What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2023-12-22 compared with 2022-12-16 · 1537 added, 1964 removed, 509 unchanged (87% of the section changed)

Quantitative and Qualitative Disclosures About Market

We are subject to financial market risks,

including changes in interest rates.

Changes in interest rates may affect both our cost of funding and our interest income from

portfolio investments and cash and cash equivalents.

Our investment income will be affected by changes in various interest rates,

including LIBOR and SOFR, to the extent our debt investments include floating interest rates.

In the future, we expect other loans

in our portfolio will have floating interest rates.

Quantitative and Qualitative Disclosures About Market Risk

are subject to financial market risks, including changes in interest rates.

Changes in interest rates may affect both our cost of funding

and our interest income from portfolio investments and cash and cash equivalents.

Our investment income will be affected by changes in

various interest rates, including SOFR, to the extent our debt investments include floating interest rates.

In the future, we expect

other loans in our portfolio will have floating interest rates.

In 2023, the Federal Reserve raised short-term interest rates and has

indicated additional interest rate increases may come.

In addition, U.S.

and global capital markets and credit markets have experienced

a higher level of stress due to the global COVID-19 pandemic, which has resulted in an increase in the level of volatility across

such markets.

We may hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and

forward contracts subject to the requirements of the 1940 Act.

For the year ended September 30, 2022, we did not engage in hedging

As of September 30, 2022, 60.2% of our

income-bearing investment portfolio bore interest based on floating rates based upon fair value.

A prolonged reduction in interest

rates will reduce our gross investment income and could result in a decrease in our net investment income if such decreases in

LIBOR, SOFR or similar reference rates are not offset by a corresponding increase in the spread over LIBOR, SOFR or similar

reference rates that we earn on any portfolio investments, a decrease in our operating expenses, including with respect to any

income incentive fee, or a decrease in the interest rate of our floating interest rate liabilities tied to LIBOR, SOFR or similar

reference rates.

In contrast, a rise in the general level of interest rates can be expected to lead to higher interest rates

applicable to any variable rate investments we hold and to declines in the value of any fixed rate investments we hold.

a rise in interest rates may increase the likelihood that a portfolio company defaults on a loan.

However, many of our variable rate

investments provide for an interest rate floor, which may prevent our interest income from increasing until benchmark interest rates

increase beyond a threshold amount.

The composition of our floating rate debt investments by cash interest rate LIBOR and SOFR floor

as of September 30, 2022 was as follows (dollars in thousands):

September 30, 2022

LIBOR and SOFR Floor

% of Floating

a higher level of stress due to the higher interest rate environment, pandemics, and other market events, which has resulted in an increase

in the level of volatility across such markets.

We may hedge against interest rate fluctuations by using standard hedging instruments

such as futures, options and forward contracts subject to the requirements of the 1940 Act.

For the year ended September 30, 2023, we

did not engage in hedging activities.

As of September 30, 2023, 59.6% of our income-bearing investment portfolio

bore interest based on floating rates based upon fair value.

The substantial majority of this component of our portfolio bore interest

based on a SOFR reference rate.

Certain such investments used a LIBOR reference rate at September 30, 2023, but no such investments utilize

a LIBOR reference rate as of the date of this report.

A prolonged reduction in interest rates will reduce our gross investment income

and could result in a decrease in our net investment income if such decreases in the applicable reference rates are not offset by a corresponding

increase in the spread over the reference rates that we earn on any portfolio investments, a decrease in our operating expenses, including

with respect to any income incentive fee, or a decrease in the interest rate of our floating interest rate liabilities tied to reference

In contrast, a rise in the general level of interest rates can be expected to lead to higher interest rates applicable to any variable

rate investments we hold and to declines in the value of any fixed rate investments we hold.

In addition, a rise in interest rates may

increase the likelihood that a portfolio company defaults on a loan.

However, many of our variable rate investments provide for an interest

rate floor, which may prevent our interest income from increasing until benchmark interest rates increase beyond a threshold amount.

composition of our floating rate debt investments by cash interest rate floor as of September 30, 2023 was as follows (dollars in thousands):

and SOFR Floor

Rate Portfolio

1 unchanged sentence

3% to under 4%

Based on our Consolidated Statements of

Assets and Liabilities as of September 30, 2022, the following table (dollars in thousands) shows the approximate

increase/(decrease) in components of net assets resulting from operations of hypothetical LIBOR and SOFR base rate changes in

interest rates, assuming no changes in our investment and capital structure.

Change in Interest Rates

Interest Income (1)

Interest Expense

Net Increase/ (Decrease)

on our Consolidated Statements of Assets and Liabilities as of September 30, 2023, the following table (dollars in thousands) shows the

approximate increase/(decrease) in components of net assets resulting from operations of hypothetical reference rate changes in interest

rates, assuming no changes in our investment and capital structure.

Interest Rates

Up 300 basis points

4 unchanged sentences

Down 300 basis points

(1) Assumes no defaults or prepayments

by portfolio companies over the next twelve months.

Assumes no defaults or

prepayments by portfolio companies over the next twelve months.

Consolidated Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Consolidated Statements of Assets and Liabilities as of September 30, 2022 and 2021

Consolidated Statements of Operations for the years ended September 30, 2022, 2021 and 2020

Consolidated Statements of Changes in Net Assets for the years ended September 30, 2022, 2021 and 2020

Consolidated Statements of Cash Flows for the years ended September 30, 2022, 2021 and 2020

Consolidated Schedules of Investments as of September 30, 2022 and 2021

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting

the Shareholders and the Board of Directors of PhenixFIN Corporation

on the Financial Statements

have audited the accompanying consolidated statements of assets and liabilities of PhenixFIN Corporation (the Company), including the

consolidated schedules of investments, as of September 30, 2022 and 2021, the related consolidated statements of operations, changes

in net assets, and cash flows for each of the three years in the period ended September 30, 2022, and the related notes (collectively

referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly,

in all material respects, the financial position of the Company at September 30, 2022 and 2021, and the results of its operations, changes

in its net assets, and its cash flows for each of the three years in the period ended September 30, 2022 in conformity with U.S.

accepted accounting principles.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of the Company’s internal control over financial reporting.

part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of

expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express

no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error

or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our procedures included confirmation of investments owned as of September 30,

2022 and 2021, by correspondence with the custodians, directly with designees of the portfolio companies and debt agents, as applicable,

when replies were not received from designees of the portfolio companies and debt agents, we performed other auditing procedures.

audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the

overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated

or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial

statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter

does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the

critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosures to which it relates.

of investments using significant unobservable inputs and assumptions

of the Matter

September 30, 2022, the fair value of the Company’s investments categorized as Level

3 within the fair value hierarchy (Level 3 investments) totaled $141.2 million.

further described in Notes 2 and 4 to the Company’s consolidated financial statements, management determines the fair value

of Level 3 investments by using valuation methodologies (e.g., market or income approach) and associated techniques including, among

others, valuations of comparable public companies, recent sales of private and public comparable companies, discounted cash flows,

and/or enterprise value analysis.

These techniques require management to make judgments about the significant unobservable inputs

and assumptions including, among others, market yields, EBITDA multiples, and revenue multiples.

the fair value of the Company’s Level 3 investments is complex, as the unobservable inputs and assumptions used by the Company

require significant management judgment or estimation and have a significant effect on the fair value measurements of such investments.

Also, applying audit procedures to address the estimation uncertainty involves a high degree of auditor subjectivity.

We Addressed the Matter in Our Audit

audit procedures performed to test the fair value of the Company’s Level 3 investments

included, among others and on a sample basis, evaluating the Company’s valuation methodologies

and significant unobservable inputs and assumptions used in the valuations, as well as testing

the mathematical accuracy of the Company’s valuation models utilized to calculate the

a sample of Level 3 investments, we obtained and reviewed management’s valuation models and compared the significant portfolio

company-specific inputs used in the models to credit agreements, underlying source documents, and/or portfolio company financial

information provided to the Company by the investees, as applicable.

We assessed whether the significant unobservable inputs and

assumptions used by the Company were developed in a manner consistent with its valuation policies.

We also evaluated the appropriateness

of the inputs and assumptions used in the fair value estimates by comparing them to portfolio company financial information and/or

available market information and evaluated the appropriateness of any significant adjustments.

Additionally,

for a sample of Level 3 investments and with the assistance of our valuation specialists, we developed independent fair value estimates

to compare to the Company’s fair value measurements by using market information from third-party sources, such as market multiples

and market yields, and/or portfolio company financial information, as applicable.

searched for and evaluated information that corroborated or contradicted the Company’s significant unobservable inputs and assumptions.

We also evaluated subsequent events and transactions and considered whether they corroborated or contradicted the Company’s year-end

Ernst & Young LLP

have served as the Company’s auditor since 2010.

York, New York

TO CONSOLIDATED FINANCIAL STATEMENTS

of Independent Registered Public Accounting Firm s

Statements of Assets and Liabilities as of September 30, 2023 and 2022

Statements of Operations for the years ended September 30, 2023, 2022 and 2021

Statements of Changes in Net Assets for the years ended September 30, 2023, 2022 and 2021

Statements of Cash Flows for the years ended September 30, 2023, 2022 and 2021

Schedules of Investments as of September 30, 2023 and 2022

to Consolidated Financial Statements

of Independent Registered Public Accounting Firms

To the Shareholders and Board of Directors

PhenixFIN Corporation:

Consolidated Statements

of Assets and Liabilities

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statement of assets and

liabilities of PhenixFIN Corporation and subsidiaries (the Company), including the consolidated schedule of investments, as of September 30,

2023, the related consolidated statements of operations, changes in net assets, and cash flows for the year ended September 30, 2023,

and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present

fairly, in all material respects, the financial position of the Company as of September 30, 2023, and the results of its operations

and its cash flows for the year ended September 30, 2023, in conformity with U.S.

generally accepted accounting principles.

Basis for Opinion

These consolidated financial statements are the responsibility of the

Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required

to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations

of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements

are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform,

an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal

control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal

control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material

misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial

Such procedures also included confirmation of securities owned as of September 30, 2023, by correspondence with custodians,

portfolio companies, agents, or by other appropriate auditing procedures.

Our audit also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a

matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated

to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and

(2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter

in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit

matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Fair value of investments

As discussed in

Notes 2, 3 and 4 of the consolidated financial statements, the Company measures its investments at fair value.

The Company determines

the fair value of investments that are not publicly traded and whose market quotations are not readily available using one or more methodologies

including the market approach and income approach, which requires the Company to make subjective judgments and estimates using unobservable

As of September 30, 2023, the fair value of level 3 investments was $165.3 million.

We identified the

assessment of the fair value of level 3 investments for which unobservable inputs were used as a critical audit matter.

The key assumptions

used to estimate the fair value of these investments related to the market yield associated with the portfolio company used in an income

approach and the selection of financial performance multiples of comparative companies used in a market approach.

Evaluating these assumptions

involved a high degree of subjective auditor judgment and involvement of professionals with specialized skills and knowledge.

in these assumptions could have a significant impact on the estimated fair value of investments.

The following are the procedures we performed to address

this critical audit matter.

We evaluated the design of certain internal controls over the Company’s process to estimate the fair

value of level 3 investments, including controls related to the determination of market yield and financial performance multiples assumptions.

We evaluated the Company’s ability to estimate fair value by comparing prior period fair values for a selection of investments to

transaction prices of transactions occurring subsequent to the prior period valuation date.

We involved valuation professionals with specialized

skills and knowledge who, for a selection of the Company’s investments, evaluated the Company’s estimate of fair value by

developing an independent estimate of fair value using independent market yields and financial performance multiples that were developed

using relevant market and portfolio company financial information and comparing such estimates to the fair values recorded by the Company

for the selected investments.

We have served as the Company’s auditor since 2023.

New York, New York

December 22, 2023

To the Shareholders and the Board of Directors of PhenixFIN Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated statement of assets and

liabilities of PhenixFIN Corporation (the Company), including the consolidated schedule of investments, as of September 30, 2022, the

related consolidated statements of operations, changes in net assets, and cash flows for each of the two years in the period ended September

30, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the

consolidated financial statements present fairly, in all material respects, the financial position of the Company at September 30, 2022,

and the results of its operations, changes in its net assets, and its cash flows for each of the two years in the period ended September

30, 2022 in conformity with U.S.

generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company’s

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public

accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to

be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations

of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free

of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit

of the Company’s internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of

internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s

internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material

misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures

included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our procedures included

confirmation of investments owned as of September 30, 2022, by correspondence with the custodians, directly with designees of the portfolio

companies and debt agents, as applicable, when replies were not received from designees of the portfolio companies and debt agents, we

performed other auditing procedures.

Our audits also included evaluating the accounting principles used and significant estimates made

by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable

basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor from 2010 to 2022.

New York, New York

December 22, 2022

Statements of Assets and Liabilities

September 30,

1 unchanged sentence

Investments at fair value

Non-controlled, non-affiliated investments (amortized cost of $147,378,917 and $92,214,167, respectively)

Non-controlled, non-affiliated investments (amortized cost of $ 134,339,121

and $ 147,378,917 , respectively)

$ 125,531,031

Affiliated investments (amortized cost of $30,585,884 and $75,963,427, respectively)

$ 122,616,275

Affiliated investments (amortized cost of $ 48,223,910 and $ 30,585,884 ,

respectively)

Controlled investments (amortized cost of $ 82,437,692 and $ 85,483,093 , respectively)

1 unchanged sentence

Cash and cash equivalents

Fees receivable

Interest receivable

Prepaid share repurchase

Due from affiliates

Dividends receivable

Paydown receivable

Dividends receivable

Other receivable

Deferred financing costs

Due from affiliate

Prepaid share repurchase

Receivable for investments sold

$ 239,693,465

$ 218,874,908

Notes payable (net of debt issuance costs of $2,059,164 and $412,795, respectively)

Due to broker

Credit facility and note payable (net of debt issuance costs of $ 1,688,835 and $ 2,059,164 , respectively)

Payable for investments purchased

Accounts payable and accrued expenses

Due to affiliate

Administrator expenses payable (see Note 6)

Interest and fees payable

Deferred revenue

Other liabilities

Deferred revenue

Administrator expenses payable (see Note 6)

Total Liabilities

13 unchanged sentences

Net Asset Value Per Common Share

See accompanying notes to consolidated financial

PHENIXFIN CORPORATION

Consolidated Statements

of Operations

Years Ended September 30

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

Statements of Operations

For the Years Ended September 30,

Interest Income:

14 unchanged sentences

Salaries and benefits

Professional fees, net

General and administrative expenses

2 unchanged sentences

Administrator expenses (see Note 6)

Professional fees, net (see Note 8)

Expenses before expense support reimbursement

Expense support reimbursement (see Note 6)

Total expenses net of expense support reimbursement

Net Investment Income (Loss)

Total expenses

Net Investment Income

Realized and unrealized gains (losses) on investments

1 unchanged sentence

Non-controlled, non-affiliated investments

( 10,538,228 )

Affiliated investments

( 1,018,267 )

Controlled investments

( 10,088,405 )

Controlled investments

( 40,144,795 )

5 unchanged sentences

( 16,701,153 )

( 5,022,484 )

Affiliated investments

1 unchanged sentence

Controlled investments

(23,178,993 )

Total net change in unrealized gains (losses)

( 14,463,337 )

(10,632,403 )

Loss on extinguishment of debt (see Note 5)

4 unchanged sentences

$ ( 6,106,946 )

$ (65,813,013 )

Weighted average basic and diluted earnings per common share

Weighted average basic and diluted net investment income (loss) per common share

Weighted average common shares outstanding - basic and diluted (see Note 11)

Dividends declared per common share

See accompanying notes to

consolidated financial statements.

PHENIXFIN CORPORATION

Consolidated Statements

of Changes in Net Assets

Capital in Excess of Par Value

Total Distributable Earnings/(Loss)

Total Net Assets

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

Statements of Changes in Net Assets

Distributable

Earnings/(Loss)

Balance at September 30, 2020

7 unchanged sentences

Net change in unrealized appreciation (depreciation) on investments

Net loss on extinguishment of debt

CAPITAL SHARE TRANSACTIONS

Distributions declared

Repurchase of common shares

( 8,203,237 )

( 8,203,444 )

Net loss on extinguishment of debt

SHAREHOLDER DISTRIBUTIONS

Tax reclassification of shareholders’

equity in accordance with generally accepted accounting principles

Tax reclassification of shareholders’ equity in accordance with generally accepted accounting principles

( 24,688,262 )

Total Increase (Decrease) in Net Assets

3 unchanged sentences

$ 688,866,642

$ ( 545,175,178 )

$ 143,693,981

Net investment income (loss)

Net realized gains (losses) on investments

Net change in unrealized appreciation (depreciation) on investments

( 14,463,337 )

Net change in unrealized appreciation (depreciation) on investments

Net loss on extinguishment of debt

CAPITAL SHARE TRANSACTIONS

Distributions declared

Repurchase of common shares

SHAREHOLDER DISTRIBUTIONS

Tax reclassification of shareholders’

equity in accordance with generally accepted accounting principles

( 16,475,414 )

( 16,475,829 )

Tax reclassification of shareholders’ equity in accordance with generally accepted accounting principles

( 3,276,372 )

Total Increase (Decrease) in Net Assets

( 13,464,840 )

( 9,383,318 )

( 22,848,573 )

Balance at September 30, 2022

$ 675,401,802

$ ( 554,558,496 )

$ 120,845,408

Net investment income (loss)

Net realized gains (losses) on investments

Net change in unrealized appreciation (depreciation) on investments

( 11,533,039 )

Net change in unrealized appreciation (depreciation) on investments

Net loss on extinguishment of debt

CAPITAL SHARE TRANSACTIONS

Distributions to shareholders

Repurchase of common shares

1 unchanged sentence

( 1,058,213 )

SHAREHOLDER DISTRIBUTIONS

Tax reclassification of shareholders’

equity in accordance with generally accepted accounting principles

Total Increase (Decrease) in Net Assets

Tax reclassification of shareholders’ equity in accordance with generally accepted accounting principles

( 20,468,622 )

Total Increase (Decrease) in Net Assets

( 19,410,437 )

3 unchanged sentences

$ 146,705,535

See accompanying notes to consolidated financial

PHENIXFIN CORPORATION

Consolidated Statements

of Cash Flows

Years Ended September 30

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

Statements of Cash Flows

For the Years Ended September 30,

Cash Flows from Operating Activities:

1 unchanged sentence

$ ( 6,106,946 )

$ (65,813,013 )

Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:

Investment increases due to payment-in-kind interest

( 1,525,392 )

Net amortization of premium (discount) on investments

( 1,560,684 )

Amortization of debt issuance cost

Amortization of deferred financing cost

Net realized (gains) losses from investments

( 5,221,051 )

Net unrealized (gains) losses on investments

( 31,941,213 )

( 25,363,072 )

Proceeds from sale and settlements of investments

6 unchanged sentences

Fees receivable

( 1,753,672 )

Interest receivable

Due from affiliates

Due from affiliate

Receivable for investments sold

( 3,940,175 )

Dividends receivable

Receivable for paydowns

Paydown receivable

Other receivable

Receivable for dispositions and investments sold

Prepaid share repurchase

Increase (decrease) in operating liabilities:

Due to broker

Payable for investments purchased

( 12,426,941 )

Accounts payable and accrued expenses

4 unchanged sentences

Management and incentive fees payable, net

( 1,392,022 )

Other liabilities

1 unchanged sentence

( 20,706,050 )

( 29,298,371 )

Cash Flows from Financing Activities:

Debt issuance costs paid

Debt issuance

Paydowns on debt

4 unchanged sentences

Debt issuance costs paid

( 2,311,036 )

Deferred financing costs

Repurchase of common shares

( 1,058,213 )

Net cash provided by (used in) financing activities

( 16,964,985 )

( 8,203,444 )

Net cash provided by (used in) financing activities

( 17,366,819 )

( 82,216,269 )

Net increase (decrease) in cash and cash equivalents

4 unchanged sentences

Supplemental information:

Interest paid during the year

Supplemental non-cash information:

Non-cash purchase of investments

Non-cash sale of investments

See accompanying notes to consolidated

financial statements.

