock iswas trading at a 26.5%40.4% discount to our net asset value as compared to 36.6%39.1% as of December 31, 2013.2015.

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

Liquidity and Capital Resources

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

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

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

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

We are currently evaluating the impact of current market conditions on our portfolio company valuations and their ability to provide current income. We have followed valuation techniques in a consistent manner; however, we are cognizant of current market conditions that might affect future valuations of portfolio securities. We believe that our operating cash flow and cash on hand will be sufficient to meet operating requirements and to finance routine capital expenditures through the next twelve months. If we effect a Consolidation of the Fund as described under “Significant Developments – Plan of Reorganization and Share Exchange with MVC Capital” and “–Authorization to Withdraw BDC Election” above, we may utilize some or a substantial portion of our current liquidity in connection with a contemplated transaction as payment of the purchase price and to pay associated legal, due diligence, accounting, and other fees. Further, we may borrow funds from financial institutions or other providers of debt capital to provide and pay for a part of the consideration and expenses necessary to effect a Consolidation.

Year Ended December 31, 2016

As of December 31, 2016, we had total assets of $73.1 million, of which $29.7 million were invested in portfolio investments and $12.0 million were invested in cash and cash equivalents. Among our portfolio investments, $3.0 million (at fair value) or 7.0% of net asset value were in the form of notes receivable from portfolio companies as of December 31, 2016.

As of December 31, 2016, we also had $30.3 million of temporary cash investments and restricted cash, including primarily the proceeds of a quarter-end margin loan that we incurred to maintain the diversification requirements applicable to a RIC. Of this amount, $30.0 million was invested in U.S. Treasury bills and $0.3 million represented a required 1% brokerage margin deposit. These securities were held by a securities brokerage firm and pledged along with other assets to secure repayment of the margin loan. The U.S. Treasury bills were sold on January 3, 2017 and we subsequently repaid this margin loan. The margin interest was paid on February 3, 2017.

Operating Activities. We used $20.1 million in cash for operating activities in 2016. In 2016, we made new investments of $2.0 million in portfolio companies. We paid fees to our professional advisers, directors, banks and others of $3.2 million, while realizing a loss of $13 thousand from the disposition of temporary cash investments.

Financing Activities. We provided $15.0 million in cash from financing activities for 2016. We did not declare any dividends in 2016.

Year Ended December 31, 2015

As of December 31, 2015, we had total assets of $52.5 million, of which $19.4 million were invested in portfolio investments and $17.0 million were invested in cash and cash equivalents. Among our portfolio investments, $0.9 million (at fair value) or 2.5% of net asset value were in the form of notes receivable from portfolio companies as of December 31, 2015.

As of December 31, 2015, we also had $15.1 million of temporary cash investments and restricted cash, including primarily the proceeds of a quarter-end margin loan that we incurred to maintain the diversification requirements applicable to a RIC. Of this amount, $15.0 million was invested in U.S. Treasury bills and $0.1 million represented a required 1% brokerage margin deposit. These securities were held by a securities brokerage firm and pledged along with other assets to secure repayment of the margin loan. The U.S. Treasury bills were sold on January 4, 2016 and we subsequently repaid this margin loan. The margin interest was paid on February 3, 2016.

Operating Activities. We provided $1.3 million in cash for operating activities in 2015. In 2015, we made no new investments in portfolio companies. We paid fees to our professional advisers, directors, banks and others of $2.8 million, while realizing a loss of $2.5 million from the disposition of portfolio securities.

Financing Activities. We provided $1.0 thousand in cash from financing activities for 2015. We did not declare any dividends in 2015.

Year Ended December 31, 2014

As of December 31, 2014, we had total assets of $52.0 million, of which $19.6 million were invested in portfolio investments and $15.7 million were invested in cash and cash equivalents. Among our portfolio investments, $4.7 million (at fair value) or 12.9% of net asset value were in the form of notes receivable from portfolio companies as of December 31, 2014. We continuecontinued to classify the promissory note issued by Spectrum Management, LLC (“Spectrum”), $3.2 at million (fair value), as non incomenon-income producing.

As of December 31, 2014, we also had $15.1 million of restricted cash and cash equivalents, including primarily the proceeds of a quarter-end margin loan that we incurred to maintain the diversification requirements applicable to a RIC. Of this amount, $15.0 million was invested in U.S. Treasury bills and $0.1 million represented a required 1% brokerage margin deposit. These securities were held by a securities brokerage firm and pledged along with other assets to secure repayment of the margin loan. The U.S. Treasury bills were sold on January 2, 2015 and we subsequently repaid this margin loan. The margin interest was paid on February 4, 2015.

Operating Activities. We used $3.4 million in cash for operating activities in 2014. In 2014, we made investments in portfolio companies of $0.8 million and paid fees to our professional advisers, directors, banks and others of $2.5 million, while realizing a gain of $0.7 million from the disposition of portfolio securities. During 2014, we incurred non-recurring expenses including settlement expenses of $0.5 million and legal expenses of $0.1 million related to the various legal proceedings described in Item 3.

Financing Activities. We used $0.001 million$1.0 thousand in cash from financing activities for 2014. We did not declare any dividends in 2014.

Year Ended December 31, 2013

As of December 31, 2013, we had total assets of $48.3 million, of which $13.5 million were invested in portfolio investments and $19.1 million were invested in cash and cash equivalents. Among our portfolio investments, $4.9 million (at fair value) or 14.7% of net asset value were in the form of notes receivable from portfolio companies as of December 31, 2013. We continue to classify the promissory note issued by Spectrum, $2.9 million (at fair value), as non income producing.

