What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-12-16 compared with 2021-12-20 · 1170 added, 982 removed, 126 unchanged (94% of the section changed)

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

December 21, 2020, the Company announced that it completed the application process for and was authorized to transfer the listing of

its shares of common stock to the NASDAQ Global Market.

The listing and trading of the common stock on the NYSE ceased at the close of

trading on December 31, 2020.

Since January 4, 2021, the common stock trades on the NASDAQ Global Market under the trading symbol “PFX.”

of September 30, 2021, we had 11stockholders of record of our common stock, which did not include stockholders for whom shares are held

in “nominee”

or “street name.”

following table sets forth, for the periods indicated, the range of high and low closing prices of our common stock and the sales price

as a percentage of the net asset value per share of our common stock.

year ending September 30, 2021

year ending September 30, 2020

year ending September 30, 2019

asset value per share is determined as of the last day in the relevant quarter and therefore

may not reflect the net asset value per share on the date of the high and low market prices.

Market for Registrant’s Common Equity, Related Stockholder

Matters and Issuer Purchases of Equity Securities

On December 21, 2020, the Company announced that

it completed the application process for and was authorized to transfer the listing of its shares of common stock to the NASDAQ Global

The listing and trading of the common stock on the NYSE ceased at the close of trading on December 31, 2020.

Since January 4,

2021, the common stock trades on the NASDAQ Global Market under the trading symbol “PFX.”

As of September 30, 2022, we had 11 stockholders

of record of our common stock, which did not include stockholders for whom shares are held in “nominee”

or “street

The following table sets forth, for the periods

indicated, the range of high and low closing prices of our common stock and the sales price as a percentage of the net asset value per

share of our common stock.

(Discount) of

Low Market Price to

Fiscal year ending September 30, 2022

Fourth Quarter

Third Quarter

Second Quarter

First Quarter

Fiscal year ending September 30, 2021

Fourth Quarter

Third Quarter

Second Quarter

First Quarter

Fiscal year ending September 30, 2020

Fourth Quarter

Third Quarter

Second Quarter

First Quarter

Net asset value per share is determined as of the

last day in the relevant quarter and therefore may not reflect the net asset value per share on the date of the high and low market

The net asset value per share shown is based on outstanding shares at the end of the period.

(2) Calculated

as of the respective high or low closing market price divided by the quarter end net asset

all periods presented in the table above, there was no return of capital included in any distribution.

of business development companies may trade at a market price that is less than the value of the net assets attributable to those shares.

The possibility that our shares of common stock will trade at a discount or premium to net asset value is separate and distinct from

the risk that our net asset value will decrease.

Calculated as of the respective high or low closing

market price divided by the quarter end net asset value.

For all periods presented in the table above,

there was no return of capital included in any distribution.

Shares of business development companies may

trade at a market price that is less than the value of the net assets attributable to those shares.

The possibility that our shares of

common stock will trade at a discount or premium to net asset value is separate and distinct from the risk that our net asset value will

The last reported closing price of our common

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As of December

2021 we had 11 stockholders of record of our common stock, including stockholders for whom shares are held in “nominee”

15, 2022 we had 11 stockholders of record of our common stock, which did not include stockholders for whom shares are held in “nominee”

or “street name.”

of Unregistered Securities

sell any securities within the past three years that were not registered under the Securities Act of 1933.

Performance Graph

graph compares the stockholder return on our common stock from September 30, 2016 to September 30, 2021 with that of the Standard

& Poor’s 500 Stock Index and the Russell 2000 Financial Services Index.

This graph assumes that on September 30, 2016, $100 was

invested in our common stock, the S&P 500 Index, and the Russell 2000 Financial Services Index.

The graph also assumes the reinvestment

of all cash dividends prior to any tax effect.

Investment performance shown for periods prior to January 1, 2021 was achieved pursuant

to our former externally-managed structure.

graph and other information furnished under this Part II Item 5 of this annual report on Form 10-K shall not be deemed to be “soliciting

material”

Sales of Unregistered Securities

We did not sell any securities within the past three years that were

not registered under the Securities Act of 1933.

Stock Performance Graph

This graph compares the stockholder return on

our common stock from September 30, 2018 to September 30, 2022 with that of the Standard & Poor’s 500 Stock Index and the Russell

2000 Financial Services Index.

This graph assumes that on September 30, 2017, $100 was invested in our common stock, the S&P 500

Index, and the Russell 2000 Financial Services Index.

The graph also assumes the reinvestment of all cash dividends prior to any tax

Investment performance shown for periods prior to January 1, 2021 was achieved pursuant to our former externally-managed structure.

The graph and other information furnished under

this Part II Item 5 of this annual report on Form 10-K shall not be deemed to be “soliciting material”

or to be “filed”

with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of

the Exchange Act.

The stock price performance included in the below graph is not necessarily indicative of future stock performance.

Purchases of Securities

relating to the Company’s purchases of its common stock during the year ended September 30, 2021is as follows:

with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act.

The stock price performance

included in the below graph is not necessarily indicative of future stock performance.

Issuer Purchases of Securities

Information relating to the Company’s purchases

of its common stock during the year ended September 30, 2022 is as follows:

Repurchase Price

Consideration for

$39.07 - $40.88

February 2022

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$37.28 - $39.19

Selected Financial Data

following selected consolidated financial data should be read in conjunction with Part II, Item 7, Management’s Discussion and

Analysis of Financial Condition and Results of Operations , and Part II, Item 8, Financial Statements and Supplementary Data ,

of this Annual Report on Form 10-K.

The following selected financial and other data for the years ended September 30, 2021, 2020, 2019,

2018, and 2017 (dollars in thousands, except per share amounts) is derived from the audited consolidated financial statements for such

years, and included in Part II, Item 8 , Consolidated Financial Statements and Supplementary Data , of this Annual Report on Form

For the years ended September 30

Statement of Operations data:

Total investment income

Base management fees

Incentive fees

All other expenses

Management fee waiver

Incentive fee waiver

Net investment income/(loss)

Net realized gains/(losses) on investments

Net unrealized appreciation/(depreciation) on investments

Change in provision for deferred taxes on unrealized (appreciation)/depreciation on investments

Loss on extinguishment of debt

Net increase/(decrease) in net assets resulting from operations

Per share data:

Net asset value per common share at year end

Market price at year end

Net investment income/(loss)

Net realized and unrealized gains/(losses) on investments

Change in provision for deferred taxes on unrealized (appreciation)/depreciation on investments

Loss on extinguishment of debt

Net increase/(decrease) in net assets resulting from operations

Dividends paid

Statement of Assets and Liabilities data:

Total investments at fair value

Cash and cash equivalents

Total liabilities

Total net assets

Weighted average annual yield on debt investments (1)

Total return based on market value (2)

Total return based on net asset value (3)

Number of portfolio companies

weighted average yield is based upon original cost on our income bearing debt investments.

return is historical and assumes changes in share price, reinvestments of all dividends and

distributions at prices obtained under the Company’s dividend reinvestment plan, and

no sales charge for the period.

return is historical and assumes changes in NAV, reinvestments of all dividends and distributions

at prices obtained under the Company’s dividend reinvestment plan, and no sales charge

for the period.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

following discussion and analysis should be read in conjunction with our financial statements and related notes and other financial information

appearing elsewhere in this annual report on Form 10-K.

as otherwise specified, references to “we,”

$36.40 - $37.23

$28.24 - $37.79

September 2022

$36.80 - $37.50

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

The following discussion and analysis should

be read in conjunction with our financial statements and related notes and other financial information appearing elsewhere in this annual

report on Form 10-K.

Except as otherwise specified, references to

“we,”

“us,”

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or the “Company,”

refer to PhenixFIN

Forward-Looking

of the statements in this annual report on Form 10-K constitute forward-looking statements, which relate to future events or our performance

or financial condition.

The forward-looking statements contained in this annual report on Form 10-K involve risks and uncertainties,

including statements as to:

introduction, withdrawal, success and timing of business initiatives and strategies;

in political, economic or industry conditions, the interest rate environment or conditions

affecting the financial and capital markets, which could result in changes in the value of

impact of increased competition;

impact of future acquisitions and divestitures;

business prospects and the prospects of our portfolio companies;

impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement

actions of government agencies relating to us;

contractual arrangements and relationships with third parties;

future financings by us;

● fluctuations

in foreign currency exchange rates;

impact of changes to tax legislation and, generally, our tax position;

ability to locate suitable investments for us and to monitor and administer our investments;

ability to attract and retain highly talented professionals;

conditions and our ability to access alternative debt markets and additional debt and equity

unfavorable resolution of legal proceedings;

● uncertainties

associated with the impact from the COVID-19 pandemic:

including its impact on the global

refer to PhenixFIN Corporation.

Forward-Looking Statements

Some of the statements in this annual report

on Form 10-K constitute forward-looking statements, which relate to future events or our performance or financial condition.

The forward-looking

statements contained in this annual report on Form 10-K involve risks and uncertainties, including statements as to:

the introduction, withdrawal, success and timing of

business initiatives and strategies;

changes in political, economic or industry conditions,

the interest rate environment or conditions affecting the financial and capital markets, which could result in changes in the value

of our assets;

the impact of increased competition;

the impact of future acquisitions and divestitures;

our business prospects and the prospects of our portfolio

the impact of legislative and regulatory actions and

reforms and regulatory, supervisory or enforcement actions of government agencies relating to us;

our contractual arrangements and relationships with

third parties;

any future financings by us;

fluctuations in foreign currency exchange rates;

the impact of changes to tax legislation and, generally,

our tax position;

our ability to locate suitable investments for us

and to monitor and administer our investments;

our ability to attract and retain highly talented

professionals;

market conditions and our ability to access alternative

debt markets and additional debt and equity capital;

the unfavorable resolution of legal proceedings;

uncertainties associated with the impact from the

COVID-19 pandemic:

including its impact on the global and U.S.

capital markets and the global and U.S.

the length and duration of the

COVID-19 outbreak in the United States as well as worldwide and the magnitude of the economic

impact of that outbreak;

the effect of the COVID-19 pandemic on our business prospects and

the operational and financial performance of our portfolio companies, including our and their

ability to achieve their respective objectives;

and the effect of the disruptions caused

by the COVID-19 pandemic on our ability to continue to effectively manage our business;

and uncertainties relating to the possibility that the Company may explore strategic alternatives,

including, but are not limited to:

the timing, benefits and outcome of any exploration of

strategic alternatives by the Company;

potential disruptions in the Company’s business

and stock price as a result of our exploration of any strategic alternatives;

to realize anticipated efficiencies, or strategic or financial benefits;

potential transaction

costs and risks;

and the risk that any exploration of strategic alternatives may have an

adverse effect on our existing business arrangements or relationships, including our ability

to retain or hire key personnel.

There is no assurance that any exploration of strategic

alternatives will result in a transaction or other strategic change or outcome.

forward-looking statements may include statements preceded by, followed by or that otherwise include the words “trend,”

the length and duration

of the COVID-19 outbreak in the United States as well as worldwide and the magnitude of the economic impact of that outbreak;

effect of the COVID-19 pandemic on our business prospects and the operational and financial performance of our portfolio companies,

including our and their ability to achieve their respective objectives;

and the effect of the disruptions caused by the COVID-19

pandemic on our ability to continue to effectively manage our business;

risks and uncertainties relating to the possibility

that the Company may explore strategic alternatives, including, but are not limited to:

the timing, benefits and outcome of any exploration

of strategic alternatives by the Company;

potential disruptions in the Company’s business and stock price as a result of our

exploration of any strategic alternatives;

the ability to realize anticipated efficiencies, or strategic or financial benefits;

transaction costs and risks;

and the risk that any exploration of strategic alternatives may have an adverse effect on our existing

business arrangements or relationships, including our ability to retain or hire key personnel.

There is no assurance that any exploration

of strategic alternatives will result in a transaction or other strategic change or outcome.

Such forward-looking statements may include statements

preceded by, followed by or that otherwise include the words “trend,”

“opportunity,”

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“achieve,”

and similar expressions, or future or conditional verbs such as “will,”

and similar expressions,

or future or conditional verbs such as “will,”

“would,”

4 unchanged sentences

The forward looking statements contained in this annual report involve risks and uncertainties.

Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including

the factors set forth as “Risk Factors”

Our actual results

could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth

as “Risk Factors”

and elsewhere in this annual report on Form 10-K.

have based the forward-looking statements included in this report on information available to us on the date of this report, and we assume

no obligation to update any such forward-looking statements.

Actual results could differ materially from those anticipated in our forward-looking

statements, and future results could differ materially from historical performance.

Although we undertake no obligation to revise or

update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult

any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the

Securities and Exchange Commission (“SEC”), including annual reports on Form 10-K, registration statements on Form N-2, quarterly

reports on Form 10-Q and current reports on Form 8-K.

has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets.

impact of COVID-19 continues to evolve and many countries, including the United States, have reacted at various stages of the pandemic

by instituting quarantines, restricting travel, and temporarily closing or limiting capacity at many corporate offices, retail stores,

restaurants, fitness clubs and manufacturing facilities and factories in affected jurisdictions.

Such actions have created disruption

in global supply chains and adversely impacted a number of industries.

The outbreak has had and could continue to have an adverse impact

on economic and market conditions and trigger a period of global economic slowdown.

We are closely monitoring the impact of the outbreak

of COVID-19 on all aspects of our business, including how it will impact our portfolio companies, employees, due diligence and underwriting

processes, and financial markets.

Given the continuing development and fluidity of this situation, we cannot estimate the long-term impact

of COVID-19 on our business, future results of operations, financial position or cash flows at this time.

Further, the operational and

financial performance of the portfolio companies in which we make investments may be significantly impacted by COVID-19, which may in

turn impact the valuation of our investments.

We believe our portfolio companies have taken immediate actions to effectively and efficiently

We have based the forward-looking statements

included in this report on information available to us on the date of this report, and we assume no obligation to update any such forward-looking

Actual results could differ materially from those anticipated in our forward-looking statements, and future results could

differ materially from historical performance.

Although we undertake no obligation to revise or update any forward-looking statements,

whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may

make directly to you or through reports that we have filed or in the future may file with the Securities and Exchange Commission (“SEC”),

including annual reports on Form 10-K, registration statements on Form N-2, quarterly reports on Form 10-Q and current reports on Form

COVID-19 Developments and War in Ukraine

COVID-19 and variants thereof have severely impacted

global economic activity and caused significant volatility and negative pressure in financial markets.

The global impact of COVID-19

continues to evolve and many countries, including the United States, have reacted at various stages of the pandemic by instituting quarantines,

restricting travel, and temporarily closing or limiting capacity at many corporate offices, retail stores, restaurants, fitness clubs

and manufacturing facilities and factories in affected jurisdictions.

Such actions have created disruption in global supply chains and

adversely impacted a number of industries.

The outbreak has had and could continue to have an adverse impact on economic and market conditions

and trigger a period of global economic slowdown.

We continue to closely monitor the impact of

the outbreak of COVID-19 on all aspects of our business, including how it will impact our portfolio companies, employees, due diligence

and underwriting processes, and financial markets.

Given the continuing development and fluidity of this situation, we cannot estimate

the long-term impact of COVID-19 on our business, future results of operations, financial position or cash flows at this time.

the operational and financial performance of the portfolio companies in which we make investments may be significantly impacted by COVID-19,

which may in turn impact the valuation of our investments.

We believe our portfolio companies have taken actions to effectively and efficiently

respond to the challenges posed by COVID-19 and related orders imposed by state and local governments, including developing liquidity

1 unchanged sentence

Paycheck Protection Program.

The Company’s performance was negatively impacted during the pandemic.

The longer-term impact of COVID-19

on the operations and the performance of the Company (including certain portfolio companies) is difficult to predict, but may also be

The longer-term potential impact on such operations and performance could depend to a large extent on future developments and

actions taken by authorities and other entities to mitigate COVID-19 and its economic impact.

The Company’s performance has been negatively impacted during the pandemic.

The longer-term impact

of COVID-19 on the operations and the performance of the Company (including certain portfolio companies) is difficult to predict, but

may also be adverse.

The longer-term potential impact on such operations and performance could depend to a large extent on future developments

and actions taken by authorities and other entities to mitigate COVID-19 and its economic impact.

The impacts, as well as the uncertainty

over impacts to come, of COVID-19 have adversely affected the performance of the Company (including certain portfolio companies) and may

continue to do so in the future.