PHENIXFIN CORPORATION

Consolidated Schedule of Investments

September 30, 2022

Interest paid during the period

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

Schedule of Investments

of September 30, 2023

of Investment

Shares/Units (2)

Non-Controlled/Non-Affiliated Investments:

Secured First Lien Term Loan B (LIBOR + 4.00%, 1.00% LIBOR Floor)(14)

Packaging, LLC

Packaging & Glass

- 417 Common Units

Seotowncenter, Inc.

- 3,434,169.6 Common Units

Investment Corp.(11)

Finance, Insurance & Real Estate

- 117,310 Class C Preferred Units(13)(15)

Non-Controlled/Non-Affiliated

Altisource S.A.R.L.(11)

Senior Secured First Lien Term Loan B

(SOFR + CSA + 5.00 %, 3.75 % PIK)(20)(25)

Arcline FM Holdings, LLC

Aerospace & Defense

First Lien Term Loans

(SOFR + CSA + 4.75 %, 0.75 % Floor)(20)(25)

Be Green Packaging, LLC

Containers, Packaging & Glass

Equity - 417 Common Units(21)

Boostability Seotowncenter, Inc.

Equity - 833,152 Common Units(21)

CB&L Associates Holdco I, LLC (11)

Banking, Finance, Insurance & Real Estate

First Lien Term Loan

(SOFR + CSA+ 2.75 %, 1.00 % Floor)(14)(20)(24)

Chimera Investment Corp.(11)

Banking, Finance, Insurance & Real Estate

Equity - 117,310 Class C Preferred Units(13)(15)

Equity - 163,601 Class D Preferred Units(13)(9)

Property CTL Pass Through Trust

1 unchanged sentence

Certificates(14)

International, Inc.

Secured Second Lien Term Loan (LIBOR + 7.25%, 1.00% LIBOR Floor)

DataOnline Corp.

High Tech Industries

Senior Secured First Lien Term

Loan (LIBOR + 6.25%, 1.00% LIBOR Floor)

Credit Facility (LIBOR + 6.25%, 1.00% LIBOR Floor)

Financing, LLC

Senior Secured First Lien Term Loan

(SOFR + CSA + 5.50 %, 1.00 % Floor)(20)(25)

Revolving Credit Facility

(SOFR + CSA + 5.50 %, 1.00 % Floor)(20)(25)

Deer Management Systems LLC

Consumer Discretionary

First Lien Term Loan

(SOFR + CSA + 8.25 %, 3.00 % Floor)(8)(20)(25)

DirecTV Financing, LLC

Broadcasting & Subscription

Secured First Lien Term Loan (LIBOR + 5.00%, 0.75% LIBOR Floor)(14)

Finders Homes, LLC

Equity (8.00% PIK)

PHENIXFIN CORPORATION

Consolidated Schedule of Investments

September 30, 2022

of Investment

Shares/Units (2)

Brands Group, LLC

Secured First Lien Term Loan (SOFR + 5.00%, 1.00% SOFR Floor)

Holding Company Inc.

- 150 Common Units

BSP Realty Trust, Inc.(11)

Finance, Insurance & Real Estate

- 529,914 Common Units(13)

Accessories Group, LLC

- 3.8% Membership Interest

AJAX Corp.(11)

Finance, Insurance & Real Estate

- 254,922 Common Units(13)

Senior Secured First Lien Term Loan

(SOFR + CSA + 5.00 %, 0.75 % Floor)(14)(20)(24)

First Brands Group, LLC

Senior Secured First Lien Term Loan

(SOFR + CSA + 5.00 %, 1.00 % Floor)(20)(26)

Franklin BSP Realty Trust, Inc.(11)

Banking, Finance, Insurance & Real Estate

Equity - 226,107 Common Units(13)

Global Accessories Group, LLC

Consumer goods:

Equity - 3.8 % Membership Interest(21)

Innovate Corp.(11)

Construction & Building

8.50 % Senior Secured Notes(14)

Mortgage Capital, Inc.(11)

Finance, Insurance & Real Estate

- 205,000 Class C Preferred Units(13)(16)

Invesco Mortgage Capital, Inc.(11)

Banking, Finance, Insurance & Real Estate

Equity - 205,000 Class C Preferred Units(13)(16)

JFL-NGS-WCS Partners, LLC

Construction & Building

Senior Secured First Lien Term

Loan B (LIBOR + 5.50%, 1.00% LIBOR Floor)

- 10,000,000 Units

Science Group Corporation

Packaging & Glass

- 0.62% of Outstanding Equity

Discretionary

Secured First Lien Term Loan(LIBOR + 5.50%, 0.75% LIBOR Floor)

PHENIXFIN CORPORATION

Consolidated Schedule of Investments

September 30, 2022

Senior Secured First Lien Term Loan B

(SOFR + CSA+ 5.50 %, 1.00 % Floor)(20)(24)

Equity - 10,000,000 Units(21)

Lighting Science Group Corporation

Containers, Packaging & Glass

Warrants - 0.62 % of Outstanding Equity(21)

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

Schedule of Investments (continued)

of September 30, 2023

of Investment

Shares/Units (2)

Maritime Wireless Holdings

Hotel, Gaming & Leisure

Senior Secured First Lien Term

Loan A (SOFR + CSA + 9.00%, 1.00% SOFR + CSA Floor)(20)

Senior Secured First Lien Term

Loan B (SOFR + CSA + 9.00%, 1.00% SOFR + CSA Floor)(20)

Promissory Note

Investment Holdings, LLC (dba Colibri)

Secured First Lien Term Loan (SOFR + CSA + 5.00%, 0.75% SOFR + CSA Floor)(20)

Financial, Inc.(11)

Finance, Insurance & Real Estate

- 97,426 Class C Preferred Units(13)(19)

York Mortgage Trust, Inc.(11)

Finance, Insurance & Real Estate

- 165,000 Class E Preferred Units(13)(18)

Financial Services, Inc.(11)

Finance, Insurance & Real Estate

- 81,500 Common Units(13)

Secured First Lien Term Loan (LIBOR + 6.00% PIK)(10)

Secured First Lien Term Loan(LIBOR + 4.75, 0.50% LIBOR Floor)

Lucky Bucks, LLC

Consumer Discretionary

Equity - 180,739 Membership Units (21)

Second Out Exit Term Loan

(SOFR + CSA + 7.50 %, 1.00 % Floor)(20)(24)

First Out Exit Term Loan

(SOFR + CSA + 7.50 %, 1.00 % Floor)(20)(24)

McKissock Investment Holdings, LLC (dba Colibri)

Senior Secured First Lien Term Loan

(SOFR + CSA + 5.00 %, 0.75 % Floor)(20)(25)

MFA Financial, Inc.(11)

Banking, Finance, Insurance & Real Estate

Equity - 97,426 Class C Preferred Units(13)(19)

New York Mortgage Trust, Inc.(11)

Banking, Finance, Insurance & Real Estate

Equity - 165,000 Class E Preferred Units(13)(18)

PennyMac Financial Services, Inc.(11)

Banking, Finance, Insurance & Real Estate

Equity - 29,500 Common Units(13)

PHH Mortgage Corp.

Banking, Finance, Insurance & Real Estate

7.875 % Senior Secured Note(14)

Senior Secured First Lien Term Loan

(LIBOR + 6.00 % PIK)(10)(21)

Power Stop LLC

Senior Secured First Lien Term Loan

(SOFR + CSA + 4.75 %, 0.50 % Floor)(20)(24)

Rithm Capital Corp.(11)

Finance, Insurance & Real Estate

- 206,684 Class B Preferred Units(13)(17)

Banking, Finance, Insurance & Real Estate

Equity - 206,684 Class B Preferred Units(13)(17)

Secure Acquisition Inc.

Paragon Films)(8)

Senior Secured First Lien Term

Loan(LIBOR + 5.00%, 0.50% LIBOR Floor)

Secured First Lien Delayed Draw Term Loan (LIBOR + 5.00%, 0.50% LIBOR Floor)(12)

PHENIXFIN CORPORATION

Consolidated Schedule of Investments

September 30, 2022

of Investment

Shares/Units (2)

Drilling Company, LLC

Debt (9.00%)(10)

SS Acquisition,

LLC (dba Soccer Shots Franchising)(8)

Secured First Lien Term Loan (LIBOR + 6.50%, 1.00% LIBOR Floor)

Financial Operations, LLC

- 700,000 Class A Preferred Units

(dba Industrial Flow Solutions Holdings, LLC)

- 338,736.11 Class A Units

Lien Term Loan (LIBOR + 4.50%, 0.0% LIBOR Floor)(14)

Holdings, Inc.(11)

Secured First Lien Term Loan B (LIBOR + 8.50%, 1.00% LIBOR Floor)

(dba Paragon Films)

Senior Secured First Lien Term Loan

(SOFR + CSA + 5.00 %, 0.50 % Floor)(20)(25)

Senior Secured First Lien Delayed Draw Term Loan (SOFR + CSA + 5.00 %, 0.50 % Floor)(8)(12)(20)(25)

SS Acquisition, LLC (dba Soccer Shots Franchising)

Senior Secured First Lien Term Loan (SOFR + CSA + 6.50 %, 1.00 % Floor)(20)(24)

Senior Secured First Lien Delayed Draw Term Loan (SOFR + CSA + 6.50 %, 1.00 % Floor)(20)(24)

SMART Financial Operations, LLC

Equity - 700,000 Class A Preferred Units(21)

Stancor (dba Industrial Flow Solutions Holdings, LLC)

Equity - 338,736.11 Class A Units(21)

Staples, Inc.

First Lien Term Loan (LIBOR + 4.50 %)(14)

Capital Partners II, L.P.(11)

Finance, Insurance & Real Estate

Investment(8)(21)

Thryv Holdings, Inc.(11)

Broadcasting & Subscription

Senior Secured First Lien Term Loan (SOFR + CSA + 8.50 %, 1.00 % Floor)(14)(20)(24)

Velocity Pooling Vehicle, LLC

Equity - 5,441 Class A Units(21)

- 0.65% of Outstanding Equity

Edison Furniture Company LLC

- 13,044 Common Units

Watermill-QMC

- 1.30% Partnership Interest(9)

Holdings, Inc.

Warrants - 0.65 % of Outstanding Equity(21)

Wingman Holdings, Inc.

Aerospace & Defense

Equity - 350 Common Shares(21)

Subtotal Non-Controlled/Non-Affiliated Investments

Non-Controlled/Non-Affiliated Investments

$ 106,630,423

1 unchanged sentence

$ 125,531,031

PHENIXFIN CORPORATION

Consolidated Schedule of Investments

September 30, 2022

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

Schedule of Investments (continued)

of September 30, 2023

of Investment

Shares/Units (2)

Affiliated Investments:

1888 Industrial Services, LLC

Senior Secured First Lien Term

Loan A (LIBOR + 5.00% PIK, 1.00% LIBOR Floor)(10)

Senior Secured First Lien Term

Loan C(LIBOR + 5.00%, 1.00% LIBOR Floor)

Revolving Credit Facility (LIBOR

+ 5.00%, 1.00% LIBOR Floor)(12)

- 21,562 Class A Units

Senior Secured First Lien Term Loan A (SOFR + 5.00 % PIK, 1.00 % Floor)(10)(21)(25)

Senior Secured First Lien Term Loan C (SOFR + 5.00 %, 1.00 % Floor)(25)

Revolving Credit Facility (SOFR + 5.00 %, 1.00 % Floor)(12)(25)

Equity - 21,562 Class A Units(21)

Black Angus Steakhouses, LLC

Hotel, Gaming & Leisure

Secured First Lien Delayed Draw Term Loan (SOFR + CSA + 9.00%, 1.00% SOFR Floor)

Secured First Lien Term Loan (SOFR + CSA + 9.00% PIK, 1.00% SOFR Floor)(10)

Secured First Lien Super Priority Delayed Draw Term Loan (SOFR + CSA + 9.00%, 1.00% SOFR Floor)

Senior Secured First Lien Delayed Draw Term Loan (SOFR + CSA + 9.00 % PIK, 1.00 % Floor)(20)(24)

Senior Secured First Lien Term Loan (SOFR + CSA + 9.00 % PIK, 1.00 % Floor)(10)(20)(24)

Senior Secured First Lien Super Priority Delayed Draw Term Loan (SOFR + CSA + 9.00 % PIK, 1.00 % Floor)(20)(24)

Equity - 17.92 % Membership Interest(21)

Kemmerer Operations, LLC(8)

Metals & Mining

Senior Secured First Lien Term

Loan(15.00% PIK)

Equity - 6.78 Common Units

US Multifamily,

Finance, Insurance & Real Estate

- 33,300 Preferred Units

Subtotal Affiliated Investments

PHENIXFIN CORPORATION

Consolidated Schedule of Investments

September 30, 2022

FST Holdings Parent, LLC

High Tech Industries

Equity - 625,548 Class A Units

Maritime Wireless Holdings LLC

Hotel, Gaming & Leisure

Senior Secured First Lien Term Loan B (SOFR + CSA + 9.00 %, 1.00 % Floor)(20)(24)

Equity - 500,000 Class A Units(21)

Affiliated Investments

of Investment

Shares/Units (2)

Controlled Investments:

Kemmerer Holdings, LLC

Metals & Mining

Senior Secured First Lien Term Loan ( 15.00 % PIK)

Equity - 31 Common Units(21)

Hotel, Gaming & Leisure

Senior Secured First Lien Delayed

Draw Term Loan (LIBOR + 4.00% Cash, 1.00% LIBOR Floor)

Senior Secured First Lien Term

Loan B (LIBOR + 9.25% PIK, 1.00% LIBOR Floor)(10)

Senior Secured First Lien Term

Loan C(LIBOR + 12.00% PIK, 1.00% LIBOR Floor)(10)

- 1,000 Class A Units

Subtotal Control Investments

Total Investments, September 30, 2022

Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 4.00 % Cash, 1.00 % LIBOR Floor)(8)(22)

Senior Secured First Lien Term Loan B (LIBOR + 9.25 % PIK, 1.00 % LIBOR Floor)(10)(21)

Senior Secured First Lien Term Loan C (LIBOR + 12.00 % PIK, 1.00 % LIBOR Floor)(10)(21)

Equity - 1,000 Class A Units(21)

Control Investments

Investments, September 30, 2023

$ 230,037,957

1 unchanged sentence

$ 226,460,691

PHENIXFIN CORPORATION

Consolidated Schedule of Investments

September 30, 2022

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

Schedule of Investments (continued)

of September 30, 2023

(1) All of our investments are domiciled in the United States.

Certain investments also have international operations.

Par amount is presented for debt investments and the amount includes accumulated payment-in-kind (“PIK”) interest, as applicable, and is net of repayments, while the number of shares or units owned is presented for equity investments.

(2) Par amount is presented for debt investments and the amount includes accumulated payment-in-kind (“PIK”) interest, as applicable, and is net of repayments, while the number of shares or units owned is presented for equity investments.

Par amount is denominated in U.S.

Dollars (“$”) unless otherwise noted.

Dollars (“$”) unless otherwise noted .

(3) Net unrealized depreciation for U.S.

1 unchanged sentence

The tax cost basis of investments is $265,010,723 as of September 30, 2023.

The amortized cost represents the original cost adjusted for the amortization or accretion of premium or discount, as applicable, on debt investments using the effective interest method.

(4) Unless otherwise indicated, all securities are valued using significant unobservable inputs, which are categorized as Level 3 assets under the definition of ASC 820 fair value hierarchy (see Note 4).

(5) Percentage is based on net assets of $146,705,535 as of September 30, 2023.

Affiliated Investments are defined by the 1940 Act as investments in companies in which the Company owns between 5% and 25% outstanding voting securities or is under common control with such portfolio company.

Control Investments are defined by the Investment Company Act of 1940, as amended (the “1940 Act”), as investments in companies in which the Company owns more than 25% of the voting securities or maintains greater than 50% of the board representation.

(6) Affiliated Investments are defined by Investment Company Act of 1940 Act, as amended (the “1940 Act”), as investments in companies in which the Company owns between 5% and 25% outstanding voting securities or is under common control with such portfolio company.

(7) Control Investments are defined by the Investment Company Act of 1940, as amended (the “1940 Act”), as investments in companies in which the Company owns more than 25% of the voting securities or maintains greater than 50% of the board representation.

(8) The investment has an unfunded commitment as of September 30, 2023 (see Note 8), and fair value includes the value of any unfunded commitments.

Represents 1.3% partnership interest in Watermill-QMC Partners, LP and Watermill-EMI Partners, LP.

The negative cost, if applicable, is the result of the capitalized discount being greater than the principal amount outstanding on the loan.

The negative fair value, if applicable, is the result of the capitalized discount on the loan.

(9) The interest rate on this investment is fixed-to-floating and will shift to 3 month SOFR plus a CSA of 0.262% plus a 5.379% spread on 3/30/2024.

(10) The investment was on non-accrual status as of September 30, 2023.

(11) The investment is not a qualifying asset as defined under Section 55(a) of 1940 Act, in a whole, or in part.

As of September 30, 2022, 17.24% of the Company’s portfolio investments were non-qualifying assets.

This investment earns 0.50% commitment fee on all unused commitment as of June 30, 2022, and is recorded as a component of interest income on the Consolidated Statements of Operations.

This investment represents a Level 1 security in the ASC 820 table as of June 30, 2022 (see Note 4).

This investment represents a Level 2 security in the ASC 820 table as of June 30, 2022 (see Note 4).

The interest rate on this loan is fixed-to-floating and will shift to 3 month LIBOR plus a 4.743% spread on 9/30/2025.

The interest rate on this loan is fixed-to-floating and will shift to 3 month LIBOR plus a 5.29% spread on 9/27/2027.

The interest rate on this loan is fixed-to-floating and will shift to 3 month LIBOR plus a 5.64% spread on 8/15/2024.

The interest rate on this loan is fixed-to-floating and will shift to 3 month LIBOR plus a 6.429% spread on 1/15/2025.

As of September 30, 2023, non-qualifying assets represented 20.21% of total assets.

(12) This investment earns 0.50% commitment fee on all unused commitment as of September 30, 2023, and is recorded as a component of interest income on the Consolidated Statements of Operations.

(13) This investment represents a Level 1 security in the ASC 820 table as of September 30, 2023 (see Note 4).

(14) This investment represents a Level 2 security in the ASC 820 table as of September 30, 2023 (see Note 4).

(15) The interest rate on this preferred equity is fixed-to-floating and will shift to 3 month SOFR plus a CSA of 0.262% plus a 4.743% spread on 9/30/2025.

(16) The interest rate on this preferred equity is fixed-to-floating and will shift to 3 month SOFR plus a CSA of 0.262% plus a 5.29% spread on 9/27/2027.

(17) The interest rate on this preferred equity is fixed-to-floating and will shift to 3 month LIBOR plus a 5.64% spread on 8/15/2024.

Credit Spread Adjustment (“CSA”)

accompanying notes to consolidated financial statements.

PHENIXFIN CORPORATION

Consolidated Schedule of Investments

September 30, 2021

Type of Investment

(18) The interest rate on this preferred equity is fixed-to-floating and will shift to 3 month SOFR plus a CSA of 0.262% plus a 6.429% spread on 1/15/2025.

(19) The interest rate on this preferred equity is fixed-to-floating and will shift to 3 month LIBOR plus a 5.345% spread on 3/31/2025.

(20) Credit Spread Adjustment (“CSA”)

(21) Non-income producing security.

(22) The interest rate on these loans is subject to 1 month LIBOR, which as of September 30, 2023 was 5.43%.

(24) The interest rate on these loans is subject to 1 month SOFR, which as of September 30, 2023 was 5.32%.

(25) The interest rate on these loans is subject to 3 month SOFR, which as of September 30, 2023 was 5.27%.

(26) The interest rate on these loans is subject to 6 month SOFR, which as of September 30, 2023 was 5.17%.