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

Operating Activities. We used $19.6 million in cash for operating activities in 2013, including $15.1 million for the purchase of U.S. Treasury bills. In 2013, we made investments in portfolio companies of $0.8 million and paid fees to our professional advisers, directors, banks and others of $2.6 million, while realizing a loss of $9.8 million from the disposition of portfolio securities. During 2013, we incurred non-recurring expenses including settlement expenses of $0.5 million and legal expenses of $0.2 million related to the various legal proceedings described in Item 3.

Financing Activities. We provided $15.0 million in cash from financing activities for 2013. We did not declare any dividends in 2013.

Year Ended December 31, 2012

As of December 31, 2012, we had total assets of $33.3 million, of which $9.2 million were invested in portfolio investments and $23.7 million were invested in cash and cash equivalents. Among our portfolio investments, $1.8 million (at fair value) or 5.6% of net asset value were in the form of notes receivable from portfolio companies as of December 31, 2012. We continue to impair certain promissory notes issued by Spectrum, having a fair value of $0.4 million.

As of December 31, 2012, we had no RIC borrowings or restricted cash.

Operating Activities. We provided $12.9 million in cash for operating activities in 2012. In 2012, we made investments in portfolio companies of $6.9 million and paid fees to our professional advisers, directors, banks and others of $3.0 million, while realizing a loss of $2.8 million from the disposition of portfolio securities.

Financing Activities. We used $6.0 million in cash from financing activities for 2012. We did not declare any dividends in 2012.

Results of Operations

Investment Income and Expense

Year Ended December 31, 20142016 as compared to Year Ended December 31, 20132015

Total income from portfolio securities increased $1.0$0.3 million in 20142016 due to a reversal of prior impairments of interest receivable from Spectrum of $0.7 million and the increase in interest-bearing investments resulting in additional interest/dividend income of $0.3 million.investments.

Professional fees increased to $1.1 during 2014 from $1.0$1.2 million during 2013.2016 from $0.6 million during 2015. These increases were principally due to the increases in consulting fees and legal fees associated with various legal proceedings.our Plan of Reorganization and due diligence and other activities incidental to a potential Consolidation as described in the Plan.

Compensation expense was comparabledecreased to $1.1 million from 2013 to 2014, and was $0.9$1.3 million in each of the years.2016 primarily due to officer bonuses earned during 2015.

General and administrative expenses increased by $0.2were comparable from 2015 to 2016, and were $0.3 million in 2014 from 2013, largely due to increased travel expenses in connection with prospective investments and the Fund’s announced Plan of Reorganization (see “Significant Developments—Plan of Reorganization” above).

Settlement expense was $0.5$0.4 million for both 2014 and 2013 and related to the various legal proceedings described in Item 3.respectively.

As a result of the factors described above, net investment loss after expenses was $2.4$2.5 million for 20142016 as compared to a net investment loss of $3.1$2.4 million for 2013.in 2015.

Year Ended December 31, 20132015 as compared to Year Ended December 31, 20122014

Total income from portfolio securities decreased $0.5 million in 20132015 due to the impairment of the interest receivable from Spectrum and the declinedecrease in interest-bearing investments.investments resulting from the sale of our interests in Spectrum Management, LLC (“Spectrum”) and Orco Property Group, S. A. (“OPG”) in January 2015 and February 2015, respectively.

Professional fees decreased to $1.0$0.6 million during 20132015 from $1.3$1.1 million during 2012.2014. These decreases were due to the decreasesabsence of legal proceedings in consulting fees2015 as compared to 2014 which required the services of various law firms and legal fees associated with various legal proceedings.consultants during the year.

Compensation expense was increased to $1.3 million from $0.9 million for 2013 and $1.1 million for 2012, respectively.  The $0.2 million decrease was largelyin 2014 during 2015 primarily due to a decreaseofficer and employee bonuses earned during 2015. Based on our management’s review of the Fund’s operations during 2014 and, in view of formal and informal criteria used to determine staff bonuses, no officer or employee bonuses were earned or paid in 2013 compared to 2012.during 2014.

Settlement expense wasGeneral and administrative expenses were comparable from 2014 to 2015, and were $0.3 million in each of these years.

There were no settlement expenses in 2015 as compared to the $0.5 million in settlement expenses for 20132014 related to the variouscertain legal proceedings described in Item 3.proceedings.

As a result of the factors described above, net investment loss after expenses was $3.1relatively unchanged at $2.4 million for 2013 as compared to a net investment loss of $2.7 million for 2012.both 2015 and 2014.

Summary of Portfolio Investment Activity

Year Ended December 31, 2016

During the year ended December 31, 2016, we had investment activity of $2.4 million in three portfolio companies. We invested $2.0 million in Biogenic Reagents, LLC (“Biogenic”) in the form of a senior secured promissory note, bearing cash and PIK interest at the combined rate of 16% per annum. During 2016, we received $0.04 million in semi-annual interest and $13 thousand in PIK’d interest in respect of this note. During 2016, we received 22,863 shares of MVC in the form of stock dividend payments. We received $50 thousand in PIK’d interest in respect to our loan to 5^TH Element Tracking, LLC (“5^TH Element”).

The following table includes significant investment activity during the year ended December 31, 2016 (in thousands):