Furthermore, the impacts of a potential worsening of global economic conditions and the continued disruptions

to and volatility in the financial markets remain unknown.

COVID-19 presents material uncertainty and risks with respect to the underlying

value of the Company’s portfolio companies, the Company’s business, financial condition, results of operations and cash flows,

such as the potential negative impact to financing arrangements, increased costs of operations, changes in law and/or regulation, and

uncertainty regarding government and regulatory policy.

over impacts to come, of COVID-19 have adversely affected the performance of the Company (including certain portfolio companies) and

may continue to do so in the future.

Furthermore, the impacts of a potential worsening of global economic conditions and the continued

disruptions to and volatility in the financial markets remain unknown.

COVID-19 presents material uncertainty and risks with respect

to the underlying value of the Company’s portfolio companies, the Company’s business, financial condition, results of operations

and cash flows, such as the potential negative impact to financing arrangements, increased costs of operations, changes in law and/or

regulation, and uncertainty regarding government and regulatory policy.

In February 2022, Russia launched a large-scale

invasion of Ukraine.

The extent and duration of Russian military action in the Ukraine, resulting sanctions and resulting future

market disruptions, including declines in stock markets in Russia and elsewhere and the value of the ruble against the U.S.

impossible to predict, but have been and could continue to be significant.

Any such disruptions caused by Russian military or other actions

(including cyberattacks and espionage) or resulting from actual or threatened responses to such actions have caused and could continue

to cause disruptions to portfolio companies located in Europe or that have substantial business relationships with European or Russian

The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but

have been and could continue to be substantial.

Any such market disruptions could affect our portfolio companies’

operations and,

as a result, could have a material adverse effect on our business, financial condition and results of operations.

We have evaluated subsequent events from September

3 unchanged sentences

and Analysis of Financial Condition and Results of Operations relates to the Company’s financial statements for the quarterly period

ended June 30, 2021, the analysis contained herein may not fully account for impacts relating to the COVID-19 pandemic.

In that regard,

for example, as of September 30, 2021, the Company valued its portfolio investments in conformity with U.S.

generally accepted accounting principles (“GAAP”) based on the facts and circumstances

known by the Company at that time, or reasonably expected to be known at that time.

Due to the overall volatility that the COVID-19 pandemic

may have caused during the months following our most recent valuation (as of September 30, 2021), any valuations conducted now or in the future

in conformity with U.S.

ended September 30, 2022, the analysis contained herein may not fully account for market event impacts.

As of September 30, 2022, the

Company valued its portfolio investments in conformity with U.S.

generally accepted accounting principles (“GAAP”) based

on the facts and circumstances known by the Company at that time, or reasonably expected to be known at that time.

Due to the overall

volatility that market events may have caused during the months following our most recent valuation (as of September 30, 2022), any valuations

conducted now or in the future in conformity with U.S.

GAAP could result in a lower fair value of our portfolio.

The longer-term impact of COVID-19 on the operations

and the performance of the Company (including certain portfolio companies) is difficult to predict, but may also be adverse.

The longer-term

potential impact on such operations and performance could depend to a large extent on future developments and actions taken by authorities

and other entities to contain COVID-19 and its economic impact.

The impacts, as well as the uncertainty over impacts to come, of COVID-19

(including the Delta variant) have adversely affected the performance of the Company and may continue to do so in the future.

the potential exists for additional variants of COVID-19, including the Omicron variant, to impede the global economic recovery and exacerbate

geographic differences in the spread of, and response to, COVID-19.

are an internally-managed non-diversified closed-end management investment company that has elected to be regulated as a BDC under the

In addition, we have elected, and intend to qualify annually, to be treated for U.S.

federal income tax purposes as a RIC under

Subchapter M of the Code.

Through December 31, 2020, we were an externally managed company.

On November 18, 2020, the board of directors

of the Company approved the adoption of an internalized management structure, effective January 1, 2021.

Since January 1, 2021, we have

operated under such internalized management structure.

commenced operations and completed our initial public offering on January 20, 2011.

Under our internalized management structure, our

activities are managed by our senior professionals and are supervised by our board of directors, of which a majority of the members are

independent of us.

Company’s investment objective is to generate current income and capital appreciation.

The management team seeks to achieve this

objective primarily through making loans, private equity or other investments in privately-held companies.

The Company may also make

debt, equity or other investments in publicly-traded companies.

(These investments may also include investments in other BDCs, closed-end

funds or REITS.) We may also pursue other strategic opportunities and invest in other assets or operate other businesses to achieve our

investment objective.

The portfolio generally consists of senior secured first lien term loans, senior secured second lien term loans,

senior secured bonds, preferred equity and common equity.

Occasionally, we will receive warrants or other equity participation features

which we believe will have the potential to increase total investment returns.

Our loan and other debt investments are primarily rated

below investment grade or are unrated.

Investments in below investment grade securities are considered predominantly speculative with

respect to the issuer’s capacity to pay interest and repay principal when due.

a BDC, we are required to comply with certain regulatory requirements.

For instance, we generally have to invest at least 70% of our

total assets in “qualifying assets,”

The longer-term impact

of COVID-19 and other market events on the operations and the performance of the Company (including certain portfolio companies) is difficult

to predict, but may also be adverse.

Further, the potential exists for additional variants of COVID-19 to adversely effect the global

We are an internally-managed non-diversified

closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act.

In addition, we have elected,

and intend to qualify annually, to be treated for U.S.

federal income tax purposes as a RIC under Subchapter M of the Code.

Through December

31, 2020, we were an externally managed company.

On November 18, 2020, the board of directors of the Company approved the adoption of

an internalized management structure, effective January 1, 2021.

Since January 1, 2021, we have operated under such internalized management

We commenced operations and completed our initial

public offering on January 20, 2011.

Under our internalized management structure, our activities are managed by our senior professionals

and are supervised by our board of directors, of which a majority of the members are independent of us.

The Company’s investment objective is to

generate current income and capital appreciation.

The management team seeks to achieve this objective primarily through making loans,

private equity or other investments in privately-held companies.

The Company may also make debt, equity or other investments in publicly-traded

(These investments may also include investments in other BDCs, closed-end funds or REITS.) We may also pursue other strategic

opportunities and invest in other assets or operate other businesses to achieve our investment objective (such as our asset-based lending

The portfolio generally consists of senior secured first lien term loans, senior secured second lien term loans, senior secured

bonds, preferred equity and common equity.

Occasionally, we will receive warrants or other equity participation features which we believe

will have the potential to increase total investment returns.

Our loan and other debt investments are primarily rated below investment

grade or are unrated.

Investments in below investment grade securities are considered predominantly speculative with respect to the issuer’s

capacity to pay interest and repay principal when due.

As a BDC, we are required to comply with certain

regulatory requirements.

For instance, we generally have to invest at least 70% of our total assets in “qualifying assets,”

including securities of private or thinly traded public U.S.

companies, cash, cash equivalents,

government securities and high-quality debt investments that mature in one year or less.

In addition, we are only allowed to borrow

money such that our asset coverage, as defined in the 1940 Act, equals at least 200% (or 150% if, pursuant to the 1940 Act, certain requirements

are met) after such borrowing, with certain limited exceptions.

To maintain our RIC tax treatment, we must meet specified source-of-income

and asset diversification requirements.

In addition, to maintain our RIC tax treatment, we must timely distribute at least 90% of our

net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, for the taxable

companies, cash, cash equivalents, U.S.

government securities and high-quality

debt investments that mature in one year or less.

In addition, we are only allowed to borrow money such that our asset coverage, as defined

in the 1940 Act, equals at least 200% (or 150% if, pursuant to the 1940 Act, certain requirements are met) after such borrowing, with

certain limited exceptions.

To maintain our RIC tax treatment, we must meet specified source-of-income and asset diversification requirements.

In addition, to maintain our RIC tax treatment, we must timely distribute at least 90% of our net ordinary income and realized net short-term

capital gains in excess of realized net long-term capital losses, if any, for the taxable year.

Reverse Stock Split;

Authorized Share Reduction

the Company’s 2020 Annual Meeting of Stockholders held on June 30, 2020 (the “Annual Meeting”), stockholders approved

a proposal to grant discretionary authority to the Company’s board of directors to amend the Company’s Certificate of Incorporation

(the “Certificate of Incorporation”) to effect a reverse stock split of its common stock, of 1-20 (the “Reverse Stock

Split”) and with the Reverse Stock Split to be effective at such time and date, if at all, as determined by the board of directors,

but not later than 60 days after stockholder approval thereof and, if and when the reverse stock split is effected, reduce the number

of authorized shares of common stock by the approved reverse stock split ratio (the “Authorized Share Reduction”).

the Annual Meeting, on July 7, 2020, the board of directors determined that it was in the best interests of the Company and its stockholders

to implement the Reverse Stock Split and the Authorized Share Reduction.

Accordingly, on July 13, 2020, the Company filed a Certificate

of Amendment (the “Certificate of Amendment”) to the Certificate of Incorporation with the Secretary of State of the State

of Delaware to effect the Reverse Stock Split and the Authorized Share Reduction.

to the Certificate of Amendment, effective as of 5:00 p.m., Eastern Time, on July 24, 2020 (the “Effective Time”), each twenty

(20) shares of common stock issued and outstanding, immediately prior to the Effective Time, automatically and without any action on

the part of the respective holders thereof, were combined and converted into one (1) share of common stock.

In connection with the Reverse

Stock Split, the Certificate of Amendment provided for a reduction in the number of authorized shares of common stock from 100,000,000

to 5,000,000 shares of common stock.

No fractional shares were issued as a result of the Reverse Stock Split.

Instead, any stockholder

who would have been entitled to receive a fractional share as a result of the Reverse Stock Split received cash payments in lieu of such

fractional shares (without interest and subject to backup withholding and applicable withholding taxes).

December 21, 2020, the Company announced that it completed the application process for and was authorized to transfer the listing of

its shares of common stock to the NASDAQ Global Market.

The listing and trading of the common stock on the NYSE ceased at the close of

trading on December 31, 2020.

Since January 4, 2021, the common stock trades on the NASDAQ Global Market under the trading symbol “PFX.”

generate revenue in the form of interest income on the debt that we hold and capital gains, if any, on warrants or other equity interests

that we may acquire in portfolio companies.

We invest our assets primarily in privately held companies with enterprise or asset values

between $25 million and $250 million and generally focus on investment sizes of $10 million to $50 million.

We believe that pursuing

opportunities of this size offers several benefits including reduced competition, a larger investment opportunity set and the ability

to minimize the impact of financial intermediaries.

At the Company’s 2020 Annual Meeting of

Stockholders held on June 30, 2020 (the “Annual Meeting”), stockholders approved a proposal to grant discretionary authority

to the Company’s board of directors to amend the Company’s Certificate of Incorporation (the “Certificate of Incorporation”)

to effect a reverse stock split of its common stock, of 1-20 (the “Reverse Stock Split”) and with the Reverse Stock Split

to be effective at such time and date, if at all, as determined by the board of directors, but not later than 60 days after stockholder

approval thereof and, if and when the reverse stock split is effected, reduce the number of authorized shares of common stock by the

approved reverse stock split ratio (the “Authorized Share Reduction”).

Following the Annual Meeting, on July 7, 2020,

the board of directors determined that it was in the best interests of the Company and its stockholders to implement the Reverse Stock

Split and the Authorized Share Reduction.

Accordingly, on July 13, 2020, the Company filed a Certificate of Amendment (the “Certificate

of Amendment”) to the Certificate of Incorporation with the Secretary of State of the State of Delaware to effect the Reverse Stock

Split and the Authorized Share Reduction.

Pursuant to the Certificate of Amendment, effective

as of 5:00 p.m., Eastern Time, on July 24, 2020 (the “Effective Time”), each twenty (20) shares of common stock issued and

outstanding, immediately prior to the Effective Time, automatically and without any action on the part of the respective holders thereof,

were combined and converted into one (1) share of common stock.

In connection with the Reverse Stock Split, the Certificate of Amendment

provided for a reduction in the number of authorized shares of common stock from 100,000,000 to 5,000,000 shares of common stock.

fractional shares were issued as a result of the Reverse Stock Split.

Instead, any stockholder who would have been entitled to receive

a fractional share as a result of the Reverse Stock Split received cash payments in lieu of such fractional shares (without interest

and subject to backup withholding and applicable withholding taxes).

On December 21, 2020, the Company announced

that it completed the application process for and was authorized to transfer the listing of its shares of common stock to the NASDAQ

Global Market.

The listing and trading of the common stock on the NYSE ceased at the close of trading on December 31, 2020.

Since January

4, 2021, the common stock trades on the NASDAQ Global Market under the trading symbol “PFX.”

We generate revenue in the form of interest income

on the debt that we hold and capital gains, if any, on warrants or other equity interests that we may acquire in portfolio companies.

We invest our assets primarily in privately held companies with enterprise or asset values between $25 million and $250 million and generally

focus on investment sizes of $10 million to $50 million.

We believe that pursuing opportunities of this size offers several benefits

including reduced competition, a larger investment opportunity set and the ability to minimize the impact of financial intermediaries.

We expect our debt investments to bear interest at either a fixed or floating rate.

Interest on debt will be payable generally either monthly or quarterly.

In some cases our debt investments may provide for a portion

of the interest to be PIK.

To the extent interest is PIK, it will be payable through the increase of the principal amount of the obligation

by the amount of interest due on the then-outstanding aggregate principal amount of such obligation.

The principal amount of the debt

and any accrued but unpaid interest will generally become due at the maturity date.

In addition, we may generate revenue in the form

of commitment, origination, structuring or diligence fees, fees for providing managerial assistance or investment management services

and possibly consulting fees.

Any such fees will be generated in connection with our investments and recognized as earned.

periods prior to December 31, 2020, our primary operating expenses included management and incentive fees pursuant to the investment

management agreement we had with MCC Advisors and overhead expenses, including our allocable portion of our administrator’s overhead

under the administration agreement, which were paid during the quarter ended March 31, 2021.

Our management and incentive fees compensated

MCC Advisors for its work in identifying, evaluating, negotiating, closing and monitoring our investments.

On November 18, 2020, the

board of directors adopted an internally managed structure, effective January 1, 2021, under which we bear all costs and expenses of

our operations and transactions, including those relating to:

● our organization

and continued corporate existence;

● calculating

our NAV (including the cost and expenses of any independent valuation firms);

incurred in monitoring our financial and legal affairs and in monitoring our investments

and performing due diligence on our prospective portfolio companies;

payable on debt, if any, incurred to finance our investments;

of all offerings of common stock and other securities, if any;

costs associated with employing investment professionals and other staff;

● distributions

on our shares;

● administration

fees payable under our administration agreement;

payable to third parties relating to, or associated with, making investments;

agent and custodial fees;

● registration

fees and listing fees;

state and local taxes;

● independent

director fees and expenses;

preparing and filing reports or other documents with the SEC or other regulators;

of any reports, proxy statements or other notices to our stockholders, including printing

● our fidelity

and officers/errors and omissions liability insurance, and any other insurance premiums;

● the operating

lease of our office space;

● indemnification

costs and expenses of administration, including audit and legal costs.

Support Agreement

June 12, 2020, the Company entered into an expense support agreement (the “Expense Support Agreement”) with MCC Advisors

and Medley LLC, pursuant to which MCC Advisors and Medley LLC agreed (jointly and severally) to cap the management fee and all of the

Company’s other operating expenses (except interest expenses, certain extraordinary strategic transaction expenses, and other expenses

approved by the Special Committee of the Board (as described in Note 10)), at $667,000 per month (the “Cap”).

Under the Expense

Support Agreement, the Cap became effective on June 1, 2020 and was to expire on September 30, 2020.

On September 29, 2020, the board

of directors, including all of the independent directors, extended the term of the Expense Support Agreement through the end of quarter

ending December 31, 2020.

The Expense Support Agreement expired by its terms at the close of business on December 31, 2020, in connection

with the adoption of the internalized management structure by the board of directors.

the three months ended December 31, 2020, the total management fee and the other operating expenses subject to the Cap (as described

above) were $2.5 million, which resulted in $0.3 million of expense support incurred during the quarter ended December 31, 2020 and due

from MCC Advisors.

The $0.3 million of expense support due was netted against Administrator expenses payable in the accompanying Consolidated

Statements of Assets and Liabilities and paid during the quarter ended March 31, 2021.