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

Schedule of Investments

of September 30, 2022

of Investment

Shares/Units (2)

Fair Value (4)

Non-Controlled/Non-Affiliated

Alpine SG, LLC (8)

High Tech Industries

Senior Secured First Lien Term Loan (LIBOR + 5.75% Cash, 1.00% LIBOR Floor) (14)

Senior Secured Incremental First Lien Term Loan (LIBOR + 8.50% Cash, 1.00% LIBOR Floor) (14)

Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 5.75% Cash, 1.00% LIBOR Floor) (14)

Senior Secured Incremental First Lien Term Loan (LIBOR + 6.50% Cash, 1.00% LIBOR Floor) (14)

Autosplice, Inc.

Senior Secured First Lien Term Loan (LIBOR + 8.00% Cash & 2.00% PIK, 1.00% LIBOR Floor) (14)

Altisource S.A.R.L.(11)

Senior Secured First Lien Term Loan B (LIBOR + 4.00 %, 1.00 % LIBOR Floor)(14)

Be Green Packaging, LLC

6 unchanged sentences

Equity - 117,310 Class C Preferred Units(13)(15)

Cleaver-Brooks, Inc.

Manufacturing

7.875% Senior Secured Notes (18)

CM Finance SPV, LLC

Unsecured Debt (10)

Property CTL Pass Through Trust

Finance, Insurance & Real Estate

Certificates(14)

CPI International, Inc.

Aerospace & Defense

Senior Secured Second Lien Term Loan (LIBOR + 7.25% Cash, 1.00% LIBOR Floor) (13)

Senior Secured Second Lien Term Loan (LIBOR + 7.25 %, 1.00 % LIBOR Floor)

DataOnline Corp.

High Tech Industries

Senior Secured First Lien Term Loan (LIBOR + 6.25% Cash, 1.00% LIBOR Floor) (14)

Revolving Credit Facility (LIBOR + 6.25% Cash, 1.00% LIBOR Floor) (14)(16)

PHENIXFIN CORPORATION

Consolidated Schedule of Investments

September 30, 2021

Senior Secured First Lien Term Loan (LIBOR + 6.25 %, 1.00 % LIBOR Floor)

Revolving Credit Facility (LIBOR + 6.25 %, 1.00 % LIBOR Floor)

DirecTV Financing, LLC

Broadcasting & Subscription

Senior Secured First Lien Term Loan (LIBOR + 5.00 %, 0.75 % LIBOR Floor)(14)

Dream Finders Homes, LLC

Construction & Building

Preferred Equity ( 8.00 % PIK)

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

Schedule of Investments (continued)

of September 30, 2022

of Investment

Shares/Units (2)

and Income Fund (11)

Finance, Insurance & Real Estate

- 87,483 Common Units (17)

Finders Homes, LLC (11)

Preferred Equity (8.00%

Acquisition, LLC

Preferred Equity (8.75%

Accessories Group, LLC

First Brands Group, LLC

Senior Secured First Lien Term Loan (SOFR + 5.00 %, 1.00 % SOFR Floor)

Footprint Holding Company Inc.

Equity - 150 Common Units

Franklin BSP Realty Trust, Inc.(11)

Banking, Finance, Insurance & Real Estate

Equity - 529,914 Common Units(13)

Global Accessories Group, LLC

Consumer goods:

Equity - 3.8%

Membership Interest

Banking, Finance,

Insurance & Real Estate

Equity - 253,651

Common Units (17)

Mortgage Capital, Inc.

Banking, Finance,

Insurance & Real Estate

Equity - 205,000

Class C Preferred Units (17)(21)

Science Group Corporation

Packaging & Glass

0.62% of Outstanding Equity (18)

Financial, Inc.

Banking, Finance,

Insurance & Real Estate

Equity - 31,692

Class C Preferred Units (17)(24)

York Mortgage Trust, Inc.

Banking, Finance,

Insurance & Real Estate

Equity - 165,000

Class E Preferred Units (17)(23)

Senior Secured

First Lien Term Loan (LIBOR + 6.00% PIK) (10)(15)

Technologies, Inc.

Hotel, Gaming & Leisure

Unsecured Debt (4.50% Cash) (12)

Unsecured Debt

(4.50% Cash) (12)

PHENIXFIN CORPORATION

Consolidated Schedule of Investments

September 30, 2021

Equity - 3.8 % Membership Interest

Great AJAX Corp.(11)

Banking, Finance, Insurance & Real Estate

Equity - 254,922 Common Units(13)

Innovate Corp.

Construction & Building

8.50 % Senior Secured Notes(14)

Invesco Mortgage Capital, Inc.(11)

Banking, Finance, Insurance & Real Estate

Equity - 205,000 Class C Preferred Units(13)(16)

JFL-NGS-WCS Partners, LLC

Construction & Building

Senior Secured First Lien Term Loan B (LIBOR + 5.50 %, 1.00 % LIBOR Floor)

- 10,000,000 Units

Lighting Science Group Corporation

Containers, Packaging & Glass

Warrants - 0.62 % of Outstanding Equity

Lucky Bucks, LLC

Consumer Discretionary

Senior Secured First Lien Term Loan(LIBOR + 5.50 %, 0.75 % LIBOR Floor)

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

Schedule of Investments (continued)

of September 30, 2022

of Investment

Shares/Units (2)

Services Group, LLC (8)

Revolving Credit Facility (LIBOR

+ 6.00% Cash, 1.00% LIBOR Floor) (13)(16)

Maritime Wireless Holdings LLC

Hotel, Gaming & Leisure

Senior Secured First Lien Term Loan A (SOFR + CSA + 9.00 %, 1.00 % SOFR + CSA Floor)(20)

Senior Secured First Lien Term Loan B (SOFR + CSA + 9.00 %, 1.00 % SOFR + CSA Floor)(20)

Promissory Note

McKissock Investment Holdings, LLC (dba Colibri)

Senior Secured First Lien Term Loan (SOFR + CSA + 5.00 %, 0.75 % SOFR + CSA Floor)(20)

MFA Financial, Inc.(11)

Banking, Finance, Insurance & Real Estate

Equity - 97,426 Class C Preferred Units(13)(19)

New York Mortgage Trust, Inc.(11)

Banking, Finance, Insurance & Real Estate

Equity - 165,000 Class E Preferred Units(13)(18)

PennyMac Financial Services, Inc.(11)

Banking, Finance, Insurance & Real Estate

Equity - 81,500 Common Units(13)

Senior Secured First Lien Term Loan (LIBOR + 6.00 % PIK)(10)

Power Stop LLC

Senior Secured First Lien Term Loan(LIBOR + 4.75 , 0.50 % LIBOR Floor)

Rithm Capital Corp.(11)

Banking, Finance,

Insurance & Real Estate

Equity - 206,684

Class B Preferred Units (17)(22)

Sendero Drilling

Unsecured Debt (9.00% Cash) (10)

Banking, Finance, Insurance & Real Estate

Equity - 206,684 Class B Preferred Units(13)(17)

Secure Acquisition Inc.

(dba Paragon Films)(8)

Senior Secured First Lien Term Loan(LIBOR + 5.00 %, 0.50 % LIBOR Floor)

Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 5.00 %, 0.50 % LIBOR Floor)(12)

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

Schedule of Investments (continued)

of September 30, 2022

of Investment

Shares/Units (2)

Sendero Drilling Company, LLC

Unsecured Debt ( 9.00 %)(10)

SS Acquisition, LLC (dba Soccer Shots Franchising)(8)

Senior Secured First Lien Term Loan (LIBOR + 6.50 %, 1.00 % LIBOR Floor)

SMART Financial Operations, LLC

2 unchanged sentences

Equity - 338,736.11 Class A Units

Staples, Inc.

First Lien Term Loan (LIBOR + 4.50 %, 0.0 % LIBOR Floor)(14)

Thryv Holdings, Inc.(11)

Senior Secured First Lien Term Loan B (LIBOR + 8.50% Cash, 1.00% LIBOR Floor) (13)

Senior Secured First Lien Term Loan B (LIBOR + 8.50 %, 1.00 % LIBOR Floor)

Velocity Pooling Vehicle, LLC

7 unchanged sentences

Wingman Holdings, Inc.

(f/k/a Crow Precision Components, LLC)

Aerospace & Defense

Equity - 350 Common Units

Subtotal Non-Controlled/Non-Affiliated Investments

PHENIXFIN CORPORATION

Consolidated Schedule of Investments

September 30, 2021

Equity - 350 Common Shares

Non-Controlled/Non-Affiliated Investments

$ 109,151,781

$ 147,378,917

$ 122,616,275

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

Schedule of Investments (continued)

of September 30, 2022

of Investment

Shares/Units (2)

Affiliated Investments :

1888 Industrial Services, LLC(8)

Senior Secured First Lien Term Loan A (LIBOR + 5.00 % PIK, 1.00 % LIBOR Floor)(10)

9/30/2021 (25)

Senior Secured First Lien Term Loan B (LIBOR + 8.00% PIK, 1.00% LIBOR Floor) (10)(14)

9/30/2021 (25)

Senior Secured First Lien Term Loan C(LIBOR + 5.00 %, 1.00 % LIBOR Floor)

9/30/2021 (25)

Revolving Credit Facility (LIBOR +5.00% PIK, 1.00% LIBOR Floor) (14)(16)

9/30/2021 (25)

Revolving Credit Facility (LIBOR + 5.00 %, 1.00 % LIBOR Floor)(12)

Equity - 21,562 Class A Units

1 unchanged sentence

Hotel, Gaming & Leisure

Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 9.00% Cash, 1.00% LIBOR Floor) (13)

Senior Secured First Lien Term Loan (LIBOR + 9.00% PIK, 1.00% LIBOR Floor) (10)(13)

Senior Secured First Lien Super Priority DDTL (LIBOR + 9.00% Cash, 1.00% LIBOR Floor) (13)(16)

Caddo Investors Holdings 1 LLC (11)

Forest Products & Paper

Senior Secured First Lien Delayed Draw Term Loan (SOFR + CSA + 9.00 %, 1.00 % SOFR Floor)

Senior Secured First Lien Term Loan (SOFR + CSA + 9.00 % PIK, 1.00 % SOFR Floor)(10)

Senior Secured First Lien Super Priority Delayed Draw Term Loan (SOFR + CSA + 9.00 %, 1.00 % SOFR Floor)

Equity - 17.92 % Membership Interest

Dynamic Energy Services International LLC

Senior Secured First Lien Term Loan (LIBOR + 13.50% PIK) (10)(15)

Equity - 12,350,000 Class A Units

JFL-NGS Partners, LLC

Construction & Building

Equity - 57,300 Class B Units

JFL-WCS Partners, LLC

Environmental Industries

Equity - 129,588 Class B Units

Kemmerer Operations, LLC(8)

1 unchanged sentence

Senior Secured First Lien Term Loan( 15.00 % PIK)

Senior Secured First Lien Delayed Draw Term Loan (15.00% PIK) (16)

Equity - 6.78 Common Units

Path Medical, LLC

Healthcare & Pharmaceuticals

Senior Secured First Lien Term Loan A (LIBOR + 9.50% Cash, 1.00% LIBOR Floor) (10)(13)

Senior Secured First Lien Term Loan B (LIBOR + 13.00% PIK, 1.00% LIBOR Floor) (10)(13)

Warrants - 7.68% of Outstanding Equity

PHENIXFIN CORPORATION

Consolidated Schedule of Investments

September 30, 2021

of Investment

Shares/Units (2)

URT Acquisition Holdings Corporation

US Multifamily, LLC

Banking, Finance, Insurance & Real Estate

Senior Secured First Lien Term Loan (10.00% Cash)

Equity - 33,300 Preferred Units

Subtotal Affiliated Investments

Controlled Investments :

Equity Interest

Affiliated Investments

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

Consolidated Schedule of Investments (continued)

As of September 30, 2022

of Investment

Shares/Units (2)

Hotel, Gaming & Leisure

Senior Secured First Lien Delayed Draw Term Loan (LIBOR + 4.00 % Cash, 1.00 % LIBOR Floor)

Senior Secured First Lien Super Priority DDTL (LIBOR + 4.00% Cash, 1.00% LIBOR Floor) (13)(16)

Senior Secured First Lien Term Loan B (LIBOR + 9.25 % PIK, 1.00 % LIBOR Floor)(10)

1 unchanged sentence

Equity - 1,000 Class A Units

Subtotal Control Investments

Control Investments

Investments, September 30, 2022

2 unchanged sentences

$ 192,956,649

PHENIXFIN CORPORATION

Consolidated Schedule of Investments

September 30, 2021

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

Consolidated Schedule of Investments (continued)

As of September 30, 2022

(1) All of our investments are domiciled in the United States.

Certain investments also have international operations.

Par amount is denominated in U.S.

Dollars (“$”) unless otherwise noted.

(3) Net unrealized depreciation for U.S.

4 unchanged sentences

(6) Affiliated Investments are defined by the 1940 Act as investments in companies in which the Company owns between 5% and 25% outstanding voting securities or is under common control with such portfolio company.

(8) The investment has an unfunded commitment as of September 30, 2022 (see Note 8), and fair value includes the value of any unfunded commitments.

The negative cost, if applicable, is the result of the capitalized discount being greater than the principal amount outstanding on the loan.

The negative fair value, if applicable, is the result of the capitalized discount on the loan.

(9) Represents 1.3% partnership interest in Watermill-QMC Partners, LP and Watermill-EMI Partners, LP.

1 unchanged sentence

(11) The investment is not a qualifying asset as defined under Section 55(a) of 1940 Act, in a whole, or in part.

As of September 30, 2021, 20.18% of the Company’s portfolio investments were non-qualifying assets.

Security is non-income producing.

The interest rate on these loans is subject to the greater of a London Interbank Offering Rate (“LIBOR”) floor, or 1 month LIBOR plus a base rate.

The 1 month LIBOR as of September 30, 2021 was 0.08%.

The interest rate on these loans is subject to the greater of a LIBOR floor, or 3 month LIBOR plus a base rate.

The 3 month LIBOR as of September 30, 2021 was 0.13 %.

The interest rate on these loans is subject to 3 month LIBOR plus a base rate.

The 3 month LIBOR as of September 30, 2021 was 0.13 %.

As of September 30, 2022, 17.24% of the Company’s portfolio investments were non-qualifying assets.

(12) This investment earns 0.50% commitment fee on all unused commitment as of September 30, 2022, and is recorded as a component of interest income on the Consolidated Statements of Operations.

1 unchanged sentence

(14) This investment represents a Level 2 security in the ASC 820 table as of September 30, 2022 (see Note 4).

As a practical expedient, the Company uses net asset value (“NAV”) to determine the fair value of this investment.

The interest rate on this preferred equity is fixed-to-floating and will shift to 3 month LIBOR plus a 4.743% spread on 9/30/2025.

The interest rate on this preferred equity is fixed-to-floating and will shift to 3 month LIBOR plus a 5.29% spread on 9/27/2027.

The interest rate on this preferred equity is fixed-to-floating and will shift to 3 month LIBOR plus a 5.64% spread on 8/15/2024.

The interest rate on this preferred equity is fixed-to-floating and will shift to 3 month LIBOR plus a 6.429% spread on 1/15/2025.

(15) The interest rate on this loan is fixed-to-floating and will shift to 3 month LIBOR plus a 4.743% spread on 9/30/2025.

(16) The interest rate on this loan is fixed-to-floating and will shift to 3 month LIBOR plus a 5.29% spread on 9/27/2027.

(17) The interest rate on this loan is fixed-to-floating and will shift to 3 month LIBOR plus a 5.64% spread on 8/15/2024.

(18) The interest rate on this loan is fixed-to-floating and will shift to 3 month LIBOR plus a 6.429% spread on 1/15/2025.

(19) The interest rate on this preferred equity is fixed-to-floating and will shift to 3 month LIBOR plus a 5.345% spread on 3/31/2025.

The maturity date was extended to May 1, 2023 subsequent to September 30, 2021.

The accompanying notes are an integral part of these

consolidated financial statements.

PHENIXFIN CORPORATION

Notes to Consolidated Financial Statements

September 30, 2022

PhenixFIN Corporation (“PhenixFIN.”

the “Company,”

“we”

and “us”) is an internally-managed non-diversified closed end management investment

company incorporated in Delaware that has elected to be regulated as a business development company (“BDC”) under the Investment

Company Act of 1940, as amended (the “1940 Act”).

We completed our initial public offering (“IPO”) and commenced

operations on January 20, 2011.

(20) Credit Spread Adjustment (“CSA”)

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

to Consolidated Financial Statements

PhenixFIN Corporation (“PhenixFIN.” the “Company,”

“we” and “us”) is an internally-managed non-diversified closed-end management investment company incorporated

in Delaware that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of

1940, as amended (the “1940 Act”).

We completed our initial public offering (“IPO”) and commenced operations on

January 20, 2011.

The Company has elected, and intends to qualify annually, to be treated, for U.S.

federal income tax

purposes, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the

“Code”).

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

structure, effective January 1, 2021.

Until close of business on December 31, 2020 we were externally managed and advised by MCC Advisors

LLC (“MCC Advisors”), pursuant to an investment management agreement.

MCC Advisors is a wholly owned subsidiary of Medley

LLC, which is controlled by Medley Management Inc.

MDLY), a publicly traded asset management firm (“MDLY”), which

in turn is controlled by Medley Group LLC, an entity wholly owned by the senior professionals of Medley LLC.

We use the term “Medley”

to refer collectively to the activities and operations of Medley Capital LLC, Medley LLC, MDLY, Medley Group LLC, MCC Advisors, associated

investment funds and their respective affiliates.

Since January 1, 2021 the Company has been managed pursuant to an internalized management

The Company has formed and expects to continue

to form certain taxable subsidiaries (the “Taxable Subsidiaries”), which are taxed as corporations for federal income tax

These Taxable Subsidiaries allow us to, among other things, hold equity securities of portfolio companies organized as pass-through

entities while continuing to satisfy the requirements of a RIC under the Code.

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 operating and managing

an asset-based lending business.

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.

Reverse Stock Split;

Authorized Share Reduction

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 2020 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

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.”

PHENIXFIN CORPORATION

Notes to Consolidated

Financial Statements (continued)

September 30, 2022

Sale of MCC JV

On October 8, 2020, the Company, Great American

Life Insurance Company (“GALIC”), MCC Senior Loan Strategy JV I LLC (the “MCC JV”), and an affiliate of Golub

Capital LLC (“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 the Company and GALIC, respectively.

federal income tax purposes, as a

regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).

On November 18, 2020, the board of directors of the Company approved the adoption of an internalized management structure, effective January

Until close of business on December 31, 2020 we were externally managed and advised by MCC Advisors LLC (“MCC Advisors”),

pursuant to an investment management agreement.

MCC Advisors was a wholly owned subsidiary of Medley LLC, which was controlled by Medley

Management Inc.

MDLM), a publicly traded asset management firm, which in turn was controlled by Medley Group LLC, an entity wholly

owned by the senior professionals of Medley LLC.

We use the term “Medley” to refer collectively to the activities and operations

of Medley Capital LLC, Medley LLC, MDLM, Medley Group LLC, MCC Advisors, associated investment funds and their respective affiliates.

Since January 1, 2021 the Company has been managed pursuant to an internalized management structure.

Company has formed and expects to continue to form certain taxable subsidiaries (the “Taxable Subsidiaries”), which are taxed

as corporations for federal income tax purposes.

These Taxable Subsidiaries allow us to, among other things, hold equity securities of

portfolio companies organized as pass-through entities while continuing to satisfy the requirements of a RIC under the Code.

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, such as operating and managing an asset-based lending business.

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

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

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

October 8, 2020, the Company, Great American Life Insurance Company (“GALIC”), MCC Senior Loan Strategy JV I LLC (the “MCC

JV”), and an affiliate of Golub Capital LLC (“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 the Company and GALIC, respectively.

Significant Accounting Policies

Basis of Presentation

The Company is an investment company following

the accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification

946 (“ASC 946”), Financial Services –

Investment Companies.

The accompanying consolidated financial statements have

been prepared on the accrual basis of accounting in conformity with U.S.

generally accepted accounting principles (“GAAP”)

and include the consolidated accounts of the Company and its wholly owned subsidiaries PhenixFIN Small Business Fund, LP (“PhenixFIN

Small Business Fund”) and PhenixFIN SLF Funding I LLC (“PhenixFIN SLF”), and its wholly owned Taxable Subsidiaries.

All references made to the “Company,”

“we,”

and “us”

herein include PhenixFIN Corporation and its

consolidated subsidiaries, except as stated otherwise.

Additionally, the accompanying consolidated financial statements of the Company

and related financial information have been prepared pursuant to the requirements for reporting on Form 10-K and Article 10 of Regulation

S-X of the Securities Act of 1933.

Use of Estimates in the Preparation of Financial

The preparation of financial statements in conformity

with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure

of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses

during the reporting period.

of Presentation

Company is an investment company following the accounting and reporting guidance in Financial Accounting Standards Board (“FASB”)

Accounting Standards Codification 946 (“ASC 946”), Financial Services – Investment Companies.

The accompanying consolidated

financial statements have been prepared on the accrual basis of accounting in conformity with U.S.

generally accepted accounting principles

(“GAAP”) and include the consolidated accounts of the Company and its wholly owned subsidiaries PhenixFIN Small Business

Fund, LP (“PhenixFIN Small Business Fund”) and PhenixFIN SLF Funding I LLC (“PhenixFIN SLF”), and its wholly

owned Taxable Subsidiaries.

All references made to the “Company,” “we,” and “us” herein include PhenixFIN

Corporation and its consolidated subsidiaries, except as stated otherwise.

Additionally, the accompanying consolidated financial statements

of the Company and related financial information have been prepared pursuant to the requirements for reporting on Form 10-K and Article

10 of Regulation S-X of the Securities Act of 1933.

Certain prior period information has been reclassified to conform to current period

presentation.

These reclassifications have no effect on the Company’s financial positions or its results of operations as previously

of Estimates in the Preparation of Financial Statements

preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported

amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the consolidated financial statements

and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

Cash, Restricted Cash and Cash Equivalents

The Company considers cash equivalents to be

highly liquid investments with original maturities of three months or less.

Cash and cash equivalents include deposits in a money market

The Company deposits its cash in financial institutions and, at times, such balances may be in excess of the Federal Deposit

Insurance Corporation insurance limits.

As of September 30, 2022 and 2021, we had $22.8 million and $69.4 million in cash and cash equivalents,

respectively, none of which is restricted.

Debt Issuance Costs

Debt issuance costs, incurred in connection with

any credit facilities and unsecured notes (see Note 5) are deferred and amortized over the life of the respective credit facility or

Restricted Cash and Cash Equivalents

Company considers cash equivalents to be highly liquid investments with original maturities of three months or less.

Cash and cash equivalents

include deposits in a money market account.

The Company deposits its cash in financial institutions and, at times, such balances may

be in excess of the Federal Deposit Insurance Corporation insurance limits.

As of September 30, 2023 and 2022, we had $ 6.0 million and

$ 22.8 million in cash and cash equivalents, respectively, none of which is restricted.

Issuance Costs

issuance costs, incurred in connection with any credit facilities and unsecured notes (see Note 5) are deferred and amortized over the

life of the respective credit facility or instrument.

Debt issuance costs related to any credit facilities and unsecured notes are presented

net against the outstanding debt balance on the Consolidated Statements of Assets and Liabilities.

Indemnification

In the normal course of business, the Company

enters into contractual agreements that provide general indemnifications against losses, costs, claims and liabilities arising from the

performance of individual obligations under such agreements.

The Company has had no material claims or payments pursuant to such agreements.

The Company’s individual maximum exposure under these arrangements is unknown, as this would involve future claims that may be

made against the Company that have not yet occurred.

However, based on management’s experience, the Company expects the risk of

loss to be remote.

PHENIXFIN CORPORATION

Notes to Consolidated

Financial Statements (continued)

September 30, 2022

Revenue Recognition

Interest income, adjusted for amortization of

premiums and accretion of discounts, is recorded on an accrual basis.

Dividend income, which represents dividends from equity investments

and distributions from Taxable Subsidiaries, is recorded on the ex-dividend date and when the distribution is received, respectively.

The Company holds debt investments in its portfolio

that contain a payment-in-kind (“PIK”) interest provision.

PIK interest, which represents contractually deferred interest

added to the investment balance that is generally due at maturity, is recorded on the accrual basis to the extent such amounts are expected

to be collected.

PIK interest is not accrued if the Company does not expect the issuer to be able to pay all principal and interest when

For the years ended September 30, 2022, 2021 and 2020, the Company earned approximately $0.8 million, $0.9 million, $3.8 million

in PIK interest, respectively.

Origination/closing, amendment and transaction

break-up fees associated with investments in portfolio companies are recognized as income when we become entitled to such fees.

penalties received by the Company for debt instruments paid back to the Company prior to the maturity date are recorded as income upon

repayment of debt.

Administrative agent fees received by the Company are capitalized as deferred revenue and recorded as fee income when

the services are rendered.

For the years ended September 30, 2022, 2021 and 2020, fee income was approximately $0.4 million, $2.6 million

and $0.7 million, respectively (see Note 9).

Investment transactions are accounted for on

a trade date basis.

the normal course of business, the Company enters into contractual agreements that provide general indemnifications against losses, costs,

claims and liabilities arising from the performance of individual obligations under such agreements.

The Company has had no material

claims or payments pursuant to such agreements.

The Company’s individual maximum exposure under these arrangements is unknown,

as this would involve future claims that may be made against the Company that have not yet occurred.

However, based on management’s

experience, the Company expects the risk of loss to be remote.

income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis.

Discounts and premiums to par

value on investments purchased are accreted and amortized into interest income over the life of the respective investment.

Loan origination

fees, original issue discount (“OID”) and market discounts or premiums are capitalized and amortized into interest income

using the effective interest method or straight-line method, as applicable.

Significant Accounting Policies (continued)

Company holds debt investments in its portfolio that contain a payment-in-kind (“PIK”) interest provision.

PIK interest,

which represents contractually deferred interest added to the investment balance that is generally due at maturity, is recorded on the

accrual basis to the extent such amounts are expected to be collected.

PIK interest is not accrued if the Company does not expect the

issuer to be able to pay all principal and interest when due.

For the years ended September 30, 2023, 2022 and 2021, the Company earned

approximately $ 1.5 million, $ 0.8 million, $ 0.9 million in PIK interest, respectively.

and transaction break-up fees associated with investments in portfolio companies are recognized as income when we become entitled to

Prepayment penalties received by the Company for debt instruments paid back to the Company prior to the maturity date are

recorded as income upon repayment of debt.

Administrative agent fees received by the Company are capitalized as deferred revenue and

recorded as fee income when the services are rendered.

For the years ended September 30, 2023, 2022 and 2021, fee income was approximately

$ 0.3 million, $ 0.4 million and $ 2.6 million, respectively (see Note 9).

Investment transactions are accounted for on a

trade date basis.

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.

During the year ended

September 30, 2020, $0.9 million of the Company’s realized losses were related to certain non-cash restructuring transactions,

which are recorded on the Consolidated Statements of Operations as a component of net realized gain/(loss) from investments.

relating to non-cash restructuring transactions occurred during the years ended September 30, 2022 and 2021.

The Company reports changes

in fair value of investments as a component of the net unrealized appreciation/(depreciation) on investments in the Consolidated Statements

of Operations.

Management reviews all loans that become 90 days

or more past due on principal or interest or when there is reasonable doubt that principal or interest will be collected for possible

placement on management’s designation of non-accrual status.

Interest receivable is analyzed regularly and may be reserved against

when deemed not collectible.

Interest payments received on non-accrual loans may be recognized as income or applied to principal depending

upon management’s judgment regarding collectability.

Non-accrual loans are restored to accrual status when past due principal and

interest is paid and, in management’s judgment, are likely to remain current, although we may make exceptions to this general rule

if the loan has sufficient collateral value and is in the process of collection.

At September 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.

Investment Classification

The Company classifies its investments in accordance

with the requirements of the 1940 Act.

Under the 1940 Act, we would be deemed to “control”

a portfolio company if we owned

more than 25% of its outstanding voting securities and/or had the power to exercise control over the management or policies of such portfolio

We refer to such investments in portfolio companies that we “control”

as “Control Investments.”

the 1940 Act, we would be deemed to be an “Affiliated Person”

of a portfolio company if we own between 5% and 25% of the

portfolio company’s outstanding voting securities or we are under common control with such portfolio company.

We refer to such

investments in Affiliated Persons as “Affiliated Investments.”

Valuation of Investments

The Company applies fair value accounting to

all of its financial instruments in accordance with the 1940 Act and ASC Topic 820 - Fair Value Measurements and Disclosures (“ASC

ASC 820 defines fair value, establishes a framework used to measure fair value and requires disclosures for fair value measurements.

In accordance with ASC 820, the Company has categorized its financial instruments carried at fair value, based on the priority of the

valuation technique, into a three-level fair value hierarchy as discussed in Note 4.

Fair value is a market-based measure considered

from the perspective of the market participant who holds the financial instrument rather than an entity specific measure.

when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that management believes

market participants would use in pricing the financial instrument at the measurement date.

PHENIXFIN CORPORATION

Notes to Consolidated

Financial Statements (continued)

September 30, 2022

Investments for which market quotations are readily

available are valued at such 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 quotations, 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, debt investments with remaining maturities within 60 days that are not credit impaired are valued at cost plus accreted discount,

or minus amortized premium, which approximates fair value.

Investments for which market quotations are not readily available are valued

at fair value as determined by the Company’s board of directors based upon input from management and third-party valuation firms.

Because these investments are illiquid and because there may not be any directly comparable companies whose financial instruments have

observable market values, these loans are valued using a fundamental valuation methodology, consistent with traditional asset pricing

standards, that is objective and consistently applied across all loans and through time.

Investments in investment funds are valued at

Fair values are generally determined utilizing the NAV supplied by, or on behalf of, management of each investment fund,

which is net of management and incentive fees or allocations charged by the investment fund and is in accordance with the “practical

expedient”, as defined by FASB Accounting Standards Update (“ASU”) 2009-12, Investments in Certain Entities that

Calculate Net Asset Value per Share .

NAVs received by, or on behalf of, management of each investment fund are based on the fair

value of the investment funds’

underlying investments in accordance with policies established by management of each investment

fund, as described in each of their financial statements and offering memorandum.

If the Company is in the process of the sale of an

investment fund, fair value will be determined by actual or estimated sale proceeds.

The methodologies utilized by the Company in

estimating the fair value of its investments categorized as Level 3 generally fall into the following two categories:

The “Market Approach”

uses prices and

other relevant information generated by market transactions involving identical or comparable (that is, similar) assets, liabilities,

or a group of assets and liabilities, such as a business.

The “Income Approach”

converts future

amounts (for example, cash flows or income and expenses) to a single current (that is, discounted) amount.

When the Income Approach

is used, the fair value measurement reflects current market expectations about those future amounts.

The Company has engaged third-party valuation

firms (the “Valuation Firms”) to assist it and its Valuation Designee (the Chief Financial Officer) in the valuation of its

portfolio investments.

The valuation reports generated by the Valuation Firms consider the evaluation of financing and sale transactions

with third parties, expected cash flows and market-based information, including comparable transactions, performance multiples, and movement

in yields of debt instruments, among other factors.

The Company uses a market yield analysis under the Income Approach or an enterprise

model of valuation under the Market Approach, or a combination thereof.

In applying the market yield analysis, the value of the Company’s

loans is determined based upon inputs such as the coupon rate, current market yield, interest rate spreads of similar securities, the

stated value of the loan, and the length to maturity.

In applying the enterprise model, the Company uses a waterfall analysis, which

takes into account the specific capital structure of the borrower and the related seniority of the instruments within the borrower’s

capital structure into consideration.

To estimate the enterprise value of the portfolio company, we weigh some or all of the traditional

market valuation methods and factors based on the individual circumstances of the portfolio company in order to estimate the enterprise

The methodologies and information that the Company

utilizes when applying the Market Approach for performing investments include, among other things:

valuations of comparable public companies (“Guideline

Comparable Approach”);

recent sales of private and public comparable companies

(“Guideline Comparable Approach”);

recent acquisition prices of the company, debt securities

or equity securities (“Recent Arms-Length Transaction”);

external valuations of the portfolio company, offers

from third parties to buy the company (“Estimated Sales Proceeds Approach”);

subsequent sales made by the company of its investments

(“Expected Sales Proceeds Approach”);

estimating the value to potential buyers.

The methodologies and information that the Company

utilizes when applying the Income Approach for performing investments include:

discounting the forecasted cash flows of the portfolio

company or securities (Discounted Cash Flow (“DCF”) Approach);

Black-Scholes model or simulation models or a combination

thereof (Income Approach - Option Model) with respect to the valuation of warrants.

PHENIXFIN CORPORATION

Notes to Consolidated

Financial Statements (continued)

September 30, 2022

For non-performing investments, we may estimate

the liquidation or collateral value of the portfolio company’s assets and liabilities using an expected recovery model (Market

Approach - Expected Recovery Analysis or Estimated Liquidation Proceeds).

We undertake a multi-step valuation process each

quarter when valuing investments for which market quotations are not readily available, as described below:

our quarterly valuation process generally begins with

each portfolio investment being internally 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 are 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.

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 our investments may differ 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 addition, changes in the market environment (including the impact of COVID-19 on financial markets), portfolio company performance,

and other events may occur over the lives of the investments that may cause the gains or losses ultimately realized on these investments

to be materially different than the valuations currently assigned.

Fair Value of Financial Instruments

The carrying amounts of certain of our financial

instruments, including cash and cash equivalents, accounts payable and accrued expenses, approximate fair value due to their short-term

The carrying amounts and fair values of our long-term obligations are discussed in Note 5.

Recent Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, “Reference

rate reform (Topic 848)—Facilitation of the effects of reference rate reform on financial reporting.”

The amendments in this

update provide optional expedients and exceptions for applying U.S.

GAAP to certain contracts and hedging relationships that reference

LIBOR or another reference rate expected to be discontinued due to reference rate reform and became effective upon issuance for all entities.

The Company has agreements that have LIBOR as a reference rate with certain portfolio companies and also with certain lenders.

these agreements include language for choosing an alternative successor rate if LIBOR reference is no longer considered to be appropriate.

Contract modifications are required to be evaluated in determining whether the modifications result in the establishment of new contracts

or the continuation of existing contracts.

In January 2021, the FASB issued ASU 2021-01, “Reference rate reform (Topic 848),”

which expanded the scope of Topic 848.

ASU 2020-04 and ASU 2021-01 are effective through December 31, 2022 when the Company plans to

apply the amendments in this update to account for contract modifications due to changes in reference rates.

The Company does not believe

the adoption of ASU 2020-04 and ASU 2021-01 will have a material impact on its consolidated financial statements and disclosures.

PHENIXFIN CORPORATION

Notes to Consolidated

Financial Statements (continued)

September 30, 2022

Federal Income Taxes

The Company has elected, and intends to qualify

annually, to be treated as a RIC under Subchapter M of the Code.

In order to continue to qualify as a RIC and be eligible for tax treatment

under Subchapter M of the Code, among other things, the Company is required to meet certain source of income and asset diversification

requirements and timely distribute to its stockholders at least 90% of the sum of investment company taxable income (“ICTI”),

as defined by the Code, including PIK interest, and net tax exempt interest income (which is the excess of gross tax exempt interest

income over certain disallowed deductions) for each taxable year.

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.

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.

The Company is subject to a nondeductible U.S.

federal excise tax

of 4% on undistributed income if it does not distribute at least 98% of its ordinary income in 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.

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.

There was no provision for federal excise tax for

the calendar year ended 2021 accrued at September 30, 2022, for the calendar year ended 2020 accrued at September 30, 2021 and the calendar

year ended 2019 accrued at September 30, 2020.

The Company’s Taxable Subsidiaries accrue

income taxes payable based on the applicable corporate rates on the unrealized gains generated by the investments held by the Taxable

Subsidiaries.

As of September 30, 2022 and 2021, the Company did not record a deferred tax liability on the Consolidated Statements of

Assets and Liabilities.

The change in provision for deferred taxes is included as a component of net realized and unrealized gain/(loss)

on investments in the Consolidated Statements of Operations.

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.

and the amortized cost basis of investment using the specific identification method, without regard to unrealized gains or losses previously

No losses relating to restructuring transactions occurred during the years ended September 30, 2023, 2022 and 2021.

reports changes in fair value of investments as a component of the net unrealized appreciation/(depreciation) on investments in the Consolidated

Statements of Operations.

reviews all loans that become 90 days or more past due on principal or interest or when there is reasonable doubt that principal or interest

will be collected for possible placement on management’s designation of non-accrual status.

Interest receivable is analyzed regularly

and may be reserved against when deemed not collectible.

Interest payments received on non-accrual loans may be recognized as income

or applied to principal depending upon management’s judgment regarding collectability.

Non-accrual loans are restored to accrual

status when past due principal and interest is paid and, in management’s judgment, are likely to remain current, although we may

make exceptions to this general rule if the loan has sufficient collateral value and is in the process of collection.

At September 30,

2023, certain investments in four portfolio companies held by the Company were on non-accrual status with a combined fair value of approximately

$ 6.5 million, or 2.9 % of the fair value of our portfolio.

At September 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

Classification

Company classifies its investments in accordance with the requirements of the 1940 Act.

Under the 1940 Act, we would be deemed to “control”

a portfolio company if we owned more than 25 % of its outstanding voting securities and/or had the power to exercise control over the

management or policies of such portfolio company.

We refer to such investments in portfolio companies that we “control” as

“Control Investments.” Under the 1940 Act, we would be deemed to be an “Affiliated Person” of a portfolio company

if we own between 5 % and 25 % of the portfolio company’s outstanding voting securities or we are under common control with such

portfolio company.

We refer to such investments in Affiliated Persons as “Affiliated Investments.”

of Investments

Company applies fair value accounting to all of its financial instruments in accordance with the 1940 Act and ASC Topic 820 - Fair Value

Measurements and Disclosures (“ASC 820”).

ASC 820 defines fair value, establishes a framework used to measure fair value

and requires disclosures for fair value measurements.

In accordance with ASC 820, the Company has categorized its financial instruments

carried at fair value, based on the priority of the valuation technique, into a three-level fair value hierarchy as discussed in Note

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity specific measure.

Therefore, when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that management

believes market participants would use in pricing the financial instrument at the measurement date.

Significant Accounting Policies (continued)

for which market quotations are readily available are valued at such 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 quotations, 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, debt investments with remaining maturities within 60 days that are not credit impaired

are valued at cost plus accreted discount, or minus amortized premium, which approximates fair value.

Investments for which market quotations

are not readily available are valued at fair value as determined by our Chief Financial Officer, the Company’s Valuation Designee,

based upon input from management and third-party valuation firms.

Because these investments are illiquid and because there may not be

any directly comparable companies whose financial instruments have observable market values, these loans are valued using a fundamental

valuation methodology, consistent with traditional asset pricing standards, that is objective and consistently applied across all loans

and through time.

in investment funds are valued at fair value.

Fair values are generally determined utilizing the NAV supplied by, or on behalf of, management

of each investment fund, which is net of management and incentive fees or allocations charged by the investment fund and is in accordance

with the “practical expedient”, as defined by FASB Accounting Standards Update (“ASU”) 2009-12, Investments

in Certain Entities that Calculate Net Asset Value per Share .

NAVs received by, or on behalf of, management of each investment fund

are based on the fair value of the investment funds’ underlying investments in accordance with policies established by management

of each investment fund, as described in each of their financial statements and offering memorandum.

If the Company is in the process

of the sale of an investment fund, fair value will be determined by actual or estimated sale proceeds.

methodologies utilized by the Company in estimating the fair value of its investments categorized as Level 3 generally fall into the

following two categories:

The “Market Approach”

uses prices and other relevant information generated by market transactions involving identical or comparable (that is, similar)

assets, liabilities, or a group of assets and liabilities, such as a business.

The “Income Approach”

converts future amounts (for example, cash flows or income and expenses) to a single current (that is, discounted) amount.

Income Approach is used, the fair value measurement reflects current market expectations about those future amounts.