Interest on debt will be payable generally either

monthly or quarterly.

In some cases our debt investments may provide for a portion of the interest to be PIK.

To the extent interest

is PIK, it will be payable through the increase of the principal amount of the obligation by the amount of interest due on the then-outstanding

aggregate principal amount of such obligation.

The principal amount of the debt and any accrued but unpaid interest will generally become

due at the maturity date.

In addition, we may generate revenue in the form of commitment, origination, structuring or diligence fees,

fees for providing managerial assistance or investment management services and possibly consulting fees.

Any such fees will be recognized

In periods prior to December 31, 2020, our primary

operating expenses included management and incentive fees pursuant to the investment management agreement we had with MCC Advisors and

overhead expenses, including our allocable portion of our administrator’s overhead under the administration agreement, which were

paid during the quarter ended March 31, 2021.

Our management and incentive fees compensated MCC Advisors for its work in identifying,

evaluating, negotiating, closing and monitoring our investments.

On November 18, 2020, the board of directors adopted an internally managed

structure, effective January 1, 2021, under which we bear all costs and expenses of our operations and transactions, including those

our organization and continued corporate existence;

calculating our NAV (including the cost and expenses of any independent

valuation firms);

expenses incurred in monitoring our financial and

legal affairs and in monitoring our investments and performing due diligence on our prospective portfolio companies;

interest payable on debt, if any, incurred to finance our investments;

the costs of all offerings of common stock and other securities, if any;

operating costs associated with employing investment professionals and

distributions on our shares;

administration fees payable under our administration agreement;

Custodial fees related to our assets

amounts payable to third parties relating to, or associated with, making

transfer agent and custodial fees;

registration fees and listing fees;

federal, state and local taxes;

independent director fees and expenses;

costs of preparing and filing reports or other documents with the SEC or

other regulators;

the costs of any reports, proxy statements or other notices to our stockholders,

including printing costs;

our fidelity bond;

directors and officers/errors and omissions liability insurance, and any

other insurance premiums;

the operating lease of our office space;

indemnification payments;

direct costs and expenses of administration, including

audit and legal costs.

Expense Support Agreement

On June 12, 2020, the Company entered into an

expense support agreement (the “Expense Support Agreement”) with MCC Advisors and Medley LLC, pursuant to which MCC Advisors

and Medley LLC agreed (jointly and severally) to cap the management fee and all of the Company’s other operating expenses (except

interest expenses, certain extraordinary strategic transaction expenses, and other expenses approved by the Special Committee of the

Board (as described in Note 10)), at $667,000 per month (the “Cap”).

Under the Expense Support Agreement, the Cap became

effective on June 1, 2020 and was to expire on September 30, 2020.

On September 29, 2020, the board of directors, including all of the

independent directors, extended the term of the Expense Support Agreement through the end of quarter ending December 31, 2020.

Support Agreement expired by its terms at the close of business on December 31, 2020, in connection with the adoption of the internalized

management structure by the board of directors.

For the three months ended December 31, 2020,

the total management fee and the other operating expenses subject to the Cap (as described above) were $2.5 million, which resulted in

$0.3 million of expense support incurred during the quarter ended December 31, 2020 and due from MCC Advisors.

The $0.3 million of expense

support due was netted against Administrator expenses payable in the accompanying Consolidated Statements of Assets and Liabilities and

paid during the quarter ended March 31, 2021.

See “Note 6”

for more information.

and Investment Activity

of September 30, 2021 and 2020, our portfolio had a fair market value of approximately $151.6 million and $246.7 million, respectively.

the year ended September 30, 2021, we received proceeds from sale and settlements of investments of $124.3 million, including principal

and dividend proceeds, realized net losses on investments of $42.5 million, and invested $45.3 million, of which $6.5 million was invested

in two new portfolio companies and two new securities in an existing portfolio company during the year.

the year ended September 30, 2020, we received proceeds from sale and settlements of investments of $110.6 million, including principal

and dividend proceeds, realized net losses on investments of $50.0 million, and invested $16.8 million.

following table summarizes the amortized cost and the fair value of our average portfolio company, including until its sale on October

8, 2020, the equity investment in the MCC Senior Loan Strategy JV I LLC (“MCC JV”), which had been our largest portfolio

2022 Long-Term Cash Incentive Plan

On May 9, 2022, the board of directors of the

Company adopted the PhenixFIN 2022 Long-Term Cash Incentive Plan (the “CIP”) pursuant to the recommendation by the Compensation

Committee of the board of directors.

The CIP provides for performance-based cash awards to key employees of the Company, as approved

by the Compensation Committee, based on the achievement of pre-established financial goals for the approved performance period.

The performance

goals may be expressed as one or a combination of net asset value of the Company, net asset value per share of the Company’s common

stock, changes in the market price of shares of the Company’s common stock, individual performance metrics and/or such other goals

and objectives the Committee considers relevant in connection with accomplishing the purposes of the CIP.

A form of Award Agreement to

be used under the CIP was also approved.

In connection with the approval of the CIP, the

Compensation Committee approved awards for the executive officers named in the table below for the three year performance period commencing

on January 1, 2022 and ending on December 31, 2024.

Each participant is eligible to receive an amount of cash equal to 0%-200% of the

target award set forth in the table below (“Target Performance Award”), based on the achievement of net asset value (“NAV”)

and NAV per share goals (weighted at 30% and 70%, respectively) as of the end of the performance period (the “Performance Goals”).

Performance is evaluated separately for each Performance Goal.

No payment is made with respect to a Performance Goal if a threshold level

of performance is not achieved.

Each Performance Goal is subject to (i) a threshold level of performance at which 50% of the Target Performance

Award attributable to that Performance Goal may be paid and below which no payment is made pursuant to an Award, (ii) a target level

of performance at which 100% of the Target Performance Award attributable to that Performance Goal may be paid and (iii) a maximum level

of performance, at which 200% of the Target Performance Award attributable to that Performance Goal may be paid, in each case subject

to such other terms and conditions of an Award.

Between threshold, target and maximum performance levels for each Performance Goal, the

portion of that Award attributed to the Performance Goal shall be interpolated in a linear progression.

The Target Performance Award for each executive officer is set forth

in the table below:

Name and Title

David Lorber, Chairman of the Board and Chief Executive Officer

Ellida McMillan, Chief Financial Officer

Portfolio and Investment Activity

As of September 30, 2022 and 2021, our portfolio

had a fair market value of approximately $193.0 million and $151.6 million, respectively.

During the year ended September 30, 2022, we

received proceeds from sale and settlements of investments of $123.8 million, including principal and dividend proceeds, realized net

gains on investments of $5.2 million, and invested $173.3 million.

During the year ended September 30, 2021, we

received proceeds from sale and settlements of investments of $124.3 million, including principal and dividend proceeds, realized net

losses on investments of $42.5 million, and invested $45.3 million, of which $6.5 million was invested in two new portfolio companies

and two new securities in an existing portfolio company during the year.

The following table summarizes the amortized

cost and the fair value of our average portfolio company:

September 30, 2022

4 unchanged sentences

Largest portfolio company

The following

table summarizes the amortized cost and the fair value of investments as of September 30, 2021 (dollars in thousands):

Senior Secured First Lien Term

The following table summarizes the amortized

cost and the fair value of investments as of September 30, 2022 (dollars in thousands):

Amortized Cost

Senior Secured First Lien Term Loans

Senior Secured Second Lien Term Loans

2 unchanged sentences

Equity/Warrants

The following

table summarizes the amortized cost and the fair value of investments as of September 30, 2020 (dollars in thousands):

Senior Secured

First Lien Term Loans

Senior Secured Second Lien

Total Investments

The following table summarizes the amortized

cost and the fair value of investments as of September 30, 2021 (dollars in thousands):

Amortized Cost

Senior Secured First Lien Term Loans

Senior Secured Second Lien Term Loans

Senior Secured Notes

Unsecured Debt

MCC Senior Loan Strategy

Equity/Warrants

As of September 30, 2021, our income-bearing investment

portfolio based upon cost represented 86.6% of our total portfolio of which 74.6% bore interest based on floating rates, such as the London

Interbank Offering Rate (“LIBOR”), while 25.4% bore interest at fixed rates.

As of September 30, 2021, the weighted average

yield based upon cost of our total portfolio was approximately 6.75%.

As of September 30, 2020, the weighted average yield based upon

cost of our total portfolio was approximately 8.5%.

The weighted average yield of our total portfolio does not represent the total return

to our stockholders.

We rate the risk profile of each of our investments

based on the following categories:

Investments that are performing

above expectations.

Investments that are performing

within expectations, with risks that are neutral or favorable compared to risks at the time of origination.

All new loans are rated

‘2’.

Investments that are performing

below expectations and that require closer monitoring, but where no loss of interest, dividend or principal is expected.

rated ‘3’

Total Investments

As of September 30, 2022, our income-bearing

investment portfolio based upon cost represented 62.0% of our total portfolio of which 81.9% bore interest based on floating rates, such

as LIBOR or SOFR, while 18.1% bore interest at fixed rates.

As of September 30, 2022, the weighted average yield based upon cost of our

total portfolio was approximately 10.85%.

As of September 30, 2021, the weighted average yield based upon cost of our total portfolio was

approximately 6.75%.

The weighted average yield of our total portfolio does not represent the total return to our stockholders.

We rate the risk profile of each of our

investments based on the following categories:

Investments that are performing above expectations.

Investments that are performing within expectations,

with risks that are neutral or favorable compared to risks at the time of origination.

All new loans are rated ’2’.

Investments that are performing below expectations

and that require closer monitoring, but where no loss of interest, dividend or principal is expected.

Companies rated ’3’

may be out of compliance with financial covenants, however, loan payments are generally not past due.

Investments that are performing

below expectations and for which risk has increased materially since origination.

Some loss of interest or dividend is expected but

no loss of principal.

In addition to the borrower being generally out of compliance with debt covenants, loan payments may be past

due (but generally not more than 180 days past due).

Investments that are performing

substantially below expectations and whose risks have increased substantially since origination.

Most or all of the debt covenants

are out of compliance and payments are substantially delinquent.

Investments that are performing below expectations

and for which risk has increased materially since origination.

Some loss of interest or dividend is expected but no loss of principal.

In addition to the borrower being generally out of compliance with debt covenants, loan payments may be past due (but generally not

more than 180 days past due).

Investments that are performing substantially below

expectations and whose risks have increased substantially since origination.

Most or all of the debt covenants are out of compliance

and payments are substantially delinquent.

Some loss of principal is expected.

COVID-19 pandemic impacted our investment ratings, causing downgrades of certain portfolio companies.

As the COVID-19 situation continues

to evolve, we continue to maintain close communications with our portfolio companies to proactively assess and manage potential risks

across our investment portfolio.

We have also increased oversight and analysis of credits in vulnerable industries in an attempt to improve

loan performance and reduce credit risk

following table shows the distribution of our investments on the 1 to 5 investment performance rating scale at fair value as of September

30, 2021 and 2020 (dollars in thousands):

of Operations

results for the years ended September 30, 2021, 2020, and 2019 are as follows (dollars in thousands):

the years ended September 30

The following table shows the distribution of

our investments on the 1 to 5 investment performance rating scale at fair value as of September 30, 2022 and 2021 (dollars in thousands):

September 30, 2022

September 30, 2021

Results of Operations

Operating results for the years ended September

30, 2022, 2021, and 2020 are as follows (dollars in thousands):

For the years ended September 30

Total investment income

Net investment income/(loss)

Net realized gains (losses) on investments

Net change in unrealized gains (losses) on investments

Loss on extinguishment of debt

(decrease) in net assets resulting from operations

Investment Income

investment income/(loss)

realized gains (losses) on investments

change in unrealized gains (losses) on investments

on extinguishment of debt

increase (decrease) in net assets resulting from operations

the year ended September 30, 2021, investment income totaled $32.3 million, of which $29.6 million was attributable to portfolio interest

and dividend income, $2.6 million was attributable to fee income, and $0.1 million was attributable to other income.

the year ended September 30, 2020, investment income totaled $21.5 million, of which $20.8 million was attributable to portfolio interest

and dividend income, and $0.7 million to fee income.

the year ended September 30, 2019, investment income totaled $46.3 million, of which $44.0 million was attributable to portfolio interest

and dividend income, and $2.3 million to fee income.

expenses for the years ended September 30, 2021, 2020, and 2019 are as follows (dollars in thousands):

the years ended September 30

For the year ended September 30, 2022, investment

income totaled $15.5 million, of which $9.3 million was attributable to portfolio interest, approximately $5.5 million was attributable

to dividend income, and $0.7 million was attributable to fee and other income.

Dividend income was received from 12 investments during

the year ended September 30, 2022.

For the year ended September 30, 2021, investment

income totaled $32.3 million, of which $29.6 million was attributable to portfolio interest and dividend income, $2.6 million was attributable

to fee income, and $0.1 million was attributable to other income.

For the year ended September 30, 2020, investment

income totaled $21.5 million, of which $20.8 million was attributable to portfolio interest and dividend income, and $0.7 million to

Operating Expenses

Operating expenses for the years ended September 30, 2022, 2021, and

2020 are as follows (dollars in thousands):

For the years ended September 30

Base management fees

5 unchanged sentences

Professional fees, net

Expenses before waivers

and reimbursements

Expenses before waivers and reimbursements

Expense support reimbursement

Expenses, net of waivers

and reimbursements

the year ended September 30, 2021, total operating expenses before management and incentive fee waivers decreased by $11.2 million, or

44.8%, compared to the year ended September 30, 2020.

the year ended September 30, 2020, total operating expenses before management and incentive fee waivers decreased by $42.2 million, or

62.9%, compared to the year ended September 30, 2019.

beginning January 1, 2021, the Company did not incur any management or incentive fees, nor was it subject to expense support arrangements

due to its transition to an internal management structure.

As a result, there were no management or incentive fee waivers or expense

support reimbursements for such period.

and Financing Expenses

Expenses, net of waivers and reimbursements

For the year ended September 30, 2022, total operating expenses before

management and incentive fee waivers decreased by $1.7 million, or 12.1%, compared to the year ended September 30, 2021.

For the year ended September 30, 2021, total

operating expenses before management and incentive fee waivers decreased by $11.2 million, or 44.8%, compared to the year ended September

For the year ended September 30, 2020, total

operating expenses before management and incentive fee waivers decreased by $42.2 million, or 62.9%, compared to the year ended September

Effective beginning January 1, 2021, the Company

did not incur any management or incentive fees, nor was it subject to expense support arrangements due to its transition to an internal

management structure.

As a result, there were no management or incentive fee waivers or expense support reimbursements for such period.

Interest and Financing Expenses

Interest and financing expenses for the year

ended September 30, 2022 decreased by $0.7 million, or 11.8%, compared to the year ended September 30, 2021.

The decrease in

interest and financing expenses was primarily due to the full repayment of the 2021 Notes on November 20, 2020 and the completion of

the repayment of the Israeli Notes (as defined below) on April 14, 2020.

and financing expenses for the year ended September 30, 2020 decreased by $9.1 million, or 37.9%, compared to the year ended September

The decrease in interest and financing expenses was primarily due to the voluntary repayment of $135.0 million SBA-guaranteed

debentures (the “SBA Debentures”), which the Company repaid between March 28, 2019 and May 10, 2019, as well as the full

repayment of $120.2 million Series A Notes (the “Israeli Notes”) between August 12, 2019 and April 14, 2020.

Management Fees and Incentive Fees

management fees for the year ended September 30, 2021 decreased by $5.2 million, or 82.0%, compared to the year ended September 30, 2020

as, since January 1, 2021, the Company no longer incurs management fees under its current internalized structure.

management fees for the year ended September 30, 2020 decreased by $4.8 million, or 43.2%, compared to the year ended September 30, 2019

principally due to the decline in our gross assets during the period.

incentive fees were paid for the year ended September 30, 2021 or the year ended September 30, 2020.

Since January 1, 2021, the Company

no longer incurs incentive fees under its current internalized structure.

Fees and Other General and Administrative Expenses

The decrease in interest

and financing expenses was primarily due to the full repayment of the 2021 Notes on November 20, 2020 and the partial repayment of the 2023 Notes on December 16, 2021, partially

offset by an increase due to the issuance of the 2028 Notes which became effective on November 16, 2021.