Company has engaged third-party valuation firms (the “Valuation Firms”) to assist it and its Valuation Designee (the Chief

Financial Officer) in the valuation of its portfolio investments.

The valuation reports generated by the Valuation Firms consider the

evaluation of financing and sale transactions with third parties, expected cash flows and market-based information, including comparable

transactions, performance multiples, and movement in yields of debt instruments, among other factors.

The Company uses a market yield

analysis under the Income Approach or an enterprise model of valuation under the Market Approach, or a combination thereof.

the market yield analysis, the value of the Company’s loans are determined based upon inputs such as the coupon rate, current market

yield, interest rate spreads of similar securities, the stated value of the loan, and the length to maturity.

In applying the enterprise

model, the Company uses a waterfall analysis, which takes into account the specific capital structure of the borrower and the related

seniority of the instruments within the borrower’s capital structure.

To estimate the enterprise value of the portfolio company,

we weigh some or all of the traditional market valuation methods and factors based on the individual circumstances of the portfolio company

in order to estimate the enterprise value.

methodologies and information that the Company utilizes when applying the Market Approach for performing investments include, among other

valuations of comparable

public companies (“Guideline Comparable Approach”);

recent sales of private

and public comparable companies (“Guideline Comparable Approach”);

recent acquisition prices

of the company, debt securities or equity securities (“Recent Arms-Length Transaction”);

external valuations of

the portfolio company, offers from third parties to buy the company (“Estimated Sales Proceeds Approach”);

sales made by the Company of its investments (“Expected Sales Proceeds Approach”);

estimating the value to

potential buyers.

Significant Accounting Policies (continued)

methodologies and information that the Company utilizes when applying the Income Approach for performing investments include:

discounting the forecasted

cash flows of the portfolio company or securities (Discounted Cash Flow (“DCF”) Approach);

Black-Scholes model or

simulation models or a combination thereof (Income Approach - Option Model) with respect to the valuation of warrants.

non-performing investments, we may estimate the liquidation or collateral value of the portfolio company’s assets and liabilities

using an expected recovery model (Market Approach - Expected Recovery Analysis or Estimated Liquidation Proceeds).

undertake a multi-step valuation process each quarter when valuing investments for which market quotations are not readily available,

as described below:

our quarterly valuation

process generally begins with each portfolio 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

Available portfolio company

data and general industry data are 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.

The Valuation Designee’s

report is then presented to the Board of Directors and the Audit Committee.

to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair

value of our investments may differ 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 addition, changes in the market environment (including the impact of pandemics, wars or other

market events on financial markets), portfolio company performance, and other events may occur over the lives of the investments that

may cause the gains or losses ultimately realized on these investments to be materially different than the valuations currently assigned.

of Financial Instruments

carrying amounts of certain of our financial instruments, including cash and cash equivalents, accounts payable and accrued expenses,

approximate fair value due to their short-term nature.

The carrying amounts and fair values of our long-term obligations are discussed

Company has elected, and intends to qualify annually, to be treated as a RIC under Subchapter M of the Code.

In order to continue to

qualify as a RIC and be eligible for tax treatment under Subchapter M of the Code, among other things, the Company is required to meet

certain source of income and asset diversification requirements and timely distribute to its stockholders at least 90 % of the sum of

investment company taxable income (“ICTI”), as defined by the Code, including PIK interest, and net tax exempt interest income

(which is the excess of gross tax exempt interest income over certain disallowed deductions) for each taxable year.

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.

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.

Significant Accounting Policies (continued)

Company is subject to a nondeductible U.S.

federal excise tax of 4 % on undistributed income if it does not distribute at least 98 % of

its ordinary income in 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.

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.

There was no provision for federal excise tax for the calendar year ended 2022 accrued at September 30, 2023, for the

calendar year ended 2021 accrued at September 30, 2022 and the calendar year ended 2020 accrued at September 30, 2021.

Company’s Taxable Subsidiaries accrue income taxes payable based on the applicable corporate rates on the unrealized gains generated

by the investments held by the Taxable Subsidiaries.

As of September 30, 2023 and 2022, the Company did not record a deferred tax liability

on the Consolidated Statements of Assets and Liabilities.

The change in provision for deferred taxes is included as a component of net

realized and unrealized gain/(loss) on investments in the Consolidated Statements of Operations.

For the years ended September 30, 2023,

2022 and 2021, the Company did not record a change in provision for deferred taxes on the unrealized (appreciation)/depreciation on investments.

As of September 30, 2023 and 2022, the Company

3 unchanged sentences

allowance of $ 23.1 million and $ 26.2 million, respectively, against its deferred tax asset.

ICTI generally differs from net investment income

for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses.

The Company may

be required to recognize ICTI in certain circumstances in which it does not receive cash.

For example, if the Company holds debt obligations

that are treated under applicable tax rules as having original issue discount, the Company must include in ICTI each year a portion of

the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received

by the Company in the same taxable year.

The Company may also have to include in ICTI other amounts that it has not yet received in cash,

such as 1) PIK interest income and 2) interest income from investments that have been classified as non-accrual for financial reporting

Interest income on non-accrual investments is not recognized for financial reporting purposes, but generally is recognized

Because any original issue discount or other amounts accrued will be included in the Company’s ICTI for the year of accrual,

the Company may be required to make a distribution to its stockholders in order to satisfy the minimum distribution requirements, even

though the Company will not have received and may not ever receive any corresponding cash amount.

ICTI also excludes net unrealized appreciation

or depreciation, as investment gains or losses are not included in taxable income until they are realized.

Permanent differences between ICTI and net investment

income for financial reporting purposes are reclassified among capital accounts in the financial statements to reflect their tax character.

Differences in classification may also result from the treatment of short-term gains as ordinary income for tax purposes.

years ended September 30, 2022, 2021 and 2020, the Company reclassified for book purposes amounts arising from permanent book/tax differences

related to the different tax treatment of net operating losses and investments in wholly-owned subsidiaries as follows:

generally differs from net investment income for financial reporting purposes due to temporary and permanent differences in the recognition

of income and expenses.

The Company may be required to recognize ICTI in certain circumstances in which it does not receive cash.

example, if the Company holds debt obligations that are treated under applicable tax rules as having original issue discount, the Company

must include in ICTI each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether

cash representing such income is received by the Company in the same taxable year.

The Company may also have to include in ICTI other

amounts that it has not yet received in cash, such as 1) PIK interest income and 2) interest income from investments that have been classified

as non-accrual for financial reporting purposes.

Interest income on non-accrual investments is not recognized for financial reporting

purposes, but generally is recognized in ICTI.

Because any original issue discount or other amounts accrued will be included in the Company’s

ICTI for the year of accrual, the Company may be required to make a distribution to its stockholders in order to satisfy the minimum

distribution requirements, even though the Company will not have received and may not ever receive any corresponding cash amount.

also excludes net unrealized appreciation or depreciation, as investment gains or losses are not included in taxable income until they

are realized.

differences between ICTI and net investment income for financial reporting purposes are reclassified among capital accounts in the financial

statements to reflect their tax character.

Differences in classification may also result from the treatment of short-term gains as ordinary

income for tax purposes.

During the years ended September 30, 2023, 2022 and 2021, the Company reclassified for book purposes amounts

arising from permanent book/tax differences related to the different tax treatment of net operating losses and investments in wholly-owned

subsidiaries as follows:

For the Years Ended September 30

Capital in excess of par value

$ (1,202,850 )

Accumulated undistributed net investment income/(loss)

( 20,468,622 )

( 3,276,372 )

( 19,047,396 )

Accumulated net realized gain/(loss) from investments

For income tax purposes, distributions paid to

stockholders are reported as ordinary income, return of capital, long term capital gains or a combination thereof.

The tax character

of distributions paid for the years ended September 30, 2022, 2021 and 2020 were as follows:

For the Years Ended September 30

( 5,640,866 )

Significant Accounting Policies (continued)

income tax purposes, distributions paid to stockholders are reported as ordinary income, return of capital, long term capital gains or

a combination thereof.

The tax character of distributions paid for the years ended September 30, 2023, 2022 and 2021 were as follows:

the Years Ended September 30

Ordinary income

1 unchanged sentence

Return of capital

Distributions on a tax basis

PHENIXFIN CORPORATION

Notes to Consolidated

Financial Statements (continued)

September 30, 2022

For federal income tax purposes, the cost of

investments owned at September 30, 2022, 2021 and 2020 were approximately $262.6 million, $206.9 million, and $327.9 million, respectively.

At September 30, 2022, 2021 and 2020, the components

of distributable earnings/(accumulated deficits) on a tax basis detailed below differ from the amounts reflected in the Company’s

Consolidated Statements of Assets and Liabilities by temporary and other book/tax differences, primarily relating to the tax treatment

of certain fee income and organizational expenses, as follows:

Distributions on a tax

For federal income tax purposes, the cost of investments owned at September

30, 2023, 2022 and 2021 were approximately $ 264.1 million, $ 262.6 million and $ 206.9 million, respectively.

September 30, 2023, 2022 and 2021, the components of distributable earnings/(accumulated deficits) on a tax basis detailed below differ

from the amounts reflected in the Company’s Consolidated Statements of Assets and Liabilities by temporary and other book/tax differences,

primarily relating to the tax treatment of certain fee income and organizational expenses, as follows:

For the Years Ended September 30

13 unchanged sentences

$ ( 545,175,178 )

Under the Regulated Investment Company

Modernization Act of 2010, net capital losses recognized for tax years beginning after December 22, 2010, may be carried forward

indefinitely, and their character is retained as short-term or long-term losses.

As of September 30, 2022, the Company had a long-term

capital loss carryforward available to offset future realized capital gains of $482,747,544 and a short-term capital loss carryforward

of $2,360,390.

The Company accounts for income taxes in conformity

with ASC Topic 740 - Income Taxes (“ASC 740”).

ASC 740 provides guidelines for how uncertain tax positions should be recognized,

measured, presented and disclosed in financial statements.

ASC 740 requires the evaluation of tax positions taken or expected to be taken

in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not”

of being sustained by the applicable tax authority.

Tax positions deemed to meet a “more-likely-than-not”

threshold would

be recorded as a tax benefit or expense in the current period.

The Company recognizes interest and penalties, if any, related to unrecognized

tax benefits as income tax expense in the Consolidated Statements of Operations.

There were no material uncertain income tax positions

at September 30, 2022.

Although we file federal and state tax returns, our major tax jurisdiction is federal.

The Company’s

federal and state tax returns for the prior three fiscal years remain open, subject to examination by the Internal Revenue Service and

applicable state tax authorities.

The Company invests in various industries.

Company separately evaluates the performance of each of its investment relationships.

However, because each of these investment relationships

has similar business and economic characteristics, they have been aggregated into a single investment segment.

All applicable segment

disclosures are included in or can be derived from the Company’s financial statements.

(1) Under the Regulated Investment Company Modernization Act of 2010, net

capital losses recognized for tax years beginning after December 22, 2010, may be carried forward indefinitely, and their character is

retained as short-term or long-term losses.

As of September 30, 2023, the Company had a long-term capital loss carryforward available

to offset future realized capital gains of $ 509,966,576 and a short-term capital loss carryforward of $ 2,842,952

Company accounts for income taxes in conformity with ASC Topic 740 - Income Taxes (“ASC 740”).

ASC 740 provides guidelines

for how uncertain tax positions should be recognized, measured, presented and disclosed in financial statements.

ASC 740 requires the

evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether

the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority.

Tax positions deemed to

meet a “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current period.

recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Consolidated Statements

of Operations.

There were no material uncertain income tax positions at September 30, 2023.

Although we file federal and state tax

returns, our major tax jurisdiction is federal.

The Company’s federal and state tax returns for the prior three fiscal years remain

open, subject to examination by the Internal Revenue Service and applicable state tax authorities.

Company invests in various industries.

The Company separately evaluates the performance of each of its investment relationships.

because each of these investment relationships has similar business and economic characteristics, they have been aggregated into a single

investment segment.

All applicable segment disclosures are included in or can be derived from the Company’s financial statements.

See Note 3 for further information.

Company Investment Risk, Concentration of Credit Risk, and Liquidity

The Company has broad discretion in making investments.

Investments generally consist of debt instruments that may be affected by business, financial market or legal uncertainties.

investments may be volatile, and a variety of factors that are inherently difficult to predict, such as domestic or international economic

and political developments, may significantly affect the results of the Company’s activities and the value of its investments.

In addition, the value of the Company’s portfolio may fluctuate as the general level of interest rates fluctuate.

The value of the Company’s investments

in loans may be detrimentally affected to the extent, among other things, that a borrower defaults on its obligations, there is insufficient

collateral and/or there are extensive legal and other costs incurred in collecting on a defaulted loan, observable secondary or primary

market yields for similar instruments issued by comparable companies increase materially or risk premiums required in the market between

smaller companies, such as our borrowers, and those for which market yields are observable increase materially.

The Company’s assets may, at any time,

include securities and other financial instruments or obligations that are illiquid or thinly traded, making purchase or sale of such

securities and financial instruments at desired prices or in desired quantities difficult.

Furthermore, the sale of any such investments

may be possible only at substantial discounts, and it may be extremely difficult to value any such investments accurately.

PHENIXFIN CORPORATION

Notes to Consolidated

Financial Statements (continued)

September 30, 2022

Company performance (including that of certain

of its portfolio companies) has been and may continue to be negatively impacted by the COVID-19 pandemic’s effects.

pandemic has adversely impacted economies and capital markets around the world in ways that may continue and may change in unforeseen

ways for an indeterminate period.

The pandemic has also adversely affected various businesses, including some in which we are invested.

The COVID-19 pandemic may exacerbate pre-existing business performance, political, social and economic risks affecting certain companies

and countries generally.

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.

Further, the potential exists for additional

variants of COVID-19 to impede the global economic recovery and exacerbate geographic differences in the spread of, and response to,

The composition of our investments as of September

30, 2022 as a percentage of our total portfolio, at amortized cost and fair value were as follows (dollars in thousands):

Significant Accounting Policies (continued)

Investment Risk, Concentration of Credit Risk, and Liquidity Risk

Company has broad discretion in making investments.

Investments generally consist of debt instruments that may be affected by business,

financial market or legal uncertainties.

Prices of investments may be volatile, and a variety of factors that are inherently difficult

to predict, such as domestic or international economic and political developments, may significantly affect the results of the Company’s

activities and the value of its investments.

In addition, the value of the Company’s portfolio may fluctuate as the general level

of interest rates fluctuate.

value of the Company’s investments in loans may be detrimentally affected to the extent, among other things, that a borrower defaults

on its obligations, there is insufficient collateral and/or there are extensive legal and other costs incurred in collecting on a defaulted

loan, observable secondary or primary market yields for similar instruments issued by comparable companies increase materially or risk

premiums required in the market between smaller companies, such as our borrowers, and those for which market yields are observable increase

Company’s assets may, at any time, include securities and other financial instruments or obligations that are illiquid or thinly

traded, making purchase or sale of such securities and financial instruments at desired prices or in desired quantities difficult.

the sale of any such investments may be possible only at substantial discounts, and it may be extremely difficult to value any such investments

composition of our investments as of September 30, 2023 as a percentage of our total portfolio, at amortized cost and fair value were

as follows (dollars in thousands):

Amortized Cost

Senior Secured First Lien Term Loans

Senior Secured Second Lien Term Loans

Senior Secured Notes

Unsecured Debt

Fund Investment

Equity/Warrants

Total Investments

The composition of our investments as of September

30, 2021 as a percentage of our total portfolio, at amortized cost and fair value were as follows (dollars in thousands):

composition of our investments as of September 30, 2022 as a percentage of our total portfolio, at amortized cost and fair value were

as follows (dollars in thousands):

Amortized Cost

Senior Secured First Lien Term Loans

Senior Secured First Lien Term

Senior Secured Second Lien Term Loans

2 unchanged sentences

Equity/Warrants

Total Investments

In connection with certain of the Company’s

investments, the Company receives warrants that are obtained for the objective of increasing the total investment returns and are not

held for hedging purposes.

At September 30, 2022 and 2021, the total fair value of warrants was $62.6 thousand and $996.7 thousand, respectively,

and were included in investments at fair value on the Consolidated Statements of Assets and Liabilities.

During the year ended September

30, 2022, the Company did not acquire any additional warrants in an existing portfolio company.

During the year ended September 30, 2021,

the Company acquired additional warrants in one existing portfolio company.

During the year ended September 30, 2020, the Company had

no warrant activity.

Total unrealized depreciation related to warrants

for the years ended September 30, 2022, 2021, and 2020 was $299.1 thousand, $981.4 thousand, and $9.6 thousand, respectively, and was

recorded on the Consolidated Statements of Operations as net unrealized appreciation/(depreciation) on investments.

The warrants are

received in connection with individual investments and are not subject to master netting arrangements.

PHENIXFIN CORPORATION

Notes to Consolidated

Financial Statements (continued)

September 30, 2022

The following table shows the portfolio composition

by industry grouping at fair value at September 30, 2022 (dollars in thousands):

Hotel, Gaming & Leisure

connection with certain of the Company’s investments, the Company receives warrants that are obtained for the objective of increasing

the total investment returns and are not held for hedging purposes.

At September 30, 2023 and 2022, the total fair value of warrants

was $ 206.5 thousand and $ 62.6 thousand, respectively, and were included in investments at fair value on the Consolidated Statements of

Assets and Liabilities.

During the year ended September 30, 2023, the Company acquired additional warrants in one existing portfolio

During the year ended September 30, 2022, the Company did not acquire any additional warrants in an existing portfolio

During the year ended September 30, 2021, the Company acquired additional warrants in one existing portfolio company.

unrealized depreciation related to warrants for the years ended September 30, 2023, 2022 and 2021 was $ 143.9 thousand, $ 299.1 thousand

and $ 981.4 thousand, respectively, and was recorded on the Consolidated Statements of Operations as net unrealized appreciation/(depreciation)

on investments.

The warrants are received in connection with individual investments and are not subject to master netting arrangements.

Investments (continued)

following table shows the portfolio composition by industry grouping at fair value at September 30, 2023 (dollars in thousands):

Banking, Finance, Insurance & Real Estate

Construction & Building

Consumer Discretionary

Hotel, Gaming & Leisure

High Tech Industries

Broadcasting & Subscription

Construction & Building

Metals & Mining

Broadcasting & Subscription

Consumer Discretionary

Aerospace & Defense

The following table shows the portfolio composition

by industry grouping at fair value at September 30, 2021 (dollars in thousands):

Construction & Building

following table shows the portfolio composition by industry grouping at fair value at September 30, 2022 (dollars in thousands):

Fair Value Percentage

Business $ 52,851 27.5 %

Hotel, Gaming & Leisure 31,947 16.7

Banking, Finance, Insurance & Real Estate 31,910 16.5

Consumer 21,243 11.0

Construction & Building 17,724 9.1

Automotive 8,075 4.2

Consumer Discretionary 6,208 3.2

High Tech Industries 5,465 2.8

Hotel, Gaming & Leisure

Manufacturing

Environmental Industries

Forest Products & Paper

Broadcasting & Subscription 4,220 2.2

Oil & Gas 4,152 2.2

Packaging 3,361 1.7

Metals & Mining 3,073 1.6

Aerospace & Defense 2,607 1.4

Consumer goods:

Healthcare & Pharmaceuticals

The Company invests in portfolio companies principally

located in North America.

The geographic composition is determined by the location of the corporate headquarters of the portfolio company,

which may not be indicative of the primary source of the portfolio company’s business.

The following table shows the portfolio composition

by geographic location at fair value at September 30, 2022 (dollars in thousands):

(1) As of September 30, 2022, the Company has an investment in U.S.

dollars in a foreign based company.

PHENIXFIN CORPORATION

Notes to Consolidated

Financial Statements (continued)

September 30, 2022

The following table shows the portfolio composition

by geographic location at fair value at September 30, 2021 (dollars in thousands):

Transactions With Affiliated/Controlled Companies

The Company had investments in portfolio companies

designated as Affiliated Investments and Controlled Investments under the 1940 Act.

Transactions with Affiliated Investments and Controlled

Investments during the years ended September 30, 2022 and 2021 were as follows:

Name of Investment (3)(4)

Retail 121 0.1

Total $ 192,957 100.0 %

Company invests in portfolio companies principally located in the United States.

The geographic composition is determined by the location

of the corporate headquarters of the portfolio company, which may not be indicative of the primary source of the portfolio company’s

following table shows the portfolio composition by geographic location at fair value at September 30, 2023 (dollars in thousands):

International

following table shows the portfolio composition by geographic location at fair value at September 30, 2022 (dollars in thousands):

International

Investments (continued)

With Affiliated/Controlled Companies

Company had investments in portfolio companies designated as Affiliated Investments and Controlled Investments under the 1940 Act.

with Affiliated Investments and Controlled Investments during the years ended September 30, 2023 and 2022 were as follows:

Investment (1)(2)

of Investment

September 30, 2022

Purchases/ (Sales)

of or Advances/

(Distributions)

In/(Out) of Affiliates

Value at September 30,

Affiliated Investments

1888 Industrial

Services, LLC

Senior Secured First Lien Term Loan B

of Affiliates

September 30, 2023

Industrial Services, LLC

Secured First Lien Term Loan C

Credit Facility

Angus Steakhouses, LLC

Secured First Lien Delayed Draw Term Loan

Secured First Lien Term Loan

Secured First Lien Super Priority Delayed Draw Term Loan

Holdings Parent, LLC

Operations, LLC

Secured First Lien Term Loan

( 2,378,510 )

Senior Secured First Lien Term Loan C

Revolving Credit Facility

Black Angus Steakhouses,LLC

Senior Secured First Lien Delayed Draw Term Loan

Senior Secured First Lien Term Loan

Senior Secured First Lien Super Priority DDTL

Caddo Investors Holdings

Dynamic Energy Services International

Senior Secured First Lien Term Loan

JFL-NGS Partners, LLC

Wireless Holdings LLC

Secured First Lien Term Loan A

$ ( 5,000,704 )

Secured First Lien Term Loan B

Multifamily, LLC

( 1,018,344 )

JFL-WCS Partners, LLC

Kemmerer Operations, LLC

Senior Secured First Lien Term Loan

Senior Secured First Lien Delayed Draw Term Loan

Path Medical, LLC

Senior Secured First Lien Term Loan A

Senior Secured First Lien Term Loan B

URT Acquisition Holdings

US Multifamily, LLC

Senior Secured First Lien Term Loan

( 1,118,971 )

Affiliated Investments

$ ( 1,018,267 )

Name of Investment (3)(4)

Investment (1)(2)

of Investment

September 30, 2022

Purchases/ (Sales)

of or Advances/

(Distributions)

Value at September 30,

Controlled Investments

Equity Interest

Senior Secured First Lien Delayed Draw Term Loan

Super Priority Senior Secured First Lien Term Loan

Senior Secured First Lien Term Loan B

Senior Secured First Lien Term Loan C

Controlled Investments

PHENIXFIN CORPORATION

Notes to Consolidated

Financial Statements (continued)

of Controlled

September 30, 2023

$ ( 8,265,435 )

Operations, LLC

Secured First Lien Term Loan

Secured First Lien Delayed Draw Term Loan

Secured First Lien Term Loan B

Controlled Investments

$ ( 6,410,084 )

Investments (continued)

Investment (1)(2)

of Investment

September 30,

(Sales) of or Advances/

Purchases/ (Sales)

of or Advances/

(Distributions)

September 30,

Affiliated Investments

1888 Industrial Services,

Senior Secured First Lien Term Loan A

Senior Secured First Lien Term Loan B

Senior Secured First Lien Term Loan C

Revolving Credit Facility

Access Media Holdings, LLC

Senior Secured First Lien Term Loan

Preferred Equity Series A

Preferred Equity Series AA

Preferred Equity Series AAA

Black Angus Steakhouses,LLC

Senior Secured First Lien Delayed Draw Term Loan

Senior Secured First Lien Term Loan

Senior Secured First Lien Super Priority DDTL

Caddo Investors Holdings

Dynamic Energy Services International

Senior Secured First Lien Term Loan

JFL-NGS Partners, LLC

Preferred Equity A-2

Preferred Equity A-1

Transfers In/(Out)

of Affiliates

Value at September 30,

Industrial Services, LLC

Secured First Lien Term Loan B

$ ( 19,468,870 )

JFL-WCS Partners, LLC

Preferred Equity Class A

Kemmerer Operations, LLC

Senior Secured First Lien Term Loan

Senior Secured First Lien Delayed Draw Term Loan

Path Medical, LLC

Senior Secured First Lien Term Loan A

Senior Secured First Lien Term Loan B

URT Acquisition Holdings

Unsecured Debt

US Multifamily, LLC

Senior Secured First Lien Term Loan

Affiliated Investments

Secured First Lien Term Loan C

Credit Facility

Angus Steakhouses, LLC

Secured First Lien Delayed Draw Term Loan

Secured First Lien Term Loan

Secured First Lien Super Priority DDTL

Investors Holdings 1 LLC

( 3,448,219 )

Energy Services International LLC

Secured First Lien Term Loan

( 4,910,671 )

( 2,417,897 )

PHENIXFIN CORPORATION

Notes to Consolidated

Financial Statements (continued)

September 30, 2022

Name of Investment(3)

Partners, LLC

( 26,807,520 )

( 26,805,513 )

Partners, LLC

( 8,084,639 )

( 7,970,361 )

Operations, LLC

Secured First Lien Term Loan

Secured First Lien Delayed Draw Term Loan

Secured First Lien Term Loan A

( 2,460,448 )

( 3,345,444 )

Secured First Lien Term Loan B

( 6,483,741 )

Acquisition Holdings Corporation

( 1,000,000 )

Multifamily, LLC

Secured First Lien Term Loan

( 2,577,418 )

( 1,192,685 )

Affiliated Investments

$ ( 49,786,504 )

Investments (continued)

Investment (1)(2)

of Investment

Fair Value at

September 30,

2 unchanged sentences

September 30,

MCC Senior Loan Strategy

JV I LLC(1)(2)

(39,739,929 )

(40,147,571 )

Senior Secured First Lien Term Loan

Super Priority Senior Secured First Lien Term Loan

Controlled Investments

$ (38,239,929 )

Secured First Lien Delayed Draw Term Loan

Priority Senior Secured First Lien Term Loan

( 1,000,000 )

The Company and GALIC were the members of MCC JV,

a joint venture formed as a Delaware limited liability company that was not consolidated by either member for financial reporting

The members of MCC JV made capital contributions as investments by MCC JV were completed, and all portfolio and other material

decisions regarding MCC JV were submitted to MCC JV’s board of managers, which was comprised of an equal number of members

appointed by each of the Company and GALIC.

Approval of MCC JV’s board of managers required the unanimous approval of a quorum

of the board of managers, with a quorum consisting of equal representation of members appointed by each of the Company and GALIC.

Because management of MCC JV was shared equally between the Company and GALIC, the Company did not have operational control over

MCC JV for purposes of the 1940 Act or otherwise.

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 MCC JV and all of GALIC’s interest in MCC JV.

Amount of income earned represented distributions

from MCC JV to the Company and is a component of dividend income, net of provisional taxes in the Consolidated Statements of Operations.

(3) The par amount and additional detail are shown in the Consolidated

Schedule of Investments.

(4) Securities with a zero value at the beginning and end of the

period, and those that had no transaction activity were excluded from the roll forward.

Purchases/(sales) of or advances to/(distributions)

from Affiliated Investments and Controlled Investments represent the proceeds from sales and settlements of investments, purchases, originations

and participations, investment increases due to PIK interest as well as net amortization of premium/(discount) on investments and are

included in the purchases and sales presented on the Consolidated Statements of Cash Flows for the years ended September 30, 2022, 2021

Transfers in/(out) of Affiliated Investments and Controlled Investments represent the fair value for the month an investment

became or was removed as an Affiliated Investment or a Controlled Investment.

Income received from Affiliated Investments and Controlled

Investments is included in total investment income on the Consolidated Statements of Operations for the years ended September 30, 2022,

2021 and 2020.

Unconsolidated Significant Subsidiaries

In accordance with the SEC’s Regulation S-X and GAAP, the Company evaluated and determined that it had one subsidiary, FlexFIN,

LLC, that is deemed to be a “significant subsidiary”

as of September 30, 2022.

Secured First Lien Term Loan B

Secured First Lien Term Loan C

Controlled Investments

(1) The par amount and additional detail are shown in the Consolidated Schedules of Investments.

(2) Securities with a zero value at the beginning and end of the period, and those that had no transaction activity were excluded from the roll forward.

Purchases/(sales)

of or advances to/(distributions) from Affiliated Investments and Controlled Investments represent the proceeds from sales and settlements

of investments, purchases, originations and participations, investment increases due to PIK interest as well as net amortization of premium/(discount)

on investments and are included in the purchases and sales presented on the Consolidated Statements of Cash Flows for the years ended

September 30, 2023, 2022 and 2021.

Transfers in/(out) of Affiliated Investments and Controlled Investments represent the fair value for

the month an investment became or was removed as an Affiliated Investment or a Controlled Investment.

Income received from Affiliated

Investments and Controlled Investments is included in total investment income on the Consolidated Statements of Operations for the years

ended September 30, 2023, 2022 and 2021.

Unconsolidated

Significant Subsidiaries

accordance with the SEC’s Regulation S-X and GAAP, the Company evaluated and determined that it had one subsidiary, FlexFIN, LLC,

that is deemed to be a “significant subsidiary” as of September 30, 2023.

In accordance with Rule 3-09, separate audited

financial statements of FlexFIN, LLC for the year ended September 30, 2023 are being filed herewith as Exhibit 99.2.

PHENIXFIN CORPORATION

Notes to Consolidated

Financial Statements (continued)

September 30, 2022

MCC Senior Loan Strategy JV I LLC

On March 27, 2015, the Company and GALIC entered

into a limited liability company operating agreement to co-manage MCC JV.

All portfolio and other material decisions regarding MCC JV

were submitted to MCC JV’s board of managers, which was comprised of four members, two of whom were selected by the Company and

the other two of whom were selected by GALIC.

The Company concluded that it did not operationally control MCC JV.

As the Company did

not operationally control MCC JV, it did not consolidate the operations of MCC JV within the consolidated financial statements.

On August 4, 2015, MCC JV entered into a senior

secured revolving credit facility (the “JV Facility”) led by Credit Suisse AG, Cayman Islands Branch (“CS”) with

commitments of $100 million subject to leverage and borrowing base restrictions.

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.

On March 29, 2019, the JV Facility reinvestment

period was extended from March 30, 2019 to June 28, 2019.

On June 28, 2019, the JV Facility reinvestment period was further extended

from June 28, 2019 to October 28, 2019.

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

2019 to March 31, 2020 and the interest rate was modified from bearing an interest rate of LIBOR (with a 0.00% floor) + 2.50% per annum

to LIBOR (with a 0.00% floor) + 2.75% per annum.

Effective as of March 31, 2020, the maturity date of the JV Facility was extended to

March 31, 2023.

As of September 30, 2020, there was approximately $111.3 million outstanding under the JV Facility.

On March 31, 2020, the JV Facility ended its

reinvestment period and entered its amortization period, during which time the interest rate was increased to LIBOR (with a 0.00% floor)

+ 3.00% per annum.

On April 20, 2020, the JV Facility was amended

to (i) during each 12-month period during the amortization period permit the sale of investments below a price of 97% as long as the

sale was approved by DB and the balance of all such investments sold is not greater than 30% of the adjusted balance of all loans as

of the first date of each 12-month period and (ii) establish a target effective advance rate at various measurement dates during the

amortization period.

All principal collections were to be swept to amortize the amount outstanding under the JV Facility and interest

collections were to be swept, as applicable, in order to meet the target effective advance rate for the applicable period.

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 MCC JV and all of GALIC’s interest in 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 the Company and GALIC, respectively.

Due to the sale transaction on October 8, 2020,

the Company no longer held an investment in MCC JV at September 30, 2021.

Below is certain summarized financial Information

for MCC JV for the year ended September 30, 2020:

For the Years

Selected Consolidated Statement of Operations Information:

Total revenues

Total expenses

Net unrealized appreciation/(depreciation)

Net realized gain/(loss)

(12,851,425 )

Net income/(loss)

$ (14,673,880 )

PHENIXFIN CORPORATION

Notes to Consolidated

Financial Statements (continued)

September 30, 2022

Fair Value Measurements

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.

In addition to using the above inputs in investment

valuations, the Company continues to employ a valuation policy approved by the board of directors that is consistent with ASC 820 (see

Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading,

in determining fair value.

The following table presents the fair value measurements

of our investments, by major class according to the fair value hierarchy, as of September 30, 2022 (dollars in thousands):

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.

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’ complexity.

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.

The three levels are

defined below:

1 - Valuations based on quoted prices in active markets for identical assets or liabilities at the measurement date.

2 - Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly

or indirectly.

3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

addition to using the above inputs in investment valuations, the Company continues to employ a valuation policy approved by the board

of directors that is consistent with ASC 820 (see Note 2).

Consistent with our valuation policy, we evaluate the source of inputs, including

any markets in which our investments are trading, in determining fair value.

Fair Value Measurements (continued)

following table presents the fair value measurements of our investments, by major class according to the fair value hierarchy, as of

September 30, 2023 (dollars in thousands):

Fair Value Hierarchy as of September 30, 2023

Senior Secured First Lien Term Loans

Senior Secured Second Lien Term Loans

Senior Secured Notes

1 unchanged sentence

Equity/Warrants

PHENIXFIN CORPORATION

Notes to Consolidated

Financial Statements (continued)

September 30, 2022

The following table presents the fair value measurements

of our investments, by major class according to the fair value hierarchy, as of September 30, 2021 (dollars in thousands):

Fair Value Hierarchy as of September 30, 2021

Senior Secured First Lien Term Loans

Senior Secured Second Lien Term Loans

Senior Secured Notes

Equity/Warrants

Investments measured at net asset value (1)

Total Investments, at fair value

Certain investments that are measured at fair value using NAV have

not been categorized in the fair value hierarchy.

The fair value amounts presented in the table are intended to permit reconciliation

of the fair value hierarchy to the amount presented in the Consolidated Statements of Assets and Liabilities.

The following table provides a reconciliation

of the beginning and ending balances for investments that use Level 3 inputs for the year ended September 30, 2022 (dollars in thousands):

Senior Secured

(1) Certain investments that are measured at fair value using NAV have not been categorized in the fair value hierarchy.

The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amount presented in the Consolidated Statements of Assets and Liabilities.

following table presents the fair value measurements of our investments, by major class according to the fair value hierarchy, as of

September 30, 2022 (dollars in thousands):

Value Hierarchy as of September 30, 2022

Senior Secured First Lien Term

Senior Secured Second Lien Term Loans

Senior Secured Notes

Unsecured Debt

Equity/Warrants

following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the year ended

September 30, 2023 (dollars in thousands):

Senior Secured First Lien Term Loans

Senior Secured Second Lien Term Loans

Equities/ Warrants

Balance as of September 30, 2022

Purchases and other adjustments to cost

Sales (including repayments or maturities)

Net realized gains/(losses) from investments

2 unchanged sentences

Balance as of September 30, 2023

following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the year ended

September 30, 2022 (dollars in thousands):

as of September 30, 2021

and other adjustments to cost

realized gains/(losses) from investments

unrealized gains/(losses)

(33,347 ) (1)

as of September 30, 2022

(1) FlexFIN, LLC was reclassed as an Equity from Secured Debt during the quarter ended December 31, 2021.

PHENIXFIN CORPORATION

Notes to Consolidated

Financial Statements (continued)

September 30, 2022

The following table provides a reconciliation

of the beginning and ending balances for investments that use Level 3 inputs for the year ended September 30, 2021 (dollars in thousands):

Senior Secured

Unsecured Debt

Loan Strategy

Balance as of September 30, 2020

Purchases and other adjustments to cost

Net realized gains/(losses) from investments

Net unrealized gains/(losses)

Balance as of September 30, 2021

Net change in unrealized gain (loss) for the

years ended September 30, 2022 and 2021 included in earnings related to investments still held as of September 30, 2022 and 2021 was

approximately $(2.5) million and $(24.3) million, respectively.

Purchases and other adjustments to cost include

purchases of new investments at cost, effects of refinancing/restructuring, accretion/amortization of income from discount/premium on

debt securities, and PIK.

Sales represent net proceeds received from investments

A review of the fair value hierarchy

classifications is conducted on a quarterly basis.

Changes in the observability of valuation inputs may result in a reclassification

for certain financial assets or liabilities.

Reclassifications impacting Level 3 of the fair value hierarchy are reported as

transfers in/out of the Level 3 category as of the beginning of the quarter in which the reclassifications occur.

During the year

ended September 30, 2022, $5,248 (in thousands) of investments were transferred out of Level 3 and $1,923 (in thousands) of

investments were transferred into Level 3.

During the year ended September 30, 2021, none of our investments transferred into or out

The following table presents the quantitative

information about Level 3 fair value measurements of our investments, as of September 30, 2022 (dollars in thousands):

Fair Value Measurements (continued)

Net change in unrealized gain (loss) for the years ended September

30, 2023 and 2022 included in earnings related to investments still held as of September 30, 2023 and 2022 was approximately $ 26.5 million

and $( 2.5 ) million, respectively.

and other adjustments to cost include purchases of new investments at cost, effects of refinancing/restructuring, accretion/amortization

of income from discount/premium on debt securities, and PIK.

represent net proceeds received from investments sold, including any repayments or maturities.

review of the fair value hierarchy classifications is conducted on a quarterly basis.

Changes in the observability of valuation inputs

may result in a reclassification for certain financial assets or liabilities.

Reclassifications impacting Level 3 of the fair value hierarchy

are reported as transfers in/out of the Level 3 category as of the beginning of the quarter in which the reclassifications occur.

the year ended September 30, 2023, no investments were transferred in or out of Level 3 .

During the year ended September 30, 2022, $5,248 (in thousands) of investments were transferred out of Level 3 and $1,923 (in thousands)

of investments were transferred into Level 3.

following table presents the quantitative information about Level 3 fair value measurements of our investments, as of September 30, 2023

(dollars in thousands):

Valuation Methodology

1 unchanged sentence

(Weighted Average)

Valuation From

An Increase In

Senior Secured First Lien Term Loans

Market Approach

Income Approach

8.50% - 32.0% (13.78%)

1 unchanged sentence

Market Approach

EBITDA Multiple

Revenue Multiple

0.3x - 0.3x (0.3x)

1 unchanged sentence

Market Approach

Revenue Multiple

EBITDA Multiple

1.7x - 5.0x (3.1x)

1 unchanged sentence

Market Approach

Market Spread

5.75% - 6.25% (6.00%)

Senior Secured Second Lien Term Loans

Market Approach

EBITDA Multiple

LTM EBITDA Multiple

5.8x - 6.8x (6.3x)

1 unchanged sentence

Cost Approach

Replacement Cost

Collateral Value

Equity/Warrants

Market Approach

EBITDA Multiple

5.8x – 6.8x (6.3x)

1 unchanged sentence

Market Approach

8.50% - 13.25% (12.75%)

EBITDA Multiple

1.8x – 36.8x (2.8x)

Equity/Warrants

Market Approach

Sum of the Parts/Estimated Proceeds

Recent Purchase

Purchase Price

N/A – N/A (N/A)

Equity/Warrants

Income Approach

DLOM (Discount for lack of Marketability)

3.0x – 3.2x (3.1x)

PHENIXFIN CORPORATION

Notes to Consolidated

Financial Statements (continued)

September 30, 2022

The following table presents the quantitative

information about Level 3 fair value measurements of our investments, as of September 30, 2021 (dollars in thousands):

Valuation Methodology

Unobservable Input

following table presents the quantitative information about Level 3 fair value measurements of our investments, as of September 30, 2022

(dollars in thousands):

(Weighted Average)

Senior Secured First Lien Term Loans

Market Approach

7.50% - 102.38% (32.78%)

Senior Secured First Lien Term Loans

Market Approach

Arms Length Transaction

Senior Secured First Lien Term Loans

Market Approach (Guideline Comparable)

Secured First Lien Term Loans

Income Approach

8.50% - 24.00% (10.57%)

Senior Secured First Lien Term Loans

Secured First Lien Term Loans

Market Approach

1 unchanged sentence

4.0x – 5.0x (4.5x)

Senior Secured First Lien Term Loans

Enterprise Value Analysis

Secured First Lien Term Loans

Market Approach

Revenue Multiple

0.2x – 0.3x (2.5x)

Senior Secured First Lien Term Loans

Market Approach

Capitalization Rate

4.50% - 5.50% (5.00%

Estimated Proceeds

Secured First Lien Term Loans

Income Approach

Market Spread

5.75% - 6.25% (6.00%)

Senior Secured First Lien Term Loans

Secured Second Lien Term Loans

Market Approach

Revenue Multiple (1)

0.25x - 0.40x (0.33x)

Senior Secured Second Lien Term Loans

Market Approach (Guideline Comparable)

EBITDA Multiple

9.0x – 10.0x (9.5x)

Equity/Warrants

Cost Approach

9 unchanged sentences

Market Approach

Revenue Multiple (1)

Sum of the Parts/Estimated Proceeds

8.1x – 11.4x (9.8x)

Equity/Warrants

Market Approach

Capitalization Rate

4.50% - 5.50% (5.00%)

Estimated Proceeds

$1.04 - $8.10 ($4.57)

Represents inputs used when the Company has determined that market

participants would use such multiples when measuring the fair value of these investments.