Interest and financing expenses for the year

ended September 30, 2021 decreased by $9.1 million, or 61.2%, compared to the year ended September 30, 2020.

The decrease in interest

and financing expenses was primarily due to the full repayment of the 2021 Notes on November 20, 2020 and the completion of the repayment

of the Israeli Notes (as defined below) on April 14, 2020.

Interest and financing expenses for the year

ended September 30, 2020 decreased by $9.1 million, or 37.9%, compared to the year ended September 30, 2019.

The decrease in interest

and financing expenses was primarily due to the voluntary repayment of $135.0 million SBA-guaranteed debentures (the “SBA Debentures”),

which the Company repaid between March 28, 2019 and May 10, 2019, as well as the full repayment of $120.2 million Series A Notes (the

“Israeli Notes”) between August 12, 2019 and April 14, 2020.

Base Management Fees and Incentive Fees

No base management fees were paid for the year ended September 30,

2022 as, since January 1, 2021, the Company ceased incurring management fees under its current internalized structure.

Base management fees for the year ended September

30, 2021 decreased by $5.2 million, or 82.0%, compared to the year ended September 30, 2020 as, since January 1, 2021, the Company no

longer incurs management fees under its current internalized structure.

Base management fees for the year ended September

30, 2020 decreased by $4.8 million, or 43.2%, compared to the year ended September 30, 2019 principally due to the decline in our gross

assets during the period.

No incentive fees were paid for the year ended

September 30, 2022, 2021 or 2020.

Since January 1, 2021, the Company no longer incurs incentive fees under its current internalized structure.

Professional Fees and Other General and

Administrative Expenses

Professional fees and general and

administrative expenses for the year ended September 30, 2022 increased by $0.9 million, or 55.5%, compared to the year ended

September 30, 2020 primarily due to a decrease in the insurance proceeds received in the year ended September 30,

2021 which offset legal expenses.

fees and general and administrative expenses for the year ended September 30, 2020 decreased by $28.3 million, or 88.5%, compared to

the year ended September 30, 2019 primarily due to insurance proceeds received related to legal expenses relating to the dismissed stockholder

class action, captioned as FrontFour Capital Group LLC, et al.

v Brook Taube et al, as well as a decrease in legal expenses, general

and administrative expenses, administrator expenses, valuation expenses, and audit expenses, offset by an increase in independent directors

expenses and insurance expenses.

Realized Gains/Losses from Investments

measure realized gains or losses by the difference between the net proceeds from the disposition and the amortized cost basis of an investment,

without regard to unrealized gains or losses previously recognized.

September 30, 2021.

This resulted primarily from recording insurance proceeds received in 2021 as an offset to legal fees which are

a component of professional fees.

During the year ended September 30, 2022, the Company did not receive any insurance proceeds.

Professional fees and general and administrative

expenses for the year ended September 30, 2021 increased by $3.1 million, or 206.0%, compared to the year ended September 30, 2020 primarily

due to a decrease in the insurance proceeds received in the year ended September 30, 2021 which offset legal expenses during such period.

Professional fees and general and administrative

expenses for the year ended September 30, 2020 decreased by $28.3 million, or 88.5%, compared to the year ended September 30, 2019 primarily

due to insurance proceeds received related to legal expenses relating to the dismissed stockholder class action, captioned as FrontFour

Capital Group LLC, et al.

v Brook Taube et al, as well as a decrease in legal expenses, general and administrative expenses, administrator

expenses, valuation expenses, and audit expenses, offset by an increase in independent directors expenses and insurance expenses.

Net Realized Gains/Losses from Investments

We measure realized gains or losses by the difference

between the net proceeds from the disposition and the amortized cost basis of an investment, without regard to unrealized gains or losses

previously recognized.

During the year ended September 30, 2022, we

recognized $5.2 million of realized gains on our portfolio investments.

The realized gains were primarily due to

the partial and full repayments of two investments and the restructuring of three investments, offset by realized losses due to the sale

of three investments and the repayment of four investments.

During the year ended September 30, 2021, we

recognized $42.5 million of realized losses on our portfolio investments.

1 unchanged sentence

JV in the first fiscal quarter of 2021.

the year ended September 30, 2020, we recognized $50.0 million of realized losses on our portfolio investments.

The realized losses were

primarily due to the sale of three investments and the write-off of two investments.

the year ended September 30, 2019, we recognized $112.2 million of realized losses on our portfolio investments.

The realized losses

were primarily due to the non-cash restructuring transactions of two investments, the sale of two investments and the write-off of two

investments, partially offset by a realized gain resulting from exercising warrants and converting junior preferred equity in one portfolio

company into common shares of a new portfolio company.

loss on extinguishment of debt

the event that we modify or extinguish our debt prior to maturity, we account for it in accordance with ASC 470-50, Modifications and

Extinguishments, in which we measure the difference between the reacquisition price of the debt and the net carrying amount of the debt,

which includes any unamortized debt issuance costs.

the year ended September 30, 2021, the Company recognized a net loss on extinguishment of debt of $0.1 million, which was due to the

Company’s $74.0 million repayment of the 2021 Notes on November 20, 2020.

the year ended September 30, 2020, the Company recognized a net loss on extinguishment of debt of $2.5 million, which was due to the

Company’s $34.1 million repayment of the Israeli Notes on December 31, 2019, $34.9 million repayment of the Israeli Notes on March 31,

2020 and $21.1 million repayment of the Israeli Notes on April 14, 2020.

the year ended September 30, 2019, the Company recognized a net loss on extinguishment of debt of $2.0 million, which was primarily due

to a loss on extinguishment of debt of $1.8 million from the pre-payment of $135.0 million of SBA Debentures in connection with SBIC

LP’s surrender of its SBIC license and a $0.2 million loss on extinguishment of debt from the $12.0 million partial redemption of the

Unrealized Appreciation/Depreciation on Investments

change in unrealized appreciation or depreciation on investments reflects the net change in the fair value of our investment portfolio.

the year ended September 30, 2021, we had $25.3 million of net unrealized appreciation on investments.

The net unrealized appreciation

was comprised of $54.8 million of net unrealized depreciation on investments and $80.1 million of net unrealized appreciation that resulted

from the reversal of previously recorded unrealized depreciation on investments that were realized, partially sold, or written-off during

the year ended September 30, 2020, we had $10.6 million of net unrealized depreciation on investments.

The net unrealized depreciation

comprised of $37.1 million of net unrealized depreciation on investments, offset by $26.5 million of net unrealized appreciation that

resulted from the reversal of previously recorded unrealized depreciation on investments that were realized, partially sold or written-off

during the year.

the year ended September 30, 2019, we had $38.5 million of net unrealized appreciation on investments.

The net unrealized appreciation

comprised of $59.6 million of net unrealized depreciation on investments, offset by $98.1 million of net unrealized appreciation that

resulted from the reversal of previously recorded unrealized depreciation on investments that were realized or written-off during the

for Deferred Taxes on Unrealized Depreciation on Investments

consolidated subsidiaries of ours are subject to U.S.

During the year ended September 30, 2020, we

recognized $50.0 million of realized losses on our portfolio investments.

The realized losses were primarily due to the sale of three

investments and the write-off of two investments.

Realized loss on extinguishment of debt

In the event that we modify or extinguish our

debt prior to maturity, we account for it in accordance with ASC 470-50, Modifications and Extinguishments, in which we measure the difference

between the reacquisition price of the debt and the net carrying amount of the debt, which includes any unamortized debt issuance costs.

During the year ended September 30, 2022, the

Company recognized a net loss on extinguishment of debt of $0.3 million, which was due to the Company’s $55.3 million repayment

of the 2023 Notes on December 16, 2021.

During the year ended September 30, 2021, the

Company recognized a net loss on extinguishment of debt of $0.1 million, which was due to the Company’s $74.0 million repayment

of the 2021 Notes on November 20, 2020.

During the year ended September 30, 2020, the

Company recognized a net loss on extinguishment of debt of $2.5 million, which was due to the Company’s $34.1 million repayment

of the Israeli Notes on December 31, 2019, $34.9 million repayment of the Israeli Notes on March 31, 2020 and $21.1 million repayment

of the Israeli Notes on April 14, 2020.

Net Unrealized Appreciation/Depreciation on Investments

Net change in unrealized appreciation or depreciation

on investments reflects the net change in the fair value of our investment portfolio.

For the year ended September 30, 2022, we had

$14.5 million of net unrealized depreciation on investments.

The net unrealized depreciation was comprised of $21.3 million of net unrealized

depreciation on investments and $6.9 million of net unrealized appreciation that resulted from the reversal of previously recorded unrealized

depreciation on investments that were realized, partially sold, or written-off during the year.

For the year ended September 30, 2021, we had

$25.3 million of net unrealized appreciation on investments.

The net unrealized appreciation was comprised of $54.8 million of net unrealized

depreciation on investments and $80.1 million of net unrealized appreciation that resulted from the reversal of previously recorded unrealized

depreciation on investments that were realized, partially sold, or written-off during the year.

For the year ended September 30, 2020, we had

$10.6 million of net unrealized depreciation on investments.

The net unrealized depreciation comprised of $37.1 million of net unrealized

depreciation on investments, offset by $26.5 million of net unrealized appreciation that resulted from the reversal of previously recorded

unrealized depreciation on investments that were realized, partially sold or written-off during the year.

Provision for Deferred Taxes on Unrealized Depreciation on Investments

Certain consolidated subsidiaries of ours are

subject to U.S.

federal and state income taxes.

These taxable subsidiaries are not consolidated

with the Company for income tax purposes, but are consolidated for GAAP purposes, and may generate income tax liabilities or assets from

temporary differences in the recognition of items for financial reporting and income tax purposes at the subsidiaries.

For the years

ended September 30, 2021, 2020 and 2019, the Company did not record a change in provision for deferred taxes on the unrealized (appreciation)/depreciation

on investments.

in Net Assets from Operations

the year ended September 30, 2021, we recorded a net increase in net assets resulting from operations of $1.2 million compared to a net

decrease in net assets resulting from operations of $65.8 million for the year ended September 30, 2020, and a net decrease in net assets

resulting from operations of $96.6 million for the year ended September 30, 2019 as a result of the factors discussed above.

2,677,891, 2,723,709, and 2,723,709 weighted average common shares outstanding for the years ended September 30, 2021, 2020, and 2019,

respectively, our per share net increase (decrease) in net assets resulting from operations was $0.46, $(24.16) and $(35.46) for the

years ended September 30, 2021, 2020, and 2019, respectively.

Condition, Liquidity and Capital Resources

a RIC, we distribute substantially all of our net income to our stockholders and have an ongoing need to raise additional capital for

investment purposes.

To fund growth, we have a number of alternatives available to increase capital, including raising equity, increasing

debt, and funding from operational cash flow.

liquidity and capital resources historically have been generated primarily from the net proceeds of public offerings of common stock,

advances from the Revolving Credit Facility (which the Company voluntarily satisfied and terminated) and net proceeds from the issuance

of notes as well as cash flows from operations.

In the future, we may generate cash from future offerings of securities, future borrowings

and cash flows from operations, including interest earned from the temporary investment of cash in U.S.

government securities and other

high-quality debt investments that mature in one year or less.

Our primary use of funds is investments in our targeted asset classes,

cash distributions to our stockholders, and other general corporate purposes.

of September 30, 2021, we had $69.4 million in cash and cash equivalents.

order to maintain our RIC tax treatment under the Code, we intend to distribute to our stockholders substantially all of our taxable

income, but we may also elect to periodically spill over certain excess undistributed taxable income from one tax year into the next

In addition, as a BDC, for each taxable year we generally are required to meet a coverage ratio of total assets to total senior

securities, which include borrowings and any preferred stock we may issue in the future, of at least 200% (or 150% if, pursuant to the

1940 Act, certain requirements are met).

This requirement limits the amount that we may borrow.

December 17, 2015, the Company issued $70.8 million in aggregate principal amount of 6.50% unsecured notes that mature on January 30,

2021 (the “2021 Notes”).

On January 14, 2016, the Company closed an additional $3.25 million in aggregate principal amount

of the 2021 Notes, pursuant to the partial exercise of the underwriters’

These taxable subsidiaries are not consolidated with the Company for income tax purposes,

but are consolidated for GAAP purposes, and may generate income tax liabilities or assets from temporary differences in the recognition

of items for financial reporting and income tax purposes at the subsidiaries.

For the years ended September 30, 2022, 2021 and 2020,

the Company did not record a change in provision for deferred taxes on the unrealized (appreciation)/depreciation on investments.

Changes in Net Assets from Operations

For the year ended September 30, 2022, we recorded

a net decrease in net assets resulting from operations of $6.1 million compared to a net increase in net assets resulting from operations

of $1.2 million for the year ended September 30, 2021, and a net decrease in net assets resulting from operations of $65.8 million for

the year ended September 30, 2020 as a result of the factors discussed above.

Based on 2,323,601, 2,677,891, and 2,723,709 weighted average

common shares outstanding for the years ended September 30, 2022, 2021, and 2020, respectively, our per share net increase (decrease)

in net assets resulting from operations was $(2.63), $0.48 and $(24.16) for the years ended September 30, 2022, 2021, and 2020, respectively.

Financial Condition, Liquidity and Capital Resources

As a RIC, we distribute substantially all of

our net income to our stockholders and have an ongoing need to raise additional capital for investment purposes.

To fund growth, we have

a number of alternatives available to increase capital, including raising equity, increasing debt, and funding from operational cash

Our liquidity and capital resources historically

have been generated primarily from the net proceeds of public offerings of common stock, advances from the Revolving Credit Facility

(which the Company voluntarily satisfied and terminated) and net proceeds from the issuance of notes as well as cash flows from operations.

In the future, we may generate cash from future offerings of securities, future borrowings and cash flows from operations, including

interest earned from the temporary investment of cash in U.S.

government securities and other high-quality debt investments that mature

in one year or less.

Our primary use of funds is investments in our targeted asset classes, cash distributions to our stockholders, and

other general corporate purposes.

As of September 30, 2022, we had $22.8 million in cash and cash equivalents.

In order to maintain our RIC tax treatment under

the Code, we intend to distribute to our stockholders substantially all of our taxable income, but we may also elect to periodically

spill over certain excess undistributed taxable income from one tax year into the next tax year.

In addition, as a BDC, for each taxable

year we generally are required to meet a coverage ratio of total assets to total senior securities, which include borrowings and any

preferred stock we may issue in the future, of at least 200% (or 150% if, pursuant to the 1940 Act, certain requirements are met).

requirement limits the amount that we may borrow.

On January 11, 2021, the Company announced that

its board of directors approved a share repurchase program.

On February 9, 2022, the Board of Directors approved the expansion of the

amount authorized for repurchase under the Company’s share repurchase program from $15 million to $25 million.

Under the share

repurchase program, the Company repurchased an aggregate of 621,580 shares of common stock through September 30, 2022, or 29.6% of shares

outstanding as of the program’s inception, with a total cost of approximately $16.5 million.

Taking into account such prior repurchases,

the total remaining amount authorized under the expanded share repurchase program at September 30, 2022 was approximately $8.5 million.

Unsecured Notes

On December 17, 2015, the Company issued $70.8

million in aggregate principal amount of 6.50% unsecured notes that mature on January 30, 2021 (the “2021 Notes”).

14, 2016, the Company closed an additional $3.25 million in aggregate principal amount of the 2021 Notes, pursuant to the partial exercise

of the underwriters’

option to purchase additional notes.

The 2021 Notes bore

interest at a rate of 6.50% per year, payable quarterly on January 30, April 30, July 30 and October 30 of each year, beginning January

October 21, 2020, the Company caused notices to be issued to the holders of the 2021 Notes regarding the Company’s exercise of

its option to redeem, in whole, the issued and outstanding 2021 Notes, pursuant to Section 1104 of the Indenture dated as of February

7, 2012, between the Company and U.S.

Bank National Association, as trustee, and Section 101(h) of the Third Supplemental Indenture dated

as of December 17, 2015.

The Company redeemed $74,012,825 in aggregate principal amount of the issued and outstanding 2021 Notes on November

20, 2020 (the “Redemption Date”).

The 2021 Notes were redeemed at 100% of their principal amount ($25 per 2021 Note), plus

the accrued and unpaid interest thereon from October 31, 2020, through, but excluding, the Redemption Date.

The Company funded the redemption

of the 2021 Notes with cash on hand.

March 18, 2013, the Company issued $60.0 million in aggregate principal amount of 2023 Notes.

As of March 30, 2016, the 2023 Notes may

be redeemed in whole or in part at any time or from time to time at the Company’s option.

On March 26, 2013, the Company closed

an additional $3.5 million in aggregate principal amount of 2023 Notes, pursuant to the partial exercise of the underwriters’

to purchase additional notes.

The 2023 Notes bear interest at a rate of 6.125% per year, payable quarterly on March 30, June 30, September

30 and December 30 of each year, beginning June 30, 2013.

December 12, 2016, the Company entered into an “At-The-Market”

(“ATM”) debt distribution agreement with FBR Capital

Markets & Co., through which the Company could offer for sale, from time to time, up to $40.0 million in aggregate principal amount

of the 2023 Notes.

The Company sold 1,573,872 of the 2023 Notes at an average price of $25.03 per note, and raised $38.6 million in net

proceeds, through the ATM debt distribution agreement.

March 10, 2018, the Company redeemed $13.0 million in aggregate principal amount of the 2023 Notes.

The redemption was accounted for

as a debt extinguishment in accordance with ASC 470-50, Modifications and Extinguishments, which resulted in a realized loss of $0.3

million and was recorded on the Consolidated Statements of Operations as a loss on extinguishment of debt.

December 31, 2018, the Company redeemed $12.0 million in aggregate principal amount of the 2023 Notes.

The redemption was accounted for

as a debt extinguishment in accordance with ASC 470-50, Modifications and Extinguishments, which resulted in a realized loss of $0.2

million and was recorded on the Consolidated Statements of Operations as a loss on extinguishment of debt.

December 21, 2020, the Company announced that it completed the application process for and was authorized to transfer the listing of

the 2023 Notes to the NASDAQ Global Market.

The listing and trading of the 2023 Notes on the NYSE ceased at the close of trading on December

Effective January 4, 2021, the 2023 Notes trade on the NASDAQ Global Market under the trading symbol “PFXNL.”

January 26, 2018, the Company priced a debt offering in Israel of $121.3 million of Israeli Notes.

The Israeli Notes were listed on the

TASE and denominated in New Israeli Shekels, but linked to the US Dollar at a fixed exchange rate which mitigates any currency exposure

to the Company.

June 5, 2018, the Company announced that on June 1, 2018, its board of directors authorized the Company to repurchase and retire up to

$20 million of the Company’s outstanding Israeli Notes on the TASE.

the quarter ended December 31, 2018, the Company exchanged $1.0 million United States Dollars to New Israeli Shekels at a rate of 3.73

USD/NIS in order to repurchase the Israeli Notes on the TASE.

As the Israeli Notes were trading below par at the time of the repurchase,

and the USD/NIS (foreign currency) spot rate was higher than the fixed exchange rate agreed upon in the deed of trust, the Company was

able to repurchase and retire 3,812,000 units, which resulted in $1,119,201 aggregate principal amount of the Israeli Notes being retired.

The redemption was accounted for as a debt extinguishment in accordance with ASC 470-50, Modifications and Extinguishments, which resulted

in a realized gain of $0.1 million and was recorded on the Consolidated Statements of Operations as a gain on extinguishment of debt.

December 31, 2019 in addition to the scheduled 12.5% quarterly amortization payment, the Company used proceeds from its principal collections

in PhenixFIN SLF and PhenixFIN Small Business Fund to pre-pay an additional $19.1 million of the Israeli Notes.

The pre-payment was accounted

for as a debt extinguishment in accordance with ASC 470-50, Modifications and Extinguishments, which resulted in a realized loss of $0.9

million and was recorded on the Consolidated Statements of Operations as a net loss on extinguishment of debt.

March 31, 2020, in addition to the scheduled 12.5% quarterly amortization payment, the Company used proceeds from its principal repayments

in assets held by PhenixFIN SLF and PhenixFIN Small Business Fund to pre-pay an additional $19.8 million of the Israeli Notes.

The pre-payment

was accounted for as a debt extinguishment in accordance with ASC 470-50, Modifications and Extinguishments, which resulted in a realized

loss of $0.9 million and was recorded on the Consolidated Statements of Operations as a net loss on extinguishment of debt.

April 14, 2020, the Company repaid the remaining $21.1 million of Israeli Notes outstanding, and as such is no longer subject to any

covenants relating thereto.

The Israeli Notes were redeemed at 100% of their principal amount, plus the accrued interest thereon, through

April 14, 2020.

Obligations and Off-Balance Sheet Arrangements

of September 30, 2021 and 2020, we had commitments under loan and financing agreements to fund up to $4.9 million to six portfolio companies

and $3.9 million to five portfolio companies, respectively.

These commitments are primarily composed of senior secured term loans and

revolvers, and the determination of their fair value is included in the Consolidated Schedule of Investments.

The commitments are generally

subject to the borrowers meeting certain criteria such as compliance with covenants and certain operational metrics.

The terms of the

borrowings and financings subject to commitment are comparable to the terms of other loan and equity securities in our portfolio.

of the composition of the unfunded commitments as of September 30, 2021 and 2020 is shown in the table below (dollars in thousands):

Redwood Services Group, LLC - Revolver

1888 Industrial Services, LLC - Revolver

Alpine SG - Revolver

Kemmerer Operations, LLC - Delayed Draw Term

NVTN LLC - DDTL

Black Angus Steakhouses, LLC - Super Priority

DataOnline Corp.

NVTN LLC - Super Priority

The 2021 Notes bore interest at a rate of 6.50% per year, payable quarterly

on January 30, April 30, July 30 and October 30 of each year, beginning January 30, 2016.

On October 21, 2020, the Company caused notices

to be issued to the holders of the 2021 Notes regarding the Company’s exercise of its option to redeem, in whole, the issued and

outstanding 2021 Notes, pursuant to Section 1104 of the Indenture dated as of February 7, 2012, between the Company and U.S.

Bank National

Association, as trustee, and Section 101(h) of the Third Supplemental Indenture dated as of December 17, 2015.

The Company redeemed $74,012,825

in aggregate principal amount of the issued and outstanding 2021 Notes on November 20, 2020 (the “Redemption Date”).

2021 Notes were redeemed at 100% of their principal amount ($25 per 2021 Note), plus the accrued and unpaid interest thereon from October

31, 2020, through, but excluding, the Redemption Date.

The Company funded the redemption of the 2021 Notes with cash on hand.

On March 18, 2013, the Company issued $60.0 million

in aggregate principal amount of 2023 Notes.

As of March 30, 2016, the 2023 Notes may be redeemed in whole or in part at any time or

from time to time at the Company’s option.

On March 26, 2013, the Company closed an additional $3.5 million in aggregate principal

amount of 2023 Notes, pursuant to the partial exercise of the underwriters’

option to purchase additional notes.

The 2023 Notes

bear interest at a rate of 6.125% per year, payable quarterly on March 30, June 30, September 30 and December 30 of each year, beginning

June 30, 2013.

On December 12, 2016, the Company entered into

an “At-The-Market”

(“ATM”) debt distribution agreement with FBR Capital Markets & Co., through which the

Company could offer for sale, from time to time, up to $40.0 million in aggregate principal amount of the 2023 Notes.

The Company sold

1,573,872 of the 2023 Notes at an average price of $25.03 per note, and raised $38.6 million in net proceeds, through the ATM debt distribution

On March 10, 2018, the Company redeemed $13.0

million in aggregate principal amount of the 2023 Notes.

The redemption was accounted for as a debt extinguishment in accordance with

ASC 470-50, Modifications and Extinguishments, which resulted in a realized loss of $0.3 million and was recorded on the Consolidated

Statements of Operations as a loss on extinguishment of debt.

On December 31, 2018, the Company redeemed $12.0

million in aggregate principal amount of the 2023 Notes.

The redemption was accounted for as a debt extinguishment in accordance with

ASC 470-50, Modifications and Extinguishments, which resulted in a realized loss of $0.2 million and was recorded on the Consolidated

Statements of Operations as a loss on extinguishment of debt.

On December 21, 2020, the Company announced that

it completed the application process for and was authorized to transfer the listing of the 2023 Notes to the NASDAQ Global Market.

listing and trading of the 2023 Notes on the NYSE ceased at the close of trading on December 31, 2020.

Effective January 4, 2021, the

2023 Notes trade on the NASDAQ Global Market under the trading symbol “PFXNL.”

On November 15, 2021, the Company caused notices

to be issued to the holders of the 2023 Notes regarding the Company’s exercise of its option to redeem $55,325,000 in aggregate

principal amount of the issued and outstanding 2023 Notes on December 16, 2021.

The redemption was accounted for as a debt extinguishment

in accordance with ASC 470-50, Modifications and Extinguishments, which resulted in a realized loss of $0.3 million and was recorded

on the Consolidated Statements of Operations as a loss on extinguishment of debt.

On November 9, 2021, the Company entered into

an underwriting agreement, by and between the Company and Oppenheimer & Co.

Inc., as representative of the several underwriters named

in Exhibit A thereto, in connection with the issuance and sale (the “Offering”) of $57,500,000 (including the underwriters’

option to purchase up to $7,500,000 aggregate principal amount) in aggregate principal amount of its 5.25% Notes due 2028 (the “2028

Notes”).

The Offering occurred on November 15, 2021, pursuant to the Company’s effective shelf registration statement on

Form N-2 previously filed with the SEC, as supplemented by a preliminary prospectus supplement dated November 8, 2021, the pricing term

sheet dated November 9, 2021 and a final prospectus supplement dated November 9, 2021.

Effective November 16, 2021, the 2028 Notes began

trading on the NASDAQ Global Market under the trading symbol “PFXNZ.”

On November 15, 2021, the Company and U.S.

National Association, as trustee entered into a Fourth Supplemental Indenture to its base Indenture, dated February 7, 2012, between

the Company and the Trustee.

The Fourth Supplemental Indenture relates to the Offering of the 2028 Notes.

Secured Notes

Israeli Notes

On January 26, 2018, the Company priced a debt

offering in Israel of $121.3 million of Israeli Notes.

The Israeli Notes were listed on the TASE and denominated in New Israeli Shekels,

but linked to the US Dollar at a fixed exchange rate which mitigates any currency exposure to the Company.

On June 5, 2018, the Company announced that on

June 1, 2018, its board of directors authorized the Company to repurchase and retire up to $20 million of the Company’s outstanding

Israeli Notes on the TASE.

During the quarter ended December 31, 2018, the

Company exchanged $1.0 million United States Dollars to New Israeli Shekels at a rate of 3.73 USD/NIS in order to repurchase the Israeli

Notes on the TASE.

As the Israeli Notes were trading below par at the time of the repurchase, and the USD/NIS (foreign currency) spot

rate was higher than the fixed exchange rate agreed upon in the deed of trust, the Company was able to repurchase and retire 3,812,000

units, which resulted in $1,119,201 aggregate principal amount of the Israeli Notes being retired.

The redemption was accounted for as

a debt extinguishment in accordance with ASC 470-50, Modifications and Extinguishments, which resulted in a realized gain of $0.1 million

and was recorded on the Consolidated Statements of Operations as a gain on extinguishment of debt.

On December 31, 2019 in addition to the scheduled

12.5% quarterly amortization payment, the Company used proceeds from its principal collections in PhenixFIN SLF and PhenixFIN Small Business

Fund to pre-pay an additional $19.1 million of the Israeli Notes.

The pre-payment was accounted for as a debt extinguishment in accordance

with ASC 470-50, Modifications and Extinguishments, which resulted in a realized loss of $0.9 million and was recorded on the Consolidated

Statements of Operations as a net loss on extinguishment of debt.

On March 31, 2020, in addition to the scheduled

12.5% quarterly amortization payment, the Company used proceeds from its principal repayments in assets held by PhenixFIN SLF and PhenixFIN

Small Business Fund to pre-pay an additional $19.8 million of the Israeli Notes.

The pre-payment was accounted for as a debt extinguishment

in accordance with ASC 470-50, Modifications and Extinguishments, which resulted in a realized loss of $0.9 million and was recorded

on the Consolidated Statements of Operations as a net loss on extinguishment of debt.

On April 14, 2020, the Company repaid the remaining

$21.1 million of Israeli Notes outstanding, and as such is no longer subject to any covenants relating thereto.

The Israeli Notes were

redeemed at 100% of their principal amount, plus the accrued interest thereon, through April 14, 2020.

On November 20, 2020, the Company repaid the

remaining $74.0 million of the 2021 Notes outstanding, and as such is no longer subject to any covenants relating thereto.

The 2021 Notes

were redeemed at 100% of their principal amount, plus the accrued interest thereon from October 31, 2020 through, but excluding, November

Contractual Obligations and Off-Balance Sheet Arrangements

As of September 30, 2022 and 2021, we had commitments

under loan and financing agreements to fund up to $6.0 million to six portfolio companies and $4.9 million to six portfolio companies,

respectively.

These commitments are primarily composed of senior secured term loans and revolvers, and the determination of their fair

value is included in the Consolidated Schedule of Investments.

The commitments are generally subject to the borrowers meeting certain

criteria such as compliance with covenants and certain operational metrics.

The terms of the borrowings and financings subject to commitment

are comparable to the terms of other loan and equity securities in our portfolio.

A summary of the composition of the unfunded commitments

as of September 30, 2022 and 2021 is shown in the table below (dollars in thousands):

September 30,

SS Acquisition, LLC (dba Soccer Shots Franchising) - Senior Secured First Lien Delayed Draw Term Loan

Kemmerer Operations, LLC - Senior Secured First Lien Delayed Draw Term Loan

Secure Acquisition Inc.

(dba Paragon Films) - Senior Secured First Lien Delayed Draw Term Loan

NVTN LLC - Senior Secured First Lien Delayed Draw Term Loan

1888 Industrial Services, LLC - Revolving Credit Facility

Black Angus Steakhouses, LLC Senior Secured First Lien Super Priority Delayed Draw Term Loan

Redwood Services Group, LLC - Revolving Credit Facility

Alpine SG, LLC - Revolving Credit Facility

Total unfunded commitments

entered into an investment management agreement with MCC Advisors on January 11, 2011 (the “Investment Management Agreement”)

in accordance with the 1940 Act.

The Investment Management Agreement became effective upon the pricing of our initial public offering.

Under the Investment Management Agreement, MCC Advisors agreed to provide us with investment advisory and management services.

services, we agreed to pay a base management fee equal to a percentage of our gross assets and an incentive fee based on our performance.

also entered into an administration agreement with MCC Advisors as our administrator.

The administration agreement became effective upon

the pricing of our initial public offering.

Under the administration agreement, MCC Advisors agreed to furnish us with office facilities

and equipment, provide us clerical, bookkeeping and record keeping services at such facilities and provide us with other administrative

services necessary to conduct our day-to-day operations.

MCC Advisors also provided on our behalf significant managerial assistance to

those portfolio companies to which we are required to provide such assistance while the Investment Management Agreement and administration

agreement were in effect.

Investment Management Agreement and administration agreement expired at the close of business on December 31, 2020, in connection with

the Company’s adoption of an internalized management structure.

of September 30, 2021, the future fixed commitments for cash payments in connection with our Notes due 2023 and rent obligations under

our office lease for each of the next five years and thereafter are as follows:

We entered into an investment management agreement

with MCC Advisors on January 11, 2011 (the “Investment Management Agreement”) in accordance with the 1940 Act.

The Investment

Management Agreement became effective upon the pricing of our initial public offering.

Under the Investment Management Agreement, MCC

Advisors agreed to provide us with investment advisory and management services.

For these services, we agreed to pay a base management

fee equal to a percentage of our gross assets and an incentive fee based on our performance.

We also entered into an administration agreement

with MCC Advisors as our administrator.

The administration agreement became effective upon the pricing of our initial public offering.

Under the administration agreement, MCC Advisors agreed to furnish us with office facilities and equipment, provide us clerical, bookkeeping

and record keeping services at such facilities and provide us with other administrative services necessary to conduct our day-to-day

MCC Advisors also provided on our behalf significant managerial assistance to those portfolio companies to which we are required

to provide such assistance while the Investment Management Agreement and administration agreement were in effect.