The significant unobservable inputs used in the

fair value measurement of the Company’s debt and derivative investments are market yields.

Increases in market yields would result

in lower fair value measurements.

The significant unobservable inputs used in the

fair value measurement of the Company’s equity/warrants investments are comparable company multiples of revenue or EBITDA for the

latest twelve months (“LTM”), next twelve months (“NTM”) or a reasonable period a market participant would consider.

Fair Value Measurements (continued)

significant unobservable inputs used in the fair value measurement of the Company’s debt and derivative investments are market

Increases in market yields would result in lower fair value measurements.

significant unobservable inputs used in the fair value measurement of the Company’s equity/warrants investments are comparable

company multiples of revenue or EBITDA for the latest twelve months (“LTM”), next twelve months (“NTM”) or a

reasonable period a market participant would consider.

Increases in EBITDA multiples in isolation would result in higher fair value measurement.

In September 2017, the Company entered into an

agreement with Global Accessories Group, LLC (“Global Accessories”), in which the Company exchanged its full position in

Lydell Jewelry Design Studio, LLC for a 3.8% membership interest in Global Accessories, which is included in the Consolidated Schedule

of Investments.

As part of the agreement, the Company is entitled to contingent consideration in the form of cash payments (“Earnout”),

as well as up to an additional 5% membership interest (“AMI”), provided Global Accessories achieves certain financial benchmarks

through calendar year ended 2022.

The Earnout and AMI were initially recorded with an aggregate fair value of $2.4 million on the transaction

date using the Income Approach and were included on the Consolidated Statements of Assets and Liabilities in other assets.

The contingent

consideration is remeasured to fair value at each reporting date until the contingency is resolved.

Any changes in fair value will be

recognized in earnings.

As of September 30, 2022 and September 30, 2021, the Company deemed the contingent consideration to be uncollectible.

As a BDC, we are generally only allowed to employ

leverage to the extent that our asset coverage, as defined in the 1940 Act, equals at least 200% after giving effect to such leverage.

The amount of leverage that we employ at any time depends on our assessment of the market and other factors at the time of any proposed

However, in March 2018, the Small Business Credit

Availability Act modified the 1940 Act by allowing a BDC to increase the maximum amount of leverage it may incur from 200% to 150%, if

certain requirements under the 1940 Act are met.

Under the 1940 Act, we are allowed to increase our leverage capacity if stockholders

representing at least a majority of the votes cast, when a quorum is present, approve a proposal to do so.

If we receive stockholder

approval, we would be allowed to increase our leverage capacity on the first day after such approval.

Alternatively, the 1940 Act allows

the majority of our independent directors to approve an increase in our leverage capacity, and such approval would become effective after

the one-year anniversary of such approval.

In either case, we would be required to make certain disclosures on our website and in SEC

filings regarding, among other things, the receipt of approval to increase our leverage, our leverage capacity and usage, and risks related

PHENIXFIN CORPORATION

Notes to Consolidated

Financial Statements (continued)

September 30, 2022

As of September 30, 2022, the Company’s

asset coverage was 255.0% after giving effect to leverage and therefore the Company’s asset coverage was greater than 200%, the

minimum asset coverage requirement applicable presently to the Company under the 1940 Act.

As of September 30, 2021, the Company’s

asset coverage was 285.6% after giving effect to leverage and therefore the Company’s asset coverage was greater than 200%, the

minimum asset coverage requirement applicable presently to the Company under the 1940 Act.

The Company’s outstanding debt excluding

debt issuance costs as of September 30, 2022 and 2021 was as follows (dollars in thousands):

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 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 6.125% unsecured notes that mature on March 30, 2023 (the “2023 Notes”).

On March 26, 2013,

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

underwriters’

option to purchase additional 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.

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.

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 $0.3 million and was recorded on the Consolidated Statements of Operations as a

loss on extinguishment of debt.

PHENIXFIN CORPORATION

Notes to Consolidated

Financial Statements (continued)

September 30, 2022

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 began trading 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,

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 that mature on November 1, 2028 (the “2028 Notes”

and collectively with the 2023 Notes, the “Notes”).

The Offering occurred on November 15, 2021, pursuant to the Company’s

September 2017, the Company entered into an agreement with Global Accessories Group, LLC (“Global Accessories”), in which

the Company exchanged its full position in Lydell Jewelry Design Studio, LLC for a 3.8 % membership interest in Global Accessories, which

is included in the Consolidated Schedule of Investments.

As part of the agreement, the Company is entitled to contingent consideration

in the form of cash payments (“Earnout”), as well as up to an additional 5 % membership interest (“AMI”), provided

Global Accessories achieves certain financial benchmarks through calendar year ended 2022.

The Earnout and AMI were initially recorded

with an aggregate fair value of $ 2.4 million on the transaction date using the Income Approach and were included on the Consolidated

Statements of Assets and Liabilities in other assets.

The contingent consideration is remeasured to fair value at each reporting date

until the contingency is resolved.

Any changes in fair value will be recognized in earnings.

As of September 30, 2023 and September 30,

2022, the Company deemed the contingent consideration to be uncollectible.

a BDC, we are generally only allowed to employ leverage to the extent that our asset coverage, as defined in the 1940 Act, equals at

least 200 % after giving effect to such leverage.

The amount of leverage that we employ at any time depends on our assessment of the market

and other factors at the time of any proposed borrowing.

However, in March 2018, the Small Business Credit Availability Act

modified the 1940 Act by allowing a BDC to increase the maximum amount of leverage it may incur from 200 % to 150 %, if certain requirements

under the 1940 Act are met.

Under the 1940 Act, we are allowed to increase our leverage capacity if stockholders representing at least

a majority of the votes cast, when a quorum is present, approve a proposal to do so.

If we receive stockholder approval, we would be allowed

to increase our leverage capacity on the first day after such approval.

Alternatively, the 1940 Act allows the majority of our independent

directors to approve an increase in our leverage capacity, and such approval would become effective after the one-year anniversary of

such approval.

In either case, we would be required to make certain disclosures on our website and in SEC filings regarding, among other

things, the receipt of approval to increase our leverage, our leverage capacity and usage, and risks related to leverage.

was requested or obtained and the Company is still subject to the 200 % requirement.

of September 30, 2023, the Company’s asset coverage was 270.7 % after giving effect to leverage and therefore the Company’s

asset coverage was greater than 200 %, the minimum asset coverage requirement applicable presently to the Company under the 1940 Act.

of September 30, 2022, the Company’s asset coverage was 255.0 % after giving effect to leverage and therefore the Company’s

asset coverage was greater than 200 %, the minimum asset coverage requirement applicable presently to the Company under the 1940 Act.

Company’s outstanding debt excluding debt issuance costs as of September 30, 2023 and 2022 were as follows (dollars in thousands):

Amount Outstanding

Principal Available

Revolving Credit Facility

Borrowings (continued)

December 15, 2022, the Company entered into a 3 year $ 50.0 million revolving credit facility (the “Credit Facility”) with

Woodforest National Bank (“Woodforest’).

Woodforest is the administrative agent, sole bookrunner and sole lead arranger.

Under the Credit Facility, the Company is required to comply with various

covenants, reporting requirements and other customary requirements for similar revolving credit facilities, including, without limitation,

covenants related to:

(a) limitations on the incurrence of additional indebtedness and liens, (b) limitations on certain investments,

(c) limitations on certain restricted payments, (d) maintaining a certain minimum stockholders’ equity, (e) maintaining a ratio

of total assets to total indebtedness of the Company and its consolidated subsidiaries (subject to certain exceptions) of not less than

2.0:1.0, (f) limitations on pledging certain unencumbered assets, and (g) limitations on the creation or existence of agreements that

prohibit liens on certain properties of the Company and certain of its subsidiaries.

These covenants are subject to important limitations

and exceptions that are described in the documents governing the Credit Facility.

Amounts available to borrow under the Credit Facility

(and the incurrence of certain other permitted debt) are also subject to compliance with a borrowing base that applies different advance

rates to different types of assets (based on their value as determined pursuant to the Credit Facility) that are pledged as collateral.

As of September 30, 2023, the Company was in compliance in all respects with the terms of the Credit Facility.

of September 30, 2023 and September 30, 2022, there was $ 28.4 million and $ 0.0 million outstanding, respectively, under the Credit Facility.

loans under the Credit Facility 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.

January 17, 2023, the Company borrowed $23.2 million under the Credit Facility and used these proceeds to redeem $22.6 million in aggregate

principal amount of the issued and outstanding 2023 Notes, comprising all issued and outstanding 2023 Notes.

The 2023 Notes were redeemed

at 100% of their principal amount, plus accrued and unpaid interest thereon from September 30, 2022 through, but excluding January 17,

2023 (the “Redemption Date”).

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’ 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 6.125 % unsecured notes that mature on March 30, 2023

(the “2023 Notes”).

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

2023 Notes, pursuant to the partial exercise of the underwriters’ option to purchase additional 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.

The 2023 Notes bore 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.

Borrowings (continued)

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

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 $ 0.3 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 began trading on the NASDAQ Global Market under the trading symbol “PFXNL.”

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.

16, 2021, the Company redeemed $ 55,325,000 in aggregate principal amount of the issued and outstanding 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 15, 2022, the Company caused notices to be issued to the holders of its 2023 Notes 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 redemption

was completed on January 17, 2023.

The Company funded the redemption of the 2023 Notes with loans obtained under the Credit Facility.

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, 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 that mature on November

1, 2028 (the “2028 Notes” or the “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.

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 (as defined below).

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 repayments in assets held by 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 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.

PHENIXFIN CORPORATION

Notes to Consolidated

Financial Statements (continued)

September 30, 2022

Fair Value of Debt Obligations

The fair values of our debt obligations are determined

in accordance with ASC 820, which defines fair value in terms of the price that would be paid to transfer a liability in an orderly transaction

between market participants at the measurement date under current market conditions.

The fair value of the Notes, which are publicly

traded, is based upon closing market quotes as of the measurement date.

As of September 30, 2022 and September 30, 2021, the Notes would

be deemed to be Level 1 in the fair value hierarchy, as defined in Note 4.

Debt issuance costs related to the Notes are

reported on the Consolidated Statements of Assets and Liabilities as a direct deduction from the face amount of the Notes.

As of September

30, 2022 and September 30, 2021, debt issuance costs related to the Notes were as follows (dollars in thousands):

September 30, 2022

September 30, 2021

Total debt issuance costs

Amortized debt issuance costs

Unamortized debt issuance costs

For the years ended September 30, 2022, 2021

and 2020, the components of interest expense, amortized debt issuance costs, weighted average stated interest rate and weighted average

outstanding debt balance for the Notes were as follows (dollars in thousands):

For the Years Ended September 30

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.

Value of Debt Obligations

fair values of our debt obligations are determined in accordance with ASC 820, which defines fair value in terms of the price that would

be paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions.

The fair value of the 2023 Notes and the 2028 Notes, which are or were publicly traded, is based upon closing market quotes as of the

measurement date.

As of September 30, 2023 and 2022 with respect to the 2028 Notes, and as of September 30, 2022 with respect to the

2023 Notes, such notes are deemed to be Level 1 in the fair value hierarchy, as defined in Note 4.

As of September 30, 2023, the Credit

Facility is deemed to be Level 3 in the fair value hierarchy, as defined in Note 4.

Borrowings (continued)

issuance costs related to the 2023 Notes and the 2028 Notes are reported on the Consolidated Statements of Assets and Liabilities as

a direct deduction from the face amount of the 2023 Notes and the 2028 Notes.

As of September 30, 2023 and September 30, 2022, debt issuance

costs related to the 2023 Notes and the 2028 Notes were as follows (dollars in thousands):

debt issuance costs at beginning of period

Amortized debt issuance

Unamortized debt issuance

the years ended September 30, 2023, 2022 and 2021, the components of interest expense, amortized debt issuance costs, amortized deferred

financing costs, weighted average stated interest rate and weighted average outstanding debt balance for the 2023 Notes and the 2028

Notes were as follows (dollars in thousands):

the Years Ended September 30,

2021 Notes Interest

2 unchanged sentences

2028 Notes Interest

Israeli Notes Interest

Amortization of debt issuance costs

Credit Facility Interest

Commitment fees

Amortization of deferred

financing costs

Amortization of debt

issuance costs

Weighted average stated interest rate

Weighted average outstanding balance

Investment Management Agreement

We had entered into an investment management

agreement with MCC Advisors on January 11, 2011 (the “Investment Management Agreement”), which expired on 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.

PHENIXFIN CORPORATION

Notes to Consolidated Financial Statements (continued)

Weighted average debt outstanding

Management Agreement and Expense Support Agreement

to January 1, 2021, we operated pursuant to an investment management agreement with MCC Advisors which expired on December 31, 2020.

Since January 1, 2021, we have operated pursuant to an internalized management structure.

In addition, prior to January 1, 2021, the

Company was party to an expense support agreement with MCC Advisors and Medley LLC, which expired by its terms at the close of business

on December 31, 2020, in connection with the Company’s adoption of the internalized management structure.

Base Management

Fee and Incentive Fee

December 31, 2020, the investment management agreement with MCC Advisors provided for a base management fee and an incentive 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.

For the year ended September

30, 2021, the Company incurred base management fees to MCC Advisors of $ 1.1 million.

No incentive fee was payable for the year ended

September 30, 2021.

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 was 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.

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, our Chairman and Chief

Executive Officer through December 31, 2020 and one of our directors through January 21, 2021 and Mr.

Seth Taube, one of our directors

through January 21, 2021 are both 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 calculated based

on the average value of the Company’s gross assets at the end of the two most recently completed calendar quarters.

For the years

ended September 30, 2021 and 2020, the Company incurred base management fees to MCC Advisors of $1.1 million and $6.4 million, respectively.

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

PHENIXFIN CORPORATION

Notes to Consolidated Financial Statements (continued)

September 30, 2022

Incentive Fee

Through December 31, 2020, the incentive fee had two components, as

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

For the years ended September 30, 2022, 2021,

and 2020, the Company did not incur any incentive fees on net investment income because pre-incentive fee net investment income did not

exceed the hurdle amount under the formula set forth in the Investment Management Agreement.

The Investment Management Agreement terminated

as of December 31, 2020, and the Company no longer incurs incentive fees under the Investment Management Agreement as a result.

Administration Agreement

On January 19, 2011, the Company entered into

an administration agreement with MCC Advisors.

Pursuant to the administration agreement, MCC Advisors furnished us with office facilities

and equipment, clerical, bookkeeping, recordkeeping and other administrative services related to the operations of the Company.

We reimbursed

MCC Advisors for our allocable portion of overhead and other expenses incurred by it performing its obligations under the administration

agreement, including rent and our allocable portion of the cost of our Chief Financial Officer and Chief Compliance Officer and their

respective staffs.

From time to time, our administrator was able to pay amounts owed by us to third-party service providers and we would

subsequently reimburse our administrator for such amounts paid on our behalf.

In connection with the adoption by the board of directors

of an internalized management structure, on November 19, 2020, the Company entered into a Fund Accounting Servicing Agreement and an

Administration Servicing Agreement on customary terms with U.S.

Bancorp Fund Services, LLC d/b/a U.S.

Bank Global Fund Services (“U.S.

Bancorp”).

Bancorp affiliate also served as the Company’s custodian.

The Company’s administrative and custodial

relationship with U.S.

Bancorp terminated on August 9, 2022.

SS&C Technologies, Inc.

(“SS&C”) has since served as

administrator of the Company and has provided the Company with fund accounting and financial reporting services pursuant to the services

agreement with the Company.

Effective September 12, 2022, Computershare Trust Company, N.A.

(“Computershare”) serves as custodian for

the Company pursuant to its Loan Administration and Custodial Agreement with the Company.

Agreements (continued)

Administration

connection with the adoption by the board of directors of an internalized management structure, on November 19, 2020, the Company entered

into a Fund Accounting Servicing Agreement and an Administration Servicing Agreement on customary terms with U.S.

affiliate also served as the Company’s custodian.

The Company’s administrative and custodial relationship with U.S.

terminated on August 9, 2022.

SS&C has since served as administrator of the Company and has provided the Company with fund accounting

and financial reporting services pursuant to the services agreement with the Company.

Effective September 12, 2022, Computershare serves

as custodian for the Company pursuant to its Loan Administration and Custodial Agreement with the Company.

For the years ended September

30, 2023, 2022 and 2021, we incurred $ 0.3 million, $ 0.3 million and $ 0.6 million in administrator expenses, respectively.

As of September 30, 2022 and 2021, $0.1 million and $0.1 million,

respectively, were included in “administrator expenses payable”

in the accompanying Consolidated Statements of Assets and

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 (as defined

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

Under the Expense Support Agreement, the Cap became effective on June 1,

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.

PHENIXFIN CORPORATION

Notes to Consolidated Financial Statements (continued)

September 30, 2022

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.

In connection with the approval of the CIP, the

Compensation Committee approved awards for the three year performance period commencing on January 1, 2022 and ending on December 31,

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.

During the year ended September 30, 2022, no accrual was recorded for this plan.

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

of September 30, 2023 and 2022, $ 0 million and $ 0.1 million, respectively, were included in “administrator expenses payable”

in the accompanying Consolidated Statements of Assets and Liabilities.

Cash Incentive Plan

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.

connection with the approval of the CIP, the Compensation Committee in April 2022, approved awards for the three year performance period

commencing on January 1, 2022 and ending on December 31, 2024 (the “2022 LTIP Plan”).

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.

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 a percentage 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.

December 2022, pursuant to the CIP, the Compensation Committee approved awards for Mr.

Lorber and Ms.

McMillan for the three-year performance

period commencing on January 1, 2023 and ending on December 31, 2025 (the “2023 LTIP Plan”).

Each participant is eligible

to receive an amount of cash equal to a percentage of the target award amount set forth above based on the factors described above.

Compensation Committee, in approving the awards, evaluated each Performance Goal separately.

Target Performance Award for each executive officer for both the 2022 LTIP plan and 2023 LTIP plan is set forth in the table below:

David Lorber, Chairman of the Board

and Chief Executive Officer

Ellida McMillan, Chief Financial Officer

the year ended September 30, 2023, the Company recorded an accrual of $ 317,000 , for these awards.

During the years ended September 30,

2022 and 2021, the Company did not record an accrual.

Related Party Transactions

Due to Affiliate

Due to affiliate at September 30, 2021 consisted of funds

received by the Company on behalf of an affiliate.

Due from Affiliates

Due from affiliates at September 30, 2022

consists of certain legal and general and administrative expenses paid by the Company on behalf of two affiliates.