The Investment Management Agreement and administration

agreement expired at the close of business on December 31, 2020, in connection with the Company’s adoption of an internalized management

The following table shows our payment obligations

for repayment of debt and other contractual obligations at September 30, 2022 (dollars in thousands):

Payments Due by Period

$ (22,521,800 )

(57,500,000 )

Operating Lease Obligation (1)

2 unchanged sentences

$ (57,500,000 )

(1) Operating

Lease Obligation means a rent payment obligation under a lease classified as an operating

lease and disclosed pursuant to ASC 842, as may be modified or supplemented.

March 27, 2015, the Company and Great American Life Insurance Company (“GALIC”) entered into a limited liability company

operating agreement to co-manage MCC Senior Loan Strategy JV I LLC (“MCC JV”).

The Company and GALIC had committed to provide

$100 million of equity to MCC JV, with the Company providing $87.5 million and GALIC providing $12.5 million.

JV commenced operations on July 15, 2015.

On August 4, 2015, MCC JV entered into a senior secured revolving credit facility (the “JV

Facility”) led by Credit Suisse, AG with commitments of $100 million.

On March 30, 2017, the Company amended the JV Facility previously

administered by CS and facilitated the assignment of all rights and obligations of CS under the JV Facility to Deutsche Bank AG, New

York Branch, (“DB”) and increased the total loan commitments to $200 million.

The JV Facility bears interest at a rate of

LIBOR (with no minimum + 2.75% per annum.

$ (80,668,227 )

Operating Lease Obligation means a rent payment obligation under a lease

classified as an operating lease and disclosed pursuant to ASC 842, as may be modified or supplemented.

On March 27, 2015, the Company and Great American

Life Insurance Company (“GALIC”) entered into a limited liability company operating agreement to co-manage MCC Senior Loan

Strategy JV I LLC (“MCC JV”).

The Company and GALIC had committed to provide $100 million of equity to MCC JV, with the Company

providing $87.5 million and GALIC providing $12.5 million.

MCC JV commenced operations on July 15, 2015.

On August 4, 2015, MCC JV entered into a senior secured revolving credit facility (the “JV Facility”) led by Credit Suisse,

AG with commitments of $100 million.

On March 30, 2017, the Company amended the JV Facility previously administered by CS and facilitated

the assignment of all rights and obligations of CS under the JV Facility to Deutsche Bank AG, New York Branch, (“DB”) and

increased the total loan commitments to $200 million.

The JV Facility bears interest at a rate of LIBOR (with no minimum + 2.75% per

On March 29, 2019, the JV Facility reinvestment period was extended to June 28, 2019 from March 30, 2019.

On June 28, 2019, the JV Facility reinvestment period was extended to October 28, 2019.

On October 28, 2019, the JV Facility

reinvestment period was further extended from October 28, 2019 to March 31, 2020, the maturity date was extended to March 31, 2023 and

the interest rate was modified from bearing an interest rate of LIBOR (with no minimum) + 2.50% per annum to LIBOR (with no minimum)

+ 2.75% per annum.

Company has determined that MCC JV is an investment company under ASC 946, however in accordance with such guidance, the Company will

generally not consolidate its investment in a company other than a wholly owned investment company subsidiary or a controlled operating

company whose business consists of providing services to the Company.

Accordingly, the Company does not consolidate its interest in MCC

October 8, 2020, the Company, GALIC, MCC JV, and an affiliate of Golub entered into a Membership Interest Purchase Agreement pursuant

to which a fund affiliated with and managed by Golub concurrently purchased all of the Company’s interest in the MCC JV and all

of GALIC’s interest in the MCC JV for a pre-adjusted gross purchase price of $156.4 million and an adjusted gross purchase price

(which constitutes the aggregate consideration for the membership interests) of $145.3 million (giving effect to adjustments primarily

for principal and interest payments from portfolio companies of MCC JV from July 1, 2020 through October 7, 2020), resulting in net proceeds

(before transaction expenses) of $41.0 million and $6.6 million for MCC and GALIC, respectively, on the terms and subject to the conditions

set forth in the Membership Interest Purchase Agreement, including the representations, warranties, covenants and indemnities contained

In connection with the closing of the transaction on October 8, 2020, MCC JV repaid in full all outstanding borrowings under,

and terminated, its senior secured revolving credit facility, dated as of August 4, 2015, as amended, administered by Deutsche Bank AG,

New York Branch.

On June 28, 2019, the

JV Facility reinvestment period was extended to October 28, 2019.

On October 28, 2019, the JV Facility reinvestment period was further

extended from October 28, 2019 to March 31, 2020, the maturity date was extended to March 31, 2023 and the interest rate was modified

from bearing an interest rate of LIBOR (with no minimum) + 2.50% per annum to LIBOR (with no minimum) + 2.75% per annum.

The Company has determined that MCC JV is an

investment company under ASC 946, however in accordance with such guidance, the Company will generally not consolidate its investment

in a company other than a wholly owned investment company subsidiary or a controlled operating company whose business consists of providing

services to the Company.

Accordingly, the Company does not consolidate its interest in MCC JV.

On October 8, 2020, the Company, GALIC, MCC JV,

and an affiliate of Golub entered into a Membership Interest Purchase Agreement pursuant to which a fund affiliated with and managed

by Golub concurrently purchased all of the Company’s interest in the MCC JV and all of GALIC’s interest in the MCC JV for

a pre-adjusted gross purchase price of $156.4 million and an adjusted gross purchase price (which constitutes the aggregate consideration

for the membership interests) of $145.3 million (giving effect to adjustments primarily for principal and interest payments from portfolio

companies of MCC JV from July 1, 2020 through October 7, 2020), resulting in net proceeds (before transaction expenses) of $41.0 million

and $6.6 million for MCC and GALIC, respectively, on the terms and subject to the conditions set forth in the Membership Interest Purchase

Agreement, including the representations, warranties, covenants and indemnities contained therein.

In connection with the closing of

the transaction on October 8, 2020, MCC JV repaid in full all outstanding borrowings under, and terminated, its senior secured revolving

credit facility, dated as of August 4, 2015, as amended, administered by Deutsche Bank AG, New York Branch.

Distributions

have elected, and intend to qualify annually, to be treated for U.S.

We have elected, and intend to qualify annually,

to be treated for U.S.

federal income tax purposes as a RIC under Subchapter M of the Code.

As a RIC, in any taxable year with respect to which we timely distribute at least 90 percent of the sum of our (i) investment company

taxable income (which is generally our net ordinary income plus the excess of realized net short-term capital gains over realized net

long-term capital losses) determined without regard to the deduction for dividends paid and (ii) net tax exempt interest income (which

is the excess of our gross tax exempt interest income over certain disallowed deductions), we (but not our stockholders) generally will

not be subject to U.S.

federal income tax on investment company taxable income and net capital gains that we distribute to our stockholders.

We intend to distribute annually all or substantially all of such income, but we may also elect to periodically spill over certain excess

undistributed taxable income from one tax year to the next tax year.

To the extent that we retain our net capital gains or any investment

company taxable income, we will be subject to U.S.

As a RIC, in any taxable year with respect

to which we timely distribute at least 90 percent of the sum of our (i) investment company taxable income (which is generally our net

ordinary income plus the excess of realized net short-term capital gains over realized net long-term capital losses) determined without

regard to the deduction for dividends paid and (ii) net tax exempt interest income (which is the excess of our gross tax exempt interest

income over certain disallowed deductions), we (but not our stockholders) generally will not be subject to U.S.

federal income tax on

investment company taxable income and net capital gains that we distribute to our stockholders.

We intend to distribute annually all

or substantially all of such income, but we may also elect to periodically spill over certain excess undistributed taxable income from

one tax year to the next tax year.

To the extent that we retain our net capital gains or any investment company taxable income, we will

be subject to U.S.

federal income tax.

We may choose to retain our net capital gains or any investment

company taxable income, and pay the associated federal corporate income tax or excise tax, described below.

not distributed on a timely basis in accordance with a calendar year distribution requirement are subject to a nondeductible 4% U.S.

We may choose to retain our net capital gains or any investment company taxable income, and pay

the associated federal corporate income tax or excise tax, described below.

Amounts not distributed on a timely basis in

accordance with a calendar year distribution requirement are subject to a nondeductible 4% U.S.

federal excise tax payable by us.

To avoid this tax, we must distribute (or be deemed to have distributed) during each calendar year

an amount equal to the sum of:

least 98.0% of our ordinary income (not taking into account any capital gains or losses)

for the calendar year;

least 98.2% of the amount by which our capital gains exceed our capital losses (adjusted

for certain ordinary losses) for a one-year period ending on October 31st of the calendar

realized, but not distributed, in preceding years and on which we did not pay federal income

we intend to distribute any income and capital gains in the manner necessary to minimize imposition of the 4% U.S.

federal excise tax,

sufficient amounts of our taxable income and capital gains may not be distributed to avoid entirely the imposition of the tax.

event, we will be liable for the tax only on the amount by which we do not meet the foregoing distribution requirement.

intend to pay quarterly dividends to our stockholders out of assets legally available for distribution.

We cannot assure you that we

will achieve investment results that will allow us to pay a specified level of dividends or year-to-year increases in dividends.

the inability to satisfy the asset coverage test applicable to us as a BDC could limit our ability to pay dividends.

All dividends will

be paid at the discretion of our board of directors and will depend on our earnings, our financial condition, maintenance of our RIC

tax treatment, compliance with applicable BDC regulations and such other factors as our board of directors may deem relevant from time

We cannot assure you that we will pay dividends to our stockholders in the future.

the extent our taxable earnings fall below the total amount of our distributions for a taxable year, a portion of those distributions

may be deemed a return of capital to our stockholders for U.S.

avoid this tax, we must distribute (or be deemed to have distributed) during each calendar year an amount equal to the sum of:

at least 98.0% of our ordinary income (not taking

into account any capital gains or losses) for the calendar year;

at least 98.2% of the amount by which our capital

gains exceed our capital losses (adjusted for certain ordinary losses) for a one-year period ending on October 31st of the calendar

income realized, but not distributed, in preceding

years and on which we did not pay federal income tax.

While we intend to distribute any income and

capital gains in the manner necessary to minimize imposition of the 4% U.S.

federal excise tax, sufficient amounts of our taxable income

and capital gains may not be distributed to avoid entirely the imposition of the tax.

In that event, we will be liable for the tax only

on the amount by which we do not meet the foregoing distribution requirement.

We intend to pay quarterly dividends to our stockholders

out of assets legally available for distribution.

We cannot assure you that we will achieve investment results that will allow us to

pay a specified level of dividends or year-to-year increases in dividends.

In addition, the inability to satisfy the asset coverage test

applicable to us as a BDC could limit our ability to pay dividends.

All dividends will be paid at the discretion of our board of directors

and will depend on our earnings, our financial condition, maintenance of our RIC tax treatment, compliance with applicable BDC regulations

and such other factors as our board of directors may deem relevant from time to time.

We cannot assure you that we will pay dividends

to our stockholders in the future.

To the extent our taxable earnings fall below

the total amount of our distributions for a taxable year, a portion of those distributions may be deemed a return of capital to our stockholders

federal income tax purposes.

should read any written disclosure accompanying a distribution carefully and should not assume that the source of any distribution is

our ordinary income or gains.

have adopted an “opt out”

dividend reinvestment plan for our common stockholders.

As a result, if we declare a cash dividend

or other distribution, each stockholder that has not “opted out”

of our dividend reinvestment plan will have their dividends

automatically reinvested in additional shares of our common stock rather than receiving cash dividends.

Stockholders who receive distributions

in the form of shares of common stock will be subject to the same federal, state and local tax consequences as if they received cash

distributions.

were no dividend distributions during the year ended September 30, 2021.

Party Transactions

with the pricing of our IPO, we entered into a number of business relationships with affiliated or related parties, including the following:

into the Investment Management Agreement with MCC Advisors on January 11, 2011, which expired December 31, 2020.

Chairman and Chief Executive Officer through December 31, 2020 and director through January 21, 2021 and Mr.

Seth Taube, director

through January 21, 2021, are both affiliated with MCC Advisors and Medley.

December 31, 2020, MCC Advisors provided us with the office facilities and administrative

services necessary to conduct day-to-day operations pursuant to our administration agreement.

We reimbursed MCC Advisors for the allocable portion (subject to the review and approval

of our board of directors) of overhead and other expenses incurred by it in performing its

obligations under the administration agreement, including rent, the fees and expenses associated

with performing compliance functions, and our allocable portion of the cost of our Chief

Financial Officer and Chief Compliance Officer and their respective staffs.

June 12, 2020, the Company entered into the Expense Support Agreement with MCC Advisors and Medley LLC, pursuant to which MCC Advisors

and Medley LLC agreed (jointly and severally) to cap the management fee and all of the Company’s other operating expenses (except

interest expenses, certain extraordinary strategic transaction and expenses, and other expenses approved by the Special Committee) at

$667,000 per month (the “Cap”).

Under the Expense Support Agreement, the Cap became effective on June 1, 2020 and was to

expire on September 30, 2020.

On September 29, 2020, the board of directors, including all of the independent directors, extended the

term of the Expense Support Agreement through the end of quarter ending December 31, 2020.

The Expense Support Agreement expired by its

terms at the close of business on December 31, 2020, in connection with the adoption of the internalized management structure by the

board of directors.

Stockholders should read any written disclosure

accompanying a distribution carefully and should not assume that the source of any distribution is our ordinary income or gains.

We have adopted an “opt out”

reinvestment plan for our common stockholders.

As a result, if we declare a cash dividend or other distribution, each stockholder that

has not “opted out”

of our dividend reinvestment plan will have their dividends automatically reinvested in additional shares

of our common stock rather than receiving cash dividends.

Stockholders who receive distributions in the form of shares of common stock

will be subject to the same federal, state and local tax consequences as if they received cash distributions.

There were no regular dividend distribution payments made during the

year ended September 30, 2022.

A special dividend was declared in the amount of $265,798 on June 24, 2022 payable on July 13, 2022 to

Stockholders of record on July 5, 2022.

Related Party Transactions

Concurrent with the pricing of our IPO, we entered

into a number of business relationships with affiliated or related parties, including the following:

We entered into the Investment Management Agreement

with MCC Advisors on January 11, 2011, which expired December 31, 2020.

Brook Taube, Chairman and Chief Executive Officer through

December 31, 2020 and director through January 21, 2021 and Mr.

Seth Taube, director through January 21, 2021, are both affiliated

with MCC Advisors and Medley.

Through December 31, 2020, MCC Advisors provided us

with the office facilities and administrative services necessary to conduct day-to-day operations pursuant to our administration

We reimbursed MCC Advisors for the allocable portion (subject to the review and approval of our board of directors) of

overhead and other expenses incurred by it in performing its obligations under the administration agreement, including rent, the

fees and expenses associated with performing compliance functions, and our allocable portion of the cost of our Chief Financial Officer

and Chief Compliance Officer and their respective staffs.

On June 12, 2020, the Company entered into the

Expense Support Agreement with MCC Advisors and Medley LLC, pursuant to which MCC Advisors and Medley LLC agreed (jointly and severally)

to cap the management fee and all of the Company’s other operating expenses (except interest expenses, certain extraordinary strategic

transaction and expenses, and other expenses approved by the Special Committee) at $667,000 per month (the “Cap”).

the Expense Support Agreement, the Cap became effective on June 1, 2020 and was to expire on September 30, 2020.

On September 29, 2020,

the board of directors, including all of the independent directors, extended the term of the Expense Support Agreement through the end

of quarter ending December 31, 2020.

The Expense Support Agreement expired by its terms at the close of business on December 31, 2020,

in connection with the adoption of the internalized management structure by the board of directors.

In addition, we have adopted a formal business

10 unchanged sentences

Conduct and Ethics must be considered by the disinterested directors.

Management Agreement

entered into an investment management agreement with MCC Advisors on January 11, 2011 (the “Investment Management Agreement”),

which expired December 31, 2020.

the terms of the Investment Management Agreement, MCC Advisors:

the composition of our portfolio, the nature and timing of the changes to our portfolio and

the manner of implementing such changes;

● identified,

evaluated and negotiated the structure of the investments we made (including performing due

diligence on our prospective portfolio companies);

closed, monitored and administered the investments we made, including the exercise of any

voting or consent rights.

Advisors’

services under the Investment Management Agreement were not exclusive, and it was free to furnish similar services to

other entities so long as its services to us were not impaired.

to the Investment Management Agreement, we paid MCC Advisors a fee for investment advisory and management services consisting of a base

management fee and a two-part incentive fee.