Insurance Reimbursements Related to Professional Fees

The Company has received insurance proceeds under

its insurance policy primarily relating to the legal expenses associated with the dismissed stockholder class action, captioned as FrontFour

Capital Group LLC, et al.

from Affiliates

from affiliates at September 30, 2023 and September 30, 2022 consists of certain legal and general and administrative expenses paid by

the Company on behalf of certain of its affiliates.

Reimbursements Related to Professional Fees

Company has received insurance proceeds under its insurance policy primarily relating to the legal expenses associated with the dismissed

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

v Brook Taube et al.

During the years ended September 30, 2022, 2021 and 2020, the Company received insurance

proceeds of $0, $2.1 million and $6.1 million, respectively.

The reimbursements have been recorded as an offset or reduction in professional

fees and expenses on the Consolidated Statements of Operations.

PHENIXFIN CORPORATION

Notes to Consolidated Financial Statements (continued)

September 30, 2022

Unfunded commitments

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

1888 Industrial Services, LLC - Revolving Credit Facility

During the years ended September 30,

2023, 2022 and 2021, the Company received insurance proceeds of $ 0 million, $ 0 million and $ 2.1 million, respectively.

The reimbursements

have been recorded as an offset or reduction in professional fees and expenses on the Consolidated Statements of Operations.

of September 30, 2023 and 2022, we had commitments under loan and financing agreements to fund up to $ 3.4 million to four portfolio companies

and $ 6.0 million to six portfolio companies, respectively.

These commitments are primarily composed of senior secured delayed draw term

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

The commitments

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

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, 2023 and 2022 is shown in the table below (dollars in thousands):

SS Acquisition, LLC (dba Soccer

Shots Franchisin–) - Senior Secured First Lien Delayed Draw Term Loan

Kemmerer Operations, L–C - 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

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

(dba Paragon Film–)

- Senior Secured First Lien Delayed Draw Term Loan

NVTN L–C - Senior Secured First Lien

Delayed Draw Term Loan

Black Angus Steakhouses, LLC Senior Secured

First Lien Super Priority Delayed Draw Term Loan

1888 Industrial Services, L–C - Revolving

Credit Facility

Deer Management Systems L–C - Senior

Secured First Lien Delayed Draw Term Loan

Tamarix Capital Partners

- Fund Investment

Total unfunded commitments

Lease obligations

Effective January 1, 2019, ASC 842 required that

a lessee evaluate its leases to determine whether they should be classified as operating or financing leases.

Company evaluates its leases to determine whether they should be classified as operating or financing leases.

PhenixFIN identified one

1 unchanged sentence

The lease commenced September 1, 2021 and expires November 30, 2026.

Upon entering into the lease on September 1,

2021, PhenixFIN recorded a right-of-use asset and a lease liability as of that date.

Total operating lease cost incurred by PhenixFIN

for the year ended September 30, 2022 was $129,552.

During the year ended September 30, 2021, the Company made a security deposit of

$72,000 and prepaid rent of $12,000 and no operating lease costs were incurred.

As of September 30, 2022 and 2021, the asset related

to the operating lease was $513,142 and $613,500, respectively, and is included in the Other assets balance on the Consolidated Balance

The lease liability was $570,695 and $613,500, respectively, and is included in the Other liabilities balance on the Consolidated

Balance Sheet.

As of September 30, 2022 and 2021, the remaining lease term was approximately four and five years, respectively, and the

implied borrowing rate was 5.25% for each of the respective periods.

The following table shows future minimum payments

under PhenixFIN’s operating lease as of September 30, 2022:

For the Years Ended September 30,

Difference between undiscounted and discounted cash flows

PHENIXFIN CORPORATION

Notes to Consolidated Financial Statements (continued)

September 30, 2022

Fee income consists of origination/closing fees,

amendment fees, prepayment penalty and other miscellaneous fees which are non-recurring in nature, as well as administrative agent fees,

which are recurring in nature.

The following table summarizes the Company’s fee income for the years ended September 30, 2022,

entering into the lease on September 1, 2021, PhenixFIN recorded a right-of-use asset and a lease liability as of that date.

operating lease cost incurred by PhenixFIN for the years ended September 30, 2023 and 2022 was $ 141,330 and $ 129,552 , respectively.

the year ended September 30, 2021, the Company made a security deposit of $ 72,000 and prepaid rent of $ 12,000 and no operating lease

costs were incurred.

As of September 30, 2023 and 2022, the asset related to the operating lease was $ 449,815 and $ 513,142 , respectively,

and is included in the Other assets balance on the Consolidated Balance Sheet.

As of September 30, 2023 and 2022, the lease liability

was $ 432,698 and $ 570,695 , respectively, and is included in the Other liabilities balance on the Consolidated Statements of Assets and

As of September 30, 2023 and 2022, the remaining lease term was approximately three and four years , respectively, for each

of the respective periods and the implied borrowing rate was 5.25 % for each of the respective periods.

following table shows future minimum payments under PhenixFIN’s operating lease as of September 30, 2023:

Years Ended September 30,

Difference between undiscounted

and discounted cash flows

income consists of amendment fees, prepayment penalty and other miscellaneous fees which are non-recurring in nature, as well as administrative

agent fees, which are recurring in nature.

The following table summarizes the Company’s fee income for the years ended September

30, 2023, 2022 and 2021 (dollars in thousands):

For the Years Ended September 30

Administrative agent fee

the Years Ended September 30,

Prepayment fee

Administrative agent fee

Amendment fee

Origination fee

Directors Fees

For each of calendar year 2021 and 2022, the

Company’s independent directors each receive an annual fee of $100,000.

In addition, the lead independent director receives an

annual retainer of $30,000;

the chair of the Audit Committee receives an annual retainer of $25,000, and each of its other members receives

an annual retainer of $12,500;

and the chairs of the Nominating and Corporate Governance Committee and of the Compensation Committee

each receive an annual retainer of $15,000 and each of the other members of these committees receive annual retainers of $8,000.

Company’s independent directors also receive a fee of $3,000 for each board meeting and $2,500 for each committee meeting that

For calendar year 2020, the Company’s independent directors each received an annual fee of $90,000.

They also received

$3,000, plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each board meeting, and $2,500,

plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each Audit Committee, Nominating and Corporate

Governance Committee, Transition Committee and Compensation Committee meeting.

The chair of the Audit Committee received an annual fee

of $25,000 and the chair of the Nominating and Corporate Governance Committee and the Compensation Committee received an annual fee of

$10,000 for their additional services in these capacities.

In addition, other members of the Audit Committee received an annual fee of

$12,500, and other members of the Nominating and Corporate Governance Committee and the Compensation Committee received an annual fee

No board service compensation is paid to directors

who are “interested persons”

of the Company (as such term is defined in the 1940 Act).

For the years ended September 30,

2022, 2021 and 2020, the Company recognized $0.7 million, $1.0 million, and $1.5 million for directors’

fees expense, respectively.

each of calendar years 2021 and 2022, the Company’s independent directors each received an annual fee of $ 100,000 .

the lead independent director received an annual retainer of $ 30,000 ;

the chair of the Audit Committee received an annual retainer of

$ 25,000 , and each of its other members received an annual retainer of $ 12,500 ;

and the chairs of the Nominating and Corporate Governance

Committee and of the Compensation Committee each received an annual retainer of $ 15,000 and each of the other members of these committees

received annual retainers of $ 8,000 .

The Company’s independent directors also received a fee of $ 3,000 for each board meeting

and $ 2,500 for each committee meeting that they attended.

the 2023 calendar period through April 30, 2023, the independent directors were subject to the foregoing fee structure.

Effective May

1, 2023, the structure was modified (simplified) such that each of the Company’s independent directors receives an annual fee of

In addition, the lead independent director receives an annual retainer of $ 30,000 ;

the chair of the Audit Committee receives

an annual retainer of $ 25,000 , and each of its other members receives an annual retainer of $ 12,500 ;

and the chairs of the Nominating

and Corporate Governance Committee and of the Compensation Committee each receives an annual retainer of $ 15,000 and each of the

other members of these committees receives annual retainers of $ 8,000 .

The Company’s independent directors no longer receive fees

for each board and committee meeting that they attend.

board service compensation is paid to directors who are “interested persons” of the Company (as such term is defined in the

For the years ended September 30, 2023, 2022 and 2021, the Company recognized $ 0.7 million, $ 0.7 million and $ 1.0 million,

for directors’ fees expense, respectively.

Earnings Per Share

In accordance with the provisions of ASC Topic

260 - Earnings per Share, basic earnings per share is computed by dividing earnings available to common stockholders by the weighted

average number of shares outstanding during the period.

Other potentially dilutive common shares, and the related impact to earnings,

are considered when calculating earnings per share on a diluted basis.

The Company does not have any potentially dilutive common shares

as of September 30, 2022, 2021 and 2020.

The following information sets forth the computation

of the weighted average basic and diluted net increase/(decrease) in net assets per share from operations for the years ended September

30, 2022, 2021 and 2020 (dollars in thousands, except share and per share amounts):

For the Years Ended September 30

accordance with the provisions of ASC Topic 260 - Earnings per Share, basic earnings per share is computed by dividing earnings available

to common stockholders by the weighted average number of shares outstanding during the period.

Other potentially dilutive common shares,

and the related impact to earnings, are considered when calculating earnings per share on a diluted basis.

The Company does not have

any potentially dilutive common shares as of September 30, 2023, 2022 and 2021.

following information sets forth the computation of the weighted average basic and diluted net increase/(decrease) in net assets per

share from operations for the years ended September 30, 2023, 2022 and 2021 (dollars in thousands, except share and per share amounts):

the Years Ended September 30,

Basic and diluted:

Net increase (decrease) in net assets resulting from operations

Net increase (decrease) in net

assets resulting from operations

Weighted average shares of common stock

1 unchanged sentence

Earnings (loss) per share of common stock - basic and diluted

PHENIXFIN CORPORATION

Notes to Consolidated Financial Statements (continued)

September 30, 2022

Financial Highlights

The following is a schedule of financial highlights for the years

ended September 30, 2022, 2021, 2020, 2019 and 2018:

For the Years Ended September 30

The following

is a schedule of financial highlights for the years ended September 30, 2023, 2022, 2021, 2020 and 2019:

the Years Ended September 30,

Per share data

Net Asset Value per share at Beginning of Period

Asset Value per share at Beginning of Period

Results of Operations:

Net Investment Income/(Loss) (1)

Net Realized Gain/(Loss) on Investments

Net Unrealized Gain/(Loss) on Investments

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

Net loss on extinguishment of debt

Net Increase (Decrease) in Net Assets Resulting from Operations

Investment Income/(Loss)(1)

Realized Gain/(Loss) on Investments

Unrealized Gain/(Loss) on Investments

loss on extinguishment of debt

Increase (Decrease) in Net Assets Resulting from Operations

Capital Share Transactions

Distributions from net investment income

Repurchase of common stock under stock repurchase program

Net Increase (Decrease) Resulting from Capital Share Transactions

Net Asset Value per share at End of Period

Net Assets at End of Period

Distributions

of common stock under stock repurchase program

Increase (Decrease) Resulting from Capital Share Transactions

Asset Value per share at End of Period

Assets at End of Period

$ 146,705,535

2 unchanged sentences

$ 150,619,517

Shares Outstanding at End of Period

Per share market value at end of period

Total return based on market value (2)

Total return based on net asset value (3)

Portfolio turnover rate

PHENIXFIN CORPORATION

Notes to Consolidated Financial Statements (continued)

September 30, 2022

The following is a schedule of ratios and supplemental data for the

years ended September 30, 2022, 2021, 2020, 2019 and 2018:

Ratio of net investment/(loss) income to average net assets after waivers, discounts and reimbursements (5)

Ratio of total expenses to average net assets after waivers, discounts and reimbursements (5)

Ratio of incentive fees to average net assets after waivers (5)

Supplemental Data:

Ratio of net operating expenses and credit facility related expenses to average net assets (5)(11)

Percentage of non-recurring fee income (6)

$ 216,432,530

Shares Outstanding

at End of Period

Per share market

value at end of period

return based on market value(2)

return based on net asset value (3)

turnover rate

Financial Highlights (continued)

of net investment/(loss) income to average net assets after waivers, discounts and reimbursements

of total expenses to average net assets

of non-recurring fee income

Average debt outstanding(4)

Average debt outstanding per common share

Asset coverage ratio per unit (8)

Total Debt Outstanding (12)

2021 Notes (10)

Israeli Notes (9)

SBA Debentures

Average market value per unit:

$ 189,038,998

$ 347,991,878

Average debt outstanding

per weighted average common share

coverage ratio per unit(5)

2021 Notes(6)

Credit Facility

Israeli Notes(7)

PHENIXFIN CORPORATION

Notes to Consolidated Financial Statements (continued)

September 30, 2022

(1) Net investment income/(loss) excluding management and incentive fee waivers, discounts and reimbursements based on total weighted average common stock outstanding equals $ 3.11 , $ 1.48 , $ 6.92 , $( 3.35 ), and $( 7.66 ) per share for the years ended September 30, 2023, 2022, 2021, 2020, and 2019, respectively.

Total 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.

Total 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.

Represents the impact of the different share amounts used in calculating per share data as a result of calculating certain per share data based upon the weighted average basic shares outstanding during the period and certain per share data based on the shares outstanding as of a period end or transaction date.

For the year ended September 30, 2022, prior to the effect of Expense Support Agreement, the ratio of net investment income/(loss), total expenses, incentive fees, and operating expenses and credit facility related expenses to average net assets is 2.55%, 9.02%, 0.00%, and 9.02%, respectively.

For the year ended September 30, 2021, prior to the effect of Expense Support Agreement, the ratio of net investment income/(loss), total expenses, incentive fees, and operating expenses and credit facility related expenses to average net assets is 12.44%, 9.26%, 0.00%, and 9.26%, respectively.

For the year ended September 30, 2020, excluding management and incentive fee waivers, the ratio of net investment income/(loss), total expenses, incentive fees, and operating expenses and credit facility related expenses to average net assets is (5.94)%, 18.94%, 0.00%, and 18.94%, respectively.

For the year ended September 30, 2019, excluding management and incentive fee waivers, the ratio of net investment income/(loss), total expenses, incentive fees, and operating expenses and credit facility related expenses to average net assets is (7.96)%, 25.62%, 0.00%, and 25.62%, respectively.

For the year ended September 30, 2018, excluding management and incentive fee waivers, the ratio of net investment income/(loss), total expenses, incentive fees, and operating expenses and credit facility related expenses to average net assets is 3.26%, 14.88%, 0.00%, and 14.88%, respectively.

For the year ended September 30, 2017, excluding management and incentive fee waivers, the ratio of net investment income/(loss), total expenses, incentive fees, and operating expenses and credit facility related expenses to average net assets is 7.48%, 12.37%, 0.18%, and 12.18%, respectively.

Represents the impact of the non-recurring fees as a percentage of total investment income.

(2) Total 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.

(3) Total 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.

(4) Based on daily weighted average carrying value of debt outstanding during the period.

1 unchanged sentence

Asset coverage per unit is expressed in terms of dollar amounts per $ 1,000 of indebtedness.

As of September 30, 2022, the Company’s asset coverage was 255.0% after giving effect to leverage and therefore the Company’s asset coverage was above 200%, the minimum asset coverage requirement under the 1940 Act.

During the year ended September 30, 2020, the Israeli Notes were redeemed in full and ceased trading on the TASE on April 14, 2020.

of September 30, 2023, the Company’s asset coverage was 270.7 % after giving effect to leverage and therefore the Company’s

asset coverage was above 200 %, the minimum asset coverage requirement under the 1940 Act.

(6) During the year ended September 30, 2021, the 2021 Notes were redeemed in full and ceased trading on November 20, 2020.

The average price for the year ended September 30, 2021 reflects the period from October 1, 2020 through November 20, 2020.

Excludes incentive fees.

Total amount of each class of senior securities outstanding at the end of the period excluding debt issuance costs.

Dividends and distributions to common stockholders

are recorded on the ex-dividend date.

The amount to be paid out as a dividend is determined by our board of directors.

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 its 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.

The Company did not make any regular distribution

payments during the years ended September 30, 2022, 2021 and 2020.

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.

PHENIXFIN CORPORATION

Notes to Consolidated Financial Statements (continued)

September 30, 2022

(7) During the year ended September 30, 2020, the Israeli Notes were redeemed in full and ceased trading on the TASE on April 14, 2020.

dividends and distributions to common stockholders are recorded on the ex-dividend date.

Any amounts to be paid out as a dividend are

determined by our board of directors.

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 its 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.

Company did not declare any regular distribution payments during the years ended September 30, 2023, 2022 and 2021.

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.

Share Transactions

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.

The following table sets forth the number of

shares of common stock repurchased by the Company at an average price of $38.24 per share under its share repurchase program from February

10, 2021 through September 29, 2022:

Shares Repurchased

Repurchase Price Per Share

Aggregate Consideration for Repurchased Shares

January 11, 2021, the Company announced that its board of directors approved a share repurchase program.

February 8, 2023, the Board of Directors approved the expansion of the amount authorized for repurchase under the Company’s share

repurchase program from $ 25 million to $ 35 million.

Since announcing this share repurchase program on January 11, 2021, the Company has

repurchased an aggregate of 649,996 shares of common stock through September 30, 2023 with a total cost of approximately $ 25.7 million,

or 23.9 % of shares outstanding as of the program’s inception.

The total remaining amount authorized under the expanded share repurchase

program is approximately $ 9.3 million.

following table sets forth the number of shares of common stock repurchased by the Company at an average price of $ 39.60 per share under

its share repurchase program from February 10, 2021 through September 30, 2023:

Price Per Share

Consideration for Repurchased Shares

February 2021

15 unchanged sentences

$ 36.80 - $ 37.50

As of September 30, 2022, 94,589 shares were

settled and administratively in the process of transferring to treasury.

The Company funded additional share repurchases of 300 shares

with a total cost of approximately $10,800 on September 30, 2022, which had not settled as of September 30, 2022.

$ 35.20 - $ 36.14

November 2022

$ 34.53 - $ 35.28

December 2022

$ 33.26 - $ 34.84

$ 32.78 - $ 34.84

February 2023

$ 33.06 - $ 39.03

$ 37.02 - $ 38.89

$ 35.79 - $ 37.03

$ 36.53 - $36.53

$ 33.63 - $ 38.76

$ 36.98 - $ 39.41

September 2023

$ 38.11 - $38.11

During the year ended September 30, 2023, 28,291

shares were transferred into treasury, including 300 shares that were repurchased during the year ended September 30, 2022 and

transferred into treasury during the year ended September 30, 2023.

Subsequent Events

Management has evaluated subsequent events through

the date of issuance of the consolidated financial statements included herein.

Other than the items disclosed herein, there have been

no subsequent events that occurred during such period that would require disclosure in this Form 10-K or would be required to be recognized

in the Consolidated Financial Statements as of and for the year ended September 30, 2022.

Under the share repurchase program, the Company

repurchased an aggregate of 2,105 shares of common stock through December 15, 2022 with a total cost of approximately $74,000, of which

100 shares with a total cost of approximately $3,000 had not settled as of December 15, 2022.

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.

Changes in and Disagreements with Accountants on Accounting

and Financial Disclosure

has evaluated subsequent events through the date of issuance of the consolidated financial statements included herein.

Other than the

items disclosed herein, there have been no subsequent events that occurred during such period that would require disclosure in this Form

10-K or would be required to be recognized in the Consolidated Financial Statements as of and for the year ended September 30, 2023.

In December 2023, the Company established a subsidiary to serve as a regulated insurance company.

This subsidiary

also entered into a merger agreement pursuant to which it agreed to acquire a controlling interest in VR Insurance SPV, LLC, a company

primarily engaged in the insurance business through its subsidiaries (“VR”), and to provide additional capital to such company.

Our subsidiary’s controlling interest in VR is being acquired pursuant to a plan of reorganization duly adopted by VR which calls

for the merger and recapitalization of VR.

The Company’s total investment in the insurance subsidiary and VR is expected to approximate

$ 49 million.

The merger transaction is presently expected to close in the first half of 2024 and is subject to various closing conditions,

including insurance regulatory approvals.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 7A. Quantitative and Qualitative Disclosures About Market Risk