December 3, 2015, MCC Advisors recommended and, in consultation with the Board, agreed to reduce fees under the Investment Management

Beginning January 1, 2016, the base management fee was reduced to 1.50% on gross assets above $1 billion.

In addition, MCC

Advisors reduced its incentive fee from 20% on pre-incentive fee net investment income over an 8% hurdle, to 17.5% on pre-incentive fee

net investment income over a 6% hurdle.

Moreover, the revised incentive fee includes a netting mechanism and is subject to a rolling

three-year look back from January 1, 2016 forward.

Under no circumstances would the new fee structure result in higher fees to MCC Advisors

than fees under the prior investment management agreement.

following discussion of our base management fee and two-part incentive fee reflect the terms of the fee waiver agreement executed by

MCC Advisors on February 8, 2016 (the “Fee Waiver Agreement”).

The terms of the Fee Waiver Agreement were effective as of

January 1, 2016, and were a permanent reduction in the base management fee and incentive fee on net investment income payable to MCC

Advisors for the investment advisory and management services it provided under the Investment Management Agreement.

The Fee Waiver Agreement

did not change the second component of the incentive fee, which was the incentive fee on capital gains.

January 15, 2020, the Company’s board of directors, including all of the independent directors, approved the renewal of the Investment

Management Agreement through the later of April 1, 2020 or so long as the Amended and Restated Agreement and Plan of Merger, dated as

of July 29, 2019 (the “Amended MCC Merger Agreement”), by and between the Company and Sierra (the “Amended MCC Merger

Agreement”) was in effect, but no longer than a year;

provided that, if the Amended MCC Merger Agreement is terminated by Sierra,

then the termination of the Investment Management Agreement would be effective on the 30th day following receipt of Sierra’s notice

of termination to the Company.

On May 1, 2020, the Company received a notice of termination of the Amended MCC Merger Agreement from

Under the Amended MCC Merger Agreement, either party was permitted, subject to certain conditions, to terminate the Amended MCC

Merger Agreement if the merger was not consummated by March 31, 2020.

Investment Management Agreement

We entered into an investment management agreement

with MCC Advisors on January 11, 2011 (the “Investment Management Agreement”), which expired December 31, 2020.

Under the terms of the Investment Management

Agreement, MCC Advisors:

determined the composition of our portfolio, the nature

and timing of the changes to our portfolio and the manner of implementing such changes;

identified, evaluated and negotiated the structure

of the investments we made (including performing due diligence on our prospective portfolio companies);

executed, closed, monitored and administered the investments

we made, including the exercise of any voting or consent rights.

MCC Advisors’

services under the Investment

Management Agreement were not exclusive, and it was free to furnish similar services to other entities so long as its services to us

were not impaired.

Pursuant to the Investment Management Agreement,

we paid MCC Advisors a fee for investment advisory and management services consisting of a base management fee and a two-part incentive

On December 3, 2015, MCC Advisors recommended

and, in consultation with the Board, agreed to reduce fees under the Investment Management Agreement.

Beginning January 1, 2016, the

base management fee was reduced to 1.50% on gross assets above $1 billion.

In addition, MCC Advisors reduced its incentive fee from 20%

on pre-incentive fee net investment income over an 8% hurdle, to 17.5% on pre-incentive fee net investment income over a 6% hurdle.

the revised incentive fee includes a netting mechanism and is subject to a rolling three-year look back from January 1, 2016 forward.

Under no circumstances would the new fee structure result in higher fees to MCC Advisors than fees under the prior investment management

The following discussion of our base management

fee and two-part incentive fee reflect the terms of the fee waiver agreement executed by MCC Advisors on February 8, 2016 (the “Fee

Waiver Agreement”).

The terms of the Fee Waiver Agreement were effective as of January 1, 2016, and were a permanent reduction

in the base management fee and incentive fee on net investment income payable to MCC Advisors for the investment advisory and management

services it provided under the Investment Management Agreement.

The Fee Waiver Agreement did not change the second component of the incentive

fee, which was the incentive fee on capital gains.

On January 15, 2020, the Company’s board

of directors, including all of the independent directors, approved the renewal of the Investment Management Agreement through the later

of April 1, 2020 or so long as the Amended and Restated Agreement and Plan of Merger, dated as of July 29, 2019 (the “Amended MCC

Merger Agreement”), by and between the Company and Sierra (the “Amended MCC Merger Agreement”) was in effect, but no

longer than a year;

provided that, if the Amended MCC Merger Agreement is terminated by Sierra, then the termination of the Investment

Management Agreement would be effective on the 30th day following receipt of Sierra’s notice of termination to the Company.

May 1, 2020, the Company received a notice of termination of the Amended MCC Merger Agreement from Sierra.

Under the Amended MCC Merger

Agreement, either party was permitted, subject to certain conditions, to terminate the Amended MCC Merger Agreement if the merger was

not consummated by March 31, 2020.

Sierra elected to do so on May 1, 2020.

As result of the termination

by Sierra of the Amended MCC Merger Agreement on May 1, 2020, the Investment Management Agreement would have been terminated effective

as of May 31, 2020.

On May 21, 2020, the Board, including all of the independent directors, extended the term of the Investment Management

Agreement through the end of the then-current quarter, June 30, 2020.

On June 12, 2020, the Board, including all of the independent directors,

extended the term of the Investment Management Agreement through September 30, 2020.

On September 29, the Board, including all of the

independent directors, extended the term of the Investment Management Agreement through December 31, 2020.

Brook Taube, Chairman

and Chief Executive Officer through December 31, 2020 and director through January 21, 2021 and Mr.

Seth Taube, director through January

21, 2021 are affiliated with MCC Advisors and Medley.

November 18, 2020, the Board approved the adoption of an internalized management structure effective January 1, 2021.

The new management

structure replaces the current Investment Management and Administration Agreements with MCC Advisors LLC, which expired on December 31,

To lead the internalized management team, the Board approved the appointment of David Lorber, who has served as an independent

director of the Company since April 2019, as interim Chief Executive Officer, and Ellida McMillan as Chief Financial Officer of the Company,

each effective January 1, 2021.

In connection with his appointment, Mr.

Lorber stepped down from the Compensation Committee of the Board,

the Nominating and Corporate Governance Committee of the Board, and the Special Committee of the Board.

Management Fee

December 31, 2020, for providing investment advisory and management services to us, MCC Advisors received a base management fee.

base management fee was calculated at an annual rate of 1.75% (0.4375% per quarter) of up to $1.0 billion of the Company’s gross

assets and 1.50% (0.375% per quarter) of any amounts over $1.0 billion of the Company’s gross assets and was payable quarterly

The base management fee was to be calculated based on the average value of the Company’s gross assets at the end of

the two most recently completed calendar quarters and was to be appropriately pro-rated for any partial quarter.

December 31, 2020, the incentive fee had two components, as follows:

Fee Based on Income

first component of the incentive fee was payable quarterly in arrears and was based on our pre-incentive fee net investment income earned

during the calendar quarter for which the incentive fee was being calculated.

MCC Advisors was entitled to receive the incentive fee

on net investment income from us if our Ordinary Income (as defined below) exceeded a quarterly “hurdle rate”

hurdle amount was calculated after making appropriate adjustments to the Company’s net assets, as determined as of the beginning

of each applicable calendar quarter, in order to account for any capital raising or other capital actions as a result of any issuances

by the Company of its common stock (including issuances pursuant to our dividend reinvestment plan), any repurchase by the Company of

its own common stock, and any dividends paid by the Company, each as may have occurred during the relevant quarter.

second component of the incentive fee was determined and payable in arrears as of the end of each calendar year (or upon termination

of the Investment Management Agreement as of the termination date) and equaled 20.0% of our cumulative aggregate realized capital gains

less cumulative realized capital losses, unrealized capital depreciation (unrealized depreciation on a gross investment-by-investment

basis at the end of each calendar year) and all capital gains upon which prior performance-based capital gains incentive fee payments

were previously made to the investment adviser.

Accounting Policies

preparation of financial statements and related disclosures in conformity with U.S.

generally accepted accounting principles requires

management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets

and liabilities at the date of the financial statements, and revenues and expenses during the periods reported.

Actual results could

materially differ from those estimates.

We have identified the following items as critical accounting policies.

of Portfolio Investments

The Company follows ASC 820 for measuring the fair value of portfolio

Fair value is the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction

between market participants at the measurement date.

Where available, fair value is based on observable market prices or parameters,

or derived from such prices or parameters.

Where observable prices or inputs are not available, valuation models are applied.

These valuation

models involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments

or market and the instruments’

The Company’s fair value analysis includes an analysis of the value of any unfunded

loan commitments.

Financial investments recorded at fair value in the consolidated financial statements are categorized for disclosure

purposes based upon the level of judgment associated with the inputs used to measure their value.

The valuation hierarchical levels are

based upon the transparency of the inputs to the valuation of the investment as of the measurement date.

Investments which are valued

using NAV as a practical expedient are excluded from this hierarchy, and certain prior period amounts have been reclassified to conform

to the current period presentation.

As result of the termination by Sierra of the Amended MCC

Merger Agreement on May 1, 2020, the Investment Management Agreement would have been terminated effective as of May 31, 2020.

21, 2020, the Board, including all of the independent directors, extended the term of the Investment Management Agreement through the

end of the then-current quarter, June 30, 2020.

On June 12, 2020, the Board, including all of the independent directors, extended the

term of the Investment Management Agreement through September 30, 2020.

On September 29, 2020, the Board, including all of the independent

directors, extended the term of the Investment Management Agreement through December 31, 2020.

Brook Taube, Chairman and Chief Executive

Officer through December 31, 2020 and director through January 21, 2021 and Mr.

Seth Taube, director through January 21, 2021 are affiliated

with MCC Advisors and Medley.

On November 18, 2020, the Board approved the

adoption of an internalized management structure effective January 1, 2021.

The new management structure replaces the current Investment

Management and Administration Agreements with MCC Advisors LLC, which expired on December 31, 2020.

To lead the internalized management

team, the Board approved the appointment of David Lorber, who had served as an independent director of the Company since April 2019,

as Chief Executive Officer, and Ellida McMillan as Chief Financial Officer of the Company, each effective January 1, 2021.

In connection

with his appointment, Mr.

Lorber stepped down from the Compensation Committee of the Board, the Nominating and Corporate Governance Committee

of the Board, and the Special Committee of the Board.

Base Management Fee

Through December 31, 2020, for providing investment

advisory and management services to us, MCC Advisors received a base management fee.

The base management fee was calculated at an annual

rate of 1.75% (0.4375% per quarter) of up to $1.0 billion of the Company’s gross assets and 1.50% (0.375% per quarter) of any amounts

over $1.0 billion of the Company’s gross assets and was payable quarterly in arrears.

The base management fee was to be calculated

based on the average value of the Company’s gross assets at the end of the two most recently completed calendar quarters and was

to be appropriately pro-rated for any partial quarter.

Incentive Fee

Through December 31, 2020, the incentive fee

had two components, as follows:

Incentive Fee Based on Income

The first component of the incentive fee was

payable quarterly in arrears and was based on our pre-incentive fee net investment income earned during the calendar quarter for which

the incentive fee was being calculated.

MCC Advisors was entitled to receive the incentive fee on net investment income from us if our

Ordinary Income (as defined below) exceeded a quarterly “hurdle rate”

The hurdle amount was calculated after making

appropriate adjustments to the Company’s net assets, as determined as of the beginning of each applicable calendar quarter, in

order to account for any capital raising or other capital actions as a result of any issuances by the Company of its common stock (including

issuances pursuant to our dividend reinvestment plan), any repurchase by the Company of its own common stock, and any dividends paid

by the Company, each as may have occurred during the relevant quarter.

The second component of the incentive fee was

determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Management Agreement as

of the termination date) and equaled 20.0% of our cumulative aggregate realized capital gains less cumulative realized capital losses,

unrealized capital depreciation (unrealized depreciation on a gross investment-by-investment basis at the end of each calendar year)

and all capital gains upon which prior performance-based capital gains incentive fee payments were previously made to the investment

Critical Accounting Policies

The preparation of financial statements and related

disclosures in conformity with U.S.

generally accepted accounting principles requires management to make estimates and assumptions that

affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements,

and revenues and expenses during the periods reported.

Actual results could materially differ from those estimates.

We have identified

the following items as critical accounting policies.

Valuation of Portfolio Investments

The Company follows ASC 820 for measuring the

fair value of portfolio investments.

Fair value is the price that would be received in the sale of an asset or paid to transfer a liability

in an orderly transaction between market participants at the measurement date.

Where available, fair value is based on observable market

prices or parameters, or derived from such prices or parameters.

Where observable prices or inputs are not available, valuation models

These valuation models involve some level of management estimation and judgment, the degree of which is dependent on the

price transparency for the instruments or market and the instruments’

The Company’s fair value analysis includes

an analysis of the value of any unfunded loan commitments.

Financial investments recorded at fair value in the consolidated financial

statements are categorized for disclosure purposes based upon the level of judgment associated with the inputs used to measure their

The valuation hierarchical levels are based upon the transparency of the inputs to the valuation of the investment as of the measurement

Investments which are valued using NAV as a practical expedient are excluded from this hierarchy, and certain prior period amounts

have been reclassified to conform to the current period presentation.

The three levels are defined below:

Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2 - Valuations based on inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable at the measurement date.

This category includes quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in non-active markets including actionable bids from third parties for privately held assets or liabilities, and observable inputs other than quoted prices such as yield curves and forward currency rates that are entered directly into valuation models to determine the value of derivatives or other assets or liabilities.

Level 3 - Valuations based on inputs that are unobservable and where there is little, if any, market activity at the measurement date.

The inputs for the determination of fair value may require significant management judgment or estimation and are based upon management’s assessment of the assumptions that market participants would use in pricing the assets or liabilities.

These investments include debt and equity investments in private companies or assets valued using the Market or Income Approach and may involve pricing models whose inputs require significant judgment or estimation because of the absence of any meaningful current market data for identical or similar investments.

The inputs in these valuations may include, but are not limited to, capitalization and discount rates, beta and EBITDA multiples.

The information may also include pricing information or broker quotes which include a disclaimer that the broker would not be held to such a price in an actual transaction.

The non-binding nature of consensus pricing and/or quotes accompanied by disclaimer would result in classification as Level 3 information, assuming no additional corroborating evidence.

value investments for which market quotations are readily available at their market quotations, which are generally obtained from an

independent pricing service or multiple broker-dealers or market makers.

We weight the use of third-party broker quotes, if any, in determining

fair value based on our understanding of the level of actual transactions used by the broker to develop the quote and whether the quote

was an indicative price or binding offer.

However, a readily available market value is not expected to exist for many of the investments

in our portfolio, and we value these portfolio investments at fair value as determined in good faith by our board of directors under

our valuation policy and process.

We may seek pricing information with respect to certain of our investments from pricing services or

brokers or dealers in order to value such investments.

methods may include comparisons of financial ratios of the portfolio companies that issued such private equity securities to peer companies

that are public, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings

and discounted cash flows, the markets in which the portfolio company does business, and other relevant factors.

When an external event

such as a purchase transaction, public offering or subsequent equity sale occurs, we will consider the pricing indicated by the external

event to corroborate the private equity valuation.

Due to the inherent uncertainty of determining the fair value of investments that

do not have a readily available market value, the fair value of the investments may differ significantly from the values that would have

been used had a readily available market value existed for such investments, and the differences could be material.

board of directors is ultimately and solely responsible for determining the fair value of the investments in our portfolio that are not

publicly traded, whose market prices are not readily available on a quarterly basis or any other situation where portfolio investments

require a fair value determination.

respect to investments for which market quotations are not readily available, our board of directors undertake a multi-step valuation

process each quarter, as described below:

quarterly valuation process generally begins with each investment being initially valued by a Valuation Firm.

● Preliminary

valuation conclusions will then be documented and discussed with senior management.

audit committee of the board of directors reviews the preliminary valuations with management

and the Valuation Firms.

board of directors discusses the valuations and determines the fair value of each investment

in the Company’s portfolio in good faith based on the input of management, the respective

Valuation Firms and the audit committee.

following these approaches, the types of factors that are taken into account in fair value pricing investments include available current

market data, including relevant and applicable market trading and transaction comparables;

Level 1 - Valuations based on quoted prices in active

markets for identical assets or liabilities at the measurement date.

Level 2 - Valuations based on inputs other than quoted

prices in active markets included in Level 1, which are either directly or indirectly observable at the measurement date.

This category

includes quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities

in non-active markets including actionable bids from third parties for privately held assets or liabilities, and observable inputs

other than quoted prices such as yield curves and forward currency rates that are entered directly into valuation models to determine

the value of derivatives or other assets or liabilities.

Level 3 - Valuations based on inputs that are unobservable

and where there is little, if any, market activity at the measurement date.

The inputs for the determination of fair value may require

significant management judgment or estimation and are based upon management’s assessment of the assumptions that market participants

would use in pricing the assets or liabilities.

These investments include debt and equity investments in private companies or assets

valued using the Market or Income Approach and may involve pricing models whose inputs require significant judgment or estimation

because of the absence of any meaningful current market data for identical or similar investments.

The inputs in these valuations

may include, but are not limited to, capitalization and discount rates, beta and EBITDA multiples.

The information may also include

pricing information or broker quotes which include a disclaimer that the broker would not be held to such a price in an actual transaction.

The non-binding nature of consensus pricing and/or quotes accompanied by disclaimer would result in classification as Level 3 information,

assuming no additional corroborating evidence.

We value investments for which market quotations

are readily available at their market quotations, which are generally obtained from an independent pricing service or multiple broker-dealers

or market makers.

We weight the use of third-party broker quotes, if any, in determining fair value based on our understanding of the

level of actual transactions used by the broker to develop the quote and whether the quote was an indicative price or binding offer.

However, a readily available market value is not expected to exist for many of the investments in our portfolio, and we value these portfolio

investments at fair value as determined in good faith by our board of directors under our valuation policy and process.

We may seek pricing

information with respect to certain of our investments from pricing services or brokers or dealers in order to value such investments.

Valuation methods may include comparisons of

financial ratios of the portfolio companies that issued such private equity securities to peer companies that are public, the nature

and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flows,

the markets in which the portfolio company does business, and other relevant factors.

When an external event such as a purchase transaction,

public offering or subsequent equity sale occurs, we will consider the pricing indicated by the external event to corroborate the private

equity valuation.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market

value, the fair value of the investments may differ significantly from the values that would have been used had a readily available market

value existed for such investments, and the differences could be material.

In December 2020, the SEC adopted Rule 2a-5 under the 1940 Act, which

permits a BDC’s board of directors to designate its executive officer(s) as a valuation designee to determine the fair value of

its investment portfolio, subject to the oversight of the board.

The Board has approved policies and procedures pursuant to Rule 2a-5

and has designated Ellida McMillan, the Company’s CFO, to serve as the Board’s valuation designee (“Valuation Designee”),

subject to the Board’s oversight, effective September 8, 2022.

Our board of directors is ultimately responsible

for overseeing the determinations of the fair values of the investments in our portfolio that are not publicly traded, whose market prices

are not readily available on a quarterly basis or any other situation where portfolio investments require a fair value determination.

With respect to investments for which market

quotations are not readily available, our board oversees and our Valuation Designee undertakes a multi-step valuation process each quarter,

as described below:

Our quarterly valuation process generally begins with

each investment being initially valued by a Valuation Firm.

Available third-party market data will be reviewed

by company personnel designated by the Valuation Designee (“Fair Value Personnel”) and the Valuation Firm.

Available portfolio company data and general industry

data is then reviewed by the Fair Value Personnel.

Preliminary valuation conclusions are then documented

and discussed with the Fair Value Personnel.

The Valuation Designee then determines the fair

value of each investment in the Company’s portfolio in good faith based on such discussions, the Company’s Valuation

Policy and the Valuation Firms’

final estimated valuations.

In following these approaches, the types of factors

that are taken into account in fair value pricing investments include available current market data, including relevant and applicable

market trading and transaction comparables;

applicable market yields and multiples;

security covenants;

call protection provisions;

information rights;

the nature and realizable value of any collateral;

the portfolio company’s ability to make payments;

the portfolio company’s

ability to make payments;

the portfolio company’s earnings and discounted cash flows;

the markets in which the portfolio company

does business;

comparisons of financial ratios of peer companies that are public;

earnings and discounted cash flows;

the markets in which the portfolio company does business;

comparisons of financial ratios of peer

companies that are public;

comparable merger and acquisition transactions;

the principal market and enterprise values.

Determination

of fair values involves subjective judgments and estimates made by management.

The notes to our financial statements refer to the uncertainty

with respect to the possible effect of such valuations, and any change in such valuations, on our consolidated financial statements.

revenue recognition policies are as follows:

and Related Investment Income We account for investment transactions on a trade-date basis and interest income, adjusted for amortization

of premiums and accretion of discounts, is recorded on an accrual basis.

For investments with contractual PIK interest, which represents

contractual interest accrued and added to the principal balance that generally becomes due at maturity, we will not accrue PIK interest

if the portfolio company valuation indicates that the PIK interest is not collectible.

Origination, closing and/or commitment fees associated

with investments in portfolio companies are recognized as income when the investment transaction closes.

Other fees are capitalized as

deferred revenue and recorded into income over the respective period.

Prepayment penalties received by the Company for debt instruments

paid back to the Company prior to the maturity date are recorded as income upon receipt.

Realized gains or losses on investments are

measured by the difference between the net proceeds from the disposition and the amortized cost basis of investment, without regard to

unrealized gains or losses previously recognized.

We report changes in the fair value of investments that are measured at fair value

as a component of the net change in unrealized appreciation/(depreciation) on investments in our Consolidated Statements of Operations.

We place loans on non-accrual status when principal and interest payments are past due by 90 days or more, or when there is reasonable

doubt that we will collect principal or interest.

and the principal market and enterprise values.

Determination of fair values involves subjective

judgments and estimates.

The notes to our financial statements refer to the uncertainty with respect to the possible effect of such valuations,

and any change in such valuations, on our consolidated financial statements.

Revenue Recognition

Our revenue recognition policies are as follows:

Investments and Related Investment Income

We account for investment transactions on a trade-date basis and interest income, adjusted for amortization of premiums and accretion

of discounts, is recorded on an accrual basis.

For investments with contractual PIK interest, which represents contractual interest accrued

and added to the principal balance that generally becomes due at maturity, we will not accrue PIK interest if the portfolio company valuation

indicates that the PIK interest is not collectible.

Origination, closing and/or commitment fees associated with investments in portfolio

companies are recognized as income when the investment transaction closes.

Other fees are capitalized as deferred revenue and recorded

into income over the respective period.

Prepayment penalties received by the Company for debt instruments paid back to the Company prior

to the maturity date are recorded as income upon receipt.

Realized gains or losses on investments are measured by the difference between

the net proceeds from the disposition and the amortized cost basis of investment, without regard to unrealized gains or losses previously

We report changes in the fair value of investments that are measured at fair value as a component of the net change in unrealized

appreciation/(depreciation) on investments in our Consolidated Statements of Operations.

Non-accrual We place loans on non-accrual

status when principal and interest payments are past due by 90 days or more, or when there is reasonable doubt that we will collect principal

Accrued interest is generally reversed when a loan is placed on non-accrual.

payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment.

Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in our management’s judgment,

are likely to remain current.

At September 30, 2021, certain investments in 9 portfolio companies held by the Company were on non-accrual

status with a combined fair value of approximately $13.9 million, or 9.2% of the fair value of our portfolio.

At September 30, 2020,

certain investments in eight portfolio companies held by the Company were on non-accrual status with a combined fair value of approximately

$21.7 million, or 8.8% of the fair value of our portfolio.

At September 30, 2019, certain investments in seven portfolio companies held

by the Company were on non-accrual status with a combined fair value of approximately $22.3 million, or 5.6% of the fair value of our

Company has elected, and intends to qualify annually, to be treated for U.S.

federal income tax purposes as a RIC under Subchapter M

of the Code and it intends to operate in a manner so as to maintain its RIC tax treatment.

To do so, among other things, the Company

is required to meet certain source of income and asset diversification requirements and must timely distribute to its stockholders at

least 90% of the sum of investment company taxable income (“ICTI”) including PIK, as defined by the Code, and net tax exempt

interest income (which is the excess of our gross tax exempt interest income over certain disallowed deductions) for each taxable year.

Interest payments received on non-accrual loans

may be recognized as income or applied to principal depending upon management’s judgment.

Non-accrual loans are restored to accrual

status when past due principal and interest is paid and, in our management’s judgment, are likely to remain current.

30, 2022, certain investments in five portfolio companies held by the Company were on non-accrual status with a combined fair value of

approximately $5.2 million, or 2.7% of the fair value of our portfolio.

At September 30, 2021, certain investments in 9 portfolio companies

held by the Company were on non-accrual status with a combined fair value of approximately $13.9 million, or 9.2% of the fair value of

our portfolio.

At September 30, 2020, certain investments in eight portfolio companies held by the Company were on non-accrual status

with a combined fair value of approximately $21.7 million, or 8.8% of the fair value of our portfolio.

Federal Income Taxes

The Company has elected, and intends to qualify

annually, to be treated for U.S.

federal income tax purposes as a RIC under Subchapter M of the Code and it intends to operate in a manner

so as to maintain its RIC tax treatment.

To do so, among other things, the Company is required to meet certain source of income and asset

diversification requirements and must timely distribute to its stockholders at least 90% of the sum of investment company taxable income

(“ICTI”) including PIK, as defined by the Code, and net tax exempt interest income (which is the excess of our gross tax

exempt interest income over certain disallowed deductions) for each taxable year.

The Company will be subject to a nondeductible U.S.

federal excise tax of 4% on undistributed income if it does not distribute at least

98% of its net ordinary income for any calendar year and 98.2% of its capital gain net income for each one-year period ending on October

31 of such calendar year and any income realized, but not distributed, in preceding years and on which it did not pay federal income

Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward ICTI in excess of current year dividend

distributions into the next tax year and pay a 4% excise tax on such income, as required.

To the extent that the Company determines that

its estimated current year annual taxable income will be in excess of estimated current year dividend distributions for excise tax purposes,

the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned.

Any such carryover ICTI must

be distributed before the end of that next tax year through a dividend declared prior to filing the final tax return related to the year

which generated such ICTI.

federal income tax requirements differ from GAAP, distributions in accordance with tax requirements may differ from net investment income

and realized gains recognized for financial reporting purposes.

federal excise tax of 4% on undistributed income if it does not distribute at least 98% of its net ordinary income for any calendar year

and 98.2% of its capital gain net income for each one-year period ending on October 31 of such calendar year and any income realized,

but not distributed, in preceding years and on which it did not pay federal income tax.

Depending on the level of ICTI earned in a tax

year, the Company may choose to carry forward ICTI in excess of current year dividend distributions into the next tax year and pay a

4% excise tax on such income, as required.

To the extent that the Company determines that its estimated current year annual taxable income

will be in excess of estimated current year dividend distributions for excise tax purposes, the Company accrues excise tax, if any, on

estimated excess taxable income as taxable income is earned.

Any such carryover ICTI must be distributed before the end of that next

tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI.

Because federal income tax requirements differ

from GAAP, distributions in accordance with tax requirements may differ from net investment income and realized gains recognized for

financial reporting purposes.

Differences may be permanent or temporary.

Permanent differences are

reclassified among capital accounts in the consolidated financial statements to reflect their tax character.

Temporary differences arise

when certain items of income, expense, gain or loss are recognized at some time in the future.

Differences in classification may also

result from the treatment of short-term gains as ordinary income for tax purposes.

November 9, 2021, the Company entered into an underwriting agreement, by and between the Company and Oppenheimer & Co.

Inc., as representative

of the several underwriters named in Exhibit A thereto, in connection with the issuance and sale (the “Offering”) of $57,500,000

(including the underwriters’

option to purchase up to $7,500,000 aggregate principal amount) in aggregate principal amount

of its 5.25% Notes due 2028 (the “2028 Notes”).

The Offering occurred on November 15, 2021, pursuant to the Company’s

effective shelf registration statement on Form N-2 previously filed with the SEC, as supplemented by a preliminary prospectus

supplement dated November 8, 2021, the pricing term sheet dated November 9, 2021 and a final prospectus supplement dated November 9,

Effective November 16, 2021, the 2028 Notes began trading on the NASDAQ Global Market under the trading symbol “PFXNZ.”

November 15, 2021, the Company and U.S.

Bank National Association, as trustee entered into a Fourth Supplemental Indenture to its base

Indenture, dated February 7, 2012, between the Company and the Trustee.

The Fourth Supplemental Indenture relates to the Offering of

the 2028 Notes.

November 15, 2021, the Company caused notices to be issued to the holders of the 2023 Notes regarding the Company’s exercise of

its option to redeem $55,325,000 in aggregate principal amount of the issued and outstanding 2023 Notes on December 16, 2021.

to fiscal year ended September 30, 2021, the COVID-19 pandemic continues and may further continue to have adverse consequences on the

and global economies.

The ultimate economic fallout from the pandemic, and the long-term impact on economies, markets, industries

and individual portfolio companies, remains uncertain.

The Company cannot predict the extent to which its financial condition and results

of operations will be affected.

The potential impact to our results will depend to an extent on future developments and new information

that may emerge regarding the duration and lasting severity of COVID-19.

The Company continues to observe and respond to the evolving

COVID-19 environment and its potential impact on areas across its business.

Further, the potential exists for additional variants of

COVID-19, including the Omicron variant, to impede the global economic recovery and exacerbate geographic differences in the spread of,

and response to, COVID-19.

Permanent differences are reclassified among capital accounts

in the consolidated financial statements to reflect their tax character.

Temporary differences arise when certain items of income, expense,

gain or loss are recognized at some time in the future.

Differences in classification may also result from the treatment of short-term

gains as ordinary income for tax purposes.

Recent Developments

On December 15, 2022, the Company and its wholly-owned

subsidiaries executed a three-year, $50 million revolving credit facility (the “Credit Facility”) with WoodForest Bank, N.A.

(“WoodForest”), Valley National Bank, and Axiom Bank, (collectively, the “Lenders”).

WoodForest is the administrative

agent, sole bookrunner and sole lead arranger.

The Company is set to borrow $50 million under the Credit Facility thirty days following

Outstanding loans under the Credit Facility will

bear a monthly interest rate at Term SOFR + 2.90%.

The Company is also subject to a commitment fee of 0.25%, which shall accrue on the

actual daily amount of the undrawn portion of the revolving credit.

The Credit Facility contains customary representations and warranties

and affirmative and negative covenants.

The Credit Facility contains customary events of default for credit facilities of this type, including

(without limitation):

nonpayment of principal, interest, fees or other amounts after a stated grace period;

inaccuracy of material representations

and warranties;

change of control;

violations of covenants, subject in certain cases to stated cure periods;

and certain bankruptcies

and liquidations.

If an event of default occurs and is continuing, the Company may be required to repay all amounts outstanding under

the Credit Facility.

In addition, the Company has

entered into a Pledge and Security Agreement with the Lenders pursuant to which the Company and its wholly owned subsidiaries have pledged

all their assets, including the cash and securities held in the Company’s custodial account with Computershare Trust Company, N.A.,

as collateral for any borrowings made by the Company pursuant to the Credit Agreement.

The Lenders have the typical rights and remedies

of a secured lender under the Uniform Commercial Code, including the right to foreclose on the collateral pledged by the Company.

On December 15, 2022, the Company caused notices to be issued to the

holders of its 2023 Notes (CUSIP No.

PFXNL) regarding the Company’s exercise of its option to redeem $22,521,800

in aggregate principal amount of issued and outstanding 2023 Notes, comprising all issued and outstanding 2023 Notes, at a price equal

to 100% of the principal amount of the 2023 Notes, plus accrued and unpaid interest thereon from September 30, 2022, through, but excluding,

January 17, 2023 in accordance with the terms of the indenture governing the 2023 Notes.

The Company expects the redemption to be completed

on January 17, 2023.

The Company intends to fund the redemption of the 2023 Notes with loans obtained under the Credit Facility, as described

earlier in this section.

This Form 10-K does not constitute a notice of redemption of the 2023 Notes.

A copy of the notice of redemption

is attached to this Form 10-K as Exhibit 99.1 and is incorporated herein by reference.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity